$590,000,000 REVOLVING CREDIT FACILITY
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
by and among
X. XXXXXXXXX ENTERPRISES, INC.
(as the Borrower)
HOVNANIAN ENTERPRISES, INC.
(as a Guarantor)
and
THE BANKS PARTY HERETO
and
PNC BANK, NATIONAL ASSOCIATION, as Administrative Agent
Bank of America, N.A.
Wachovia Bank, National Association,
as
Syndication Agents
Fleet National Bank, as
Documentation Agent
PNC Capital Markets, LLC
Wachovia Securities, Inc.
as
Joint Lead Arrangers and Joint Book Runners
Amended and Restated February 20, 2003
1. CERTAIN DEFINITIONS 1
1.1 Certain Definitions. 1
1.2 Construction. 21
1.2.1. Number; Inclusion. 21
1.2.2. Determination. 21
1.2.3. Agent's Discretion and Consent. 22
1.2.4. Documents Taken as a Whole. 22
1.2.5. Headings. 22
1.2.6. Implied References to this Agreement. 22
1.2.7. Persons. 22
1.2.8. Modifications to Documents. 22
1.2.9. From, To and Through. 22
1.2.10. Shall; Will. 23
1.3 Accounting Principles. 23
2. REVOLVING CREDIT AND SWING LOAN FACILITIES 23
2.1 Revolving Credit Commitments. 23
2.1.1. Revolving Credit Loans. 23
2.1.2. Swing Loan Commitment. 23
2.1.3. Increase in Commitments After Closing Date. 24
2.1.4. Voluntary Reduction of Commitment. 24
2.2 Nature of Banks' Obligations with Respect to Revolving Credit
Loans. 24
2.3 Commitment Fees. 25
2.4 Revolving Credit Loan Requests; Swing Loan Requests. 25
2.4.1. Revolving Credit Loan Requests. 25
2.4.2. Swing Loan Requests. 26
2.5 Making Revolving Credit Loans and Swing Loans. 26
2.5.1. Generally. 26
2.5.2. Making Swing Loans. 26
2.6 Swing Loan Note. 26
2.7 Use of Proceeds. 27
2.8 Borrowings to Repay Swing Loans. 27
2.9 Letter of Credit Subfacility. 27
2.9.1. Issuance of Letters of Credit. 27
2.9.2. Letter of Credit Fees. 28
2.9.3. Disbursements, Reimbursement. 28
2.9.4. Repayment of Participation Advances. 29
2.9.5. Documentation. 30
2.9.6. Determinations to Honor Drawing Requests. 30
2.9.7. Nature of Participation and Reimbursement Obligations. 30
2.9.8. Indemnity. 31
2.9.9. Liability for Acts and Omissions. 32
2.9.10. Sharing Letter of Credit Documentation. 33
2.10 Extension by Banks of the Expiration Date. 33
2.10.1. Requests; Approval by All Banks. 33
2.10.2. Approval by 80% Banks. 33
2.11 Designation of Subsidiaries and Release of Guarantors. 34
2.11.1. Release of Guarantors. 34
2.11.2. Designation of Non-Restricted Person. 34
2.11.3. Automatic Designation of Non-Restricted Person. 35
2.11.4. Designation of Restricted Subsidiary. 35
3. INTEREST RATES 35
3.1 Interest Rate Options. 35
3.1.1. Revolving Credit Interest Rate Options. 36
3.1.2. Rate Quotations. 36
3.2 Interest Periods. 36
3.3 Interest After Default. 36
3.3.1. Default Rate. 36
3.3.2. Acknowledgment. 37
3.4 LIBO-Rate Unascertainable; Illegality; Increased Costs;
Deposits Not Available. 37
3.4.1. Unascertainable. 37
3.4.2. Illegality; Increased Costs; Deposits Not Available. 37
3.4.3. Agent's and Bank's Rights. 37
3.5 Selection of Interest Rate Options. 38
4. PAYMENTS 38
4.1 Payments. 38
4.2 Pro Rata Treatment of Banks. 39
4.3 Interest Payment Dates. 39
4.4 Voluntary Prepayments. 39
4.4.1. Right to Prepay. 39
4.4.2. Replacement of a Bank. 40
4.4.3. Change of Lending Office. 41
4.5 Mandatory Payments. 41
4.6 Additional Compensation in Certain Circumstances. 41
4.6.1. Increased Costs or Reduced Return Resulting from Taxes,
Reserves, Capital Adequacy Requirements, Expenses, Etc. 41
4.6.2. Indemnity. 42
4.7 Notes. 43
4.8 Settlement Date Procedures. 43
5. REPRESENTATIONS AND WARRANTIES 43
5.1 Representations and Warranties. 43
5.1.1. Organization and Qualification. 43
5.1.2. Subsidiaries. 44
5.1.3. Power and Authority. 44
5.1.4. Validity and Binding Effect. 44
5.1.5. No Conflict. 45
5.1.6. Litigation. 45
5.1.7. Title to Properties. 45
5.1.8. Financial Statements. 45
5.1.9. Use of Proceeds; Margin Stock. 46
5.1.10. Full Disclosure. 46
5.1.11. Taxes. 47
5.1.12. Consents and Approvals. 47
5.1.13. No Event of Default; Compliance with Instruments. 47
5.1.14. Patents, Trademarks, Copyrights, Licenses, Etc. 47
5.1.15. Insurance. 48
5.1.16. Compliance with Laws. 48
5.1.17. Burdensome Restrictions. 48
5.1.18. Investment Companies; Regulated Entities. 48
5.1.19. Plans and Benefit Arrangements. 48
5.1.20. Employment Matters. 49
5.1.21. Environmental Matters. 49
5.1.22. Senior Debt Status. 50
5.2 Continuation of Representations. 50
6. CONDITIONS OF LENDING AND ISSUANCE OF LETTERS OF CREDIT 50
6.1 First Loans and Letters of Credit. 50
6.1.1. Officer's Certificate. 50
6.1.2. Incumbency Certificate. 51
6.1.3. Delivery of Loan Documents . 51
6.1.4. Opinion of Counsel. 51
6.1.5. Legal Details. 51
6.1.6. Payment of Fees. 52
6.1.7. Consents. 52
6.1.8. Officer's Certificate Regarding MACs. 52
6.1.9. No Actions or Proceedings. 52
6.2 Each Additional Loan or Letter of Credit. 52
7. COVENANTS 53
7.1 Affirmative Covenants. 53
7.1.1. Preservation of Existence, Etc. 53
7.1.2. Payment of Liabilities, Including Taxes, Etc. 53
7.1.3. Maintenance of Insurance. 53
7.1.4. Maintenance of Properties and Leases. 54
7.1.5. Maintenance of Patents, Trademarks, Etc. 54
7.1.6. Visitation Rights. 54
7.1.7. Keeping of Records and Books of Account. 54
7.1.8. Plans and Benefit Arrangements. 54
7.1.9. Compliance with Laws. 55
7.1.10. Use of Proceeds. 55
7.2 Negative Covenants. 55
7.2.1. Indebtedness. 55
7.2.2. Liens. 55
7.2.3. Loans and Investments. 56
7.2.4. Liquidations, Mergers, Consolidations, Acquisitions. 56
7.2.5. Dispositions of Assets or Subsidiaries; Sale and Leaseback. 57
7.2.6. Restricted Payments; Restricted Investments. 57
7.2.7. Subsidiaries, Partnerships and Joint Ventures. 58
7.2.8. Continuation of or Change in Business. 58
7.2.9. Plans and Benefit Arrangements. 58
7.2.10. Borrowing Base. 59
7.2.11. Minimum ATNW. 59
7.2.12. Leverage Ratio. 59
7.2.13. Inventory and Land Purchase Limits. 59
7.2.14. Fiscal Year. 60
7.2.15. Changes in Subordinated Debt Documents. 60
7.3 Reporting Requirements. 60
7.3.1. Quarterly Financial Statements. 60
7.3.2. Annual Financial Statements. 61
7.3.3. Certificates of the Borrower. 61
7.3.4. Notice of Default. 62
7.3.5. Notice of Litigation. 62
7.3.6. Notice of Change in Debt Rating. 63
7.3.7. Budgets, Forecasts, Other Reports and Information. 63
7.3.8. Notices Regarding Plans and Benefit Arrangements. 63
8. DEFAULT 64
8.1 Events of Default. 64
8.1.1. Payments Under Loan Documents. 65
8.1.2. Breach of Warranty. 65
8.1.3. Breach of Certain Negative Covenants. 65
8.1.4. Breach of Other Covenants. 65
8.1.5. Defaults in Other Agreements or Indebtedness. 65
8.1.6. Final Judgments or Orders. 65
8.1.7. Loan Document Unenforceable. 66
8.1.8. Uninsured Losses; Proceedings Against Assets. 66
8.1.9. Notice of Lien or Assessment. 66
8.1.10. Insolvency. 66
8.1.11. Events Relating to Plans and Benefit Arrangements. 66
8.1.12. Cessation of Business. 67
8.1.13. Change of Control. 67
8.1.14. Involuntary Proceedings. 67
8.1.15. Voluntary Proceedings. 68
8.2 Consequences of Event of Default. 68
8.2.1. Events of Default Other Than Bankruptcy, Insolvency or
Reorganization Proceedings. 68
8.2.2. Bankruptcy, Insolvency or Reorganization Proceedings. 68
8.2.3. Set-off. 69
8.2.4. Suits, Actions, Proceedings. 69
8.2.5. Application of Proceeds. 69
8.2.6. Other Rights and Remedies. 70
9. THE AGENT 70
9.1 Appointment. 70
9.2 Delegation of Duties. 70
9.3 Nature of Duties; Independent Credit Investigation. 70
9.4 Actions in Discretion of Agent; Instructions From the Banks. 71
9.5 Reimbursement and Indemnification of Agent by the Borrower. 71
9.6 Exculpatory Provisions; Limitation of Liability. 72
9.7 Reimbursement and Indemnification of Agent by Banks. 73
9.8 Reliance by Agent. 73
9.9 Notice of Default. 73
9.10 Notices. 73
9.11 Banks in Their Individual Capacities; Agents in its
Individual Capacity. 74
9.12 Holders of Notes. 74
9.13 Equalization of Banks. 74
9.14 Successor Agent. 75
9.15 Agent's Fee. 75
9.16 Availability of Funds. 75
9.17 Calculations. 76
9.18 Beneficiaries. 76
10. MISCELLANEOUS 76
10.1 Modifications, Amendments or Waivers. 76
10.1.1. Increase of Commitment. 76
10.1.2. Extension of Payment; Reduction of Principal,
Interest or Fees; Modification of Terms of Payment. 77
10.1.3. Miscellaneous 77
10.2 No Implied Waivers; Cumulative Remedies; Writing Required. 77
10.3 Reimbursement and Indemnification of Banks by the Borrower;
Taxes. 77
10.4 Holidays. 78
10.5 Funding by Branch, Subsidiary or Affiliate. 79
10.5.1. Notional Funding. 79
10.5.2. Actual Funding. 79
10.6 Notices. 79
10.7 Severability. 80
10.8 Governing Law. 80
10.9 Prior Understanding. 81
10.10 Duration; Survival. 81
10.11 Successors and Assigns. 81
10.12 Confidentiality. 83
10.12.1. General. 83
10.12.2. Sharing Information With Affiliates of the Banks. 83
10.13 Counterparts. 83
10.14 Agent's or Bank's Consent. 84
10.15 Exceptions. 84
10.16 CONSENT TO FORUM; WAIVER OF JURY TRIAL. 84
10.17 Tax Withholding Clause. 84
10.18 Joinder of Guarantors. 85
10.19 Concerning Agent Terms. 85
10.20 Ratification of Notes and Loan Documents and Existing
Obligations. 86
LIST OF SCHEDULES AND EXHIBITS
SCHEDULES
SCHEDULE 1.1(A) - APPLICABLE MARGIN
SCHEDULE 1.1(B) - COMMITMENTS OF BANKS AND ADDRESSES FOR NOTICES
SCHEDULE 1.1(C) - LISTING OF RESTRICTED SUBSIDIARIES, JOINT
VENTURES, MORTGAGE SUBSIDIARIES AND NON-
RESTRICTED PERSONS
SCHEDULE 1.1(E) - INCOME PRODUCING PROPERTIES
SCHEDULE 1.1(P) - PERMITTED LIENS
SCHEDULE 2.9.1 - EXISTING LETTERS OF CREDIT
SCHEDULE 5.1.2 - SUBSIDIARIES
SCHEDULE 5.1.12 - CONSENTS AND APPROVALS
SCHEDULE 7.2.1 - PERMITTED INDEBTEDNESS
EXHIBITS
EXHIBIT 1.1(A) - ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT 1.1.(B)(1) - BANK JOINDER
EXHIBIT 1.1(G) - GUARANTOR JOINDER
EXHIBIT 1.1(R) - REVOLVING CREDIT NOTE
EXHIBIT 1.1(S) - SWING LOAN NOTE
EXHIBIT 2.4.1 - LOAN REQUEST
EXHIBIT 2.4.2 - SWING LOAN REQUEST
EXHIBIT 7.3.3.1 - QUARTERLY COMPLIANCE CERTIFICATE
EXHIBIT 7.3.3.2 - BORROWING BASE CERTIFICATE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT is dated February
20, 2003 and is made by and among X. XXXXXXXXX ENTERPRISES, INC., a New
Jersey corporation (the "Borrower"), HOVNANIAN ENTERPRISES, INC., a
Delaware corporation ("Hovnanian" and a "Guarantor"), the BANKS (as
hereinafter defined), and PNC BANK, NATIONAL ASSOCIATION, in its capacity
as administrative agent for the Banks under this Agreement (hereinafter
referred to in such capacity as the "Agent").
WITNESSETH:
WHEREAS, the Banks provided a $440,000,000 revolving credit
facility to the Borrower pursuant to an Amended and Restated Credit
Agreement dated June 21, 2002 among the parties hereto (the "Prior
Credit Agreement");
WHEREAS, the Borrower and the Banks have agreed that the aggregate
Commitments of the Banks may be increased to $590,000,000 and that Prior
Credit Agreement be amended and restated as provided herein;
WHEREAS, the revolving credit provided hereunder shall be used to
refinance existing indebtedness, provide for letters of credit and
provide working capital and funds for general corporate purposes;
WHEREAS, the parties hereto intend that the Notes and other Loan
Documents delivered in connection with the Prior Credit Agreement be the
"Loan Documents" hereunder and be of continued force and effect.
NOW, THEREFORE, the parties hereto, in consideration of their
mutual covenants and agreements hereinafter set forth and intending to be
legally bound hereby, covenant and agree as follows:
1. CERTAIN DEFINITIONS
1.1 Certain Definitions.
In addition to words and terms defined elsewhere in this
Agreement, the following words and terms shall have the following
meanings, respectively, unless the context hereof clearly requires
otherwise:
Actual Leverage shall mean the ratio of (x)(i)
Homebuilding Indebtedness minus (ii) Excess Cash to (y) Adjusted Tangible
Net Worth.
Additional Bank shall have the meaning assigned to that
term in Section 10.11(b) (Successors and Assigns).
Adjusted Operating Income shall mean for any period the
sum of (x) consolidated net income of Hovnanian for such period, (y) to
the extent deducted in arriving at such net income, consolidated income
taxes, consolidated interest expense, Letter of Credit Fees,
depreciation, amortization, non-cash valuation charges or adjustments and
(z) cash distributions received by any Loan Party from Non-Restricted
Persons during such period. Adjusted Operating Income shall exclude net
income or loss of Non-Restricted Persons.
Adjusted Tangible Net Worth (or ATNW) shall mean (x)
consolidated shareholders equity of Hovnanian minus, without duplication
(y) (i) Intangibles, (ii) the Dollar amount of Restricted Investments and
(iii) equity (comprising "cost" according to GAAP minus the amount of
debt secured by applicable mortgages) in residential inventory properties
with Purchase Money Mortgages, all as calculated and consolidated in
accordance with GAAP.
Affiliate as to any Person shall mean any other Person
(i)which directly or indirectly controls, is controlled by, or is under
common control with such Person, (ii)which beneficially owns or holds 10%
or more of any class of the voting or other equity interests of such
Person, or (iii)10% or more of any class of voting interests or other
equity interests of which is beneficially owned or held, directly or
indirectly, by such Person. Control, as used in this definition, shall
mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise,
including the power to elect a majority of the directors or trustees of a
corporation or trust, as the case may be.
Agent shall mean PNC Bank, National Association, and
its successors and assigns.
Agent's Fee shall have the meaning assigned to that
term in Section 9.15 (Agent's Fee).
Agent's Letter shall have the meaning assigned to that
term in Section 9.15 (Agent's Fee).
Agreement shall mean this Credit Agreement, as the same
may be supplemented or amended from time to time, including all schedules
and exhibits.
Annual Statements shall have the meaning assigned to
that term in Section 5.1.8((i) (Historical Statements)).
Applicable Commitment Fee Rate shall mean the
percentage rate per annum at the indicated level of Debt Rating in the
pricing grid on Schedule 1.1(A) below the heading "Commitment Fee." The
Applicable Commitment Fee Rate shall be computed in accordance with the
parameters set forth on Schedule 1.1(A).
Applicable Letter of Credit Fee Rate shall mean the
percentage rate per annum at the indicated level of Debt Rating in the
pricing grid on Schedule 1.1(A) below the heading "LOC Fee." The
Applicable Letter of Credit Fee Rate shall be computed in accordance with
the parameters set forth on Schedule 1.1(A).
Applicable Margin shall mean, as applicable:
(A) the percentage spread to be added to Base Rate
under the Revolving Credit Base Rate Option at the indicated level of
Debt Rating in the pricing grid on Schedule 1.1(A) below the heading
"Base Rate Margin,"
(B) the percentage spread to be added to LIBO-Rate
under the Revolving Credit LIBO-Rate Option at the indicated level of
Debt Rating in the pricing grid on Schedule 1.1(A) below the heading
"Libor Margin".
The Applicable Margin shall be computed in accordance with the parameters
set forth on Schedule 1.1(A).
Assignee Bank shall have the meaning assigned to such
term in Section 2.10.2 (Approval by 80% Banks).
Assignment and Assumption Agreement shall mean an
Assignment and Assumption Agreement by and among a Purchasing Bank, a
Transferor Bank and the Agent, as Agent and on behalf of the remaining
Banks, substantially in the form of Exhibit 1.1(A).
Authorized Officer shall mean those individuals,
designated by written notice to the Agent from the Borrower, authorized
to execute notices, reports and other documents on behalf of the Loan
Parties required hereunder. The Borrower may amend such list of
individuals from time to time by giving written notice of such amendment
to the Agent.
Banks shall mean the financial institutions named on
Schedule 1.1(B) and their respective successors and assigns as permitted
hereunder, each of which is referred to herein as a Bank.
Base Rate shall mean the greater of (i)the interest
rate per annum announced from time to time by the Agent at its Principal
Office as its then prime rate, which rate may not be the lowest rate then
being charged commercial borrowers by the Agent, or (ii)the Federal Funds
Open Rate plus 1/2% per annum.
Base Rate Option shall mean the Revolving Credit Base
Rate Option.
Benefit Arrangement shall mean at any time an "employee
benefit plan," within the meaning of Section3(3) of ERISA, which is
neither a Plan nor a Multiemployer Plan and which is maintained,
sponsored or otherwise contributed to by the Borrower.
Borrower shall mean X. Xxxxxxxxx Enterprises, Inc., a
corporation organized and existing under the laws of the State of New
Jersey and wholly-owned by Hovnanian.
Borrowing Base shall mean at any time, the Dollar
amount equal to the sum of the following items, each owned free and clear
of all Liens (except Permitted Liens of the type described in items (i),
(ii), (iii), (iv), (v) and (vi) of the definition of "Permitted Liens")
by the Borrower, Hovnanian or a Restricted Subsidiary:
(i) 100% of Excess Cash;
(ii) 95% of Sold Homes;
(iii) 70% of Unsold Homes; and
(iv) 55% of Finished Lots and Land Under
Development;
provided however that the Borrowing Base shall exclude in all events the
Dollar amount of
property located outside of the United
States of America in excess of $10,000,000;
Unimproved Land;
(iii) any residential or commercial
property owned by Hovnanian or any
Subsidiary which is leased or held
for purposes of leasing primarily to
unaffiliated third parties; and
(iv) properties subject to any Purchase
Money Mortgage.
The determination of the Agent in respect of the Borrowing Base shall be
conclusive absent manifest error.
Borrowing Base Certificate shall mean the Borrowing
Base Certificate in the form of Exhibit 7.3.3.2 duly completed and
delivered by the Borrower pursuant to Section 7.3.3.2 (Borrowing Base
Certificate).
Borrowing Date shall mean, with respect to any Loan,
the date for the making thereof or the renewal or conversion thereof at
or to the same or a different Interest Rate Option, which shall be a
Business Day.
Borrowing Tranche shall mean specified portions of
Loans outstanding as follows: (i)any Loans to which a LIBO-Rate Option
applies which become subject to the same Interest Rate Option under the
same Loan Request by the Borrower and which have the same Interest Period
shall constitute one Borrowing Tranche, and (ii)all Loans to which a Base
Rate Option applies shall constitute one Borrowing Tranche.
Business Day shall mean any day other than a Saturday
or Sunday or a legal holiday on which commercial banks are authorized or
required to be closed for business at the Principal Office and if the
applicable Business Day relates to any Loan to which the LIBO-Rate Option
applies, such day must also be a day on which dealings are carried on in
the London interbank market.
Capital Stock Retirement shall mean any repurchase,
redemption, acquisition or retirement of any capital stock or other
ownership interest of Hovnanian or of any warrants, options or other
rights to purchase such capital stock or other ownership interest;
provided that "Capital Stock Retirement" shall not include the conversion
or exchange of any of the foregoing into shares of capital stock of
Hovnanian.
Cash Flow shall mean Adjusted Operating Income plus any
decrease in any Sold Homes, Unsold Homes, Unimproved Land or Finished
Lots and Land Under Development which is not the result of a valuation
charge or adjustment (or minus any increase in any of the foregoing
categories).
Cash Flow Coverage Ratio shall mean the ratio, as of
any date of determination, of (x) Cash Flow for the prior twelve (12)
months to (y) four (4) multiplied by Fixed Charges for the most-recently
ended fiscal quarter.
Closing Date shall mean the Business Day on which the
first Loan shall be made, which shall February 20, 2003. The closing
shall take place at 11:00 a.m., Eastern time, on the Closing Date at the
offices of Xxxxxxxx Ingersoll Professional Corporation, Philadelphia,
Pennsylvania, or at such other time and place as the parties agree.
Commitment shall mean as to any Bank its Revolving
Credit Commitment and, in the case of the Agent, its Revolving Credit
Commitment and its Swing Loan Commitment; and Commitments shall mean the
aggregate of the Revolving Credit Commitments of all of the Banks,
including the Swing Loan Commitment of the Agent.
Commitment Fee shall have the meaning assigned to that
term in Section 2.3 (Commitment Fees).
Compliance Certificate shall have the meaning assigned
to such term in Section 7.3.3 (Certificates of the Borrower).
Contamination shall mean the presence or release or
threat of release of Regulated Substances in, on, under or emanating to
or from any of the Property, which pursuant to Environmental Laws
requires notification or reporting to an Official Body, or which pursuant
to Environmental Laws requires the investigation, cleanup, removal,
remediation, containment, abatement of or other response action or which
otherwise constitutes a violation of Environmental Laws.
Debt Rating shall mean the rating of Hovnanian's senior
unsecured long-term debt by each of Standard & Poor's and Xxxxx'x.
Default Rate shall have the meaning assigned to that
term in Section 3.3.l (Default Rate).
Dividends shall mean any dividend or distribution by a
Person in respect of its capital stock or ownership interests, whether in
cash, property or securities.
Dollar, Dollars, U.S. Dollars and the symbol $ shall
mean lawful money of the United States of America.
Drawing Date shall mean each date that an amount is
paid by the Letter of Credit Bank under any Letter of Credit.
Dwelling Unit shall mean a residential housing unit
held for sale by a Loan Party.
Environmental Complaint shall mean any written
complaint by any Person or Official Body setting forth a cause of action
for personal injury or property damage, natural resource damage,
contribution or indemnity for response costs, civil or administrative
penalties, criminal fines or penalties, or declaratory or equitable
relief arising under any Environmental Laws or under any order, notice of
violation, citation, subpoena, request for information or other written
notice or demand of any type issued by an Official Body pursuant to any
Environmental Laws.
Environmental Laws shall mean all federal, state, local
and foreign Laws and any consent decrees, settlement agreements,
judgments, orders, directives, policies or programs issued by or entered
into with an Official Body pertaining or relating to: (i)pollution or
pollution control; (ii)protection of human health or the environment;
(iii)employee safety in the workplace; (iv)the presence, use, management,
generation, manufacture, processing, extraction, treatment, recycling,
refining, reclamation, labeling, transport, storage, collection,
distribution, disposal or release or threat of release of Regulated
Substances; (v)the presence of Contamination; (vi)the protection of
endangered or threatened species; and (vii)the protection of
Environmentally Sensitive Areas.
Environmentally Sensitive Area shall mean (i) any
wetland as defined by applicable Environmental Laws; (ii) any area
designated as a coastal zone pursuant to applicable Laws, including
Environmental Laws; (iii) any area of historic or archeological
significance or scenic area as defined or designated by applicable Laws,
including Environmental Laws; (iv)habitats of endangered species or
threatened species as designated by applicable Laws, including
Environmental Laws; or (v) a floodplain or other flood hazard area as
defined pursuant to any applicable Laws.
ERISA shall mean the Employee Retirement Income
Security Act of 1974, as the same may be amended or supplemented from
time to time, and any successor statute of similar import, and the rules
and regulations thereunder, as from time to time in effect.
ERISA Group shall mean, at any time, the Borrower and
any entity (whether or not incorporated) that is under common control
with the Borrower within the meaning of Section 4001 of ERISA, or the
Borrower l and all other entities which, together with the Borrower, are
treated as a single employer under Sections414 (b) or (c) of the Internal
Revenue Code.
Event of Default shall mean any of the events described
in Section 8.1 (Events of Default) and referred to therein as an "Event
of Default."
Excess Cash shall mean cash that would appear on a
consolidated balance sheet of Hovnanian (to the extent not pledged or
encumbered in any way) in excess of $10,000,000.
Existing Related Business shall mean any mortgage
services, income property management and title insurance businesses as
such businesses are operated as of the Closing Date.
Expiration Date shall mean, with respect to the
Revolving Credit Commitments, July 30, 2005 as such may be extended
pursuant to Section 2.10 (Extension by Banks of the Expiration Date).
Extending Bank shall have the meaning assigned to such
term in Section 2.10.2 (Approval by 80% Bank).
Federal Funds Effective Rate for any day shall mean the
rate per annum (based on a year of 360 days and actual days elapsed and
rounded upward to the nearest 1/100 of 1%) announced by the Federal
Reserve Bank of New York (or any successor) on such day as being the
weighted average of the rates on overnight federal funds transactions
arranged by federal funds brokers on the previous trading day, as
computed and announced by such Federal Reserve Bank (or any successor) in
substantially the same manner as such Federal Reserve Bank computes and
announces the weighted average it refers to as the "Federal Funds
Effective Rate" as of the date of this Agreement; provided, if such
Federal Reserve Bank (or its successor) does not announce such rate on
any day, the "Federal Funds Effective Rate" for such day shall be the
Federal Funds Effective Rate for the last day on which such rate was
announced.
Federal Funds Open Rate shall mean the rate per annum
determined by the Agent in accordance with its usual procedures (which
determination shall be conclusive absent manifest error) to be the "open"
rate for federal funds transactions as of the opening of business for
federal funds transactions among members of the Federal Reserve System
arranged by federal funds brokers on such day, as quoted by Xxxxxx
Guybutler, any successor entity thereto, or any other broker selected by
the Bank, as set forth on the applicable Telerate display page; provided,
however; that if such day is not a Business Day, the Federal Funds Open
Rate for such day shall be the "open rate" on the immediately preceding
Business Day, or if no such rate shall be quoted by a Federal funds
broker at such time, such other rate as determined by the Agent in
accordance with its usual procedures.
Financial Projections shall have the meaning assigned
to that term in Section 5.1.8((ii)) (Financial Projections).
Finished Lots and Land Under Development shall mean the
Dollar amount of the lower of (x) actual cost (including land costs and
capitalized expenses relating thereto) or (y) the market value
(determined in accordance with GAAP) of any land that has been granted
Preliminary Approvals until a time which is the earlier of when (x) it is
"Unsold Homes" and (y) it is "Sold Homes".
Fixed Charge Coverage Ratio shall mean the ratio, as of
any date of determination, of (x) Adjusted Operating Income for the prior
twelve (12) months to (y) four (4) multiplied by Fixed Charges for the
most-recently ended fiscal quarter.
Fixed Charges shall mean the sum of (i) interest cost
incurred on all Senior Homebuilding Indebtedness over the past fiscal
quarter; (ii) interest cost incurred on the Subordinated Debt over the
past fiscal quarter; (iii) 50% of the interest cost incurred on all
Purchase Money Mortgages over the past fiscal quarter; (iv) Letter of
Credit Fees accrued over the past fiscal quarter; and (v) the interest
component of capitalized leases over the past fiscal quarter.
GAAP shall mean generally accepted accounting
principles as are in effect from time to time, subject to the provisions
of Section 1.3 (Accounting Principles), and applied on a consistent basis
both as to classification of items and amounts.
Governmental Acts shall have the meaning assigned to
that term in Section 2.9.8 (Indemnity).
Guarantor shall mean each of the parties to the
Guaranty Agreement (and designated as a "Guarantor" on Schedule 1.1(C))
and each other Person which joins the Guaranty Agreement as a Guarantor
after the date hereof pursuant to Section 10.18 (Joinder of Guarantors).
As of the Closing Date, Hovnanian shall be a Guarantor and all Restricted
Subsidiaries other than the Borrower shall be Guarantors.
Guarantor Joinder shall mean a joinder by a Person as a
Guarantor under the Guaranty Agreement in the form of Exhibit 1.1(G).
Guaranty of any Person shall mean any obligation of
such Person guaranteeing or in effect guaranteeing any Indebtedness of
any other Person in any manner, whether directly or indirectly.
Guaranty Agreement shall mean the Amended and Restated
Guaranty and Suretyship Agreement dated the Closing Date and executed and
delivered by each of the Guarantors to the Agent for the benefit of the
Banks, as supplemented by joinders delivered from time to time in respect
of new Guarantors..
Historical Statements shall have the meaning assigned
to that term in Section 5.1.8((i)) (Historical Statements).
Homebuilding Indebtedness shall mean the sum of (x)
Senior Homebuilding Indebtedness and (y) Subordinated Debt.
Hovnanian shall mean Hovnanian Enterprises, Inc., a
Delaware corporation, shares of whose Class A Common Stock are registered
pursuant to the Securities Exchange Act of 1934.
Indebtedness shall mean, as to any Person at any time,
any and all indebtedness, obligations or liabilities (whether matured or
unmatured, liquidated or unliquidated, direct or indirect, absolute or
contingent, or joint or several) of such Person for or in respect of:
(i) borrowed money, (ii) amounts raised under or liabilities in respect
of any note purchase or acceptance credit facility, (iii)reimbursement
obligations (contingent or otherwise) under any letter of credit,
(iv)any other transaction (including forward sale or purchase agreements,
capitalized leases and conditional sales agreements) having the
commercial effect of a borrowing of money entered into by such Person to
finance its operations or capital requirements (but not including trade
payables and accrued expenses incurred in the ordinary course of business
which are not more than ninety (90) days past due or that are being
contested in good faith by appropriate proceedings), if and to the extent
any of any of the foregoing in this item (iv) would appear as a liability
on the balance sheet of such Person prepared on a consolidated basis in
accordance with GAAP, or (v)any Guaranty of Indebtedness for borrowed
money.
Ineligible Security shall mean any security which may
not be underwritten or dealt in by member banks of the Federal Reserve
System under Section 16 of the Banking Act of 1933 (12 U.S.C. Section 24,
Seventh), as amended.
Insolvency Proceeding shall mean, with respect to any
Person, (a)a case, action or proceeding with respect to such Person
(i)before any court or any other Official Body under any bankruptcy,
insolvency, reorganization or other similar Law now or hereafter in
effect, or (ii)for the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator, conservator (or similar official) of
any Loan Party or otherwise relating to the liquidation, dissolution,
winding-up or relief of such Person, or (b)any general assignment for the
benefit of creditors, composition, marshaling of assets for creditors, or
other, similar arrangement in respect of such Person's creditors
generally or any substantial portion of its creditors undertaken under
any Law.
Intangibles shall mean all patents, patent
applications, copyrights, trademarks, tradenames, goodwill, organization
expenses and other like items of Hovnanian and its Subsidiaries which are
treated as intangibles under GAAP.
Interest Period shall mean the period of time selected
by the Borrower in connection with (and to apply to) any election
permitted hereunder by the Borrower to have Revolving Credit Loans bear
interest under the LIBO-Rate Option. Subject to the last sentence of
this definition, such period shall be one, two, three or six Months if
Borrower selects the LIBO-Rate Option. Such Interest Period shall
commence on the effective date of such Interest Rate Option, which shall
be (i) the Borrowing Date if the Borrower is requesting new Loans, or
(ii) the date of renewal of or conversion to the LIBO-Rate Option if the
Borrower is renewing or converting to the LIBO-Rate Option applicable to
outstanding Loans. Notwithstanding the second sentence hereof: (A) any
Interest Period which would otherwise end on a date which is not a
Business Day shall be extended to the next succeeding Business Day unless
such Business Day falls in the next calendar month, in which case such
Interest Period shall end on the next preceding Business Day, and (B) the
Borrower shall not select, convert to or renew an Interest Period for any
portion of the Loans that would end after the Expiration Date.
Interest Rate Option shall mean any LIBO-Rate Option or
Base Rate Option.
Internal Revenue Code shall mean the Internal Revenue
Code of 1986, as the same may be amended or supplemented from time to
time, and any successor statute of similar import, and the rules and
regulations thereunder, as from time to time in effect.
Investment shall mean any loan or advance to or on
behalf of, or purchase, acquisition or ownership of any stock, bonds,
notes or securities of, or any partnership interest (whether general or
limited) or limited liability company interest in, or any other similar
investment or interest in, or any capital contribution made to, any other
Person, or any agreement to become or remain liable to do any of the
foregoing.
Investment in Related Business shall mean the
Investments by any of Hovnanian and the Restricted Subsidiaries in (i)
income-producing properties other than those listed on Schedule 1.1E; or
(ii ) Existing Related Businesses.
Joint Ventures shall mean any Person in whom a Loan
Party has an ownership interest and which is not a "Subsidiary". Each of
the Joint Ventures as of the Closing Date is listed on Schedule 1.1(C).
KHL shall mean K. HOV IP II, Inc., a California
corporation, successor by merger to KHL, Inc, a Delaware corporation, or,
as applicable, KHL, Inc, a Delaware corporation prior to such merger.
KHL Agreement shall mean KHL Agreement dated the date
of the Prior Credit Agreement and executed and delivered by KHL in
respect of its obligations to the Agent and the Banks.
Labor Contracts shall mean all employment agreements,
employment contracts, collective bargaining agreements and other
agreements among any Loan Party or Subsidiary of a Loan Party and its
employees.
Law shall mean any law (including common law),
constitution, statute, treaty, regulation, rule, ordinance, opinion,
release, ruling, order, injunction, writ, decree, bond, judgment,
authorization or approval, lien or award of or settlement agreement with
any Official Body.
Letter of Credit shall have the meaning assigned to
that term in Section 2.9.1 (Issuance of Letters of Credit).
Letter of Credit Bank shall have the meaning assigned
to that term in Section 2.9.1 (Issuance of Letters of Credit).
Letter of Credit Borrowing shall have the meaning
assigned to such term in Section 2.9.3.4 (Disbursements, Reimbursement).
Letter of Credit Fee shall have the meaning assigned to
that term in Section 2.9.2 (Letter of Credit Fees).
Letter of Credit Outstandings shall mean at any time
the sum of (i)the aggregate undrawn face amount of outstanding Letters of
Credit and (ii)the aggregate amount of all unpaid and outstanding
Reimbursement Obligations and Letter of Credit Borrowings.
LIBO-Rate shall mean, with respect to the Loans
comprising any Borrowing Tranche to which the LIBO-Rate Option applies
for any Interest Period, the interest rate per annum determined by the
Agent by dividing (the resulting quotient rounded upwards, if necessary,
to the nearest 1/100th of 1% per annum) (i)the rate of interest
determined by the Agent in accordance with its usual procedures (which
determination shall be conclusive absent manifest error) to be the
average of the London interbank offered rates for U.S. Dollars quoted by
the British Bankers' Association as set forth on Dow Xxxxx Markets
Service (formerly known as Telerate) (or appropriate successor or, if the
British Bankers' Association or its successor ceases to provide such
quotes, a comparable replacement determined by the Agent) display page
3750 (or such other display page on the Dow Xxxxx Markets Service system
as may replace display page 3750) two (2) Business Days prior to the
first day of such Interest Period for an amount comparable to such
Borrowing Tranche and having a borrowing date and a maturity comparable
to such Interest Period by (ii)a number equal to 1.00 minus the LIBO-Rate
Reserve Percentage. The LIBO-Rate may also be expressed by the following
formula:
LIBO-Rate = Average of London interbank offered rates quoted
by BBA or appropriate successor as shown on
Dow Xxxxx Markets Service display page 3750
1.00 - LIBO-Rate Reserve Percentage
The LIBO-Rate shall be adjusted with respect to any Loan to which the
LIBO-Rate Option applies that is outstanding on the effective date of any
change in the LIBO-Rate Reserve Percentage as of such effective date.
The Agent shall give prompt notice to the Borrower of the LIBO-Rate as
determined or adjusted in accordance herewith, which determination shall
be conclusive absent manifest error.
LIBO-Rate Option shall mean the Revolving Credit LIBO-
Rate Option.
LIBO-Rate Reserve Percentage shall mean as of any day
the maximum percentage in effect on such day, as prescribed by the Board
of Governors of the Federal Reserve System (or any successor) for
determining the reserve requirements (including supplemental, marginal
and emergency reserve requirements) with respect to eurocurrency funding
(currently referred to as "Eurocurrency Liabilities").
Lien shall mean any mortgage, deed of trust, pledge,
lien, security interest, charge or other encumbrance or security
arrangement of any nature whatsoever, whether voluntarily or
involuntarily given, including any conditional sale or title retention
arrangement, and any assignment, deposit arrangement or lease intended
as, or having the effect of, security.
LLC Interests shall have the meaning assigned to such
term in Section 5.1.2 (Subsidiaries).
Loan Documents shall mean this Agreement, the Agent's
Letter, the Notes, the Guaranty Agreement, and any other instruments,
certificates or documents delivered or contemplated to be delivered
hereunder or thereunder or in connection herewith or therewith, as the
same may be supplemented or amended from time to time in accordance
herewith or therewith, and Loan Document shall mean any of the Loan
Documents. Each of the Loan Documents under the Prior Credit Agreement
(other than the KHL Agreement and the Stock Pledge) shall be Loan
Documents hereunder.
Loan Parties shall mean the Borrower and the
Guarantors.
Loan Request shall have the meaning assigned to that
term in Section 2.5 (Revolving Credit Loan Requests; Swing Loan
Requests).
Loans shall mean collectively all Revolving Credit
Loans and Swing Loans and Loan shall mean separately, any Revolving
Credit Loan or Swing Loan.
Material Adverse Change shall mean any set of
circumstances or events which (a)has or could reasonably be expected to
have any material adverse effect whatsoever upon the validity or
enforceability of this Agreement or any other Loan Document, (b)is or
could reasonably be expected to be material and adverse to the business,
properties, assets, financial condition, results of operations or
business prospects of the Loan Parties taken as a whole, (c)impairs
materially or could reasonably be expected to impair materially the
ability of the Loan Parties taken as a whole to duly and punctually pay
or perform their material Indebtedness for borrowed money, or (d)impairs
materially or could reasonably be expected to impair materially the
ability of the Agent or any of the Banks, to the extent permitted, to
enforce their legal remedies pursuant to this Agreement, the Notes or the
Guaranty Agreement.
Month, with respect to an Interest Period under the
LIBO-Rate Option, shall mean the interval between the days in consecutive
calendar months numerically corresponding to the first day of such
Interest Period. If any LIBO-Rate Interest Period begins on a day of a
calendar month for which there is no numerically corresponding day in the
month in which such Interest Period is to end, the final month of such
Interest Period shall be deemed to end on the last Business Day of such
final month.
Moody's shall mean Xxxxx'x Investors Service, Inc. and
its successors.
Mortgage Subsidiary shall mean each Subsidiary which is
in the business of making residential mortgage loans. Each of the
Mortgage Subsidiaries as of the Closing Date is listed on Schedule
1.1(C).
Multiemployer Plan shall mean any employee benefit plan
which is a "multiemployer plan" within the meaning of Section 4001(a)(3)
of ERISA.
Non-approving Bank shall have the meaning assigned to
such term in Section 2.10.2 (Approval by 80% Banks).
Non-Restricted Person shall mean any (i) Joint Venture
and (ii) Subsidiary of Hovnanian which is not a Restricted Subsidiary.
Each of the Non-Restricted Persons as of the Closing Date is listed on
Schedule 1.1(C).
Notes shall mean the Revolving Credit Notes and the
Swing Note.
Notices shall have the meaning assigned to that term in
Section 10.6 (Notices).
Obligation shall mean any obligation or liability of
any of the Loan Parties to the Agent or any of the Banks, howsoever
created, arising or evidenced, whether direct or indirect, absolute or
contingent, now or hereafter existing, or due or to become due, under or
in connection with this Agreement, any Notes, the Letters of Credit, the
Agent's Letter or any other Loan Document.
Official Body shall mean any national, federal, state,
local or other government or political subdivision or any agency,
authority, board, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury or
arbitrator, in each case whether foreign or domestic.
Participation Advance shall mean, with respect to any
Bank, such Bank's payment in respect of its participation in a Letter of
Credit Borrowing according to its Ratable Share pursuant to Section 2.9.4
[Repayment of Participation Advances].
Partnership Interests shall have the meaning assigned
to such term in 5.1.2. (Subsidiaries).
PBGC shall mean the Pension Benefit Guaranty
Corporation established pursuant to Subtitle A of Title IV of ERISA or
any successor.
Permitted Acquisitions shall have the meaning assigned
to such term in Section 7.2.4 (Liquidations, Mergers, Consolidations,
Acquisitions).
Permitted Investments shall mean a Loan Party's
Investment in:
(a) (i) cash, marketable direct obligations
of the United States of America or any agency thereof, and certificates
of deposit, demand deposits, time deposits, or repurchase agreements
issued by any bank with a capital and surplus of at least $25,000,000
organized under the laws of the United States of America or any state
thereof, provided that such obligations, certificates of deposit, demand
deposits, time deposits, and repurchase agreements have a maturity of
less than one year from the date of purchase;
(ii) investment grade commercial paper or
debt having a maturity date of one year or less from the date of
purchase; and
(iii) funds holding assets primarily
consisting of those described in clause (i) hereof;
(b) loans or advances to employees of a Loan
Party in the ordinary course of business;
(c) any Person that is
or concurrently becomes a Loan Party;
(d) purchase money notes not exceeding
$5,000,000 principal amount in the aggregate received incident to sales
of property by a Restricted Subsidiary;
(e) trade credit extended on usual and
customary terms in the ordinary course of business;
(f) loans to officers and directors to the
extent permitted by Section 7.2.6.2 (Restricted Payment; Restricted
Investments);
(g) marketable securities costing at the time
of purchase no more than $3,000,000 in the aggregate of any one or more
residential real estate developers and which are registered under the
Securities Exchange Act of 1934; and
(h) other Investments not in excess of
$5,000,000 in the aggregate.
Permitted Liens shall mean:
(i) Liens for taxes, assessments or other
governmental charges not yet payable or being contested in good faith and
as to which adequate reserves shall have been established in accordance
with GAAP;
(ii) Pledges or deposits made in the
ordinary course of business to secure payment of workers' compensation,
or to participate in any fund in connection with workers' compensation,
unemployment insurance, old-age pensions or other social security
programs;
(iii) Mechanics', materialmen's,
warehousemen's, carriers' or other like liens arising in the ordinary
course of business securing obligations which are not overdue for a
period longer than 30 days or which are being contested in good faith by
appropriate proceedings;
(iv) Good-faith pledges or deposits made
in the ordinary course of business to secure performance of bids,
tenders, contracts (other than for the repayment of borrowed money) or
leases, not in excess of the aggregate amount due thereunder, or to
secure statutory obligations, or surety, appeal, indemnity, performance
or other similar bonds required in the ordinary course of business;
(v) Encumbrances consisting of zoning
restrictions, easements or other restrictions on the use of real
property, none of which materially impairs the use of such property or
the value thereof, and none of which is violated in any material respect
by existing or proposed structures or land use;
(vi) Liens, security interests and
mortgages in favor of the Agent for the benefit of the Banks;
(vii) Liens on property leased by any Loan
Party or Subsidiary of a Loan Party under capital and operating leases
not prohibited by this Agreement securing obligations of such Loan Party
or Subsidiary to the lessor under such leases;
(viii) Any Lien existing on the date
of this Agreement and described on Schedule 1.1(P), provided that the
principal amount secured thereby is not hereafter increased, and no
additional assets become subject to such Lien;
(ix) Purchase Money Mortgages and Purchase
Money Security Interests and Liens on real property owned and occupied by
Hovnanian or any Subsidiary; and
(x) The following, (A)if the validity or
amount thereof is being contested in good faith by appropriate and lawful
proceedings diligently conducted so long as levy and execution thereon
have been stayed and continue to be stayed or (B)if a final judgment is
entered and such judgment is discharged within thirty (30) days of entry,
and they do not in the aggregate materially impair the ability of any
Loan Party to perform its Obligations hereunder or under the other Loan
Documents:
(1) Claims or Liens for taxes,
assessments or charges due and payable and subject to interest or
penalty, provided that the applicable Loan Party maintains such reserves
or other appropriate provisions as shall be required by GAAP and pays all
such taxes, assessments or charges forthwith upon the commencement of
proceedings to foreclose any such Lien;
(2) Claims, Liens or encumbrances
upon, and defects of title to, real or personal property, including any
attachment of personal or real property or other legal process prior to
adjudication of a dispute on the merits;
(3) Claims or Liens of mechanics,
materialmen, warehousemen, carriers, or other statutory nonconsensual
Liens; or
(4) Liens resulting from final
judgments or orders described in Section 8.1.6 (Final Judgments or
Orders).
(xi) Other Liens securing obligations not
in excess of $5,000,000 in the aggregate.
Person shall mean any individual, corporation,
partnership, limited liability company, association, joint-stock company,
trust, unincorporated organization, joint venture, government or
political subdivision or agency thereof, or any other entity.
Plan shall mean at any time an employee pension benefit
plan (other than a Multiemployer Plan) which is covered by Title IV of
ERISA or is subject to the minimum funding standards under Section 412 of
the Internal Revenue Code in respect of which the Borrower or any member
of the ERISA Group is an "employer" as defined in Section 3(5) of ERISA.
PNC Bank shall mean PNC Bank, National Association, its
successors and assigns.
Potential Default shall mean any event or condition
which with notice, passage of time or a determination by the Agent or the
Required Banks, or any combination of the foregoing, would constitute an
Event of Default.
Preliminary Approvals shall mean the following: (i) in
New Jersey, as defined in the Municipal Land Use Law (N.J.S.A. 40:55D-1
et seq.) and (ii) for states other than New Jersey, a point in time
equivalent thereto.
Principal Office shall mean the main banking office of
the Agent in Pittsburgh, Pennsylvania or such other location so
designated by the Agent.
Prior Credit Agreement shall have the meaning assigned
to such term in the preamble to this Agreement.
Prohibited Transaction shall mean any prohibited
transaction as defined in Section 4975 of the Internal Revenue Code or
Section 406 of ERISA for which neither an individual nor a class
exemption has been issued by the United States Department of Labor.
Property shall mean all real property, both owned and
leased, of any Loan Party or Subsidiary of a Loan Party.
Purchase Money Mortgage shall mean any non-recourse
mortgages granted to secure Indebtedness of any Loan Party.
Purchase Money Security Interest shall mean Liens upon
tangible personal property securing loans to any Loan Party or deferred
payments by such Loan Party or Subsidiary for the purchase of such
tangible personal property and excluding Purchase Money Mortgages.
Purchasing Bank shall mean a Bank which becomes a party
to this Agreement by executing an Assignment and Assumption Agreement.
Ratable Share shall mean the proportion that a Bank's
Commitment (excluding the Swing Loan Commitment) bears to the Commitments
(excluding the Swing Loan Commitment) of all of the Banks.
Regulated Substances shall mean, without limitation,
any substance, material or waste, regardless of its form or nature,
defined under Environmental Laws as a "hazardous substance," "pollutant,"
"pollution," "contaminant," "hazardous or toxic substance," "extremely
hazardous substance," "toxic chemical," "toxic substance," "toxic waste,"
"hazardous waste," "special handling waste," "industrial waste,"
"residual waste," "solid waste," "municipal waste," "mixed waste,"
"infectious waste," "chemotherapeutic waste," "medical waste," or
"regulated substance" or any other material, substance or waste,
regardless of its form or nature, which otherwise is regulated by
Environmental Laws.
Regulation U shall mean Regulation U, T or X as
promulgated by the Board of Governors of the Federal Reserve System, as
amended from time to time.
Reimbursement Obligation shall mean the obligation of
the Borrower to reimburse a Letter of Credit Bank for draws under a
Letter of Credit issued by such Bank under this Agreement, except to the
extent such obligation is represented by a Revolving Credit Loan.
Reportable Event shall mean a reportable event
described in Section 4043 of ERISA and regulations thereunder with
respect to a Plan other than those events as to which the 30-day notice
is waived under the PBGC regulations.
Required Banks shall mean
(i) if there are no Loans, Reimbursement
Obligations or Letter of Credit Borrowings outstanding, Banks whose
Commitments (excluding the Swing Loan Commitments) aggregate at least 66
2/3% of the Revolving Credit Commitments of all of the Banks, or
(ii) if there are Loans, Reimbursement
Obligations, or Letter of Credit Borrowings outstanding, any Bank or
group of Banks if the sum of the Loans (excluding the Swing Loans),
Reimbursement Obligations and Letter of Credit Borrowings of such Banks
then outstanding aggregates at least 66 2/3% of the total principal
amount of all of the Loans (excluding the Swing Loans), Reimbursement
Obligations and Letter of Credit Borrowings then outstanding.
Reimbursement Obligations and Letter of Credit Borrowings shall be
deemed, for purposes of this definition, to be in favor of the Agent and
not a participating Bank if such Bank has not made its Participation
Advance in respect thereof and shall be deemed to be in favor of such
Bank to the extent of its Participation Advance if it has made its
Participation Advance in respect thereof.
Required Environmental Notices shall mean all notices,
reports, plans, forms or other filings which pursuant to Environmental
Laws, Required Environmental Permits or at the request or direction of an
Official Body either must be submitted to an Official Body or which
otherwise must be maintained.
Required Environmental Permits shall mean all permits,
licenses, bonds, consents, programs, approvals or authorizations required
under Environmental Laws to own, occupy or maintain the Property or which
otherwise are required for the operations and business activities of the
Loan Parties.
Required Share shall have the meaning assigned to such
term in Section 4.8 (Settlement Date Procedures).
Restricted Investment shall mean a Loan Party's
Investment that constitutes a Subsidiary Investment in any Non-
Restricted Person or any Investment in Related Business.
Restricted Payments shall mean
(i) Dividends and Capital Stock
Retirement payments after January 31, 2001 by Hovnanian or otherwise to
the shareholders of Hovnanian; and
(ii) Payments (whether in the form of
principal payments, note repurchases or similar items) to the holder of
Subordinated Debt made on or after January 31, 2001; provided, however,
with respect to this item (ii), a refinancing of the Subordinated Debt to
the extent consisting of the repayment of the Subordinated Debt and the
incurring of new "Subordinated Debt" within 60 days of such repayment
shall not constitute a "Restricted Payment".
Restricted Subsidiaries shall mean any Subsidiary that
has not been designated a Non-Restricted Person as of the Closing Date or
in accordance with Section 2.11 (Designation of Subsidiaries and Release
of Guarantors). Each of the Restricted Subsidiaries as of the Closing
Date is listed on Schedule 1.1(C).
Revolving Credit Base Rate Option shall mean the option
of the Borrower to have Revolving Credit Loans bear interest at the rate
and under the terms and conditions set forth in Section 3.1.1((i))
(Revolving Credit Base Rate Option).
Revolving Credit Commitment shall mean, as to any Bank
at any time, the amount set forth opposite its name on Schedule 1.1(B) in
the column labeled "Amount of Commitment for Revolving Credit Loans" or
on Schedule I to the Assignment and Assumption Agreement pursuant to
which such Bank became a party hereto, and Revolving Credit Commitments
shall mean the aggregate Revolving Credit Commitments of all of the
Banks.
Revolving Credit LIBO-Rate Option shall mean the option
of the Borrower to have Revolving Credit Loans bear interest at the rate
and under the terms and conditions set forth in Section 3.1.1((ii))
[Revolving Credit LIBO-Rate Option].
Revolving Credit Loans shall mean collectively and
Revolving Credit Loan shall mean separately all Revolving Credit Loans or
any Revolving Credit Loan made by the Banks or one of the Banks to the
Borrower pursuant to Section 2.1 (Revolving Credit Commitments) or 2.9.3
(Disbursements, Reimbursement).
Revolving Credit Note shall mean any Revolving Credit
Note of the Borrower in the form of Exhibit 1.1(R), whether in the form
of an Amended and Restated Note or a Revolving Credit Note which is not
amended and restated, issued by the Borrower at the request of a Bank
pursuant to Section 4.7 (Notes) evidencing the Revolving Credit Loans to
such Bank, together with all amendments, extensions, renewals,
replacements, refinancings or refundings thereof in whole or in part.
Revolving Facility Usage shall mean at any time the sum
of the Revolving Credit Loans outstanding and the Letter of Credit
Outstandings.
SEC shall mean the Securities and Exchange Commission
or any governmental agencies substituted therefor.
Senior Homebuilding Indebtedness shall mean the sum
(without duplication) of (a) outstanding principal amount of the
Obligations, (b) letters of credit (whether or not issued under this
Agreement), (c) Guaranties by any Loan Party of any obligation of any
Person which is not a Restricted Subsidiary or Hovnanian, (d) Senior
Notes, (e) surety bonds (or similar products) issued by bonding companies
in lieu of cash payments or cash deposits on contracts for any Loan Party
to acquire land inventory in respect of which a Loan Party is obligated
and (f) other Indebtedness of Hovnanian or a Restricted Subsidiary which
is permitted under this Agreement; provided however, that "Senior
Homebuilding Indebtedness" shall not include (i) obligations of Hovnanian
under the Keep-Well Guaranty dated July 16, 2001 previously provided to
Bank One, NA, as agent for the benefit of X. Xxxxxxxxx Mortgage Inc.,
(ii) debt secured by Purchase Money Security Interests and Purchase Money
Mortgages and (iii) Subordinated Debt.
Senior Notes shall mean the (i) $150,000,000 principal
amount 10 1/2% Senior Notes of the Borrower and guaranteed by Hovnanian
due October 2007 and (ii) $150,000,000 9 1/8% Senior Notes of the
Borrower and guaranteed by Hovnanian due in April 2009 and (iii) other
notes sold or guaranteed by Hovnanian or the Borrower from time to time
after the Closing Date on terms not materially less favorable to the
Banks (as determined by the Agent) as those described in clauses (i) and
(ii) above
Settlement Date shall mean the date selected from time
to time by the Agent (after consulting the Borrower) on which the Agents
elects to effect settlement pursuant to Section 4.8 (Settlement Date
Procedures).
Sold Homes shall mean the Dollar amount of the
capitalized construction costs of any Dwelling Unit upon which a third
party purchaser has paid a cash deposit pursuant to an enforceable
agreement of sale. Such cost shall include the proportional costs of the
land under the Dwelling Unit, site improvements and soft costs incurred
to date.
Standard & Poor's shall mean Standard & Poor's Ratings
Services, a division of The XxXxxx-Xxxx Companies, Inc., and its
successors.
Stock Pledge shall mean the Stock Pledge Agreement
dated the date of the Prior Credit Agreement pursuant to which Hovnanian
pledged to the Agent on behalf of the Banks 100% of the capital stock of
KHL as security for the Obligations.
Subordinated Debt shall mean (i) the $100,000,000
principal amount 9 3/4% Subordinated Notes of the Borrower due June 1,
2005, and (ii) any other unsecured indebtedness of the Borrower,
Hovnanian, or any other Loan Party which is subordinated by its terms to
the prior payment in full of the Obligations evidenced by this Agreement,
the Notes and the Letters of Credit, as may be outstanding from time to
time, in a manner no less favorable to the Banks than the terms of the
Subordinated Debt described in clause (i) above and which contain
covenants that are not materially less favorable to Hovnanian, the
Borrower or any other Loan Party than those contained in the Subordinated
Debt described in clause (i) above.
Subsidiary of any Person at any time, shall mean a
corporation, partnership, limited liability company or other entity (x)
whose assets and liabilities are consolidated with Hovnanian in
accordance with GAAP and (y) of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other
ownership interests having such power only by reason of the happening of
a contingency) to elect a majority of the board of directors or other
managers of such corporation, partnership or other entity are at the time
owned, or the management of which is otherwise controlled, directly or
indirectly through one or more intermediaries, or both, by such Person.
Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or
Subsidiaries of Hovnanian.
Subsidiary Investment shall mean with respect to any
Subsidiary or Joint Venture the sum of (x) loans to such Person by
Hovnanian or a Restricted Subsidiary and (y) Hovnanian's or a Restricted
Subsidiary's share of equity in such Person.
Subsidiary Shares shall have the meaning assigned to
that term in Section 5.1.2 (Subsidiaries).
Swing Loan Commitment shall mean PNC Bank's commitment
to make Swing Loans to the Borrower pursuant to Section 2.1.2 (Swing Loan
Commitment) hereof in an aggregate principal amount of up to $10,000,000.
Swing Loan Note shall mean the Swing Loan Note of the
Borrower in the form of Exhibit 1.1(S) evidencing the Swing Loans,
together with all amendments, extensions, renewals, replacements,
refinancings or refundings thereof in whole or in part.
Swing Loan Request shall mean a request for Swing Loans
made in accordance with Section 2.4.2 (Swing Loan Requests) hereof.
Swing Loans shall mean collectively and Swing Loan
shall mean separately all Swing Loans or any Swing Loan made by PNC Bank
to the Borrower pursuant to Section 2.1.2 (Swing Loan Commitment) hereof.
Total Debt Multiplier shall mean 2.40, subject to
adjustment as described in this definition.
(a) Total Debt Multiplier shall not at any time
be greater than 2.40 and shall decrease (under circumstances described
below) to 2.05 and then 1.95 and so forth in increments of 10 basis
points; similarly, at any time Total Debt Multiplier shall increase
(under circumstances described below) it shall increase in 10 basis point
increments up to 2.05 and then from 2.05 to 2.40. Such decreases and
increases shall occur as follows, with reference to the Fixed Charge
Coverage Ratio, but only when Actual Leverage is less than or equal to
2.2-to-1.0.
(b) If the Fixed Charge Coverage Ratio is less
than 1.25-to-1.0 for two (2) consecutive quarters (for purposes hereof
the "reference quarters"):
(i) then for the second of such quarters
Total Debt Multiplier shall reduce to 2.05; and
(ii) for the next such quarter after the
reference quarters, and each subsequent consecutive quarter in which the
Fixed Charge Coverage Ratio is less than 1.25-to-1.0, Total Debt
Multiplier shall reduce for each such quarter in the increments described
in subsection (a) of this definition.
(c) If the Fixed Charge Ratio equals or exceeds
1.25-to-1.0 for any quarter after the two (2) reference quarters, then
Total Debt Multiplier shall increase for such quarters in the increments
described in subsection (a) of this definition.
Transferor Bank shall mean the selling Bank pursuant to
an Assignment and Assumption Agreement.
Unimproved Land shall mean the Dollar value of land
which has not been granted Preliminary Approvals, calculated at the lower
of (x) the actual cost (including land costs and capital expenses
relating thereto) or (y) the market value (as determined in accordance
with GAAP) thereof.
Unsold Dwelling Units shall mean the number of Dwelling
Units comprising from time to time "Unsold Homes".
Unsold Homes shall mean the Dollar amount of
capitalized construction costs of any Dwelling Unit being built for which
the construction of slab (or foundation) has been completed and upon
which no cash deposit has been paid pursuant to an enforceable agreement
of sale. Such Dollar amount shall include the proportional costs of the
land under the Dwelling Unit, site improvements and soft costs actually
incurred to date.
1.2 Construction.
Unless the context of this Agreement otherwise clearly
requires, the following rules of construction shall apply to this
Agreement and each of the other Loan Documents:
1.2.1. Number; Inclusion.
references to the plural include the singular, the
plural, the part and the whole; "or" has the inclusive meaning
represented by the phrase "and/or," and "including" has the meaning
represented by the phrase "including without limitation";
1.2.2. Determination.
references to "determination" of or by the Agent or the
Banks shall be deemed to include good-faith estimates by the Agent or the
Banks (in the case of quantitative determinations) and good-faith beliefs
by the Agent or the Banks (in the case of qualitative determinations) and
such determination shall be conclusive absent manifest error;
1.2.3. Agent's Discretion and Consent.
whenever the Agent or the Banks are granted the right
herein to act in its or their sole discretion or to grant or withhold
consent such right shall be exercised in good faith;
1.2.4. Documents Taken as a Whole.
the words "hereof," "herein," "hereunder," "hereto" and
similar terms in this Agreement or any other Loan Document refer to this
Agreement or such other Loan Document as a whole and not to any
particular provision of this Agreement or such other Loan Document;
1.2.5. Headings.
the section and other headings contained in this
Agreement or such other Loan Document and the Table of Contents (if any)
preceding this Agreement or such other Loan Document are for reference
purposes only and shall not control or affect the construction of this
Agreement or such other Loan Document or the interpretation thereof in
any respect;
1.2.6. Implied References to this Agreement.
article, section, subsection, clause, schedule and
exhibit references are to this Agreement or other Loan Document, as the
case may be, unless otherwise specified;
1.2.7. Persons.
reference to any Person includes such Person's
successors and assigns but, if applicable, only if such successors and
assigns are permitted by this Agreement or such other Loan Document, as
the case may be, and reference to a Person in a particular capacity
excludes such Person in any other capacity;
1.2.8. Modifications to Documents.
reference to any agreement (including this Agreement
and any other Loan Document together with the schedules and exhibits
hereto or thereto), document or instrument means such agreement, document
or instrument as amended, modified, replaced, substituted for, superseded
or restated;
1.2.9. From, To and Through.
relative to the determination of any period of time,
"from" means "from and including," "to" means "to but excluding," and
"through" means "through and including"; and
1.2.10. Shall; Will.
references to "shall" and "will" are intended to have
the same meaning.
1.3 Accounting Principles.
Except as otherwise provided in this Agreement, all
computations and determinations as to accounting or financial matters and
all financial statements to be delivered pursuant to this Agreement shall
be made and prepared in accordance with GAAP (including principles of
consolidation where appropriate), and all accounting or financial terms
shall have the meanings ascribed to such terms by GAAP; provided,
however, that all accounting terms used in Section 7.2 (Negative
Covenants) (and all defined terms used in the definition of any
accounting term used in Section 7.2 (Negative Covenants) shall have the
meaning given to such terms (and defined terms) under GAAP as in effect
on the date hereof applied on a basis consistent with those used in
preparing the Annual Statements referred to in Section 5.1.8((i))
(Historical Statements). In the event of any change after the date
hereof in GAAP, and if such change would result in the inability to
determine compliance with the financial covenants set forth in Section
7.2 (Negative Covenants) based upon the Loan Parties' regularly prepared
financial statements by reason of the preceding sentence, then the
parties hereto agree to endeavor, in good faith, to agree upon an
amendment to this Agreement that would adjust such financial covenants in
a manner that would not affect the substance thereof, but would allow
compliance therewith to be determined in accordance with the Loan
Parties' financial statements at that time.
2. REVOLVING CREDIT AND SWING LOAN FACILITIES
2.1 Revolving Credit Commitments.
2.1.1. Revolving Credit Loans.
Subject to the terms and conditions hereof and relying
upon the representations and warranties herein set forth, each Bank
severally agrees to make Revolving Credit Loans to the Borrower at any
time or from time to time on or after the date hereof to the Expiration
Date provided that after giving effect to such Loan the aggregate amount
of Revolving Credit Loans from such Bank shall not exceed such Bank's
Revolving Credit Commitment minus such Bank's Ratable Share of the Letter
of Credit Outstandings. Within such limits of time and amount and
subject to the other provisions of this Agreement, the Borrower may
borrow, repay and reborrow pursuant to this Section 2.1.
2.1.2. Swing Loan Commitment.
Subject to the terms and conditions hereof and relying
upon the representations and warranties herein set forth, PNC Bank shall
make swing loans (the "Swing Loans") to the Borrower at any time or from
time to time after the date hereof to, but not including, the Expiration
Date, in an aggregate principal amount up to but not in excess of the
Swing Loan Commitment. The Swing Loan Commitment is a sublimit of the
Revolving Credit Commitments and the aggregate principal amount of the
Swing Loans, the Revolving Credit Loans and the Letter of Credit
Outstandings of all the Banks at any one time outstanding shall not
exceed the Revolving Credit Commitments of all the Banks. Within such
limits of time and amount and subject to the other provisions of this
Agreement, the Borrower may borrow, repay and reborrow pursuant to this
Section 2.1.2. Swing Loans shall, at the option of PNC Bank after
consultation with the Borrower, be repaid by the proceeds of a Revolving
Credit Loan deemed to have been made for such purpose pursuant to Section
2.8 [Borrowings to Repay Swing Loans] and shall be subject to the
provisions of Section 4.8 [Settlement Date Procedures].
2.1.3. Increase in Commitments After Closing Date.
Borrower may request at any time after the Closing
Date, subject to the time restrictions in Section 2.1.1 (Revolving Credit
Loan) and the requirements of Section 6.2 (Each Additional Loan or Letter
of Credit), that a new lender join this Agreement as a "Bank" in order to
provide additional Revolving Credit Commitments or that an existing Bank
increase its Revolving Credit Commitment. (Any existing Bank may decline
to increase its Revolving Credit Commitment in its sole discretion.) In
connection with any such increase, Schedule 1.1(A) shall be amended and
restated to reflect such increase. The selection of any new Bank shall
be subject to the Borrower's and Agent's consent, which shall not be
unreasonably withheld. Any new Bank shall join this Agreement as a Bank
pursuant to the procedures contained in Section 10.11(b) (Additional
Bank). The Revolving Credit Commitments as increased in accordance
herewith shall not exceed Five Hundred Ninety Million Dollars
($590,000,000).
2.1.4. Voluntary Reduction of Commitment.
The Borrower shall have the right at any time after the
Closing Date (i) upon five (5) days' prior written notice to the Agent to
permanently reduce the Revolving Credit Commitments, in a minimum amount
of $500,000 and whole multiples of $100,000 (provided that in no event
shall the aggregate Revolving Credit Commitments be reduced to an amount
less than $295,000,000) or (ii) at any time upon prepayment in full of
the Obligations, terminate completely the Commitments, without penalty or
premium except as hereinafter set forth, provided that any such reduction
or termination shall be accompanied by prepayment of the Notes, together
with outstanding Commitment Fees, and the full amount of interest accrued
on the principal sum to be prepaid (and all amounts referred to in
Section 4.6.2 (Indemnity) hereof), to the extent that the aggregate
amount thereof then outstanding exceeds the Commitments as so reduced or
terminated. Any notice to reduce the Revolving Credit Commitments under
this Section 2.1. shall be irrevocable.
2.2 Nature of Banks' Obligations with Respect to Revolving Credit
Loans.
Each Bank shall be obligated to participate in each request
for Revolving Credit Loans pursuant to Section 2.4 (Revolving Credit Loan
Requests; Swing Loan Requests) in accordance with its Ratable Share. The
aggregate of each Bank's Revolving Credit Loans outstanding hereunder to
the Borrower at any time shall never exceed its Revolving Credit
Commitment minus its Ratable Share of the Letter of Credit Outstandings.
The obligations of each Bank hereunder are several. The failure of any
Bank to perform its obligations hereunder shall not affect the
Obligations of the Borrower to any other party nor shall any other party
be liable for the failure of such Bank to perform its obligations
hereunder. The Banks shall have no obligation to make Revolving Credit
Loans hereunder on or after the Expiration Date.
2.3 Commitment Fees.
Accruing from the date hereof until the Expiration Date, the
Borrower agrees to pay to the Agent for the account of each Bank, as
consideration for such Bank's Revolving Credit Commitment hereunder, a
nonrefundable commitment fee (the "Commitment Fee") equal to the
Applicable Commitment Fee Rate (computed on the basis of a year of 365 or
366 days, as the case may be, and actual days elapsed) on the average
daily difference between the amount of (i) such Bank's Revolving Credit
Commitment as the same may be constituted from time to time and the
(ii) the sum of such Bank's Revolving Credit Loans outstanding (plus, in
the case of PNC Bank, its Swing Loans outstanding) plus its Ratable Share
of Letter of Credit Outstandings. All Commitment Fees shall be payable
in arrears on the fifteenth (15) day of each calendar quarter after the
date hereof and on the Expiration Date or upon acceleration of the
Obligations.
2.4 Revolving Credit Loan Requests; Swing Loan Requests.
2.4.1. Revolving Credit Loan Requests.
Except as otherwise provided herein, the Borrower may
from time to time prior to the Expiration Date request the Banks to make
Revolving Credit Loans, or renew or convert the Interest Rate Option
applicable to existing Revolving Credit Loans or pursuant to Section 3.2
(Interest Periods), by delivering to the Agent, not later than 11:00
a.m., Eastern time, (i)three (3) Business Days prior to the proposed
Borrowing Date with respect to the making of Revolving Credit Loans to
which the LIBO-Rate Option applies or the conversion to or the renewal of
the LIBO-Rate Option for any Loans; and (ii) on the day of either the
proposed Borrowing Date with respect to the making of a Revolving Credit
Loan to which the Base Rate Option applies or the last day of the
preceding Interest Period with respect to the conversion to the Base Rate
Option for any Loan, of a duly completed request therefor substantially
in the form of Exhibit 2.4.1 or a request by telephone promptly confirmed
in writing by letter or facsimile in such form (each, a "Loan Request"),
it being understood that the Agent may rely on the authority of any
individual making such a telephonic request without the necessity of
receipt of such written confirmation. Each Loan Request shall be
irrevocable and shall specify (i)the proposed Borrowing Date; (ii)the
aggregate amount of the proposed Loans comprising each Borrowing Tranche,
which shall be in integral multiples of $500,000 and not less than
$2,500,000 for each Borrowing Tranche to which the LIBO-Rate Option
applies and which shall be in integral multiples of $100,000 and not less
than $500,000 for Borrowing Tranches to which the Base Rate Option
applies; (iii)whether the LIBO-Rate Option or Base Rate Option shall
apply to the proposed Loans comprising the applicable Borrowing Tranche;
and (iv)in the case of a Borrowing Tranche to which the LIBO-Rate Option
applies, an appropriate Interest Period for the Loans comprising such
Borrowing Tranche.
2.4.2. Swing Loan Requests.
Except as otherwise provided herein, the Borrower may
from time to time prior to the Expiration Date request PNC Bank to make
Swing Loans by delivery to PNC Bank not later than 2:00 p.m. Eastern time
on the proposed Borrowing Date of a duly completed request therefor
substantially in the form of Exhibit 2.4.2 hereto or a request by
telephone promptly confirmed in writing by letter or facsimile (each, a
"Swing Loan Request"), it being understood that the Agent may rely on the
authority of any individual making such a telephonic request without the
necessity of receipt of such written confirmation. Each Swing Loan
Request shall be irrevocable and shall specify the proposed Borrowing
Date and the principal amount of such Swing Loan, which shall be not less
than $100,000.
2.5 Making Revolving Credit Loans and Swing Loans.
2.5.1. Generally.
The Agent shall, promptly after receipt by it of a Loan
Request pursuant to Section 2.4.1 (Revolving Credit Loan Requests), but
not later than 12:00 noon, notify the Banks of its receipt of such Loan
Request specifying: (i)the proposed Borrowing Date and the time and
method of disbursement of the Revolving Credit Loans requested thereby;
(ii)the amount and type of each such Revolving Credit Loan and the
applicable Interest Period (if any); and (iii)the apportionment among the
Banks of such Revolving Credit Loans as determined by the Agent in
accordance with Section 2.2 (Nature of Banks' Obligations with Respect to
Revolving Credit Loans). Each Bank shall remit the principal amount of
each Revolving Credit Loan to the Agent such that the Agent is able to,
and the Agent shall, to the extent the Banks have made funds available to
it for such purpose and subject to Section 6.2 (Each Additional Loan or
Letter of Credit), fund such Revolving Credit Loans to the Borrower in
U.S. Dollars and immediately available funds at the Principal Office
prior to 2:30 p.m., Eastern time, on the applicable Borrowing Date,
provided that if any Bank fails to remit such funds to the Agent in a
timely manner, the Agent may elect in its sole discretion to fund with
its own funds the Revolving Credit Loans of such Bank on such Borrowing
Date, and such Bank shall be subject to the repayment obligation in
Section 9.16 (Availability of Funds).
2.5.2. Making Swing Loans.
Subject to the other provisions of this Agreement, PNC
Bank shall, after receipt by it of a Swing Loan Request pursuant to
Section 2.4.2 (Swing Loan Requests), fund such Swing Loan to the Borrower
in Dollars and immediately available funds at the Principal Office as
soon as reasonably practicable after receipt by PNC Bank of said Swing
Loan Request but in any event by the close of business on the same
Business Day.
2.6 Swing Loan Note.
The obligation of the Borrower to repay the unpaid principal
amount of the Swing Loans made to it by PNC Bank together with interest
thereon shall, if requested by PNC Bank, be evidenced by the Swing Loan
Note dated the Closing Date payable to the order of PNC Bank in a face
amount equal to the Swing Loan Commitment.
2.7 Use of Proceeds.
The proceeds of the Revolving Credit Loans shall be used to
refinance existing indebtedness and provide for Letters of Credit and
provide working capital and funds for general corporate purpose for the
Borrower, Hovnanian and the Restricted Subsidiaries, all in accordance
with Section 7.1.10 (Use of Proceeds).
2.8 Borrowings to Repay Swing Loans.
PNC Bank may, at its option, and upon consultation with the
Borrower, exercisable at any time for any reason whatsoever, demand that
each Bank shall make a Revolving Credit Loan in an amount equal to such
Bank's Ratable Share of the aggregate principal amount of the outstanding
Swing Loans made in accordance with Section 2.5.2 (Making Swing Loans),
plus, if PNC Bank so requests, accrued interest thereon, provided that no
Bank shall be obligated in any event to make Revolving Credit Loans in
excess of its Revolving Credit Commitment. Revolving Credit Loans made
pursuant to the preceding sentence shall bear interest at the Base Rate
Option and shall be deemed to have been properly requested in accordance
with Section 2.4.1 (Revolving Credit Loan Requests) without regard to any
of the requirements of that provision. PNC Bank shall provide notice to
the Banks (which may be telephonic or written notice by letter, facsimile
or telex) that such Revolving Credit Loans are to be made under this
Section 2.8 and of the apportionment among the Banks, and the Banks shall
be unconditionally obligated to fund such Revolving Credit Loans (whether
or not the conditions specified in Section 2.4.1 (Revolving Credit Loan
Requests) or Section 6.2 (Each Additional Loan or Letter of Credit) are
then satisfied) by the time PNC Bank so requests, which shall not be
earlier than three o'clock (3:00) p.m. Eastern time on the Business Day
next after the date the Banks receive such notice from PNC Bank.
2.9 Letter of Credit Subfacility.
2.9.1. Issuance of Letters of Credit.
The Borrower may request the issuance of a letter of credit (each a
"Letter of Credit") on behalf of itself or another Loan Party by the
Agent or any Bank which issues a Letter of Credit hereunder (such Bank,
with respect to the issuance of the Letter of Credit so requested by the
Borrower, being a "Letter of Credit Bank") by delivering to the Agent and
the Letter of Credit Bank a completed application and agreement for
letters of credit in such form as the Letter of Credit Bank and the Agent
may specify from time to time by no later than 10:00 a.m., Eastern time,
at least three (3) Business Days, or such shorter period as may be agreed
to by the Letter of Credit Bank, in advance of the proposed date of
issuance. Each letter of credit issued hereunder, including those issued
under the terms of the Prior Credit Agreement and those issued or
existing pursuant to the Second Amended and Restated Credit Agreement
dated as of February 22, 2000 and thereafter made "Letters of Credit"
under the terms of the Prior Credit Agreement, is described on Schedule
2.9.1 and shall be deemed to be a "Letter of Credit" hereunder as of the
Closing Date. Subject to the terms and conditions hereof and in reliance
on the agreements of the other Banks set forth in this Section 2.9, the
Letter of Credit Bank will issue a Letter of Credit provided that each
Letter of Credit shall in no event expire later than one (1) Business Day
prior to the Expiration Date and provided that in no event shall Letter
of Credit Outstanding exceed, at any one time, $175,000,000.
2.9.2. Letter of Credit Fees.
The Borrower shall pay (i)to the Agent for the ratable
account of the Banks a fee (the "Letter of Credit Fee") equal to the
Applicable Letter of Credit Fee Rate (computed on the daily average
Letter of Credit Outstandings) and (ii)to the Agent on behalf of each
respective Letter of Credit Bank for its own account a fronting fee for
Letters of Credit issued by such Letter of Credit Bank equal to .125% per
annum (computed on the basis of a year of 365 or 366 days, as the case
may be, and actual days elapsed) and shall be payable quarterly in
arrears commencing with the fifteenth (15) day of each calendar quarter
following issuance of each Letter of Credit and on the Expiration Date.
The Borrower shall also pay to the Letter of Credit Bank for the Letter
of Credit Bank's sole account the Letter of Credit Bank's then in effect
customary fees and administrative expenses payable with respect to the
Letters of Credit as the Letter of Credit Bank may generally charge or
incur from time to time in connection with the issuance, maintenance,
modification (if any), assignment or transfer (if any), negotiation, and
administration of Letters of Credit.
2.9.3. Disbursements, Reimbursement.
2.9.3.1 Immediately upon the issuance
of each Letter of Credit, each Bank shall be deemed to, and hereby
irrevocably and unconditionally agrees to, purchase from the Letter of
Credit Bank a participation in such Letter of Credit and each drawing
thereunder in an amount equal to such Bank's Ratable Share of the maximum
amount available to be drawn under such Letter of Credit and the amount
of such drawing, respectively.
2.9.3.2 In the event of any request for
a drawing on or before 11:00 a.m. under a Letter of Credit by the
beneficiary or transferee thereof, the Letter of Credit Bank shall
promptly notify the Agent upon such request. Provided that it shall have
received such notice, the Agent will promptly notify the Borrower and
each Bank thereof, and the Borrower shall be deemed to have requested
that Revolving Credit Loans be made by the Banks in an amount equal to
the amount so paid by the Letter of Credit Bank under the Base Rate
Option to be disbursed on the Drawing Date under such Letter of Credit,
subject to the amount of the unutilized portion of the Revolving Credit
Commitment and not subject to the conditions set forth in Section 6.2
(Each Additional Loan or Letter of Credit). Any notice given by the
Letter of Credit Bank or the Agent pursuant to this Section 2.9.3.2 may
be oral if immediately confirmed in writing; provided that the lack of
such an immediate confirmation shall not affect the conclusiveness or
binding effect of such notice.
2.9.3.3 Each Bank shall upon any notice
pursuant to Section 2.9.3.2 (Disbursements, Reimbursement) make available
to the Agent on behalf of the Letter of Credit Bank an amount in
immediately available funds equal to its Ratable Share of the amount of
the drawing, whereupon the participating Banks shall (subject to Section
2.9.3.4 (Disbursements, Reimbursement)) each be deemed to have made a
Revolving Credit Loan under the Base Rate Option to the Borrower in that
amount. If any Bank so notified fails to make available to the Agent for
the account of the Agent on behalf of the Letter of Credit Bank the
amount of such Bank's Ratable Share of such amount by no later than two
o'clock (2:00) p.m., Eastern time on the Drawing Date, then interest
shall accrue on such Bank's obligation to make such payment from the
Drawing Date to the date on which such Bank makes such payment (i) at a
rate per annum equal to the Federal Funds Effective Rate during the first
three days following the Drawing Date and (ii) at a rate per annum equal
to the rate applicable to Loans under the Revolving Credit Base Rate
Option on and after the fourth day following the Drawing Date. The Agent
will promptly give notice of the occurrence of the Drawing Date, but
failure of the Agent to give any such notice on the Drawing Date or in
sufficient time to enable any Bank to effect such payment on such date
shall not relieve such Bank from its obligation under this Section
2.9.3.3.
2.9.3.4 With respect to any
unreimbursed drawing that is not converted into Revolving Credit Loans
under the Base Rate Option to the Borrower in whole or in part as
contemplated by Section 2.9.3.2 (Disbursements, Reimbursement), the
Borrower shall be deemed to have incurred from the Agent a borrowing
(each a "Letter of Credit Borrowing") in the amount of such drawing.
Such Letter of Credit Borrowing shall be due and payable on demand
(together with interest) and shall bear interest at the rate per annum
applicable to the Revolving Credit Loans under the Base Rate Option.
Each Bank's payment to the Agent pursuant to Section 2.9.3.3
[Disbursements, Reimbursement] shall be deemed to be a payment in respect
of its participation in such Letter of Credit Borrowing and shall
constitute a "Participation Advance" from such Bank in satisfaction of
its participation obligation under Section 2.9.3 (Disbursements,
Reimbursement).
2.9.4. Repayment of Participation Advances.
2.9.4.1 Upon (and only upon) receipt by
the Agent on behalf of the Letter of Credit Bank of immediately available
funds from the Borrower (i) in reimbursement of any payment made by the
on behalf of the Letter of Credit Bank under the Letter of Credit with
respect to which any Bank has made a Participation Advance to the Agent
on behalf of the Letter of Credit Bank or (ii) in payment of interest on
such a payment made by the Agent under such a Letter of Credit, the Agent
will pay to each Bank, in the same funds as those received by the Agent,
the amount of such Bank's Ratable Share of such funds, except the Agent
shall retain the amount of the Ratable Share of such funds of any Bank
that did not make a Participation Advance in respect of such payment by
Agent. If the Letter of Credit Bank receives any such payment prior to
1:00 p.m. on a Business Day and does not make payment to any such Bank
which has made such a Participation Advance on the same Business Day,
then such Bank shall be entitled to receive such Letter of Credit Bank
interest at the Federal Funds Effective Rate for each day until such
payment is made to such Bank.
2.9.4.2 If the Agent or the Letter of
Credit Bank is required at any time to return to any Loan Party, or to a
trustee, receiver, liquidator, custodian, or any official in any
Insolvency Proceeding, any portion of the payments made by any Loan Party
pursuant to Section 2.9.4.1 (Repayment of Participation Advances) in
reimbursement of a payment made under the Letter of Credit or interest or
fee thereon, each Bank shall, on demand of the Agent on behalf of the
Letter of Credit Bank, forthwith return to the Agent the amount of its
Ratable Share of any amounts so returned by the Agent or such Letter of
Credit Bank plus interest thereon from the date such demand is made to
the date such amounts are returned by such Bank to the Agent, at a rate
per annum equal to the Federal Funds Effective Rate in effect from time
to time.
2.9.5. Documentation.
Each Loan Party agrees to be bound by the terms of the
Letter of Credit Bank's application and agreement for letters of credit
and the Letter of Credit Bank's written regulations and customary
practices relating to letters of credit, though such interpretation may
be different from such Loan Party's own. In the event of a conflict
between such application or agreement and this Agreement, this Agreement
shall govern. It is understood and agreed that, except in the case of
gross negligence or willful misconduct, the Letter of Credit Bank shall
not be liable for any error, negligence and/or mistakes, whether of
omission or commission, in following any Loan Party's instructions or
those contained in the Letters of Credit or any modifications, amendments
or supplements thereto.
2.9.6. Determinations to Honor Drawing Requests.
In determining whether to honor any request for drawing
under any Letter of Credit by the beneficiary thereof, the Letter of
Credit Bank shall be responsible only to determine that the documents and
certificates required to be delivered under such Letter of Credit have
been delivered and that they comply on their face with the requirements
of such Letter of Credit.
2.9.7. Nature of Participation and Reimbursement Obligations.
Each Bank's obligation in accordance with this
Agreement to make the Revolving Credit Loans or Participation Advances,
as contemplated by Section 2.9.3 (Disbursements, Reimbursement), as a
result of a drawing under a Letter of Credit, and the obligations of the
Borrower to reimburse the Agent upon a draw under a Letter of Credit,
shall be absolute, unconditional and irrevocable, and shall be performed
strictly in accordance with the terms of this Section 2.9 (Letter of
Credit Subfacility) under all circumstances, including the following
circumstances:
(i) any set-off, counterclaim,
recoupment, defense or other right which such Bank may have against the
Agent, any Loan Party or any other Person for any reason whatsoever;
(ii) the failure of any Loan Party or any
other Person to comply, in connection with a Letter of Credit Borrowing,
with the conditions set forth in Section 2.1 (Revolving Credit
Commitments), 2.4 (Revolving Credit Loan Requests; Swing Loan Requests),
2.4.2 (Swing Loan Requests) or 6.2 (Each Additional Loan or Letter of
Credit), if applicable, or as otherwise set forth in this Agreement for
the making of a Revolving Credit Loan, it being acknowledged that such
conditions are not required for the making of a Letter of Credit
Borrowing and the obligation of the Banks to make Participation Advances
under Section 2.9.3 (Disbursements, Reimbursement);
(iii) any lack of validity or
enforceability of any Letter of Credit;
(iv) the existence of any claim, set-off,
defense or other right which any Loan Party or any Bank may have at any
time against a beneficiary or any transferee of any Letter of Credit (or
any Persons for whom any such transferee may be acting), the Agent, the
Letter of Credit Bank or any Bank or any other Person or, whether in
connection with this Agreement, the transactions contemplated herein or
any unrelated transaction (including any underlying transaction between
any Loan Party or Subsidiaries of a Loan Party and the beneficiary for
which any Letter of Credit was procured);
(v) any draft, demand, certificate or
other document presented under any Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect even if the Letter of
Credit Bank has been notified thereof;
(vi) payment by the Letter of Credit Bank
under any Letter of Credit against presentation of a demand, draft or
certificate or other document which does not comply with the terms of
such Letter of Credit;
(vii) any adverse change in the business,
operations, properties, assets, condition (financial or otherwise) or
prospects of any Loan Party or Subsidiaries of a Loan Party;
(viii) any breach of this Agreement or
any other Loan Document by any party thereto;
(ix) the occurrence or continuance of an
Insolvency Proceeding with respect to any Loan Party;
(x) the fact that an Event of Default or
a Potential Default shall have occurred and be continuing;
(xi) the fact that the Expiration Date
shall have passed or this Agreement or the Commitments hereunder shall
have been terminated; and
(xii) any other circumstance or happening
whatsoever, whether or not similar to any of the foregoing.
2.9.8. Indemnity.
In addition to amounts payable as provided in Section
9.5 (Reimbursement and Indemnification of Agent by the Borrower), the
Borrower hereby agrees to protect, indemnify, pay and save harmless the
Agent and any Letter of Credit Bank from and against any and all claims,
demands, liabilities, damages, losses, costs, charges and expenses
(including reasonable fees, expenses and disbursements of counsel and
allocated costs of internal counsel) which the Agent or any Letter of
Credit Bank may incur or be subject to as a consequence, direct or
indirect, of the issuance of any Letter of Credit, other than as a result
of (A)the gross negligence or willful misconduct of the Agent or any
Letter of Credit Bank as determined by a final judgment of a court of
competent jurisdiction or (B)the wrongful dishonor by the Letter of
Credit Bank of a proper demand for payment made under any Letter of
Credit, except if such dishonor resulted from any act or omission,
whether rightful or wrongful, of any present or future de jure or de
facto government or governmental authority (all such acts or omissions
herein called "Governmental Acts").
2.9.9. Liability for Acts and Omissions.
As between any Loan Party and the Agent or any Letter
of Credit Bank, such Loan Party assumes all risks of the acts and
omissions of, or misuse of the Letters of Credit by, the respective
beneficiaries of such Letters of Credit. In furtherance and not in
limitation of the foregoing, neither the Agent nor any Letter of Credit
Bank shall not be responsible for: (i)the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document submitted by any
party in connection with the application for an issuance of any such
Letter of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged (even if
the Agent or any Letter of Credit Bank shall have been notified thereof);
(ii)the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any such Letter of Credit
or the rights or benefits thereunder or proceeds thereof, in whole or in
part, which may prove to be invalid or ineffective for any reason;
(iii)the failure of the beneficiary of any such Letter of Credit, or any
other party to which such Letter of Credit may be transferred, to comply
fully with any conditions required in order to draw upon such Letter of
Credit or any other claim of any Loan Party against any beneficiary of
such Letter of Credit, or any such transferee, or any dispute between or
among any Loan Party and any beneficiary of any Letter of Credit or any
such transferee; (iv)errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher; (v)errors in
interpretation of technical terms; (vi)any loss or delay in the
transmission or otherwise of any document required in order to make a
drawing under any such Letter of Credit or of the proceeds thereof;
(vii)the misapplication by the beneficiary of any such Letter of Credit
of the proceeds of any drawing under such Letter of Credit; or (viii) any
consequences arising from causes beyond the control of the Agent or
Letter of Credit Bank, including any Governmental Acts, and none of the
above shall affect or impair, or prevent the vesting of, any of the
Agent's or any Letter of Credit Bank's rights or powers hereunder.
Nothing in the preceding sentence shall relieve the Agent or any Letter
of Credit Bank from liability for the Agent's or any Letter of Credit
Bank's gross negligence or willful misconduct in connection with actions
or omissions described in such clauses (i) through (viii) of such
sentence.
In furtherance and extension and not in limitation of
the specific provisions set forth above, any action taken or omitted by
the Agent or any Letter of Credit Bank under or in connection with the
Letters of Credit issued by it or any documents and certificates
delivered thereunder, if taken or omitted in good faith, shall not put
the Agent or any Letter of Credit Bank under any resulting liability to
any Loan Party or any Bank.
2.9.10. Sharing Letter of Credit Documentation.
Each Letter of Credit Bank shall furnish to the Agent
copies of any letter of credit application and related documentation to
which such Letter of Credit Bank and a Loan Party are parties and
promptly after issuance, a copy of any Letter of Credit or amendment to
any Letter of Credit issued by such Bank.
2.10 Extension by Banks of the Expiration Date.
2.10.1. Requests; Approval by All Banks.
After delivery by the Borrower of the annual financial
statements to be provided under Section 7.3.2 (Annual Financial
Statements])for the fiscal year ending October 30, 2002 or any subsequent
fiscal year, the Borrower may request a one-year extension of the
Expiration Date by written notice to the Banks made by May 30, and the
Banks agree to respond to the Borrower's request for an extension no
later than thirty (30) days following receipt of the request; provided,
however, that the failure of any Bank to respond within such time period
shall not in any manner constitute an agreement by such Bank to extend
the Expiration Date. If all Banks elect to extend, the Expiration Date
shall be extended for a period of one year. If one or more Banks decline
to extend or do not respond to Borrower's request, the provisions of
Section 2.10.2 (Approval by 80% Banks) shall apply.
2.10.2. Approval by 80% Banks.
In the event that one or more Banks do not agree to
extend the Expiration Date or do not respond to Borrower's request for an
extension within the time required under Section 2.10.1 (Requests;
Approval by All Banks) (each a "Non-approving Bank"), but 80% of the
Banks (measured by their Ratable Shares and not per capita) agree to such
extension within such time (each such agreeing Bank being an "Extending
Bank"), then the Borrower may, at the Borrower's option, on or before
July 31 of each year notify the Agent and the Banks that the Borrower
intends to employ one or more of the following three (3) options: (i)
cause the Commitment of each Non-approving Bank to be terminated (after
which time such Non-approving Bank shall cease to be a "Bank" hereunder)
and cause the aggregate Commitments to be reduced by the amount of such
terminated Commitments, or (ii) require the Non-approving Banks to sell,
and allow (upon prior notice to the Agent) the Extending Banks which have
agreed to such extension within the time required under Section 2.11.1
(Requests; Approval by All Banks) or any financial institution approved
by the Agent and (absent an Event of Default) the Borrower (each such
Person referred to in this clause (ii) being an "Assignee Bank") to
purchase all of the outstanding Loans if any, of the Non-approving Banks
and succeed to and assume the Commitments and all other rights, interests
and obligations of the Non-approving Banks under this Agreement and the
other Loan Documents, or (iii) require the Non-approving Bank to remain a
Bank and require it to maintain its Commitment and retain for such Non-
approving Bank's Commitment the "Expiration Date" established prior to
the extension referred to in this Section 2.10.2, all subject to the
other provisions of this Agreement. Any such purchase and assumption
pursuant to clause (ii) above shall be (1)pursuant to an Assignment and
Assumption Agreement and (2)subject to and in accordance with Section
10.11 (Successors and Assigns). The Borrower shall pay all amounts due
and payable to the Non-approving Bank on the effective date of such
Assignment and Assumption Agreement. In the event that the Agent shall
become a Non-approving Bank, the provisions of this Section 2.10
(Extension by Banks of the Expiration Date) shall be subject to Section
9.14 (Successor Agent). In the event that the Borrower has selected the
option described in clause (ii) above and if the Loans and Commitments of
a Non-approving Bank are, nevertheless, not fully assigned and assumed
pursuant to this Section 2.10.2, or terminated or retained pursuant to
clause (i) or clause (iii)above, as applicable, on or before August 31 of
such year, then the Expiration Date shall not be extended for any Bank.
Nothing in this Section 2.10.2 shall expand the options provided in
Section 4.4.2 (Replacement of a Bank).
2.11 Designation of Subsidiaries and Release of Guarantors.
2.11.1. Release of Guarantors.
At any time when the Borrower wishes to cause the Banks
to release a Guarantor from its obligations under the Guaranty Agreement
(whether directly or in connection with the designation of a Restricted
Subsidiary as a Non-Restricted Person), the consent of the Banks shall be
required as described below and shall be subject to the other provisions
of this Section 2.11.
(a) For the release of any Guarantor (i) whose
assets are principally comprised of residential or commercial property
which is leased or held for the purposes of leasing to unaffiliated third
parties or (ii) in which any Loan Party (or Loan Parties in the
aggregate) has, at the time of such release, a Subsidiary Investment less
than $100,000, no consent of the Banks shall be required and such request
of the Borrower shall be granted absent an Event of Default or Potential
Default, effective on the date specified by the Borrower which shall not
be earlier than five (5) Business Days after the receipt by the Agent of
such request;
(b) For the release of any Guarantor (not
described in item (a)(i) hereof) in which any Loan Party (or Loan Parties
in the aggregate) has, at the time of such release, a Subsidiary
Investment greater than or equal to $100,000 and less than $1,000,000,
the consent of Required Banks shall be required;
(c) For the release of Hovnanian or any
Guarantor (not described in item (a)(i) hereof) in which any Loan Party
(or Loan Parties in the aggregate) has, at the time of such release, a
Subsidiary Investment greater than or equal to $1,000,000, the consent of
100% of the Banks shall be required; and
(d) The designation of a Person as a Non-
Restricted Person for any reason shall not itself constitute a release of
any Guarantor.
2.11.2. Designation of Non-Restricted Person.
The Borrower may, by written notice delivered to the
Agent, designate as a Non-Restricted Person a Subsidiary formerly
designated a Restricted Subsidiary or a newly formed or acquired
Subsidiary, subject to: (i) the provisions of subsection 2.11.1 hereof
in relation to Guaranties, (ii) the requirements of Section 7 (Covenants)
and in particular Section 7.2.10 (Borrowing Base); and (iii) the
requirement that such designation not cause an Event of Default or
Potential Default. Such designation shall be effective on the date
specified by the Borrower which shall not be earlier than five (5)
Business Days after the receipt by the Agent of such notice.
2.11.3. Automatic Designation of Non-Restricted Person.
Upon the occurrence of any event described in Section
8.1.10 (Insolvency), Section 8.1.14 (Involuntary Proceedings), Section
8.1.15 (Voluntary Proceedings), or the winding-up or termination of
business, with respect to any Restricted Subsidiary, such Subsidiary
shall automatically become a Non-Restricted Person. Such designation as
a Non-Restricted Person shall, with respect such Person's obligations
under the Guaranty Agreement, if any, be subject to the requirements of
Section 2.11.1 (Release of Guarantors). The release of any Subsidiary
which is a Guarantor from its obligations under the Guaranty Agreement
pursuant to Section 2.11.1 (Release of Guarantors) shall automatically
cause such Subsidiary to be a Non-Restricted Person.
2.11.4. Designation of Restricted Subsidiary.
The Borrower may by written notice delivered to the
Agent designate as a Restricted Subsidiary a Subsidiary formerly
designated a Non-Restricted Person or a newly formed or acquired
Subsidiary. Such designation is subject to (i) compliance with Section
10.18 (Joinder of Guarantors); (ii) the requirements of Section 7
[Covenants] and in particular Section 7.2.10 (Borrowing Base); and (iii)
the requirement that such designation not cause an Event of Default or
Potential Default. Such designation shall be effective on the date
specified by the Borrower which shall not be earlier than five (5)
Business Days after the receipt by the Agent of such notice.
3. INTEREST RATES
3.1 Interest Rate Options.
The Borrower shall pay interest in respect of the outstanding
unpaid principal amount of the Loans as selected by it from the Base Rate
Option or LIBO-Rate Option set forth below applicable to the Loans, it
being understood that, subject to the provisions of this Agreement, the
Borrower may select different Interest Rate Options and different
Interest Periods to apply simultaneously to the Loans comprising
different Borrowing Tranches and may convert to or renew one or more
Interest Rate Options with respect to all or any portion of the Loans
comprising any Borrowing Tranche, provided that there shall not be at any
one time outstanding more than ten (10) Borrowing Tranches in the
aggregate among all of the Loans, and provided further that only the Base
Rate Option shall apply to the Swing Loans. If at any time the
designated rate applicable to any Loan made by any Bank exceeds such
Bank's highest lawful rate, the rate of interest on such Bank's Loan
shall be limited to such Bank's highest lawful rate.
3.1.1. Revolving Credit Interest Rate Options.
The Borrower shall have the right to select from the
following Interest Rate Options applicable to the Revolving Credit Loans
(subject to the provisions above regarding Swing Loans):
(i) Revolving Credit Base Rate Option: A
fluctuating rate per annum (computed on the basis of a year of 365 or 366
days, as the case may be, and actual days elapsed) equal to the Base Rate
plus the Applicable Margin, such interest rate to change automatically
from time to time effective as of the effective date of each change in
the Base Rate; or
(ii) Revolving Credit LIBO-Rate Option: A
rate per annum (computed on the basis of a year of 360 days and actual
days elapsed) equal to the LIBO-Rate plus the Applicable Margin.
3.1.2. Rate Quotations.
The Borrower may call the Agent on or before the date
on which a Loan Request is to be delivered to receive an indication of
the rates then in effect, but it is acknowledged that such projection
shall not be binding on the Agent or the Banks nor affect the rate of
interest which thereafter is actually in effect when the election is
made.
3.2 Interest Periods.
At any time when the Borrower shall select, convert to
or renew a LIBO-Rate Option, the Borrower shall notify the Agent thereof
at least three (3) Business Days prior to the effective date of such
LIBO-Rate Option by delivering a Loan Request. The notice shall specify
an Interest Period during which such Interest Rate Option shall apply.
Notwithstanding the preceding sentence, in the case of the renewal of a
LIBO-Rate Option at the end of an Interest Period, the first day of the
new Interest Period shall be the last day of the preceding Interest
Period, without duplication in payment of interest for such day.
3.3 Interest After Default.
3.3.1. Default Rate.
To the extent permitted by Law, upon the occurrence of
an Event of Default under Section 8.1.1 [Payment Under Loan Documents],
Section 8.1.10 [Insolvency], Section 8.1.14 [Involuntary Proceedings],
Section 8.1.15 [Voluntary Proceedings] or the Obligations are accelerated
under this Agreement and until such time such Event of Default shall have
been cured or waived, each Obligation hereunder shall bear interest at a
rate per annum equal to the sum of the rate of interest applicable under
the Revolving Credit Base Rate Option plus an additional 3.0% per annum
from the time such Obligation becomes due and payable and until it is
paid in full (the "Default Rate").
3.3.2. Acknowledgment.
The Borrower acknowledges that the increase in rate
referred to in Section 3.3.1 (Default Rate) reflects, among other things,
the fact that such Loans or other amounts have become a substantially
greater risk given their default status and that the Banks are entitled
to additional compensation for such risk; and all such interest shall be
payable by Borrower upon demand by Agent.
3.4 LIBO-Rate Unascertainable; Illegality; Increased Costs;
Deposits Not Available.
3.4.1. Unascertainable.
If on any date on which a LIBO-Rate would otherwise be
determined, the Agent shall have determined that:
(i) adequate and reasonable means do not
exist for ascertaining such LIBO-Rate, or
(ii) a contingency has occurred which
materially and adversely affects the London interbank eurodollar market
relating to the LIBO-Rate, the Agent shall have the rights specified in
Section 3.4.3 (Agent's and Bank's Rights).
3.4.2. Illegality; Increased Costs; Deposits Not
Available.
If at any time any Bank shall have determined that:
(i) the making, maintenance or funding of
any Loan to which a LIBO-Rate Option applies has been made impracticable
or unlawful by compliance by such Bank in good faith with any Law or any
interpretation or application thereof by any Official Body or with any
request or directive of any such Official Body (whether or not having the
force of Law), or
(ii) such LIBO-Rate Option will not
adequately and fairly reflect the cost to such Bank of the establishment
or maintenance of any such Loan, or
(iii) after making all reasonable efforts,
deposits of the relevant amount in Dollars for the relevant Interest
Period for a Loan, or to banks generally, to which a LIBO-Rate Option
applies, respectively, are not available to such Bank with respect to
such Loan, or to banks generally, in the interbank eurodollar market,
then the Agent shall have the rights specified in Section 3.4.3 (Agent's
and Bank's Rights).
3.4.3. Agent's and Bank's Rights.
In the case of any event specified in Section 3.4.1
(Unascertainable) above, the Agent shall promptly so notify the Banks and
the Borrower thereof, and in the case of an event specified in Section
3.4.2 (Illegality; Increased Costs; Deposits Not Available) above, such
Bank shall promptly so notify the Agent and endorse a certificate to such
notice as to the specific circumstances of such notice, and the Agent
shall promptly send copies of such notice and certificate to the other
Banks and the Borrower. Upon such date as shall be specified in such
notice (which shall not be earlier than the date such notice is given),
the obligation of (A)the Banks, in the case of such notice given by the
Agent, or (B)such Bank, in the case of such notice given by such Bank, to
allow the Borrower to select, convert to or renew a LIBO-Rate Option
shall be suspended until the Agent shall have later notified the
Borrower, or such Bank shall have later notified the Agent, of the
Agent's or such Bank's, as the case may be, determination that the
circumstances giving rise to such previous determination no longer exist.
If at any time the Agent makes a determination under Section 3.4.1
(Unascertainable) and the Borrower has previously notified the Agent of
its selection of, conversion to or renewal of a LIBO-Rate Option and such
Interest Rate Option has not yet gone into effect, such notification
shall be deemed to provide for selection of, conversion to or renewal of
the Base Rate Option otherwise available with respect to such Loans. If
any Bank notifies the Agent of a determination under Section 3.4.2
(Illegality; Increased Costs; Deposits Not Available), the Borrower
shall, subject to the Borrower's indemnification Obligations under
Section 4.6.2 (Indemnity), as to any Loan of the Bank to which a LIBO-
Rate Option applies, on the date specified in such notice either convert
such Loan to the Base Rate Option otherwise available with respect to
such Loan or prepay such Loan in accordance with Section 4.4 (Voluntary
Prepayments). Absent due notice from the Borrower of conversion or
prepayment, such Loan shall automatically be converted to the Base Rate
Option otherwise available with respect to such Loan upon such specified
date.
3.5 Selection of Interest Rate Options.
If the Borrower fails to select a new Interest Period to
apply to any Borrowing Tranche of Loans under the LIBO-Rate Option at the
expiration of an existing Interest Period applicable to such Borrowing
Tranche in accordance with the provisions of Section 3.2 [Interest
Periods], the Borrower shall be deemed to have converted such Borrowing
Tranche to the Revolving Credit Base Rate Option, commencing upon the
last day of the existing Interest Period.
4. PAYMENTS
4.1 Payments.
All payments and prepayments to be made in respect of
principal, interest, Commitment Fees, Letter of Credit Fees, Agent's Fee
or other fees or amounts due from the Borrower hereunder shall be payable
prior to eleven o'clock (11:00) a.m., Eastern time, on the date when due
without presentment, demand, protest or notice of any kind, all of which
are hereby expressly waived by the Borrower, and without set-off,
counterclaim or other deduction of any nature, and an action therefor
shall immediately accrue. Such payments shall be made to the Agent at
the Principal Office for the account of PNC Bank with respect to the
Swing Loans and for the ratable accounts of the Banks with respect to the
Revolving Credit Loans in Dollars and in immediately available funds, and
the Agent shall promptly distribute such amounts to the Banks in
immediately available funds, provided that in the event payments are
received by eleven o'clock (11:00) a.m., Eastern time, by the Agent with
respect to the Loans and such payments are not distributed to the Banks
on the same day received by the Agent, the Agent shall pay the Banks the
Federal Funds Effective Rate with respect to the amount of such payments
for each day held by the Agent and not distributed to the Banks. The
Agent's and each Bank's statement of account, ledger or other relevant
record shall, in the absence of manifest error, be conclusive as the
statement of the amount of principal of and interest on the Loans and
other amounts owing under this Agreement and shall be deemed an "account
stated."
4.2 Pro Rata Treatment of Banks.
Each borrowing shall be allocated to each Bank according to
its Ratable Share, and each selection of, conversion to or renewal of any
Interest Rate Option and each payment or prepayment by the Borrower with
respect to principal, interest, Commitment Fees, Letter of Credit Fees,
or other fees (except for the Agent's Fee) or amounts due from the
Borrower hereunder to the Banks with respect to the Loans, shall (except
as provided in Section 3.4.3 (Agent's and Bank's Rights) in the case of
an event specified in Sections 3.4 (LIBO-Rate Unascertainable;
Illegality, Increased Costs, Deposits Not Available), 4.4.2 (Replacement
of a Bank) or 4.6 (Additional Compensation in Certain Circumstances)) be
made in proportion to the applicable Loans outstanding from each Bank
and, if no such Loans are then outstanding, in proportion to the Ratable
Share of each Bank. Notwithstanding any of the foregoing, each borrowing
or payment or prepayment by the Borrower of principal, interest, fees or
other amounts from the Borrower with respect to Swing Loans shall be made
by or to PNC Bank according to Section 2 (Revolving Credit and Swing Loan
Facilities).
4.3 Interest Payment Dates.
Interest on Loans to which the Base Rate Option applies shall
be due and payable in arrears on the first Business Day of each calendar
month after the date hereof and on the Expiration Date or upon
acceleration of the Loan. Interest on Loans to which the LIBO-Rate
Option applies shall be due and payable on the last day of each Interest
Period for those Loans and, if such Interest Period is longer than three
(3) Months, also on the 90th day of such Interest Period. Interest on
mandatory prepayments of principal under Section 4.5 (Mandatory Payments)
shall be due on the date such mandatory prepayment is due. Interest on
the principal amount of each Loan or other monetary Obligation shall be
due and payable on demand after such principal amount or other monetary
Obligation becomes due and payable (whether on the stated maturity date,
upon acceleration or otherwise).
4.4 Voluntary Prepayments.
4.4.1. Right to Prepay.
The Borrower shall have the right at its option at any
time and from time to time to prepay the Loans in whole or part without
premium or penalty (except as provided in Section 4.4.2 (Replacement of a
Bank) below or in Section 4.6 (Additional Compensation in Certain
Circumstances)).
Whenever the Borrower desires to prepay any part of the Loans, it shall
provide a prepayment notice to the Agent no later than (A) 11:00 a.m.,
Eastern time, at least two (2) Business Days prior to the date of
prepayment of the Revolving Credit Loans to which the LIBO-Rate Option
applies, (B) 11:00 a.m., Eastern time, on the date of prepayment of
Revolving Credit Loans to which the Base Rate Option applies or (C) 2:00
p.m., Eastern time, on the date of prepayment of Swing Loans, setting
forth the following information:
(x) the date, which shall be a Business Day, on
which the proposed prepayment is to be made;
(y) a statement indicating the application of
the prepayment between the Swing Loans and the Revolving
Credit Loans; and
(z) the total principal amount of such
prepayment, which shall not be less than (i) $100,000 and in
increments of $100,000 for any Swing Loans, (ii) $500,000 and
in increments of $100,000 for any Revolving Credit Loan to
which the Base Rate Option applies or (iii) $2,500,000 and in
increments of $500,000 for any Revolving Credit Loan to which
the LIBO-Rate Option applies.
All prepayment notices shall be irrevocable. The
principal amount of the Loans for which a prepayment notice is given,
together with interest on such principal amount except with respect to
Loans to which the Base Rate Option applies, shall be due and payable on
the date specified in such prepayment notice as the date on which the
proposed prepayment is to be made. Except as provided in Section 3.4.3
(Agent's and Bank's Rights), if the Borrower prepays a Loan but fails to
specify the applicable Borrowing Tranche which the Borrower is prepaying,
the prepayment shall be applied first to Swing Loans, then to Loans to
which the Base Rate Option applies, and then to Loans to which the LIBO-
Rate Option applies. Any prepayment hereunder shall be subject to the
Borrower's Obligation to indemnify the Banks under Section 4.6.2
(Indemnity).
4.4.2. Replacement of a Bank.
In the event any Bank (i)gives notice under Section 3.4
(LIBO-Rate Unascertainable; Illegality; Increased Costs; Deposits Not
Available) or Section 4.6.1 (Increased Costs or Reduced Return Resulting
from Taxes, Reserves, Capital Adequacy Requirements, Expenses, Etc.),
(ii)does not fund Revolving Credit Loans because the making of such Loans
would contravene any Law applicable to such Bank, or (iii)becomes subject
to the control of an Official Body (other than normal and customary
supervision), then the Borrower shall have the right at its option, with
the consent of the Agent, which shall not be unreasonably withheld, to
prepay the Loans of such Bank in whole, together with all interest
accrued thereon, and terminate such Bank's Commitment within ninety (90)
days after (x)receipt of such Bank's notice under Section 3.4 (LIBO-Rate
Unascertainable; Illegality; Increased Costs; Deposits Not Available) or
4.6.1 (Increased Costs or Reduced Return Resulting from Taxes, Reserves,
Capital Adequacy Requirements, Expenses, Etc.), (y)the date such Bank has
failed to fund Revolving Credit Loans because the making of such Loans
would contravene Law applicable to such Bank, or (z)the date such Bank
became subject to the control of an Official Body, as applicable;
provided that the Borrower shall also pay to such Bank at the time of
such prepayment any amounts required under Section 4.6 (Additional
Compensation in Certain Circumstances) and any accrued interest due on
such amount and any related fees; provided, further, the remaining Banks
shall have no obligation hereunder to increase their Commitments.
Notwithstanding the foregoing, the Agent may only be replaced subject to
the requirements of Section 9.14 (Successor Agent).
4.4.3. Change of Lending Office.
Each Bank agrees that upon the occurrence of any event
giving rise to increased costs or other special payments under Section
3.4.2 (Illegality; Increased Costs; Deposits Not Available) or 4.6.1
(Increased Costs or Reduced Return Resulting from Taxes, Reserves,
Capital Adequacy Requirements, Expenses, Etc.) with respect to such Bank,
it will if requested by the Borrower, use reasonable efforts (subject to
overall policy considerations of such Bank) to designate another lending
office for any Loans or Letters of Credit affected by such event,
provided that such designation is made on such terms that such Bank and
its lending office suffer no economic, legal or regulatory disadvantage,
with the object of avoiding the consequence of the event giving rise to
the operation of such Section. Nothing in this Section 4.4.3 (Change of
Lending Office) shall affect or postpone any of the Obligations of the
Borrower or any other Loan Party or the rights of the Agent or any Bank
provided in this Agreement.
4.5 Mandatory Payments.
The Borrower shall make mandatory payments of principal
(together with accrued interest thereon) to the Agent to the extent by
which Revolving Facility Usage exceeds at any time the Commitments (as
they may be reduced pursuant to Section 2.1. (Voluntary Reduction of
Commitment), Section 2.11.2 (Approval by 80% Banks) or otherwise) within
three (3) Business Days after such excess is calculated.
4.6 Additional Compensation in Certain Circumstances.
4.6.1. Increased Costs or Reduced Return Resulting from
Taxes, Reserves, Capital Adequacy Requirements,
Expenses, Etc.
If any Law, guideline or interpretation or any change
in any Law, guideline or interpretation or application thereof by any
Official Body charged with the interpretation or administration thereof
or compliance with any request or directive (whether or not having the
force of Law) of any central bank or other Official Body:
(i) subjects any Bank to any tax or
changes the basis of taxation with respect to this Agreement, the Notes,
the Loans or payments by the Borrower of principal, interest, Commitment
Fees, or other amounts due from the Borrower hereunder (except for taxes
on the overall net income of such Bank),
(ii) imposes, modifies or deems applicable
any reserve, special deposit or similar requirement against credits or
commitments to extend credit extended by, or assets (funded or
contingent) of, deposits with or for the account of, or other
acquisitions of funds by, any Bank, or
(iii) imposes, modifies or deems applicable
any capital adequacy or similar requirement (A)against assets (funded or
contingent) of, or letters of credit, other credits or commitments to
extend credit extended by, any Bank, or (B)otherwise applicable to the
obligations of any Bank under this Agreement,
and the result of any of the foregoing is to increase the cost to, reduce
the income receivable by, or impose any expense upon any Bank with
respect to this Agreement, or the making, maintenance or funding of any
part of the Loans (or, in the case of any capital adequacy or similar
requirement, to have the effect of reducing the rate of return on any
Bank's capital, taking into consideration such Bank's customary policies
with respect to capital adequacy) by an amount which such Bank in its
sole discretion deems to be material, such Bank shall from time to time
notify the Borrower and the Agent of the amount determined in good faith
(using any averaging and attribution methods employed in good faith) by
such Bank to be necessary to compensate such Bank for such increase in
cost, reduction of income, additional expense or reduced rate of return.
Such notice shall set forth in reasonable detail the basis for such
determination. Such amount shall be due and payable by the Borrower to
such Bank ten (10) Business Days after such notice is given.
4.6.2. Indemnity.
In addition to the compensation required by Section
4.6.1 (Increased Costs or Reduced Return Resulting from Taxes, Reserves,
Capital Adequacy Requirements, Expenses, Etc.), the Borrower shall
indemnify each Bank against all liabilities, losses or expenses
(including actual loss of margin, any loss or expense incurred in
liquidating or employing deposits from third parties and any loss or
expense incurred in connection with funds acquired by a Bank to fund or
maintain Loans subject to a LIBO-Rate Option) which such Bank sustains or
incurs as a consequence of any:
(i) payment, prepayment, conversion or
renewal of any Loan to which a LIBO-Rate Option applies on a day other
than the last day of the corresponding Interest Period (whether or not
such payment or prepayment is mandatory, voluntary or automatic and
whether or not such payment or prepayment is then due),
(ii) attempt by the Borrower to revoke
(expressly, by later inconsistent notices or otherwise) in whole or part
any Loan Requests under Section 2.4 (Revolving Credit Loan Requests;
Swing Loan Requests) or Section 3.2 (Interest Periods) or notice relating
to prepayments under Section 4.4 (Voluntary Prepayments), or
(iii) default by the Borrower in the
performance or observance of any covenant or condition contained in this
Agreement or any other Loan Document, including any failure of the
Borrower to pay when due (by acceleration or otherwise) any principal,
interest, Commitment Fee, Letter of Credit Fees, or any other amount due
hereunder.
If any Bank sustains or incurs any such loss or
expense, it shall from time to time notify the Borrower of the amount
determined in good faith by such Bank (which determination may include
such assumptions, allocations of costs and expenses and averaging or
attribution methods as such Bank shall deem reasonable) to be necessary
to indemnify such Bank for such loss or expense. Such notice shall set
forth in reasonable detail the basis for such determination. Such amount
shall be due and payable by the Borrower to such Bank ten (10) Business
Days after such notice is given.
4.7 Notes.
The Revolving Credit Loans made by each Bank shall, if
requested by such Bank, be evidenced by a Revolving Credit Note.
4.8 Settlement Date Procedures.
The Borrower may borrow, repay and reborrow Swing Loans and
PNC Bank may make Swing Loans as provided in Section 2.1.2 (Swing Loan
Commitment) hereof. On any Business Day, the Agent may notify each Bank
of its Ratable Share of the total of the Revolving Credit Loans and the
Swing Loans (each a "Required Share"). Prior to 2:30 p.m., Eastern
time, on the date following the date of such notice, each Bank shall pay
to the Agent the amount equal to the difference between its Required
Share and its Revolving Credit Loans, and the Agent shall pay to each
Bank its Ratable Share of all payments made by the Borrower to the Agent
with respect to the Revolving Credit Loans. The Agent shall also effect
settlement in accordance with the foregoing sentence on the proposed
Borrowing Dates for Revolving Credit Loans and on any date when payments
of principal of any Loan is required to be paid by any Loan Party
hereunder and may at its option, and in consultation with the Borrower,
effect settlement on any other Business Day. These settlement procedures
are established solely as a matter of administrative convenience, and
nothing contained in this Section 4.8 shall relieve the Banks of their
obligations to fund Revolving Credit Loans on dates other than a
Settlement Date pursuant to Section 2.8 (Borrowings to Repay Swing
Loans). The Agent may at any time at its option for any reason
whatsoever require each Bank to pay immediately to the Agent such Bank's
Ratable Share of the outstanding Revolving Credit Loans and each Bank may
at any time require the Agent to pay immediately to such Bank its Ratable
Share of all payments made by the Borrower to the Agent with respect to
the Revolving Credit Loans.
5. REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties.
The Borrower and Hovnanian, jointly and severally, represent
and warrant to the Agent and to each of the Banks as follows:
5.1.1. Organization and Qualification.
Each of the Borrower and Hovnanian is a corporation
duly organized, validly existing and in good standing under the laws of
its jurisdiction of organization and each other Loan Party is a
corporation, partnership or limited liability company duly organized,
validly existing and in good standing under the laws of its jurisdiction
of organization except to the extent the failure to do so could not,
individually or in the aggregate, reasonably be expected to cause a
Material Adverse Change. Each Loan Party has the lawful power to own or
lease its properties and to engage in the business it presently conducts
or proposes to conduct. Each Loan Party is duly licensed or qualified
and in good standing in each jurisdiction where the failure to obtain
them could, individually or in the aggregate, reasonably be expected to
cause a Material Adverse Change.
5.1.2. Subsidiaries.
As of the Closing Date, Schedule 5.1.2 states the name
of each of Hovnanian's Subsidiaries and its jurisdiction of
incorporation. Hovnanian and each Loan Party has good and marketable
title to all of the Subsidiary Shares, Partnership Interests and LLC
Interests it purports to own, free and clear in each case of any Lien.
All Subsidiary Shares, Partnership Interests and LLC Interests have been
validly issued, and all Subsidiary Shares are fully paid and
nonassessable. All capital contributions and other consideration
required to be made or paid in connection with the issuance of the
Partnership Interests and LLC Interests have been made or paid, as the
case may be. Schedule 5.1.2 also sets forth, as to each of Hovnanian's
Subsidiaries, the percentage ownership of each owner of: the issued and
outstanding shares (referred to herein as the "Subsidiary Shares") if
such Subsidiary is a corporation, its outstanding partnership interests
(the "Partnership Interests") if such Subsidiary is a partnership and its
outstanding limited liability company interests (the "LLC Interests") if
such Subsidiary is a limited liability company. Schedule 5.1.2 also
footnote the controlling interests of each Subsidiary if such controlling
interest is held by a Person other than Hovnanian or a Subsidiary of
Hovnanian.
5.1.3. Power and Authority.
Each Loan Party has full power to enter into, execute,
deliver and carry out this Agreement and the other Loan Documents to
which it is a party, to incur the Indebtedness contemplated by the Loan
Documents and to perform its Obligations under the Loan Documents to
which it is a party, and all such actions have been duly authorized by
all necessary proceedings on its part.
5.1.4. Validity and Binding Effect.
This Agreement has been duly and validly executed and
delivered by each Loan Party, and each other Loan Document which any Loan
Party is required to execute and deliver on or after the date hereof will
have been duly executed and delivered by such Loan Party on the required
date of delivery of such Loan Document. This Agreement and each other
Loan Document constitutes, or will constitute, legal, valid and binding
obligations of each Loan Party which is or will be a party thereto on and
after its date of delivery thereof, enforceable against such Loan Party
in accordance with its terms, except to the extent that enforceability of
any of such Loan Document may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
enforceability of creditors' rights generally or limiting the right of
specific performance.
5.1.5. No Conflict.
Neither the execution and delivery of this Agreement or
the other Loan Documents by any Loan Party nor the consummation of the
transactions herein or therein contemplated or compliance with the terms
and provisions hereof or thereof by any of them will conflict with,
constitute a default under or result in any breach of (i)the terms and
conditions of the certificate of incorporation, bylaws, certificate of
limited partnership, partnership agreement, certificate of formation,
limited liability company agreement or other organizational documents of
any Loan Party or (ii)any Law or any material agreement or instrument or
order, writ, judgment, injunction or decree to which any Loan Party is a
party or by which it is bound or to which it is subject, or result in the
creation or enforcement of any Lien, charge or encumbrance whatsoever
upon any property (now or hereafter acquired) of any Loan Party (other
than Liens granted under the Loan Documents) which could, individually or
in the aggregate, reasonably be expected to cause a Material Adverse
Change.
5.1.6. Litigation.
There are no actions, suits, proceedings or
investigations pending or, to the knowledge of any Loan Party, threatened
against such Loan Party at law or equity before any Official Body which
individually or in the aggregate may result in any Material Adverse
Change. None of the Loan Parties is in violation of any order, writ,
injunction or any decree of any Official Body which may result in any
Material Adverse Change.
5.1.7. Title to Properties.
Each Loan Party has good and marketable title to or a
valid leasehold interest in all properties, assets and other rights which
it purports to 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, 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.
5.1.8. Financial Statements.
(i) Historical Statements. The Borrower
has delivered to the Agent copies of Hovnanian's audited consolidated
year-end financial statements for and as of the end of the fiscal year
ended October 31, 2002 (the "Annual Statements"). (The Annual Statements
are also sometimes referred to as the "Historical Statements"). The
Historical Statements were compiled from the books and records maintained
by Hovnanian's management, are correct and complete and fairly represent
the consolidated financial condition of Hovnanian and its Subsidiaries as
of their dates and the results of operations for the fiscal periods then
ended and have been prepared in accordance with GAAP consistently
applied.
(ii) Financial Projections. The Borrower
has delivered to the Agent and the Banks financial projections of
Hovnanian and its Subsidiaries for the period ending October 31, 2005
derived from various assumptions of Hovnanian's management (the
"Financial Projections"). The Financial Projections represent a
reasonable range of possible results in light of the history of the
business, present and foreseeable conditions and the intentions of
Hovnanian's management (it being understood that actual results may vary
materially from the Financial Projections). The Financial Projections
accurately reflect the liabilities of Hovnanian and its Subsidiaries upon
consummation of the transactions contemplated hereby as of the Closing
Date.
(iii) Accuracy of Financial Statements. As
of the Closing Date, neither Hovnanian nor any Subsidiary of Hovnanian
has any liabilities, contingent or otherwise, or forward or long-term
commitments that are required by GAAP to be, but are not, disclosed in
the Historical Statements or in the notes thereto, and except as
disclosed therein there are no unrealized or anticipated losses from any
commitments of Hovnanian or any Subsidiary of Hovnanian which may cause a
Material Adverse Change. Since October 31, 2002, no Material Adverse
Change has occurred.
5.1.9. Use of Proceeds; Margin Stock.
5.1.9.1 General.
The Loan Parties intend to use the proceeds of the
Loans in accordance with Sections 2.7 (Use of Proceeds) and 7.1.10 (Use
of Proceeds).
5.1.9.2 Margin Stock.
None of the Loan Parties engages or intends to engage
principally, or as one of its important activities, in the business of
extending credit for the purpose, immediately, incidentally or
ultimately, of purchasing or carrying margin stock (within the meaning of
Regulation U). No part of the proceeds of any Loan has been or will be
used, immediately, incidentally or ultimately, to purchase or carry any
margin stock or to extend credit to others for the purpose of purchasing
or carrying any margin stock or to refund Indebtedness originally
incurred for such purpose, or for any purpose which entails a violation
of or which is inconsistent with the provisions of the regulations of the
Board of Governors of the Federal Reserve System. None of the Loan
Parties holds or intends to hold margin stock in such amounts that more
than 25% of the reasonable value of the assets of such Loan Party are or
will be represented by margin stock.
5.1.10. Full Disclosure.
Neither this Agreement nor any other Loan Document, nor
any certificate, statement, agreement or other documents furnished to the
Agent or any Bank in connection herewith or therewith, contains any
untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein and therein,
in light of the circumstances under which they were made, not misleading.
There is no fact known to any Loan Party which materially adversely
affects the business, property, assets, financial condition, results of
operations or business prospects of the Loan Parties taken as a whole
which has not been set forth in this Agreement or in the certificates,
statements, agreements or other documents furnished in writing to the
Agent and the Banks prior to or at the date hereof in connection with the
transactions contemplated hereby.
5.1.11. Taxes.
All federal, state, local and other tax returns
required to have been filed with respect to the Loan Parties have been
filed, and payment or adequate provision has been made for the payment of
all taxes, fees, assessments and other governmental charges which have or
may become due pursuant to said returns or to assessments received,
except to the extent that such taxes, fees, assessments and other charges
are not material or are being contested in good faith by appropriate
proceedings diligently conducted and for which such reserves or other
appropriate provisions, if any, as shall be required by GAAP shall have
been made. There are no agreements or waivers extending the statutory
period of limitations applicable to any federal income tax return of any
Loan Party for any period.
5.1.12. Consents and Approvals.
No consent, approval, exemption, order or authorization
of, or a registration or filing with, any Official Body or any other
Person is required by any Law or any agreement in connection with the
execution, delivery and carrying out of this Agreement and the other Loan
Documents by any Loan Party, except as listed on Schedule 5.1.12, all of
which shall have been obtained or made on or prior to the Closing Date
except as otherwise indicated on Schedule 5.1.12.
5.1.13. No Event of Default; Compliance with Instruments.
No event has occurred and is continuing and no
condition exists or will exist after giving effect to the borrowings or
other extensions of credit to be made on the Closing Date under or
pursuant to the Loan Documents which constitutes an Event of Default or
Potential Default. None of the Loan Parties is in violation of (i)any
term of its certificate of incorporation, bylaws, certificate of limited
partnership, partnership agreement, certificate of formation, limited
liability company agreement or other organizational documents or (ii)any
material agreement or instrument to which it is a party or by which it or
any of its properties may be subject or bound where such violation would
constitute a Material Adverse Change.
5.1.14. Patents, Trademarks, Copyrights, Licenses, Etc.
Each Loan Party owns or possesses all the material
patents, trademarks, service marks, trade names, copyrights, licenses,
registrations, franchises, permits and rights necessary to own and
operate its properties and to carry on its business as presently
conducted and planned to be conducted by such Loan Party, without known
possible, alleged or actual material conflict with the rights of others.
5.1.15. Insurance.
No notice has been given or claim made and no grounds
exist to cancel or avoid any of insurance policies of the type described
in Section 7.1.3 (Maintenance of Insurance) or to reduce the coverage
provided thereby.
5.1.16. Compliance with Laws.
The Loan Parties are in compliance in all material
respects with all applicable Laws (other than Environmental Laws which
are specifically addressed in Section 5.1.21 (Environmental Matters)) in
all jurisdictions in which any Loan Party is presently or will be doing
business except where the failure to do so would not constitute a
Material Adverse Change.
5.1.17. Burdensome Restrictions.
None of the Loan Parties is bound by any contractual
obligation, or subject to any restriction in any organization document,
or any requirement of Law which could reasonably be expected to
constitute a Material Adverse Change.
5.1.18. Investment Companies; Regulated Entities.
None of the Loan Parties is an "investment company"
registered or required to be registered under the Investment Company Act
of 1940 or under the "control" of an "investment company" as such terms
are defined in the Investment Company Act of 1940 and shall not become
such an "investment company" or under such "control." None of the Loan
Parties is subject to any other Federal or state statute or regulation
limiting its ability to incur Indebtedness for borrowed money (other than
Regulation X of the Board of Governors of the Federal Reserve System).
5.1.19. Plans and Benefit Arrangements.
(i) Except where the liability that could
reasonably be expected to result therefrom would not, individually or in
the aggregate, result in a Material Adverse Change, (a) the Loan Parties
and each other member of the ERISA Group are in compliance in all
material respects with any applicable provisions of ERISA with respect to
all Plans and, as to the Borrower, Benefit Arrangements; (b) there has
been no Prohibited Transaction with respect to any such Benefit
Arrangement or any Plan which could result in any material liability of
the Loan Parties or any other member of the ERISA Group; (c) the Loan
Parties and all other members of the ERISA Group have made when due any
and all payments required to be made under any agreement relating to a
Multiemployer Plan or any Law pertaining thereto; (d) with respect to
each Plan the Loan Parties and each other member of the ERISA Group
(i)have fulfilled in all respects their obligations under the minimum
funding standards of ERISA, (ii)have not incurred any liability to the
PBGC, except for premiums in the ordinary course which are not overdue
and (iii) have not had asserted against them any penalty for failure to
fulfill the minimum funding requirements of Section 302 of ERISA; and (e)
all Plans and Benefit Arrangements have been administered in material
compliance with their terms and applicable Law.
(ii) Except where the liability that could
reasonably be expected to result therefrom would not, individually or in
the aggregate, result in a Material Adverse Change, no event requiring
notice to the PBGC under Section 302(f)(4)(A) of ERISA has occurred or is
reasonably expected to occur with respect to any Plan, and no amendment
with respect to which security is required under Section 307 of ERISA has
been made or is reasonably expected to be made to any Plan.
(iii) Except where the liability that could
reasonably be expected to result therefrom would not, individually or in
the aggregate, result in a Material Adverse Change, neither the Loan
Parties nor any other member of the ERISA Group has incurred or
reasonably expects to incur any material withdrawal liability under
Section 4201 of ERISA to any Multiemployer Plan or under Section 4063 or
4064 of ERISA to any Plan;. Neither the Loan Parties nor any other
member of the ERISA Group has been notified by any Multiemployer Plan or
Plan that such Multiemployer Plan or Plan has been terminated within the
meaning of Sections 4041 A or 4064, respectively, of ERISA and, to the
best knowledge of the Borrower, no Multiemployer Plan is reasonably
expected to be reorganized or terminated, within the meaning of Title IV
of ERISA.
(iv) To the best knowledge of Borrower,
neither the Borrower nor any other member of the ERISA Group has, within
the preceding five years, entered into a transaction to which either
Section 4069 or Section 4212(c) of ERISA could apply so as to subject
Borrower or other member of the ERISA Group to a liability, except where
the liability that could reasonably be expected to result therefrom would
not result in a Material Adverse Change.
5.1.20. Employment Matters.
Each of the Loan Parties is in compliance with the
Labor Contracts and all applicable Federal, state and local labor and
employment Laws including those related to equal employment opportunity
and affirmative action, labor relations, minimum wage, overtime, child
labor, medical insurance continuation, worker adjustment and relocation
notices, immigration controls and worker and unemployment compensation,
where such failure to comply would constitute a Material Adverse Change.
There are no outstanding grievances, arbitration awards or appeals
therefrom arising out of the Labor Contracts or current or threatened
strikes, picketing, handbilling or other work stoppages or slowdowns at
facilities of any of the Loan Parties which in any case would constitute
a Material Adverse Change.
5.1.21. Environmental Matters.
None of the Loan Parties has received any Environmental
Complaint, including but not limited to those from any Official Body or
private Person alleging that such Loan Party or any prior owner, operator
or occupant of any of the Property is a potentially responsible party
under the Comprehensive Environmental Response, Cleanup and Liability
Act, 42 U.S.C. 9601, et seq., the Resource Conservation and Recovery Act,
42 U.S.C. 6901, et seq. or any analogous state or local Law, which could
reasonably be expected to constitute a Material Adverse Change and none
of the Loan Parties has any reason to believe that such an Environmental
Complaint might be received. There are no pending or, to any Loan
Party's knowledge, threatened Environmental Complaints relating to any
Loan Party or, to any Loan Party's knowledge, any prior owner, operator
or occupant of any of the Properties pertaining to, or arising out of,
any Contamination or violations of Environmental Laws or Required
Environmental Permits which could reasonably be expected to constitute a
Material Adverse Change.
5.1.22. Senior Debt Status.
The Obligations of each Loan Party under this
Agreement, the Guaranty Agreement and each of the other Loan Documents to
which it is a party do rank and will rank at least pari passu in priority
of payment with all other Indebtedness of such Loan Party except
Indebtedness of such Loan Party to the extent secured by Permitted Liens.
There is no Lien upon or with respect to any of the properties or income
of any Loan Party which secures Indebtedness or other obligations of any
Person except for Permitted Liens.
5.2 Continuation of Representations.
The Borrower and Hovnanian make the representations and
warranties in this Section 5 on the date hereof and on the Closing Date
and each date thereafter on which a Loan is made or a Letter of Credit is
issued as provided in and subject to Sections 6.1 (First Loans and
Letters of Credit) and 6.2 (Each Additional Loan or Letter of Credit).
6. CONDITIONS OF LENDING AND ISSUANCE OF LETTERS OF CREDIT
The obligation of each Bank to make Loans and of the Agent
and the Letter of Credit Banks to issue Letters of Credit hereunder is
subject to the performance by each of the Loan Parties of its Obligations
to be performed hereunder at or prior to the making of any such Loans or
issuance of such Letters of Credit and to the satisfaction of the
following further conditions:
6.1 First Loans and Letters of Credit.
On the Closing Date:
6.1.1. Officer's Certificate.
The representations and warranties of each of the Loan
Parties contained in Section 5 (Representation and Warranties) and in
each of the other Loan Documents shall be true and correct on and as of
the Closing Date with the same effect as though such representations and
warranties had been made on and as of such date (except representations
and warranties which relate solely to an earlier date or time, which
representations and warranties shall be true and correct on and as of the
specific dates or times referred to therein), and each of the Loan
Parties shall have performed and complied with all covenants and
conditions hereof and thereof, no Event of Default or Potential Default
shall have occurred and be continuing or shall exist; and there shall be
delivered to the Agent for the benefit of each Bank a certificate of each
of the Loan Parties, dated the Closing Date and signed by the Chief
Executive Officer, President or Chief Financial Officer of each of the
Loan Parties, to each such effect.
6.1.2. Incumbency Certificate.
There shall be delivered to the Agent for the benefit
of each Bank a certificate dated the Closing Date and signed by the
Secretary or an Assistant Secretary or the managing member (or
equivalent), as the case may be, of each of the Loan Parties, certifying
as appropriate as to:
(i) all action taken by each Loan Party
in connection with this Agreement and the other Loan Documents;
(ii) the names of the officer or officers
authorized to sign this Agreement and the other Loan Documents and the
true signatures of such officer or officers and specifying the Authorized
Officers permitted to act on behalf of each Loan Party for purposes of
this Agreement and the true signatures of such officers, on which the
Agent and each Bank may conclusively rely; and
(iii) as to Hovnanian and the Borrower
only, copies of its organizational documents, including its certificate
of incorporation, bylaws, certificate of limited partnership, partnership
agreement, certificate of formation, and limited liability company
agreement as in effect on the Closing Date certified by the appropriate
state official where such documents are filed in a state office together
with certificates from the appropriate state officials as to the
continued existence and good standing of such Loan Party in each state
where organized, all as acceptable to the Agent.
6.1.3. Delivery of Loan Documents .
The Guaranty Agreement and the other Loan Documents
shall have been duly executed and delivered by Hovnanian to the Agent on
or before the date hereof for the benefit of the Banks. (The KHL
Agreement and the Stock Pledge (together with certificates evidencing
100% of the stock of KHL and stock powers therefor executed in blank)
were delivered on the date of the Prior Agreement, but they are no longer
effective and are no longer "Loan Documents" hereunder.)
6.1.4. Opinion of Counsel.
There shall be delivered to the Agent for the benefit
of each Bank a written opinion of Xxxxx Xxxxxxxx, Esquire, in-house
counsel for the Loan Parties, dated the Closing Date and in form and
substance satisfactory to the Agent and its counsel.
6.1.5. Legal Details.
All legal details and proceedings in connection with
the transactions contemplated by this Agreement and the other Loan
Documents shall be in form and substance satisfactory to the Agent and
counsel for the Agent, and the Agent shall have received all such other
counterpart originals or certified or other copies of such documents and
proceedings in connection with such transactions, in form and substance
satisfactory to the Agent and said counsel, as the Agent or said counsel
may reasonably request.
6.1.6. Payment of Fees.
The Borrower shall have paid or caused to be paid to
the Agent for itself and for the account of the Banks to the extent not
previously paid, all commitment and other fees accrued through the
Closing Date and the costs and expenses for which the Agent and the Banks
are entitled to be reimbursed.
6.1.7. Consents.
All material consents required to effectuate the
transactions contemplated hereby as set forth on Schedule 5.1.12 shall
have been obtained.
6.1.8. Officer's Certificate Regarding MACs.
Since October 31, 2002, no Material Adverse Change
shall have occurred, and there shall have been delivered to the Agent for
the benefit of each Bank a certificate dated the Closing Date and signed
by the Chief Executive Officer, President or Chief Financial Officer of
each Loan Party to each such effect.
6.1.9. No Actions or Proceedings.
No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any
court, governmental agency or legislative body to enjoin, restrain or
prohibit, or to obtain damages in respect of, this Agreement, the other
Loan Documents or the consummation of the transactions contemplated
hereby or thereby.
6.2 Each Additional Loan or Letter of Credit.
At the time of making any Loans or issuing any Letters of
Credit other than Loans made or Letters of Credit issued on the Closing
Date and after giving effect to the proposed extensions of credit: the
representations and warranties of the Loan Parties contained in Section 5
(Representations and Warranties) and in the other Loan Documents shall be
true and correct in all material respects on and as of the date of such
additional Loan or Letter of Credit with the same effect as though such
representations and warranties had been made on and as of such date
(except representations and warranties which expressly relate solely to
an earlier date or time, which representations and warranties shall be
true and correct in all material respects on and as of the specific dates
or times referred to therein); no Event of Default or Potential Default
shall have occurred and be continuing or shall exist; and the Borrower
shall have delivered to the Agent a duly executed and completed Loan
Request or application for a Letter of Credit as the case may be.
7. COVENANTS
7.1 Affirmative Covenants.
The Borrower and Hovnanian, jointly and severally, covenant
and agree that until payment in full of the Loans, Reimbursement
Obligations and Letter of Credit Borrowings, and interest thereon,
expiration or termination of all Letters of Credit, satisfaction of all
of the Loan Parties' other Obligations under the Loan Documents and
termination of the Commitments, they shall, and shall cause the other
Loan Parties to, comply at all times with the following affirmative
covenants:
7.1.1. Preservation of Existence, Etc.
Each Loan Party shall maintain its legal existence as a
corporation, limited partnership or limited liability company and its
license or qualification and good standing in each jurisdiction in which
its ownership or lease of property or the nature of its business makes
such license or qualification necessary, except as otherwise expressly
permitted in Section 7.2.4 (Liquidations, Mergers, Consolidations,
Acquisitions) and except where failure to do so could not reasonably be
expected to constitute a Material Adverse Change with respect to the
Borrower or Hovnanian or with respect to the Loan Parties taken as a
whole.
7.1.2. Payment of Liabilities, Including Taxes, Etc.
Each Loan Party shall duly pay and discharge all
material liabilities to which it is subject or which are asserted against
it, promptly as and when the same shall become due and payable, including
all material taxes, assessments and governmental charges upon it or any
of its properties, assets, income or profits, prior to the date on which
penalties attach thereto, except to the extent that such liabilities,
including taxes, assessments or charges, are being contested in good
faith and by appropriate and lawful proceedings diligently conducted and
for which such reserve or other appropriate provisions, if any, as shall
be required by GAAP shall have been made, or to the extent that failure
to discharge any such liabilities would not result in any additional
liability which would adversely affect to a material extent the financial
condition of the Borrower or Hovnanian or of the Loan Parties taken as a
whole, provided that the Loan Parties will pay all such liabilities
forthwith upon the commencement of proceedings to foreclose any Lien
which may have attached as security therefor.
7.1.3. Maintenance of Insurance.
Each Loan Party shall insure its properties and assets
against loss or damage by fire and such other insurable hazards as such
assets are commonly insured (including fire, extended coverage, property
damage, workers' compensation, public liability, flood and business
interruption insurance) and against other risks (including errors and
omissions) in such amounts as similar properties and assets are insured
by prudent companies in similar circumstances carrying on similar
businesses, and with reputable and financially sound insurers, including
self-insurance to the extent customary.
7.1.4. Maintenance of Properties and Leases.
Each Loan Party shall maintain in good repair, working
order and condition (ordinary wear and tear excepted) in accordance with
the general practice of other businesses of similar character and size,
all of those properties necessary to its business, and from time to time,
such Loan Party will make or cause to be made all appropriate repairs,
renewals or replacements thereof.
7.1.5. Maintenance of Patents, Trademarks, Etc.
Each Loan Party shall maintain in full force and effect
all patents, trademarks, service marks, trade names, copyrights,
licenses, franchises, permits and other authorizations necessary for the
ownership and operation of its properties and business if the failure so
to maintain the same would constitute a Material Adverse Change.
7.1.6. Visitation Rights.
Each Loan Party shall permit any of the officers or
authorized employees or representatives of the Agent or (at the expense
of such Bank) any of the Banks to visit and inspect any of its properties
and to examine and make excerpts from its books and records and discuss
its business affairs, finances and accounts with its officers, all in
such detail and at such times and as often as any of the Banks may
reasonably request, provided that each Bank shall provide the Borrower
and the Agent with reasonable notice prior to any visit or inspection.
In the event any Bank desires to conduct an audit of any Loan Party, such
Bank shall make a reasonable effort to conduct such audit
contemporaneously with any audit to be performed by the Agent.
7.1.7. Keeping of Records and Books of Account.
The Loan Parties shall maintain and keep proper books
of record and account which enable Hovnanian and its Subsidiaries to
issue financial statements in accordance with GAAP and as otherwise
required by applicable Laws of any Official Body having jurisdiction over
Hovnanian or any Subsidiary of Hovnanian, and in which full, true and
correct entries shall be made in all material respects of all its
dealings and business and financial affairs.
7.1.8. Plans and Benefit Arrangements.
The Loan Parties shall, and shall cause each member of
the ERISA Group that is a Subsidiary to, and shall use its reasonable
best efforts to cause each other member of the ERISA Group to, comply
with ERISA, the Internal Revenue Code and other applicable Laws
applicable to Plans and, as to the Borrower, Benefit Arrangements, except
where such failure, alone or in conjunction with any other failure, would
not result in a Material Adverse Change. Without limiting the generality
of the foregoing, the Loan Parties shall cause all of their Plans and
shall use reasonable best efforts to cause all Plans maintained by any
member of the ERISA Group, to be funded in accordance with the minimum
funding requirements of ERISA and shall make, and cause each Subsidiary
to, and shall use its reasonable best efforts to cause each member of the
ERISA Group to make, in a timely manner, all contributions due to Plans
and Multiemployer Plans except where such failure, alone or in
conjunction with any other failure, would not result in a Material
Adverse Change.
7.1.9. Compliance with Laws.
Each Loan Party shall comply with all applicable Laws,
including all Environmental Laws, in all respects, provided that it shall
not be deemed to be a violation of this Section 7.1.9 if any failure to
comply with any Law would not result in fines, penalties, remediation
costs, other similar liabilities or injunctive relief which in the
aggregate would constitute a Material Adverse Change.
7.1.10. Use of Proceeds.
The Loan Parties will use the Letters of Credit and the
proceeds of the Loans only for general corporate purposes and for working
capital for the Borrower, Hovnanian and the Restricted Subsidiaries.
7.2 Negative Covenants.
The Borrower and Hovnanian, jointly and severally, covenant
and agree that until payment in full of the Loans, Reimbursement
Obligations and Letter of Credit Borrowings and interest thereon,
expiration or termination of all Letters of Credit, satisfaction of all
of the Loan Parties' other Obligations hereunder and termination of the
Commitments, they shall, and shall cause the other Loan Parties to,
comply with the following negative covenants:
7.2.1. Indebtedness.
7.2.1.1 Each of the Loan Parties shall
not at any time create, incur, assume or suffer to exist any secured
indebtedness, except Indebtedness secured by Permitted Liens.
7.2.1.2 Omitted.
7.2.1.3 The Loan Parties shall not
permit any Mortgage Subsidiary to incur or suffer to exist any
Indebtedness if, after giving effect thereto, the ratio of (x) debt to
(y) equity plus the amount of any loans or Guaranties provided by
Hovnanian of such Mortgage Subsidiary exceeds 12.0-to-1.0.
7.2.2. Liens.
Each of the Loan Parties shall not at any time create,
incur, assume or suffer to exist any Lien on any of its property or
assets, tangible or intangible, now owned or hereafter acquired, or agree
or become liable to do so, except Permitted Liens.
7.2.3. Loans and Investments.
Each of the Loan Parties shall not, at any time, make
or suffer to remain outstanding any Investment except Permitted
Investments and, to the extent permitted by Section 7.2.6 (Restricted
Payments; Restricted Investments), Restricted Investments.
7.2.4. Liquidations, Mergers, Consolidations,
Acquisitions.
Each of the Loan Parties shall not dissolve, liquidate
or wind-up its affairs, or become a party to any merger or consolidation,
or acquire by purchase, lease or otherwise all or substantially all of
the assets or capital stock of any other Person, provided that
(1) any Loan Party other than the Borrower or
Hovnanian may consolidate or merge into another Loan Party (or any Person
that concurrently becomes a Loan Party) which is wholly-owned by one or
more of the other Loan Parties, and
(2) any Loan Party may consolidate or merge with a
Person who is not a Loan Party if the common stockholders of Hovnanian
prior to such transaction maintain at least 50% of the voting control
(direct or indirect) of the combined entity after consummation of the
transaction, and
(3) any Loan Party may acquire, whether by purchase
or by merger, (A)all or substantially all of the ownership interests of
another Person or (B)all or substantially all of assets of another Person
or of a business or division of another Person (each, a "Permitted
Acquisition"), provided that each of the following requirements is met:
(i) if the Loan Parties are acquiring the
ownership interests in such Person, and such Person is, or concurrently
will be, designated a Restricted Subsidiary, such Person shall execute a
Guarantor Joinder and join this Agreement as a Guarantor pursuant to
Section 10.18 (Joinder of Guarantors) and the Borrower shall have
otherwise complied with Section 2.11.4 (Designation of Restricted
Subsidiary) on or before the date of such Permitted Acquisition;
(ii) if such Person's shares are
registered as "public" shares under applicable law, the board of
directors or other equivalent governing body of such Person shall have
approved such Permitted Acquisition;
(iii) the business acquired, or the
business conducted by the Person whose ownership interests are being
acquired, as applicable, shall comply with Section 7.2.8 [Continuation of
or Change in Business]; and
(iv) no Potential Default or Event of
Default shall exist immediately prior to and after giving effect to such
Permitted Acquisition.
(4) the Loan Parties may make, whether by purchase or
merger or otherwise, Permitted Investments and, to the extent permitted
by Section 7.2.6 (Restricted Investments and Restricted Payments),
Restricted Investments and Restricted Payments;
(5) the Loan Parties may liquidate or wind-up
Restricted Subsidiaries of Hovnanian which are not individually material
to Hovnanian, the Borrower or to the Loan Parties taken as a whole;
provided that the Loan Parties shall satisfy the requirements of Section
2.11 [Designation of Subsidiaries and Release of Guarantors], to the
extent applicable;
(6) the Loan Parties may effectuate any sale
permitted by Section 7.2.5 as a merger or consolidation; and
(7) for the avoidance of doubt, any Loan Party may
effect or allow the liquidation or winding-up of any Non-Restricted
Person.
7.2.5. Dispositions of Assets or Subsidiaries; Sale and
Leaseback.
7.2.5.1 Each of the Loan Parties shall
not sell, convey, assign, lease, abandon or otherwise transfer or
dispose of, voluntarily or involuntarily, any of its properties or
assets, tangible or intangible (including sale, assignment, discount or
other disposition of accounts, contract rights, chattel paper, equipment
or general intangibles with or without recourse or of capital stock,
shares of beneficial interest, partnership interests or limited liability
company interests of a Subsidiary of such Loan Party, but excluding
Investments in Non-Restricted Persons), except:
(i) any sale, transfer or lease of assets
in the ordinary course of business which are no longer necessary or
required in the conduct of such Loan Party's business;
(ii) any sale, transfer or lease of assets
to a Loan Party;
(iii) any sale, transfer or lease of assets
in the ordinary course of business which are replaced by substitute
assets acquired not in violation of this Agreement; or
(iv) any sale and leaseback permitted by
Section 7.2.5.2.
7.2.5.2 The Loan Parties shall not,
directly or indirectly, sell, transfer or otherwise dispose of real
and/or personal property with a view directly or indirectly to the
leasing back of the same or of any similar property except for (i) sales
and leasebacks of sample model homes and their contents; (ii) sales and
leasebacks of any office buildings and their contents, or (iii) sales and
leasebacks in the normal course of business.
7.2.6. Restricted Payments; Restricted Investments.
7.2.6.1 The Loan Parties shall not pay or
make Restricted Payments or Restricted Investments from and after January
31, 2001 which exceed in the aggregate the sum of:
(i) $45,000,000;
(ii) 50% of net income of Hovnanian
(calculated and consolidated in accordance with GAAP) for all fiscal
quarters commencing on February 1, 2001 and thereafter; and
(iii) 50% of the proceeds (less costs of
issuance) of any issuance or sale of equity of Hovnanian to any Person
other than a Loan Party during all fiscal quarters commencing on February
1, 2001 and thereafter.
7.2.6.2 Each of the Loan Parties shall not
enter into or carry out any transaction with any Affiliate (including
purchasing property or services from or selling property or services to
any Affiliate of any Loan Party or other Person but excluding
transactions between Loan Parties) unless such transaction is not
otherwise prohibited by this Agreement, is entered into in the ordinary
course of business upon fair and reasonable arm's-length terms and is in
accordance with all applicable Law. Without limiting the foregoing, the
aggregate amount of all Indebtedness for owed or borrowed money owing to
any Loan Party by any officer or director, or relative thereof, shall not
exceed $4,000,000 in the aggregate owing at any one time and all such
Indebtedness shall bear interest at a rate not less than the coupon rate
on six month U.S. Treasury bills as of the date such Indebtedness is
incurred.
7.2.6.3 The Loan Parties shall not pay or
make (i) any Restricted Payment in respect of Dividends and Capital Stock
Retirement during the period commencing on February 1, 2001 which, in the
aggregate, exceed an amount equal to (x) $25,000,000 plus (y) 50% of
Hovnanian's consolidated net income (calculated and consolidated in
accordance with GAAP) generated after January 31, 2002 or (ii) any
Restricted Payment in respect of the Subordinated Debt in excess of
$25,000,000 in the aggregate after January 31, 2001.
7.2.7. Subsidiaries, Partnerships and Joint Ventures.
Each of the Loan Parties shall not own or create
directly or indirectly any Subsidiaries other than (i) any Subsidiary
which has executed the Guaranty Agreement as Guarantor on the Closing
Date, (ii) any Subsidiary formed or acquired after the Closing Date which
joins the Guaranty Agreement as a Guarantor pursuant to Section 10.18
(Joinder of Guarantors) or (iii) any Non-Restricted Person.
7.2.8. Continuation of or Change in Business.
Each of the Loan Parties shall not engage in any
business other than the homebuilding business or Existing Related
Businesses.
7.2.9. Plans and Benefit Arrangements.
Each of the Loan Parties shall not engage in a
Prohibited Transaction with any Plan, Benefit Arrangement or
Multiemployer Plan which, alone or in conjunction with any other
circumstances or set of circumstances, results in liability under ERISA,
except where the liability that could reasonably be expected to result
therefrom would not result in a Material Adverse Change.
7.2.10. Borrowing Base.
The Loan Parties shall not permit Senior Homebuilding
Indebtedness minus the face amount of outstanding letters of credit
(whether "Letters of Credit" or not) in respect of which a Loan Party is
obligated and which is issued to guaranty or assure the installation of
site improvements on (or appurtenant to) land owned by a Loan Party to
exceed at any time the Borrowing Base. Pursuant thereto, the Borrower
shall make (or cause to be made), on the Business Day following the date
on which any such excess is calculated, payments of principal of Senior
Homebuilding Indebtedness sufficient to reduce to zero ($0) on such date
any such excess.
7.2.11. Minimum ATNW.
The Loan Parties shall not permit Adjusted Tangible Net
Worth to be less than the sum of: (i)$272,710,000 and (ii) 50% of
Hovnanian's consolidated net income (calculated and consolidated in
accordance with GAAP) for each fiscal quarter commencing on February 1,
2002 and thereafter in which net income was earned (as opposed to a net
loss) and (iii) 50% of the proceeds (less costs of issuance) of any
issuance or sale of equity of Hovnanian to any Person other than a Loan
Party during each fiscal quarter commencing on February 1, 2001 and
thereafter.
7.2.12. Leverage Ratio.
(a) The Loan Parties shall not permit Actual
Leverage to exceed 2.20-to-1.0 in any two (2) consecutive fiscal quarters
in which the Fixed Charge Coverage Ratio is less than 1.5-to-1.0; and
(b) The Loan Parties shall not permit Actual
Leverage to exceed the Total Debt Multiplier.
7.2.13. Inventory and Land Purchase Limits.
7.2.13.1 The Loan Parties shall not
permit:
(i) The Dollar value of Unimproved Land
to exceed twenty percent (20%) of the sum of Adjusted Tangible Net Worth
and the principal amount of the Subordinated Debt, as calculated as of
the end of each fiscal quarter;
(ii) The Dollar value of Finished Lots and
Land under Development plus Unimproved Land to exceed the sum of Adjusted
Tangible Net Worth and the principal amount of the Subordinated Debt, as
calculated as of the end of each fiscal quarter; or
(iii) The number of Unsold Dwelling Units
existing as of the end of any fiscal quarter to exceed 25% of the number
of Dwelling Units conveyed by any Person who is a Loan Party on the date
of determination or any Person that was acquired and merged or
consolidated with and into a Person who is a Loan Party on the date of
determination to third party purchasers within the previous twelve (12)
months.
7.2.13.2 If the Fixed Charge Coverage
Ratio is less than 1.0-to-1.0 and the Cash Flow Coverage Ratio is less
than 1.1-to-1.0 for two (2) consecutive fiscal quarters (referred to
herein as the "prior two quarters"), then, during the fiscal quarter
following the prior two quarters, the Loan Parties shall not purchase
land (whether Unimproved Land or otherwise) in amounts which exceed in
such quarter the lesser of:
(x) the total land portion of "cost of sales"
as reflected in the financial statements delivered pursuant to Section
7.3 (Reporting Requirements) for sales by the Loan Parties to third party
purchasers in arm's length transactions during the immediately preceding
fiscal quarter; and
(y) fifty percent (50%) of the total land
portion of "cost of sales" as reflected in the financial statements
delivered pursuant to Section 7.3 [Reporting Requirements] for the
average quarterly sales by the Loan Parties to third party purchasers in
arm's length transactions during the preceding four (4) fiscal quarters.
7.2.14. Fiscal Year.
The Loan Parties shall not change their fiscal year
from the twelve-month period ending October 31.
7.2.15. Changes in Subordinated Debt Documents.
The Loan Parties shall not amend or modify any
provisions of the documents relating to the Subordinated Debt without
providing at least ten (10) calendar days' prior written notice to the
Agent and the Banks, and, if the same would adversely affect the
interests of the Agent and the Banks, obtaining the prior written consent
of the Required Banks. No Loan Party shall directly or indirectly make
any payment on the Subordinated Debt which would violate the provisions
of any applicable subordination agreement or provision. Neither the
Senior Notes nor the Subordinated Debt shall become secured.
7.3 Reporting Requirements.
The Borrower and Hovnanian, jointly and severally, covenant
and agree that until payment in full of the Loans, Reimbursement
Obligations and Letter of Credit Borrowings and interest thereon,
expiration or termination of all Letters of Credit, satisfaction of all
of the Loan Parties' other Obligations hereunder and under the other Loan
Documents and termination of the Commitments, they shall, and shall cause
the other Loan Parties to, furnish or cause to be furnished to the Agent
and each of the Banks:
7.3.1. Quarterly Financial Statements.
As soon as available and in any event within fifty-five
(55) calendar days after the end of each of the first three fiscal
quarters in each fiscal year of Hovnanian, financial statements of
Hovnanian, consisting of a consolidated and consolidating balance sheet
as of the end of such fiscal quarter and related consolidated and
consolidating statements of income, stockholders' equity and cash flows
for the fiscal quarter then ended and the fiscal year through that date,
all in reasonable detail and certified (subject to normal year-end audit
adjustments) by the Chief Executive Officer, President, Treasurer or
Chief Financial Officer or principal accounting officer of Hovnanian as
having been prepared in accordance with GAAP, consistently applied, and
setting forth in comparative form the respective financial statements for
the corresponding date and period in the previous fiscal year. The Loan
Parties will be deemed to have complied with the delivery requirements of
this Section 7.3.1 if within fifty-five (55) days after the end of their
fiscal quarter, the Borrower delivers to the Agent and each of the Banks
a copy of Hovnanian's Form 10-Q as filed with the SEC and the financial
statements contained therein meets the requirements described in this
Section 7.3.1.
7.3.2. Annual Financial Statements.
As soon as available and in any event within ninety
(90) days after the end of each fiscal year of Hovnanian, financial
statements of Hovnanian consisting of a consolidated balance sheet as of
the end of such fiscal year, and related consolidated statements of
income, stockholders' equity and cash flows for the fiscal year then
ended, all in reasonable detail and setting forth in comparative form the
financial statements as of the end of and for the preceding fiscal year,
and certified by independent certified public accountants of nationally
recognized standing satisfactory to the Agent. The certificate or report
of accountants shall be free of qualifications (other than any
consistency qualification that may result from a change in the method
used to prepare the financial statements as to which such accountants
concur) and shall not indicate the occurrence or existence of any event,
condition or contingency which would materially impair the prospect of
payment or performance of any covenant, agreement or duty of any Loan
Party under any of the Loan Documents or cause or constitute an Event of
Default. The Loan Parties will be deemed to have complied with the
delivery requirements of this Section 7.3.2 if within ninety (90) days
after the end of Hovnanian's fiscal year, the Borrower delivers to the
Agent and each of the Banks a copy of Hovnanian's Annual Report and Form
10-K as filed with the SEC and the financial statements and separately
delivers the above-referenced certification of public accountants.
7.3.3. Certificates of the Borrower.
7.3.3.1 Compliance Certificate. Concurrently
with the financial statements of Hovnanian furnished to the Agent and to
the Banks pursuant to Sections 7.3.1 (Quarterly Financial Statements) and
7.3.2 (Annual Financial Statements):
(a) a certificate of the Borrower signed by the
Chief Executive Officer, President, Treasurer or Chief Financial Officer
or principal accounting officer of the Borrower, in the form of Exhibit
7.3.3.1, to the effect that, except as described pursuant to Section
7.3.3.2 (Borrowing Base Certificate), (i)the representations and
warranties of the Borrower contained in Section 5.1 (Representations and
Warranties) and in the other Loan Documents are true and correct in all
material respects on and as of the date of such certificate with the same
effect as though such representations and warranties had been made on and
as of such date (except representations and warranties which expressly
relate solely to an earlier date or time), (ii)no Event of Default or
Potential Default exists and is continuing on the date of such
certificate and (iii)containing calculations in sufficient detail to
demonstrate compliance as of the date of such financial statements with
all financial covenants contained in Section 7.2 (Negative Covenants).
(b) summary consolidated and consolidating
financial statements for each of (i) the Mortgage Subsidiaries as a
group; (ii) the Non-Restricted Persons as a group and (iii) the Borrower,
Hovnanian and the Restricted Subsidiaries as a group;
(c) summary financial statements for each Joint
Venture in which any Loan Party has a Subsidiary Investment greater than
an amount equal to 2% of Adjusted Tangible Net Worth as of the last day
of the previous fiscal quarter of Hovnanian; and
(d) to the extent not previously disclosed in
writing to the Agent and the Banks, a report of any changes to Schedule
1.1(C) including changes arising under Section 2.11 (Designation of
Subsidiaries and Release of Guarantors).
7.3.3.2 Borrowing Base Certificate.
As soon as available, but not later than fifty-five
(55) days after the end of each month, a Borrowing Base Certificate as of
the end of such month, appropriately completed, executed and delivered by
an Authorized Officer, together with a certificate of the Borrower signed
by the Chief Executive Officer, President, Treasurer or Chief Financial
Officer or principal accounting officer of the Borrower, in the form of
Exhibit 7.3.3.2, to the effect that, except as described pursuant to
Section 7.3.4 (Notice of Default), no Event of Default or Potential
Default exists and is continuing on the date of such Borrowing Base
Certificate; provided, however, the Borrowing Base Certificate delivered
with respect to the month of October, in any year, may be in draft form,
subject to change as a result of the year-end audit, but in no event
shall be executed and delivered in final form later than ninety (90) days
after the end of such fiscal year.
7.3.4. Notice of Default.
Promptly after any officer of any Loan Party has
learned of the occurrence of an Event of Default or Potential Default, a
certificate signed by the Chief Executive Officer, President or Chief
Financial Officer or principal accounting officer of such Loan Party
setting forth the details of such Event of Default or Potential Default
and the action which such Loan Party proposes to take with respect
thereto.
7.3.5. Notice of Litigation.
Promptly after the commencement thereof, notice of all
actions, suits, proceedings or investigations before or by any Official
Body or any other Person against any Loan Party that involve a claim or
series of claims in excess of $1,000,000 which is not covered by
insurance or which could reasonably be expected to constitute a Material
Adverse Change.
7.3.6. Notice of Change in Debt Rating.
Within two (2) Business Days after Standard & Poor's or
Xxxxx'x announces a change in Hovnanian's Debt Rating, notice of such
change. Hovnanian will deliver together with such notice a copy of any
written notification which Hovnanian received from the applicable rating
agency regarding such change of Debt Rating.
7.3.7. Budgets, Forecasts, Other Reports and
Information.
Promptly upon their becoming available to any Loan
Party:
(i) any reports, notices or proxy
statements generally distributed by Hovnanian to its stockholders,
(ii) regular or periodic reports,
including Forms 10-K, 10-Q and 8-K, registration statements and
prospectuses, filed by Hovnanian with the SEC, and
(iii) such other reports and information as
any of the Banks may from time to time reasonably request. The Loan
Parties shall also notify the Banks promptly of the enactment or adoption
of any Law which could reasonably be expected to constitute a Material
Adverse Change.
7.3.8. Notices Regarding Plans and Benefit Arrangements.
7.3.8.1 Certain Events.
Promptly after learning of the occurrence thereof,
notice (including the nature of the event and, when known, any action
taken or threatened by the Internal Revenue Service or the PBGC with
respect thereto) of any of the following events, or services of such
events, if, individually or in the aggregate, any liabilities or
penalties resulting from such event(s) could reasonably be expected to
result in a Material Adverse Change:
(i) any Reportable Event with respect to
any Plan,
(ii) any Prohibited Transaction which
could subject any Loan Party or any other member of the ERISA Group to a
civil penalty assessed pursuant to Section 502(i) of ERISA or a tax
imposed by Section 4975 of the Internal Revenue Code in connection with
any Plan, any Benefit Arrangement or any trust created thereunder,
(iii) any withdrawal from a Multiemployer
Plan by the Borrower or any other member of the ERISA Group under Title
IV of ERISA or assertion by a Multiemployer Plan that such a withdrawal
has occurred
(iv) any cessation of operations (by any
Loan Party or any other member of the ERISA Group) at a facility in the
circumstances described in Section 4062(e) of ERISA,
(v) withdrawal by any Loan Party or any
other member of the ERISA Group from a Plan in the circumstances
described in Section 4063 of ERISA or the termination of such Plan in the
circumstances described in Section 4064 of ERISA,
(vi) a failure to make any required
contribution to a Plan or the creation of any Lien in favor of the PBGC
or a Plan,
(vii) the adoption of an amendment to a
Plan requiring the provision of security to such Plan pursuant to Section
307 of ERISA, or
(viii) the distress termination of a
Plan, under Title IV of ERISA, which has insufficient assets to pay all
liabilities.
7.3.8.2 Notices of Involuntary
Termination and Annual Reports.
Promptly after receipt thereof, copies of (a)all
notices received by any Loan Party or any other member of the ERISA Group
of the PBGC's intent to terminate any Plan administered or maintained by
the Borrower or any member of the ERISA Group, or to have a trustee
appointed to administer any such Plan; and (b)at the request of the Agent
or any Bank each annual report (IRS Form 5500 series) and all
accompanying schedules, the most recent actuarial reports, the most
recent financial information concerning the financial status of each Plan
administered or maintained by any Loan Party or any other member of the
ERISA Group, and schedules showing the amounts contributed to each such
Plan by or on behalf of the Borrower or any other member of the ERISA
Group in which any of their personnel participate or from which such
personnel may derive a benefit, and each Schedule B (Actuarial
Information) to the annual report filed by any Loan Party or any other
member of the ERISA Group with the Internal Revenue Service with respect
to each such Plan.
7.3.8.3 Notice of Voluntary
Termination.
Where a termination of any Plan would result in a Material
Adverse Change, promptly upon the filing thereof, copies of any Form
5310, or any successor or equivalent form to Form 5310, filed with the
PBGC in connection with the termination of any Plan.
..
8. DEFAULT
8.1 Events of Default.
An Event of Default shall mean the occurrence or existence of
any one or more of the following events or conditions (whatever the
reason therefor and whether voluntary, involuntary or effected by
operation of Law):
8.1.1. Payments Under Loan Documents.
The Borrower shall fail to pay (i)any principal of any
Loan (including scheduled installments, mandatory prepayments or the
payment due at maturity), Reimbursement Obligation or Letter of Credit
Borrowing when such principal is due hereunder or (ii)any interest on any
Loan, Reimbursement Obligation or Letter of Credit Borrowing or any other
amount owing hereunder or under the other Loan Documents within three (3)
Business Days after such interest or other amount becomes due in
accordance with the terms hereof or thereof;
8.1.2. Breach of Warranty.
Any representation or warranty made at any time by any
of the Loan Parties herein or by any of the Loan Parties in any other
Loan Document, or in any certificate, other instrument or statement
furnished pursuant to the provisions hereof or thereof, shall prove to
have been false or misleading in any material respect as of the time it
was made or furnished;
8.1.3. Breach of Certain Negative Covenants.
Any of the Loan Parties shall default in the observance
or performance of any covenant contained in Sections 7.2.10 (Borrower
Base), 7.2.11 (Minimum ATNW), 7.2.12 (Leverage Ratio) or 7.2.13
[Inventory and Land Purchase Limits];
8.1.4. Breach of Other Covenants.
Any of the Loan Parties shall default in the observance
or performance of any other covenant, condition or provision hereof or of
any other Loan Document and such default shall continue unremedied for a
period of thirty (30) Business Days after notice to the Borrower from the
Agent;
8.1.5. Defaults in Other Agreements or Indebtedness.
A default or event of default shall occur at any time
under the terms of any other agreement involving borrowed money or the
extension of credit or any other Indebtedness under which any Loan Party
may be obligated as a borrower or guarantor in excess of $1,000,000 in
the aggregate, and such breach, default or event of default consists of
the failure to pay (beyond any period of grace permitted with respect
thereto, whether waived or not) any Indebtedness when due (whether at
stated maturity, by acceleration or otherwise) or if such breach or
default permits or causes the acceleration of any Indebtedness (whether
or not such right shall have been waived) or the termination of any
commitment to lend;
8.1.6. Final Judgments or Orders.
Any final judgments or orders for the payment of money
in excess of $1,000,000 in the aggregate shall be entered against any
Loan Party by a court having jurisdiction, which judgment is not
discharged, vacated, bonded or stayed pending appeal within a period of
thirty (30) days from the date of entry;
8.1.7. Loan Document Unenforceable.
Any of the Loan Documents shall cease to be legal,
valid and binding agreements enforceable against the party executing the
same or such party's successors and assigns (as permitted under the Loan
Documents) in accordance with the respective terms thereof or shall in
any way be terminated (except in accordance with its terms or as
permitted under the Loan Documents) or become or be declared ineffective
or inoperative or shall in any way be challenged or contested or cease to
give or provide the respective Liens, security interests, rights, titles,
interests, remedies, powers or privileges intended to be created thereby;
8.1.8. Uninsured Losses; Proceedings Against Assets.
Any of the Loan Parties' assets are attached, seized,
levied upon or subjected to a writ or distress warrant; or such come
within the possession of any receiver, trustee, custodian or assignee for
the benefit of creditors and the same is not cured within thirty (30)
days thereafter and any of the foregoing could reasonably be expected to
constitute a Material Adverse Change;
8.1.9. Notice of Lien or Assessment.
A notice of Lien or assessment in excess of $1,000,000
which is not a Permitted Lien is filed of record with respect to all or
any part of any of the Loan Parties' assets by the United States, or any
department, agency or instrumentality thereof, or by any state, county,
municipal or other governmental agency, including the PBGC, or any taxes
or debts owing at any time or times hereafter to any one of these becomes
payable and the same is not paid within thirty (30) days after the same
becomes payable;
8.1.10. Insolvency.
Any of (i) Hovnanian, (ii) the Borrower or (iii)
Restricted Subsidiaries owning as of the date of any event described in
this Section 8.1.10 three percent (3%) or more of the Dollar value of all
of the assets of all of the Subsidiaries of Hovnanian taken as a whole
ceases to be solvent or admits in writing its inability to pay its debts
as they mature;
8.1.11. Events Relating to Plans and Benefit Arrangements.
Any of the following occurs: (i)any Reportable Event
with respect to a Plan, which the Agent reasonably determines in good
faith constitutes grounds for the termination of any Plan by the PBGC or
the appointment of a trustee to administer or liquidate any Plan, shall
have occurred and be continuing; (ii)proceedings shall have been
instituted or other action taken to terminate any Plan, or a termination
notice shall have been filed with respect to any Plan; (iii)a trustee
shall be appointed to administer or liquidate any Plan; (iv)the PBGC
shall give notice of its intent to institute proceedings to terminate any
Plan or Plans or to appoint a trustee to administer or liquidate any
Plan; and, in the case of the occurrence of (i), (ii), (iii) or (iv)
above, the Agent reasonably determines in good faith that the amount of
any Loan Party's liability is likely to exceed 10% of its Consolidated
Tangible Net Worth; (v)any "accumulated funding deficiency" (as defined
in Section 302 of ERISA) shall exist with respect to any Plan, or any
Lien in favor of the PBGC or a Plan shall arise on the assets of the
Borrower or any other member of the ERISA Group, (vi)any Loan Party or
any other member of the ERISA Group shall make any amendment to a Plan
with respect to which security is required under Section 307 of ERISA;
(vii)any Loan Party or any other member of the ERISA Group shall incur
any liability in connection with a withdrawal from a Multiemployer Plan;
(viii)any Loan Party or any other member of the ERISA Group shall
withdraw under Section 4063 of ERISA (or shall be deemed under Section
4062(e) of ERISA to withdraw) from a Plan; or (ix)any applicable Law is
adopted, changed or interpreted by any Official Body with respect to or
otherwise affecting one or more Plans, Multiemployer Plans or Benefit
Arrangements and, with respect to any of the events specified in (v),
(vi), (vii), (viii) or (ix), the Agent reasonably determines in good
faith that any such occurrence, together with all other such events,
would be reasonably likely to result in a Material Adverse Change;
8.1.12. Cessation of Business.
Any Loan Party ceases to conduct its business as
contemplated, except as expressly permitted under Section 7.2.4
(Liquidations, Mergers, Consolidations, Acquisitions) or Section 7.2.5
(Dispositions of Assets or Subsidiaries; Sale and Leaseback), or any Loan
Party is enjoined, restrained or in any way prevented by court order from
conducting all or any material part of its business and such injunction,
restraint or other preventive order is not dismissed within thirty (30)
days after the entry thereof and any of the foregoing could reasonably be
expected to constitute a Material Adverse Change;
8.1.13. Change of Control.
(i) Any person or group of persons (within the
meaning of Sections 13(d) or 14(a) of the Securities Exchange Act of
1934, as amended) shall have acquired beneficial ownership of (within the
meaning of Rule 13d-3 promulgated by the SEC under said Act) 40% or more
of the voting capital stock of Hovnanian; or (ii) within a period of
twelve (12) consecutive calendar months, individuals who were directors
of the Borrower on the first day of such period, or who were nominated by
a majority of such directors, shall cease to constitute a majority of the
board of directors of the Borrower;
8.1.14. Involuntary Proceedings.
A proceeding shall have been instituted in a court
having jurisdiction seeking a decree or order for relief in respect of
any of (i) Hovnanian, (ii) the Borrower or (iii) Restricted Subsidiaries
owning as of the date of any event described in this Section 8.1.14 three
percent (3%) or more of the Dollar value of all of the assets of all of
the Subsidiaries of Hovnanian taken as a whole in an involuntary case
under any applicable bankruptcy, insolvency, reorganization or other
similar law now or hereafter in effect, or for the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator,
conservator (or similar official) of any Loan Party for any substantial
part of its property, or for the winding-up or liquidation of its
affairs, and such proceeding shall remain undismissed or unstayed and in
effect for a period of sixty (60) consecutive days or such court shall
enter a decree or order granting any of the relief sought in such
proceeding; or
8.1.15. Voluntary Proceedings.
Any of (i) Hovnanian, (ii) the Borrower or (iii)
Restricted Subsidiaries owning as of the date of any event described in
this Section 8.1.15 three percent (3%) or more of the Dollar value of all
of the assets of all of the Subsidiaries of Hovnanian taken as a whole
shall commence a voluntary case under any applicable bankruptcy,
insolvency, reorganization or other similar law now or hereafter in
effect, shall consent to the entry of an order for relief in an
involuntary case under any such law, or shall consent to the appointment
or taking possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator, conservator (or other similar official) of itself
or for any substantial part of its property or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay
its debts as they become due, or shall take any action in furtherance of
any of the foregoing.
8.2 Consequences of Event of Default.
8.2.1. Events of Default Other Than Bankruptcy,
Insolvency or Reorganization Proceedings.
If an Event of Default specified under Sections 8.1.1
(Payments Under Loan Documents) through 8.1.13 (Change of Control) shall
occur and be continuing, the Banks and the Agent shall be under no
further obligation to make Loans or issue Letters of Credit, as the case
may be, and the Agent may, and upon the request of the Required Banks,
shall (i)by written notice to the Borrower, declare the unpaid principal
amount of the Loan then outstanding and all interest accrued thereon, any
unpaid fees and all other Indebtedness of the Borrower to the Banks
hereunder and thereunder to be forthwith due and payable, and the same
shall thereupon become and be immediately due and payable to the Agent
for the benefit of each Bank without presentment, demand, protest or any
other notice of any kind, all of which are hereby expressly waived, and
(ii)require the Borrower to, and the Borrower shall thereupon, deposit in
an interest-bearing account with the Agent, as cash collateral for its
Obligations under the Loan Documents, an amount equal to the maximum
amount currently or at any time thereafter available to be drawn on all
outstanding Letters of Credit, and the Borrower hereby pledges to the
Agent and the Banks, and grants to the Agent and the Banks a security
interest in, all such cash as security for such Obligations. Upon the
curing of all existing Events of Default, the Agent shall return such
cash collateral to the Borrower; and
8.2.2. Bankruptcy, Insolvency or Reorganization
Proceedings.
If an Event of Default specified under Section 8.1.14
(Involuntary Proceedings) or 8.1.15 (Voluntary Proceedings) shall occur,
the Banks shall be under no further obligations to make Loans or issue
Letters of Credit hereunder and the unpaid principal amount of the Loans
then outstanding and all interest accrued thereon, any unpaid fees and
all other Indebtedness of the Borrower to the Banks hereunder and
thereunder shall be immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which are hereby expressly
waived; and
8.2.3. Set-off.
If an Event of Default shall occur and be continuing,
any Bank to whom any Obligation is owed by any Loan Party hereunder or
under any other Loan Document or any participant of such Bank which has
agreed in writing to be bound by the provisions of Section 9.13
(Equalization of Banks) and any branch, Subsidiary or Affiliate of such
Bank or participant anywhere in the world shall have the right, in
addition to all other rights and remedies available to it, without notice
to such Loan Party, to set-off against and apply to the then unpaid
balance of all past-due Loans and all other past-due Obligations of the
Borrower and the other Loan Parties hereunder or under any other Loan
Document any debt owing to, and any other funds held in any manner for
the account of, the Borrower or such other Loan Party by such Bank or
participant or by such branch, Subsidiary or Affiliate, including all
funds in all deposit accounts (whether time or demand, general or
special, provisionally credited or finally credited, or otherwise) now or
hereafter maintained by the Borrower or such other Loan Party for its own
account (but not including funds held in custodian or trust accounts)
with such Bank or participant or such branch, Subsidiary or Affiliate;
and
8.2.4. Suits, Actions, Proceedings.
If an Event of Default shall occur and be continuing,
and whether or not the Agent shall have accelerated the maturity of Loans
pursuant to any of the foregoing provisions of this Section 8.2
(Consequences of Event of Default), the Agent or any Bank, if owed any
amount with respect to the Loans, may proceed to protect and enforce its
rights by suit in equity, action at law and/or other appropriate
proceeding, whether for the specific performance of any covenant or
agreement contained in this Agreement or the other Loan Documents,
including as permitted by applicable Law the obtaining of the ex parte
appointment of a receiver, and, if such amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof or any
other legal or equitable right of the Agent or such Bank; and
8.2.5. Application of Proceeds.
From and after the date on which the Agent has taken
any action pursuant to this Section 8.2 (Consequences of Event of
Default) and until all Obligations of the Loan Parties have been paid in
full, any and all proceeds received by the Agent from the exercise of any
remedy by the Agent, shall be applied as follows:
(i) first, to reimburse the Agent and the
Banks for out-of-pocket costs, expenses and disbursements, including
reasonable attorneys' and paralegals' fees and legal expenses, incurred
by the Agent or the Banks in connection with collection of any
Obligations of any of the Loan Parties under any of the Loan Documents;
(ii) second, to the repayment of all
Indebtedness then due and unpaid of the Loan Parties to the Banks
incurred under this Agreement or any of the other Loan Documents, whether
of principal, interest, fees, expenses or otherwise, in such manner as
the Agent may determine in its discretion; and
(iii) the balance, if any, as required by
Law.
8.2.6. Other Rights and Remedies.
In addition to all of the rights and remedies contained
in this Agreement or in any of the other Loan Documents, the Agent shall
have all of the rights and remedies under applicable Law, all of which
rights and remedies shall be cumulative and non-exclusive, to the extent
permitted by Law. The Agent may, and upon the request of the Required
Banks shall, exercise all post-default rights granted to the Agent and
the Banks under the Loan Documents or applicable Law.
9. THE AGENT
9.1 Appointment.
Each Bank hereby irrevocably designates, appoints and
authorizes PNC Bank to act as Agent for such Bank under this Agreement
and to execute and deliver or accept on behalf of each of the Banks the
other Loan Documents. Each Bank hereby irrevocably authorizes the Agent
to take such action on its behalf under the provisions of this Agreement
and the other Loan Documents and any other instruments and agreements
referred to herein, and to exercise such powers and to perform such
duties hereunder as are specifically delegated to or required of the
Agent by the terms hereof, together with such powers as are reasonably
incidental thereto. PNC Bank agrees to act as the Agent on behalf of the
Banks to the extent provided in this Agreement.
9.2 Delegation of Duties.
The Agent may perform any of its duties hereunder by or
through agents or employees (provided such delegation does not constitute
a relinquishment of its duties as Agent) and, subject to Sections 9.5
(Reimbursement and Indemnification of Agent by the Borrower) and 9.6
(Exculpatory Provisions; Limitation of Liability), shall be entitled to
engage and pay for the advice or services of any attorneys, accountants
or other experts concerning all matters pertaining to its duties
hereunder and to rely upon any advice so obtained.
9.3 Nature of Duties; Independent Credit Investigation.
The Agent shall have no duties or responsibilities except
those expressly set forth in this Agreement and no implied covenants,
functions, responsibilities, duties, obligations, or liabilities shall be
read into this Agreement or otherwise exist. The duties of the Agent
shall be mechanical and administrative in nature; the Agent shall not
have by reason of this Agreement a fiduciary or trust relationship in
respect of any Bank; and nothing in this Agreement, expressed or implied,
is intended to or shall be so construed as to impose upon the Agent any
obligations in respect of this Agreement except as expressly set forth
herein. Without limiting the generality of the foregoing, the use of the
term "agent" in this Agreement with reference to the Agent is not
intended to connote any fiduciary or other implied (or express)
obligations arising under agency doctrine of any applicable Law.
Instead, such term is used merely as a matter of market custom, and is
intended to create or reflect only an administrative relationship between
independent contracting parties. Each Bank expressly acknowledges
(i)that the Agent has not made any representations or warranties to it
and that no act by the Agent hereafter taken, including any review of the
affairs of any of the Loan Parties, shall be deemed to constitute any
representation or warranty by the Agent to any Bank; (ii)that it has made
and will continue to make, without reliance upon the Agent, its own
independent investigation of the financial condition and affairs and its
own appraisal of the creditworthiness of each of the Loan Parties in
connection with this Agreement and the making and continuance of the
Loans hereunder; and (iii)except as expressly provided herein, that the
Agent shall have no duty or responsibility, either initially or on a
continuing basis, to provide any Bank with any credit or other
information with respect thereto, whether coming into its possession
before the making of any Loan or at any time or times thereafter.
9.4 Actions in Discretion of Agent; Instructions From the Banks.
The Agent agrees, upon the written request of the Required
Banks, to take or refrain from taking any action of the type specified as
being within the Agent's rights, powers or discretion herein, provided
that the Agent shall not be required to take any action which exposes the
Agent to personal liability or which is contrary to this Agreement or any
other Loan Document or applicable Law. In the absence of a request by
the Required Banks, the Agent shall have authority, in its sole
discretion, to take or not to take any such action, unless this Agreement
specifically requires the consent of the Required Banks or all of the
Banks. Any action taken or failure to act pursuant to such instructions
or discretion shall be binding on the Banks, subject to Section 9.6
(Exculpatory Provisions; Limitation of Liability). Subject to the
provisions of Section 9.6 (Exculpatory Provisions; Limitation of
Liability), no Bank shall have any right of action whatsoever against the
Agent as a result of the Agent acting or refraining from acting hereunder
in accordance with the instructions of the Required Banks, or in the
absence of such instructions, in the absolute discretion of the Agent.
9.5 Reimbursement and Indemnification of Agent by the Borrower.
The Borrower unconditionally agrees to pay or reimburse the
Agent and hold the Agent harmless against (a)liability for the payment of
all reasonable out-of-pocket costs, expenses and disbursements, including
fees and expenses of counsel (including the allocated costs of staff
counsel), incurred by the Agent (i)in connection with the development,
negotiation, preparation, printing, execution, administration,
syndication, interpretation and performance of this Agreement and the
other Loan Documents, (ii)relating to any requested amendments, waivers
or consents pursuant to the provisions hereof, (iii)in connection with
the enforcement of this Agreement or any other Loan Document or
collection of amounts due hereunder or thereunder or the proof and
allowability of any claim arising under this Agreement or any other Loan
Document, whether in bankruptcy or receivership proceedings or otherwise,
and (iv)in any workout or restructuring or in connection with the
protection, preservation, exercise or enforcement of any of the terms
hereof or of any rights hereunder or under any other Loan Document or in
connection with any foreclosure, collection or bankruptcy proceedings,
and (b)all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against the
Agent, in its capacity as such, in any way relating to or arising out of
this Agreement or any other Loan Documents or any action taken or omitted
by the Agent hereunder or thereunder, provided that the Borrower shall
not be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements if the same results from the Agent's gross negligence or
willful misconduct, or if the Borrower was not given notice of the
subject claim and the opportunity to participate in the defense thereof,
at its expense (except that the Borrower shall remain liable to the
extent such failure to give notice does not result in a loss to the
Borrower), or if the same results from a compromise or settlement
agreement entered into without the consent of the Borrower, which shall
not be unreasonably withheld. In addition, after the occurrence and
during the continuance of an Event of Default, the Borrower agrees to
reimburse and pay all reasonable out-of-pocket expenses of the Agent's
regular employees and agents engaged periodically to perform audits of
the Loan Parties' books, records and business properties.
9.6 Exculpatory Provisions; Limitation of Liability.
Neither the Agent nor any of its directors, officers,
employees, agents, attorneys or Affiliates shall (a)be liable to any Bank
for any action taken or omitted to be taken by it or them hereunder, or
in connection herewith including pursuant to any Loan Document, unless
caused by its or their own gross negligence or willful misconduct, (b)be
responsible in any manner to any of the Banks for the effectiveness,
enforceability, genuineness, validity or the due execution of this
Agreement or any other Loan Documents or for any recital, representation,
warranty, document, certificate, report or statement herein or made or
furnished under or in connection with this Agreement or any other Loan
Documents, or (c)be under any obligation to any of the Banks to ascertain
or to inquire as to the performance or observance of any of the terms,
covenants or conditions hereof or thereof on the part of the Loan
Parties, or the financial condition of the Loan Parties, or the existence
or possible existence of any Event of Default or Potential Default. No
claim may be made by any of the Loan Parties, any Bank, the Agent or any
of their respective Subsidiaries against the Agent, any Bank or any of
their respective directors, officers, employees, agents, attorneys or
Affiliates, or any of them, for any special, indirect or consequential
damages or, to the fullest extent permitted by Law, for any punitive
damages in respect of any claim or cause of action (whether based on
contract, tort, statutory liability, or any other ground) based on,
arising out of or related to any Loan Document or the transactions
contemplated hereby or any act, omission or event occurring in connection
therewith, including the negotiation, documentation, administration or
collection of the Loans, and each of the Loan Parties (for itself and on
behalf of each of its Subsidiaries), the Agent and each Bank hereby
waive, release and agree never to xxx upon any claim for any such
damages, whether such claim now exists or hereafter arises and whether or
not it is now known or suspected to exist in its favor. Each Bank agrees
that, except for notices, reports and other documents expressly required
to be furnished to the Banks by the Agent hereunder or given to the Agent
for the account of or with copies for the Banks, the Agent and each of
its directors, officers, employees, agents, attorneys or Affiliates shall
not have any duty or responsibility to provide any Bank with credit or
other information concerning the business, operations, property,
condition (financial or otherwise), prospects or creditworthiness of the
Loan Parties which may come into the possession of the Agent or any of
its directors, officers, employees, agents, attorneys or Affiliates.
9.7 Reimbursement and Indemnification of Agent by Banks.
Each Bank agrees to reimburse and indemnify the Agent (to the
extent not reimbursed by the Borrower and without limiting the obligation
of the Borrower to do so) in proportion to its Ratable Share from and
against all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements, including
attorneys' fees and disbursements (including the allocated costs of staff
counsel), and costs of appraisers and environmental consultants, of any
kind or nature whatsoever which may be imposed on, incurred by or
asserted against the Agent, in its capacity as such, in any way relating
to or arising out of this Agreement or any other Loan Documents or any
action taken or omitted by the Agent hereunder or thereunder, provided
that no Bank shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements (a)if the same results from the Agent's
gross negligence or willful misconduct, or (b)if such Bank was not given
notice of the subject claim and the opportunity to participate in the
defense thereof, at its expense (except that such Bank shall remain
liable to the extent such failure to give notice does not result in a
loss to the Bank), or (c)if the same results from a compromise and
settlement agreement entered into without the consent of such Bank, which
shall not be unreasonably withheld. In addition, each Bank agrees
promptly upon demand to reimburse the Agent (to the extent not reimbursed
by the Borrower and without limiting the obligation of the Borrower to do
so) in proportion to its Ratable Share for all amounts due and payable by
the Borrower to the Agent in connection with the Agent's periodic audit
of the Loan Parties' books, records and business properties.
9.8 Reliance by Agent.
The Agent shall be entitled to rely upon any writing,
telegram, telex or teletype message, electronic mail, resolution, notice,
consent, certificate, letter, cablegram, statement, order or other
document or conversation by telephone or otherwise believed by it to be
genuine and correct and to have been signed, sent or made by the proper
Person or Persons, and upon the advice and opinions of counsel and other
professional advisers selected by the Agent. The Agent shall be fully
justified in failing or refusing to take any action hereunder unless it
shall first be indemnified to its satisfaction by the Banks against any
and all liability and expense which may be incurred by it by reason of
taking or continuing to take any such action.
9.9 Notice of Default.
The Agent shall not be deemed to have knowledge or notice of
the occurrence of any Potential Default or Event of Default unless the
Agent has received written notice from a Bank or the Borrower referring
to this Agreement, describing such Potential Default or Event of Default
and stating that such notice is a "notice of default."
9.10 Notices.
The Agent shall promptly send to each Bank a copy of all
notices received from the Borrower pursuant to the provisions of this
Agreement or the other Loan Documents promptly upon receipt thereof. The
Agent shall promptly notify the Borrower and the other Banks of each
change in the Base Rate and the effective date thereof.
9.11 Banks in Their Individual Capacities; Agents in its
Individual Capacity.
With respect to its Revolving Credit Commitment, the
Revolving Credit Loans made by it and any other rights and powers given
to it as a Bank hereunder or under any of the other Loan Documents, the
Agent shall have the same rights and powers hereunder as any other Bank
and may exercise the same as though it were not the Agent, and the term
"Bank" and "Banks" shall, unless the context otherwise indicates, include
the Agent in its individual capacity. PNC Bank and its Affiliates and
each of the Banks and their respective Affiliates may, without liability
to account, except as prohibited herein, make loans to, issue letters of
credit for the account of, acquire equity interests in, accept deposits
from, discount drafts for, act as trustee under indentures of, and
generally engage in any kind of banking, trust, financial advisory,
underwriting or other business with, the Loan Parties and their
Affiliates, in the case of the Agent, as though it were not acting as
Agent hereunder and in the case of each Bank, as though such Bank were
not a Bank hereunder, in each case without notice to or consent of the
other Banks. The Banks acknowledge that, pursuant to such activities,
the Agent or its Affiliates may (i)receive information regarding the Loan
Parties or any of their Subsidiaries or Affiliates (including information
that may be subject to confidentiality obligations in favor of the Loan
Parties or such Subsidiary or Affiliate) and acknowledge that the Agent
shall be under no obligation to provide such information to them, and
(ii) accept fees and other consideration from the Loan Parties for
services in connection with this Agreement and otherwise without having
to account for the same to the Banks.
9.12 Holders of Notes.
The Agent may deem and treat any payee of any Note as the
owner thereof for all purposes hereof unless and until written notice of
the assignment or transfer thereof shall have been filed with the Agent.
Any request, authority or consent of any Person who at the time of making
such request or giving such authority or consent is the holder of any
Note shall be conclusive and binding on any subsequent holder, transferee
or assignee of such Note or of any Note or Notes issued in exchange
therefor.
9.13 Equalization of Banks.
The Banks and the holders of any participations in any
Commitments or Loans or other rights or obligations of a Bank hereunder
agree among themselves that, with respect to all amounts received by any
Bank or any such holder for application on any Obligation hereunder or
under any such participation, whether received by voluntary payment, by
realization upon security, by the exercise of the right of set-off or
banker's lien, by counterclaim or by any other non-pro rata source,
equitable adjustment will be made in the manner stated in the following
sentence so that, in effect, all such excess amounts will be shared
ratably among the Banks and such holders in proportion to their interests
in payments on the Loans, except as otherwise provided in Section 3.4.3
(Agent's and Bank's Rights), 4.4.2 (Replacement of a Bank) or 4.6
(Additional Compensation in Certain Circumstances). The Banks or any
such holder receiving any such amount shall purchase for cash from each
of the other Banks an interest in such Bank's Loans in such amount as
shall result in a ratable participation by the Banks and each such holder
in the aggregate unpaid amount of the Loans, provided that if all or any
portion of such excess amount is thereafter recovered from the Bank or
the holder making such purchase, such purchase shall be rescinded and the
purchase price restored to the extent of such recovery, together with
interest or other amounts, if any, required by law (including court
order) to be paid by the Bank or the holder making such purchase.
9.14 Successor Agent.
The Agent (i)may resign as Agent or (ii)shall resign if such
resignation is requested by the Required Banks (if the Agent is a Bank,
the Agent's Loans and its Commitment shall be considered in determining
whether the Required Banks have requested such resignation) or required
by Section 4.4.2 (Replacement of a Bank), in either case of (i) or (ii)
by giving not less than thirty (30) days' prior written notice to the
Borrower. If the Agent shall resign under this Agreement, then either
(a)the Required Banks shall appoint from among the Banks a successor
agent for the Banks, subject to the consent of the Borrower, such consent
not to be unreasonably withheld, or (b)if a successor agent shall not be
so appointed and approved within the thirty (30) day period following the
Agent's notice to the Banks of its resignation, then the Agent shall
appoint from among the Banks, with the consent of the Borrower, such
consent not to be unreasonably withheld, a successor agent who shall
serve as Agent until such time as the Required Banks appoint and the
Borrower consents to the appointment of a successor agent. Upon its
appointment pursuant to either clause (a) or (b) above, such successor
agent shall succeed to the rights, powers and duties of the Agent, and
the term "Agent" shall mean such successor agent, effective upon its
appointment, and the former Agent's rights, powers and duties as Agent
shall be terminated without any other or further act or deed on the part
of such former Agent or any of the parties to this Agreement. After the
resignation of any Agent hereunder, the provisions of this Section 9
shall inure to the benefit of such former Agent and such former Agent
shall not by reason of such resignation be deemed to be released from
liability for any actions taken or not taken by it while it was an Agent
under this Agreement.
9.15 Agent's Fee.
The Borrower shall pay to the Agent a nonrefundable fee (the
"Agent's Fee") under the terms of a letter (the "Agent's Letter") between
the Borrower and Agent, as amended from time to time.
9.16 Availability of Funds.
The Agent may assume that each Bank has made or will make the
proceeds of a Loan available to the Agent unless the Agent shall have
been notified by such Bank on or before the later of (1)the close of
Business on the Business Day preceding the Borrowing Date with respect to
such Loan or two (2) hours before the time on which the Agent actually
funds the proceeds of such Loan to the Borrower (whether using its own
funds pursuant to this Section 9.16 or using proceeds deposited with the
Agent by the Banks and whether such funding occurs before or after the
time on which Banks are required to deposit the proceeds of such Loan
with the Agent). The Agent may, in reliance upon such assumption (but
shall not be required to), make available to the Borrower a corresponding
amount. If such corresponding amount is not in fact made available to
the Agent by such Bank, the Agent shall be entitled to recover such
amount on demand from such Bank (or, if such Bank fails to pay such
amount forthwith upon such demand from the Borrower) together with
interest thereon, in respect of each day during the period commencing on
the date such amount was made available to the Borrower and ending on the
date the Agent recovers such amount, at a rate per annum equal to (i) the
Federal Funds Effective Rate during the first three (3) days after such
interest shall begin to accrue and (ii) the applicable interest rate in
respect of such Loan after the end of such three-day period.
9.17 Calculations.
In the absence of gross negligence or willful misconduct, the
Agent shall not be liable for any error in computing the amount payable
to any Bank whether in respect of the Loans, fees or any other amounts
due to the Banks under this Agreement. In the event an error in
computing any amount payable to any Bank is made, the Agent, the Borrower
and each affected Bank shall, forthwith upon discovery of such error,
make such adjustments as shall be required to correct such error, and any
compensation therefor will be calculated at the Federal Funds Effective
Rate.
9.18 Beneficiaries.
Except as expressly provided herein, the provisions of this
Section 9 (The Agent) are solely for the benefit of the Agent and the
Banks, and the Loan Parties shall not have any rights to rely on or
enforce any of the provisions hereof. In performing its functions and
duties under this Agreement, the Agent shall act solely as agent of the
Banks and does not assume and shall not be deemed to have assumed any
obligation toward or relationship of agency or trust with or for any of
the Loan Parties.
10. MISCELLANEOUS
10.1 Modifications, Amendments or Waivers.
With the written consent of the Required Banks, the Agent,
acting on behalf of all the Banks, and the Borrower, on behalf of the
Loan Parties, may from time to time enter into written agreements
amending or changing any provision of this Agreement or any other Loan
Document or the rights of the Banks or the Loan Parties hereunder or
thereunder, or may grant written waivers or consents to a departure from
the due performance of the Obligations of the Loan Parties hereunder or
thereunder. Any such agreement, waiver or consent made with such written
consent shall be effective to bind all the Banks and the Loan Parties;
provided, that, without the written consent of all the Banks, no such
agreement, waiver or consent may be made which will:
10.1.1. Increase of Commitment.
Increase the amount of the aggregate Revolving Credit
Commitments, except as provided in Section 2.1.3;
10.1.2. Extension of Payment; Reduction of Principal,
Interest or Fees; Modification of Terms of Payment.
Subject to Section 2.10 (Extension by Banks of the
Expiration Date), but whether or not any Loans are outstanding, extend
the time for payment of principal or interest of any Loan (excluding the
due date of any mandatory prepayment of a Loan or any mandatory
Commitment reduction in connection with such a mandatory prepayment
hereunder except for mandatory reductions of the Commitments on the
Expiration Date), the Commitment Fee or any other fee payable to any
Bank, or reduce the principal amount of or the rate of interest borne by
any Loan or reduce the Commitment Fee or any other fee payable to any
Bank, or otherwise directly affect the terms of payment of the principal
of or interest of any Loan, the Commitment Fee or any other fee payable
to any Bank;
10.1.3. Miscellaneous
Amend Section 4.2 (Pro Rata Treatment of Banks), 9.6
(Exculpatory Provisions; Limitation of Liability), 9.13 (Equalization of
Banks) or this Section 10.1 (Modifications, Amendments or Waivers) change
the pro rata treatment of the Banks, change the definition of Required
Banks, or change any requirement providing for the Banks or the Required
Banks to authorize the taking of any action hereunder;
provided, that no agreement, waiver or consent which would modify the
interests, rights or obligations of the Agent in its capacity as Agent
shall be effective without the written consent of the Agent and provided
further, that no provision of Sections 2.1.2 (Swing Loan Commitment),
2.4.2 (Swing Loan Requests), 2.5.2 (Making Swing Loans), 2.6 (Swing Loan
Note), 2.8 (Borrowings to Repay Swing Loans) and 4.8 (Settlement Date
Procedures) may be amended or modified without the consent of PNC Bank.
10.2 No Implied Waivers; Cumulative Remedies; Writing Required.
No course of dealing and no delay or failure of the Agent or
any Bank in exercising any right, power, remedy or privilege under this
Agreement or any other Loan Document shall affect any other or future
exercise thereof or operate as a waiver thereof, nor shall any single or
partial exercise thereof or any abandonment or discontinuance of steps to
enforce such a right, power, remedy or privilege preclude any further
exercise thereof or of any other right, power, remedy or privilege. The
rights and remedies of the Agent and the Banks under this Agreement and
any other Loan Documents are cumulative and not exclusive of any rights
or remedies which they would otherwise have. Any waiver, permit, consent
or approval of any kind or character on the part of any Bank of any
breach or default under this Agreement or any such waiver of any
provision or condition of this Agreement must be in writing and shall be
effective only to the extent specifically set forth in such writing.
10.3 Reimbursement and Indemnification of Banks by the Borrower;
Taxes.
The Borrower agrees unconditionally upon demand to pay or
reimburse to each Bank (other than the Agent, as to which the Borrower's
Obligations are set forth in Section 9.5 (Reimbursement and
Indemnification of Agent by the Borrower)) and to save such Bank harmless
against (i)liability for the payment of all reasonable out-of-pocket
costs, expenses and disbursements (including fees and expenses of counsel
(including allocated costs of staff counsel) for the Agent except with
respect to (a) and (b) below), incurred by the Agent (a)in connection
with the administration and interpretation of this Agreement, and other
instruments and documents to be delivered hereunder, (b)relating to any
amendments, waivers or consents pursuant to the provisions hereof, (c)in
connection with the enforcement of this Agreement or any other Loan
Document, or collection of amounts due hereunder or thereunder or the
proof and allowability of any claim arising under this Agreement or any
other Loan Document, whether in bankruptcy or receivership proceedings or
otherwise, and (d)in any workout or restructuring or in connection with
the protection, preservation, exercise or enforcement of any of the terms
hereof or of any rights hereunder or under any other Loan Document or in
connection with any foreclosure, collection or bankruptcy proceedings, or
(ii)all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against the
Agent, in its capacity as such, in any way relating to or arising out of
this Agreement or any other Loan Documents or any action taken or omitted
by the Agent hereunder or thereunder, provided that the Borrower shall
not be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements (A)if the same results from the Agent's gross negligence or
willful misconduct, or (B)if the Borrower was not given notice of the
subject claim and the opportunity to participate in the defense thereof,
at its expense (except that the Borrower shall remain liable to the
extent such failure to give notice does not result in a loss to the
Borrower), or (C)if the same results from a compromise or settlement
agreement entered into without the consent of the Borrower, which shall
not be unreasonably withheld. The Borrower agrees unconditionally to pay
all stamp, document, transfer, recording or filing taxes or fees and
similar impositions now or hereafter determined by the Agent to be
payable in connection with this Agreement or any other Loan Document, and
the Borrower agrees unconditionally to save the Agent and the Banks
harmless from and against any and all present or future claims,
liabilities or losses with respect to or resulting from any omission to
pay or delay in paying any such taxes, fees or impositions.
10.4 Holidays.
Whenever payment of a Loan to be made or taken hereunder
shall be due on a day which is not a Business Day such payment shall be
due on the next Business Day (except as provided in Section 3.2 (Interest
Periods) with respect to Interest Periods under the LIBO-Rate Option) and
such extension of time shall be included in computing interest and fees,
except that the Loans shall be due on the Business Day preceding the
Expiration Date if the Expiration Date is not a Business Day. Whenever
any payment or action to be made or taken hereunder (other than payment
of the Loans) shall be stated to be due on a day which is not a Business
Day, such payment or action shall be made or taken on the next following
Business Day, and such extension of time shall not be included in
computing interest or fees, if any, in connection with such payment or
action.
10.5 Funding by Branch, Subsidiary or Affiliate.
10.5.1. Notional Funding.
Each Bank shall have the right from time to time,
without notice to the Borrower, to deem any branch, Subsidiary or
Affiliate (which for the purposes of this Section 10.5 shall mean any
corporation or association which is directly or indirectly controlled by
or is under direct or indirect common control with any corporation or
association which directly or indirectly controls such Bank) of such Bank
to have made, maintained or funded any Loan to which the LIBO-Rate Option
applies at any time, provided that immediately following (on the
assumption that a payment were then due from the Borrower to such other
office), and as a result of such change, the Borrower would not be under
any greater financial obligation (including pursuant to Section 4.6
(Additional Compensation in Certain Circumstances)) than it would have
been in the absence of such change. Notional funding offices may be
selected by each Bank without regard to such Bank's actual methods of
making, maintaining or funding the Loans or any sources of funding
actually used by or available to such Bank.
10.5.2. Actual Funding.
Each Bank shall have the right from time to time to
make or maintain any Loan by arranging for a branch, Subsidiary or
Affiliate of such Bank to make or maintain such Loan subject to the last
sentence of this Section 10.5.2. If any Bank causes a branch, Subsidiary
or Affiliate to make or maintain any part of the Loans hereunder, all
terms and conditions of this Agreement shall, except where the context
clearly requires otherwise, be applicable to such part of the Loans to
the same extent as if such Loans were made or maintained by such Bank,
but in no event shall any Bank's use of such a branch, Subsidiary or
Affiliate to make or maintain any part of the Loans hereunder cause such
Bank or such branch, Subsidiary or Affiliate to incur any cost or
expenses payable by the Borrower hereunder or require the Borrower to pay
any other compensation to any Bank (including any expenses incurred or
payable pursuant to Section 4.6 (Additional Compensation in Certain
Circumstances)) which would otherwise not be incurred.
10.6 Notices.
Any notice, request, demand, direction or other communication
(for purposes of this Section 10.6 only, a "Notice") to be given to or
made upon any party hereto under any provision of this Agreement shall be
given or made by telephone or in writing (which includes means of
electronic transmission (i.e., "e-mail") or facsimile transmission or by
setting forth such Notice on a site on the World Wide Web (a "Website
Posting") if Notice of such Website Posting (including the information
necessary to access such site) has previously been delivered to the
applicable parties hereto by another means set forth in this Section 10.6
in accordance with this Section 10.6. Any such Notice must be delivered
to the applicable parties hereto at the addresses and numbers set forth
under their respective names on Schedule 1.1(B) hereof or in accordance
with any subsequent unrevoked Notice from any such party that is given in
accordance with this Section 10.6. Any Notice shall be effective:
(i) In the case of hand-delivery, when
delivered;
(ii) If given by mail, four (4) days after
such Notice is deposited with the United States Postal Service, with
first-class postage prepaid, return receipt requested;
(iii) In the case of a telephonic Notice,
when a party is contacted by telephone, if delivery of such telephonic
Notice is confirmed no later than the next Business Day by hand delivery,
a facsimile or electronic transmission, a Website Posting or overnight
courier delivery of a confirmatory notice (received at or before noon on
such next Business Day);
(iv) In the case of a facsimile
transmission, when sent to the applicable party's facsimile machine's
telephone number if the party sending such Notice receives confirmation
of the delivery thereof from its own facsimile machine;
(v) In the case of electronic
transmission, when actually received;
(vi) In the case of a Website Posting,
upon delivery of a Notice of such posting (including the information
necessary to access such web site) by another means set forth in this
Section 10.6; and
(vii) If given by any other means
(including by overnight courier), when actually received.
Any Bank giving a Notice to a Loan Party shall concurrently send a copy
thereof to the Agent, and the Agent shall promptly notify the other Banks
of its receipt of such Notice.
10.7 Severability.
The provisions of this Agreement are intended to be
severable. If any provision of this Agreement shall be held invalid or
unenforceable in whole or in part in any jurisdiction, such provision
shall, as to such jurisdiction, be ineffective to the extent of such
invalidity or unenforceability without in any manner affecting the
validity or enforceability thereof in any other jurisdiction or the
remaining provisions hereof in any jurisdiction.
10.8 Governing Law.
Each Letter of Credit and Section 2.10 (Letter of Credit
Subfacility) shall be subject to the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, as the same may be revised or amended from time to
time, and to the extent not inconsistent therewith, the internal laws of
the State of New Jersey without regard to its conflict of laws
principles, and the balance of this Agreement shall be deemed to be a
contract under the Laws of the State of New Jersey and for all purposes
shall be governed by and construed and enforced in accordance with the
internal laws of the State of New Jersey without regard to its conflict
of laws principles.
10.9 Prior Understanding.
This Agreement and the other Loan Documents supersede all
prior understandings and agreements, whether written or oral, between the
parties hereto and thereto relating to the transactions provided for
herein and therein, including any prior confidentiality agreements and
commitments.
10.10 Duration; Survival.
All representations and warranties of the Borrower and
Hovnanian contained herein or made in connection herewith shall survive
the making of Loans and issuance of Letters of Credit and shall not be
waived by the execution and delivery of this Agreement, any investigation
by the Agent or the Banks, the making of Loans, issuance of Letters of
Credit, or payment in full of the Loans. All covenants and agreements of
the Borrower and Hovnanian contained in Sections 7.1 (Affirmative
Covenants), 7.2 (Negative Covenants) and 7.3 (Reporting Requirements)
herein shall continue in full force and effect from and after the date
hereof so long as the Borrower may borrow or request Letters of Credit
hereunder and until termination of the Commitments and payment in full of
the Loans and expiration or termination of all Letters of Credit. All
covenants and agreements of the Borrower contained herein relating to the
payment of principal, interest, premiums, additional compensation or
expenses and indemnification, including those set forth in Section 4
(Payments) and Sections 9.5 (Reimbursement and Indemnification of Agent
by the Borrower), 9.7 (Reimbursement and Indemnification of Agent by
Banks) and 10.3 (Reimbursement and Indemnification of Banks by Borrower;
Taxes), shall survive payment in full of the Loans, expiration or
termination of the Letters of Credit and termination of the Commitments.
10.11 Successors and Assigns.
(a) (i) This Agreement shall be binding
upon and shall inure to the benefit of the Banks, the Agent, the Loan
Parties a party hereto and their respective successors and assigns,
except that none of the Loan Parties a party hereto may assign or
transfer any of its rights and obligations hereunder or any interest
herein. Each Bank may, at its own cost, make assignments of or sell
participations in all or any part of its Commitments and the Loans made
by it to one or more banks or other entities, subject to the consent of
the Borrower and the Agent with respect to any assignee, such consent not
to be unreasonably withheld provided that (1)no consent of the Borrower
shall be required (A) if an Event of Default exists and is continuing,
(B) in the case of an assignment by a Bank to an Affiliate of such Bank,
or (C) in respect of the sale of a participation and (2)any assignment by
a Bank to a Person other than an Affiliate of such Bank may not be made
in amounts less than the lesser of $10,000,000 or the amount of the
assigning Bank's Commitment. In the case of an assignment, upon receipt
by the Agent of the Assignment and Assumption Agreement, the assignee
shall have, to the extent of such assignment (unless otherwise provided
therein), the same rights, benefits and obligations as it would have if
it had been a signatory Bank hereunder, the Commitments shall be adjusted
accordingly, and upon surrender of any Note subject to such assignment,
the Borrower shall execute and deliver a new Note to the assignee, if
such assignee requests such a Note in an amount equal to the amount of
the Revolving Credit Commitment assumed by it and a new Revolving Credit
Note to the assigning Bank, if the assigning Bank requests such a Note,
in an amount equal to the Revolving Credit Commitment or retained by it
hereunder. Any Bank which assigns any or all of its Commitment or Loans
to a Person other than an Affiliate of such Bank shall pay to the Agent a
service fee in the amount of $3,500 for each assignment. In the case of
a participation, the participant shall only have the rights specified in
Section 8.2.3 (Set-off) (the participant's rights against such Bank in
respect of such participation to be those set forth in the agreement
executed by such Bank in favor of the participant relating thereto and
not to include any voting rights except with respect to changes of the
type referenced in Sections 10.1.1 (Increase of Commitment, Extension of
Expiration Date), or 10.1.2 (Extension of Payment; Reduction of
Principal, Interest or Fees; Modification of Terms of Payment)), all of
such Bank's obligations under this Agreement or any other Loan Document
shall remain unchanged, and all amounts payable by any Loan Party
hereunder or thereunder shall be determined as if such Bank had not sold
such participation.
(ii) Each Bank or assignee or participant
of a Bank that is not incorporated under the laws of the United States of
America or a state thereof (and, upon the written request of the Agent,
each other Bank or assignee or participant of a Bank) shall deliver to
the Borrower and the Agent a Withholding Certificate as described in
Section 10.17 (Tax Withholding Clause) relating to federal income tax
withholding. Each Bank may furnish any publicly available information
concerning Hovnanian or any Loan Party and any other information
concerning Hovnanian or any Loan Party in the possession of such Bank
from time to time to assignees and participants (including prospective
assignees or participants), provided that such assignees and participants
agree to be bound by the provisions of Section 10.12 (Confidentiality).
(iii) Notwithstanding any other provision
in this Agreement, any Bank may at any time pledge or grant a security
interest in all or any portion of its rights under this Agreement, its
Note (if any) and the other Loan Documents to any Federal Reserve Bank in
accordance with Regulation A of the FRB or U.S. Treasury Regulation 31
CFR Section 203.14 without notice to or consent of the Borrower or the
Agent. No such pledge or grant of a security interest shall release the
transferor Bank of its obligations hereunder or under any other Loan
Document.
(b) Additional Bank. A lender which is to
become a party to this Agreement pursuant to Section 2.1.3 [Increase in
Commitments After Closing Date] hereof or otherwise (each an "Additional
Bank") shall execute and deliver to the Agent a Bank Joinder to this
Agreement in substantially the form attached hereto as Exhibit 1.1(B)(1).
Upon execution and delivery of a Bank Joinder, such Additional Bank shall
be a party hereto and a "Bank" under each of the Loan Documents for all
purposes, except that such Additional Bank shall not participate in any
Revolving Credit Loans to which the LIBO-Rate Option applies which are
outstanding on the effective date of such Bank Joinder. If Borrower
should renew after the effective date of such Bank Joinder the LIBO-Rate
Option with respect to Revolving Credit Loans existing on such date,
Borrower shall be deemed to repay the applicable Revolving Credit Loans
on the renewal date and then reborrow a similar amount on such date so
that the Additional Bank shall participate in such Revolving Credit Loans
after such renewal date. Schedule 1.1(B) shall be amended and restated on
the date of such Bank Joinder to read as set forth on the attachment to
such Bank Joinder. Simultaneously with the execution and delivery of
such Bank Joinder, the Borrower shall execute, if requested, a Revolving
Credit Note and deliver it to such Additional Bank together with copies
of such other documents described in Section 7.1 (Affirmative Covenants)
hereof as such Additional Bank may reasonably require.
10.12 Confidentiality.
10.12.1. General.
The Agent and the Banks each agree to keep
confidential all information obtained from any Loan Party or its
Subsidiaries which is nonpublic and confidential or proprietary in nature
(including any information the Borrower specifically designates as
confidential), except as provided below, and to use such information only
in connection with their respective capacities under this Agreement and
for the purposes contemplated hereby. The Agent and the Banks shall be
permitted to disclose such information (i)to outside legal counsel,
accountants and other professional advisors who need to know such
information in connection with the administration and enforcement of this
Agreement, subject to agreement of such Persons to maintain the
confidentiality, (ii) to Xxxxx'x, Standard & Poor's and similar rating
agencies, (iii)to assignees and participants as contemplated by Section
10.11 (Successors and Assigns), and prospective assignees and
participants subject to an agreement of such Persons to maintain the
confidentiality, (iv)to the extent requested by any bank regulatory
authority or, with notice to the Borrower, as otherwise required by
applicable Law or by any subpoena or similar legal process, or in
connection with any investigation or proceeding arising out of the
transactions contemplated by this Agreement, (v)if it becomes publicly
available other than as a result of a breach of this Agreement or becomes
available from a source not known to be subject to confidentiality
restrictions, or (vi)if the Borrower shall have consented to such
disclosure.
10.12.2. Sharing Information With Affiliates of the Banks.
Each Loan Party a party hereto acknowledges that from
time to time financial advisory, investment banking and other services
may be offered or provided to the Borrower or one or more of its
Affiliates (in connection with this Agreement or otherwise) by any Bank
or by one or more Subsidiaries or Affiliates of such Bank and each of the
Loan Parties a party hereto hereby authorizes each Bank to share any
information delivered to such Bank by such Loan Party and its
Subsidiaries pursuant to this Agreement, or in connection with the
decision of such Bank to enter into this Agreement, to any such
Subsidiary or Affiliate of such Bank, it being understood that any such
Subsidiary or Affiliate of any Bank receiving such information shall be
bound by the provisions of Section 10.12 (Confidentiality) as if it were
a Bank hereunder. Such Authorization shall survive the repayment of the
Loans and other Obligations and the termination of the Commitments.
10.13 Counterparts.
This Agreement may be executed by different parties hereto on
any number of separate counterparts, each of which, when so executed and
delivered, shall be an original, and all such counterparts shall together
constitute one and the same instrument.
10.14 Agent's or Bank's Consent.
Whenever the Agent's or any Bank's consent is required to be
obtained under this Agreement or any of the other Loan Documents as a
condition to any action, inaction, condition or event, unless
specifically otherwise provided herein, the Agent and each Bank shall be
authorized to give or withhold such consent in its sole and absolute
discretion and to condition its consent upon the giving of additional
collateral, the payment of money or any other matter.
10.15 Exceptions.
The representations, warranties and covenants contained
herein shall be independent of each other, and no exception to any
representation, warranty or covenant shall be deemed to be an exception
to any other representation, warranty or covenant contained herein unless
expressly provided, nor shall any such exceptions be deemed to permit any
action or omission that would be in contravention of applicable Law.
10.16 CONSENT TO FORUM; WAIVER OF JURY TRIAL.
EACH LOAN PARTY A PARTY HERETO HEREBY IRREVOCABLY CONSENTS TO
THE NONEXCLUSIVE JURISDICTION OF THE SUPERIOR COURT OF NEW JERSEY, LAW
DIVISION, MIDDLESEX COUNTY AND THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF NEW JERSEY AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS
UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY
CERTIFIED OR REGISTERED MAIL DIRECTED TO SUCH LOAN PARTY AT THE ADDRESSES
PROVIDED FOR IN SECTION 10.6 (NOTICES) AND SERVICE SO MADE SHALL BE
DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF. EACH LOAN PARTY A
PARTY HERETO WAIVES ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION
INSTITUTED AGAINST IT AS PROVIDED HEREIN AND AGREES NOT TO ASSERT ANY
DEFENSE BASED ON LACK OF JURISDICTION OR VENUE. EACH LOAN PARTY A PARTY
HERETO, THE AGENT AND THE BANKS HEREBY WAIVE TRIAL BY JURY IN ANY ACTION,
SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO
THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY COLLATERAL TO THE FULL
EXTENT PERMITTED BY LAW.
10.17 Tax Withholding Clause.
Each Bank or assignee or participant of a Bank that is not
incorporated under the Laws of the United States of America or a state
thereof (and, upon the written request of the Agent, each other Bank or
assignee or participant of a Bank) agrees that it will deliver to each of
the Borrower and the Agent two (2) duly completed appropriate valid
Withholding Certificates (as defined under 1.1441-1(c)(16) of the Income
Tax Regulations ("Regulations")) certifying its status (i.e., U.S. or
foreign person) and, if appropriate, making a claim of reduced, or
exemption from, U.S. withholding tax on the basis of an income tax treaty
or an exemption provided by the Internal Revenue Code. Such delivery may
be made by electronic transmission as described in 1.1441-1(e)(4)(iv) of
the Regulations if the Agent establishes an electronic delivery system.
The term "Withholding Certificate" means a Form W-9; a Form W-8BEN; a
Form W-8ECI; a Form W-8IMY and the related statements and certifications
as required under 1.1441-1(e)(3) of the Regulations; a statement
described in 1.871-14(c)(2)(v) of the Regulations; or any other
certificates under the Code or Regulations that certify or establish the
status of a payee or beneficial owner as a U.S. or foreign person. Each
Bank, assignee or participant required to deliver to the Borrower and the
Agent a valid Withholding Certificate pursuant to the preceding sentence
shall deliver such valid Withholding Certificate as follows: (A) each
Bank which is a party hereto on the Closing Date shall deliver such valid
Withholding Certificate at least five (5) Business Days prior to the
first date on which any interest or fees are payable by the Borrower
hereunder for the account of such Bank; (B) each assignee or participant
shall deliver such valid Withholding Certificate at least five (5)
Business Days before the effective date of such assignment or
participation (unless the Agent in its sole discretion shall permit such
assignee or participant to deliver such Withholding Certificate less than
five (5) Business Days before such date in which case it shall be due on
the date specified by the Agent). Each Bank, assignee or participant
which so delivers a valid Withholding Certificate further undertakes to
deliver to each of the Borrower and the Agent two (2) additional copies
of such Withholding Certificate (or a successor form) on or before the
date that such Withholding Certificate expires or becomes obsolete or
after the occurrence of any event requiring a change in the most recent
Withholding Certificate so delivered by it, and such amendments thereto
or extensions or renewals thereof as may be reasonably requested by the
Borrower or the Agent. Notwithstanding the submission of a Withholding
Certificate claiming a reduced rate of, or exemption from, United States
withholding tax, the Agent shall be entitled to withhold United States
federal income taxes at the full 30% withholding rate if in its
reasonable judgment it is required to do so under the due diligence
requirements imposed upon a withholding agent under 1.1441-7(b) of the
Regulations. Further, the Agent is indemnified under 1.1461-1(e) of the
Regulations against any claims and demands of any Bank or assignee or
participant of a Bank for the amount of any tax it deducts and withholds
in accordance with regulations under 1441 of the Internal Revenue Code.
10.18 Joinder of Guarantors.
Any Subsidiary of Hovnanian which is required to join the
Guaranty Agreement as a Guarantor pursuant to Section 7.2.7
(Subsidiaries, Partnerships and Joint Ventures) or which is to become, a
Restricted Subsidiary shall execute and deliver to the Agent (i)a
Guarantor Joinder pursuant to which it shall join as a Guarantor the
Guaranty Agreement; and (ii) at the request of the Agent, documents in
the forms described in Section 6.1 (First Loans and Letters of Credit)
modified as appropriate to relate to such new Guarantor. Hovnanian and
Borrower shall deliver such Guarantor Joinder and any related documents
that the Agent may reasonably request to the Agent after the formation
thereof and its designation as a Restricted Subsidiary; such Subsidiary
shall not be a Restricted Subsidiary until the delivery and effectiveness
of the items required herein.
10.19 Concerning Agent Terms.
Notwithstanding anything contained herein which may be
construed to the contrary, none of the Syndication Agent, the
Documentation Agent and the Joint Lead Arrangers and Joint Book Runners
shall exercise any of the rights or have any of the responsibilities of
the Agent hereunder, or any other rights or responsibilities other than
their respective rights and responsibilities (if any) as Banks hereunder.
10.20 Ratification of Notes and Loan Documents and Existing
Obligations.
All of the terms, conditions, provisions and covenants in the
Prior Credit Agreement, the Notes and other Loan Documents delivered in
connection therewith, and all other documents delivered to the Agent and
the Banks in connection with any of the foregoing documents and
obligations evidenced or secured thereby shall remain unaltered and in
full force and effect and are hereby ratified and confirmed in all
respects, except as specifically modified herein. Each of the Notes
under the Prior Credit Agreement shall bear an Expiration Date of July
30, 2005, unless replaced by a new Note hereunder. This Agreement amends
and restates, and supersedes, the Prior Credit Agreement and is in no way
intended to constitute a novation of the "Obligations" under the Prior
Credit Agreement. On the date this Agreement becomes effective, and
subject to the satisfaction (or waiver by Agent in its sole discretion)
of all applicable conditions to advances hereunder, all sums owing under
the Prior Credit Agreement and the Loan Documents thereunder shall be
deemed to be outstanding and owing under, evidenced by, and governed by
the terms of this Agreement, the existing Notes, and the other existing
Loan Documents.
[SIGNATURES CONTINUED ON NEXT PAGE]
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the
date first written.
X. XXXXXXXXX ENTERPRISES, INC.
By:
Title:
PNC BANK, NATIONAL ASSOCIATION
as Agent and as a Bank
By:
Title
BANK OF AMERICA, N.A.
By:
Title:
FLEET NATIONAL BANK
By:
Title:
WACHOVIA BANK, NATIONAL ASSOCIATION
By:
Title:
GUARANTY BANK
By:
Title:
KEYBANK, NATIONAL ASSOCIATION
By:
Title:
BANK ONE, NA
By:
Title:
AMSOUTH BANK
By:
Title:
COMERICA BANK
By:
Title:
SUNTRUST BANK
By:
Title:
NATIONAL CITY BANK OF
PENNSYLVANIA
By:
Title:
WASHINGTON MUTUAL BANK, FA
By:
Title:
BNP PARIBAS
By:
Title
and
By:
Title:
ACCEPTED AND AGREED:
HOVNANIAN ENTERPRISES, INC.
as a Guarantor
By:
Title:
SCHEDULE 1.1(A)
X. XXXXXXXXX ENTERPRISES, INC.
PRICING GRID
(expressed in basis points)
Level
Debt Rating
Libor Margin Base Rate Margin
Commitment Fee
LOC Fee
I BB+/Ba1 145 0 30.0 117.5
II BB/Ba2 165 15 32.5 137.5
III BB-/Ba3 185 40 37.5 157.5
IV B+/B1 205 60 42.5 177.5
V B/B2 225 80 47.5 197.5
The Applicable Margins will only be as shown above if Hovnanian holds
both noted Debt Ratings from S&P and Xxxxx'x, respectively. In the event
of inconsistent Debt Ratings, the Applicable Margin will be the midpoint
of the margin(s) between the two levels. In the absence of ratings,
pricing will be at Level V. As of the Closing Date, pricing shall be a
Level III.
Any change in the Applicable Margin; the Applicable Commitment Fee Rate
or the Applicable Letter of Credit Fee Rate shall become effective five
Business Days after any public announcement of the change in the Debt
Rating requiring such change.
Bank
Amount of
Commitment
for Revolving
Credit Loans
Ratable
Share
Bank Name (also Agent):
PNC Bank, National
Association
Address for Notices:
Xxx Xxxxx Xxxxxx, 00xx Xx
X. Xxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Address of Lending Office:
One PNC Plaza
MS: P1-XXXX-22-1
000 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxx Xxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
$70,000,000
13.8614%
Bank Name:
Bank of America, N.A.
Address for Notices:
000 X. XxXxxxx Xxxxxx
Mail Code IL 1-231-12-18
Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Address of Lending Office:
000 X. XxXxxxx Xxxxxx
Mail Code IL 1-231-12-18
Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
$60,000,000
11.8812%
Bank
Amount of
Commitment
for Revolving
Credit Loans
Ratable
Share
Bank Name:
Fleet National Bank
Address for Notices:
000 Xxxxxxxxx Xxxxxx Xxxxx XX
Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Address of Lending Office:
000 Xxxxxxxxx Xxxxxx Xxxxx XX
Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
$50,000,000
9.9010%
Bank Name:
Wachovia Bank, National
Association
Address for Notices:
Commercial Real Estate Group
3rd Floor
0000 Xxxxxx Xxxxxx
Xxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Address of Lending Office:
Commercial Real Estate Group
3rd Floor
0000 Xxxxxx Xxxxxx
Xxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
$70,000,000
13.8614%
Bank
Amount of
Commitment
for Revolving
Credit Loans
Ratable
Share
Bank Name:
Guaranty Bank
Address for Notices:
0000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxx Xxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Address of Lending Office:
0000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxx Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
$40,000,000
7.9208%
Bank Name:
KeyBank, National Association
Address for Notices:
Law Group
000 Xxxxxx Xxxxxx
Mail Stop: OH-01-27-0200
Xxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxx,
Esquire
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
With a copy to:
KeyBank Real Estate Capital
000 0xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X.
Xxxxxxx, V.P.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Bank
Amount of
Commitment
for Revolving
Credit Loans
Ratable
Share
Address of Lending Office:
KeyBank Real Estate Capital
000 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
OH-01-27-0839
Attn: X.X. Xxxxx, CSA
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
$30,000,000
5.9406%
Bank Name:
Bank One, NA
Address for Notices:
Xxx Xxxx Xxx Xxxxx
Xxxxx XX 0-0000
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Address of Lending Office:
One Bank Xxx Xxxxx
Xxxxx XX 0-0000
Xxxxxxx, XX 00000
Attention: Xxx Xxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
$30,000,000
5.9406%
Bank Name:
AmSouth Bank
Address for Notices:
0000 0xx Xxxxxx; AST-9
Xxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Bank
Amount of
Commitment
for Revolving
Credit Loans
Ratable
Share
Address of Lending Office:
0000 0xx Xxxxxx; AST-9
Xxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
$25,000,000
4.9505%
Bank Name:
Comerica Bank
Address for Notices:
000 Xxxxxxxx Xxxxxx
XX 0000
Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Address of Lending Office:
000 Xxxxxxxx Xxxxxx
XX 0000
Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
$25,000,000
4.9505%
Bank
Amount of
Commitment
for Revolving
Credit Loans
Ratable
Share
Bank Name:
SunTrust Bank
Address for Notices:
000 Xxxxxxxxx Xxxxxx XX
0xx Xxxxx, XX 0000
X.X. Xxx 0000
Xxxxxxx, XX 00000-0000
Attention: Xxxx Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Address of Lending Office:
000 Xxxxxxxxx Xxxxxx XX
0xx Xxxxx, XX 0000
X.X. Xxx 0000
Xxxxxxx, XX 00000-0000
Attention: Xxxxxxx Xxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
$25,000,000
4.9505%
Bank Name:
National City Bank of
Pennsylvania
Address for Notices:
Xxx Xxxxx Xxxxx Xxxxxx
00xx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxx Xxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Address of Lending Office:
00 Xxxxxxx Xxxxxx, 00-000
Xxxxxxxxxx, PA 15222-4802
Attention: Xxxxx X.
Xxxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
$20,000,000
3.9604%
Bank
Amount of
Commitment
for Revolving
Credit Loans
Ratable
Share
Bank Name:
Washington Mutual Bank, FA
Address for Notices:
Xxxx X. Xxxxxxx
Vice President
Washington Mutual Bank, FA
0000 Xx Xxxxx Xxxxx, Xxxxx
000
Xxxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (760) 804--8590
Address of Lending Office:
0000 Xxxxxxxxx Xxxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
$45,000,000
8.9109%
Bank Name:
BNP PARIBAS
Address for Notices:
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxxx Xxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Address of Lending Office:
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxxx Xxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
$15,000,000
2.9703%
Total
$505,000,000
100%
unsubscribed
$85,000,000
n/a
Maximum
$590,000,000
n/a
AGENT
Name: Xxxxxxx X. Xxxx, Senior Vice President
Address: PNC Bank, National Association
Xxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxxx Xxxxxxxxx, Xxx Xxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
BORROWER:
Name: X. XXXXXXXXX ENTERPRISES, INC.
Address: 00 Xxxxx 00, X.X. Xxx 000
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
GUARANTORS:
Name: [name of Guarantor]
Address: c/o X. Xxxxxxxxx Enterprises, Inc.
00 Xxxxx 00, X.X. Xxx 000
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
TABLE OF CONTENTS
Section Page
- iii -
- vi -
SCHEDULE 1.1(B)
COMMITMENTS OF BANKS AND ADDRESSES FOR NOTICES
Part 1 - Addresses Commitments of Banks and Addresses for Notices to Banks
SCHEDULE 1.1(B) - 5
SCHEDULE 1.1(B) - 8
