Exhibit 4.1
X. XXXXXXXXX ENTERPRISES, INC.
AND THE GUARANTORS PARTY HERETO
9 1/8% Senior Notes due 2009
First Supplemental Indenture
Dated as of May 4, 1999
FIRST UNION NATIONAL BANK,
Trustee
FIRST SUPPLEMENTAL INDENTURE dated as of May 4, 1999 ("Supplemental
Indenture"), to the Indenture dated as of May 4, 1999 (as supplemented, the
"Indenture"), by and among X. XXXXXXXXX ENTERPRISES, INC., a New Jersey
corporation (the "Issuer"), HOVNANIAN ENTERPRISES, INC., a Delaware
Corporation (the "Company"), each of the Guarantors (as defined herein) and
FIRST UNION NATIONAL BANK, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the holders of Notes (as defined
herein):
WHEREAS, the Company, the Issuer, the Guarantors and the Trustee
have duly authorized the execution and delivery of the Indenture to provide
for the issuance from time to time of senior debt securities (the
"Securities") to be issued in one or more series as in the Indenture
provided;
WHEREAS, the Company, the Issuer and the Guarantors desire and have
requested the Trustee to join them in the execution and delivery of this
Supplemental Indenture in order to establish and provide for the issuance by
the Issuer of a series of Securities designated as its 9 1/8% Senior Notes
due 2009 in the aggregate principal amount of $150,000,000, substantially in
the form attached hereto as Exhibit A (the "Notes"), guaranteed by the
Company and the Guarantors, on the terms set forth herein;
WHEREAS, Section 2.1 of the Indenture provides that a supplemental
indenture may be entered into by the Company, the Issuer, the Guarantors and
the Trustee for such purpose provided certain conditions are met;
WHEREAS, the conditions set forth in the Indenture for the
execution and delivery of this Supplemental Indenture have been complied
with; and
WHEREAS, all things necessary to make this Supplemental Indenture a
valid agreement of the Company, the Issuer, the Guarantors and the Trustee,
in accordance with its terms, and a valid amendment of, and supplement to, the
Indenture have been done;
NOW, THEREFORE:
In consideration of the premises and the purchase and acceptance
of the Notes by the holders thereof the Company, the Issuer and the
Guarantors mutually covenant and agree with the Trustee, for the equal and
ratable benefit of the holders, that the Indenture is supplemented and
amended, to the extent expressed herein, as follows:
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ARTICLE I
Scope of Supplemental Indenture; General
This Supplemental Indenture supplements, and to the extent
inconsistent therewith, replaces the provisions of the Indenture, to which
provisions reference is hereby made.
The changes, modifications and supplements to the Indenture
effected by this Supplemental Indenture shall be applicable only with respect
to, and govern the terms of, the Notes, which shall be limited in aggregate
principal amount to $150,000,000 and shall not apply to any other Securities
that may be issued under the Indenture unless a supplemental indenture with
respect to such other Securities specifically incorporates such changes,
modifications and supplements. Pursuant to this Supplemental Indenture, there
is hereby created and designated a series of Securities under the Indenture
entitled "9 1/8% Senior Notes due 2009." The Notes shall be in the form of
Exhibit A hereto. The Notes shall be guaranteed by the Company and the
Guarantors as provided in such form and the Indenture. If required, the Notes
may bear an appropriate legend regarding original issue discount for federal
income tax purposes.
In the event that the Issuer shall issue and the Trustee shall
authenticate any Notes issued under this Supplemental Indenture subsequent to
the Issue Date (such Notes, "Additional Securities"), the Issuer shall use
its best efforts to obtain the same "CUSIP" number for such Notes as is
printed on the Notes outstanding at such time; provided, however, that if any
series of Notes issued under this Supplemental Indenture subsequent to the
Issue Date is determined, pursuant to an Opinion of Counsel of the Issuer in
a form reasonably satisfactory to the Trustee, to be a different class of
security than the Notes outstanding at such time for federal income tax
purposes, the Issuer may obtain a "CUSIP" number for such Notes that is
different than the "CUSIP" number printed on the Notes then outstanding.
Notwithstanding the foregoing, all Notes issued under this Supplemental
Indenture shall vote and consent together on all matters as one class and no
series of Notes will have the right to vote or consent as a separate class on
any matter.
ARTICLE II
Certain Definitions
The following terms have the meanings set forth below in this
Supplemental Indenture. Capitalized terms used but not defined herein have
the meanings ascribed to such terms in the Indenture. To the extent terms
defined herein differ from the Indenture the terms defined herein will
govern.
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"Acquired Indebtedness" means (a) with respect to any Person that
becomes a Restricted Subsidiary (or is merged into the Company, the Issuer or
any Restricted Subsidiary) after the Issue Date, Indebtedness of such Person
or any of its Subsidiaries existing at the time such Person becomes a
Restricted Subsidiary (or is merged into the Company, the Issuer or any
Restricted Subsidiary) that was not incurred in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary (or being
merged into the Company, the Issuer or any Restricted Subsidiary) and (b)
with respect to the Company, the Issuer or any Restricted Subsidiary, any
Indebtedness expressly assumed by the Company, the Issuer or any Restricted
Subsidiary in connection with the acquisition of any assets from another
Person (other than the Company, the Issuer or any Restricted Subsidiary),
which Indebtedness was not incurred by such other Person in connection with
or in contemplation of such acquisition. Indebtedness incurred in connection
with or in contemplation of any transaction described in clause (a) or (b) of
the preceding sentence shall be deemed to have been incurred by the Company
or a Restricted Subsidiary, as the case may be, at the time such Person
becomes a Restricted Subsidiary (or is merged into the Company, the Issuer or
any Restricted Subsidiary) in the case of clause (a) or at the time of the
acquisition of such assets in the case of clause (b), but shall not be deemed
Acquired Indebtedness.
"Affiliate" means, when used with reference to a specified Person any
Person direct or indirectly controlling, or controlled by or under direct or
indirect common control with the Person specified.
"Asset Acquisition" means (a) an Investment by the Company, the Issuer
or any Restricted Subsidiary in any other Person if, as a result of such
Investment, such Person shall become a Restricted Subsidiary or shall be
consolidated or merged with or into the Company, the Issuer or any Restricted
Subsidiary or (b) the acquisition by the Company, the Issuer or any
Restricted Subsidiary of the assets of any Person, which constitute all or
substantially all of the assets or of an operating unit or line of business
of such Person or which is otherwise outside the ordinary course of business.
"Asset Disposition" means any sale, transfer, conveyance, lease or other
disposition (including, without limitation, by way of merger, consolidation
or sale and leaseback or sale of shares of Capital Stock in any Subsidiary)
(each, a "transaction") by the Company, the Issuer or any Restricted
Subsidiary to any Person of any Property having a Fair Market Value in any
transaction or series of related transactions of at least $5 million. The
term "Asset Disposition" shall not include:
(a) a transaction between the Company, the Issuer and any
Restricted Subsidiary or a transaction between Restricted Subsidiaries,
(b) a transaction in the ordinary course of business, including,
without limitation, sales (directly or indirectly), dedications and other
donations to governmental authorities, leases and sales and leasebacks of (A)
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homes, improved land and unimproved land and (B) real estate (including
related amenities and improvements),
(c) a transaction involving the sale of Capital Stock of, or the
disposition of assets in, an Unrestricted Subsidiary,
(d) any exchange or swap of assets of the Company, the Issuer or
any Restricted Subsidiary for assets that (x) are to be used by the Company,
the Issuer or any Restricted Subsidiary in the ordinary course of its Real
Estate Business and (y) have a Fair Market Value not less than the Fair
Market Value of the assets exchanged or swapped,
(e) any sale, transfer, conveyance, lease or other disposition of
assets and properties that is governed by Section 3.8 hereof, or
(f) dispositions of mortgage loans and related assets and
mortgage-backed securities in the ordinary course of a mortgage lending
business.
"Attributable Debt" means, with respect to any Capitalized Lease
Obligations, the capitalized amount thereof determined in accordance with
GAAP.
"Bankruptcy Law" means title 11 of the United States Code, as amended,
or any similar federal or state law for the relief of debtors.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of or in
such Person's capital stock or other equity interests, and options, rights or
warrants to purchase such capital stock or other equity interests, whether
now outstanding or issued after the Issue Date, including, without
limitation, all Disqualified Stock and Preferred Stock.
"Capitalized Lease Obligations" of any Person means the obligations of
such Person to pay rent or other amounts under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP, and the
amount of such obligations will be the capitalized amount thereof determined
in accordance with GAAP.
"Cash Equivalents" means
(a) U.S. dollars;
(b) securities issued or directly and fully guaranteed or insured
by the U.S. government or any agency or instrumentality thereof having
maturities of one year or less from the date of acquisition;
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(c) certificates of deposit and eurodollar time deposits with
maturities of one year or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any domestic commercial bank having capital and
surplus in excess of $500 million;
(d) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clauses (b) and (c)
entered into with any financial institution meeting the qualifications
specified in clause (c) above;
(e) commercial paper rated P-1, A-1 or the equivalent thereof by
Xxxxx'x or S & P, respectively, and in each case maturing within six months
after the date of acquisition; and
(f) investments in money market funds substantially all of the
assets of which consist of securities described in the foregoing clauses (a)
through (e).
"Change of Control" means
(a) any sale, lease, or other transfer (in one transaction or a
series of transactions) of all or substantially all of the consolidated
assets of the Company and its Restricted Subsidiaries to any Person (other
than a Restricted Subsidiary); provided, however, that a transaction where
the holders of all classes of Common Equity of the Company immediately prior
to such transaction own, directly or indirectly, more than 50% of all classes
of Common Equity of such Person immediately after such transaction shall not
be a Change of Control;
(b) a "person" or "group" (within the meaning of Section 13(d) of
the Exchange Act (other than (x) the Company or (y) the Permitted Hovnanian
Holders) becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of Common Equity of the Company representing more than 50% of
the voting power of the Common Equity of the Company;
(c) Continuing Directors cease to constitute at least a majority
of the Board of Directors of the Company;
(d) the stockholders of the Company approve any plan or proposal
for the liquidation or dissolution of the Company; provided, however, that a
liquidation or dissolution of the Company which is part of a transaction that
does not constitute a Change of Control under the proviso contained in clause
(a) above shall not constitute a Change of Control; or
(e) a change of control shall occur as defined in the instrument
governing any publicly traded debt securities of the Company or the Issuer
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which requires the Company or the Issuer to repay or repurchase such debt
securities.
"Common Equity" of any Person means Capital Stock of such Person that is
generally entitled to (a) vote in the election of directors of such Person or
(b) if such Person is not a corporation, vote or otherwise participate in the
selection of the governing body, partners, managers or others that will
control the management or policies of such Person.
"Consolidated Adjusted Tangible Assets" of the Company as of any date
means the Consolidated Tangible Assets of the Company, the Issuer and the
Restricted Subsidiaries at the end of the fiscal quarter immediately
preceding the date less any assets securing any Non-Recourse Indebtedness, as
determined in accordance with GAAP.
"Consolidated Cash Flow Available for Fixed Charges" means, for any
period, Consolidated Net Income for such period plus (each to the extent
deducted in calculating such Consolidated Net Income and determined in
accordance with GAAP) the sum for such period, without duplication, of:
(a) income taxes,
(b) Consolidated Interest Expense,
(c) depreciation and amortization expenses and other non-cash
charges to earnings, and
(d) interest and financing fees and expenses which were previously
capitalized and which are amortized to cost of sales, minus
all other non-cash items (other than the receipt of notes receivable)
increasing such Consolidated Net Income.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
determination date, the ratio of (x) Consolidated Cash Flow Available for
Fixed Charges for the prior four full fiscal quarters (the "Four Quarter
Period") for which financial results have been reported immediately preceding
the determination date (the "Transaction Date"), to (y) the aggregate
Consolidated Interest Incurred for the Four Quarter Period. For purposes of
this definition, "Consolidated Cash Flow Available for Fixed Charges" and
"Consolidated Interest Incurred" shall be calculated after giving effect on a
pro forma basis for the period of such calculation to
(a) the incurrence or the repayment, repurchase, defeasance or
other discharge or the assumption by another Person that is not an Affiliate
(collectively, "repayment") of any Indebtedness of the Company, the Issuer or
any Restricted Subsidiary (and the application of the proceeds thereof)
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giving rise to the need to make such calculation, and any incurrence or
repayment of other Indebtedness (and the application of the proceeds
thereof), at any time on or after the first day of the Four Quarter Period
and on or prior to the Transaction Date, as if such incurrence or repayment,
as the case may be (and the application of the proceeds thereof), occurred on
the first day of the Four Quarter Period, except that Indebtedness under
revolving credit facilities shall be deemed to be the average daily balance
of such Indebtedness during the Four Quarter Period (as reduced on such pro
forma basis by the application of any proceeds of the incurrence of
Indebtedness giving rise to the need to make such calculation);
(b) any Asset Disposition or Asset Acquisition (including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of the Company, the Issuer or any Restricted
Subsidiary (including any Person that becomes a Restricted Subsidiary as a
result of any such Asset Acquisition) incurring Acquired Indebtedness at any
time on or after the first day of the Four Quarter Period and on or prior to
the Transaction Date), as if such Asset Disposition or Asset Acquisition
(including the incurrence or repayment of any such Indebtedness) and the
inclusion, notwithstanding clause (b) of the definition of "Consolidated Net
Income," of any Consolidated Cash Flow Available for Fixed Charges associated
with such Asset Acquisition as if it occurred on the first day of the Four
Quarter Period; provided, however, that the Consolidated Cash Flow Available
for Fixed Charges associated with any Asset Acquisition shall not be included
to the extent the net income so associated would be excluded pursuant to the
definition of "Consolidated Net Income," other than clause (b) thereof, as if
it applied to the Person or assets involved before they were acquired; and
(c) the Consolidated Cash Flow Available for Fixed Charges and the
Consolidated Interest Incurred attributable to discontinued operations, as
determined in accordance with GAAP, shall be excluded.
Furthermore, in calculating "Consolidated Cash Flow Available for Fixed
Charges" for purposes of determining the denominator (but not the numerator)
of this "Consolidated Fixed Charge Coverage Ratio,"
(a) interest on Indebtedness in respect of which a pro forma
calculation is required that is determined on a fluctuating basis as of the
Transaction Date (including Indebtedness actually incurred on the Transaction
Date) and which will continue to be so determined thereafter shall be deemed
to have accrued at a fixed rate per annum equal to the rate of interest on
such Indebtedness in effect on the Transaction Date, and
(b) notwithstanding clause (a) above, interest on such
Indebtedness determined on a fluctuating basis, to the extent such interest
is covered by agreements relating to Interest Protection Agreements, shall be
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deemed to accrue at the rate per annum resulting after giving effect to the
operation of such agreements.
"Consolidated Interest Expense" of the Company for any period means the
Interest Expense of the Company, the Issuer and the Restricted Subsidiaries
for such period, determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Incurred" for any period means the Interest
Incurred of the Company, the Issuer and the Restricted Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" for any period means the aggregate net income
(or loss) of the Company and its Subsidiaries for such period, determined on
a consolidated basis in accordance with GAAP; provided that there will be
excluded from such net income (loss) (to the extent otherwise included
therein), without duplication:
(a) the net income (or loss) of (x) any Unrestricted Subsidiary
(other than a Mortgage Subsidiary) or (y) any Person (other than a Restricted
Subsidiary or a Mortgage Subsidiary) in which any Person other than the
Company, the Issuer or any Restricted Subsidiary has an ownership interest,
except, in each case, to the extent that any such income has actually been
received by the Company, the Issuer or any Restricted Subsidiary in the form
of cash dividends or similar cash distributions during such period, which
dividends or distributions are not in excess of the Company's, the Issuer's
or such Restricted Subsidiary's (as applicable) pro rata share of such
Unrestricted Subsidiary's or such other Person's net income earned during
such period,
(b) except to the extent includable in Consolidated Net Income
pursuant to the foregoing clause (a), the net income (or loss) of any Person
that accrued prior to the date that (i) such Person becomes a Restricted
Subsidiary or is merged with or into or consolidated with the Company, the
Issuer or any of its Restricted Subsidiaries (except, in the case of an
Unrestricted Subsidiary that is redesignated a Restricted Subsidiary during
such period, to the extent of its retained earnings from the beginning of
such period to the date of such redesignation) or (ii) the assets of such
Person are acquired by the Company or any Restricted Subsidiary,
(c) the net income of any Restricted Subsidiary to the extent that
(but only so long as) the declaration or payment of dividends or similar
distributions by such Restricted Subsidiary of that income is not permitted
by operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable
to that Restricted Subsidiary during such period,
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(d) the gains or losses, together with any related provision for
taxes, realized during such period by the Company, the Issuer or any
Restricted Subsidiary resulting from (i) the acquisition of securities, or
extinguishment of Indebtedness, of the Company or any Restricted Subsidiary
or (ii) any Asset Disposition by the Company or any Restricted Subsidiary,
(e) any extraordinary gain or loss together with any related
provision for taxes, realized by the Company, the Issuer or any Restricted
Subsidiary, and
(f) any non-recurring expense recorded by the Company, the Issuer
or any Restricted Subsidiary in connection with a merger accounted for as a
"pooling-of-interests" transaction;
provided, further, that for purposes of calculating Consolidated Net Income
solely as it relates to clause (iii) of Section 3.3(a) hereof, clause (d)(ii)
above shall not be applicable.
"Consolidated Net Worth" of any Person as of any date means the
stockholders' equity (including any Preferred Stock that is classified as
equity under GAAP, other than Disqualified Stock) of such Person and its
Restricted Subsidiaries on a consolidated basis at the end of the fiscal
quarter immediately preceding such date, as determined in accordance with
GAAP, less any amount attributable to Unrestricted Subsidiaries.
"Consolidated Tangible Assets" of the Company as of any date means the
total amount of assets of the Company, the Issuer and the Restricted
Subsidiaries (less applicable reserves) on a consolidated basis at the end of
the fiscal quarter immediately preceding such date, as determined in
accordance with GAAP, less (a) Intangible Assets and (b) appropriate
adjustments on account of minority interests of other Persons holding equity
investments in Restricted Subsidiaries.
"Continuing Director" means a director who either was a member of the
Board of Directors of the Company on the date of the Indenture or who became
a director of the Company subsequent to such date and whose election or
nomination for election by the Company's stockholders, was duly approved by a
majority of the Continuing Directors on the Board of Directors of the Company
at the time of such approval, either by a specific vote or by approval of the
proxy statement issued by the Company on behalf of the entire Board of
Directors of the Company in which such individual is named as nominee for
director.
"control" when used with respect to any Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
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and the terms "controlling" and "controlled" have meanings correlative to
the foregoing.
"Credit Facilities" means, collectively, each of the credit facilities
and lines of credit of the Company or one or more Restricted Subsidiaries in
existence on the Issue Date and one or more other facilities and lines of
credit among or between the Company or one or more Restricted Subsidiaries
and one or more lenders pursuant to which the Company or one or more
Restricted Subsidiaries may incur indebtedness for working capital and
general corporate purposes (including acquisitions), as any such facility or
line of credit may be amended, restated, supplemented or otherwise modified
from time to time, and includes any agreement extending the maturity of,
increasing the amount of, or restructuring, all or any portion of the
Indebtedness under such facility or line of credit or any successor
facilities or lines of credit and includes any facility or line of credit
with one or more lenders refinancing or replacing all or any portion of the
Indebtedness under such facility or line of credit or any successor facility
or line of credit.
"Currency Agreement" of any Person means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect such Person or any of its Subsidiaries against fluctuations in
currency values.
"Custodian" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
"Default" means any event, act or condition that is, or after notice or
the passage of time or both would be, an Event of Default.
"Designation Amount" has the meaning provided in the definition of
Unrestricted Subsidiary.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, (a) matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise,
or is redeemable at the option of the holder thereof, in whole or in part,
on or prior to the final maturity date of the Notes or (b) is convertible
into or exchangeable or exercisable for (whether at the option of the
issuer or the holder thereof) (i) debt securities or (ii) any Capital
Stock referred to in (a) above, in each case, at any time prior to the final
maturity date of the Notes; provided, however, that any Capital Stock that
would not constitute Disqualified Stock but for provisions thereof giving
holders thereof (or the holders of any security into or for which such
Capital Stock is convertible, exchangeable or exercisable) the right to
require the Company to repurchase or redeem such Capital Stock upon the
occurrence of a change in control occurring prior to the final maturity date
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of the Notes shall not constitute Disqualified Stock if the change in control
provision applicable to such Capital Stock are no more favorable to such
holders than Section 3.1 hereof and such Capital Stock specifically provides
that the Company will not repurchase or redeem any such Capital Stock
pursuant to such provisions prior to the Company's repurchase of the Notes as
are required pursuant to Section 3.1 hereof.
"Event of Default" means any event or condition specified as such in
Section 3.10 hereof.
"Fair Market Value" means, with respect to any asset, the price (after
taking into account any liabilities relating to such assets) that would be
negotiated in an arm's-length transaction for cash between a willing seller
and a willing and able buyer, neither of which is under any compulsion to
complete the transaction, as such price is determined in good faith by the
Board of Directors of the Company or a duly authorized committee thereof, as
evidenced by a resolution of such Board or committee.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment
of the accounting profession of the United States, as in effect on the Issue
Date.
"Guarantee" means the guarantee of the Notes by the Company and each
Guarantor under the Indenture.
"Guarantors" means (a) initially, each of the Company's Subsidiaries,
except the Issuer, four subsidiaries formerly engaged in the issuance of
collaterized mortgage obligations, a mortgage lending subsidiary, a
subsidiary holding and licensing the Hovnanian trade name and a subsidiary
engaged in homebuilding activities in Poland and (b) each of the Company's
Subsidiaries which becomes a Guarantor of the Notes pursuant to the
provisions of the Indenture.
"Holder" means the Person in whose name a Note is registered in the
books of the Registrar for the Notes.
"Indebtedness" of any Person means, without duplication,
(a) any liability of such Person (i) for borrowed money or under
any reimbursement obligation relating to a letter of credit or other similar
instruments (other than standby letters of credit or similar instrument
issued for the benefit of or surety, performance, completion or payment
xxxxx, xxxxxxx money notes or similar purpose undertakings or
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indemnifications issued by, such Person in the ordinary course of business),
(ii) evidenced by a bond, note, debenture or similar instrument (including a
purchase money obligation) given in connection with the acquisition of any
businesses, properties or assets of any kind or with services incurred in
connection with capital expenditures (other than any obligation to pay a
contingent purchase price which, as of the date of incurrence thereof is not
required to be recorded as a liability in accordance with GAAP), or (iii) in
respect of Capitalized Lease Obligations (to the extent of the Attributable
Debt in respect thereof),
(b) any Indebtedness of others that such Person has guaranteed to
the extent of the guarantee, provided, however, that Indebtedness of the
Company and its Restricted Subsidiaries will not include the obligations of
the Company or a Restricted Subsidiary under warehouse lines of credit of
Mortgage Subsidiaries to repurchase mortgages at prices no greater than 98%
of the principal amount thereof, and upon any such purchase the excess, if
any, of the purchase price thereof over the Fair Market Value of the
mortgages acquired, will constitute Restricted Payments subject to Section
3.3 hereof,
(c) to the extent not otherwise included, the obligations of such
Person under Currency Agreements or Interest Protection Agreements to the
extent recorded as liabilities not constituting Interest Incurred, net of
amounts recorded as assets in respect of such agreements, in accordance with
GAAP, and
(d) all Indebtedness of others secured by a Lien on any asset of
such Person, whether or not such Indebtedness is assumed by such Person;
provided, that Indebtedness shall not include accounts payable, liabilities
to trade creditors of such Person or other accrued expenses arising in the
ordinary course of business. The amount of Indebtedness of any Person at any
date shall be (i) the outstanding balance at such date of all unconditional
obligations as described above, net of any unamortized discount to be
accounted for as Interest Expense, in accordance with GAAP, (ii) the maximum
liability of such Person for any contingent obligations under clause (a)
above at such date, net of an unamortized discount to be accounted for as
Interest Expense in accordance with GAAP, and (iii) in the case of clause (d)
above, the lesser of (x) the fair market value of any asset subject to a Lien
securing the Indebtedness of others on the date that the Lien attaches and
(y) the amount of the Indebtedness secured.
"Intangible Assets" of the Company means all unamortized debt discount
and expense, unamortized deferred charges, goodwill, patents, trademarks,
service marks, trade names, copyrights, write-ups of assets over their prior
carrying value (other than write-ups which occurred prior to the Issue Date
and other than, in connection with the acquisition of an asset, the write-up
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of the value of such asset (within one year of its acquisition) to its fair
market value in accordance with GAAP) and all other items which would be
treated as intangible on the consolidated balance sheet of the Company, the
Issuer and the Restricted Subsidiaries prepared in accordance with GAAP.
"Interest Expense" of any Person for any period means, without
duplication, the aggregate amount of (a) interest which, in conformity with
GAAP, would be set opposite the caption "interest expense" or any like
caption on an income statement for such Person (including, without
limitation, imputed interest included in Capitalized Lease Obligations, all
commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing, the net costs (but
reduced by net gains) associated with Currency Agreements and Interest
Protection Agreements, amortization of other financing fees and expenses, the
interest portion of any deferred payment obligation, amortization of discount
or premium, if any, and all other noncash interest expense (other than
interest and other charges amortized to cost of sales), and (b) all interest
actually paid by the Company or a Restricted Subsidiary under any guarantee
of Indebtedness (including, without limitation, a guarantee of principal,
interest or any combination thereof) of any Person other than the Company,
the Issuer or any Restricted Subsidiary during such period; provided, that
Interest Expense shall exclude any expense associated with the complete
write-off of financing fees and expenses in connection with the repayment of
any Indebtedness.
"Interest Incurred" of any Person for any period means, without
duplication, the aggregate amount of (a) Interest Expense and (b) all
capitalized interest and amortized debt issuance costs.
"Interest Protection Agreement" of any Person means any interest rate
swap agreement, interest rate collar agreement, option or futures contract or
other similar agreement or arrangement designed to protect such Person or any
of its Subsidiaries against fluctuations in interest rates with respect to
Debt permitted to be incurred under the Indenture.
"Investments" of any Person means (a) all investments by such Person in
any other Person in the form of loans, advances or capital contributions, (b)
all guarantees of Indebtedness or other obligations of any other Person by
such Person, (c) all purchases (or other acquisitions for consideration) by
such Person of Indebtedness, Capital Stock or other securities of any other
Person and (d) all other items that would be classified as investments in any
other Person (including, without limitation, purchases of assets outside the
ordinary course of business) on a balance sheet of such Person prepared in
accordance with GAAP.
"Issue Date" means the date on which the Notes are originally issued
under the Indenture.
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"Lien" means, with respect to any Property, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this definition, a Person shall be deemed to own,
subject to a Lien, any Property which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such Property.
"Marketable Securities" means (a) equity securities that are listed on
the New York Stock Exchange, the American Stock Exchange or The Nasdaq
National Market and (b) debt securities that are rated by a nationally
recognized rating agency, listed on the New York Stock Exchange or the
American Stock Exchange or covered by at least two reputable market makers.
"Moody's" means Xxxxx'x Investors Service, Inc. or any successor to its
debt rating business.
"Mortgage Subsidiary" means any Subsidiary of the Company substantially
all of whose operations consist of the mortgage lending business.
"Net Cash Proceeds" means with respect to an Asset Disposition, cash
payments received (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or
otherwise (including any cash received upon sale or disposition of such note
or receivable), but only as and when received), excluding any other
consideration received in the form of assumption by the acquiring Person of
Indebtedness or other obligations relating to the Property disposed of in
such Asset Disposition or received in any other non-cash form unless and
until such non-cash consideration is converted into cash therefrom, in each
case, net of all legal, title and recording tax expenses, commissions and
other fees and expenses incurred, and all federal, state and local taxes
required to be accrued as a liability under GAAP as a consequence of such
Asset Disposition, and in each case net of a reasonable reserve for the
after-tax cost of any indemnification or other payments (fixed and
contingent) attributable to the seller's indemnities or other obligations to
the purchaser undertaken by the Company, the Issuer or any of its Restricted
Subsidiaries in connection with such Asset Disposition, and net of all
payments made on any Indebtedness which is secured by or relates to such
Property, in accordance with the terms of any Lien or agreement upon or with
respect to such Property or which must by its terms or by applicable law be
repaid out of the proceeds from such Asset Disposition, and net of all
contractually required distributions and payments made to minority interest
holders in Restricted Subsidiaries or joint ventures as a result of such
Asset Disposition.
"Non-Recourse Indebtedness" with respect to any Person means
Indebtedness of such Person for which (a) the sole legal recourse for
collection of principal and interest on such Indebtedness is against the
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specific property identified in the instruments evidencing or securing such
Indebtedness and such property was acquired with the proceeds of such
Indebtedness or such Indebtedness was incurred within 90 days after the
acquisition of such property and (b) no other assets of such Person may be
realized upon in collection of principal or interest on such Indebtedness.
Indebtedness which is otherwise Non-Recourse Indebtedness will not lose its
character as Non-Recourse Indebtedness because there is recourse to the
borrower, any guarantor or any other Person for (i) environmental warranties
and indemnities, or (ii) indemnities for and liabilities arising from fraud,
misrepresentation, misapplication or non-payment of rents, profits, insurance
and condemnation proceeds and other sums actually received by the borrower
from secured assets to be paid to the lender, waste and mechanics' liens.
"Permitted Hovnanian Holders" means, collectively, Xxxxxx X. Xxxxxxxxx,
Xxx X. Xxxxxxxxx, the members of their immediate families, the respective
estates, spouses, heirs, ancestors, lineal descendants, legatees and legal
representatives of any of the foregoing and the trustee of any bona fide
trust of which one or more of the foregoing are the sole beneficiaries or the
grantors thereof, or any entity of which any of the foregoing, individually
or collectively, beneficially own more than 50% of the Common Equity.
"Permitted Indebtedness" means
(a) Indebtedness under Credit Facilities which does not exceed
$250 million principal amount outstanding at any one time;
(b) Indebtedness in respect of obligations of the Company and its
Subsidiaries to the trustees under indentures for debt securities;
(c) intercompany debt obligations of (i) the Company to the
Issuer, (ii) the Issuer to the Company, (iii) the Company or the Issuer to
any Restricted Subsidiary and (iv) any Restricted Subsidiary to the Company
or the Issuer or any other Restricted Subsidiary; provided, however, that any
Indebtedness of any Restricted Subsidiary or the Issuer or the Company owed
to any Restricted Subsidiary or the Issuer that ceases to be a Restricted
Subsidiary shall be deemed to be incurred and shall be treated as an
incurrence for purposes of Section 3.2(a) hereof at the time the Restricted
Subsidiary in question ceases to be a Restricted Subsidiary;
(d) Indebtedness of the Company or the Issuer or any Restricted
Subsidiary under any Currency Agreements or Interest Protection Agreements in
a notional amount no greater than the payments due (at the time the related
Currency Agreement or Interest Protection Agreement is entered into) with
respect to the Indebtedness or currency being hedged;
(e) Purchase Money Indebtedness;
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(f) Capitalized Lease Obligations;
(g) obligations for, pledge of assets in respect of, and
guaranties of, bond financings of political subdivisions or enterprises
thereof in the ordinary course of business;
(h) Indebtedness secured only by office buildings owned or
occupied by the Company or any Restricted Subsidiary, which Indebtedness does
not exceed $10 million aggregate principal amount outstanding at any one
time;
(i) Indebtedness under warehouse lines of credit, repurchase
agreements and Indebtedness secured by mortgage loans and related assets of
mortgage lending Subsidiaries in the ordinary course of a mortgage lending
business; and
(j) Indebtedness of the Company or any Restricted Subsidiary
which, together with all other Indebtedness under this clause (j), does not
exceed $30 million aggregate principal amount outstanding at any one time.
"Permitted Investment" means
(a) Cash Equivalents;
(b) any Investment in the Company, the Issuer or any Restricted
Subsidiary or any Person that becomes a Restricted Subsidiary as a result of
such Investment or that is consolidated or merged with or into, or transfers
all or substantially all of the assets of it or an operating unit or line of
business to, the Company or a Restricted Subsidiary;
(c) any receivables, loans or other consideration taken by the
Company, the Issuer or any Restricted Subsidiary in connection with any asset
sale otherwise permitted by the Indenture;
(d) Investments received in connection with any bankruptcy or
reorganization proceeding, or as a result of foreclosure, perfection or
enforcement of any Lien or any judgment or settlement of any Person in
exchange for or satisfaction of Indebtedness or other obligations or other
property received from such Person, or for other liabilities or obligations
of such Person created, in accordance with the terms of the Indenture;
(e) Investments in Currency Agreements or Interest Protection
Agreements described in the definition of Permitted Indebtedness;
(f) any loan or advance to an executive officer, director or
employee of the Company or any Restricted Subsidiary made in the ordinary
course of business or in accordance with past practice; provided, however,
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that any such loan or advance exceeding $1 million shall have been approved
by the Board of Directors of the Company or a committee thereof consisting of
disinterested members;
(g) Investments in joint ventures in a Real Estate Business with
unaffiliated third parties in an aggregate amount at any time outstanding not
to exceed 10% of Consolidated Tangible Assets at such time;
(h) Investments in interests in issuances of collateralized
mortgage obligations, mortgages, mortgage loan servicing, or other mortgage
related assets;
(i) obligations of the Company or a Restricted Subsidiary under
warehouse lines of credit of Mortgage Subsidiaries to repurchase mortgages;
and
(j) Investments in an aggregate amount outstanding not to exceed
$10 million.
"Permitted Liens" means
(a) Liens for taxes, assessments or governmental or quasi-
government charges or claims that (i) are not yet delinquent, (ii) are being
contested in good faith by appropriate proceedings and as to which
appropriate reserves have been established or other provisions have been made
in accordance with GAAP, if required, or (iii) encumber solely property
abandoned or in the process of being abandoned,
(b) statutory Liens of landlords and carriers', warehousemen's,
mechanics', suppliers', materialmen's, repairmen's or other Liens imposed by
law and arising in the ordinary course of business and with respect to
amounts that, to the extent applicable, either (i) are not yet delinquent or
(ii) are being contested in good faith by appropriate proceedings and as to
which appropriate reserves have been established or other provisions have
been made in accordance with GAAP, if required,
(c) Xxxxx (other than any Lien imposed by the Employer Retirement
Income Security Act of 1974, as amended) incurred or deposits made in the
ordinary course of business in connection with workers' compensation.
unemployment insurance and other types of social security,
(d) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal bonds,
development obligations, progress payments, government contacts, utility
services, developer's or other obligations to make on-site or off-site
improvements and other obligations of like nature (exclusive of obligations
for the payment of borrowed money but including the items referred to in the
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parenthetical in clause (a)(i) of the definition of "Indebtedness" ), in
each case incurred in the ordinary course of business of the Company, the
Issuer and the Restricted Subsidiaries,
(e) attachment or judgment Liens not giving rise to a Default or
an Event of Default,
(f) easements, dedications, assessment district or similar Liens
in connection with municipal or special district financing, rights-of-way,
restrictions, reservations and other similar charges, burdens, and other
similar charges or encumbrances not materially interfering with the ordinary
course of business of the Company, the Issuer and the Restricted
Subsidiaries,
(g) zoning restrictions, licenses, restrictions on the use of real
property or minor irregularities in title thereto, which do not materially
impair the use of such real property in the ordinary course of business of
the Company, the Issuer and the Restricted Subsidiaries,
(h) Liens securing Indebtedness incurred pursuant to clause (h) or
(i) of the definition of Permitted Indebtedness,
(i) Liens securing Indebtedness of the Company, the Issuer or any
Restricted Subsidiary permitted to be incurred under the Indenture; provided,
that the aggregate amount of all consolidated Indebtedness of the Company,
the Issuer and the Restricted Subsidiaries (including, with respect to
Capitalized Lease Obligations, the Attributable Debt in respect thereof)
secured by Xxxxx (other than Non-Recourse Indebtedness and Indebtedness
incurred pursuant to clause (i) of the definition of Permitted Indebtedness)
shall not exceed 40% of Consolidated Adjusted Tangible Assets at any one time
outstanding (after giving effect to the incurrence of such Indebtedness and
the use of the proceeds thereof),
(j) Liens securing Non-Recourse Indebtedness of the Company, the
Issuer or any Restricted Subsidiary; provided, that such Liens apply only to
the property financed out of the net proceeds of such Non-Recourse
Indebtedness within 90 days after the incurrence of such Non-Recourse
Indebtedness,
(k) Liens securing Purchase Money Indebtedness; provided that such
Liens apply only to the property acquired, constructed or improved with the
proceeds of such Purchase Money Indebtedness within 90 days after the
incurrence of such Purchase Money Indebtedness,
(l) Liens on property or assets of the Company, the Issuer or any
Restricted Subsidiary securing Indebtedness of the Company, the Issuer or any
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Restricted Subsidiary owing to the Company, the Issuer or one or more
Restricted Subsidiaries,
(m) leases or subleases granted to others not materially
interfering with the ordinary course of business of the Company and the
Restricted Subsidiaries,
(n) purchase money security interests (including, without
limitation, Capitalized Lease Obligations); provided that such Liens apply
only to the Property acquired and the related Indebtedness is incurred within
90 days after the acquisition of such Property,
(o) any right of first refusal, right of first offer, option,
contract or other agreement to sell an asset; provided that such sale is not
otherwise prohibited under the Indenture,
(p) any right of a lender or lenders to which the Company, the
Issuer or a Restricted Subsidiary may be indebted to offset against, or
appropriate and apply to the payment of such, Indebtedness any and all
balances, credits, deposits, accounts or money of the Company, the Issuer or
a Restricted Subsidiary with or held by such lender or lenders or its
Affiliates,
(q) any pledge or deposit of cash or property in conjunction with
obtaining surety, performance, completion or payment bonds and letters of
credit or other similar instruments or providing xxxxxxx money obligations,
escrows or similar purpose undertakings or indemnifications in the ordinary
course of business of the Company, the Issuer and the Restricted
Subsidiaries,
(r) Liens for homeowner and property owner association
developments and assessments,
(s) Liens securing Refinancing Indebtedness; provided, that such
Liens extend only to the assets securing the Indebtedness being refinanced,
(t) Xxxxx incurred in the ordinary course of business as security
for the obligations of the Company, the Issuer and the Restricted
Subsidiaries with respect to indemnification in respect of title insurance
providers,
(u) Liens on property of a Person existing at the time such Person
is merged with or into or consolidated with the Company or any Subsidiary of
the Company or becomes a Subsidiary of the Company; provided that such Liens
were in existence prior to the contemplation of such merger or consolidation
or acquisition and do not extend to any assets other than those of the Person
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merged into or consolidated with the Company or the Subsidiary or acquired by
the Company or its Subsidiaries,
(v) Liens on property existing at the time of acquisition thereof
by the Company or any Subsidiary of the Company, provided that such Liens
were in existence prior to the contemplation of such acquisition,
(w) Liens existing on the Issue Date and any extensions, renewals
or replacements thereof, and
(x) Liens on specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other
goods.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, incorporated or unincorporated association,
joint stock company, trust, unincorporated organization or government or any
agency or political subdivision thereof.
"Preferred Stock" of any Person means all Capital Stock of such Person
which has a preference in liquidation or with respect to the payment of
dividends.
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person, whether or not included in
the most recent consolidated balance sheet of such Person and its
Subsidiaries under GAAP.
"Public Equity Offering" means an underwritten public offering of Common
Equity of the Company pursuant to an effective registration statement filed
under the Securities Act (excluding registration statements filed on Form S-8
or any successor form).
"Purchase Money Indebtedness" means Indebtedness of the Company, the
Issuer or any Restricted Subsidiary incurred for the purpose of financing all
or any part of the purchase price, or the cost of construction or
improvement, of any property to be used in the ordinary course of business by
the Company, the Issuer and the Restricted Subsidiaries; provided, however,
that (a) the aggregate principal amount of such Indebtedness shall not exceed
such purchase price or cost and (b) such Indebtedness shall be incurred no
later than 90 days after the acquisition of such property or completion of
such construction or improvement.
"Qualified Stock" means Capital Stock of the Company other than
Disqualified Stock.
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"Real Estate Business" means homebuilding, housing construction, real
estate development or construction and related real estate activities,
including the provision of mortgage financing or title insurance.
"Refinancing Indebtedness" means Indebtedness (to the extent not
Permitted Indebtedness) that refunds, refinances or extends any Indebtedness
of the Company, the Issuer or any Restricted Subsidiary (to the extent not
Permitted Indebtedness) outstanding on the Issue Date or other Indebtedness
(to the extent not Permitted Indebtedness) permitted to be incurred by the
Company, the Issuer or any Restricted Subsidiary pursuant to the terms of the
Indenture, but only to the extent that
(a) the Refinancing Indebtedness is subordinated, if at all, to
the Notes or the Guarantee, as the case may be, to the same extent as the
Indebtedness being refunded, refinanced or extended,
(b) the Refinancing Indebtedness is scheduled to mature either (i)
no earlier than the Indebtedness being refunded, refinanced or extended or
(ii) after the maturity date of the Notes,
(c) the portion, if any, of the Refinancing Indebtedness that is
scheduled to mature on or prior to the maturity date of the Notes has a
Weighted Average Life to Maturity at the time such Refinancing Indebtedness
is incurred that is equal to or greater than the Weighted Average Life to
Maturity of the portion of the Indebtedness being refunded, refinanced or
extended that is scheduled to mature on or prior to the maturity date of the
Notes, and
(d) such Refinancing Indebtedness is in an aggregate principal
amount that is equal to or less than the aggregate principal amount then
outstanding under the Indebtedness being refunded, refinanced or extended.
"Restricted Payment" means any of the following:
(a) the declaration or payment of any dividend or any other
distribution on Capital Stock of the Company, the Issuer or any Restricted
Subsidiary or any payment made to the direct or indirect holders (in their
capacities as such) of Capital Stock of the Company, the Issuer or any
Restricted Subsidiary (other than (i) dividends or distributions payable
solely in Qualified Stock and (ii) in the case of the Issuer or Restricted
Subsidiaries, dividends or distributions payable to the Company, the Issuer
or a Restricted Subsidiary);
(b) the purchase, redemption or other acquisition or retirement
for value of any Capital Stock of the Company, the Issuer or any Restricted
Subsidiary (other than a payment made to the Company, the Issuer or any
Restricted Subsidiary); and
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(c) any Investment (other than any Permitted Investment),
including any Investment in an Unrestricted Subsidiary (including by the
designation of a Subsidiary of the Company as an Unrestricted Subsidiary)
and any amounts paid in accordance with clause (b) of the definition of
Indebtedness.
"Restricted Subsidiary" means any Subsidiary of the Company which is not
an Unrestricted Subsidiary.
"S&P" means Standard and Poor's Ratings Group or any successor to its
debt rating business.
"Significant Subsidiary" means any Subsidiary of the Company which would
constitute a "significant subsidiary" as defined in Rule 1-02 of Regulation
S-X under the Securities Act and the Exchange Act as in effect on the Issue
Date.
"Subsidiary" of any Person means any corporation or other entity of
which a majority of the Capital Stock having ordinary voting power to elect a
majority of the Board of Directors or other persons performing similar
functions is at the time directly or indirectly owned or controlled by such
Person.
"Trustee" means the party named as such above until a successor replaces
such party in accordance with the applicable provisions of the Indenture and
thereafter means the successor serving hereunder.
"Unrestricted Subsidiary" means any Subsidiary of the Company so
designated by a resolution adopted by the Board of Directors of the Company
or a duly authorized committee thereof as provided below; provided that (a)
the holders of Indebtedness thereof do not have direct or indirect recourse
against the Company, the Issuer or any Restricted Subsidiary, and neither the
Company, the Issuer nor any Restricted Subsidiary otherwise has liability
for, any payment obligations in respect of such Indebtedness (including any
undertaking, agreement or instrument evidencing such Indebtedness), except,
in each case, to the extent that the amount thereof constitutes a Restricted
Payment permitted by the Indenture, in the case of Non-Recourse Indebtedness,
to the extent such recourse or liability is for the matters discussed in the
last sentence of the definition of "Non-Recourse Indebtedness," or to the
extent such Indebtedness is a guarantee by such Subsidiary of Indebtedness of
the Company, the Issuer or a Restricted Subsidiary and (b) no holder of any
Indebtedness of such Subsidiary shall have a right to declare a default on
such Indebtedness or cause the payment thereof to be accelerated or payable
prior to its stated maturity as a result of a default on any Indebtedness of
the Company, the Issuer or any Restricted Subsidiary. The Unrestricted
Subsidiaries will be the following:
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X. Xxxxxxxxx Mortgage, Inc., Hovnanian Financial Services I, Inc.,
Hovnanian Financial Services II, Inc., Hovnanian Financial Services III, Inc.
and Hovnanian Financial Services IV. Inc.
Subject to the foregoing, the Board of Directors of the Company or a
duly authorized committee thereof may designate any Subsidiary in addition to
those named above to be an Unrestricted Subsidiary; provided, however, that
(a) the net amount (the "Designation Amount") then outstanding of all
previous Investments by the Company and the Restricted Subsidiaries in such
Subsidiary will be deemed to be a Restricted Payment at the time of such
designation and will reduce the amount available for Restricted Payments
under Section 3.3 hereof to the extent provided therein, (b) the Company must
be permitted under Section 3.3 hereof to make the Restricted Payment deemed
to have been made pursuant to clause (a), and (c) after giving effect to such
designation, no Default or Event of Default shall have occurred or be
continuing. In accordance with the foregoing, and not in limitation thereof,
Investments made by any Person in any Subsidiary of such Person prior to such
Person's merger with the Company or any Restricted Subsidiary (but not in
contemplation or anticipation of such merger) shall not be counted as an
Investment by the Company or such Restricted Subsidiary if such Subsidiary of
such Person is designated as an Unrestricted Subsidiary.
The Board of Directors of the Company or a duly authorized committee
thereof may also redesignate an Unrestricted Subsidiary to be a Restricted
Subsidiary provided, however, that (a) the Indebtedness of such Unrestricted
Subsidiary as of the date of such redesignation could then be incurred under
Section 3.2 hereof and (b) immediately after giving effect to such
redesignation and the incurrence of any such additional Indebtedness, the
Company and the Restricted Subsidiaries could incur $1.00 of additional
Indebtedness under Section 3.2(a) hereof. Any such designation or
redesignation by the Board of Directors of the Company or a committee thereof
will be evidenced to the Trustee by the filing with the Trustee of a
certified copy of the resolution of the Board of Directors of the Company or
a committee thereof giving effect to such designation or redesignation and
an Officers' Certificate certifying that such designation or redesignation
complied with the foregoing conditions and setting forth the underlying
calculations of such Officers' Certificate. The designation of any Person
as an Unrestricted Subsidiary shall be deemed to include a designation of all
Subsidiaries of such Person as Unrestricted Subsidiaries; provided, however,
that the ownership of the general partnership interest (or a similar member's
interest in a limited liability company) by an Unrestricted Subsidiary shall
not cause a Subsidiary of the Company of which more than 95% of the equity
interest is held by the Company or one or more Restricted Subsidiaries to be
deemed an Unrestricted Subsidiary.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness or portion thereof at any date, the number of years obtained by
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dividing (a) the sum of the products obtained by multiplying (i) the amount
of each then remaining installment, sinking fund, serial maturity or other
required payment of principal, including, without limitation, payment at
final maturity, in respect thereof, by (ii) the number of years (calculated
to the nearest one-twelfth) that will elapse between such date and the making
of such payment by (b) the sum of all such payments described in clause
(a)(i) above.
ARTICLE III
Covenants
Section 3.1 Repurchase of Notes upon Change of Control.
(a) In the event that there shall occur a Change of Control, each
Holder of Notes shall have the right, at such Holder's option, to require the
Issuer to purchase all or any part of such Holder's Notes on a date (the
"Repurchase Date") that is no later than 90 days after notice of the Change
of Control, at 101% of the principal amount thereof plus accrued and unpaid
interest to the Repurchase Date.
(b) On or before the thirtieth day after any Change of Control,
the Issuer is obligated to mail or cause to be mailed, to all Holders of
record of Notes a notice regarding the Change of Control and the repurchase
right. The notice shall state the Repurchase Date, the date by which the
repurchase right must be exercised, the price for the Notes and the procedure
which the Holder must follow to exercise such right. Substantially
simultaneously with mailing of the notice, the Issuer shall cause a copy of
such notice to be published in a newspaper of general circulation in the
Borough of Manhattan, The City of New York. To exercise such right, the
Holder of such Note must deliver at least ten days prior to the Repurchase
Date written notice to the Issuer (or an agent designated by the Issuer for
such purpose) of the Holder's exercise of such right, together with the Note
with respect to which the right is being exercised, duly endorsed for
transfer; provided, however, that if mandated by applicable law, a Holder may
be permitted to deliver such written notice nearer to the Repurchase Date
than may be specified by the Issuer.
(c) The Issuer will comply with applicable law, including Section
14(e) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule
l4e-1 thereunder, if applicable, if the Issuer is required to give a notice
of a right of repurchase as a result of a Change of Control.
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Section 3.2 Limitations on Indebtedness.
(a) The Company and the Issuer will not, and will not cause or
permit any Restricted Subsidiary, directly or indirectly, to create, incur,
assume, become liable for or guarantee the payment of (collectively, an
"incurrence") any Indebtedness (including Acquired Indebtedness) unless,
after giving effect thereto and the application of the proceeds therefrom,
the Consolidated Fixed Charge Coverage Ratio on the date thereof would be at
least 2.0 to 1.0.
(b) Notwithstanding the foregoing, the provisions of the Indenture
will not prevent the incurrence of:
(i) Permitted Indebtedness,
(ii) Refinancing Indebtedness,
(iii) Non-Recourse Indebtedness,
(iv) any Guarantee of Indebtedness represented by the Notes,
and
(v) any guarantee of Indebtedness incurred under Credit
Facilities in compliance with the Indenture.
(c) For purposes of determining compliance with this covenant, in
the event that an item of Indebtedness may be incurred through the first
paragraph of this covenant or by meeting the criteria of one or more of the
types of Indebtedness described in the second paragraph of this covenant (or
the definitions of the terms used therein), the Company, in its sole
discretion,
(i) may classify such item of Indebtedness under and comply
with either of such paragraphs (or any of such definitions), as applicable,
(ii) may classify and divide such item of Indebtedness into
more than one of such paragraphs (or definitions), as applicable, and
(iii) may elect to comply with such paragraphs (or
definitions), as applicable, in any order.
(d) The Company and the Issuer will not, and will not cause or
permit any Guarantor to, directly or indirectly, in any event incur any
Indebtedness that purports to be by its terms (or by the terms of any
agreement governing such Indebtedness) subordinated to any other Indebtedness
of the Company or of such Guarantor, as the case may be, unless such
Indebtedness is also by its terms (or by the terms of any agreement governing
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such Indebtedness) made expressly subordinated to the Notes or the Guarantee
of such Guarantor, as the case may be, to the same extent and in the same
manner as such Indebtedness is subordinated to such other Indebtedness of the
Company or such Guarantor, as the case may be.
Section 3.3 Limitations on Restricted Payments.
(a) The Company and the Issuer will not, and will not cause or
permit any Restricted Subsidiary to, directly or indirectly, make any
Restricted Payment unless:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to
such Restricted Payment;
(ii) immediately after giving effect to such Restricted
Payment, the Company could incur at least $1.00 of Indebtedness
pursuant to Section 3.2(a) hereof; and
(iii) immediately after giving effect to such Restricted
Payment, the aggregate amount of all Restricted Payments (including
the Fair Market Value of any non-cash Restricted Payment) declared
or made after the Issue Date does not exceed the sum of:
(A) 50% of the Consolidated Net Income of the Company on
a cumulative basis during the period (taken as one accounting
period) from and including February 1, 1999 and ending on the
last day of the Company's fiscal quarter immediately preceding
the date of such Restricted Payment (or in the event such
Consolidated Net Income shall be a deficit, minus 100% of such
deficit), plus
(B) 100% of the aggregate net cash proceeds of and the
Fair Market Value of Property received by the Company from (1)
any capital contribution to the Company after February 1, 1999
or any issue or sale after February 1, 1999 of Qualified Stock
(other than to any Subsidiary of the Company) and (2) the
issue or sale after February 1, 1999 of any Indebtedness or
other securities of the Company convertible into or
exercisable for Qualified Stock of the Company that have been
so converted or exercised, as the case may be, plus
(C) in the case of the disposition or repayment of any
Investment constituting a Restricted Payment made after the
Issue Date, an amount (to the extent not included in the
calculation of Consolidated Net Income referred to in (A))
equal to the lesser of (x) the return of capital with respect
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to such Investment (including by dividend, distribution or
sale of Capital Stock) and (y) the amount of such Investment
that was treated as a Restricted Payment, in either case, less
the cost of the disposition or repayment of such Investment
(to the extent not included in the calculation of Consolidated
Net Income referred to in (A)), plus
(D) with respect to any Unrestricted Subsidiary that is
redesignated as a Restricted Subsidiary after the Issue Date,
in accordance with the definition of Unrestricted Subsidiary
(so long as the designation of such Subsidiary as an
Unrestricted Subsidiary was treated as a Restricted Payment
made after the Issue Date, and only to the extent not included
in the calculation of Consolidated Net Income referred to in
(A)), an amount equal to the lesser of (x) the proportionate
interest of the Company or a Restricted Subsidiary in an
amount equal to the excess of (I) the total assets of such
Subsidiary, valued on an aggregate basis at the lesser of book
value and Fair Market Value thereof, over (II) the total
liabilities of such Subsidiary, determined in accordance with
GAAP, and (y) the Designation Amount at the time of such
Subsidiary's designation as an Unrestricted Subsidiary, plus
(E) $17 million, minus
(F) the aggregate amount of all Restricted Payments
(other than Restricted Payments referred to in clause (iii) of
paragraph (b) below) made after February 1, 1999 through the
Issue Date.
(b) Clauses (ii) and (iii) of paragraph (a) will not prohibit:
(i) the payment of any dividend within 60 days of its
declaration if such dividend could have been made on the date of
its declaration without violation of the provisions of the
Indenture;
(ii) the repurchase, redemption or retirement of any shares of
Capital Stock of the Company in exchange for, or out of the net
proceeds of the substantially concurrent sale (other than to a
Subsidiary of the Company) of, other shares of Qualified Stock; and
(iii) the purchase, redemption or other acquisition,
cancellation or retirement for value of Capital Stock, or options,
warrants, equity appreciation rights or other rights to purchase or
acquire Capital Stock, of the Company or any Subsidiary held by
officers or employees or former officers or employees of the
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Company or any Subsidiary (or their estates or beneficiaries under
their estates) not to exceed $10 million in the aggregate since the
Issue Date;
provided, however that each Restricted Payment described in clauses (i) and
(ii) of this sentence shall be taken into account for purposes of computing
the aggregate amount of all Restricted Payments pursuant to clause (iii) of
the immediately preceding paragraph.
(c) For purposes of determining the aggregate and permitted
amounts of Restricted Payments made, the amount of any guarantee of any
Investment in any Person that was initially treated as a Restricted Payment
and which was subsequently terminated or expired, net of any amounts paid by
the Company or any Restricted Subsidiary in respect of such guarantee, shall
be deducted.
(d) In determining the "Fair Market Value of Property" for
purposes of clause (iii) of paragraph (a), Property other than cash, Cash
Equivalents and Marketable Securities shall be deemed to be equal in value to
the "equity value" of the Capital Stock or other securities issued in
exchange therefor. The equity value of such Capital Stock or other
securities shall be equal to (i) the number of shares of Common Equity issued
in the transaction (or issuable upon conversion or exercise of the Capital
Stock or other securities issued in the transaction) multiplied by the
closing sale price of the Common Equity on its principal market on the date
of the transaction (less, in the case of Capital Stock or other securities
which require the payment of consideration at the time of conversion or
exercise, the aggregate consideration payable thereupon) or (ii) if the
Common Equity is not then traded on the New York Stock Exchange, American
Stock Exchange or Nasdaq National Market, or if the Capital Stock or other
securities issued in the transaction do not consist of Common Equity (or
Capital Stock or other securities convertible into or exercisable for Common
Equity), the value (if more than $10 million) of such Capital Stock or other
securities as determined by a nationally recognized investment banking firm
retained by the Board of Directors of the Company.
Section 3.4 Limitations on Transactions with Affiliates.
(a) The Company and the Issuer will not, and will not cause or
permit any Restricted Subsidiary to, make any loan, advance, guarantee or
capital contribution to, or for the benefit of, or sell, lease, transfer or
otherwise dispose of any property or assets to or for the benefit of, or
purchase or lease any property or assets from, or enter into or amend any
contract, agreement or understanding with, or for the benefit of, any
Affiliate of the Company or any Affiliate of any of the Company's
Subsidiaries or any holder of 10% or more of the Common Equity of the Company
(including any Affiliates of such holders), in a single transaction or series
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of related transactions (each, an "Affiliate Transaction"), except for any
Affiliate Transaction the terms of which are at least as favorable as the
terms which could be obtained by the Company, the Issuer or such Restricted
Subsidiary, as the case may be, in a comparable transaction made on an arm's
length basis with Persons who are not such a holder, an Affiliate of such a
holder or an Affiliate of the Company or any of the Company's Subsidiaries.
(b) In addition, the Company and the Issuer will not, and will not
cause or permit any Restricted Subsidiary to, enter into an Affiliate
Transaction unless:
(i) with respect to any such Affiliate Transaction involving or
having a value of more than $1 million, the Company shall have (x) obtained
the approval of a majority of the Board of Directors of the Company and (y)
either obtained the approval of a majority of the Company's disinterested
directors or obtained an opinion of a qualified independent financial advisor
to the effect that such Affiliate Transaction is fair to the Company, the
Issuer or such Restricted Subsidiary, as the case may be, from a financial
point of view, and
(ii) with respect to any such Affiliate Transaction involving
or having a value of more than $10 million, the Company shall have (x)
obtained the approval of a majority of the Board of Directors of the Company
and (y) delivered to the Trustee an opinion of a qualified independent
financial advisor to the effect that such Affiliate Transaction is fair to
the Company, the Issuer or such Restricted Subsidiary, as the case may be,
from a financial point of view.
(c) Notwithstanding the foregoing, an Affiliate Transaction will
not include:
(i) any contract, agreement or understanding with, or for the
benefit of, or plan for the benefit of, employees of the Company or its
Subsidiaries generally (in their capacities as such) that has been approved
by the Board of Directors of the Company,
(ii) Capital Stock issuances to directors, officers and
employees of the Company or its Subsidiaries pursuant to plans approved by
the stockholders of the Company,
(iii) any Restricted Payment otherwise permitted under Section
3.3 hereof,
(iv) any transaction between or among the Company and one or
more Restricted Subsidiaries or between or among Restricted Subsidiaries
(provided, however, no such transaction shall involve any other Affiliate of
the Company (other than an Unrestricted Subsidiary to the extent the
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applicable amount constitutes a Restricted Payment permitted by the
Indenture)),
(v) any transaction between one or more Restricted Subsidiaries
and one or more Unrestricted Subsidiaries where all of the payments to, or
other benefits conferred upon, such Unrestricted Subsidiaries are
substantially contemporaneously dividended, or otherwise distributed or
transferred without charge, to the Company or a Restricted Subsidiary,
(vi) issuances, sales or other transfers or dispositions of
mortgages and collateralized mortgage obligations in the ordinary course of
business between Restricted Subsidiaries and Unrestricted Subsidiaries of the
Company, and
(vii) the payment of reasonable and customary fees to, and
indemnity provided on behalf of, officers, directors, employees or
consultants of the Company, the Issuer or any Restricted Subsidiary.
Section 3.5 Limitations on Dispositions of Assets. The Company
and the Issuer will not, and will not cause or permit any Restricted
Subsidiary to, make any Asset Disposition unless (x) the Company (or such
Restricted Subsidiary, as the case may be) receives consideration at the time
of such Asset Disposition at least equal to the Fair Market Value thereof,
and (y) not less than 70% of the consideration received by the Company (or
such Restricted Subsidiary, as the case may be) is in the form of cash, Cash
Equivalents and Marketable Securities. The amount of (i) any Indebtedness
(other than any Indebtedness subordinated to the Notes) of the Company or any
Restricted Subsidiary that is actually assumed by the transferee in such
Asset Disposition and (ii) the fair market value (as determined in good faith
by the Board of Directors of the Company) of any property or assets received
that are used or useful in a Real Estate Business, shall be deemed to be
consideration required by clause (y) above for purposes of determining the
percentage of such consideration received by the Company or the Restricted
Subsidiaries. The Net Cash Proceeds of an Asset Disposition shall, within
one year, at the Company's election, (a) be used by the Company or a
Restricted Subsidiary in the business of the construction and sale of homes
conducted by the Company and the Restricted Subsidiaries or any other
business of the Company or a Restricted Subsidiary existing at the time of
such Asset Disposition or (b) to the extent not so used, be applied to make a
Net Cash Proceeds offer for the Notes and, if the Company or a Restricted
Subsidiary elects or is required to do so repay, purchase or redeem any other
unsubordinated Indebtedness (on a pro rata basis if the amount available for
such repayment, purchase or redemption is less than the aggregate amount of
(i) the principal amount of the Notes tendered in such Net Cash Proceeds
Offer and (ii) the lesser of the principal amount, or accreted value, of such
other unsubordinated Indebtedness, plus, in each case accrued interest to
the date of repayment, purchase or redemption) at 100% of the principal amount
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or accreted value thereof, as the case may be, plus accrued interest to
the date of repurchase or repayment. Notwithstanding the foregoing,
(A) the Company will not be required to apply such Net Cash Proceeds to
the repurchase of Notes in accordance with clause (b) of the preceding
sentence except to the extent that such Net Cash Proceeds, together with
the aggregate Net Cash Proceeds of prior Asset Dispositions (other than
those so used) which have not been applied in accordance with this provision
and as to which no prior Net Cash Proceeds offer shall have been made,
exceed 5% of Consolidated Tangible Assets and (B) in connection with an
Asset Disposition, the Company and the Restricted Subsidiaries will not
be required to comply with the requirements of clause (y) of the first
sentence of the first paragraph of this covenant to the extent that the
non-cash consideration received in connection with such Asset Disposition
together with the sum of all non-cash consideration received in connection
with all prior Asset Disposition that has not yet been converted into cash,
does not exceed 5% of Consolidated Tangible Assets; provided, however,
that when any non-cash consideration is converted into cash, such cash
shall constitute Net Cash Proceeds and be subject to the preceding sentence.
Section 3.6 Limitations on Liens. The Company and the Issuer
will not, and will not cause or permit any Restricted Subsidiary to, create,
incur, assume or suffer to exist any Liens, other than Permitted Liens, on
any of its Property, or on any shares of Capital Stock or Indebtedness of any
Restricted Subsidiary, unless contemporaneously therewith or prior thereto
all payments due under the Indenture and the Notes are secured on an equal
and ratable basis with the obligation or liability so secured until such time
as such obligation or liability is no longer secured by a Lien.
Section 3.7 Limitations on Restrictions Affecting Restricted
Subsidiaries. The Company and the Issuer will not, and will not cause or
permit any Restricted Subsidiary to, create, assume or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction
(other than encumbrances or restrictions imposed by law or by judicial or
regulatory action or by provisions of agreements that restrict the
assignability thereof) on the ability of any Restricted Subsidiary to:
(i) pay dividends or make any other distributions on its
Capital Stock or any other interest or participation in, or measured by, its
profits, owned by the Company or any other Restricted Subsidiary, or pay
interest on or principal of any Indebtedness owed to the Company or any other
Restricted Subsidiary,
(ii) make loans or advances to the Company or any other
Restricted Subsidiary, or
(iii) transfer any of its property or assets to the Company or
any other Restricted Subsidiary,
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except for
(a) encumbrances or restrictions existing under or by
reason of applicable law,
(b) contractual encumbrances or restrictions in effect on
the Issue Date and any amendments, modifications, restatements, renewals,
supplements, refundings, replacements or refinancings thereof, provided that
such amendments, modifications, restatements, renewals, supplements,
refundings, replacements or refinancings are no more restrictive, taken as a
whole, with respect to such dividend and other payment restrictions than
those contained in such contractual encumbrances or restrictions, as in
effect on the Issue Date,
(c) any restrictions or encumbrances arising under
Acquired Indebtedness; provided that such encumbrance or restriction applies
only to either the assets that were subject to the restriction or encumbrance
at the time of the acquisition or the obligor on such Indebtedness and its
Subsidiaries prior to such acquisition,
(d) any restrictions or encumbrances arising in connection
with Refinancing Indebtedness; provided, however, that any restrictions and
encumbrances of the type described in this clause (d) that arise under such
Refinancing Indebtedness shall not be materially more restrictive or apply to
additional assets than those under the agreement creating or evidencing the
Indebtedness being refunded, refinanced, replaced or extended,
(e) any Permitted Lien, or any other agreement restricting
the sale or other disposition of property, securing Indebtedness permitted by
the Indenture if such Permitted Lien or agreement does not expressly restrict
the ability of a Subsidiary of the Company to pay dividends or make or repay
loans or advances prior to default thereunder,
(f) reasonable and customary borrowing base covenants set
forth in agreements evidencing Indebtedness otherwise permitted by the
Indenture,
(g) customary non-assignment provisions in leases,
licenses, encumbrances, contracts or similar assets entered into or acquired
in the ordinary course of business,
(h) any restriction with respect to a Restricted
Subsidiary imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all of the Capital Stock or assets of
such Restricted Subsidiary pending the closing of such sale or disposition,
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(i) encumbrances or restrictions existing under or by
reason of the Indenture or the Notes,
(j) purchase money obligations that impose restrictions on
the property so acquired of the nature described in clause (iii) of the
preceding paragraph,
(k) Liens permitted under the Indenture securing
Indebtedness that limit the right of the debtor to dispose of the assets
subject to such Lien,
(l) provisions with respect to the disposition or
distribution of assets or property in joint venture agreements, assets sale
agreements, stock sale agreements and other similar agreements,
(m) customary provisions of any franchise, distribution or
similar agreements,
(n) restrictions on cash or other deposits or net worth
imposed by contracts entered into in the ordinary course of business, and
(o) any encumbrance or restrictions of the type referred
to in clauses (i), (ii) or (iii) of the first paragraph of this section
imposed by any amendments, modifications, restatements, renewals,
supplements, refinancings, replacements or refinancings of the contracts,
instruments or obligations referred to in clauses (a) through (n) of this
paragraph, provided that such amendments, modifications, restatements,
renewals, supplements, refundings, replacements or refinancings are, in the
good faith judgment of the Company's Board of Directors, no more restrictive
with respect to such dividend and other payment restrictions than those
contained in the dividend or other payment restrictions prior to such
amendment, modification, restatement, renewal, supplement, refunding,
replacement or refinancing.
Section 3.8 Limitations on Mergers, Consolidations and Sales of
Assets. Neither the Company nor the Issuer nor any Guarantor will
consolidate or merge with or into, or sell, lease, convey or otherwise
dispose of all or substantially all of its assets (including, without
limitation, by way of liquidation or dissolution), or assign any of its
obligations under the Notes, the Guarantee or the Indenture (as an entirety
or substantially as an entirety in one transaction or in a series of related
transactions), to any Person (in each case other than in a transaction in
which the Company, the Issuer or a Restricted Subsidiary is the survivor of a
consolidation or merger, or the transferee in a sale, lease, conveyance or
other disposition) unless:
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(i) the Person formed by or surviving such consolidation or
merger (if other than the Company, the Issuer or the Guarantor, as the case
may be), or to which such sale, lease, conveyance or other disposition or
assignment will be made (collectively, the "Successor"), is a corporation or
other legal entity organized and existing under the laws of the United States
or any state thereof or the District of Columbia, and the Successor assumes
by supplemental indenture in a form reasonably satisfactory to the Trustee
all of the obligations of the Company, the Issuer or the Guarantor, as the
case may be, under the Notes or a Guarantee, as the case may be, and the
Indenture,
(ii) immediately after giving effect to such transaction, no
Default or Event of Default has occurred and is continuing,
(iii) in the case of a transaction involving the Company,
immediately after giving effect to such transaction and the use of any net
proceeds therefrom, on a pro forma basis, the Consolidated Net Worth of the
Company or the Successor as the case may be, would be at least equal to the
Consolidated Net Worth of the Company immediately prior to such transaction
(exclusive of any adjustments to Consolidated Net Worth attributable to
transaction costs) less any amount treated as a Restricted Payment in
connection with such transaction in accordance with the Indenture, and
(iv) immediately after giving effect to such transaction, the
Company (or its Successor) could incur at least $1.00 of Indebtedness
pursuant to Section 3.2(a) hereof.
The foregoing provisions shall not apply to (i) a transaction
involving the sale or disposition of Capital Stock of a Guarantor, or the
consolidation or merger of a Guarantor, or the sale, lease, conveyance or
other disposition of all or substantially all of the assets of a Guarantor,
that in any such case results in such Guarantor being released from its
Guarantee pursuant to the Indenture, or (ii) a transaction the purpose of
which is to change the state of incorporation of the Company, the Issuer or
any Guarantor.
Section 3.9 Reports to Holders of Notes. The Company shall file
with the Commission the annual reports and the information, documents and
other reports required to be filed pursuant to Section 13 or 15(d) of the
Exchange Act. The Company shall file with the Trustee and mail to each Holder
of record of Notes such reports, information and documents within 15 days
after it files them with the Commission. In the event that the Company is no
longer subject to these periodic requirements of the Exchange Act, it will
nonetheless continue to file reports with the Commission and the Trustee and
mail such reports to each Holder of Notes as if it were subject to such
reporting requirements. Regardless of whether the Company is required to
furnish such reports to its stockholders pursuant to the Exchange Act, the
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Company will cause its consolidated financial statements and a "Management's
Discussion and Analysis of Results of Operations and Financial Condition"
written report, similar to those that would have been required to appear in
annual or quarterly reports, to be delivered to Holders of Notes.
ARTICLE IV
Remedies
Section 4.1 Events of Default.
(a) "Event of Default" means any one or more of the following
events:
(i) the failure by the Company, the Issuer and the Guarantors
to pay interest on any Note when the same becomes due and
payable and the continuance of any such failure for a
period of 30 days;
(ii) the failure by the Company, the Issuer and the Guarantors
to pay the principal or premium of any Note when the same
becomes due and payable at maturity, upon acceleration or
otherwise;
(iii) the failure by the Company, the Issuer or any Restricted
Subsidiary to comply with any of its agreements or
covenants in, or provisions of, the Notes, the Guarantee
or the Indenture and such failure continues for the
period and after the notice specified below (except in
the case of a default under Sections 3.1 and 3.8 hereof,
which will constitute Events of Default with notice but
without passage of time);
(iv) the acceleration of any Indebtedness (other than Non-
Recourse Indebtedness) of the Company, the Issuer or any
Restricted Subsidiary that has an outstanding principal
amount of $10 million or more, individually or in the
aggregate, and such acceleration does not cease to exist,
or such Indebtedness is not satisfied, in either case
within 30 days after such acceleration;
(v) the failure by the Company, the Issuer or any Restricted
Subsidiary to make any principal or interest payment in
an amount of $10 million or more, individually or in the
aggregate, in respect of Indebtedness (other than Non-
Recourse Indebtedness) of the Company or any Restricted
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Subsidiary within 30 days of such principal or interest
becoming due and payable (after giving effect to any
applicable grace period set forth in the documents
governing such Indebtedness);
(vi) a final judgment or judgments that exceed $10 million or
more, individually or in the aggregate, for the payment
of money having been entered by a court or courts of
competent jurisdiction against the Company, the Issuer or
any of its Restricted Subsidiaries and such judgment or
judgments is not satisfied, stayed, annulled or rescinded
within 60 days of being entered;
(vii) the Company or any Restricted Subsidiary that is a
Significant Subsidiary pursuant to or within the meaning
of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against
it in an involuntary case,
(C) consents to the appointment of a Custodian of it or
for all or substantially all of its property, or
(D) makes a general assignment for the benefit of its
creditors;
(viii) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company or any Restricted
Subsidiary that is a Significant Subsidiary as
debtor in an involuntary case,
(B) appoints a Custodian of the Company or any
Restricted Subsidiary that is a Significant
Subsidiary or a Custodian for all or substantially
all of the property of the Company or any Restricted
Subsidiary that is a Significant Subsidiary, or
(C) orders the liquidation of the Company or any
Restricted Subsidiary that is a Significant
Subsidiary,
and the order or decree remains unstayed and in effect for 60 days, or
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(ix) any Guarantee of a Guarantor which is a Significant
Subsidiary ceases to be in full force and effect (other
than in accordance with the terms of such Guarantee and
the Indenture) or is declared null and void and
unenforceable or found to be invalid or any Guarantor
denies its liability under its Guarantee (other than by
reason of release of a Guarantor from its Guarantee in
accordance with the terms of the Indenture and the
Guarantee).
A Default as described in subclause (iii) above will not be deemed
an Event of Default until the Trustee notifies the Company, or the Holders of
at least 25 percent in principal amount of the then outstanding Notes notify
the Company and the Trustee, of the Default and (except in the case of a
default with respect to Sections 3.1 and 3.8 hereof) the Company does not
cure the Default within 60 days after receipt of the notice. The notice must
specify the Default, demand that it be remedied and state that the notice is
a "Notice of Default." If such a Default is cured within such time period, it
ceases.
If an Event of Default (other than an Event of Default with respect
to the Company resulting from subclauses (vii) or (viii) above), shall have
occurred and be continuing under the Indenture, the Trustee by notice to the
Company, or the Holders of at least 25 percent in principal amount of the
Notes then outstanding by notice to the Company and the Trustee, may declare
all Notes to be due and payable immediately. Upon such declaration of
acceleration, the amounts due and payable on the Notes will be due and
payable immediately. If an Event of Default with respect to the Company
specified in subclauses (vii) or (viii) above occurs, such an amount will
ipso facto become and be immediately due and payable without any declaration,
notice or other act on the part of the Trustee and the Company or any Holder.
Section 4.2 Waiver of Defaults by Majority of Stockholders. The
Holders of a majority in principal amount of the Notes then outstanding by
written notice to the Trustee and the Company may waive any Default or Event
of Default (other than any Default or Event of Default in payment of
principal or interest) on the Notes under the Indenture. Holders of a
majority in principal amount of the then outstanding Notes may rescind an
acceleration and its consequence (except an acceleration due to nonpayment of
principal or interest on the Notes) if the rescission would not conflict with
any judgment or decree and if all existing Events of Default (other than the
non-payment of accelerated principal) have been cured or waived.
Section 4.3 Direction of Proceedings. The Holders may not enforce
the provisions of the Indenture, the Notes or the Guarantee except as
provided in the Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the Notes then outstanding may direct the
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Trustee in its exercise of any trust or power, provided, however, that such
direction does not conflict with the terms of the Indenture. The Trustee may
withhold from the Holders notice of any continuing Default or Event of
Default (except any Default or Event of Default in payment of principal or
interest on the Notes or that resulted from the failure to comply with
Section 3.1 hereof) if the Trustee determines that withholding such notice is
in the Holders' interest.
Section 4.4 Notice of Defaults. The Company is required to
deliver to the Trustee an annual statement regarding compliance with the
Indenture, and include in such statement, if any officer of the Company is
aware of any Default or Event of Default, a statement specifying such Default
or Event of Default and what action the Company is taking or proposes to take
with respect thereto. In addition, the Company is required to deliver to the
Trustee prompt written notice of the occurrence of any Default or Event of
Default.
ARTICLE V
Guarantee
Section 5.1 Unconditional Guarantee. The Company and each of
the Guarantors will (so long, in the case of a Restricted Subsidiary, as it
remains a Restricted Subsidiary) unconditionally guarantee on a joint and
several basis all of the Issuer's obligations under the Notes, including its
obligations to pay principal, premium, if any, and interest with respect to
the Notes. The Guarantee will be general unsecured obligations of the
Company and the Guarantors and will rank pari passu with all existing and
future unsecured Indebtedness of the Guarantors that is not, by its terms,
expressly subordinated in right of payment to the Guarantee. The obligations
of each Guarantor other than the Company are limited to the maximum amount
which, after giving effect to all other contingent and fixed liabilities of
such Guarantor and after giving effect to any collections from or payments
made by or on behalf of any other Guarantor in respect of the obligations of
such other Guarantor under its Guarantee or pursuant to its contribution
obligations under the Indenture, will result in the obligations of such
Guarantor under its Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law. Each Guarantor other than
the Company that makes a payment or distribution under a Guarantee shall be
entitled to a contribution from each other Guarantor in an amount pro rata,
based on the net assets of each Guarantor, determined in accordance with
GAAP. Except as provided in Article 3 hereof, the Company is not restricted
from selling or otherwise disposing of any of the Guarantors.
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Each existing and future Restricted Subsidiary (other than KHL, Inc. and
X. Xxxxxxxxx Poland, Inc.) will be a Guarantor. The Company will be
permitted to cause any Unrestricted Subsidiary to be a Guarantor.
Section 5.2 Release of a Guarantor. If all or substantially all of
the assets of any Guarantor other than the Company or all of the Capital
Stock of any Guarantor other than the Company is sold (including by
consolidation, merger, issuance or otherwise) or disposed of (including by
liquidation, dissolution or otherwise) by the Company or any of its
Subsidiaries, or, unless the Company elects otherwise, if any Guarantor other
than the Company is designated an Unrestricted Subsidiary in accordance with
the terms of the Indenture, then such Guarantor (in the event of a sale or
other disposition of all of the Capital Stock of such Guarantor or a
designation as an Unrestricted Subsidiary) or the Person acquiring such
assets (in the event of a sale or other disposition of all or substantially
all of the assets of such Guarantor) shall be deemed automatically and
unconditionally released and discharged from any of its obligations under the
Indenture without any further action on the part of the Trustee or any Holder
of the Notes.
An Unrestricted Subsidiary that is a Guarantor shall be deemed
automatically and unconditionally released and discharged from all
obligations under its Guarantee upon notice from the Company to the Trustee
to such effect, without any further action required on the part of the
Trustee or any Holder.
ARTICLE VI
Discharge of Indenture
Section 6.1 Defeasance of Indenture. The Company, the Issuer and the
Guarantors will terminate all of their respective obligations under the
Indenture with respect to the Notes and the Guarantee, other than the
obligation to pay interest on and the principal of the Notes and certain
other obligations, at any time by
(a) depositing in trust with the Trustee, under an irrevocable trust
agreement, money or U.S. government obligations in an amount
sufficient to pay principal of and interest on the Notes to their
maturity, and
(b) complying with certain other conditions, including delivery to the
Trustee of an opinion of counsel or a ruling received from the
Internal Revenue Service to the effect that Holders will not
recognize income, gain or loss for federal income tax purposes as a
result of the Company's exercise of such right and will be subject
-39-
to federal income tax on the same amount and in the same manner and
at the same times as would have been the case otherwise.
In addition, the Indenture will permit the Company, the Issuer and the
Guarantors to terminate all of their obligations under the Indenture with
respect to the Notes and the Guarantee (including the obligations to pay
interest on and the principal of the Notes and certain other obligations), at
any time by
(a) depositing in trust with the Trustee, under an irrevocable trust
agreement, money or U.S. government obligations in an amount
sufficient to pay principal of and interest on the Notes to their
maturity, and
(b) complying with certain other conditions, including delivery to the
Trustee of an opinion of counsel or a ruling, received from the
Internal Revenue Service, to the effect that Holders will not
recognize income, gain or loss for federal income tax purposes as a
result of the Company's exercise of such right and will be subject
to federal income tax on the same amount and in the same manner and
at the same times as would have been the case otherwise, which
opinion of counsel is based upon a change in the applicable federal
tax law since the date of the Indenture.
ARTICLE VII
The Notes
Section 7.1 Book Entry, Delivery and Form.
The Notes will be issued in the form of a fully registered Global Note
(the "Global Note"). The Global Note will be deposited on or about the Issue
Date with, or on behalf of, The Depository Trust Company (the "Depositary")
and registered in the name of Cede & Co., as nominee of the Depositary (such
nominee being referred to herein as the "Global Note Holder").
So long as the Global Note Holder is the registered owner of any Notes,
the Global Note Holder will be considered the sole owner or holder of such
Notes outstanding under the Indenture. Except as provided below, owners of
Notes will not be entitled to have Notes registered in their names, will not
receive or be entitled to receive physical delivery of Notes in definitive
form, and will not be considered the Holders thereof under the Indenture for
any purpose, including with respect to the giving of any directions,
instructions or approvals to the Trustee thereunder. As a result, the
ability of a Person having a beneficial interest in Notes represented by the
Global Note to pledge such interest to Persons or entities that do not
-40-
participate in the Depositary's system or to otherwise take actions in
respect of such interest may be affected by the lack of a physical
certificate evidencing such interest.
Neither the Company, the Issuer, the Trustee, the Paying Agent nor the
Notes Registrar will have any responsibility or liability for any aspect of
the records relating to or payments made on account of Notes by the
Depositary, or for maintaining, supervising or reviewing any records of the
Depositary relating to such Notes.
Payments in respect of the principal, premium, if any, and interest on
any Notes registered in the name of a Global Note Holder on the applicable
record date will be payable by the Trustee to or at the direction of such
Global Note Holder in its capacity as the registered holder under the
Indenture. Under the terms of the Indenture, the Company, the Issuer and
the Trustee may treat the Persons in whose names the Notes, including the
Global Note, are registered as the owners thereof for the purpose of
receiving such payments and for any and all other liability for the payment
of such amounts to beneficial owners of Notes (including principal, premium,
if any, and interest).
As long as the Notes are represented by a Global Note, the Depositary's
nominee will be the holder of the Notes and therefore will be the only entity
that can exercise a right to repayment or repurchase of the Notes. Notice by
Participants or Indirect Participants of the Depository of the exercise of
the option to elect repayment of beneficial interests in Notes represented by
a Global Note must be transmitted to the Depositary in accordance with its
procedures on a form required by the Depositary and provided to Participants.
In order to ensure that the Depositary's nominee will timely exercise a right
to repayment with respect to a particular Note, the beneficial owner of such
Note must instruct the broker or the Participant or Indirect Participant
through which it holds an interest in such Note to notify the Depositary of
its desire to exercise a right to repayment. Each beneficial owner should
consult the broker or other Participant or Indirect Participant through which
it holds an interest in a Note in order to ascertain the cut-off time by
which such an instruction must be given in order for timely notice to be
delivered to the Depositary. The Company and the Issuer will not be liable
for any delay in delivery of notices of the exercise of the option to elect
repayment.
Section 7.2 Certificated Notes.
Subject to certain conditions, any Person having a beneficial interest
in the Global Note may, upon request to the Issuer or the Trustee, exchange
such beneficial interest for Notes in the form of Certificated Notes. Upon
any such issuance, the Trustee is required to register such Notes in the name
of, and cause the same to be delivered to, such Person or Persons (or the
nominee of any thereof). In addition, if (i) the Issuer notifies the Trustee
-41-
in writing that the Depositary is no longer willing or able to act as a
depositary and the Issuer is unable to locate a qualified successor within 90
days or (ii) the Issuer, at its option, notifies the Trustee in writing that
it elects to cause the issuance of Notes in the form of Certificated Notes
under the Indenture, then, upon surrender by the relevant Global Note Holder
of its Global Note, Notes in such form will be issued to each Person that
such Global Note Holder and the Depositary identify as the beneficial owner
of the related Notes.
Neither the Company, the Issuer nor the Trustee shall be liable for any
delay by the related Global Note Holder or the Depositary in identifying the
beneficial owners of Notes and each such Person may conclusively rely on and
shall be protected in relying on, instructions from the Global Note Holder or
of the Depositary for all purposes (including with respect to the
registration and delivery, and the respective principal amounts, of the Notes
to be issued).
Section 7.3 Same-Day Settlement and Payment.
The payments in respect of the Notes (including principal, premium, if
any, and interest) will be made by wire transfer of immediately available
funds to the accounts specified by the Global Note Holder.
Section 7.4 Transfer and Exchange.
A holder may transfer or exchange the Notes in accordance with the
procedures set forth in the Indenture. The Registrar may require a holder,
among other things, to furnish appropriate endorsements and transfer
documents, and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar is not required to transfer or exchange any Note
selected for redemption. Also, the Registrar is not required to transfer or
exchange any Note for a period of 15 days before a selection of the Notes to
be redeemed.
The registered Holder of a Note will be treated as the owner of it for
all purposes.
ARTICLE VIII
Miscellaneous
Section 8.1 Governing Law. The laws of the State of New York
shall govern this Supplemental Indenture, the Notes and the Guarantee without
giving effect to principles of conflict of laws.
-42-
Section 8.2 No Adverse Interpretation of other Agreements. This
Supplemental Indenture may not be used to interpret another indenture, loan
or debt agreement of the Company, the Issuer or a Subsidiary. Any such
indenture, loan or debt agreement may not be used to interpret this
Supplemental Indenture.
Section 8.3 No Recourse Against Others. All liability described
in paragraph 12 of the Global Note of any director, officer, employee or
stockholder, as such, of the Issuer is waived and released.
Section 8.4 Successors and Assigns. All covenants and
agreements of the Issuer, the Company and the Guarantors in this Supplemental
Indenture and the Notes shall bind its successors and assigns. All
agreements of the Trustee in this Supplemental Indenture shall bind its
successors and assigns.
Section 8.5 Duplicate Originals. The parties may sign any
number of copies of this Supplemental Indenture. Each signed copy shall be
an original, but all of them together represent the same agreement.
Section 8.6 Severability. In case any one or more of the
provisions contained in this Supplemental Indenture or in the Notes shall for
any reason be held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provisions of this Supplemental Indenture or of the Notes.
-43-
SIGNATURES
IN WITNESS WHEREOF, the parties have caused this Supplemental
Indenture to be duly executed, all as of the date first above written.
X. XXXXXXXXX ENTERPRISES, INC.,
as the Issuer
By: /s/ X. Xxxxx Xxxxxx
_______________________
Name: X. Xxxxx Xxxxxx
Title: Treasurer and Chief Financial
Officer
HOVNANIAN ENTERPRISES, INC.,
as the Company
By: /s/ X. Xxxxx Xxxxxx
________________________
Name: X. Xxxxx Xxxxxx
Title: Treasurer and Chief Financial
Officer
GUARANTORS:
HOVNANIAN ENTERPRISES, INC.
X. XXXXXXXXX AT HOPEWELL ILL, INC.
RECREATIONAL DEVELOPMENT CORP., INC.
PINE BROOK COMPANY, INC.
X. XXXXXXXXX AT BEDMINSTER, INC.
X. XXXXXXXXX AT THE BLUFF, INC.
X. XXXXXXXXX AT ATLANTIC CITY, INC.
HOVNANIAN PROPERTIES OF ATLANTIC COUNTY,
INC.
MONTEGO BAY I ACQUISITION CORP., INC.
PIKE UTILITIES, INC.
ARROW PROPERTIES, INC.
X. XXXXXXXXX REAL ESTATE INVESTMENT, INC.
HOVNANIAN TEXAS, INC.
LANDARAMA, INC.
TROPICAL SERVICE BUILDERS, INC.
HOVNANIAN PENNSYLVANIA, INC.
X. XXXXXXXXX PROPERTIES OF NORTH BRUNSWICK
V, INC.
X. XXXXXXXXX AT MAHWAH VIII, INC.
X. XXXXXXXXX AT WALL TOWNSHIP IV, INC.
X. XXXXXXXXX AT MONTVILLE, INC.
-44-
HOVNANIAN OF PALM BEACH, INC.
X. XXXXXXXXX COMPANIES OF FLORIDA, INC.
X. XXXXXXXXX AT FREEHOLD TOWNSHIP, INC.
HOVNANIAN PROPERTIES OF LAKE WORTH, INC.
X. XXXXXXXXX COMPANIES OF PENNSYLVANIA,
INC.
X. XXXXXXXXX PROPERTIES OF XXXXXXXX, INC.
X. XXXXXXXXX AT SCOTCH PLAINS, INC.
X. XXXXXXXXX AT XXXXX XX, INC.
HOVNANIAN DEVELOPMENTS OF FLORIDA, INC.
MONTEGO BAY II ACQUISITION CORP., INC.
HOVNANIAN OF PALM BEACH VII, INC.
X. XXXXXXXXX AT WALL TOWNSHIP II, INC.
X. XXXXXXXXX ENTERPRISES, INC.
HOVNANIAN OF PALM BEACH IX, INC.
HOVNANIAN AT TARPON LAKES I, INC.
X. XXXXXXXXX COMPANIES NORTHEAST, INC.
KINGS GRANT EVESHAM CORP.
X. XXXXXXXXX AT MANALAPAN, INC.
X. XXXXXXXXX AT WALL TOWNSHIP, INC.
X. XXXXXXXXX AT EAST BRUNSWICK VII, INC.
X. XXXXXXXXX COMPANIES OF CENTRAL JERSEY,
INC.
HOVNANIAN OF PALM BEACH XI, INC.
X. XXXXXXXXX AT SOUTH BRUNSWICK II, INC.
X. XXXXXXXXX AT XXXXXXXX SQUARE, INC.
X. XXXXXXXXX AT TARPON LAKES III, INC.
X. XXXXXXXXX AT HORIZON HEIGHTS, INC.
X. XXXXXXXXX AT RESERVOIR RIDGE, INC.
X. XXXXXXXXX AT JERSEY CITY I, INC.
X. XXXXXXXXX INVESTMENT PROPERTIES OF NEW
JERSEY, INC.
X. XXXXXXXXX AT FT. XXXXX I, INC.
X. XXXXXXXXX AT XXXXXX TOWNSHIP II, INC.
X. XXXXXXXXX AT KLOCKNER FARMS, INC.
X. XXXXXXXXX AT XXXXXX BEACH, INC.
XXXXX XXXXXXX CONSTRUCTION CO., INC.
X. XXXXXXXXX AT MAHWAH VII, INC.
X. XXXXXXXXX AT XXXXX III, INC.
X. XXXXXXXXX PROPERTIES OF EAST BRUNSWICK
II, INC.
X. XXXXXXXXX AT KINGS GRANT I, INC.
THE NEW FORTIS CORPORATION
X. XXXXXXXXX AT CLARKSTOWN, INC.
X. XXXXXXXXX COMPANIES OF NEW YORK, INC.
X. XXXXXXXXX DEVELOPMENTS OF NEW YORK,
INC.
-45-
DRYER ASSOCIATES, INC.
X. XXXXXXXXX AT PASCO I, INC.
X. XXXXXXXXX AT LAKEWOOD, INC.
X. XXXXXXXXX AT XXXXXX XXXXX XX, INC.
X. XXXXXXXXX AVIATION, INC.
X. XXXXXXXXX INVESTMENT PROPERTIES, INC.
X. XXXXXXXXX AT FT. XXXXX II, INC.
X. XXXXXXXXX AT XXXXXXXX II, INC.
X. XXXXXXXXX AT SOUTH BRUNSWICK III, INC.
XXXXXXX GROUP, INC.
X. XXXXXXXXX DEVELOPMENTS OF NEW JERSEY,
INC.
X. XXXXXXXXX AT BRIDGEWATER V, INC.
X. XXXXXXXXX AT NORTH BRUNSWICK II, INC.
X. XXXXXXXXX AT WASHINGTONVILLE, INC.
X. XXXXXXXXX AT PEEKSKILL, INC.
X. XXXXXXXXX AT NEWARK I, INC.
X. XXXXXXXXX AT CARMEL, INC.
X. XXXXXXXXX AT EAST WINDSOR I, INC.
PARTHENON GROUP, INC.
X. XXXXXXXXX AT MARLBORO TOWNSHIP II, INC.
X. XXXXXXXXX AT SOMERSET III, INC.
R.C.K. COMMUNITY MANAGEMENT CO., INC.
X. XXXXXXXXX AT MONTCLAIR, NJ, INC.
X. XXXXXXXXX AT EAST BRUNSWICK VI, INC.
X. XXXXXXXXX AT HACKETTSTOWN, INC.
X. XXXXXXXXX COMPANIES OF NORTH CAROLINA,
INC.
X. XXXXXXXXX AT MONTVILLE II, INC.
X. XXXXXXXXX AT WALL TOWNSHIP VII, INC.
X. XXXXXXXXX AT BRIDGEWATER II, INC.
X. XXXXXXXXX AT MERRIMACK, INC.
X. XXXXXXXXX AT XXXXXXXX III, INC.
EASTERN NATIONAL TITLE INSURANCE AGENCY,
INC.
X. XXXXXXXXX AT XXXXX V, INC.
X. XXXXXXXXX AT XXXXX XX, INC.
X. XXXXXXXXX AT DELRAY BEACH II, INC.
X. XXXXXXXXX AT BRANCHBURG I, INC.
X. XXXXXXXXX AT PLAINSBORO II, INC.
X. XXXXXXXXX AT NORTHERN WESTCHESTER, INC.
X. XXXXXXXXX AT MARLBORO TOWNSHIP, INC.
X. XXXXXXXXX AT WEST ORANGE, INC.
EASTERN TITLE AGENCY, INC.
X. XXXXXXXXX PROPERTIES OF FRANKLIN, INC.
X. XXXXXXXXX AT MAHWAH II, INC.
-46-
NEW ENGLAND COMMUNITY MANAGEMENT COMPANY,
INC.
X. XXXXXXXXX AT XXXXXX TOWNSHIP, INC.
X. XXXXXXXXX AT SOUTH BRUNSWICK IV, INC.
X. XXXXXXXXX AT WALL TOWNSHIP VI, INC.
X. XXXXXXXXX PROPERTIES OF PISCATAWAY,
INC.
X. XXXXXXXXX AT MAHWAH V, INC.
X. XXXXXXXXX AT MERRIMACK II, INC.
X. XXXXXXXXX AT NEWARK URBAN RENEWAL
CORPORATION I
X. XXXXXXXXX AT XXXXXXXX XXXXX, INC.
X. XXXXXXXXX AT CEDAR GROVE I, INC.
X. XXXXXXXXX AT CEDAR GROVE II, INC.
X. XXXXXXXXX AT NORTH BRUNSWICK III, INC.
X. XXXXXXXXX AT JERSEY CITY II, INC.
X. XXXXXXXXX AT BURLINGTON, INC.
X. XXXXXXXXX AT SOUTH BRUNSWICK V, INC.
X. XXXXXXXXX AT HALF MOON BAY, INC.
X. XXXXXXXXX AT JACKSONVILLE II, INC.
X. XXXXXXXXX AT BRANCHBURG II, INC.
X. XXXXXXXXX AT EMBASSY LAKES, INC.
X. XXXXXXXXX AT THE RESERVE AT MEDFORD,
INC.
X. XXXXXXXXX AT BRANCHBURG III, INC.
X. XXXXXXXXX AT LOWER SAUCON, INC.
JERSEY CITY XXXXXXXX CSO, INC.
X. XXXXXXXXX AT EAST WINDSOR II, INC.
X. XXXXXXXXX AT MARLBORO TOWNSHIP III,
INC.
X. XXXXXXXXX AT NEWARK URBAN RENEWAL CORP.
III, INC.
X. XXXXXXXXX AT SOMERSET VIII, INC.
X. XXXXXXXXX AT READINGTON, INC.
X. XXXXXXXXX AT HOPEWELL I, INC.
X. XXXXXXXXX AT NEWARK URBAN RENEWAL CORP.
IV, INC.
X. XXXXXXXXX AT NEWARK URBAN RENEWAL CORP.
V, INC.
X. XXXXXXXXX AT PLAINSBORO III, INC.
X. XXXXXXXXX AT MAHWAH IV, INC.
X. XXXXXXXXX AT POMPANO BEACH, INC.
X. XXXXXXXXX AT JERSEY CITY III, INC.
X. XXXXXXXXX PROPERTIES OF NEWARK URBAN
RENEWAL CORPORATION, INC.
X. XXXXXXXXX AT NORTH BRUNSWICK IV, INC.
X. XXXXXXXXX AT BRIDGEWATER IV, INC.
-47-
X. XXXXXXXXX AT SOUTH BRUNSWICK, INC.
X. XXXXXXXXX AT PERKIOMEN I, INC.
X. XXXXXXXXX AT VALLEYBROOK, INC.
X. XXXXXXXXX AT OCEAN TOWNSHIP, INC.
X. XXXXXXXXX AT PLAINSBORO I, INC.
X. XXXXXXXXX REAL ESTATE OF FLORIDA, INC.
WESTERN FINANCIAL SERVICES, INC.
X. XXXXXXXXX AT XXXXX, INC.
X. XXXXXXXXX PROPERTIES OF RED BANK, INC.
X. XXXXXXXXX AT HANOVER, INC.
X. XXXXXXXXX AT LAKE CHARLESTON, INC.
NEW X. XXXXXXXXX DEVELOPMENTS OF FLORIDA,
INC.
X. XXXXXXXXX COMPANIES OF METRO
WASHINGTON, INC.
X. XXXXXXXXX AT XXXXXXXXXX I, INC.
EXC, INC.
X. XXXXXXXXX DEVELOPMENTS OF METRO
WASHINGTON, INC.
X. XXXXXXXXX AT XXXXXXX VILLAGE, INC.
X. XXXXXXXXX AT WOODMONT, INC.
X. XXXXXXXXX AT FAIRWAY VIEWS, INC.
X. XXXXXXXXX AT CAROLINA COUNTRY CLUB I,
INC.
X. XXXXXXXXX AT CHAPEL TRAIL, INC.
X. XXXXXXXXX TREASURE COAST, INC.
X. XXXXXXXXX AT UPPER MERION, INC.
X. XXXXXXXXX AT MAHWAH VI, INC.
X. XXXXXXXXX AT MEDFORD I, INC.
K. HOV INTERNATIONAL, INC.
X. XXXXXXXXX AT MONTCLAIR, INC.
X. XXXXXXXXX AT BULL RUN, INC.
X. XXXXXXXXX AT SULLY STATION, INC.
X. XXXXXXXXX AT SPRING RIDGE, INC.
X. XXXXXXXXX MARINE, INC.
X. XXXXXXXXX AT RIVER OAKS, INC.
X. XXXXXXXXX AT XXXXX CREST, INC.
X. XXXXXXXXX PROPERTIES OF ROUTE 35, INC.
STONEBROOK HOMES, INC.
X. XXXXXXXXX AT XXXXXXX TRAILS, INC.
X. XXXXXXXXX AT LAKES OF BOCA RATON, INC.
X. XXXXXXXXX AT LAKE CHARLESTON II, INC.
X. XXXXXXXXX AT LAKE CHARLESTON III, INC.
X. XXXXXXXXX AT BRIDGEWATER VI, INC.
KHIPE, INC.
X. XXXXXXXXX AT FAIR LAKES, INC.
-48-
X. XXXXXXXXX AT CAROLINA COUNTRY CLUB II,
INC.
X. XXXXXXXXX AT VALLEYBROOK II, INC.
X. XXXXXXXXX AT PARK RIDGE, INC.
X. XXXXXXXXX AT BELMONT, INC.
X. XXXXXXXXX AT XXXXXXX TRAILS II, INC.
X. XXXXXXXXX FAIR LAKES XXXX, INC.
X. XXXXXXXXX AT PEMBROKE SHORES, INC.
X. XXXXXXXXX AT CAROLINA COUNTRY CLUB III,
INC.
GOVERNOR'S ABSTRACT CO., INC.
X. XXXXXXXXX AT COCONUT CREEK, INC.
X. XXXXXXXXX AT POLO TRACE, INC.
FOUNDERS TITLE AGENCY, INC.
X. XXXXXXXXX AT XXXXXXXX IV, INC.
X. XXXXXXXXX AT PERKIOMEN II, INC.
X. XXXXXXXXX AT XXXXX XX, INC.
X. XXXXXXXXX AT UPPER MAKEFIELD I, INC.
X. XXXXXXXXX COMPANIES OF CALIFORNIA, INC.
X. XXXXXXXXX AT TERRAZA, INC.
X. XXXXXXXXX DEVELOPMENTS OF CALIFORNIA,
INC.
KHC ACQUISITION, INC.
X. XXXXXXXXX AT XXXXXX ROAD, INC.
X. XXXXXXXXX AT HIGHLAND VINEYARDS, INC.
X. XXXXXXXXX AT BALLANTRAE, INC.
BALLANTRAE HOME SALES, INC.
X. XXXXXXXXX COMPANIES AT WILDROSE, INC.
X. XXXXXXXXX AT GREENBROOK, INC.
X. XXXXXXXXX AT XXXXXX ESTATES, INC.
X. XXXXXXXXX AT CARMEL DEL MAR, INC.
X. XXXXXXXXX AT XXXX RANCH, INC.
X. XXXXXXXXX AT PRINCETON, INC.
X. XXXXXXXXX AT RARITAN I, INC.
X. XXXXXXXXX AT CALABRIA, INC.
X. XXXXXXXXX AT SENECA CROSSING, INC.
X. XXXXXXXXX COMPANIES OF MARYLAND, INC.
X. XXXXXXXXX DEVELOPMENTS OF MARYLAND,
INC.
X. XXXXXXXXX AT EXETER HILLS, INC.
X. XXXXXXXXX FLORIDA REGION, INC.
X. XXXXXXXXX SOUTHEAST FLORIDA, INC.
X. XXXXXXXXX AT BERLIN, INC.
X. XXXXXXXXX AT EAST BRUNSWICK VI, INC.
X. XXXXXXXXX AT BEDMINSTER II, INC.
X. XXXXXXXXX AT INVERRARY I, INC.
X. XXXXXXXXX AT MAHWAH IX, INC.
-49-
X. XXXXXXXXX AT NORTHLAKE, INC.
X. XXXXXXXXX AT HOPEWELL IV, INC.
X. XXXXXXXXX AT LOCUST GROVE I, INC.
X. XXXXXXXXX AT CASTILE, INC.
X. XXXXXXXXX AT TIERRASANTA, INC.
X. XXXXXXXXX AT XXXXXXX, INC.
X. XXXXXXXXX AT XXXXXXXX III, INC.
X. XXXXXXXXX AT XXXXX VI, INC.
X. XXXXXXXXX PROPERTIES OF NORTH CENTER
DRIVE, INC.
BALLANTRAE DEVELOPMENT CORP.
X. XXXXXXXXX AT LA TROVATA, INC.
X. XXXXXXXXX AT RANCHO CRISTIANITOS, INC.
X. XXXXXXXXX AT TANNERY HILL, INC.
X. XXXXXXXXX PROPERTIES OF N.B. THEATRE,
INC.
X. XXXXXXXXX AT XXXXXXX SPRINGS, INC.
X. XXXXXXXXX AT THE CEDARS, INC.
X. XXXXXXXXX CONSTRUCTION MANAGEMENT,
INC.
X. XXXXXXXXX ACQUISITIONS, INC.
X. XXXXXXXXX AT BURLINGTON II, INC.
X. XXXXXXXXX AT BURLINGTON III, INC.
X. XXXXXXXXX AT BALLANTRAE ESTATES, INC.
X. XXXXXXXXX AT SMITHVILLE, INC.
X. XXXXXXXXX AT XXXXXXXXX, INC.
X. XXXXXXXXX AT UPPER FREEHOLD TOWNSHIP I,
INC.
X. XXXXXXXXX AT XXXXXXX'X MILL, INC.
X. XXXXXXXXX AT DOMINION RIDGE, INC.
X. XXXXXXXXX AT PORT IMPERIAL NORTH, INC.
X. XXXXXXXXX AT UNION TOWNSHIP I, INC.
X. XXXXXXXXX AT EAST BRUNSWICK VIII, INC.
X. XXXXXXXXX AT MANALAPAN II, INC.
X. XXXXXXXXX AT HOPEWELL V, INC.
X. XXXXXXXXX AT HOPEWELL VI, INC.
X. XXXXXXXXX AT XXXXXXX XXXXX, INC.
X. XXXXXXXXX AT XXXXXXXXX, INC.
X. XXXXXXXXX AT XXXXX VII, INC.
X. XXXXXXXXX SCOTCH PLAINS II, INC.
X. XXXXXXXXX AT MARLBORO TOWNSHIP IV, INC.
X. XXXXXXXXX PORT IMPERIAL URBAN RENEWAL,
INC.
X. XXXXXXXXX AT EAST WHITELAND I, INC.
X. XXXXXXXXX AT STONEGATE, INC.
X. XXXXXXXXX AT CRESTLINE, INC.
X. XXXXXXXXX AT SAN SEVAINE, INC.
-50-
X. XXXXXXXXX AT SYCAMORE, INC.
X. XXXXXXXXX COMPANIES OF SOUTHERN
CALIFORNIA, INC.
X. XXXXXXXXX AT SMITHVILLE II, INC.
X. XXXXXXXXX AT STONY POINT, INC.
X. XXXXXXXXX AT XXXXX CANYON, INC.
X. XXXXXXXXX AT TUXEDO, INC.
X. XXXXXXXXX AT BRIDGEPORT, INC.
X. XXXXXXXXX AT SARATOGA, INC.
X. XXXXXXXXX AT CHAPARRAL, INC.
X. XXXXXXXXX AT OCEAN WALK, INC.
X. XXXXXXXXX AT LOWER SAUGON II, INC.
X. XXXXXXXXX AT STONEGATE, INC.
X. XXXXXXXXX AT BARRINGTON, INC.
X. XXXXXXXXX AT XXXXXXX OAKS, INC.
X. XXXXXXXXX AT P.C. HOMES, INC.
X. XXXXXXXXX AT P.C. PROPERTIES, INC.
X. XXXXXXXXX AT SUMMERWOOD, INC.
X. XXXXXXXXX AT THE XXXX
X. XXXXXXXXX'X FOUR SEASONS OF THE PALM
BEACHES, INC.
X. XXXXXXXXX AT WALL TOWNSHIP VIII, INC.
X. XXXXXXXXX AT NORTH JERSEY ACQUISITION,
L.L.C.
K. HOVNANIAN CENTRAL ACQUISITION, L.L.C.
K. HOVNANIAN SHORE ACQUISITION, L.L.C.
K. HOVNANIAN SOUTH JERSEY ACQUISITION,
L.L.C.
K. HOVNANIAN AT XXXXXXXXX I, L.L.C.
K. HOVNANIAN AT MANSFIELD II, L.L.C.
K. HOVNANIAN NORTH CENTRAL ACQUISITION,
L.L.C.
K. HOVNANIAN AT XXXXX XXXX, L.L.C.
K. HOVNANIAN AT XXXXXXXX X, L.L.C.
K. HOVNANIAN AT WANAQUE, L.L.C.
K. HOVNANIAN AT XXXXXXX X, L.L.C.
K. HOVNANIAN AT WINCHESTER, L.L.C.
K. HOVNANIAN AT MIDDLETOWN, L.L.C.
K. HOVNANIAN'S FOUR SEASONS, L.L.C.
K. HOVNANIAN AT MENIFEE, L.L.C.
K. HOVNANIAN AT NORTH BRUNSWICK VI, L.L.C.
K. HOVNANIAN AT CARMEL VILLAGE, L.L.C.
K. HOVNANIAN AT XXXXXXXX, L.L.C.
K. HOVNANIAN AT BLUE HERON PINES, L.L.C.
K. HOVNANIAN AT XXXXXXX, L.L.C.
K. HOVNANIAN AT XXXXXX HEIGHTS, L.L.C.
K. HOVNANIAN AT BERKELEY, L.L.C.
-51-
X. XXXXXXXXX AT XXXX FARM, L.L.C.
K. HOVNANIAN AT SOUTH BANK, L.L.C.
K. HOVNANIAN AT PRINCE XXXXXXX, L.L.C.
K. HOVNANIAN AT LAKE TERRAPIN, L.L.C.
By: /s/ X. Xxxxx Xxxxxx
__________________________
Name: X. Xxxxx Xxxxxx
Title: Treasurer and Chief Financial
Officer
FIRST UNION NATIONAL BANK,
as Trustee
By: /s/ Xxxxxxxxx Xxxxx
__________________________
Name: Xxxxxxxxx Xxxxx
Title: Vice President
-52-
Exhibit A
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS GLOBAL NOTE IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE INDENTURE, AND NO TRANSFER OF THIS GLOBAL NOTE (OTHER THAN A TRANSFER OF
THIS GLOBAL NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY
OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE
DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
-1-
No. 1 CUSIP No.:000000XX0
9 1/8% Senior Notes due 2009
X. XXXXXXXXX ENTERPRISES, INC.
A NEW JERSEY CORPORATION
promises to pay to
or registered assigns
the principal sum of Dollars on May 1, 2009
Interest Payment Dates: May 1 and November 1, commencing November 1, 1999
Interest Record Dates: April 15 and October 15
Dated:
X. XXXXXXXXX ENTERPRISES, INC.
[Seal]
By:____________________________
Title:
By:____________________________
Title:
First Union National Bank,
as Trustee, certifies that
this is the Global Note
referred to in the within mentioned
Indenture.
Date:
By:__________________________
Authorized Signatory
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X. XXXXXXXXX ENTERPRISES, INC.
9 1/8% Senior Notes due 2009
1. Interest.
X. XXXXXXXXX ENTERPRISES, INC. (the "Issuer"), a New Jersey
corporation, promises to pay interest on the principal amount of this Note at
the rate per annum shown above. The Issuer will pay interest semiannually on
May 1 and November 1 of each year, commencing November 1, 1999, until the
principal is paid or made available for payment. Interest on the Notes will
accrue from the most recent date to which interest has been paid or duly
provided for or, if no interest has been paid, from the date of original
issuance, provided that, if there is no existing default in the payment of
interest, and if this note is authenticated between a record date referred to
on the face hereof and the next succeeding interest payment date, interests
shall accrue from such interest payment date. Interest will be computed on
the basis of a 360-day year of twelve 30-day months.
2. Method of Payment.
The Issuer will pay interest on the Notes (except defaulted
interest, if any, which will be paid on such special payment date to Holders
of record on such special record date as may be fixed by the Issuer) to the
persons who are registered Holders of Notes at the close of business on the
April 15 and October 15 immediately preceding the interest payment date.
Holders must surrender Notes to a Paying Agent to collect principal payments.
The Issuer will pay principal and interest in money of the United States that
at the time of payment is legal tender for payment of public and private
debts.
3. Paying Agent and Registrar.
Initially, First Union National Bank (the "Trustee") will
act as Paying Agent and Registrar. The Issuer may change or appoint any
Paying Agent, Registrar or co-Registrar without notice. The Issuer or any of
its Subsidiaries may act as Paying Agent, Registrar or co-Registrar.
The Issuer issued the Notes under a Supplemental Indenture
dated as of May 4, 1999 to the Indenture dated May 4, 1999, among the Issuer,
the Company, the Guarantors and the Trustee, (as supplemented, the
"Indenture"). The terms of the Notes and the Guarantee include those stated
in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 ("TIA") as in effect on the date of the
Indenture. The Notes and the Guarantee are subject to all such terms, and
Holders are referred to the Indenture and the Act for a statement of them.
-3-
Capitalized terms not defined herein have the meanings given to those terms
in the Indenture.
The Issuer will furnish to any Holder upon written request
and without charge a copy of the Indenture and the applicable Authorizing
Resolution or supplemental indenture. Requests may be made to: Hovnanian
Enterprises, Inc., 00 Xxxxxxx 00, X.X. Box 500, Red Bank, New Jersey 07701,
Attention: Chief Financial Officer.
4. Redemption.
Except as set forth below, the Notes will not be redeemable
prior to May 1, 2004. Thereafter, the Issuer may redeem the Notes, at its
option, in whole at any time or in part from time to time. Such redemption
will be at the following redemption prices plus accrued and unpaid interest,
if any, to the redemption date (subject to the right of holders of record on
the relevant record date to receive interest due on the relevant interest
payment date), if redeemed during the 12-month period commencing on May 1 of
the years set forth below:
Year Redemption Price
2004 104.563%
2005 103.042%
2006 101.521%
2007 and thereafter 100.000%
In addition, the Issuer may redeem Notes, at any time prior
to May 1, 2002, with the net cash proceeds of one or more Public Equity
Offerings by the Company, at a redemption price equal to 109.125% of the
principal amount of such Notes, plus accrued and unpaid interest, if any, to
the date of redemption, provided, however, that after each such redemption
not less than $97.5 million principal amount of Notes (excluding any Notes
held by the Company or any of its Affiliates) remains outstanding. Notice of
any such redemption must be given within 60 days after the date of the
closing of the relevant Public Equity Offering.
Selection of the Notes or portions thereof for redemption
pursuant to the foregoing shall be made by the Trustee only on a pro rata
basis or on as nearly a pro rata basis as is practicable (subject to the
procedures of The Depository Trust Company), unless such method is otherwise
prohibited. Notice of redemption will be mailed at least 30 days but not
more than 60 days before the redemption date to each Holder whose Notes are
to be redeemed at the registered address of such Holder. On and after the
redemption date, interest ceases to accrue on the Notes or portions thereof
called for redemption.
-4-
5. Denominations, Transfer, Exchange.
The Notes are in registered form only without coupons in
denominations of $1,000 and integral multiples of $1,000. A Holder may
transfer or exchange Notes by presentation of such Notes to the Registrar or
a co-Registrar with a request to register the transfer or to exchange them
for an equal principal amount of Notes of other denominations. The Registrar
may require a Holder, among other things, to furnish appropriate endorsements
and transfer documents and to pay any taxes and fees required by law or
permitted by the Indenture. The Registrar is not required to transfer or
exchange any Note selected for redemption. The Registrar is not required to
transfer or exchange any Notes for a period of 15 days before a selection of
Notes to be redeemed.
6. Persons Deemed Owners.
The registered Holder of this Note shall be treated as the
owner of it for all purposes.
7. Unclaimed Money.
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent will pay the money back
to the Issuer at its request. After that, Holders entitled to the money must
look to the Issuer for payment unless an abandoned property law designates
another person.
8. Amendment, Supplement, Waiver.
Subject to certain exceptions, the Indenture, the Notes or
the Guarantee may be amended or supplemented with the consent (which may
include consents obtained in connection with a tender offer or exchange offer
for Notes) of the Holders of at least a majority in principal amount of the
Notes then outstanding, and any existing Default under, or compliance with
any provision of the Indenture may be waived (other than any continuing
Default or Event of Default in the payment of interest on or the principal of
the Notes) with the consent (which may include consents obtained in
connection with a tender offer or exchange offer for Notes) of the Holders of
a majority in principal amount of the Notes then outstanding. Without the
consent of any Holder, the Company, the Issuer, the Guarantors and the
Trustee may amend or supplement the Indenture, the Notes or the Guarantee to
cure any ambiguity, defect or inconsistency; to comply with Section 3.8 of
the Supplemental Indenture; to provide for uncertificated Notes in addition
to or in place of certificated Notes; to make any change that does not
adversely affect the legal rights of any Holder; to add a Guarantor; or to
delete a Guarantor which, in accordance with the terms of the Indenture,
ceases to be liable on its Guarantee.
-5-
Without the consent of each Holder affected, the Company, the Issuer,
the Guarantors and the Trustee may not:
(1) reduce the amount of Notes whose Holders must
consent to an amendment, supplement or waiver,
(2) reduce the rate of or change the time for payment of
interest, including default interest, on any Note,
(3) reduce the principal of or change the fixed maturity
of any Note or alter the provisions (including related definitions)
with respect to redemptions described under paragraph 4 hereof or
with respect to mandatory offers to repurchase Notes under Sections
3.1 and 3.5 of the Supplemental Indenture,
(4) make any Note payable in money other than that
stated in the Global Note,
(5) make any change in the "Waiver of Defaults by
Majority of Securityholders," "Proceedings by Securityholders" or the
"Supplemental Indentures with Consent of Securityholders" sections
set forth in the Indenture,
(6) modify the ranking or priority of the Notes or any
Guarantee,
(7) release any Guarantor from any of its obligations
under its Guarantee or the Indenture otherwise than in accordance
with the Indenture, or
(8) waive a continuing Default or Event of Default in
the payment of principal of or interest on the Notes.
The right of any Holder to participate in any consent required or
sought pursuant to any provision of the Indenture (and the obligation of the
Issuer to obtain any such consent otherwise required from such Holder) may be
subject to the requirement that such Holder shall have been the Holder of
record of any Notes with respect to which such consent is required or sought
as of a date identified by the Trustee in a notice furnished to Holders in
accordance with the terms of the Indenture.
-6-
9. Successor Corporation.
When a successor corporation assumes all the obligations of
its predecessor under the Notes and the Indenture, the predecessor
corporation will be released from those obligations.
10. Trustee Dealings With Issuer.
First Union National Bank, the Trustee under the Indenture,
in its individual or any other capacity, may make loans to, accept deposits
from, and perform services for the Issuer or its affiliates, and may
otherwise deal with the Issuer or its affiliates, as if it were not Trustee;
however, if it acquires any conflicting interest (as defined in the
Indenture), it must eliminate such conflict or resign.
11. No Recourse Against Others.
A director, officer, employee or stockholder, as such, of
the Issuer or the Company shall not have any liability for any obligations of
the Issuer or the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the issue of the Notes.
12. Discharge of Indenture.
The Company, the Issuer and the Guarantors will terminate all of
their respective obligations under the Indenture with respect to the Notes
and the Guarantee, other than the obligation to pay interest on and the
principal of the Notes and certain other obligations, at any time by
(1) depositing in trust with the Trustee, under an irrevocable
trust agreement, money or U.S. government obligations in an
amount sufficient to pay principal of and interest on the
Notes to their maturity, and
(2) complying with certain other conditions, including delivery
to the Trustee of an opinion of counsel or a ruling received
from the Internal Revenue Service to the effect that Holders
will not recognize income, gain or loss for federal income
tax purposes as a result of the Company's exercise of such
right and will be subject to federal income tax on the same
amount and in the same manner and at the same times as would
have been the case otherwise.
In addition, the Indenture will permit the Company, the Issuer and
the Guarantors to terminate all of their obligations under the Indenture with
-7-
respect to the Notes and the Guarantee (including the obligations to pay
interest on and the principal of the Notes and certain other obligations), at
any time by
(1) depositing in trust with the Trustee, under an irrevocable
trust agreement, money or U.S. government obligations in an
amount sufficient to pay principal of and interest on the
Notes to their maturity, and
(2) complying with certain other conditions, including delivery
to the Trustee of an opinion of counsel or a ruling,
received from the Internal Revenue Service, to the effect
that Holders will not recognize income, gain or loss for
federal income tax purposes as a result of the Company's
exercise of such right and will be subject to federal income
tax on the same amount and in the same manner and at the
same times as would have been the case otherwise, which
opinion of counsel is based upon a change in the applicable
federal tax law since the date of the Indenture.
13. Authentication.
This Note shall not be valid until the Trustee signs the
certificate of authentication on the other side of this Note.
14. Abbreviations.
Customary abbreviations may be used in the name of a Holder
or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (= joint tenants with right of survivorship and not
as tenants in common), CUST (= custodian), and U/G/M/A (= Uniform Gifts to
Minors Act).
-8-
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form
below:
I or we assign and transfer this Note to
(Insert assignee's social security or tax ID number)
(Print or type assignee's name, address, and zip code)
and irrevocably appoint
agent to transfer this Note on the books of the Issuer. The agent may
substitute another to act for him.
Date: Your signature:
(Sign exactly as your name appears on
the other side of this Note)
Signature Guarantee:
Signature must be guaranteed by
participant in a recognized Signature
Guarantee Medallion Program (or other
signature guarantor program reasonably
acceptable to the Trustee)
-9-
[FORM OF NOTATION ON NOTE RELATING TO GUARANTEE]
GUARANTEE
The undersigned (the "Guarantors") have unconditionally
guaranteed, jointly and severally (such guarantee by each Guarantor being
referred to herein as the "Guarantee") (i) the due and punctual payment of
the principal of and interest on the Notes, whether at maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue principal and interest, if any, on the Notes, to the extent lawful,
and the due and punctual performance of all other obligations of the Issuer
to the Holders or the Trustee all in accordance with the terms set forth in
Article 5 of the Supplemental Indenture and (ii) in case of any extension of
time of payment or renewal of any Notes or any of such other obligations,
that the same will be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise.
No past, present or future stockholder, officer, director,
employee or incorporator, as such, of any of the Guarantors shall have any
liability under the Guarantee by reason of such person's status as
stockholder, officer, director, employee or incorporator. Each Holder of a
Note by accepting a Note waives and releases all such liability. This waiver
and release are part of the consideration for the issuance of the Guarantee.
Each Holder of a Note by accepting a Note agrees that any
Guarantor named below shall have no further liability with respect to its
Guarantee if such Guarantor otherwise ceases to be liable in respect of its
Guarantee in accordance with the terms of the Indenture.
The Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Notes upon which the
Guarantee is noted shall have been executed by the Trustee under the
Indenture by the manual signature of one of its authorized officers.
[Guarantors]
By: __________________________
Title:
-10-
