-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
 MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
 TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
 JtlJpvqY9ZD+UHsy8bmu66hxm0b8WxeLBRF4/d1rjAjnbePohb7MlOmCUoEcne4r
 F9jnx5dZx5xnfhgqEQv7uw==

<SEC-DOCUMENT>0000950123-10-001940.txt : 20100112
<SEC-HEADER>0000950123-10-001940.hdr.sgml : 20100112
<ACCEPTANCE-DATETIME>20100112130848
ACCESSION NUMBER:		0000950123-10-001940
CONFORMED SUBMISSION TYPE:	424B3
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20100112
DATE AS OF CHANGE:		20100112

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			K HOVNANIAN ENTERPRISES INC
		CENTRAL INDEX KEY:			0000833199
		STANDARD INDUSTRIAL CLASSIFICATION:	GEN BUILDING CONTRACTORS - RESIDENTIAL BUILDINGS [1520]
		IRS NUMBER:				222423583
		STATE OF INCORPORATION:			NJ
		FISCAL YEAR END:			1031

	FILING VALUES:
		FORM TYPE:		424B3
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-163967
		FILM NUMBER:		10522163

	BUSINESS ADDRESS:	
		STREET 1:		10 HIGHWAY 35
		STREET 2:		P O BOX 500
		CITY:			RED BANK
		STATE:			NJ
		ZIP:			07701
		BUSINESS PHONE:		7327477800

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			HOVNANIAN ENTERPRISES INC
		CENTRAL INDEX KEY:			0000357294
		STANDARD INDUSTRIAL CLASSIFICATION:	OPERATIVE BUILDERS [1531]
		IRS NUMBER:				221851059
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1031

	FILING VALUES:
		FORM TYPE:		424B3
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-163967-01
		FILM NUMBER:		10522164

	BUSINESS ADDRESS:	
		STREET 1:		110 WEST FRONT STREET
		STREET 2:		PO BOX 500
		CITY:			RED BANK
		STATE:			NJ
		ZIP:			07701
		BUSINESS PHONE:		7327477800

	MAIL ADDRESS:	
		STREET 1:		110 WEST FRONT STREET PO BOX 500
		STREET 2:		110 WEST FRONT STREET  PO BOX 500
		CITY:			RED BANK
		STATE:			NJ
		ZIP:			07701
</SEC-HEADER>
<DOCUMENT>
<TYPE>424B3
<SEQUENCE>1
<FILENAME>y80797b3e424b3.htm
<DESCRIPTION>424B3
<TEXT>
<HTML>
<HEAD>
<TITLE>e424b3</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->
</DIV><!-- END PAGE WIDTH -->
<DIV style="width: 89%; margin-left: 5%"><!-- BEGIN PAGE WIDTH -->

<DIV align="right" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Filed Pursuant to Rule&#160;424(b)(3)</B>
</DIV>

<DIV align="right" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Registration No.&#160;333-163967</B>
</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>PROSPECTUS</B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 14pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">$785,000,000<BR>
    <FONT style="font-size: 24pt">K. Hovnanian Enterprises, Inc.<BR>
    </FONT></FONT><FONT style="font-size: 10pt; font-family: 'Times New Roman', Times">Guaranteed
    by<BR>
    </FONT><FONT style="font-size: 24pt; font-family: 'Times New Roman', Times">Hovnanian
    Enterprises, Inc.</FONT></B>
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 14pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Offer to
    Exchange All Outstanding<BR>
    10<FONT style="vertical-align: text-top; font-size: 70%;">5</FONT>/<FONT style="font-size: 70%;">8</FONT>%&#160;Senior
    Secured Notes due 2016<BR>
    ($785,000,000 aggregate principal amount outstanding)<BR>
    for
    10<FONT style="vertical-align: text-top; font-size: 70%;">5</FONT>/<FONT style="font-size: 70%;">8</FONT>%&#160;Senior
    Secured Notes due 2016, which have been registered<BR>
    under the Securities Act of 1933</FONT></B>
</DIV>

<DIV style="margin-top: 2pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">The
    Exchange Offer Will Expire at 5:00&#160;p.m., New York City
    Time, on February&#160;17, 2010, Unless Extended</FONT></B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 17%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=480 length=84 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Exchange Offer:
</DIV>

<DIV style="margin-top: 2pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    We will exchange all outstanding notes that are validly tendered
    and not validly withdrawn for an equal principal amount of
    exchange notes that are freely tradeable.
</TD>
</TR>


<TR style="line-height: 2pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    You may withdraw tenders of outstanding notes at any time prior
    to the expiration date of the exchange offer.
</TD>
</TR>


<TR style="line-height: 2pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    The exchange offer expires at 5:00&#160;p.m., New York City
    time, on February&#160;17, 2010, unless extended. We do not
    currently intend to extend the expiration date.
</TD>
</TR>


<TR style="line-height: 2pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    The exchange of outstanding notes for exchange notes in the
    exchange offer will not be a taxable event for U.S.&#160;federal
    income tax purposes.
</TD>
</TR>


<TR style="line-height: 2pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    We will not receive any proceeds from the exchange offer.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 2pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Exchange Notes:
</DIV>

<DIV style="margin-top: 2pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    The exchange notes are being offered in order to satisfy some of
    our obligations under the registration rights agreement entered
    into in connection with the placement of the outstanding notes.
</TD>
</TR>


<TR style="line-height: 2pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    The terms of the exchange notes to be issued in the exchange
    offer are substantially identical to the outstanding notes,
    except that the exchange notes will be freely tradeable.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 2pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Exchange Guarantees:
</DIV>

<DIV style="margin-top: 2pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Hovnanian Enterprises, Inc., the parent company of the issuer of
    the exchange notes, K. Hovnanian Enterprises, Inc., and each of
    its wholly-owned subsidiaries, other than the issuer and certain
    of Hovnanian Enterprises, Inc.&#146;s financial service
    subsidiaries, joint ventures and subsidiaries holding interests
    in joint ventures, will fully and unconditionally guarantee our
    obligations under the exchange notes.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 2pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Resales of Exchange Notes:
</DIV>

<DIV style="margin-top: 2pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    The exchange notes may be sold in the over-the-counter market,
    in negotiated transactions or through a combination of such
    methods. We do not plan to list the exchange notes on a national
    market.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 2pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 5%; font-size: 12pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>You should consider carefully the &#147;Risk Factors&#148;
    beginning on page&#160;14 of this prospectus before
    participating in the exchange offer.</B>
</DIV>

<DIV style="margin-top: 2pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Each broker-dealer that receives exchange notes for its own
    account in the exchange offer must acknowledge that it will
    deliver a prospectus in connection with any resale of those
    exchange notes. The letter of transmittal states that, by so
    acknowledging and delivering a prospectus, a broker-dealer will
    not be deemed to admit that it is an &#147;underwriter&#148;
    within the meaning of the Securities Act of 1933.
</DIV>

<DIV style="margin-top: 2pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This prospectus, as it may be amended or supplemented from time
    to time, may be used by a broker-dealer in connection with
    resales of exchange notes received in exchange for outstanding
    notes where the outstanding notes were acquired by the
    broker-dealer as a result of market-making activities or other
    trading activities.
</DIV>

<DIV style="margin-top: 2pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have agreed that, for a period of up to 180&#160;days after
    the consummation of this exchange offer, we will use our best
    efforts to make this prospectus available to any broker-dealer
    for use in connection with the resale of exchange notes. See
    &#147;Plan of Distribution.&#148;
</DIV>

<DIV style="margin-top: 2pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Neither the Securities and Exchange Commission nor any state
    securities commission has approved or disapproved of the
    exchange notes to be distributed in the exchange offer or passed
    upon the accuracy or adequacy of this prospectus. Any
    representation to the contrary is a criminal offense.</B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <FONT style="font-family: 'Times New Roman', Times">This
    prospectus is dated January&#160;11, 2010.
    </FONT>
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 89%; margin-left: 5%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->
</DIV><!-- END PAGE WIDTH -->
<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">TABLE OF
    CONTENTS</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>
<DIV align="left">
<!-- TOC -->
</DIV>

<DIV align="left">
<A name="tocpage"></A>
</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="95%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadleft -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadright -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Page</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#201'>Prospectus Summary</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#202'>Risk Factors</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    14
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#203'>Ratio of Earnings to Fixed Charges</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    30
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#204'>Use of Proceeds</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    31
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#205'>Capitalization</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    32
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#206'>Selected Historical Consolidated Financial
    Data</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    33
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#207'>The Exchange Offer</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#208'>Description of Notes</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    45
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#209'>Exchange Offer; Registration Rights</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    84
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#210'>Book-Entry, Delivery and Form</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    86
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#211'>Certain United States Federal Tax Consequences</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    89
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#212'>Plan of Distribution</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    94
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#213'>Legal Matters</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    95
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#214'>Experts</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    95
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#215'>Available Information</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    95
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#216'>Incorporation of Certain Documents by
    Reference</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    95
</TD>
<TD>&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 18%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=456 length=84 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>The information contained in this prospectus speaks only as
    of the date of this prospectus unless the information
    specifically indicates that another date applies. No dealer,
    salesperson or other person has been authorized to give any
    information or to make any representations other than those
    contained in this prospectus in connection with the offer
    contained herein and, if given or made, such information or
    representations must not be relied upon as having been
    authorized by us. Neither the delivery of this prospectus nor
    any sale made hereunder shall under any circumstances create an
    implication that there has been no change in our affairs or that
    of our subsidiaries since the date hereof.</B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 18%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=456 length=84 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Except in the section under the caption &#147;Description of
    Notes&#148; and unless the context otherwise requires or
    indicates, all references in this prospectus to:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    &#147;Issuer&#148; or &#147;K. Hovnanian&#148; means K.
    Hovnanian Enterprises, Inc., a California corporation;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    &#147;Hovnanian,&#148; &#147;us,&#148; &#147;we,&#148;
    &#147;our&#148; or &#147;Company&#148; means Hovnanian
    Enterprises, Inc., a Delaware corporation, together with its
    consolidated subsidiaries, including K. Hovnanian;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    &#147;guarantors&#148; are to Hovnanian and its restricted
    subsidiaries that guarantee the outstanding notes and that will
    guarantee the exchange notes offered hereby;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    &#147;Second Lien Notes&#148; means the Issuer&#146;s
    11<FONT style="vertical-align: text-top; font-size: 70%;">1</FONT>/<FONT style="font-size: 70%;">2</FONT>%&#160;Senior
    Secured Notes due 2013;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    &#147;Third Lien Notes&#148; means the Issuer&#146;s
    18.0%&#160;Senior Secured Notes due 2017;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    &#147;Existing Secured Notes&#148; means the Second Lien Notes
    and Third Lien Notes;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    &#147;Senior Unsecured Notes&#148; means our 8%&#160;Senior
    Notes due 2012,
    6<FONT style="vertical-align: text-top; font-size: 70%;">1</FONT>/<FONT style="font-size: 70%;">2</FONT>%&#160;Senior
    Notes due 2014,
    6<FONT style="vertical-align: text-top; font-size: 70%;">3</FONT>/<FONT style="font-size: 70%;">8</FONT>%&#160;Senior
    Notes due 2014,
    6<FONT style="vertical-align: text-top; font-size: 70%;">1</FONT>/<FONT style="font-size: 70%;">4</FONT>%&#160;Senior
    Notes due 2015,
    7<FONT style="vertical-align: text-top; font-size: 70%;">1</FONT>/<FONT style="font-size: 70%;">2</FONT>%&#160;Senior
    Notes due 2016,
    6<FONT style="vertical-align: text-top; font-size: 70%;">1</FONT>/<FONT style="font-size: 70%;">4</FONT>%&#160;Senior
    Notes due 2016 and
    8<FONT style="vertical-align: text-top; font-size: 70%;">5</FONT>/<FONT style="font-size: 70%;">8</FONT>%
    Senior Notes due 2017;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    &#147;outstanding notes&#148; means the $785,000,000 aggregate
    principal amount of
    10<FONT style="vertical-align: text-top; font-size: 70%;">5</FONT>/<FONT style="font-size: 70%;">8</FONT>%&#160;Senior
    Secured Notes due 2016, which were issued on October&#160;20,
    2009;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    &#147;exchange notes&#148; means the $785,000,000 aggregate
    principal amount of
    10<FONT style="vertical-align: text-top; font-size: 70%;">5</FONT>/<FONT style="font-size: 70%;">8</FONT>%&#160;Senior
    Secured Notes due 2016, which we are offering in this exchange
    offer;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    &#147;notes&#148; means both the outstanding notes and the
    exchange notes offered hereby.
</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->

<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 18%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=456 length=84 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This prospectus incorporates important business and financial
    information about the Company that is not included in or
    delivered with the prospectus. Hovnanian will provide without
    charge to each person, including any beneficial owner, to whom a
    copy of this prospectus is delivered, upon the written or oral
    request of such person, a copy of any or all of the information
    incorporated by reference in this prospectus, other than
    exhibits to such information (unless such exhibits are
    specifically incorporated by reference into the information that
    this prospectus incorporates). Requests for such copies should
    be directed to Paul W. Buchanan, Senior Vice President and Chief
    Accounting Officer, Hovnanian Enterprises, Inc., 110&#160;West
    Front Street, P.O.&#160;Box&#160;500, Red Bank, New Jersey
    07701, (telephone:
    <FONT style="white-space: nowrap">(732)&#160;747-7800).</FONT>
    To obtain timely delivery, security holders must request the
    information no later than five business days before
    February&#160;17, 2010, the expiration date of the exchange
    offer.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 18%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=456 length=84 -->

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">FORWARD-LOOKING
    STATEMENTS</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This prospectus and the documents incorporated by reference
    include &#147;forward-looking statements&#148; within the
    meaning of the Private Securities Litigation Reform Act of 1995.
    Such statements involve known and unknown risks, uncertainties
    and other factors that may cause actual results, performance or
    achievements of the Company to be materially different from any
    future results, performance or achievements expressed or implied
    by the forward-looking statements. Although we believe that our
    plans, intentions and expectations reflected in, or suggested by
    such forward-looking statements are reasonable, we can give no
    assurance that such plans, intentions or expectations will be
    achieved. Such risks, uncertainties and other factors include,
    but are not limited to, (1)&#160;changes in general and local
    economic and industry and business conditions, (2)&#160;adverse
    weather conditions and natural disasters, (3)&#160;changes in
    market conditions and seasonality of the Company&#146;s
    business, (4)&#160;changes in home prices and sales activity in
    the markets where the Company builds homes, (5)&#160;government
    regulation, including regulations concerning development of
    land, the home building, sales and customer financing processes,
    and the environment, (6)&#160;fluctuations in interest rates and
    the availability of mortgage financing, (7)&#160;shortages in,
    and price fluctuations of, raw materials and labor, (8)&#160;the
    availability and cost of suitable land and improved lots,
    (9)&#160;levels of competition, (10)&#160;availability of
    financing to the Company, (11)&#160;utility shortages and
    outages or rate fluctuations, (12)&#160;levels of indebtedness
    and restrictions on the Company&#146;s operations and activities
    imposed by the agreements governing the Company&#146;s
    outstanding indebtedness; (13)&#160;operations through joint
    ventures with third parties; (14)&#160;product liability
    litigation and warranty claims; (15)&#160;successful
    identification and integration of acquisitions;
    (16)&#160;significant influence of the Company&#146;s
    controlling stockholders; (17)&#160;geopolitical risks,
    terrorist acts and other acts of war; and (18)&#160;other
    factors described in detail in our
    <FONT style="white-space: nowrap">Form&#160;10-K</FONT>
    for the year ended October&#160;31, 2009 and in this prospectus
    under &#147;Risk Factors&#148;. All forward-looking statements
    attributable to the Company or persons acting on our behalf are
    expressly qualified in their entirety by the cautionary
    statements and risk factors contained throughout this
    prospectus. Except as otherwise required by applicable
    securities laws, we undertake no obligation to publicly update
    or revise any forward-looking statements, whether as a result of
    new information, future events, changed circumstances or any
    other reason.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    ii
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->

<A name='201'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PROSPECTUS
    SUMMARY</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>The following summary contains information about the Company
    and the exchange offer. It does not contain all of the
    information that may be important to you in making a decision to
    participate in the exchange offer. For a more complete
    understanding of the Company and the exchange offer, we urge you
    to read this prospectus carefully, including the &#147;Risk
    Factors&#148; section and the financial statements and the notes
    to those statements incorporated by reference herein.</I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">The
    Company</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We design, construct, market and sell single-family detached
    homes, attached townhomes and condominiums, mid-rise and
    high-rise condominiums, urban infill and active adult homes in
    planned residential developments and are one of the
    nation&#146;s largest builders of residential homes. Founded in
    1959 by Kevork Hovnanian, Hovnanian Enterprises, Inc. was
    incorporated in New Jersey in 1967 and reincorporated in
    Delaware in 1983. Since the incorporation of our predecessor
    company and including unconsolidated joint ventures, we have
    delivered in excess of 286,000 homes, including 5,659 homes in
    the year ended October&#160;31, 2009. The Company consists of
    two distinct operations: homebuilding and financial services.
    Our homebuilding operations consist of six segments: Northeast,
    Mid-Atlantic, Midwest, Southeast, Southwest and West. Our
    financial services operations provide mortgage loans and title
    services to the customers of our homebuilding operations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are currently, excluding unconsolidated joint ventures,
    offering homes for sale in 179 communities in 39 markets in
    18&#160;states throughout the United States. We market and build
    homes for first-time buyers, first-time and second-time
    <FONT style="white-space: nowrap">move-up</FONT>
    buyers, luxury buyers, active adult buyers and empty nesters. We
    offer a variety of home styles at base prices ranging from
    $36,000 (low income housing) to $1,800,000 with an average sales
    price, including options, of $283,900 nationwide in fiscal 2009.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our operations span all significant aspects of the home-buying
    process&#160;&#151; from design, construction and sale, to
    mortgage origination and title services.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following is a summary of our growth history:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    1959&#160;&#151; Founded by Kevork Hovnanian as a New Jersey
    homebuilder.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    1983&#160;&#151; Completed initial public offering.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    1986&#160;&#151; Entered the North Carolina market through the
    investment in New Fortis Homes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    1992&#160;&#151; Entered the greater Washington,&#160;D.C.
    market.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    1994&#160;&#151; Entered the Coastal Southern California market.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    1998&#160;&#151; Expanded in the greater Washington,&#160;D.C.
    market through the acquisition of P.C. Homes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    1999&#160;&#151; Entered the Dallas, Texas market through our
    acquisition of Goodman Homes. Further diversified and
    strengthened our position as New Jersey&#146;s largest
    homebuilder through the acquisition of Matzel&#160;&#038;
    Mumford.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    2001&#160;&#151; Continued expansion in the greater
    Washington,&#160;D.C. and North Carolina markets through the
    acquisition of Washington Homes. This acquisition further
    strengthened our operations in each of these markets.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    2002&#160;&#151; Entered the Central Valley market in Northern
    California and Inland Empire region of Southern California
    through the acquisition of Forecast Homes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    2003&#160;&#151; Expanded operations in Texas and entered the
    Houston market through the acquisition of Parkside Homes and
    Brighton Homes. Entered the greater Ohio market through our
    acquisition of Summit Homes and entered the greater metro
    Phoenix market through our acquisition of Great Western Homes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    2004&#160;&#151; Entered the greater Tampa, Florida market
    through the acquisition of Windward Homes, and started
    operations in the Minneapolis/St. Paul, Minnesota market.
</DIV>
<!-- XBRL Pagebreak Begin -->
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    1
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    2005&#160;&#151; Entered the Orlando, Florida market through our
    acquisition of Cambridge Homes and entered the greater Chicago,
    Illinois market and expanded our position in Florida and
    Minnesota through the acquisition of the operations of
    Town&#160;&#038; Country Homes, which occurred concurrently with
    our entering into a joint venture with affiliates of Blackstone
    Real Estate Advisors to own and develop Town&#160;&#038;
    Country&#146;s existing residential communities. We also entered
    the Fort&#160;Myers market through the acquisition of First Home
    Builders of Florida, and the Cleveland, Ohio market through the
    acquisition of Oster Homes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    2006&#160;&#151; Entered the coastal markets of South Carolina
    and Georgia through the acquisition of Craftbuilt Homes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Hovnanian markets and builds homes that are constructed in 21 of
    the nation&#146;s top 50 housing markets. We segregate our
    homebuilding operations geographically into the following six
    segments:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Northeast:</I> New Jersey, New York, Pennsylvania
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Mid-Atlantic:</I> Delaware, Maryland, Virginia, West
    Virginia, Washington,&#160;D.C.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Midwest:</I> Illinois, Kentucky, Minnesota, Ohio
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Southeast:</I> Florida, Georgia, North Carolina, South
    Carolina
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Southwest:</I> Arizona, Texas
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>West:</I> California
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We employed approximately 1,750&#160;full-time employees (which
    we refer to as associates) as of October&#160;31, 2009.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our corporate offices are located at 110&#160;West Front Street,
    P. O. Box 500, Red Bank, New Jersey 07701, our telephone number
    is
    <FONT style="white-space: nowrap">(732)&#160;747-7800,</FONT>
    and our Internet website address is <I>www.khov.com</I>.
    Information on our website is not a part of, or incorporated by
    reference in, this prospectus.
</DIV>
<!-- XBRL Pagebreak Begin -->
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    2
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
<!-- XBRL Pagebreak End -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Summary
    of the Terms of the Exchange Offer</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>On October&#160;20, 2009, K. Hovnanian completed a private
    offering of the outstanding notes.</I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="36%"></TD>
    <TD width="1%"></TD>
    <TD width="63%"></TD>
</TR>

<TR>
    <TD valign="top">
    General</TD>
    <TD></TD>
    <TD valign="bottom">
    In connection with the private offering of the outstanding
    notes, we entered into a registration rights agreement in which
    the Issuer and the guarantors agreed, among other things, to
    deliver this prospectus to you and to complete an exchange offer
    for the outstanding notes within the time period specified in
    the registration rights agreement. See &#147;Exchange Offer;
    Registration Rights.&#148;</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    You are entitled to exchange in the exchange offer your
    outstanding notes for exchange notes, which are identical in all
    material respects to the outstanding notes except:</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;the exchange notes have been registered under the
    Securities Act of 1933, as amended, which we refer to as the
    &#147;Securities Act&#148;;</DIV>
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;the exchange notes are not entitled to certain
    registration rights which are applicable to the outstanding
    notes under the registration rights agreement; and</DIV>
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;certain additional interest rate provisions are no
    longer applicable.</DIV>
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Outstanding Notes</TD>
    <TD></TD>
    <TD valign="bottom">
    $785,000,000 aggregate principal amount of
    10<FONT style="vertical-align: text-top; font-size: 70%;">5</FONT>/<FONT style="font-size: 70%;">8</FONT>%&#160;Senior
    Secured Notes due 2016, which were issued on October&#160;20,
    2009.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Exchange Notes</TD>
    <TD></TD>
    <TD valign="bottom">
    $785,000,000 aggregate principal amount of
    10<FONT style="vertical-align: text-top; font-size: 70%;">5</FONT>/<FONT style="font-size: 70%;">8</FONT>%&#160;Senior
    Secured Notes due 2016, which we are offering in this exchange
    offer.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    The Exchange Offer</TD>
    <TD></TD>
    <TD valign="bottom">
    We are offering to exchange up to $785,000,000 aggregate
    principal amount of our exchange notes, which have been
    registered under the Securities Act, for a like aggregate
    principal amount of the outstanding notes. You may only exchange
    outstanding notes in denominations of $2,000 and higher integral
    multiples of $1,000.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    Subject to the satisfaction or waiver of specified conditions,
    we will exchange the exchange notes for all outstanding notes
    that are validly tendered and not validly withdrawn prior to the
    expiration of the exchange offer. We will cause the exchange to
    be consummated promptly after the expiration of the exchange
    offer.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    Upon completion of the exchange offer, there may be no market
    for the outstanding notes and you may have difficulty selling
    them. See &#147;The Exchange Offer.&#148;</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Resales</TD>
    <TD></TD>
    <TD valign="bottom">
    Based on interpretations by the staff of the Securities and
    Exchange Commission, or the &#147;SEC,&#148; set forth in
    no-action letters issued to third parties referred to below, we
    believe that you may resell or otherwise transfer exchange notes
    issued in the exchange offer without complying with the
    registration and prospectus delivery requirements of the
    Securities Act, if:</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    (1)&#160;you are not an &#147;affiliate&#148; of K. Hovnanian or
    any guarantor of the exchange notes within the meaning of
    Rule&#160;405 under the Securities Act;</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    3
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="36%"></TD>
    <TD width="1%"></TD>
    <TD width="63%"></TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    (2)&#160;you are not engaged in, do not intend to engage in, and
    have no arrangement or understanding with any person to
    participate in, a distribution of the exchange notes; and</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    (3)&#160;you are acquiring the exchange notes in the ordinary
    course of your business.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    If you are an affiliate of K. Hovnanian or the guarantors of the
    exchange notes, or are engaging in, or intend to engage in, or
    have any arrangement or understanding with any person to
    participate in, a distribution of the exchange notes, or are not
    acquiring the exchange notes in the ordinary course of your
    business:</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    (1)&#160;you cannot rely on the position of the staff of the SEC
    enunciated in <I>Morgan Stanley&#160;&#038; Co., Inc.
    </I>(available June&#160;5, 1991), <I>Exxon Capital Holdings
    Corporation</I> (available May&#160;13, 1988), as interpreted in
    the SEC&#146;s letter to <I>Shearman&#160;&#038; Sterling
    </I>(available July&#160;2, 1993), or similar no-action letters;
    and</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    (2)&#160;in the absence of an exception from the position of the
    SEC stated in (1)&#160;above, you must comply with the
    registration and prospectus delivery requirements of the
    Securities Act in connection with any resale or other transfer
    of the exchange notes.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    If you are a broker-dealer and receive exchange notes for your
    own account in exchange for outstanding notes that you acquired
    as a result of market-making or other trading activities, you
    must acknowledge that you will deliver a prospectus, as required
    by law, in connection with any resale or other transfer of the
    exchange notes that you receive in the exchange offer. See
    &#147;The Exchange Offer&#160;&#151;  Resale of Exchange
    Notes&#148; and &#147;Plan of Distribution.&#148;</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Expiration Date</TD>
    <TD></TD>
    <TD valign="bottom">
    The exchange offer will expire at 5:00&#160;p.m., New York City
    time, on February&#160;17, 2010 unless extended by us. We do not
    currently intend to extend the expiration date. See &#147;The
    Exchange Offer&#160;&#151; Expiration Date; Extensions,
    Amendment.&#148;</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Withdrawal</TD>
    <TD></TD>
    <TD valign="bottom">
    You may withdraw the tender of your outstanding notes at any
    time prior to the expiration date. We will return to you any of
    your outstanding notes that are not accepted for any reason for
    exchange, without expense to you, promptly after the expiration
    or termination of the exchange offer. See &#147;The Exchange
    Offer&#160;&#151; Withdrawal Rights.&#148;</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Interest on the Exchange Notes and the Outstanding Notes</TD>
    <TD></TD>
    <TD valign="bottom">
    Each exchange note will bear interest at the rate of
    10<FONT style="vertical-align: text-top; font-size: 70%;">5</FONT>/<FONT style="font-size: 70%;">8</FONT>%
    per annum from the most recent date to which interest has been
    paid on the outstanding notes or, if no interest has been paid
    on the outstanding notes, from October&#160;20, 2009. The
    interest will be payable semi-annually on each April 15 and
    October 15, beginning April&#160;15, 2010. No interest will be
    paid on outstanding notes following their acceptance for
    exchange.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Conditions to the Exchange Offer</TD>
    <TD></TD>
    <TD valign="bottom">
    The exchange offer is subject to customary conditions, which we
    may assert or waive. See &#147;The Exchange Offer&#160;&#151;
    Conditions to the Exchange Offer.&#148;</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    4
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="36%"></TD>
    <TD width="1%"></TD>
    <TD width="63%"></TD>
</TR>

<TR>
    <TD valign="top">
    Procedures for Tendering Outstanding Notes</TD>
    <TD></TD>
    <TD valign="bottom">
    If you wish to participate in the exchange offer, you must
    complete, sign and date the accompanying letter of transmittal,
    or a facsimile of the letter of transmittal, according to the
    instructions contained in this prospectus and the letter of
    transmittal. You must then mail or otherwise deliver the letter
    of transmittal, or a facsimile of the letter of transmittal,
    together with the outstanding notes and any other required
    documents, to the exchange agent at the address set forth on the
    cover page of the letter of transmittal. If you hold outstanding
    notes through The Depository Trust&#160;Company, or
    &#147;DTC,&#148; and wish to participate in the exchange offer,
    you must comply with the Automated Tender Offer Program
    procedures of DTC, by which you will agree to be bound by the
    letter of transmittal. By signing, or agreeing to be bound by,
    the letter of transmittal, you will represent to us that, among
    other things:</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    (1)&#160;you are not an &#147;affiliate&#148; of K. Hovnanian or
    the guarantors of the notes within the meaning of Rule&#160;405
    under the Securities Act;</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    (2)&#160;you are not engaged in, do not intend to engage in, and
    have no arrangement or understanding with any person to
    participate in, a distribution of the exchange notes;</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    (3)&#160;you are acquiring the exchange notes in the ordinary
    course of your business; and</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    (4)&#160;if you are a broker-dealer and receive exchange notes
    for your own account in exchange for outstanding notes that you
    acquired as a result of market-making or other trading
    activities, that you will deliver a prospectus, as required by
    law, in connection with any resale or other transfer of such
    exchange notes.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    If you are an affiliate of K. Hovnanian or the guarantors of the
    notes or are engaging in, or intend to engage in, or have any
    arrangement or understanding with any person to participate in,
    a distribution of the exchange notes, or are not acquiring the
    exchange notes in the ordinary course of your business, you
    cannot rely on the applicable positions and interpretations of
    the staff of the SEC and you must comply with the registration
    and prospectus delivery requirements of the Securities Act in
    connection with any resale or other transfer of the exchange
    notes. See &#147;The Exchange Offer&#160;&#151; Procedures for
    Tendering.&#148;</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Special Procedures for Beneficial Owners</TD>
    <TD></TD>
    <TD valign="bottom">
    If you are a beneficial owner of outstanding notes that are held
    in the name of a broker, dealer, commercial bank, trust company
    or other nominee and you wish to tender those outstanding notes
    in the exchange offer, you should contact such person promptly
    and instruct such person to tender those outstanding notes on
    your behalf.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Guaranteed Delivery Procedures</TD>
    <TD></TD>
    <TD valign="bottom">
    If you wish to tender your outstanding notes and your
    outstanding notes are not immediately available or you cannot
    deliver your outstanding notes, the letter of transmittal and
    any other documents required by the letter of transmittal or you
    cannot comply with the DTC procedures for book-entry transfer
    prior to the expiration date, you must tender your outstanding
    notes according to the guaranteed  </TD>
</TR>
<!-- XBRL Paragraph Pagebreak -->

</TABLE>
<!-- XBRL Pagebreak Begin -->
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    5
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
<!-- XBRL Pagebreak End -->

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="36%"></TD>
    <TD width="1%"></TD>
    <TD width="63%"></TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    delivery procedures set forth in this prospectus under &#147;The
    Exchange Offer&#160;&#151; Guaranteed Delivery Procedures.&#148;</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Effect on Holders of Outstanding Notes</TD>
    <TD></TD>
    <TD valign="bottom">
    In connection with the sale of the outstanding notes, we entered
    into a registration rights agreement, which grants the holders
    of outstanding notes registration rights. By making this
    exchange offer, we will have fulfilled most of our obligations
    under the registration rights agreement. Accordingly, we will
    not be obligated to pay additional interest as described in the
    registration rights agreement. If you do not tender your
    outstanding notes in the exchange offer, you will continue to be
    entitled to all the rights and limitations applicable to the
    outstanding notes as set forth in the indenture, except we will
    not have any further obligation to you to provide for the
    registration of the outstanding notes under the registration
    rights agreement and we will not be obligated to pay additional
    interest as described in the registration rights agreement,
    except in certain limited circumstances. See &#147;Exchange
    Offer; Registration Rights.&#148; </TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    To the extent that outstanding notes are tendered and accepted
    in the exchange offer, the trading market for outstanding notes
    could be adversely affected.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Consequences of Failure to Exchange</TD>
    <TD></TD>
    <TD valign="bottom">
    All untendered outstanding notes will continue to be subject to
    the restrictions on transfer set forth in the outstanding notes
    and in the indenture. In general, the outstanding notes may not
    be offered or sold, unless registered under the Securities Act,
    except pursuant to an exemption from, or in a transaction not
    subject to, the Securities Act and applicable state securities
    laws. We do not currently anticipate that we will register the
    outstanding notes under the Securities Act. See &#147;The
    Exchange Offer&#160;&#151; Consequences of Failure to
    Exchange.&#148;</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Certain Income Tax Considerations</TD>
    <TD></TD>
    <TD valign="bottom">
    The exchange of outstanding notes for exchange notes in the
    exchange offer will not be a taxable event for U.S. federal
    income tax purposes. See &#147;Certain United States Federal Tax
    Consequences.&#148;</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Use of Proceeds</TD>
    <TD></TD>
    <TD valign="bottom">
    We will not receive any cash proceeds from the issuance of
    exchange notes in the exchange offer.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Exchange Agent</TD>
    <TD></TD>
    <TD valign="bottom">
    Wilmington Trust&#160;Company, whose address and telephone
    number are set forth in the section captioned &#147;The Exchange
    Offer&#160;&#151; Exchange Agent&#148; of this prospectus, is
    the exchange agent for the exchange offer.</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    6
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
<!-- XBRL Pagebreak End -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Summary
    of the Terms of the Exchange Notes</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>The terms of the exchange notes are identical in all material
    respects to the terms of the outstanding notes, except that the
    exchange notes will not contain terms with respect to transfer
    restrictions or additional interest upon a failure to fulfill
    certain of our obligations under the registration rights
    agreement. The exchange notes will evidence the same debt as the
    outstanding notes. The exchange notes will be governed by the
    same indenture under which the outstanding notes were issued and
    the exchange notes and the outstanding notes will constitute a
    single class and series of notes for all purposes under the
    indenture.</I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="36%"></TD>
    <TD width="1%"></TD>
    <TD width="63%"></TD>
</TR>

<TR>
    <TD valign="top">
    Issuer</TD>
    <TD></TD>
    <TD valign="bottom">
    K. Hovnanian Enterprises, Inc.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Notes Offered</TD>
    <TD></TD>
    <TD valign="bottom">
    K. Hovnanian is offering $785,000,000 aggregate principal amount
    of
    10<FONT style="vertical-align: text-top; font-size: 70%;">5</FONT>/<FONT style="font-size: 70%;">8</FONT>%&#160;Senior
    Secured Notes due 2016.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Maturity Date</TD>
    <TD></TD>
    <TD valign="bottom">
    October&#160;15, 2016.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Interest Payment Dates</TD>
    <TD></TD>
    <TD valign="bottom">
    Each April&#160;15 and October&#160;15, beginning April&#160;15,
    2010.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Optional Redemption</TD>
    <TD></TD>
    <TD valign="bottom">
    K. Hovnanian may redeem some or all of the notes at any time on
    or after October&#160;15, 2012, at the redemption prices
    specified under the section &#147;Description of
    Notes&#160;&#151; Redemption&#148; plus accrued and unpaid
    interest, if any. In addition, K. Hovnanian may redeem up to 35%
    of the aggregate principal amount of the notes before
    October&#160;15, 2012 with the net cash proceeds from certain
    equity offerings at a price equal to 110.625% of the principal
    amount thereof plus accrued and unpaid interest, if any.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Change of Control</TD>
    <TD></TD>
    <TD valign="bottom">
    Upon a Change of Control as described in the section
    &#147;Description of Notes&#160;&#151; Certain
    covenants&#160;&#151; Repurchase of Notes upon Change of
    Control,&#148; you may require us to repurchase all or part of
    your notes at 101% of the principal amount, plus accrued and
    unpaid interest, if any, to the date of repurchase. We can give
    no assurance that, upon such an event, we will have sufficient
    funds to repurchase any of the notes.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Guarantees</TD>
    <TD></TD>
    <TD valign="bottom">
    The guarantors of the notes are Hovnanian Enterprises, Inc., the
    parent corporation of the Issuer, and substantially all of the
    parent&#146;s existing and future restricted subsidiaries. If
    the Issuer cannot make payments on the notes when they are due,
    the guarantors must make the payments instead. As of the date of
    this prospectus, our home mortgage subsidiaries, our joint
    ventures and subsidiaries holding interests in our joint
    ventures and certain of our title insurance subsidiaries are not
    guarantors or restricted subsidiaries.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Ranking</TD>
    <TD></TD>
    <TD valign="bottom">
    The exchange notes and the guarantees thereof will be the
    Issuer&#146;s and the guarantors&#146; general senior secured
    obligations and will:</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;rank senior in right of payment to the Issuer&#146;s
    and the guarantors&#146; existing and future debt and other
    obligations that expressly provide for their subordination to
    the notes and the guarantees;</DIV>
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;be effectively senior to all of the Issuer&#146;s
    and the guarantors&#146; debt that is unsecured or secured by
    junior-priority liens (including the Existing Secured Notes), to
    the extent of the value of the collateral;</DIV>
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;rank equally in right of payment to all of the
    Issuer&#146;s and the guarantors&#146; existing and future
    unsubordinated debt, including our Existing Secured Notes and
    Senior Unsecured Notes;</DIV>
</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    7
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="36%"></TD>
    <TD width="1%"></TD>
    <TD width="63%"></TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;be effectively subordinated to any of the
    Issuer&#146;s or any of the guarantors&#146; debt that is
    secured by permitted liens on assets that are not part of the
    collateral securing the notes, to the extent of the value of
    such assets (see &#147;&#151; Collateral&#148; below); and</DIV>
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;be structurally subordinated to all of the existing
    and future liabilities, including trade payables, of our
    subsidiaries that do not guarantee the notes.</DIV>
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    Furthermore, the indenture governing the notes requires (except
    with respect to certain assets excluded from the collateral
    securing the notes, including $25.0&#160;million of cash and
    cash equivalents collateralizing letters of credit or similar
    instruments) that the holders of the notes have a security
    interest in the cash and cash equivalents that collateralize
    certain letter of credit agreements, facilities or similar
    instruments on a basis that is junior to the lien granted to the
    applicable issuing bank. Accordingly, upon an enforcement event
    or insolvency proceeding, proceeds from such cash and cash
    equivalents will be applied first to satisfy such letter of
    credit obligations and then to satisfy the obligations on the
    notes.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    At October&#160;31, 2009, the Issuer and the guarantors had:</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;approximately $797.2&#160;million of secured
    indebtedness outstanding ($783.1&#160;million, net of discount),
    including the outstanding notes;</DIV>
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;approximately $824.3&#160;million of Senior
    Unsecured Notes ($822.3&#160;million, net of discount); and</DIV>
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;approximately $146.2&#160;million of senior
    subordinated notes.</DIV>
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    In addition, as of October&#160;31, 2009, we had
    $130.3&#160;million in aggregate face amount of letters of
    credit issued under cash collateralized letter of credit
    agreements or facilities.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    Under the terms of our indentures governing our senior secured,
    senior and senior subordinated notes we are currently limited in
    our ability to incur additional indebtedness other than certain
    permitted indebtedness, refinancing indebtedness and
    non-recourse indebtedness as described under &#147;Description
    of Notes&#160;&#151; Certain covenants&#160;&#151; Limitations
    on indebtedness.&#148;</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    In addition, as of October&#160;31, 2009, our non-guarantor
    subsidiaries had approximately $72.5&#160;million of
    liabilities, including trade payables, but excluding
    intercompany obligations.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    See &#147;Description of Notes&#160;&#151; Ranking.&#148; </TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Collateral</TD>
    <TD></TD>
    <TD valign="bottom">
    The exchange notes and the guarantees thereof will be secured by
    a first-priority lien on substantially all the assets owned by
    the Issuer and the guarantors on October&#160;20, 2009 (the
    issue date of the outstanding notes) or thereafter acquired,
    subject to permitted liens and certain exceptions.</TD>
</TR>
    <FONT style="font-size: 10pt">
    </FONT>

<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    The collateral will not include:</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;the pledge of stock of guarantors or of
    K.&#160;Hovnanian JV&#160;Holdings, L.L.C. to the extent such
    pledge would result in separate financial statements of such
    guarantor being required in SEC filings;</DIV>
</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    8
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="36%"></TD>
    <TD width="1%"></TD>
    <TD width="63%"></TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;personal property where the cost of obtaining a
    security interest or perfection thereof exceeds its benefits;</DIV>
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;real property subject to a lien securing
    indebtedness incurred for the purpose of financing the
    acquisition thereof;</DIV>
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;real property located outside of the United States;</DIV>
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;unentitled land;</DIV>
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;real property which is leased or held for the
    purpose of leasing to unaffiliated third parties;</DIV>
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;equity interests in subsidiaries other than
    restricted subsidiaries, except for K.&#160;Hovnanian
    JV&#160;Holdings, L.L.C., our wholly-owned holding company
    subsidiary that owns our equity interests in substantially all
    of our joint ventures, and subject to future grants under
    certain circumstances as required under the indenture;</DIV>
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;any real property in a community under development
    with a dollar amount of investment as of the most recent
    month-end (determined in accordance with GAAP) of less than
    $2.0&#160;million or with less than 10 lots remaining;</DIV>
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;up to $50.0&#160;million of assets received in
    certain asset dispositions or asset swaps or exchanges made in
    accordance with the indenture;</DIV>
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;assets with respect to which any applicable law or
    contract prohibits the creation or perfection of security
    interests therein; and</DIV>
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;up to $25.0&#160;million of cash and cash
    equivalents securing letters of credit and similar instruments,
    provided that we will use commercially reasonable efforts to
    obtain the necessary consent of the banks issuing the letters of
    credit in order to have such cash and cash equivalents securing
    letters of credit and similar instruments secure the exchange
    notes. Upon release of such cash or cash equivalents from the
    liens securing such letters of credit, such cash and cash
    equivalents will become subject to a lien in favor of the
    holders of the exchange notes, pending usage as permitted by the
    indenture.</DIV>
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    Furthermore, the Issuer and the guarantors will not be required
    to provide control agreements with respect to certain deposit,
    checking or securities accounts with average balances below a
    certain dollar amount.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    At October&#160;31, 2009, the aggregate book value of the real
    property that would constitute part of the collateral securing
    the exchange notes was approximately $780.7&#160;million, which
    does not include the impact of inventory investments, home
    deliveries or impairments thereafter and which may differ from
    the appraised value. In addition, cash that would constitute a
    part of the collateral securing the exchange notes was
    $426.0&#160;million as of October&#160;31, 2009, which includes
    $135.2&#160;million of restricted cash collateralizing certain
    letters of credit. Subsequent to such date, cash uses include
    general business operations and real estate and other
    investments. The incremental value of the stock of guarantors
    that would constitute a part of the collateral securing the
    exchange notes is not meaningful because the underlying assets
    of such guarantors have been separately pledged as collateral.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    For more details, see &#147;Description of Notes&#160;&#151;
    Security.&#148;</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    9
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="36%"></TD>
    <TD width="1%"></TD>
    <TD width="63%"></TD>
</TR>

<TR>
    <TD valign="top">
    Sharing of Liens</TD>
    <TD></TD>
    <TD valign="bottom">
    We have also granted liens on the collateral to secure our
    outstanding Second Lien Notes and Third Lien Notes, which liens
    are subordinated to the liens securing the exchange notes
    offered hereby pursuant to intercreditor agreements. See
    &#147;Description of Notes&#160;&#151; Security&#160;&#151;
    Intercreditor Agreements.&#148;</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    In certain circumstances, we may secure specified indebtedness
    and other obligations, including letters of credit and similar
    instruments, permitted to be incurred under the indenture
    governing the notes by granting liens upon any or all of the
    collateral securing the exchange notes. Such indebtedness and
    other obligations may be secured, subject to certain limits, on
    an equal or a junior basis with respect to the exchange notes.</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Certain Covenants</TD>
    <TD></TD>
    <TD valign="bottom">
    The exchange notes will be issued under the same indenture as
    the outstanding notes were issued. The indenture contains
    covenants that, among other things, restrict the Issuer&#146;s
    ability and the ability of the guarantors to:</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;borrow money;</DIV>
</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;pay dividends and distributions on our common and
    preferred stock;</DIV>
</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;repurchase senior and senior subordinated notes and
    common and preferred stock;</DIV>
</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;make investments in subsidiaries and joint ventures
    that are not restricted;</DIV>
</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;sell certain assets;</DIV>
</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;incur certain liens;</DIV>
</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;merge with or into other companies; and</DIV>
</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;enter into certain transactions with our affiliates.</DIV>
</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    These covenants will be subject to a number of important
    exceptions and qualifications. For more details, see
    &#147;Description of Notes&#160;&#151; Certain covenants.&#148;</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Original Issue Discount</TD>
    <TD></TD>
    <TD valign="bottom">
    The outstanding notes were issued with original issue discount
    (&#147;OID&#148;) for U.S. federal income tax purposes. Thus, in
    addition to the stated interest on the notes, a U.S. holder will
    be required to include such OID in gross income on a constant
    yield to maturity basis in advance of the receipt of cash
    payment thereof and regardless of such holder&#146;s method of
    accounting for U.S. federal income tax purposes. For more
    details, see &#147;Certain United States Federal Tax
    Consequences.&#148;</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Absence of a Public Market</TD>
    <TD></TD>
    <TD valign="bottom">
    The exchange notes will generally be freely transferable
    (subject to certain restrictions discussed in &#147;Exchange
    Offer; Registration Rights&#148;) but will be a new issue of
    securities for which there will not initially be a market.
    Accordingly, there can be no assurance as to the development or
    liquidity of any market for the exchange notes. We do not intend
    to apply for a listing of the exchange notes on any securities
    exchange or automated dealer quotation system.</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Use of Proceeds</TD>
    <TD></TD>
    <TD valign="bottom">
    We will not receive any cash proceeds from the issuance of the
    exchange notes in the exchange offer. For a description of the
    use of proceeds from the private offering of the outstanding
    notes, see &#147;Use of Proceeds.&#148;</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    10
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
<!-- XBRL Pagebreak End -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Summary
    Financial Information</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>The following table presents summary historical consolidated
    financial and other data of Hovnanian Enterprises, Inc. and
    subsidiaries as of and for the years ended October&#160;31,
    2009, 2008 and 2007. The consolidated financial and other data
    for the years ended October&#160;31, 2009, 2008 and 2007 have
    been derived from Hovnanian Enterprises, Inc.&#146;s audited
    consolidated financial statements. You should read this data in
    conjunction with &#147;Management&#146;s Discussion and Analysis
    of Financial Condition and Results of Operations&#148; included
    in Hovnanian Enterprises, Inc. Annual Report on Form 10-K for
    the fiscal year ended October&#160;31, 2009, which is
    incorporated by reference herein, and with the consolidated
    financial statements, related notes and other financial
    information included and incorporated by reference herein.</I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="65%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>October&#160;31, <BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>October&#160;31, <BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>October&#160;31, <BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom">
    <B>(Dollars in thousands, except per share data)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Income Statement and Other Data</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Revenues
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,596,290
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,308,111
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    4,798,921
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Inventory impairment loss and land option write-offs
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (659,475
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (710,120)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (457,773)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Gain on extinguishment of debt
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    410,185
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    (Loss) income from unconsolidated joint ventures
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (46,041
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (36,600)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (28,223)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Pre-tax (loss) income excluding land related charges, intangible
    impairments and gain on extinguishment of debt(l)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (379,118
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (391,323)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (20,887)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    (Loss) income before income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (672,019
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,168,048)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (646,966)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    State and Federal income tax (benefit) provision
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    44,693
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (43,458)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (19,847)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net (loss) income
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (716,712
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,124,590)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (627,119)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Less: preferred stock dividends
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10,674
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net (loss) income attributable to common stockholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (716,712
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (1,124,590)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (637,793)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Per share data:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Basic and Assuming dilution:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    (Loss) income per common share
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (9.16
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (16.04)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (10.11)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Weighted average number of common shares outstanding
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    78,238
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    70,131
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    63,079
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=60 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    Pre-tax (loss) income excluding land related charges, intangible
    impairments and gain on extinguishment of debt is not a
    financial measure calculated in accordance with U.S. generally
    accepted accounting principles (&#147;GAAP&#148;). The most
    directly comparable GAAP financial measure is (loss) income
    before income taxes. The reconciliation of pre-tax (loss) income
    excluding land related charges, intangible impairments and gain
    on extinguishment of debt to (loss) income before income taxes
    is presented below. Pre-tax (loss) income excluding land related
    charges, intangible impairments and gain on extinguishment of
    debt should be considered in addition to, but not as a
    substitute for, (loss) income before income taxes, net (loss)
    income and other measures of financial performance prepared in
    accordance with GAAP that are presented on the financial
    statements and notes incorporated by reference herein.
    Additionally, our calculation of pre-tax (loss) income excluding
    land related charges, intangible impairments and gain on
    extinguishment of debt may be different from the calculation
    used by other companies, and, therefore, comparability may be
    affected. Management believes pre-tax (loss) income excluding
    land related charges, intangible impairments and gain on
    extinguishment of debt to be relevant and useful information
    because it provides a better metric for our operating
    performance.</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    11
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    Reconciliation of pre-tax (loss) income excluding land related
    charges, intangible impairments and gain on extinguishment of
    debt to (loss) income before income taxes:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="61%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>October&#160;31, <BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>October&#160;31,<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>October&#160;31,<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom">
    <B>(Dollars in thousands)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    (Loss) income before income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (672,019
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (1,168,048)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (646,966)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Inventory impairment loss and land option write-offs
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (659,475
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (710,120)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (457,773)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Goodwill and definite life intangible impairments
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    35,363
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    135,206
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Unconsolidated joint venture investment, intangible and land
    related charges
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    43,611
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    31,242
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    33,100
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Gain on extinguishment of debt
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (410,185
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Pre-tax (loss) income excluding land related charges, intangible
    impairments and gain on extinguishment of debt
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (379,118
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (391,323)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (20,887)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="62%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>October&#160;31,<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>October&#160;31,<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>October&#160;31,<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom">
    <B>(Dollars in thousands)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Summary Consolidated Balance Sheet Data</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,024,577
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,637,322
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    4,540,548
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Mortgages, term loans, revolving credit agreements, and notes
    payable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    77,364
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    107,913
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    410,298
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Senior secured notes, senior notes and senior subordinated notes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,751,701
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,505,805
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,910,600
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Stockholders&#146; (deficit) equity
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (349,598
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    330,264
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,321,803
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
<!-- XBRL Pagebreak Begin -->
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    12
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Important indicators of our future results are recently signed
    contracts and home contract backlog for future deliveries. Our
    sales contracts and homes in contract backlog, which primarily
    use base sales prices by segment, are set forth below:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="44%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="8%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="7%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>Net Contracts(1) for the<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>Contract Backlog as of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended October 31,</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>October&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="14" nowrap align="center" valign="bottom">
    <B>(Dollars in thousands)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Northeast:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Dollars
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    350,515
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    381,401
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    196,262
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    215,604
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Homes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    783
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    934
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    457
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    497
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Mid-Atlantic:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Dollars
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    281,194
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    313,405
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    150,819
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    165,871
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Homes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    789
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    880
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    386
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    385
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Midwest:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Dollars
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    95,764
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    106,887
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    46,418
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    61,108
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Homes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    482
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    497
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    253
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    291
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Southeast</B>:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Dollars
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    103,173
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    132,245
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    35,970
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    45,657
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Homes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    461
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    584
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    135
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    163
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Southwest:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Dollars
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    377,292
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    518,565
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    77,418
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    100,305
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Homes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,798
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,285
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    351
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    420
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>West:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Dollars
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    220,369
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    421,292
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    52,666
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    57,642
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Homes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    914
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,366
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    190
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    151
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Consolidated total:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Dollars
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,428,307
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,873,795
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    559,553
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    646,187
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Homes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,227
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,546
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,772
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,907
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Unconsolidated joint ventures:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Dollars
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    56,886
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    221,858
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    88,263
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    157,167
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Homes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    193
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    540
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    159
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    263
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Totals:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Dollars
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,485,193
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,095,653
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    647,816
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    803,354
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Homes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,420
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,086
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,931
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,170
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=60 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    Net contracts are defined as new contracts during the period for
    the purchase of homes, less cancellations of prior contracts in
    the same period.</TD>
</TR>

</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
</DIV><!-- End box 1 -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    13
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='202'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">RISK
    FACTORS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>In addition to the other information included in this
    prospectus and the documents incorporated by reference in this
    prospectus, you should carefully consider the following risk
    factors before you decide to participate in the exchange
    offer.</I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Risks
    Related to the Exchange Offer</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">If you
    choose not to exchange your outstanding notes in the exchange
    offer, the transfer restrictions currently applicable to your
    outstanding notes will remain in force and the market price of
    your outstanding notes could decline.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If you do not exchange your outstanding notes for exchange notes
    in the exchange offer, then you will continue to be subject to
    the transfer restrictions on the outstanding notes as set forth
    in the confidential offering circular distributed in connection
    with the private offering of the outstanding notes. In general,
    the outstanding notes may not be offered or sold unless they are
    registered or exempt from registration under the Securities Act
    and applicable state securities laws. Except as required by the
    registration rights agreement, we do not intend to register
    resales of the outstanding notes under the Securities Act. You
    should refer to &#147;Prospectus Summary&#160;&#151; Summary of
    the Terms of the Exchange Offer&#148; and &#147;The Exchange
    Offer&#148; for information about how to tender your outstanding
    notes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The tender of outstanding notes under the exchange offer will
    reduce the principal amount of the outstanding notes
    outstanding, which may have an adverse effect upon, and increase
    the volatility of, the market price of the outstanding notes due
    to reduction in liquidity.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">You
    must follow the exchange offer procedures carefully in order to
    receive the exchange notes.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If you do not follow the procedures described herein, you will
    not receive any exchange notes. The exchange notes will be
    issued to you in exchange for outstanding notes only after
    timely receipt by the exchange agent of:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    your outstanding notes and either:
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="2%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a properly completed and executed letter of transmittal and all
    other required documents;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a book-entry delivery by electronic transmittal of an
    agent&#146;s message through the Automated Tender Offer Program
    of DTC.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If you want to tender your outstanding notes in exchange for
    exchange notes, you should allow sufficient time to ensure
    timely delivery. No one is under any obligation to give you
    notification of defects or irregularities with respect to
    tenders of outstanding notes for exchange. For additional
    information, see the section captioned &#147;The Exchange
    Offer&#148; in this prospectus.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Risks
    Related to Our Business</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">The
    homebuilding industry is significantly affected by changes in
    general and local economic conditions, real estate markets, and
    weather conditions, which could affect our ability to build
    homes at prices our customers are willing or able to pay, could
    reduce profits that may not be recaptured, could result in
    cancellation of sales contracts, and could affect our
    liquidity.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The homebuilding industry is cyclical, has from time to time
    experienced significant difficulties, and is significantly
    affected by changes in general and local economic conditions
    such as:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    employment levels and job growth;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    availability of financing for home buyers;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    interest rates;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    foreclosure rates;
</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    14
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    inflation;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    adverse changes in tax laws;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    consumer confidence;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    housing demand;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    population growth.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Turmoil in the financial markets could affect our liquidity. In
    addition, our cash balances are primarily invested in short-term
    government-backed instruments. The remaining cash balances are
    held at numerous financial institutions and may, at times,
    exceed insurable amounts. We believe we help to mitigate this
    risk by depositing our cash in major financial institutions and
    diversifying our investments. In addition, our homebuilding
    operations often require us to obtain letters of credit. In
    connection with the issuance of our senior secured first lien
    notes in the fourth quarter of fiscal 2009, we terminated our
    revolving credit facility and refinanced the borrowing capacity
    thereunder. In addition, we entered into certain stand alone
    letter of credit facilities, and agreements pursuant to which
    all of the outstanding letters of credit under our revolving
    credit facility were replaced with letters of credit issued
    under such new letter of credit facilities and agreements.
    However, we will likely need additional letters of credit above
    the amounts provided under these new letter of credit facilities
    and agreements. If we are unable to obtain such additional
    letters of credit as needed to operate our business, we may be
    adversely affected.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Weather conditions and natural disasters such as hurricanes,
    tornadoes, earthquakes, floods, and fires can harm the local
    homebuilding business. Our business in Florida was adversely
    affected in late 2005 and into 2006 due to the impact of
    Hurricane Wilma on materials and labor availability and pricing.
    Conversely, Hurricane Ike, which hit Houston in September 2008,
    did not have an impact on materials and labor availability or
    pricing, but did impact the volume of home sales in subsequent
    weeks.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The difficulties described above could cause us to take longer
    and incur more costs to build our homes. We may not be able to
    recapture increased costs by raising prices in many cases
    because we fix our prices up to 12&#160;months in advance of
    delivery by signing home sales contracts. In addition, some home
    buyers may cancel or not honor their home sales contracts
    altogether.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">The
    homebuilding industry is undergoing a significant and sustained
    downturn which has, and could continue to, materially and
    adversely affect our business, liquidity, and results of
    operations.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The homebuilding industry is now experiencing a significant and
    sustained downturn. An industry-wide softening of demand for new
    homes has resulted from a lack of consumer confidence, decreased
    housing affordability, decreased availability of mortgage
    financing, and large supplies of resale and new home
    inventories. In addition, an oversupply of alternatives to new
    homes, such as rental properties, resale homes, and
    foreclosures, has depressed prices and reduced margins for the
    sale of new homes. Industry conditions had a material adverse
    effect on our business and results of operations during fiscal
    years 2007, 2008, and 2009 and are continuing to materially
    adversely affect our business and results of operations in
    fiscal 2010. Further, we substantially increased our inventory
    through fiscal 2006, which required significant cash outlays and
    which has increased our price and margin exposure as we continue
    to work through this inventory. Although our absorption rate per
    community is stabilizing or even increasing, we expect our
    aggregate net sales to continue to decline due to the further
    reduction of active communities as we deliver our final homes
    therein without replacements at an equivalent rate. Looking
    forward, given the continued deterioration in the housing
    market, it will become more difficult to generate positive cash
    flow. General economic conditions in the U.S.&#160;remain weak.
    Market volatility has been unprecedented and extraordinary in
    the last 18&#160;months, and the resulting economic turmoil may
    continue to exacerbate industry conditions or have other
    unforeseen consequences, leading to uncertainty about future
    conditions in the homebuilding industry. There can be no
    assurances that government responses to the disruptions in the
    financial markets will restore consumer confidence, stabilize
    the markets, or increase liquidity and the availability of
    credit, or whether any such results will be sustainable.
    Continuation or worsening of this downturn or general economic
    conditions would continue to have a material adverse effect on
    our business, liquidity, and results of operations.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    15
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The housing market has benefited from a number of government
    programs, including:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    tax credits for home buyers provided by the federal government
    and certain state governments, including California;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    support of the mortgage market, including through purchases of
    mortgage-backed securities by The Federal Reserve Bank and the
    underwriting of a substantial amount of new mortgages by the
    Federal Housing Administration (&#147;FHA&#148;) and other
    governmental agencies.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    These programs are expected to wind down over time; for example
    the California tax credit ended recently and the federal tax
    credit is scheduled to expire in April 2010. In addition, recent
    remarks from the U.S.&#160;Department of Housing and Urban
    Development (&#147;HUD&#148;) secretary suggest that FHA
    underwriting standards may be tightened. We cannot assure that
    the housing markets will not decline further as these programs
    are ended.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Leverage
    places burdens on our ability to comply with the terms of our
    indebtedness, may restrict our ability to operate, may prevent
    us from fulfilling our obligations, and may adversely affect our
    financial condition.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have a significant amount of debt.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    our debt, as of October&#160;31, 2009, including the debt of the
    subsidiaries that guarantee our debt, was $1,767.7&#160;million
    ($1,751.7&#160;million net of discount);&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    our debt service payments for the
    <FONT style="white-space: nowrap">12-month</FONT>
    period ended October&#160;31, 2009, which include interest
    incurred and mandatory principal payments on our corporate debt
    under the terms of our indentures (but which do not include
    principal and interest on non-recourse secured debt and debt of
    our financial subsidiaries), were $176.9&#160;million.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, as of October&#160;31, 2009, we had
    $130.3&#160;million in aggregate outstanding face amount of
    letters of credit issued under various letter of credit
    facilities and agreements, which were collateralized by
    $135.2&#160;million of restricted cash. We also had substantial
    contractual commitments and contingent obligations, including
    approximately $446.0&#160;million of performance bonds as of
    October&#160;31, 2009. See &#147;Management&#146;s Discussion
    and Analysis of Financial Condition and Results of
    Operations&#160;&#151; Contractual Obligations&#148; in our
    Annual Report on
    <FONT style="white-space: nowrap">Form&#160;10-K</FONT>
    for the year ended October&#160;31, 2009, which is incorporated
    by reference herein.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our significant amount of debt could have important
    consequences. For example, it could:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    limit our ability to obtain future financing for working
    capital, capital expenditures, acquisitions, debt service
    requirements, or other requirements;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    require us to dedicate a substantial portion of our cash flow
    from operations to the payment of our debt and reduce our
    ability to use our cash flow for other purposes;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    limit our flexibility in planning for, or reacting to, changes
    in our business;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    place us at a competitive disadvantage because we have more debt
    than some of our competitors;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    make us more vulnerable to downturns in our business and general
    economic conditions.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our ability to meet our debt service and other obligations will
    depend upon our future performance. We are engaged in businesses
    that are substantially affected by changes in economic cycles.
    Our revenues and earnings vary with the level of general
    economic activity in the markets we serve. Our businesses are
    also affected by customer sentiment and financial, political,
    business, and other factors, many of which are beyond our
    control. The factors that affect our ability to generate cash
    can also affect our ability to raise additional funds for these
    purposes through the sale of equity securities, the refinancing
    of debt, or the sale of assets. Changes in prevailing interest
    rates may affect our ability to meet our debt service
    obligations to the extent we have any floating rate
    indebtedness. A higher interest rate on our debt service
    obligations could result in lower earnings or increased losses.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    16
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    sources of liquidity are limited and may not be sufficient to
    meet our needs.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In connection with the issuance of our senior secured first lien
    notes in the fourth quarter of fiscal 2009, we terminated our
    revolving credit facility and refinanced the borrowing capacity
    thereunder. Because we no longer have a revolving credit
    facility, we are dependent on our current cash balance and
    future cash flows from operations (which may not be positive) to
    enable us to service our indebtedness, to cover our operating
    expenses,
    <FONT style="white-space: nowrap">and/or</FONT> to
    fund our other liquidity needs. We may need to refinance all or
    a portion of our debt on or before maturity, which we may not be
    able to do on favorable terms or at all. If our cash flows and
    capital resources are insufficient to fund our debt service
    obligations or we are unable to refinance our indebtedness, we
    may be forced to reduce or delay investments and capital
    expenditures, or to sell assets, seek additional capital, or
    restructure our indebtedness. These alternative measures may not
    be successful and may not permit us to meet our debt service
    obligations. We have also entered into certain cash
    collateralized letter of credit agreements and facilities that
    require us to maintain specified amounts of cash in segregated
    accounts as collateral to support our letters of credit issued
    thereunder, which will affect the amount of cash we have
    available for other uses. If our available cash and capital
    resources are insufficient to meet our debt service obligations,
    we could face substantial liquidity problems and might be
    required to dispose of material assets or operations to meet our
    debt service and other obligations. We may not be able to
    consummate those dispositions, or the proceeds from the
    dispositions may not be adequate to meet any debt service
    obligations then due.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Restrictive
    covenants in our debt instruments may restrict our ability to
    operate and if our financial performance worsens, we may not be
    able to maintain compliance with the financial covenants of our
    debt instruments.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The indentures governing our outstanding debt securities impose
    certain restrictions on our operations and activities. The most
    significant restrictions relate to debt incurrence, sales of
    assets, cash distributions, including paying dividends on common
    and preferred stock, capital stock and debt repurchases, and
    investments by us and certain of our subsidiaries. Because of
    these restrictions, we are currently prohibited from paying
    dividends on our preferred stock and anticipate that we will
    remain prohibited for the foreseeable future.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If we fail to comply with any of the restrictions or covenants
    of our debt instruments, and are unable to amend the instrument
    or obtain a waiver, or make timely payments on this debt and
    other material indebtedness, the trustees under the indentures
    governing our debt instruments could cause our debt to become
    due and payable prior to maturity. In such a situation, there
    can be no assurance that we would be able to obtain alternative
    financing. Either situation could have a material adverse effect
    on the solvency of the Company.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">The
    terms of our debt instruments allow us to incur additional
    indebtedness.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under the terms of our indebtedness under our indentures, we
    have the ability, subject to our debt covenants, to incur
    additional amounts of debt. The incurrence of additional
    indebtedness could magnify the risks described above. In
    addition, certain obligations such as standby letters of credit
    and performance bonds issued in the ordinary course of business,
    including those issued under our stand-alone letter of credit
    agreements and facilities, are not considered indebtedness under
    our indentures (and may be secured), and therefore, are not
    subject to limits in our debt covenants.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We
    could be adversely affected by a negative change in our credit
    rating.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our ability to access capital on favorable terms is a key factor
    in our ability to service our indebtedness to cover our
    operating expenses, and to fund our other liquidity needs. On
    March&#160;16, 2009, Fitch lowered the Company&#146;s issuer
    default rating to CCC from B&#8722;. On April&#160;7, 2009,
    Moody&#146;s affirmed our corporate family rating of Caa1, with
    a negative outlook. On April&#160;1, 2009, S&#038;P lowered our
    B&#8722; corporate credit rating to CCC, with a negative
    outlook. On October&#160;5, 2009, S&#038;P raised our corporate
    credit rating to CCC+ from CCC and revised our outlook to
    developing from negative. Downgrades may make it more difficult
    and costly
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    17
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    for us to access capital, therefore, any further downgrade by
    any of the principal credit agencies may exacerbate these
    difficulties.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    business is seasonal in nature and our quarterly operating
    results can fluctuate.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our quarterly operating results generally fluctuate by season.
    Historically, a large percentage of our agreements of sale have
    been entered into in the winter and spring. The construction of
    a customer&#146;s home typically begins after signing the
    agreement of sale and can take 12&#160;months or more to
    complete. Weather-related problems, typically in the late winter
    and early spring, can delay starts or closings and increase
    costs and thus reduce profitability. In addition, delays in
    opening communities could have an adverse impact on our sales
    and revenues. Due to these factors, our quarterly operating
    results may continue to fluctuate.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    success depends on the availability of suitable undeveloped land
    and improved lots at acceptable prices and our having sufficient
    liquidity to fund such investments.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our success in developing land and in building and selling homes
    depends in part upon the continued availability of suitable
    undeveloped land and improved lots at acceptable prices. The
    availability of undeveloped land and improved lots for purchase
    at favorable prices depends on a number of factors outside of
    our control, including the risk of competitive over-bidding on
    land and lots and restrictive governmental regulation. Should
    suitable land opportunities become less available, the number of
    homes we may be able to build and sell would be reduced, which
    would reduce revenue and profits. In addition, our ability to
    make land purchases will depend upon us having sufficient
    liquidity to fund such purchases. We may be at a disadvantage in
    competing for land due to our significant debt obligations,
    which require substantial cash resources.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Raw
    material, labor shortages and price fluctuations could delay or
    increase the cost of home construction and adversely affect our
    operating results.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The homebuilding industry has from time to time experienced raw
    material and labor shortages. In particular, shortages and
    fluctuations in the price of lumber or in other important raw
    materials could result in delays in the start or completion of,
    or increase the cost of, developing one or more of our
    residential communities. In addition, we contract with
    subcontractors to construct our homes. Therefore, the timing and
    quality of our construction depends on the availability, skill,
    and cost of our subcontractors. Delays or cost increases caused
    by shortages and price fluctuations could harm our operating
    results, the impact of which may be further affected depending
    on our ability to raise sales prices.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Changes
    in economic and market conditions could result in the sale of
    homes at a loss or holding land in inventory longer than
    planned, the cost of which can be significant.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Land inventory risk can be substantial for homebuilders. We must
    continuously seek and make acquisitions of land for expansion
    into new markets and for replacement and expansion of land
    inventory within our current markets. The market value of
    undeveloped land, buildable lots, and housing inventories can
    fluctuate significantly as a result of changing economic and
    market conditions. In the event of significant changes in
    economic or market conditions, we may have to sell homes at a
    loss or hold land in inventory longer than planned. In the case
    of land options, we could choose not to exercise them, in which
    case we would write off the value of these options. Inventory
    carrying costs can be significant and can result in losses in a
    poorly performing project or market. The assessment of
    communities for indication of impairment is performed quarterly.
    While we consider available information to determine what we
    believe to be our best estimates as of the reporting period,
    these estimates are subject to change in future reporting
    periods as facts and circumstances change. See
    &#147;Management&#146;s Discussion and Analysis of Financial
    Condition and Results of Operations&#160;&#151; Critical
    Accounting Policies&#148; in our Annual Report on
    <FONT style="white-space: nowrap">Form&#160;10-K</FONT>
    for the year ended October&#160;31, 2009, which is incorporated
    by reference herein. For example, during 2009, 2008, and 2007,
    we decided not to exercise many option contracts and walked away
    from land option deposits and predevelopment costs, which
    resulted in land option write-offs of $45.4&#160;million,
    $114.1&#160;million and $126.0&#160;million, respectively. Also,
    in 2009, 2008, and 2007, as a result of the difficult market
    conditions, we recorded inventory impairment losses on owned
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    18
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    property of $614.1&#160;million, $596.0&#160;million, and
    $331.8&#160;million, respectively. If market conditions continue
    to worsen, additional inventory impairment losses and land
    option write-offs will likely be necessary.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Home
    prices and sales activities in the California, New Jersey,
    Texas, Virginia, and Maryland markets have a large impact on our
    results of operations because we conduct a significant portion
    of our business in these markets.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We presently conduct a significant portion of our business in
    the California, New Jersey, Texas, Virginia, and Maryland
    markets. Home prices and sales activities in these markets, and
    in most of the other markets in which we operate, have declined
    from time to time, particularly as a result of slow economic
    growth. In particular, California, New Jersey, Virginia, and
    Maryland have declined significantly since the end of 2006.
    Furthermore, precarious economic and budget situations at the
    state government level may adversely affect the market for our
    homes in those affected areas. If home prices and sales activity
    decline in one or more of the markets in which we operate, our
    costs may not decline at all or at the same rate and may
    negatively impact our results of operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Because
    almost all of our customers require mortgage financing,
    increases in interest rates or the decreased availability of
    mortgage financing could impair the affordability of our homes,
    lower demand for our products, limit our marketing
    effectiveness, and limit our ability to fully realize our
    backlog.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Virtually all of our customers finance their acquisitions
    through lenders providing mortgage financing. Increases in
    interest rates or decreases in availability of mortgage
    financing could lower demand for new homes because of the
    increased monthly mortgage costs to potential home buyers. Even
    if potential customers do not need financing, changes in
    interest rates and mortgage availability could make it harder
    for them to sell their existing homes to potential buyers who
    need financing. This could prevent or limit our ability to
    attract new customers as well as our ability to fully realize
    our backlog because our sales contracts generally include a
    financing contingency. Financing contingencies permit the
    customer to cancel his obligation in the event mortgage
    financing at prevailing interest rates, including financing
    arranged or provided by us, is unobtainable within the period
    specified in the contract. This contingency period is typically
    four to eight weeks following the date of execution of the sales
    contract.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Over the last several quarters, many lenders have significantly
    tightened their underwriting standards, and many subprime and
    other alternative mortgage products are no longer being made
    available in the marketplace. If these trends continue and
    mortgage loans continue to be difficult to obtain, the ability
    and willingness of prospective buyers to finance home purchases
    or to sell their existing homes will be adversely affected,
    which will adversely affect our operating results. In addition,
    we believe that the availability of mortgage financing,
    including Federal National Mortgage Association, Federal Home
    Loan Mortgage Corp. and FHA/VA financing, is an important factor
    in marketing many of our homes. Recently, remarks from the HUD
    secretary suggest that FHA underwriting standards may be
    tightened. Any limitations or restrictions on the availability
    of those types of financing could reduce our sales.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We
    conduct certain of our operations through unconsolidated joint
    ventures with independent third parties in which we do not have
    a controlling interest. These investments involve risks and are
    highly illiquid.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We currently operate through a number of unconsolidated
    homebuilding and land development joint ventures with
    independent third parties in which we do not have a controlling
    interest. At October&#160;31, 2009, we had invested an aggregate
    of $41.3&#160;million in these joint ventures, which had
    borrowings outstanding of approximately $11.5&#160;million. In
    addition, as part of our strategy, we intend to continue to
    evaluate additional joint venture opportunities.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    These investments involve risks and are highly illiquid. There
    are a limited number of sources willing to provide acquisition,
    development, and construction financing to land development and
    homebuilding joint ventures, and as market conditions become
    more challenging, it may be difficult or impossible to obtain
    financing for our joint ventures on commercially reasonable
    terms. Recently, we have been unable to obtain
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    19
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    financing for newly created joint ventures. In addition, we lack
    a controlling interest in these joint ventures, and therefore,
    are usually unable to require that our joint ventures sell
    assets or return invested capital, make additional capital
    contributions, or take any other action without the vote of at
    least one of our venture partners. Therefore, absent partner
    agreement, we will be unable to liquidate our joint venture
    investments to generate cash.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Homebuilders
    are subject to a number of federal, local, state, and foreign
    laws and regulations concerning the development of land, the
    homebuilding, sales, and customer financing processes and
    protection of the environment, which can cause us to incur
    delays and costs associated with compliance and which can
    prohibit or restrict our activity in some regions or
    areas.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are subject to extensive and complex regulations that affect
    the development and home building, sales, and customer financing
    processes, including zoning, density, building standards, and
    mortgage financing. These regulations often provide broad
    discretion to the administering governmental authorities. This
    can delay or increase the cost of development or homebuilding.
    In light of recent developments in the home building industry
    and the financial markets, federal, state, or local governments
    may seek to adopt regulations that limit or prohibit
    homebuilders from providing mortgage financing to their
    customers. If adopted, any such regulations could adversely
    affect future revenues and earnings. In addition, some state and
    local governments in markets where we operate have approved, and
    others may approve, slow-growth or no-growth initiatives that
    could negatively impact the availability of land and building
    opportunities within those areas. Approval of these initiatives
    could adversely affect our ability to build and sell homes in
    the affected markets
    <FONT style="white-space: nowrap">and/or</FONT> could
    require the satisfaction of additional administrative and
    regulatory requirements, which could result in slowing the
    progress or increasing the costs of our homebuilding operations
    in these markets. Any such delays or costs could have a negative
    effect on our future revenues and earnings.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We also are subject to a variety of local, state, federal, and
    foreign laws and regulations concerning protection of health and
    the environment. The particular environmental laws which apply
    to any given community vary greatly according to the community
    site, the site&#146;s environmental conditions, and the present
    and former uses of the site. These environmental laws may result
    in delays, may cause us to incur substantial compliance,
    remediation,
    <FONT style="white-space: nowrap">and/or</FONT> other
    costs, and can prohibit or severely restrict development and
    homebuilding activity.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For example, during 2005, we received two requests for
    information pursuant to Section&#160;308 of the Clean Water Act
    from Region 3 of the Environmental Protection Agency (the
    &#147;EPA&#148;). These requests sought information concerning
    storm water discharge practices in connection with completed,
    ongoing, and planned homebuilding projects by subsidiaries in
    the states and district that comprise EPA Region 3. We also
    received a notice of violations for one project in Pennsylvania
    and requests for sampling plan implementation in two projects in
    Pennsylvania. We have subsequently received notification from
    the EPA alleging violations of storm water discharge practices
    at other locations and requesting related information. We
    provided the EPA with information in response to its requests.
    The Department of Justice (&#147;DOJ&#148;) is also involved in
    the review of these practices and enforcement with respect to
    them. We are engaged in discussions with the DOJ and EPA
    regarding a resolution of these matters, which we anticipate
    will include a monetary fine and an agreement to implement
    certain operational and training measures nationwide to ensure
    ongoing compliance with storm water regulations. Although we do
    not currently anticipate that we will incur any material costs
    in excess of the amount we have reserved for this matter, we
    cannot predict whether our discussions with the DOJ and EPA will
    result in a resolution, or what any resolution of these matters
    ultimately will require of us.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We anticipate that increasingly stringent requirements will be
    imposed on developers and homebuilders in the future. Although
    we cannot predict the effect of these requirements, they could
    result in time-consuming and expensive compliance programs and
    in substantial expenditures, which could cause delays and
    increase our cost of operations. In addition, the continued
    effectiveness of permits already granted or approvals already
    obtained is dependent upon many factors, some of which are
    beyond our control, such as changes in policies, rules, and
    regulations and their interpretation and application.
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    20
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Product
    liability litigation and warranty claims that arise in the
    ordinary course of business may be costly.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As a homebuilder, we are subject to construction defect and home
    warranty claims arising in the ordinary course of business. Such
    claims are common in the homebuilding industry and can be
    costly. In addition, the amount and scope of coverage offered by
    insurance companies is currently limited, and this coverage may
    be further restricted and become more costly. If we are not able
    to obtain adequate insurance against such claims, we may
    experience losses that could hurt our financial results. Our
    financial results could also be adversely affected if we were to
    experience an unusually high number of claims or unusually
    severe claims. Recently, other homebuilders in Florida have had
    construction defect claims associated with allegedly defective
    drywall manufactured in China (Chinese Drywall) that may be
    responsible for noxious smells and accelerated corrosion of
    certain metals in the home. We have identified only 15 homes
    with this potential issue, however, if additional homes are
    identified to have this issue, or our actual costs to remediate
    differ from our current estimated costs, it may require us to
    revise our warranty reserves.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We
    compete on several levels with homebuilders that may have
    greater sales and financial resources, which could hurt future
    earnings.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We compete not only for home buyers but also for desirable
    properties, financing, raw materials, and skilled labor often
    within larger subdivisions designed, planned, and developed by
    other homebuilders. Our competitors include other local,
    regional, and national homebuilders, some of which have greater
    sales and financial resources.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The competitive conditions in the homebuilding industry together
    with current market conditions have, and could continue to,
    result in:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    difficulty in acquiring suitable land at acceptable prices;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    increased selling incentives;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    lower sales;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    delays in construction.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Any of these problems could increase costs
    <FONT style="white-space: nowrap">and/or</FONT> lower
    profit margins.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We may
    have difficulty in obtaining the additional financing required
    to operate and develop our business.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our operations require significant amounts of cash, and we may
    be required to seek additional capital, whether from sales of
    equity or borrowing additional money, for the future growth and
    development of our business. The terms or availability of
    additional capital is uncertain. Moreover, the indentures for
    our outstanding debt securities contain provisions that restrict
    the debt we may incur and the equity we may issue in the future.
    If we are not successful in obtaining sufficient capital, it
    could reduce our sales and may hinder our future growth and
    results of operations. In addition, pledging substantially all
    of our assets to support our first, second, and third lien
    senior secured notes may make it more difficult to raise
    additional financing in the future.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    future growth may include additional acquisitions of companies
    that may not be successfully integrated and may not achieve
    expected benefits.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Acquisitions of companies have contributed to our historical
    growth and may again be a component of our growth strategy in
    the future. In the future, we may acquire businesses, some of
    which may be significant. As a result of acquisitions of
    companies, we may need to seek additional financing and
    integrate product lines, dispersed operations, and distinct
    corporate cultures. These integration efforts may not succeed or
    may distract our management from operating our existing
    business. Additionally, we may not be able to enhance our
    earnings as a result of acquisitions. Our failure to
    successfully identify and manage future acquisitions could harm
    our operating results.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    21
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    controlling stockholders are able to exercise significant
    influence over us.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Members of the Hovnanian family, including Ara K. Hovnanian, our
    chairman of the board, president and chief executive officer,
    have voting control, through personal holdings and family owned
    entities, of Class&#160;A and Class&#160;B common stock that
    enables them to cast approximately 70% of the votes that may be
    cast by the holders of our outstanding Class&#160;A and
    Class&#160;B common stock combined. Their combined stock
    ownership enables them to exert significant control over us,
    including power to control the election of our Board of
    Directors and to approve matters presented to our stockholders.
    This concentration of ownership may also make some transactions,
    including mergers or other changes in control, more difficult or
    impossible without their support. Also, because of their
    combined voting power, circumstances may occur in which their
    interests could be in conflict with the interests of other
    stakeholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    net operating loss carryforwards could be substantially limited
    if we experience an ownership change as defined in the Internal
    Revenue Code.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Based on recent impairments and our current financial
    performance, we generated a federal net operating loss
    carryforward of $1.3&#160;billion through the year ended
    October&#160;31, 2009, and we may generate net operating loss
    carryforwards in future years.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Section&#160;382 of the Internal Revenue Code contains rules
    that limit the ability of a company that undergoes an ownership
    change, which is generally any change in ownership of more than
    50% of its stock over a three-year period, to utilize its net
    operating loss carryforwards and certain built-in losses
    recognized in years after the ownership change. These rules
    generally operate by focusing on ownership changes among
    stockholders owning directly or indirectly 5% or more of the
    stock of a company and any change in ownership arising from a
    new issuance of stock by the company.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If we undergo an ownership change for purposes of
    Section&#160;382 as a result of future transactions involving
    our common stock, including purchases or sales of stock between
    5% shareholders, our ability to use our net operating loss
    carryforwards and to recognize certain built-in losses would be
    subject to the limitations of Section&#160;382. Depending on the
    resulting limitation, a significant portion of our net operating
    loss carryforwards could expire before we would be able to use
    them. Our inability to utilize our net operating loss
    carryforwards could have a negative impact on our financial
    position and results of operations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In August 2008, we announced that our Board of Directors adopted
    a shareholder rights plan designed to preserve shareholder value
    and the value of certain tax assets primarily associated with
    net loss carryforwards and built-in losses under
    Section&#160;382 of the Internal Revenue Code and on
    December&#160;5, 2008, our stockholders approved the Board of
    Directors&#146; decision to adopt the shareholder rights plan.
    In addition, on December&#160;5, 2008, our stockholders approved
    an amendment to our Certificate of Incorporation to restrict
    certain transfers of Class&#160;A common stock in order to
    preserve the tax treatment of our net operating loss
    carryforwards and built-in losses under Section&#160;382 of the
    Internal Revenue Code. See Note&#160;3 to the Consolidated
    Financial Statements in our Annual Report on
    <FONT style="white-space: nowrap">Form&#160;10-K</FONT>
    for the year ended October&#160;31, 2009, which is incorporated
    by reference herein, for further details.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Utility
    shortages and outages or rate fluctuations could have an adverse
    effect on our operations.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In prior years, the areas in which we operate in California have
    experienced power shortages, including periods without
    electrical power, as well as significant fluctuations in utility
    costs. We may incur additional costs and may not be able to
    complete construction on a timely basis if such power
    shortages/outages and utility rate fluctuations continue.
    Furthermore, power shortages and outages, such as the blackout
    that occurred in 2003 in the Northeast, and rate fluctuations
    may adversely affect the regional economies in which we operate,
    which may reduce demand for our homes. Our operations may be
    adversely affected if further rate fluctuations
    <FONT style="white-space: nowrap">and/or</FONT> power
    shortages and outages occur in California, the Northeast, or in
    our other markets.
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    22
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Geopolitical
    risks and market disruption could adversely affect our operating
    results and financial condition.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Geopolitical events, such as the aftermath of the war with Iraq
    and the continuing involvement in Iraq and Afghanistan, may have
    a substantial impact on the economy and the housing market. The
    terrorist attacks on the World Trade Center and the Pentagon on
    September&#160;11, 2001 had an impact on our business and the
    occurrence of similar events in the future cannot be ruled out.
    The war and the continuing involvement in Iraq and Afghanistan,
    terrorism, and related geopolitical risks have created many
    economic and political uncertainties, some of which may have
    additional material adverse effects on the U.S.&#160;economy,
    and our customers and, in turn, our results of operations and
    financial condition.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Risks
    Related to the Notes</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We
    have a significant amount of indebtedness and we may incur
    additional indebtedness.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    At October&#160;31, 2009, the Issuer and the guarantors had
    approximately $1,767.7&#160;million ($1,751.7&#160;million, net
    of discount) of debt (including the outstanding notes)
    outstanding. We and our subsidiaries may incur additional
    indebtedness in the future. While the terms of the indenture
    under which the outstanding notes were, and the exchange notes
    will be, issued and our other existing debt instruments restrict
    us or our subsidiaries from incurring additional indebtedness,
    these restrictions include exceptions that will allow us and our
    subsidiaries to incur additional debt. If indebtedness is added
    to our current debt levels, the risks related to the notes and
    our indebtedness generally that we and our subsidiaries now face
    could intensify.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">The
    notes and the guarantees thereof will be structurally
    subordinated to indebtedness of our
    <FONT style="white-space: nowrap">non-guarantor</FONT>
    subsidiaries and joint ventures.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The notes and the guarantees thereof will be structurally
    subordinated to the indebtedness (including trade payables) of
    any non-guarantor subsidiary and joint venture to the extent of
    the value of their assets, and holders of the notes will not
    have any claim as a creditor against any non-guarantor
    subsidiary or joint venture. In addition, the indenture under
    which the outstanding notes were, and the exchange notes will
    be, issued permits, subject to certain limitations,
    non-guarantor subsidiaries and joint ventures to incur
    additional indebtedness and will not contain any limitation on
    the amount of liabilities (such as trade payables) that may be
    incurred by them. At October&#160;31, 2009, non-guarantor
    subsidiaries and joint ventures had approximately
    $72.5&#160;million and $270.0&#160;million, respectively, of
    outstanding liabilities, including trade payables.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    non-guarantor subsidiaries and joint ventures are not subject to
    the restrictive covenants in the indenture under which the
    outstanding notes were, and the exchange notes will be,
    issued.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Certain of our subsidiaries and all of our joint venture
    operations are not subject to the restrictive covenants in the
    indenture under which the outstanding notes were, and the
    exchange notes will be, issued. This means that these entities
    will be able to engage in many of the activities that we and our
    restricted subsidiaries are prohibited or limited from doing
    under the terms of such indenture, such as incurring additional
    debt, securing assets in priority to the claims of the holders
    of the notes, paying dividends, making certain investments,
    selling assets and entering into mergers or other business
    combinations. If non-guarantors and joint ventures engage in any
    of these activities, their actions could reduce the amount of
    cash that we will have available to us to fund payments of
    principal and interest on the notes when due and to comply with
    our other obligations under the notes, and could reduce the
    amount of our assets that would be available to satisfy your
    claims should we default on the notes.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">The
    liens securing the notes will provide holders of the notes with
    a secured claim only to the extent of the value of the assets
    that have been granted as security for the notes and we may be
    able to incur additional secured indebtedness.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Substantially all the assets owned by the Issuer and the
    guarantors on October&#160;20, 2009 (the date of the indenture)
    or thereafter acquired, and all proceeds therefrom, will be
    subject to first-priority liens in favor of the collateral agent
    for the benefit of the trustee and the holders of the notes.
    Under the indenture governing
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    23
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    the notes and the indentures governing our other outstanding
    debt instruments, we may incur additional secured debt,
    including debt that is secured by assets that are not pledged to
    the holders of notes or secured on a parity basis or, as
    described below, on an effectively senior basis. Any such
    indebtedness may further limit the recovery of the value of such
    collateral to satisfy the claims of the holders of the notes.
    For example, the indenture governing the notes requires (except
    with respect to certain assets excluded from the collateral
    securing the notes, including $25.0&#160;million of cash and
    cash equivalents collateralizing letters of credit or similar
    instruments) that the holders of the notes have a security
    interest in the cash and cash equivalents that collateralize
    certain letter of credit agreements, facilities or similar
    instruments, but that such liens will be on a basis that is
    junior to the lien granted to the applicable issuing bank.
    Accordingly, upon an enforcement event or insolvency proceeding,
    proceeds from such cash and cash equivalents will be applied
    first to satisfy such letter of credit obligations and then to
    satisfy the obligations on the notes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Furthermore, the fair market value of real property and other
    collateral securing the notes is subject to fluctuations based
    on factors that include, among others, the condition of the
    homebuilding industry, our ability to implement our business
    strategy, the ability to sell the collateral in an orderly sale,
    general economic conditions, the availability of buyers and
    similar factors. In addition, courts could limit recoverability
    if they apply
    <FONT style="white-space: nowrap">non-New&#160;York</FONT>
    law to a proceeding and deem a portion of the interest claim
    usurious in violation of public policy. The amount to be
    received upon a sale of any collateral would be dependent on
    numerous factors, including, but not limited, to the actual fair
    market value of the collateral at such time and the timing and
    the manner of the sale. By its nature, some or all of the
    collateral may be illiquid and may have no readily ascertainable
    market value. In the event that a bankruptcy case is commenced
    by or against us, if the value of the collateral is less than
    the amount of principal and accrued and unpaid interest on the
    notes and all other senior secured obligations, interest may
    cease to accrue on the notes from and after the date the
    bankruptcy petition is filed. In the event of a foreclosure,
    liquidation, bankruptcy or similar proceeding, we cannot assure
    you that the proceeds from any sale or liquidation of the
    collateral will be sufficient to pay our obligations due under
    the notes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, not all of our assets secure the notes. With
    respect to those assets that are not part of the collateral
    securing the notes but which secure other obligations, the notes
    will be effectively junior to these obligations to the extent of
    the value of such assets. See &#147;Description of
    Notes&#160;&#151; Security.&#148; For example, the collateral
    will not include:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    pledges of stock of guarantors to the extent they would result
    in the filing of separate financial statements of such guarantor
    being required in SEC filings;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    personal property where the cost of obtaining a security
    interest or perfection thereof exceeds its benefits;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    real property subject to a lien securing indebtedness incurred
    for the purpose of financing the acquisition thereof;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    real property located outside of the United States;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    unentitled land;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    real property which is leased or held for the purpose of leasing
    to unaffiliated third parties;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    equity interests in subsidiaries other than restricted
    subsidiaries, except for K. Hovnanian JV Holdings, L.L.C., our
    wholly-owned holding company subsidiary that owns our equity
    interests in substantially all of our joint ventures, and
    subject to future grants under certain circumstances as required
    under the indenture;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    any real property in a community under development with a dollar
    amount of investment as of the most recent month-end (determined
    in accordance with GAAP) of less than $2.0&#160;million or with
    less than 10&#160;lots remaining;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    up to $50.0&#160;million of assets received in certain asset
    dispositions or asset swaps or exchanges made in accordance with
    the indenture;
</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    24
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    assets with respect to which any applicable law or contract
    prohibits the creation or perfection of security interests
    therein;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    up to $25.0&#160;million of cash and cash equivalents securing
    letters of credit and similar instruments provided that we will
    use commercially reasonable efforts to obtain the necessary
    consent of the banks issuing the letters of credit in order to
    have such cash and cash equivalents securing such letters of
    credit and similar instruments secure the notes.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, the Issuer and the guarantors will not be required
    to provide control agreements with respect to certain deposit,
    checking or securities accounts with average balances below a
    certain dollar amount.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    To the extent that the claims of the holders of the notes exceed
    the value of the assets securing those notes, those claims will
    rank equally with the claims of the holders of our outstanding
    secured and unsecured senior notes and any other unsubordinated
    indebtedness. As a result, if the value of the assets pledged as
    security for the notes is less than the value of the claims of
    the holders of the notes, those claims may not be satisfied in
    full.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We
    will, absent the occurrence and continuance of an event of
    default under the indenture governing the notes, have control
    over the collateral, and the sale of particular assets by us
    could reduce the pool of assets securing the notes and the
    guarantees thereof.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Absent the occurrence and continuance of any event of default
    under the indenture governing the notes, the indenture and the
    security documents relating to the collateral allow us to remain
    in possession of, retain exclusive control over, freely operate,
    and collect, invest and dispose of any income from, the
    collateral securing the notes and the guarantees.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Your
    rights to the collateral securing the notes and the guarantees
    thereof may be adversely affected by the failure to perfect
    security interests in the collateral and other issues generally
    associated with the realization of security interests in
    collateral.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Applicable law requires that a security interest in certain
    tangible and intangible assets can only be properly perfected
    and its priority retained through certain actions undertaken by
    the secured party. In addition, applicable law requires that
    certain property and rights acquired after the grant of a
    general security interest, such as real property, can only be
    perfected at the time such property and rights are acquired and
    identified. The indenture governing the notes and the security
    documents provide that at any time the Issuer or the guarantors
    of the notes acquires property that is required to be pledged as
    collateral that is not automatically subject to a perfected
    security interest under the security documents or a subsidiary
    becomes a guarantor, then the Issuer or guarantor will, as soon
    as practical after such property&#146;s acquisition, provide
    security over such property (or, in the case of a new guarantor,
    all of its assets that are required to be pledged as collateral)
    in favor of the collateral agent and cause the lien granted to
    be duly perfected. See &#147;Description of Notes&#160;&#151;
    Security&#160;&#151; General.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    There can be no assurance that the trustee or the collateral
    agent for the notes will monitor the future acquisition of
    property and rights that constitute collateral, and that the
    necessary action will be taken to properly perfect the security
    interest in such after-acquired collateral. The collateral agent
    for the notes has no obligation to monitor the acquisition of
    additional property or rights that constitute collateral or the
    perfection of any security interest. Such failure may result in
    the loss of the security interest in the collateral or the
    priority of the security interest in favor of the notes and the
    guarantees against third parties.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, the security interest of the collateral agent will
    be subject to practical challenges generally associated with the
    realization of security interests in collateral. For example,
    the collateral agent may need to obtain the consent of a third
    party to obtain or enforce a security interest in a contract. We
    cannot assure you that the collateral agent will be able to
    obtain any such consent. We also cannot assure you that the
    consents of any third parties will be given when required to
    facilitate a foreclosure on such assets. Accordingly, the
    collateral agent may not have the ability to foreclose upon
    those assets and the value of the collateral may significantly
    decrease.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    25
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">There
    are circumstances other than repayment, defeasance or discharge
    of the notes under which the collateral securing the notes and
    guarantees thereof will be released automatically, without your
    consent or the consent of the trustee or collateral
    agent.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under various circumstances, collateral securing the notes will
    be released automatically, including a sale, transfer or other
    disposal of such collateral in a transaction not prohibited
    under the indenture and, with respect to collateral held by a
    guarantor, upon the release of such guarantor from its guarantee.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, the guarantee of a guarantor will be automatically
    released to the extent it is released in connection with a sale
    of such guarantor in a transaction not prohibited by the
    indenture.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The indenture will also permit, subject to the terms of the
    indenture, us to designate one or more of our restricted
    subsidiaries that is a guarantor of the notes as an unrestricted
    subsidiary. If we designate a guarantor as an unrestricted
    subsidiary for purposes of the indenture governing the notes,
    all of the liens on any collateral owned by such subsidiary or
    any of its subsidiaries and any guarantees of the notes by such
    subsidiary or any of its subsidiaries will be released under the
    indenture governing the notes. Designation of an unrestricted
    subsidiary will reduce the aggregate value of the collateral
    securing the notes to the extent that liens on the assets of the
    unrestricted subsidiary and its subsidiaries are released. In
    addition, the creditors of the unrestricted subsidiary and its
    subsidiaries will have a senior claim on the assets of such
    unrestricted subsidiary and its subsidiaries.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">If we
    default on our obligations to pay our other indebtedness, we may
    not be able to make payments on the notes.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Any default under the agreements governing our other
    indebtedness and the remedies sought by the holders of such
    indebtedness, could prevent us from paying principal, premium,
    if any, and interest on the notes and substantially decrease the
    market value of the notes. If we are unable to generate
    sufficient cash flow and are otherwise unable to obtain funds
    necessary to meet required payments of principal, premium, if
    any, and interest on our other indebtedness, or if we otherwise
    fail to comply with the various covenants in our debt
    instruments, we could be in default under the terms of the
    agreements governing our other indebtedness. In the event of
    such default,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the holders of such indebtedness may be able to cause all of our
    available cash flow to be used to pay such indebtedness and, in
    any event, could elect to declare all the funds borrowed
    thereunder to be due and payable, together with accrued and
    unpaid interest; and/or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    we could be forced into bankruptcy or liquidation.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If our operating performance declines, we may in the future need
    to amend or modify the agreements governing our other
    indebtedness or seek concessions from the holders of such
    indebtedness.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">In the
    event of our bankruptcy, the ability of the holders of the notes
    to realize upon the collateral will be subject to certain
    bankruptcy law limitations.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The ability of holders of the notes to realize upon the
    collateral will be subject to certain bankruptcy law limitations
    in the event of our bankruptcy. Under federal bankruptcy law,
    secured creditors are prohibited from repossessing their
    security from a debtor in a bankruptcy case, or from disposing
    of security repossessed from such a debtor, without bankruptcy
    court approval, which may not be given. Moreover, applicable
    federal bankruptcy laws generally permit the debtor to continue
    to use and expend collateral, including cash collateral, and to
    provide liens senior to the collateral agent for the notes&#146;
    liens to secure indebtedness incurred after the commencement of
    a bankruptcy case, provided that the secured creditor either
    consents or is given &#147;adequate protection.&#148;
    &#147;Adequate protection&#148; could include cash payments or
    the granting of additional security, if and at such times as the
    presiding court in its discretion determines, for any diminution
    in the value of the collateral as a result of the stay of
    repossession or disposition of the collateral during the
    pendency of the bankruptcy case, the use of collateral
    (including cash collateral) and the incurrence of such senior
    indebtedness. In view of the lack of a precise definition of the
    term &#147;adequate protection&#148; and the broad discretionary
    powers of a U.S.&#160;bankruptcy court, we cannot predict
    whether or when the collateral agent under the indenture for the
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    26
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    notes could foreclose upon or sell the collateral, or whether
    the holders of the notes will be fully compensated for any delay
    in payment or loss of value of the collateral through the
    provision of &#147;adequate protection,&#148; except to the
    extent of any grant of additional liens. In the event of a
    bankruptcy, liquidation, dissolution, reorganization or similar
    proceeding against us, holders of the notes will only be
    entitled to post-petition interest and &#147;adequate
    protection&#148; under the bankruptcy code to the extent that
    the value of their security interest in the collateral is
    greater than their pre-bankruptcy claim. Holders of the notes
    that have a security interest in collateral with a value equal
    or less than their pre-bankruptcy claim will not be entitled to
    post-petition interest or &#147;adequate protection&#148; under
    the bankruptcy code. In addition, if any payments of
    post-petition interest had been made at the time of such a
    finding of under-collateralization, those payments could be
    recharacterized by a U.S. bankruptcy court as a reduction of the
    principal amount of the secured claims with respect to the
    notes. No appraisal of the fair market value of the collateral
    has been prepared in connection with this offering, and we
    therefore cannot assure you that the value of the collateral
    equals or exceeds the principal amount of the notes.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Security
    over certain collateral may not be in place on the issue date of
    the exchange notes or may not be perfected on such
    date.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Certain security may not be in place on the issue date of the
    exchange notes or may not be perfected on such date. In
    particular, we are required by the terms of the indenture to
    provide and record mortgages over real property collateral no
    later than 120&#160;days after October&#160;20, 2009 (the date
    of the indenture). As a result, perfection of such security
    interests may not occur for some time. Consequently, if a
    default should occur prior to the perfection of such security
    interests, holders of the notes may not benefit from such
    security interests.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Any
    future grant of collateral might be avoidable by a trustee in
    bankruptcy.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Any future grant of collateral in favor of the collateral agent
    for the benefit of the trustee might be avoidable by the grantor
    (as debtor-in-possession) or by its trustee in bankruptcy if
    certain events or circumstances exist or occur, including, among
    others, if the grantor is insolvent at the time of the grant,
    the grant permits the holders of the notes to receive a greater
    recovery than if the grant had not been given and a bankruptcy
    proceeding in respect of the grantor is commenced within
    90&#160;days following the grant or, in certain circumstances, a
    longer period. A substantial portion of the collateral will
    constitute inventory of real estate. As the inventory is sold
    and new inventory is acquired, the granting of liens on the new
    inventory will trigger a new 90-day &#147;preference&#148;
    period. It is possible, particularly during a time when our
    inventory is turning over quickly, that liens on a substantial
    portion of the collateral at any time may have been granted
    during the preceding 90-day period.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Corporate
    benefit laws and other limitations on guarantees and security
    interests may adversely affect the validity and enforceability
    of the guarantees of the notes and the security granted by the
    guarantors.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The guarantees of the notes by the guarantors and security
    granted by such guarantors provide the holders of the notes with
    a direct claim against the assets of the guarantors. Each of the
    guarantees and the amount recoverable under the security
    documents, however, will be limited to the maximum amount that
    can be guaranteed or secured by a particular guarantor without
    rendering the guarantee or security interest, as it relates to
    that guarantor, voidable or otherwise ineffective under
    applicable law. In addition, enforcement of any of these
    guarantees or security interest against any guarantor will be
    subject to certain defenses available to guarantors and security
    providers generally. These laws and defenses include those that
    relate to fraudulent conveyance or transfer, voidable
    preference, corporate purpose or benefit, preservation of share
    capital, thin capitalization and regulations or defenses
    affecting the rights of creditors generally. If one or more of
    these laws and defenses are applicable, a guarantor may have no
    liability or decreased liability under its guarantee or the
    security documents to which it is a party.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    27
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Federal
    and state laws allow courts, under specific circumstances, to
    void guarantees and grants of security and to require you to
    return payments received from guarantors.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under U.S.&#160;federal bankruptcy law or comparable provisions
    of state fraudulent transfer laws, future creditors of any
    guarantor could void the issuance of the related guarantees and
    the grant of security by the guarantors or subordinate such
    obligations or liens to all other debts and liabilities of such
    guarantor, if such creditors were successful in establishing
    that:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the guarantee or grant of security was incurred with fraudulent
    intent;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the guarantor did not receive fair consideration or reasonably
    equivalent value for issuing its guarantee or grant of
    security&#160;and
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="2%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    was insolvent at the time of the guarantee or grant;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    was rendered insolvent by reason of the guarantee or grant;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    was engaged in a business or transaction for which its assets
    constituted unreasonably small capital to carry on its
    business;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    intended to incur, or believed that it would incur, debt beyond
    its ability to pay such debt as it matured.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The measures of insolvency for purposes of determining whether a
    fraudulent conveyance occurred vary depending upon the laws of
    the relevant jurisdiction and upon the valuation assumptions and
    methodology applied by the courts. Generally, however, a company
    would be considered insolvent for purposes of the foregoing if:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the sum of the company&#146;s debts, including contingent,
    unliquidated and unmatured liabilities, is greater than all of
    such company&#146;s property at a fair valuation;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    if the present fair saleable value of the company&#146;s assets
    is less than the amount that will be required to pay the
    probable liability on its existing debts as they become absolute
    and matured.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We cannot assure you as to what standard a court would apply in
    order to determine whether a guarantor was &#147;insolvent&#148;
    as of the date its guarantee or grant of a security interest was
    issued, and we cannot assure you that, regardless of the method
    of valuation, a court would not determine that such guarantors
    were insolvent on such date. Guarantees issued by
    Hovnanian&#146;s subsidiaries could be subject to the claim
    that, since the guarantees and grant of security interest were
    incurred for the benefit of the Issuer and Hovnanian, and only
    indirectly for the benefit of the other guarantors, the
    obligations of the guarantors thereunder were incurred for less
    than reasonably equivalent value or fair consideration.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Federal
    and state environmental laws may decrease the value of the
    collateral securing the notes and may result in you being liable
    for environmental cleanup costs at our facilities.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The notes and guarantees are secured by liens on real property
    that may be subject to both known and unforeseen environmental
    risks, and these risks may reduce or eliminate the value of the
    real property pledged as collateral for the notes and the
    guarantees adversely affect the ability of the debtor to repay
    the notes. See &#147;&#151;&#160;Risks Related to our
    Business&#160;&#151; Homebuilders are subject to a number of
    federal, local, state and foreign laws and regulations
    concerning the development of land, the homebuilding, sales and
    customer financing processes and protection of the environment,
    which can cause us to incur delays and costs associated with
    compliance and which can prohibit or restrict our activity in
    some regions or areas&#148; and &#147;Business&#160;&#151;
    Regulation and Environmental Matters&#148; in our Annual Report
    on
    <FONT style="white-space: nowrap">Form&#160;10-K</FONT>
    for the year ended October&#160;31, 2009, which is incorporated
    by reference herein.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Moreover, under some federal and state environmental laws, a
    secured lender may in some situations become subject to its
    debtor&#146;s environmental liabilities, including liabilities
    arising out of contamination at or from the debtor&#146;s
    properties. Such liability can arise before foreclosure, if the
    secured lender becomes sufficiently involved in the management
    of the affected facility. Similarly, when a secured lender
    forecloses and takes title to a contaminated facility or
    property, the lender could become subject to such liabilities,
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    28
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    depending on the circumstances. Before taking some actions, the
    collateral agent for the notes may request that you provide for
    its reimbursement for any of its costs, expenses and
    liabilities. Cleanup costs could become a liability of the
    collateral agent for the notes, and, if you agreed to provide
    for the collateral agent&#146;s costs, expenses and liabilities,
    you could be required to help repay those costs. You may agree
    to indemnify the collateral agent for the notes for its costs,
    expenses and liabilities before you or the collateral agent
    knows what those amounts ultimately will be. If you agreed to
    this indemnification without sufficient limitations, you could
    be required to pay the collateral agent an amount that is
    greater than the amount you paid for the notes. In addition,
    rather than acting through the collateral agent, you may in some
    circumstances act directly to pursue a remedy under the
    indenture. If you exercise that right, you could be considered
    to be a lender and be subject to the risks discussed above.
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Exercise
    of Change of Control Rights&#160;&#151; We may not have the
    funds necessary to finance any change of control offer required
    by the indenture.</FONT></I></B>
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If a change of control occurs as described under
    &#147;Description of Notes&#160;&#151; Certain
    covenants&#160;&#151; Repurchase of Notes upon Change of
    Control,&#148; the Issuer would be required to offer to purchase
    your notes at 101% of their principal amount together with all
    accrued and unpaid interest, if any, to the date of purchase. If
    a purchase offer obligation were to arise under the indenture
    governing your notes, a change of control would have also
    occurred under the indentures governing the Issuer&#146;s other
    outstanding indebtedness. Furthermore, any of the Issuer&#146;s
    future debt agreements may contain similar restrictions and
    provisions. If a purchase offer were required, the Issuer may
    not have sufficient funds to pay the purchase price for all
    indebtedness required to be repurchased. We do not currently
    have sufficient funds available to purchase all of such
    outstanding debt.
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">The
    outstanding notes were issued with original issue discount for
    U.S. federal income tax purposes.</FONT></I></B>
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The outstanding notes were issued with OID for U.S.&#160;federal
    income tax purposes. Thus, in addition to the stated interest on
    the notes, a U.S.&#160;holder will be required to include such
    OID in gross income on a constant yield to maturity basis in
    advance of the receipt of cash payment thereof and regardless of
    such holder&#146;s method of accounting for U.S.&#160;federal
    income tax purposes. See &#147;Certain United States Federal Tax
    Consequences.&#148;
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If a bankruptcy petition were filed by or against us under the
    U.S.&#160;Bankruptcy Code, the claim by any holder of the notes
    for the principal amount of the notes may be limited to an
    amount equal to the sum of:
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the original issue price for the notes;&#160;and
</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    that portion of the OID (if any) that does not constitute
    &#147;unmatured interest&#148; for purposes of the
    U.S.&#160;Bankruptcy Code.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Any OID that was not amortized as of the date of the bankruptcy
    filing would constitute unmatured interest. Accordingly, holders
    of the notes under these circumstances may receive a lesser
    amount than they would be entitled to receive under the terms of
    the indenture governing the notes, even if sufficient funds are
    available.
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">An
    active trading market may not develop for the exchange
    notes.</FONT></I></B>
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are offering the exchange notes to the holders of the
    outstanding notes. The exchange notes are a new issue of
    securities. There is no active public trading market for the
    exchange notes. The Issuer does not intend to apply for listing
    of the exchange notes on any securities exchange or automated
    dealer quotation system. We cannot assure you that an active
    trading market will develop for the exchange notes or that the
    exchange notes will trade as one class with the outstanding
    notes. In addition, the liquidity of the trading market in the
    exchange notes and the market prices quoted for the exchange
    notes may be adversely affected by changes in the overall market
    for this type of security and by changes in our financial
    performance or prospects or in the prospects for companies in
    our industry generally. As a consequence, an active trading
    market may not develop for your exchange notes, you may not be
    able to sell your exchange notes, or, even if you can sell your
    exchange notes, you may not be able to sell them at an
    acceptable price.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    29
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='203'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">RATIO OF
    EARNINGS TO FIXED CHARGES</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For purposes of computing the ratio of earnings to fixed
    charges, earnings consist of earnings from continuing operations
    before income taxes and income or loss from equity investees,
    plus fixed charges and distributed income of equity investees,
    less interest capitalized. Fixed charges consist of all interest
    incurred plus the amortization of debt issuance costs and bond
    discounts.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth the ratio of earnings to fixed
    charges for Hovnanian for each of the periods indicated.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="71%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="19" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended October&#160;31,</B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2005</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Ratio of earnings to fixed charges
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (a
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (a
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (a
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2.0
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7.8
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=60 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (a) </TD>
    <TD></TD>
    <TD valign="bottom">
    Earnings for the years ended October&#160;31, 2009, 2008 and
    2007 were insufficient to cover fixed charges for such period by
    $616.1&#160;million, $1,138.5&#160;million and
    $667.5&#160;million, respectively.</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    30
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='204'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">USE OF
    PROCEEDS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The exchange offer is intended to satisfy our obligations under
    the registration rights agreement that we entered into in
    connection with the private offering of the outstanding notes.
    We will not receive any cash proceeds from the issuance of the
    exchange notes in the exchange offer. As consideration for
    issuing the exchange notes as contemplated in this prospectus,
    we will receive in exchange a like principal amount of
    outstanding notes, the terms of which are identical in all
    material respects to the exchange notes, except that the
    exchange notes will be registered under the Securities Act and
    will not contain terms with respect to transfer restrictions or
    additional interest upon a failure to fulfill certain of our
    obligations under the registration rights agreement. The
    outstanding notes that are surrendered in exchange for the
    exchange notes will be retired and cancelled and cannot be
    reissued. As a result, the issuance of the exchange notes will
    not result in any increase or decrease in our capitalization.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Issuer issued the outstanding notes on October&#160;20,
    2009. The net proceeds from the issuance were used, together
    with cash on hand, to purchase certain of the Issuer&#146;s
    secured and unsecured notes in tender offers as follows:
    approximately $599.5&#160;million of
    11<FONT style="vertical-align: text-top; font-size: 70%;">1</FONT>/<FONT style="font-size: 70%;">2</FONT>%&#160;Senior
    Secured Notes due 2013, approximately $17.6&#160;million of
    18.0%&#160;Senior Secured Notes due 2017 (the 18.0% Senior
    Secured Notes were issued on December&#160;3, 2008 in exchange
    for various series of the Issuer&#146;s unsecured senior notes),
    approximately $7.9&#160;million of 8%&#160;Senior Notes due
    2012, approximately $57.1&#160;million of
    6<FONT style="vertical-align: text-top; font-size: 70%;">1</FONT>/<FONT style="font-size: 70%;">2</FONT>%&#160;Senior
    Notes due 2014, approximately $23.6&#160;million of
    6<FONT style="vertical-align: text-top; font-size: 70%;">3</FONT>/<FONT style="font-size: 70%;">8</FONT>%&#160;Senior
    Notes due 2014, approximately $36.6&#160;million of
    6<FONT style="vertical-align: text-top; font-size: 70%;">1</FONT>/<FONT style="font-size: 70%;">4</FONT>%&#160;Senior
    Notes due 2015 and approximately $0.2&#160;million of
    7<FONT style="vertical-align: text-top; font-size: 70%;">1</FONT>/<FONT style="font-size: 70%;">2</FONT>%&#160;Senior
    Notes due 2016. These purchases resulted in a recognized loss on
    extinguishment of debt of $36.4&#160;million, net of the
    write-off of unamortized discounts and fees.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    31
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='205'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">CAPITALIZATION</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth our capitalization as of
    October&#160;31, 2009. This table should be read in conjunction
    with our consolidated financial statements and the related notes
    thereto and the other financial information included and
    incorporated by reference in this prospectus.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="84%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="12%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>As of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>October&#160;31, 2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Actual</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(In thousands)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Homebuilding Cash and Cash Equivalents, Excluding Restricted
    Cash (1)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    419,955
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Debt(2):
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Nonrecourse Land Mortgages
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Nonrecourse Mortgages Secured by Operating Property
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    21,507
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    10<FONT style="vertical-align: text-top; font-size: 70%;">5</FONT>/<FONT style="font-size: 70%;">8</FONT>%&#160;Senior
    Secured Notes due 2016
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    770,972
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    11<FONT style="vertical-align: text-top; font-size: 70%;">1</FONT>/<FONT style="font-size: 70%;">2</FONT>%&#160;Senior
    Secured Notes due 2013
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    474
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    18.0%&#160;Senior Secured Notes due 2017
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11,702
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    8%&#160;Senior Notes due 2012
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    35,425
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    6<FONT style="vertical-align: text-top; font-size: 70%;">1</FONT>/<FONT style="font-size: 70%;">2</FONT>%&#160;Senior
    Notes due 2014
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    81,347
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    6<FONT style="vertical-align: text-top; font-size: 70%;">3</FONT>/<FONT style="font-size: 70%;">8</FONT>%&#160;Senior
    Notes due 2014
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    83,714
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    6<FONT style="vertical-align: text-top; font-size: 70%;">1</FONT>/<FONT style="font-size: 70%;">4</FONT>%&#160;Senior
    Notes due 2015
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    82,270
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    6<FONT style="vertical-align: text-top; font-size: 70%;">1</FONT>/<FONT style="font-size: 70%;">4</FONT>%&#160;Senior
    Notes due 2016
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    171,369
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    7<FONT style="vertical-align: text-top; font-size: 70%;">1</FONT>/<FONT style="font-size: 70%;">2</FONT>%&#160;Senior
    Notes due 2016
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    172,269
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    8<FONT style="vertical-align: text-top; font-size: 70%;">5</FONT>/<FONT style="font-size: 70%;">8</FONT>%&#160;Senior
    Notes due 2017
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    195,918
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    6%&#160;Senior Subordinated Notes due 2010
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,609
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    8<FONT style="vertical-align: text-top; font-size: 70%;">7</FONT>/<FONT style="font-size: 70%;">8</FONT>%&#160;Senior
    Subordinated Notes due 2012
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    68,039
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    7<FONT style="vertical-align: text-top; font-size: 70%;">3</FONT>/<FONT style="font-size: 70%;">4</FONT>%&#160;Senior
    Subordinated Notes due 2013
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    64,593
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Total Debt (1)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,773,208
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Stockholders&#146; (Deficit):
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Preferred Stock, $0.01&#160;par value; 100,000&#160;Shares
    Authorized; issued 5,600&#160;Shares of 7.625% Series&#160;A
    Preferred Stock issued at October&#160;31, 2009 with a
    liquidation preference of $140,000
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    135,299
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Common Stock, Class&#160;A, $0.01&#160;par value; authorized
    200,000,000&#160;shares; issued 74,376,946&#160;shares at
    October&#160;31, 2009 (including 11,694,720&#160;shares held in
    Treasury at October&#160;31, 2009)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    743
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Common Stock, Class&#160;B, $0.01&#160;par value (convertible to
    Class&#160;A at time of sale); authorized
    30,000,000&#160;shares; issued 15,265,067&#160;shares at
    October&#160;31, 2009 (including 691,748&#160;shares held in
    Treasury at October&#160;31, 2009)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    153
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Paid in Capital&#160;&#151; Common Stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    455,471
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Accumulated Deficit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (826,007
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Treasury Stock&#160;&#151; at Cost
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (115,257
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Total Stockholders&#146; (Deficit)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (349,598
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Total Capitalization
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,843,565
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=60 -->



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    Restricted Cash primarily includes cash placed in segregated
    accounts to collateralize certain of our letters of credit and
    similar instruments ($135.2&#160;million at October&#160;31,
    2009), collateralize as surety bonds ($14.7&#160;million at
    October&#160;31, 2009)&#160;and customers&#146; deposits which
    are restricted from use by us ($7.4&#160;million at
    October&#160;31, 2009).</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR>
    <TD align="right" valign="top">
    (2) </TD>
    <TD></TD>
    <TD valign="bottom">
    References to our consolidated debt in this prospectus exclude
    (1) debt of $55.9&#160;million under our secured master
    repurchase agreement as of October&#160;31, 2009, a short-term
    borrowing facility used by our mortgage banking subsidiary and
    (2) letters of credit issued under our letter of credit
    agreements and facilities described in Note&#160;(1) above. In
    addition, debt amounts reflected in this table are net of
    discount.</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    32
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='206'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SELECTED
    HISTORICAL CONSOLIDATED FINANCIAL DATA</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following selected historical consolidated financial data
    for each of the fiscal years ended October&#160;31, 2009, 2008,
    2007, 2006 and 2005 have been derived from the audited
    consolidated financial statements of Hovnanian Enterprises, Inc.
    Per common share data and weighted average number of common
    shares outstanding reflect all stock splits.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    You should read the following data in conjunction with
    &#147;Management&#146;s Discussion and Analysis of Financial
    Condition and Results of Operations&#148; included in Hovnanian
    Enterprises, Inc.&#146;s Annual Report on
    <FONT style="white-space: nowrap">Form&#160;10-K</FONT>
    for the fiscal year ended October&#160;31, 2009, which is
    incorporated by reference herein, and with the consolidated
    financial statements, related notes, and other financial
    information included and incorporated by reference herein.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="55%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=07 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=07 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=08 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=08 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=08 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=08 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="18" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended October&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2005</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="26" align="center" valign="bottom">
    <B>(Dollars in thousands, except per share data)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>Income Statement Data</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Revenues
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,596,290
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,308,111
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    4,798,921
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    6,148,235
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    5,348,417
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Gain on extinguishment of debt
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    410,185
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,632,453
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,439,559
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,417,664
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,930,514
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,602,871
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    (Loss) income from unconsolidated joint ventures
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (46,041
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (36,600
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (28,223
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    15,385
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    35,039
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    (Loss) income before income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (672,019
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,168,048
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (646,966
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    233,106
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    780,585
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    State and federal income tax (benefit) provision
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    44,693
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (43,458
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (19,847
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    83,573
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    308,738
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Net (loss) income
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (716,712
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,124,590
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (627,119
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    149,533
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    471,847
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Less: preferred stock dividends
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10,674
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10,675
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,758
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Net (loss) income attributable to common stockholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (716,712
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (1,124,590
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (637,793
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    138,858
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    469,089
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Per Share Data
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Basic:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    (Loss) income per common share
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (9.16
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (16.04
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (10.11
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2.21
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    7.51
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Weighted average number of common shares outstanding
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    78,238
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    70,131
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    63,079
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    62,822
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    62,490
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Assuming Dilution:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    (Loss) income per common share
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (9.16
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (16.04
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (10.11
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2.14
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    7.16
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Weighted average number of common shares outstanding
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    78,238
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    70,131
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    63,079
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    64,838
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    65,549
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>Balance sheet data</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Total assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,024,577
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,637,322
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    4,540,548
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    5,480,035
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    4,726,138
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Mortgages, term loans, revolving credit agreements and notes
    payable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    77,364
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    107,913
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    410,298
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    319,943
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    271,868
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Senior secured notes, senior notes and senior subordinated notes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,751,701
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,505,805
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,910,600
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,049,778
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,498,739
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Stockholders&#146; (Deficit) equity
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (349,598
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    330,264
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,321,803
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,942,163
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,791,357
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    33
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='207'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">THE
    EXCHANGE OFFER</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">General</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    K.&#160;Hovnanian hereby offers to exchange a like principal
    amount of exchange notes for any or all outstanding notes on the
    terms and subject to the conditions set forth in this prospectus
    and accompanying letter of transmittal. We refer to this offer
    as the &#147;exchange offer.&#148; You may tender some or all of
    your outstanding notes pursuant to the exchange offer.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of the date of this prospectus, $785,000,000 aggregate
    principal amount of the outstanding notes is outstanding. This
    prospectus, together with the letter of transmittal, is first
    being sent to all holders of outstanding notes known to us on or
    about January&#160;15, 2010. K. Hovnanian&#146;s obligation to
    accept outstanding notes for exchange pursuant to the exchange
    offer is subject to certain conditions set forth under
    &#147;&#151;&#160;Conditions to the Exchange Offer&#148; below.
    K. Hovnanian currently expects that each of the conditions will
    be satisfied and that no waivers will be necessary.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Purpose
    and Effect of the Exchange Offer</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In connection with the offering of the outstanding notes, we
    entered into a registration rights agreement in which we agreed,
    under certain circumstances, to file a registration statement
    relating to an offer to exchange the outstanding notes for
    exchange notes by February&#160;17, 2010. We also agreed to use
    our reasonable best efforts to cause such offer to be
    consummated by June&#160;12, 2010. The exchange notes will have
    terms substantially identical to the terms of the outstanding
    notes, except that the exchange notes will not contain terms
    with respect to transfer restrictions or additional interest
    upon a failure to fulfill certain of our obligations under the
    registration rights agreement. The outstanding notes were issued
    on October&#160;20, 2009.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under the circumstances set forth below, we will use our
    reasonable best efforts to cause the SEC to declare effective a
    shelf registration statement with respect to the resale of the
    outstanding notes within the time periods specified in the
    registration rights agreement and to keep the shelf registration
    statement effective at least one year after the effective date
    of the shelf registration statement or such shorter period as
    will terminate when all securities covered by such shelf
    registration statement have been sold pursuant thereto. These
    circumstances include:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    if applicable law or interpretations of the staff of the SEC do
    not permit K. Hovnanian and the guarantors to effect this
    exchange offer after we have sought a no-action letter or other
    favorable decision from the SEC and after we have taken all such
    other actions as may be requested by the SEC or otherwise
    required in connection with such decision;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    if any holder of the outstanding notes notifies us within 20
    business days following the consummation deadline of the
    exchange offer that:
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="2%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    based on an opinion of counsel, such holder was prohibited by
    law or SEC policy from participating in the exchange
    offer;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    such holder is a broker-dealer and holds the outstanding notes
    acquired directly from us or our affiliates.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If we fail to comply with certain obligations under the
    registration rights agreement, we will be required to pay
    additional interest to holders of the outstanding notes and the
    exchange notes required to be registered on a shelf registration
    statement. Please read the section &#147;Exchange Offer;
    Registration Rights&#148; for more details regarding the
    registration rights agreement.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Each holder of outstanding notes that wishes to exchange their
    outstanding notes for exchange notes in the exchange offer will
    be required to make the following written representations:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    such holder is not an affiliate of K. Hovnanian or the
    guarantors within the meaning of Rule&#160;144 of the Securities
    Act, or, if it is an affiliate, it will comply with all
    applicable registration and prospectus delivery requirements of
    the Securities Act;
</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    34
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    such holder is not engaged in, does not intend to engage in, and
    has no arrangement or understanding with any person to
    participate in, a distribution (within the meaning of the
    Securities Act) of the exchange notes in violation of the
    provisions of the Securities Act;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    such holder is acquiring the exchange notes in the ordinary
    course of its business.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Each broker-dealer that receives exchange notes for its own
    account in exchange for outstanding notes, where the
    broker-dealer acquired the outstanding notes as a result of
    market-making activities or other trading activities, must
    acknowledge that it will deliver a prospectus in connection with
    any resale of such exchange notes. See &#147;Plan of
    Distribution.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Resale of
    Exchange Notes</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Based on interpretations by the staff of the SEC set forth in
    no-action letters issued to third parties referred to below, we
    believe that you may resell or otherwise transfer exchange notes
    issued in the exchange offer without complying with the
    registration and prospectus delivery provisions of the
    Securities Act, if:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    you are acquiring the exchange notes in your ordinary course of
    business;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    you do not have an arrangement or understanding with any person
    to participate in a distribution of the exchange notes;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    you are not an affiliate of K. Hovnanian or any guarantor as
    defined by Rule&#160;405 of the Securities Act;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    you are not engaged in, and do not intend to engage in, a
    distribution of the exchange notes.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If you are an affiliate of K. Hovnanian or any guarantor, or are
    engaged in, or intend to engage in, or have any arrangement or
    understanding with any person to participate in, a distribution
    of the exchange notes, or are not acquiring the exchange notes
    in the ordinary course of your business:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    you cannot rely on the position of the staff of the SEC
    enunciated in <I>Morgan Stanley&#160;&#038; Co., Inc.
    </I>(available June&#160;5, 1991), <I>Exxon Capital Holdings
    Corporation </I>(available May&#160;13, 1988), as interpreted in
    the SEC&#146;s letter to <I>Shearman&#160;&#038; Sterling
    </I>(available July&#160;2, 1993), or similar no-action
    letters;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    in the absence of an exception from the position stated
    immediately above, you must comply with the registration and
    prospectus delivery requirements of the Securities Act in
    connection with any resale of the exchange notes.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This prospectus may be used for an offer to resell, for resale
    or for other retransfer of exchange notes only as specifically
    set forth in this prospectus. With regard to broker-dealers,
    only broker-dealers that acquired the outstanding notes as a
    result of market-making activities or other trading activities
    may participate in the exchange offer. Each broker-dealer that
    receives exchange notes for its own account in exchange for
    outstanding notes, where such outstanding notes were acquired by
    such broker-dealer as a result of market-making activities or
    other trading activities, must acknowledge that it will deliver
    a prospectus in connection with any resale of the exchange
    notes. Please read &#147;Plan of Distribution&#148; for more
    details regarding the transfer of exchange notes.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Terms of
    the Exchange Offer</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On the terms and subject to the conditions set forth in this
    prospectus and in the accompanying letter of transmittal, the
    Issuer will accept for exchange in the exchange offer
    outstanding notes that are validly tendered and not validly
    withdrawn prior to the expiration date. Outstanding notes may
    only be tendered in denominations of $2,000 and higher integral
    multiples of $1,000. We will issue $2,000 principal amount of
    exchange notes (and $1,000 principal amount of exchange notes in
    excess thereof) in exchange for each $2,000 principal amount of
    outstanding notes (and $1,000 principal amount of outstanding
    notes in excess thereof) surrendered in the exchange offer.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    35
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The form and terms of the exchange notes will be substantially
    identical to the form and terms of the outstanding notes, except
    that the exchange notes will be registered under the Securities
    Act and will not contain terms with respect to transfer
    restrictions or additional interest upon a failure to fulfill
    certain of our obligations under the registration rights
    agreement. The exchange notes will evidence the same debt as the
    outstanding notes. The exchange notes will be issued under and
    entitled to the benefits of the same indenture under which the
    outstanding notes were issued and the exchange notes and the
    outstanding notes will constitute a single class and series of
    notes for all purposes under the indenture. For a description of
    the notes and the indenture, see &#147;Description of
    Notes.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The exchange offer is not conditioned upon any minimum aggregate
    principal amount of outstanding notes being tendered for
    exchange.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of the date of this prospectus, $785,000,000 aggregate
    principal amount of the outstanding notes is outstanding. This
    prospectus and a letter of transmittal are being sent to all
    registered holders of outstanding notes. There will be no fixed
    record date for determining registered holders of outstanding
    notes entitled to participate in the exchange offer.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to conduct the exchange offer in accordance with the
    provisions of the registration rights agreement, the applicable
    requirements of the Securities Act and the Securities Exchange
    Act of 1934, as amended (the &#147;Exchange Act&#148;), and the
    rules and regulations of the SEC. Outstanding notes that are not
    tendered for exchange in the exchange offer will remain
    outstanding and continue to accrue interest and will be entitled
    to the rights and benefits that such holders have under the
    indenture relating to such holders&#146; outstanding notes,
    except for any rights under the registration rights agreement
    that by their terms terminate upon the consummation of the
    exchange offer.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Issuer will be deemed to have accepted for exchange properly
    tendered outstanding notes when it has given notice of the
    acceptance to the exchange agent. The exchange agent will act as
    agent for the tendering holders for the purposes of receiving
    the exchange notes from the Issuer and delivering exchange notes
    to holders. Subject to the terms of the registration rights
    agreement, the Issuer expressly reserves the right to amend or
    terminate the exchange offer and to refuse to accept outstanding
    notes not previously accepted upon the occurrence of any of the
    conditions specified below under &#147;&#151;&#160;Conditions to
    the Exchange Offer.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Holders who tender outstanding notes in the exchange offer will
    not be required to pay brokerage commissions or fees or, subject
    to the instructions in the letter of transmittal, transfer taxes
    with respect to the exchange of outstanding notes. We will pay
    all charges and expenses, other than certain applicable taxes
    described below, in connection with the exchange offer. It is
    important that you read &#147;&#151;&#160;Fees and
    Expenses&#148; below for more details regarding fees and
    expenses incurred in the exchange offer.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Expiration
    Date; Extensions, Amendments</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As used in this prospectus, the term &#147;expiration date&#148;
    means 5:00&#160;p.m., New York City time, on February&#160;17,
    2010. However, if the Issuer, in its sole discretion, extends
    the period of time for which the exchange offer is open, the
    term &#147;expiration date&#148; will mean the latest time and
    date to which the Issuer shall have extended the expiration of
    the exchange offer.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    To extend the period of time during which the exchange offer is
    open, the Issuer will notify the exchange agent of any
    extension, followed by notification to the registered holders of
    the outstanding notes no later than 9:00&#160;a.m., New York
    City time, on the business day after the previously scheduled
    expiration date.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Issuer reserves the right, in its sole discretion:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    to delay accepting for exchange any outstanding notes that have
    not been properly tendered, including because of irregularities
    in the documents required to be delivered to the exchange agent
    by tendering holders or if such documents are incomplete, or
    because of an extension of the exchange offer;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    to extend the exchange offer or to terminate the exchange offer
    and to refuse to accept outstanding notes not previously
    accepted if any of the conditions set forth below under
    &#147;&#151;&#160;Conditions to the
</TD>
</TR>
<!-- XBRL Paragraph Pagebreak -->

</TABLE>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    36
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>
</TD>
    <TD align="left">
    Exchange Offer&#148; have not been satisfied, by giving notice
    of such delay, extension or termination to the exchange
    agent;&#160;and
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    subject to the terms of the registration rights agreement, to
    amend the terms of the exchange offer in any manner.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Any delay in acceptance, extension, termination or amendment
    will be followed as promptly as practicable by notice to the
    registered holders of the outstanding notes. If the Issuer
    amends the exchange offer in a manner that it determines to
    constitute a material change, including the waiver of a material
    condition, the Issuer will promptly disclose the amendment in a
    manner reasonably calculated to inform the holders of
    outstanding notes of that amendment and the Issuer will extend
    the offer period if necessary so that at least five business
    days remain in the offer following notice of the material change.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Conditions
    to the Exchange Offer</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Despite any other term of the exchange offer, the Issuer will
    not be required to accept for exchange, or to issue exchange
    notes in exchange for, any outstanding notes, and may terminate
    or amend the exchange offer as provided in this prospectus
    before accepting any outstanding notes for exchange if:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the exchange offer, or the making of any exchange by a holder of
    outstanding notes, violates any applicable law or interpretation
    of the staff of the SEC;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    any action or proceeding shall have been instituted or
    threatened in any court or by any governmental agency which
    might materially impair the Company&#146;s ability to proceed
    with the exchange offer, and any material adverse development
    shall have occurred in any existing action or proceeding with
    respect to the Company;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    all governmental approvals shall not have been obtained, which
    approvals the Issuer deems necessary for the consummation of the
    exchange offer.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, the Issuer will not be obligated to accept for
    exchange the outstanding notes of any holder that has not made
    to it:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the representations described under &#147;&#151;&#160;Purpose
    and Effect of the Exchange Offer&#148; above and
    &#147;&#151;&#160;Procedures for Tendering&#148; below;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    any other representations as may be reasonably necessary under
    applicable SEC rules, regulations, or interpretations to make
    available to the Issuer an appropriate form for registration of
    the exchange notes under the Securities Act.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Issuer expressly reserves the right at any time or at
    various times to extend the period of time during which the
    exchange offer is open. Consequently, the Issuer may delay
    acceptance of any outstanding notes by giving notice of such
    extension to their holders. During any such extensions, all
    outstanding notes previously tendered will remain subject to the
    exchange offer and the Issuer may accept them for exchange. The
    Issuer will return any outstanding notes that it does not accept
    for exchange for any reason without expense to their tendering
    holders as promptly as practicable after the expiration or
    termination of the exchange offer.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Issuer expressly reserves the right to amend or terminate
    the exchange offer and to reject for exchange any outstanding
    notes not previously accepted for exchange upon the occurrence
    of any of the conditions of the exchange offer specified above.
    The Issuer will give notice of any extension, amendment,
    non-acceptance or termination to the holders of the outstanding
    notes as promptly as practicable. In the case of any extension,
    such notice will be issued no later than 9:00&#160;a.m., New
    York City time, on the business day after the previously
    scheduled expiration date.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    These conditions are for our sole benefit, and we may assert
    them regardless of the circumstances that may give rise to them
    or waive them in whole or in part at any or at various times in
    our sole discretion. If we fail at any time to exercise any of
    the foregoing rights, this failure will not constitute a waiver
    of such right. Each such right will be deemed an ongoing right
    that we may assert at any time or at various times.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    37
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Procedures
    for Tendering</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Only a holder of outstanding notes may tender their outstanding
    notes in the exchange offer. To tender in the exchange offer, a
    holder must comply with either of the following:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    complete, sign and date the letter of transmittal, or a
    facsimile of the letter of transmittal, have the signature on
    the letter of transmittal guaranteed if required by the letter
    of transmittal and mail or deliver such letter of transmittal or
    facsimile to the exchange agent prior to the expiration
    date;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    comply with DTC&#146;s Automated Tender Offer Program procedures
    described below.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, either:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the exchange agent must receive outstanding notes along with the
    letter of transmittal;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    prior to the expiration date, the exchange agent must receive a
    timely confirmation of book-entry transfer of outstanding notes
    into the exchange agent&#146;s account at DTC according to the
    procedure for book-entry transfer described below or a properly
    transmitted agent&#146;s message;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the holder must comply with the guaranteed delivery procedures
    described below.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    To be tendered effectively, the exchange agent must receive any
    physical delivery of the letter of transmittal and other
    required documents at the address set forth below under
    &#147;&#151;&#160;Exchange Agent&#148; prior to the expiration
    date.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A tender to us that is not withdrawn prior to the expiration
    date constitutes an agreement between us and the tendering
    holder upon the terms and subject to the conditions described in
    this prospectus and in the letter of transmittal.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The method of delivery of outstanding notes, letter of
    transmittal, and all other required documents to the exchange
    agent is at the holder&#146;s election and risk. Rather than
    mail these items, we recommend that holders use an overnight or
    hand delivery service. In all cases, holders should allow
    sufficient time to assure timely delivery to the exchange agent
    before the expiration date. Holders should not send letters of
    transmittal or certificates representing outstanding notes to
    us. Holders may request that their respective brokers, dealers,
    commercial banks, trust companies or other nominees effect the
    above transactions for them.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If you are a beneficial owner whose outstanding notes are held
    in the name of a broker, dealer, commercial bank, trust company,
    or other nominee and you wish to participate in the exchange
    offer, you should promptly contact such party and instruct such
    person to tender outstanding notes on your behalf.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    You must make these arrangements or follow these procedures
    before completing and executing the letter of transmittal and
    delivering your outstanding notes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Signatures on the letter of transmittal or a notice of
    withdrawal, as the case may be, must be guaranteed by a member
    firm of a registered national securities exchange or of the
    Financial Industry Regulatory Authority, a commercial bank or
    trust company having an office or correspondent in the United
    States or another &#147;Eligible Guarantor Institution&#148;
    within the meaning of
    <FONT style="white-space: nowrap">Rule&#160;17Ad-15</FONT>
    under the Exchange Act unless the outstanding notes surrendered
    for exchange are tendered:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    by a registered holder of the outstanding notes who has not
    completed the box entitled &#147;Special Registration
    Instructions&#148; or &#147;Special Delivery Instructions&#148;
    on the letter of transmittal;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    for the account of an Eligible Guarantor Institution.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If the letter of transmittal is signed by a person other than
    the registered holder of any outstanding notes listed on the
    outstanding notes, such outstanding notes must be endorsed or
    accompanied by a properly completed bond power. The bond power
    must be signed by the registered holder as the registered
    holder&#146;s name appears on the outstanding notes and an
    Eligible Guarantor Institution must guarantee the signature on
    the bond power.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    38
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If the letter of transmittal or any certificates representing
    outstanding notes, or bond powers are signed by trustees,
    executors, administrators, guardians, attorneys-in-fact,
    officers of corporations, or others acting in a fiduciary or
    representative capacity, those persons should also indicate when
    signing and, unless waived by us, they should also submit
    evidence satisfactory to us of their authority to so act.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Book-Entry
    Delivery Procedures</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Promptly after the date of this prospectus, the exchange agent
    will establish an account with respect to the outstanding notes
    at DTC for purposes of the exchange offer. Any financial
    institution that is a participant in DTC&#146;s systems may make
    book-entry delivery of the outstanding notes by causing DTC to
    transfer those outstanding notes into the exchange agent&#146;s
    account at DTC in accordance with DTC&#146;s procedures for such
    transfer. To be timely, book-entry delivery of outstanding notes
    requires receipt of a confirmation of a book-entry transfer, a
    &#147;book-entry confirmation,&#148; prior to the expiration
    date. In addition, although delivery of outstanding notes may be
    effected through book-entry transfer into the exchange
    agent&#146;s account at DTC, the letter of transmittal or a
    manually signed facsimile thereof, together with any required
    signature guarantees and any other required documents, or an
    &#147;agent&#146;s message,&#148; as defined below, in
    connection with a book-entry transfer, must, in any case, be
    delivered or transmitted to and received by the exchange agent
    at its address set forth on the cover page of the letter of
    transmittal prior to the expiration date to receive exchange
    notes for tendered outstanding notes, or the guaranteed delivery
    procedure described below must be complied with. Tender will not
    be deemed made until such documents are received by the exchange
    agent. Delivery of documents to DTC does not constitute delivery
    to the exchange agent. Holders of outstanding notes who are
    unable to deliver confirmation of the book-entry tender of their
    outstanding notes into the exchange agent&#146;s account at DTC
    or all other documents required by the letter of transmittal to
    the exchange agent on or prior to the expiration date must
    tender their outstanding notes according to the guaranteed
    delivery procedures described below.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Tender of
    Outstanding Notes Held Through The Depository
    Trust&#160;Company</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The exchange agent and DTC have confirmed that any financial
    institution that is a participant in DTC&#146;s system may use
    DTC&#146;s Automated Tender Offer Program to tender.
    Participants in the program may, instead of physically
    completing and signing the letter of transmittal and delivering
    it to the exchange agent, electronically transmit their
    acceptance of the exchange offer by causing DTC to transfer the
    outstanding notes to the exchange agent in accordance with
    DTC&#146;s Automated Tender Offer Program procedures for
    transfer. DTC will then send an agent&#146;s message to the
    exchange agent. The term &#147;agent&#146;s message&#148; means
    a message transmitted by DTC, received by the exchange agent and
    forming part of the book-entry confirmation, which states that:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    DTC has received an express acknowledgment from a participant in
    its Automated Tender Offer Program that it is tendering
    outstanding notes that are the subject of the book-entry
    confirmation;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the participant has received and agrees to be bound by the terms
    of the letter of transmittal, or, in the case of an agent&#146;s
    message relating to guaranteed delivery, that such participant
    has received and agrees to be bound by the applicable notice of
    guaranteed delivery;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    we may enforce that agreement against such participant.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Acceptance
    of Exchange Notes</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In all cases, we will issue exchange notes for outstanding notes
    that we have accepted for exchange under the exchange offer only
    after the exchange agent timely receives:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    outstanding notes or a timely book-entry confirmation of such
    outstanding notes into the exchange agent&#146;s account at
    DTC;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a properly completed and duly executed letter of transmittal and
    all other required documents or a properly transmitted
    agent&#146;s message.
</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    39
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    By tendering outstanding notes pursuant to the exchange offer,
    each holder will represent to us that, among other things:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the holder is not an affiliate of K. Hovnanian or the guarantors
    within the meaning of Rule&#160;405 of the Securities Act;
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the holder is not engaged in, does not intend to engage in, and
    has no arrangement or understanding with any person to
    participate in, a distribution of the exchange notes;&#160;and
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the holder is acquiring the exchange notes in the ordinary
    course of its business.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If the holder is an affiliate of K. Hovnanian or any guarantor,
    or is engaging in, or intends to engage in, or has any
    arrangement or understanding with any person to participate in,
    a distribution of the exchange notes, or is not acquiring the
    exchange notes in the ordinary course of its business:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the holder cannot rely on the position of the staff of the SEC
    enunciated in <I>Morgan Stanley&#160;&#038; Co., Inc.
    </I>(available June&#160;5, 1991), <I>Exxon Capital Holdings
    Corporation </I>(available May&#160;13, 1988), as interpreted in
    the SEC&#146;s letter to <I>Shearman&#160;&#038; Sterling
    </I>(available July&#160;2, 1993), or similar no-action
    letters;&#160;and
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    in the absence of an exception from the position stated
    immediately above, the holder must comply with the registration
    and prospectus delivery requirements of the Securities Act in
    connection with any resale of the exchange notes.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, each broker-dealer that is to receive exchange
    notes for its own account in exchange for outstanding notes must
    represent that such outstanding notes were acquired by that
    broker-dealer as a result of market-making activities or other
    trading activities and must acknowledge that it will deliver a
    prospectus that meets the requirements of the Securities Act in
    connection with any resale of the exchange notes. The letter of
    transmittal states that by so acknowledging and by delivering a
    prospectus, a broker-dealer will not be deemed to admit that it
    is an &#147;underwriter&#148; within the meaning of the
    Securities Act. See &#147;Plan of Distribution.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We will interpret the terms and conditions of the exchange
    offer, including the letter of transmittal and the instructions
    to the letter of transmittal, and will resolve all questions as
    to the validity, form, eligibility, including time of receipt,
    and acceptance of outstanding notes tendered for exchange. Our
    determinations in this regard will be final and binding on all
    parties. We reserve the absolute right to reject any and all
    tenders of any particular outstanding notes not properly
    tendered or to not accept any particular outstanding notes if
    the acceptance might, in our or our counsel&#146;s judgment, be
    unlawful. We also reserve the absolute right to waive any
    defects or irregularities or conditions of the exchange offer as
    to any particular outstanding notes either before or after the
    expiration date, including the right to waive the ineligibility
    of any holder who seeks to tender outstanding notes in the
    exchange offer.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Unless waived, any defects or irregularities in connection with
    tenders of outstanding notes for exchange must be cured within a
    reasonable period of time as we determine. Neither we, the
    exchange agent, nor any other person will be under any duty to
    give notification of any defect or irregularity with respect to
    any tender of outstanding notes for exchange, nor will any of
    them incur any liability for any failure to give notification.
    Any outstanding notes received by the exchange agent that are
    not properly tendered and as to which the irregularities have
    not been cured or waived will be returned by the exchange agent
    to the tendering holder, without cost to the holder, unless
    otherwise provided in the letter of transmittal, as soon as
    practicable after the expiration date.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Guaranteed
    Delivery Procedures</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Holders wishing to tender their outstanding notes but whose
    outstanding notes are not immediately available or who cannot
    deliver their outstanding notes, the letter of transmittal or
    any other required documents to the exchange agent or comply
    with the applicable procedures under DTC&#146;s Automatic Tender
    Offer Program prior to the expiration date may still tender if:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the tender is made through an Eligible Guarantor Institution;
</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    40
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    prior to the expiration date, the exchange agent receives from
    such Eligible Guarantor Institution either (i)&#160;a properly
    completed and duly executed notice of guaranteed delivery by
    facsimile transmission, mail or hand delivery or (ii)&#160;a
    properly transmitted agent&#146;s message and notice of
    guaranteed delivery:
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="2%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    setting forth the name and address of the holder, the registered
    number(s) of such outstanding notes and the principal amount of
    outstanding notes tendered;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    stating that the tender is being made thereby;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    guaranteeing that, within three New York Stock Exchange trading
    days after the expiration date, the letter of transmittal, or
    facsimile thereof, together with the outstanding notes or a
    book-entry confirmation, and any other documents required by the
    letter of transmittal, will be deposited by the Eligible
    Guarantor Institution with the exchange agent;&#160;and
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the exchange agent receives the properly completed and executed
    letter of transmittal or facsimile thereof, as well as
    certificate(s) representing all tendered outstanding notes in
    proper form for transfer or a book-entry confirmation of
    transfer of the outstanding notes into the exchange agent&#146;s
    account at DTC, and all other documents required by the letter
    of transmittal within three New York Stock Exchange trading days
    after the expiration date.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Withdrawal
    Rights</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Except as otherwise provided in this prospectus, holders of
    outstanding notes may withdraw their tender of outstanding notes
    at any time prior to 5:00&#160;p.m., New York City time, on the
    expiration date.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For a withdrawal to be effective:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the exchange agent must receive a written notice of withdrawal,
    which may be by telegram, telex, facsimile or letter, at one of
    the addresses set forth below under &#147;&#151;&#160;Exchange
    Agent&#148;;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    holders must comply with the appropriate procedures of
    DTC&#146;s Automated Tender Offer Program system.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Any notice of withdrawal must:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    specify the name of the person who tendered the outstanding
    notes to be withdrawn;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    identify the outstanding notes to be withdrawn, including the
    principal amount of the outstanding notes;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    where certificates for outstanding notes have been transmitted,
    specify the name in which such outstanding notes were
    registered, if different from that of the withdrawing holder.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If certificates for outstanding notes have been delivered or
    otherwise identified to the exchange agent, then, prior to the
    release of such certificates, the withdrawing holder must also
    submit:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the serial numbers of the particular certificates to be
    withdrawn;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a signed notice of withdrawal with signatures guaranteed by an
    Eligible Guarantor Institution unless such holder is an Eligible
    Guarantor Institution.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If outstanding notes have been tendered pursuant to the
    procedures for book-entry transfer described above, any notice
    of withdrawal must specify the name and number of the account at
    DTC to be credited with the withdrawn outstanding notes and
    otherwise comply with the procedures of the facility. We will
    determine all questions as to the validity, form, and
    eligibility, including time of receipt, of notices of
    withdrawal, and our determination will be final and binding on
    all parties. Any outstanding notes so withdrawn will be deemed
    not to have been validly tendered for exchange for purposes of
    the exchange offer. Any outstanding notes that have been
    tendered for exchange but that are not exchanged for any reason
    will be returned to their holder, without cost to the holder or,
    in the case of book-entry transfer, will be credited to an
    account maintained with DTC, as soon as practicable after
    withdrawal, rejection of tender or termination of the exchange
    offer. Properly
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    41
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    withdrawn outstanding notes may be retendered by following the
    procedures described under &#147;&#151;&#160;Procedures for
    Tendering&#148; above at any time on or prior to the expiration
    date.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Exchange
    Agent</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Wilmington Trust&#160;Company has been appointed as the exchange
    agent for the exchange offer. Wilmington Trust&#160;Company also
    acts as trustee under the indenture governing the outstanding
    notes, which is the same indenture that will govern the exchange
    notes. You should direct all executed letters of transmittal and
    all questions and requests for assistance, for additional copies
    of this prospectus or the letter of transmittal, or for notices
    of guaranteed delivery to the exchange agent addressed as
    follows:
</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <FONT style="font-family: 'Times New Roman', Times">Delivery to:
    Wilmington Trust&#160;Company, Exchange Agent
    </FONT>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="34%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="31%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="31%">&nbsp;</TD>	<!-- colindex=03 type=maindata -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<!-- TableOutputBody -->
<TR valign="bottom">
<TD nowrap align="center" valign="top">
    <I>By Mail:</I>
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    <I>By Overnight Mail or Courier<BR>
    Delivery:</I>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    <I>By Hand:</I>
</TD>
</TR>
<TR valign="bottom" style="line-height: 6pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="center" valign="top">
    Wilmington Trust&#160;Company<BR>
    Rodney Square North<BR>
    1100 North Market Street<BR>
    Wilmington, DE
    <FONT style="white-space: nowrap">19890-1626</FONT><BR>
    Attn: Corporate Trust&#160;Operations
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    Wilmington Trust Company<BR>
    Rodney Square North<BR>
    1100 North Market Street<BR>
    Wilmington, DE 19890-1626<BR>
    Attn: Corporate Trust Operations
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    Wilmington Trust Company<BR>
    Rodney Square North<BR>
    1100 North Market Street<BR>
    Wilmington, DE 19890-1626<BR>
    Attn: Corporate Trust Operations
</TD>
</TR>
<TR valign="bottom" style="line-height: 6pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="center" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    <I>For Facsimile Transmission:<BR>
    </I>(302) 636-4139
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="center" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    <I>Confirm By Telephone:<BR>
    </I>(302) 636-6181
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 6pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="center" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    <I>For Information:<BR>
    </I>(302) 636-6181
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    IF YOU DELIVER THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER
    THAN AS SET FORTH ABOVE OR TRANSMIT INSTRUCTIONS&#160;VIA
    FACSIMILE OTHER THAN AS SET FORTH ABOVE, THAT DELIVERY OR THOSE
    INSTRUCTIONS&#160;WILL NOT BE EFFECTIVE.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Fees and
    Expenses</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We will bear the expenses of soliciting tenders. The principal
    solicitation is being made by mail or electronic delivery by the
    exchange agent. We may make additional solicitations by mail,
    electronic delivery, facsimile, telephone or in person by our
    officers and regular employees and our affiliates.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have not retained any dealer-manager in connection with the
    exchange offer and will not make any payment to broker-dealers
    or others for soliciting acceptances of the exchange offer. We
    will, however, pay the exchange agent reasonable and customary
    fees for its services and reimburse it for its related,
    reasonable out-of-pocket expenses.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We will pay the estimated cash expenses to be incurred in
    connection with the exchange offer. The expenses are estimated
    in the aggregate to be approximately $170,000. They include:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    SEC registration fees;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    fees and expenses of the exchange agent and trustee;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    accounting and legal fees and printing costs;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    related fees and expenses.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Accounting
    Treatment of this Exchange Offer</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We will record the exchange notes in our accounting records at
    the same carrying value as the outstanding notes, which is the
    aggregate principal amount as reflected in our accounting
    records on the date of exchange.
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    42
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Accordingly, we will not recognize any gain or loss for
    accounting purposes upon the consummation of this exchange
    offer. We will capitalize the expenses of this exchange offer
    and amortize them over the life of the notes.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Transfer
    Taxes</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We will pay all transfer taxes, if any, applicable to the
    exchange of outstanding notes under the exchange offer. The
    tendering holder, however, will be required to pay any transfer
    taxes, whether imposed on the registered holder or any other
    person, if:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    certificates representing outstanding notes for principal
    amounts not tendered or accepted for exchange are to be
    delivered to, or are to be issued in the name of, any person
    other than the registered holder of outstanding notes
    tendered;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    tendered outstanding notes are registered in the name of any
    person other than the person signing the letter of
    transmittal;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a transfer tax is imposed for any reason other than the exchange
    of outstanding notes under the exchange offer.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If satisfactory evidence of payment of such taxes is not
    submitted with the letter of transmittal, the amount of such
    transfer taxes will be billed to that tendering holder.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Holders who tender their outstanding notes for exchange will not
    be required to pay any transfer taxes. However, holders who
    instruct us to register exchange notes in the name of, or
    request that outstanding notes not tendered or not accepted in
    the exchange offer be returned to, a person other than the
    registered tendering holder will be required to pay any
    applicable transfer tax.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Consequences
    of Failure to Exchange</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Holders of outstanding notes who do not exchange their
    outstanding notes for exchange notes under the exchange offer
    will remain subject to the restrictions on transfer of such
    outstanding notes:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    as set forth in the legend printed on the notes as a consequence
    of the issuance of the outstanding notes pursuant to the
    exemptions from, or in transactions not subject to, the
    registration requirements of the Securities Act and applicable
    state securities laws;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    otherwise set forth in the confidential offering circular
    distributed in connection with the private offering of the
    outstanding notes.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In general, you may not offer or sell the outstanding notes
    unless they are registered under the Securities Act or if the
    offer or sale is exempt from registration under the Securities
    Act and applicable state securities laws. Except as required by
    the registration rights agreement, we do not intend to register
    resales of the outstanding notes under the Securities Act. Based
    on interpretations of the staff of the SEC, exchange notes
    issued pursuant to the exchange offer may be offered for resale,
    resold or otherwise transferred by their holders without
    compliance with the registration and prospectus delivery
    provisions of the Securities Act, provided that:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the holder is not an affiliate of K. Hovnanian or any guarantor
    within the meaning of Rule&#160;405 of the Securities Act;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the holder is not engaged in, does not intend to engage in, and
    does not have an arrangement or understanding with any person to
    participate in, a distribution of the exchange notes;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the holder is acquiring the exchange notes in the ordinary
    course of its business.
</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    43
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Any holder who tenders outstanding notes in the exchange offer
    for the purpose of participating in a distribution of the
    exchange notes:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    cannot rely on the position of the staff of the SEC enunciated
    in <I>Morgan Stanley&#160;&#038; Co., Inc. </I>(available
    June&#160;5, 1991), <I>Exxon Capital Holdings Corporation
    </I>(available May&#160;13, 1988), as interpreted in the
    SEC&#146;s letter to <I>Shearman&#160;&#038; Sterling
    </I>(available July&#160;2, 1993), or similar no-action letters;
    and
</TD>
</TR>
    <FONT style="font-size: 10pt">
    </FONT>

<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    in the absence of an exception from the position stated
    immediately above, must comply with the registration and
    prospectus delivery requirements of the Securities Act in
    connection with any resale of the exchange notes.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Other</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Participating in the exchange offer is voluntary, and you should
    carefully consider whether to accept. You are urged to consult
    your financial and tax advisors in making your own decision on
    what action to take.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We may in the future seek to acquire untendered outstanding
    notes in open market or privately negotiated transactions,
    through subsequent exchange offers or otherwise. We have no
    present plans to acquire any outstanding notes that are not
    tendered in the exchange offer or to file a registration
    statement to permit resales of any untendered outstanding notes.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    44
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='208'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">DESCRIPTION
    OF NOTES</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>In this section, references to the <B>&#147;Company&#148;</B>
    mean Hovnanian Enterprises, Inc., a Delaware corporation, and do
    not include K.&#160;Hovnanian Enterprises, Inc. or any of its
    subsidiaries, and references to the <B>&#147;Issuer,&#148;
    &#147;us</B>,&#148; <B>&#147;we&#148;</B> or
    <B>&#147;our&#148;</B> mean K. Hovnanian Enterprises, Inc., a
    California corporation. References to <B>&#147;Notes&#148;</B>
    in this section are references to the outstanding
    10<FONT style="vertical-align: text-top; font-size: 70%;">5</FONT>/<FONT style="font-size: 70%;">8</FONT>%&#160;Senior
    Secured Notes due 2016 and the exchange
    10<FONT style="vertical-align: text-top; font-size: 70%;">5</FONT>/<FONT style="font-size: 70%;">8</FONT>%&#160;Senior
    Secured Notes due 2016 offered hereby, collectively.</I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Issuer issued the outstanding notes, and will issue the
    exchange notes described in this prospectus, under an indenture
    (the <B>&#147;Indenture&#148;</B>), dated as of October&#160;20,
    2009, among the Issuer, the Guarantors and Wilmington
    Trust&#160;Company, a Delaware banking corporation, as trustee
    (the <B>&#147;Trustee&#148;</B>). The following is a summary of
    the material terms and provisions of the Notes. The terms of the
    Notes include those stated in the Indenture and those made part
    of the Indenture by reference to the Trust&#160;Indenture Act of
    1939, as amended (the <B>&#147;Trust&#160;Indenture
    Act&#148;</B>), as in effect on the date of the Indenture. The
    Notes are subject to all such terms, and prospective
    participants in the exchange offer should refer to the Indenture
    and the Trust&#160;Indenture Act for a statement of such terms.
    The form and terms of the exchange notes and the outstanding
    notes are identical in all material respects, except that the
    exchange notes have been registered under the Securities Act and
    will not contain terms with respect to transfer restrictions or
    additional interest upon a failure to fulfill certain of our
    obligations under the registration rights agreement.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This description of the Notes contains definitions of terms,
    including those defined under the caption
    &#147;&#151;&#160;Definitions of certain terms used in the
    Indenture.&#148; Capitalized terms that are used but not
    otherwise defined herein have the meanings assigned to them in
    the Indenture.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Any outstanding notes that remain outstanding after consummation
    of this exchange offer and the exchange notes will constitute a
    single series of debt securities under the Indenture. Holders of
    outstanding notes who do not exchange their notes in this
    exchange offer will vote together with the holders of exchange
    notes for all relevant purposes under the Indenture.
    Accordingly, when determining whether the required holders have
    given notice, consent or waiver or taken any other action
    permitted under the Indenture, any outstanding notes that are
    not exchanged pursuant to the exchange offer will be aggregated
    with the exchange notes. All references herein to specified
    percentages in aggregate principal amount of Notes outstanding
    shall be deemed to mean, at any time after this exchange offer
    is consummated, percentages in aggregate principal amount of
    outstanding notes and exchange notes outstanding.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">General</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Notes will bear interest from the most recent date to which
    interest has been paid or, if no interest has been paid, from
    October&#160;20, 2009 at the rate per annum of
    10<FONT style="vertical-align: text-top; font-size: 70%;">5</FONT>/<FONT style="font-size: 70%;">8</FONT>%,
    payable semi-annually on April&#160;15 and October&#160;15 of
    each year, commencing April&#160;15, 2010 to Holders of record
    at the close of business on April 1 or October&#160;1, as the
    case may be, immediately preceding each such interest payment
    date. The Notes will mature on October&#160;15, 2016, and will
    be issued in denominations of $2,000 and higher integral
    multiples of $1,000. Interest will be computed on the basis of a
    <FONT style="white-space: nowrap">360-day</FONT> year
    consisting of twelve
    <FONT style="white-space: nowrap">30-day</FONT>
    months.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Indenture initially limits the principal amount of
    securities that the Issuer may issue thereunder to $785.0
    million. Subject to the covenants described below, including
    &#147;&#151;&#160;Certain covenants&#160;&#151; Limitations on
    indebtedness&#148; and &#147;&#151;&#160;Certain
    covenants&#160;&#151; Limitations on liens,&#148; the Issuer may
    issue Notes under the Indenture having the same terms in all
    respects as the Notes except that interest may accrue on the
    additional notes <B>(&#147;Additional Notes&#148;</B>) from
    their date of issuance. The Notes and any Additional Notes
    issued under the Indenture would be treated as a single class
    for all purposes under the Indenture, and will vote together as
    one class on all matters with respect to the Notes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The outstanding notes are, and the exchange notes will be,
    guaranteed by the Company and each of the Guarantors (together,
    the <B>&#147;Guarantors&#148;</B>) pursuant to the Guarantees
    (the <B>&#147;Guarantees&#148;</B>) described below.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    45
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Ranking</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The outstanding notes are, and the exchange notes will be,
    general secured obligations of the Issuer and rank senior in
    right of payment to all existing and future Indebtedness of the
    Issuer that is, by its terms, expressly subordinated in right of
    payment to the Notes and <I>pari passu </I>in right of payment
    with all existing and future Indebtedness of the Issuer that is
    not so subordinated, effectively senior to all unsecured
    Indebtedness to the extent of the value of the Collateral
    referred to below and effectively junior to any obligations of
    the Issuer that are secured by assets that are not part of the
    Collateral securing the Notes, to the extent of the value of the
    assets securing such obligations. Under specified circumstances,
    the Issuer may be released from its obligations under the Notes
    and the Indenture. See &#147;&#151;&#160;Condition for Release
    of the Issuer&#148; below. The Guarantees of the outstanding
    notes are, and the Guarantees of the exchange notes will be,
    general secured obligations of the Guarantors and will rank
    senior in right of payment to all existing and future
    Indebtedness of the Guarantors that is, by its terms, expressly
    subordinated in right of payment to the Guarantees and <I>pari
    passu </I>in right of payment with all existing and future
    Indebtedness of the Guarantors that is not so subordinated,
    effectively senior to all unsecured Indebtedness of the
    Guarantors to the extent of the value of the Collateral and
    effectively junior to any obligations of any Guarantor that are
    secured by assets that are not part of the Collateral securing
    the Guarantees, to the extent of the value of the assets
    securing such obligations. In addition, the Indenture permits
    the Issuer and the Guarantors to grant certain &#147;Permitted
    Liens&#148;, some of which, as a matter of law, may have
    priority claims over the Collateral.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    At October&#160;31, 2009, the Issuer and the Guarantors had:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    approximately $797.2&#160;million of secured indebtedness
    outstanding ($783.1&#160;million, net of discount), including
    the outstanding notes;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    approximately $824.3&#160;million of Senior Unsecured Notes
    ($822.3&#160;million, net of discount); and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    approximately $146.2&#160;million senior subordinated notes.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, as of October&#160;31, 2009, we had $130.3 million
    in aggregate face amount of letters of credit issued under cash
    collateralized letter of credit agreements or facilities.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under the terms of our indentures governing our senior secured,
    senior and senior subordinated notes we are currently limited in
    our ability to incur additional indebtedness other than certain
    permitted indebtedness, refinancing indebtedness and
    non-recourse indebtedness as described under &#147;&#151;
    Certain covenants&#160;&#151; Limitations on indebtedness.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, as of October&#160;31, 2009, our non-guarantor
    subsidiaries had approximately $72.5&#160;million of
    liabilities, including trade payables, but excluding
    intercompany obligations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Security</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">General</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Notes will be secured by first-priority Liens (the
    <B>&#147;First-Priority Liens&#148;</B>) granted by the Issuer,
    the existing Guarantors and any future Guarantor on all of the
    assets of the Issuer and the Guarantors (whether now owned or
    hereafter arising or acquired) other than Excluded Property
    (referred to below) and subject to Permitted Liens and
    encumbrances described in the Indenture and the Security
    Documents (collectively the <B>&#147;Collateral&#148;</B>).
    Certain security may not be in place on the issue date of the
    exchange notes or may not be perfected on the issue date of the
    exchange notes. In particular, we are required by the terms of
    the Indenture to use reasonable best efforts to provide security
    and record mortgages over real property promptly, but in no
    event later than 120 days after October&#160;20, 2009 (the date
    of the Indenture).
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Collateral will not include (collectively, the
    <B>&#147;Excluded Property&#148;</B>) (a)&#160;any pledges of
    stock of a Guarantor or of K.&#160;Hovnanian JV Holdings, L.L.C.
    to the extent that
    <FONT style="white-space: nowrap">Rule&#160;3-16</FONT>
    of
    <FONT style="white-space: nowrap">Regulation&#160;S-X</FONT>
    under the Securities Act requires or would require (or is
    replaced with another rule or regulation, or any other law, rule
    or regulation is adopted, that would require) the filing with
    the SEC of separate financial statements of such Guarantor or of
    K.&#160;Hovnanian JV Holdings, L.L.C. that are not otherwise
    required to be filed, but only to the
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    46
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    extent necessary to not be subject to such requirement,
    (b)&#160;up to $50.0&#160;million of assets received in
    connection with Asset Dispositions and asset swaps or exchanges
    as permitted by paragraph (3)&#160;of the definition of
    &#147;Permitted Investments,&#148; (c)&#160;personal property
    where the cost of obtaining a security interest or perfection
    thereof exceeds its benefits (as reasonably determined by the
    Company&#146;s Board of Directors in a board resolution
    delivered to the Collateral Agent), (d)&#160;real property
    subject to a Lien securing Indebtedness incurred for the purpose
    of financing the acquisition thereof, (e)&#160;real property
    located outside the United States, (f)&#160;unentitled land,
    (g)&#160;real property that is leased or held for the purpose of
    leasing to unaffiliated third parties, (h)&#160;equity interests
    in Unrestricted Subsidiaries, except for K. Hovnanian JV
    Holdings, L.L.C., our wholly owned holding company subsidiary
    that owns our equity interests in substantially all of our joint
    ventures, and subject to future grants under certain
    circumstances as required under the Indenture, (i)&#160;any real
    property in a community under development with a dollar amount
    of investment as of the most recent month-end (as determined in
    accordance with GAAP) of less than $2.0&#160;million or with
    less than 10 lots remaining, (j)&#160;assets, with respect to
    which any applicable law or contract prohibits the creation or
    perfection of security interests therein and (k)&#160;up to
    $25.0&#160;million of cash or Cash Equivalents that are pledged
    to secure obligations in respect of letters of credit and
    similar instruments if, after the use of commercially reasonable
    efforts by the Company to obtain a Lien on such cash or Cash
    Equivalents for the benefit of the Holders of the Notes, the
    entities issuing such letters of credit do not consent to the
    granting of such Liens. Upon release of such cash or Cash
    Equivalents from the liens securing such letters of credit and
    similar instruments, such cash and Cash Equivalents will become
    subject to a Lien in favor of the Holders of Notes, pending
    usage as permitted by the Indenture. In addition, under the
    terms of the Security Documents, the Issuer and the Guarantors
    will not be required to provide control agreements for the
    benefit of the First-Priority Liens with respect to certain
    deposit, checking or securities accounts with average balances
    below a certain dollar amount. The Issuer and the Guarantors
    will also not be required to provide title insurance policies in
    respect of real property Collateral.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If property (other than Excluded Property) is acquired by the
    Issuer or a Guarantor that is not automatically subject to a
    perfected security interest under the Security Documents or a
    Restricted Subsidiary becomes a Guarantor, then the Issuer or
    Guarantor will, as soon as practical after such property&#146;s
    acquisition or it no longer being Excluded Property (subject to
    the post-closing time period described above), provide security
    over such property (or, in the case of a new Guarantor, all of
    its assets except Excluded Property) in favor of the Collateral
    Agent, cause the Liens to be duly perfected and deliver certain
    certificates and opinions in respect thereof as required by the
    Indenture or the Security Documents.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, the Indenture will permit the Issuer and the
    Guarantors to create additional Liens under specified
    circumstances, including certain additional Liens on the
    Collateral that may rank equally with the Liens securing the
    Notes or, in certain circumstances, senior to such Liens. See
    &#147;&#151; Ranking&#148; below and the definition of
    &#147;Permitted Liens.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Collateral will be pledged to (1)&#160;Wilmington
    Trust&#160;Company as collateral agent (together with any
    successor, the <B>&#147;Collateral Agent&#148;</B>), on a
    first-priority basis, for the benefit of the Trustee and the
    Holders of the Notes and (2)&#160;Wilmington Trust&#160;Company,
    as collateral agent, on a junior-priority basis, for the benefit
    of the holders of any outstanding Second Lien Notes, Wilmington
    Trust&#160;Company, as collateral agent, on a junior-priority
    basis, for the benefit of the holders of any outstanding Third
    Lien Notes (collectively, the <B>&#147;Outstanding Junior
    Secured Notes&#148;</B>) and to a collateral agent (together
    with Wilmington Trust&#160;Company and any successors, the
    <B>&#147;Junior Collateral Agents&#148;</B>) for any future
    Indebtedness secured by a junior lien on the Collateral as
    permitted by the Indenture and the Intercreditor Agreements
    (together with the Outstanding Junior Secured Notes, the
    <B>&#147;Junior Notes&#148;</B>) and obligations in respect of
    the Junior Notes (collectively, the <B>&#147;Junior Priority
    Lien Obligations&#148;</B>). The Junior Priority Lien
    Obligations will constitute claims separate and apart from (and
    of different classes from) the First-Priority Lien Obligations
    and the Liens on the Collateral securing such obligations (the
    <B>&#147;Junior Priority Liens&#148;</B>) will be junior to the
    First-Priority Liens. In certain states, mortgages will be
    granted solely to a single collateral agent, which will hold
    such mortgages for the benefit of the holders of the
    First-Priority Liens and the Junior Priority Liens.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    47
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Control
    Over Collateral and Enforcement of Liens</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Security Documents provide that, while any First-Priority
    Lien Obligations are outstanding, the holders of the
    First-Priority Liens will control at all times all remedies and
    other actions related to the Collateral and the Junior-Priority
    Liens will not entitle the Junior Collateral Agents, the
    trustees or representatives of any Junior Notes (the
    <B>&#147;Junior Trustees&#148;) </B>or the holders of any Junior
    Notes to take any action whatsoever (other than limited actions
    to preserve and protect the Junior-Priority Liens that do not
    impair the First-Priority Liens) with respect to the Collateral.
    As a result, while any First-Priority Lien Obligations are
    outstanding, none of the Junior Collateral Agents, the Junior
    Trustees or the holders of the Junior Notes will be able to
    force a sale of the Collateral or otherwise exercise remedies
    normally available to secured creditors without the concurrence
    of the holders of the First-Priority Liens or challenge any
    decisions in respect thereof by the holders of the
    First-Priority Liens.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Proceeds realized by the Collateral Agent or the Junior
    Collateral Agent from the Collateral or in an insolvency
    proceeding will be applied:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    first, to amounts owing to the Collateral Agent and the Trustee
    in their capacities as such in accordance with the terms of the
    Security Documents;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    second, to amounts owing to the holders of the First-Priority
    Lien Obligations in accordance with the terms of the
    First-Priority Lien Obligations until they are paid in full;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    third, to amounts owing to the Junior Collateral Agent and the
    Junior Trustee in their capacity as such in accordance with the
    terms of the applicable debt instruments;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    fourth, ratably to amounts owing to the Holders of the Junior
    Notes in accordance with the terms of the applicable debt
    instruments;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    fifth, to the Issuers and the Guarantors
    <FONT style="white-space: nowrap">and/or</FONT> other
    persons entitled thereto.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Collateral has not been appraised in connection with the
    offering of the Notes. At October&#160;31, 2009, the aggregate
    book value of the real property that would constitute part of
    the Collateral was approximately $780.7&#160;million, which does
    not include the impact of inventory investments, home deliveries
    or impairments thereafter and which may differ from the
    appraised value. In addition, cash that would constitute a part
    of the Collateral was $426.0&#160;million as of October&#160;31,
    2009, which includes $135.2&#160;million of restricted cash
    collateralizing certain letters of credit. Subsequent to such
    date, cash uses include general business operations and real
    estate and other investments. The incremental value of the stock
    of Guarantors that would constitute a part of the Collateral
    securing the Notes is not meaningful because the underlying
    assets of such Guarantors have been separately pledged as
    Collateral. The fair market value of the Collateral is subject
    to fluctuations based on factors that include, among others, the
    condition of the homebuilding industry, our ability to implement
    our business strategy, the ability to sell the Collateral in an
    orderly sale, general economic conditions, the availability of
    buyers and similar factors. The amount to be received upon a
    sale of the Collateral would be dependent on numerous factors,
    including, but not limited to, the actual fair market value of
    the Collateral at such time and the timing and the manner of the
    sale. By its nature, portions of the Collateral may be illiquid
    and may have no readily ascertainable market value. Likewise,
    there can be no assurance that the Collateral will be saleable,
    or, if saleable, that there will not be substantial delays in
    its liquidation. In the event of a foreclosure, liquidation,
    bankruptcy or similar proceeding, we cannot assure you that the
    proceeds from any sale or liquidation of the Collateral will be
    sufficient to pay our obligations under the Notes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If the proceeds of any of the Collateral were not sufficient to
    repay all amounts due on the Notes, the Holders of the Notes (to
    the extent not repaid from the proceeds of the sale of the
    Collateral) would have only an unsecured claim against the
    remaining assets of the Issuer and the Guarantors. By its
    nature, some or all of the Collateral will be illiquid and may
    have no readily ascertainable market value. Likewise, there can
    be no assurance that the Collateral will be saleable, or, if
    saleable, that there will not be substantial delays in its
    liquidation. To the extent that Liens (including Permitted
    Liens), rights or easements granted to third parties encumber
    assets located on property owned by the Issuer or the
    Guarantors, including the Collateral, such third parties may
    exercise rights and remedies with respect to the property
    subject to such Liens that could
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    48
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    adversely affect the value of the Collateral and the ability of
    the Collateral Agent, the Trustee or the Holders of the Notes to
    realize or foreclose on Collateral.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Release
    of Liens</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Security Documents and the Indenture provide that the
    First-Priority Liens securing the Guarantee of any Guarantor
    will be automatically released when such Guarantor&#146;s
    Guarantee is released in accordance with the terms of the
    Indenture. In addition, the First-Priority Liens securing the
    Notes will be released:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (a)&#160;upon discharge of the Indenture or defeasance of the
    Notes as set forth below under &#147;&#151;&#160;Discharge and
    defeasance of Indenture,&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (b)&#160;upon payment in full of principal, interest and all
    other Obligations on the Notes issued under the Indenture,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (c)&#160;with the consent of the requisite Holders of the Notes
    in accordance with the provisions under
    &#147;&#151;&#160;Amendment, supplement and waiver,&#148;
    including, without limitation, consents obtained in connection
    with a tender offer or exchange offer for, or purchase of,
    Notes,&#160;and
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (d)&#160;in connection with any disposition of Collateral to any
    Person other than the Company, the Issuer or any of the
    Restricted Subsidiaries (but excluding any transaction subject
    to &#147;Certain Covenants&#160;&#151; Limitations on mergers,
    consolidations and sales of assets&#148; where the recipient is
    required to become the obligor on the Notes or a Guarantee) that
    is permitted by the Indenture (with respect to the Lien on such
    Collateral).
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The indentures governing the Outstanding Junior Notes, the
    security documents related thereto and the Intercreditor
    Agreements referred to below generally provide that the
    Junior-Priority Liens will be released upon a release of the
    First-Priority Liens on all or a part of the Collateral, other
    than a release contemplated by clause&#160;(b) above (except to
    the extent the Collateral or any portion thereof was disposed of
    in order to repay the First-Priority Lien Obligations secured by
    the Collateral, in which case the Junior-Priority Liens will be
    released).
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    To the extent applicable, the Issuer will comply with
    Section&#160;313(b) of the Trust Indenture Act, relating to
    reports, and, following qualification of the Indenture under
    Section&#160;314(d) of the Trust&#160;Indenture Act, relating to
    the release of property and to the substitution therefor of any
    property to be pledged as Collateral for the Notes. Any
    certificate or opinion required by Section&#160;314(d) of the
    Trust&#160;Indenture Act may be made by an Officer of the Issuer
    except in cases where Section&#160;314(d) of the Trust Indenture
    Act requires that such certificate or opinion be made by an
    independent engineer, appraiser or other expert, who shall be
    reasonably satisfactory to the Trustee. Notwithstanding anything
    to the contrary herein, the Issuer and the Guarantors will not
    be required to comply with all or any portion of
    Section&#160;314(d) of the Trust&#160;Indenture Act if they
    determine, in good faith based on advice of counsel (which may
    be internal counsel), that under the terms of that section
    <FONT style="white-space: nowrap">and/or</FONT> any
    interpretation or guidance as to the meaning thereof of the SEC
    and its staff, including &#147;no action&#148; letters or
    exemptive orders, all or any portion of Section&#160;314(d) of
    the Trust&#160;Indenture Act is inapplicable to the released
    Collateral. Without limiting the generality of the foregoing,
    certain no-action letters issued by the SEC have permitted an
    indenture qualified under the Trust&#160;Indenture Act to
    contain provisions permitting the release of collateral from
    Liens under such indenture in the ordinary course of the
    issuer&#146;s business without requiring the issuer to provide
    certificates and other documents under Section&#160;314(d) of
    the Trust&#160;Indenture Act.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Intercreditor
    Agreements</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Issuer, the Guarantors, the Trustee, the Collateral Agent,
    Wilmington Trust&#160;Company (as collateral agent with respect
    to Liens in certain states for the First-Priority Lien
    Obligations and the Junior Priority Lien Obligations with
    respect to such Liens), the Junior Trustees and the Junior
    Collateral Agents have entered into amended Intercreditor
    Agreements, which establish the first priority status of the
    Notes and any other future First-Priority Lien Obligations and
    the junior priority status of the Junior Priority Liens. In
    addition to the provisions described above with respect to
    control of remedies and release of Collateral, the Intercreditor
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    49
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Agreements also impose certain other customary restrictions and
    agreements, including the restrictions and agreements described
    below.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Pursuant to the Intercreditor Agreements, the Junior Trustees,
    the Junior Collateral Agents and the holders of the Junior Notes
    agree that the Collateral Agent and the Holders have no
    fiduciary duties to them in respect of the maintenance or
    preservation of the Collateral (other than, in the case of the
    Collateral Agent, a duty to hold certain possessory collateral
    as bailee of the Junior Trustees and the Holders of the Junior
    Notes for purposes of perfecting the Junior Priority Liens
    thereon). In addition, the Junior Trustees and the holders of
    the Junior Notes waive, to the fullest extent permitted by law,
    any claim against the Collateral Agent, the Trustee and the
    Holders in connection with any actions they may take under the
    Indenture or with respect to the Collateral. They further waive,
    to the fullest extent permitted by law, any right to assert, or
    request the benefit of, any marshalling or similar rights that
    may otherwise be available to them.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Pursuant to the Intercreditor Agreements, the Junior Collateral
    Agents and the Junior Trustees, for themselves and on behalf of
    the holders of the Junior Notes, irrevocably constitute and
    appoint the Collateral Agent and any officer or agent of the
    Collateral Agent, with full power of substitution, as their true
    and lawful attorney-in-fact with full irrevocable power and
    authority in the place of the Junior Collateral Agents, Junior
    Trustees or holders of the Junior Notes or in the Collateral
    Agent&#146;s own name, from time to time in the Collateral
    Agent&#146;s discretion, for the purpose of carrying out the
    terms of certain sections of the Intercreditor Agreements
    (including those relating to the release of the Junior Priority
    Liens as permitted thereby, including releases upon sales due to
    enforcement of remedies), to take any and all appropriate action
    and to execute any and all releases, documents and instruments
    which may be necessary or desirable to accomplish the purposes
    of such sections of the Intercreditor Agreements, including any
    financing statements, mortgage releases, intellectual property
    releases, endorsements or other instruments or transfer or
    release of such liens.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    So long as the First-Priority Lien Obligations are outstanding,
    the Issuer and the Guarantors will agree that if any of the
    Junior Collateral Agents
    <FONT style="white-space: nowrap">and/or</FONT> the
    Junior Trustees holds any Lien on any assets of the Issuer or
    any Guarantor securing any Junior Priority Lien Obligations that
    are not also subject to First-Priority Liens, the applicable
    Junior Trustee, at the request of the Collateral Agent or the
    Issuer, will assign such Lien to the Collateral Agent as
    security for the First-Priority Lien Obligations (in which case
    the Junior Collateral Agents will retain a Junior Priority Lien
    on such assets subject to the terms of the Intercreditor
    Agreements).
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    The Junior Trustees and the holders of Junior Notes agree that
    (i)&#160;in certain circumstances the holders of the
    First-Priority Lien Obligations are required by the terms
    thereof to be repaid with proceeds of dispositions prior to
    repayment of the Junior Priority Lien Obligations and
    (ii)&#160;they will not accept payments from such dispositions
    until applied to repayment of the First-Priority Lien
    Obligations as so required. The Junior Trustees and the holders
    of the Junior Notes generally agree that if they receive
    payments from the Collateral in contravention of the
    Intercreditor Agreements, they will turn such payments over to
    First-Priority Lien Obligation holders as required by the
    Intercreditor Agreements.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Pursuant to the Intercreditor Agreements, the Trustee and the
    Collateral Agent, for itself and on behalf of the Holders of the
    Notes, will agree to amend the Intercreditor Agreements (or to
    enter into a new intercreditor agreement in form and substance
    substantially similar to the Intercreditor Agreements) to
    provide for the inclusion of additional Junior Priority Lien
    Obligations (to the extent permitted by the Indenture).
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, if the Issuer or any Guarantor is subject to any
    insolvency or liquidation proceeding, the Junior Trustees and
    the holders of the Junior Notes agree that:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    they will consent to the Issuer&#146;s use of cash collateral if
    the First-Priority Lien Obligation holders consent to such usage
    and the Junior Priority Lien Obligation holders receive adequate
    protection as set out below;
</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    50
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    they shall not seek or require the Issuer to provide any
    adequate protection, or accept any such adequate protection, for
    Junior Priority Lien Obligations except replacement or
    additional Liens that are fully junior and subordinate to the
    Liens securing the First-Priority Lien Obligations, and except
    for the foregoing, will not seek or accept any payments pursuant
    to Section&#160;362(d)(3)(B) of Title&#160;11 of the United
    States Code;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    if the First-Priority Lien Obligation holders consent to a
    <FONT style="white-space: nowrap">debtor-in-possession</FONT>
    (&#147;DIP&#148;) financing that provides for priming of the
    First-Priority Lien Obligations, the Junior Trustees and the
    holders of the Junior Priority Lien Obligations will be deemed
    to have consented to priming of their Liens and will not object
    to any DIP financing approved from time to time by holders of
    the First-Priority Lien Obligations or any adequate protection
    provided to the First-Priority Lien Obligation holders, except
    that if the Holders and the Collateral Agent are granted
    adequate protection in the form of additional collateral, the
    Junior Trustees may seek or request adequate protection in the
    form of a replacement Lien on such additional collateral, which
    Lien is fully junior and subordinate to the Lien granted to the
    Holders and the Collateral Agent and the DIP financing providers;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    without the consent of the Collateral Agent acting at the
    direction of the holders of a majority in principal amount of
    the Notes and holders of the other First-Priority Lien
    Obligations, they will not seek relief from the automatic stay
    so long as any Notes are outstanding or any amounts are
    outstanding under any other First-Priority Lien Obligations;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    they will not oppose any sale or other disposition of the
    Collateral consented to by the First-Priority Lien Obligation
    holders;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    they will not vote in favor of any plan of reorganization unless
    (1)&#160;such plan provides for the payment in full in cash on
    the effective date of such plan of reorganization of all claims
    of the Collateral Agent and the Holders, (2)&#160;such plan
    provides for treatment of such claims of the Collateral Agent
    and the holders of the First-Priority Lien Obligations in a
    manner that would result in such claims having relative Lien
    (or, if the obligations, property or assets to be distributed in
    respect of such clauses under such plan are unsecured, other)
    priority over the claims of the Junior Trustees and the Holders
    of the Junior Notes to at least the same extent as the
    First-Priority Liens have priority over the Junior Priority
    Liens, whether or not such obligations, property or assets are,
    in fact secured by any Liens, or (3)&#160;such plan is approved
    by the Collateral Agent and the required holders of the
    First-Priority Lien Obligations.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">No
    Impairment of the Security Interests</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Neither the Issuer nor any of the Guarantors will be permitted
    to take any action, or knowingly or negligently omit to take any
    action, which action or omission might or would have the result
    of materially impairing the security interest with respect to
    the Collateral for the benefit of the Trustee and the Holders of
    the Notes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Indenture provides that any release of Collateral in
    accordance with the provisions of the Indenture and the Security
    Documents will not be deemed to impair the security under the
    Indenture, and that any engineer, appraiser or other expert may
    rely on such provision in delivering a certificate requesting
    release so long as all other provisions of the Indenture with
    respect to such release have been complied with.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">The
    Guarantees</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    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 our obligations under the Notes and the Indenture,
    including our obligations to pay principal, premium, if any, and
    interest with respect to the Notes. 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
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    51
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    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 <I>pro
    rata</I>, based on the net assets of each Guarantor, determined
    in accordance with GAAP. Except as provided in
    &#147;&#151;&#160;Certain covenants&#148; below, the Company is
    not restricted from selling or otherwise disposing of any of the
    Guarantors.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Indenture requires that each existing and future Restricted
    Subsidiary of the Company (other than the Issuer (for so long as
    it remains the Issuer) and K. Hovnanian Poland, sp.z.o.o.) be a
    Guarantor. The Company is permitted to cause any Unrestricted
    Subsidiary to be a Guarantor.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Indenture provides that 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.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    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.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A sale of assets or Capital Stock of a Guarantor may constitute
    an Asset Disposition subject to the &#147;Certain
    covenants&#160;&#151; Limitations on dispositions of
    assets&#148; covenant.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Redemption</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Except as set forth in the next two paragraphs, the Notes are
    not redeemable at the option of the Issuer.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    At any time and from time to time on or after October&#160;15,
    2012, the Issuer may redeem the Notes, in whole or in part, at a
    redemption price equal to the percentage of principal amount set
    forth below plus accrued and unpaid interest to the redemption
    date.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="91%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Period Commencing</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Percentage</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    October&#160;15, 2012
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    107.969
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    October&#160;15, 2013
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    105.313
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    October&#160;15, 2014
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    102.656
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    October&#160;15, 2015 and thereafter
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    100.000
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    At any time and from time to time prior to October&#160;15,
    2012, the Issuer may redeem Notes with the net cash proceeds
    received by the Issuer from any Equity Offering of the Company
    at a redemption price equal to 110.625% of the principal amount
    plus accrued and unpaid interest to the redemption date, in an
    aggregate principal amount for all such redemptions not to
    exceed 35% of the original aggregate principal amount of the
    Notes (including Additional Notes) <I>provided </I>that:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;in each case the redemption takes place not later than
    60&#160;days after the closing of the related Equity
    Offering,&#160;and
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;not less than 65% of the original aggregate principal
    amount of the Notes (including Additional Notes) remains
    outstanding immediately thereafter.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    There is no sinking fund for, or mandatory redemption of, the
    Notes.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    52
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Selection
    and notice</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If less than all of the Notes are to be redeemed at any time,
    the Trustee will select Notes for redemption on a pro rata
    basis, by lot or by such other method as the Trustee in its sole
    discretion shall deem appropriate and fair.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    No Notes of $2,000 in original principal amount or less shall be
    redeemed in part. Notices of redemption may not be conditional.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If any Note is to be redeemed in part only, the notice of
    redemption that relates to that Note shall state the portion of
    the principal amount thereof to be redeemed. A new Note in
    principal amount equal to the unredeemed portion of the original
    Note will be issued in the name of the Holder thereof upon
    cancellation of the original Note. Notes called for redemption
    become due on the date fixed for redemption. On and after the
    redemption date, interest ceases to accrue on Notes or portions
    of them called for redemption.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Certain
    covenants</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following is a summary of certain covenants that are
    contained in the Indenture. Such covenants are applicable
    (unless waived or amended as permitted by the Indenture) so long
    as any of the Notes are outstanding or until discharge of the
    Indenture or the Notes are defeased pursuant to provisions
    described under &#147;&#151; Discharge and defeasance of
    Indenture.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Repurchase
    of Notes upon Change of Control.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In the event that there shall occur a Change of Control, each
    Holder of Notes shall have the right, at such Holder&#146;s
    option, to require the Issuer to purchase all or any part of
    such Holder&#146;s Notes on a date (the <B>&#147;Repurchase
    Date&#148;</B>) that is no later than 90&#160;days after notice
    of the Change of Control, at 101% of the principal amount
    thereof plus accrued and unpaid interest, if any, to the
    Repurchase Date.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    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 and the Trustree, 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&#146;s exercise of
    such right, together with the Note with respect to which the
    right is being exercised, duly endorsed for transfer;
    <I>provided, however</I>, 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.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Issuer will comply with applicable law, including
    Section&#160;14(e) of the Securities Exchange Act of 1934 (the
    <B>&#147;Exchange Act&#148;</B>) and
    <FONT style="white-space: nowrap">Rule&#160;14e-1</FONT>
    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.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    With respect to any disposition of assets, the phrase &#147;all
    or substantially all&#148; as used in the Indenture (including
    as set forth under &#147;&#151; Limitations on mergers,
    consolidations and sales of assets&#148; below) varies according
    to the facts and circumstances of the subject transaction, has
    no clearly established meaning under New York law (which governs
    the Indenture) and is subject to judicial interpretation.
    Accordingly, in certain circumstances there may be a degree of
    uncertainty in ascertaining whether a particular transaction
    would involve a disposition of &#147;all or substantially
    all&#148; of the assets of the Company, and therefore it may be
    unclear as to whether a Change of Control has occurred and
    whether the Holders have the right to require the Issuer to
    repurchase Notes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    None of the provisions relating to a repurchase upon a Change of
    Control is waivable by the Board of Directors of the Issuer or
    the Company. The Company could, in the future, enter into
    certain transactions,
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    53
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    including certain recapitalizations of the Company, that would
    not result in a Change of Control, but would increase the amount
    of Indebtedness outstanding at such time.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Indenture requires the payment of money for Notes or
    portions thereof validly tendered to, and accepted for payment
    by, the Issuer pursuant to a Change of Control offer. In the
    event that a Change of Control has occurred under the Indenture,
    a change of control will also have occurred under the indentures
    governing the Outstanding Junior Secured Notes and the
    Issuer&#146;s other outstanding notes. If a Change of Control
    were to occur, there can be no assurance that the Issuer would
    have sufficient funds to pay the purchase price for all the
    Notes and amounts due under other Indebtedness that the Company
    may be required to repurchase or repay or that the Company or
    the other Guarantors would be able to make such payments. In the
    event that the Issuer were required to purchase outstanding
    Notes pursuant to a Change of Control offer, the Company expects
    that it would need to seek third-party financing to the extent
    it does not have available funds to enable the Issuer to meet
    its purchase obligations. However, there can be no assurance
    that the Company would be able to obtain such financing.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Failure by the Issuer to purchase the Notes when required upon a
    Change of Control will result in an Event of Default with
    respect to the Notes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    These provisions could have the effect of deterring hostile or
    friendly acquisitions of the Company where the Person attempting
    the acquisition views itself as unable to finance the purchase
    of the principal amount of Notes which may be tendered to the
    Issuer upon the occurrence of a Change of Control.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Limitations
    on indebtedness.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Indenture provides that 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
    <B>&#147;incurrence&#148;</B>) 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.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Notwithstanding the foregoing, the provisions of the Indenture
    will not prevent the incurrence of:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;Permitted Indebtedness,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;Refinancing Indebtedness,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (3)&#160;Non-Recourse Indebtedness,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (4)&#160;any Guarantee of Indebtedness represented by the Notes,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (5)&#160;any guarantee of Indebtedness incurred under Credit
    Facilities in compliance with the Indenture, and
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (6)&#160;any guarantee by the Issuer, the Company or any
    Guarantor of Indebtedness that is permitted to be incurred in
    compliance with the Indenture; <I>provided </I>that in the event
    such Indebtedness that is being guaranteed is subordinated to
    the Notes or a Guarantee, as the case may be, then the related
    guarantee shall be subordinated in right of payment to the Notes
    or such Guarantee, as the case may be.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    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,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;may classify such item of Indebtedness under and comply
    with either of such paragraphs (or any of such definitions), as
    applicable,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;may classify and divide such item of Indebtedness into
    more than one of such paragraphs (or definitions), as
    applicable,&#160;and
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (3)&#160;may elect to comply with such paragraphs (or
    definitions), as applicable, in any order.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    54
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    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 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.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Limitations
    on restricted payments.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Indenture provides that 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:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;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;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;immediately after giving effect to such Restricted
    Payment, the Company could incur at least $1.00 of Indebtedness
    pursuant to the first paragraph of the &#147;Limitations on
    indebtedness&#148; covenant;&#160;and
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (3)&#160;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 on or after the Issue Date does not
    exceed the sum of:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (a)&#160;50% of the Consolidated Net Income of the Company on a
    cumulative basis during the period (taken as one accounting
    period) from and including the Issue Date and ending on the last
    day of the Company&#146;s fiscal quarter immediately preceding
    the date of such Restricted Payment (or in the event such
    Consolidated Net Income shall be a deficit, <I>minus </I>100% of
    such deficit), <I>plus</I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (b)&#160;100% of the aggregate net cash proceeds of and the Fair
    Market Value of Property received by the Company from
    (1)&#160;any capital contribution to the Company after the Issue
    Date or any issue or sale after the Issue Date of Qualified
    Stock (other than (i)&#160;to any Subsidiary of the Company or
    (ii)&#160;any Excluded Contribution) and (2)&#160;the issue or
    sale after the Issue Date 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, <I>plus</I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (c)&#160;in the case of the disposition or repayment of any
    Investment constituting a Restricted Payment (or if the
    Investment was made prior to the Issue Date, that would have
    constituted a Restricted Payment if made after the Issue Date,
    if such disposition or repayment results in cash received by the
    Company, the Issuer or any Restricted Subsidiary), an amount (to
    the extent not included in the calculation of Consolidated Net
    Income referred to in (a)) equal to the lesser of (x)&#160;the
    return of capital with respect to such Investment (including by
    dividend, distribution or sale of Capital Stock) and
    (y)&#160;the amount of such Investment that was treated (or
    would have been treated when made) 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)), <I>plus</I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (d)&#160;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)&#160;the proportionate
    interest of the Company or a Restricted Subsidiary in an amount
    equal to the excess of (I)&#160;the total assets of such
    Subsidiary, valued on an aggregate basis at the lesser of book
    value and Fair Market Value thereof, over (II)&#160;the total
    liabilities of such Subsidiary, determined in accordance with
    GAAP, and (y)&#160;the Designation Amount at the time of such
    Subsidiary&#146;s designation as an Unrestricted Subsidiary
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    55
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The foregoing clauses&#160;(2) and (3)&#160;will not prohibit:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (A)&#160;the payment of any dividend within 60&#160;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;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (B)&#160;the purchase, repayment, repurchase, redemption,
    defeasance or other acquisition or retirement for value of any
    Subordinated Indebtedness of the Issuer, the Company or any
    Restricted Subsidiary or 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 or
    constituting an Excluded Contribution) of, shares of Qualified
    Stock;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (C)&#160;(i)&#160;the purchase, repayment, redemption,
    repurchase, defeasance or other acquisition or retirement for
    value of Subordinated Indebtedness of the Issuer, the Company or
    any Restricted Subsidiary in exchange for, or out of proceeds
    of, Refinancing Indebtedness;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (ii)&#160;the purchase, repayment, redemption, repurchase,
    defeasance or other acquisition or retirement for value of
    Subordinated Indebtedness of the Issuer, the Company or any
    Restricted Subsidiary or the making of Restricted Investments in
    joint ventures:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (a)&#160;in an aggregate amount not to exceed $50.0&#160;million
    (after giving effect to all subsequent reductions in the amount
    of any Restricted Investment in a joint venture made pursuant to
    this clause&#160;(a) as a result of the repayment or disposition
    thereof for cash, not to exceed the amount of such Restricted
    Investment previously made pursuant to this clause (a));&#160;or
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (b)&#160;in an aggregate amount made under this clause (ii)(b)
    not to exceed Excluded Contributions (after giving effect to all
    subsequent reductions in the amount of any Restricted Investment
    in a joint venture made pursuant to this clause&#160;(b) as a
    result of the repayment or disposition thereof for cash, not to
    exceed the amount of such Restricted Investment previously made
    pursuant to this clause (b));&#160;and
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (iii)&#160;the purchase, repayment, redemption, repurchase,
    defeasance or other acquisition or retirement for value of
    Subordinated Indebtedness of the Issuer, the Company or any
    Restricted Subsidiary or the making of Restricted Investments in
    joint ventures (after giving effect to all subsequent reductions
    in the amount of any Restricted Investment in a joint venture
    made pursuant to this clause&#160;(iii) as a result of the
    repayment or disposition thereof for cash, not to exceed the
    amount of such Restricted Investment previously made pursuant to
    this clause (iii)), in an aggregate amount not to exceed
    $150.0&#160;million <I>less </I>the aggregate amount of
    Restricted Payments previously made under clause (C)(ii)(a)
    above; <I>provided </I>that, on a pro forma basis after giving
    effect to any such Restricted Payment, the aggregate fair market
    value of the Collateral (as determined in good faith by the
    Company&#146;s chief financial officer) is equal to at least
    200% of the aggregate principal amount of Collateralized Debt
    (such ratio as calculated, the &#147;<B>Collateral
    Ratio</B>&#148;) as of such date (or, in the case of a
    Restricted Investment in a joint venture, on the date the
    Company determines to make such Investment, so long as the
    Investment is completed within 120&#160;days of such
    determination date), such fair market value to be determined,
    with respect to real property Collateral, by reference to (i)
    the most recent Qualified Collateral Appraisal, as adjusted by
    the chief financial officer in good faith to reflect changes
    since the date of such appraisal or (ii) following receipt of a
    Qualified Collateral Appraisal establishing a Collateral Ratio
    of at least 300%, book value pursuant to GAAP;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (D)&#160;the payment of dividends on Preferred Stock and
    Disqualified Stock up to an aggregate amount of $10&#160;million
    in any fiscal year; <I>provided </I>that immediately after
    giving effect to any declaration of such dividend, the Company
    could incur at least $1.00 of Indebtedness pursuant to the first
    paragraph under the &#147;Limitations on indebtedness&#148;
    covenant;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (E)&#160;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
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    56
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Company or any Subsidiary (or their estates or beneficiaries
    under their estates) not to exceed $10&#160;million in the
    aggregate since the Issue Date;&#160;and
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (F)&#160;the purchase, repayment, redemption, repurchase,
    defeasance or other acquisition or retirement for value of
    Subordinated Indebtedness of the Issuer, the Company or any
    Restricted Subsidiary from time to time with the proceeds of the
    offering of the Notes as described in this offering circular
    under &#147;Use of Proceeds;&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>provided, however</I>, that each Restricted Payment described
    in clauses&#160;(A) and (B)&#160;of this sentence shall be taken
    into account for purposes of computing the aggregate amount of
    all Restricted Payments pursuant to clause&#160;(3) of the
    immediately preceding paragraph.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    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.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In determining the &#147;Fair Market Value of Property&#148; for
    purposes of clause&#160;(3) of the first paragraph of this
    covenant, Property other than cash, Cash Equivalents and
    Marketable Securities shall be deemed to be equal in value to
    the &#147;equity value&#148; 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)&#160;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)&#160;if the
    Common Equity is not then traded on the New York Stock Exchange,
    American Stock Exchange or Nasdaq Stock 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&#160;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.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Solely for the purpose of making Restricted Payments under
    clause (C)(iii) above, the Indenture will provide that the
    Company shall seek appraisals of any real property Collateral
    from an independent appraiser at least once every eighteen
    months with respect to any one item of real property Collateral.
    Such appraisal is referred to as a <B>&#147;Qualified Collateral
    Appraisal&#148;</B>.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Indenture provides that any restricted payments (without
    giving effect to the change in the definition of restricted
    payments pursuant to the Third Supplemental Indenture, dated as
    of October&#160;6, 2009, among the Issuer, the Company, the
    guarantors named therein and the Trustee party thereto, as
    trustee) that were made on or after May&#160;27, 2008, the date
    of the indenture under which the Second Lien Notes were issued,
    and prior to the Issue Date under the provisions of the
    May&#160;27, 2008 indenture governing the Second Lien Notes that
    are substantially identical to paragraph (C)(ii)(b) above shall
    be treated as Restricted Payments made under paragraph
    (C)(ii)(b) above under the Indenture governing the Notes (and
    subsequent reductions in any Restricted Investments made with
    such restricted payments shall be given effect as well).
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Limitations
    on transactions with affiliates.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Indenture provides that 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&#146;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 of related
    transactions (each, an <B>&#147;Affiliate
    Transaction&#148;</B>), 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&#146;s-
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    57
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    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&#146;s Subsidiaries.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    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:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;with respect to any such Affiliate Transaction
    involving or having a value of more than $1&#160;million, the
    Company shall have (x)&#160;obtained the approval of a majority
    of the Board of Directors of the Company and (y)&#160;either
    obtained the approval of a majority of the Company&#146;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,&#160;and
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;with respect to any such Affiliate Transaction
    involving or having a value of more than $10&#160;million, the
    Company shall have (x)&#160;obtained the approval of a majority
    of the Board of Directors of the Company and (y)&#160;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.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Indenture also provides that notwithstanding the foregoing,
    an Affiliate Transaction will not include:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;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,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;Capital Stock issuances to directors, officers and
    employees of the Company or its Subsidiaries pursuant to plans
    approved by the stockholders of the Company,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (3)&#160;any Restricted Payment otherwise permitted under the
    &#147;Limitations on restricted payments&#148; covenant,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (4)&#160;any transaction between or among the Company and one or
    more Restricted Subsidiaries or between or among Restricted
    Subsidiaries (<I>provided, however</I>, no such transaction
    shall involve any other Affiliate of the Company (other than an
    Unrestricted Subsidiary to the extent the applicable amount
    constitutes a Restricted Payment permitted by the Indenture)),
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (5)&#160;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,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (6)&#160;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,&#160;and
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (7)&#160;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.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Limitations
    on dispositions of assets.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Indenture provides that the Company and the Issuer will not,
    and will not cause or permit any Restricted Subsidiary to, make
    any Asset Disposition unless:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (a)&#160;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,&#160;and
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (b)&#160;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
    (which must be pledged as Collateral if the assets disposed of
    constituted Collateral).
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    58
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The amount of (i)&#160;any Indebtedness (other than any
    Subordinated Indebtedness) of the Company or any Restricted
    Subsidiary that is actually assumed by the transferee in such
    Asset Disposition and (ii)&#160;the fair market value (as
    determined in good faith by the Board of Directors of the
    Company) of any property or assets (including Capital Stock of
    any Person that will be a Restricted Subsidiary following
    receipt thereof) received that are used or useful in a Real
    Estate Business (<I>provided </I>that (except as permitted by
    clause&#160;(3) under Permitted Investments) to the extent that
    the assets disposed of in such Asset Disposition were
    Collateral, such property or assets are pledged as Collateral
    under the Security Documents substantially simultaneously with
    such sale, with the Lien on such Collateral securing the Notes
    being of the same priority with respect to the Notes as the Lien
    on the assets disposed of), shall be deemed to be consideration
    required by clause&#160;(b) above for purposes of determining
    the percentage of such consideration received by the Company or
    the Restricted Subsidiaries.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Net Cash Proceeds of an Asset Disposition shall, within one
    year, at the Company&#146;s election, (a)&#160;be used by the
    Company or a Restricted Subsidiary to invest in assets
    (including Capital Stock of any Person that is or will be a
    Restricted Subsidiary following investment therein) used or
    useful in the business of the construction and sale of homes
    conducted by the Company and the Restricted Subsidiaries
    (<I>provided </I>that (except as permitted by clause&#160;(3)
    under the definition of <B>&#147;Permitted
    Investments&#148;</B>) to the extent that the assets disposed of
    in such Asset Disposition were Collateral, such assets are
    pledged as Collateral under the Security Documents with the Lien
    on such Collateral securing the Notes being of the same priority
    with respect to the Notes as the Lien on the assets disposed
    of), (b)&#160;be used to permanently prepay or permanently repay
    any (1)&#160;Indebtedness which had been secured by the assets
    sold in the relevant Asset Disposition, to the extent the assets
    sold were not Collateral or (2)&#160;Indebtedness of a
    Restricted Subsidiary that is not a Guarantor, to the extent the
    assets sold were not Collateral, or (c)&#160;be applied to make
    an Offer to Purchase Notes and, if the Company or a Restricted
    Subsidiary elects or is required to do so, to repay, purchase or
    redeem any other First-Priority Lien Obligations (or cash
    collateralize letters of credit that constitute First-Priority
    Lien Obligations incurred in connection with a Credit Facility)
    and, if the Company or a Restricted Subsidiary elects or is
    required to do so and the assets disposed of were not
    Collateral, repay, purchase or redeem any unsubordinated
    Indebtedness (on a <I>pro rata</I> basis if the amount available
    for such repayment, purchase, redemption or cash
    collateralization is less than the aggregate amount of
    (i)&#160;the principal amount of the Notes tendered in such
    Offer to Purchase, (ii)&#160;the lesser of the principal amount,
    or accreted value, of such other First-Priority Lien Obligations
    tendered or to be repaid, redeemed, repurchased or cash
    collateralized and (iii)&#160;the lesser of the principal
    amount, or accreted value, of such unsubordinated Indebtedness
    tendered or to be repaid, repurchased or redeemed, plus, in each
    case, accrued interest to the date of repayment, purchase or
    redemption) at 100% of the principal amount or accreted value
    thereof, as the case may be, plus accrued and unpaid interest,
    if any, to the date of repurchase, repayment or redemption.
    Pending any such application under this paragraph, Net Cash
    Proceeds may be used to temporarily reduce Indebtedness or
    otherwise be invested in any manner not prohibited by the
    Indenture.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Notwithstanding the foregoing, (A)&#160;the Company will not be
    required to apply such Net Cash Proceeds in accordance with
    clauses&#160;(b) or (c)&#160;of the preceding paragraph 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 prepayments or
    repayments shall have been made and no Offer to Purchase shall
    have been made, exceed $25&#160;million and (B)&#160;in
    connection with an Asset Disposition, the Company and the
    Restricted Subsidiaries will not be required to comply with the
    requirements of clause&#160;(b) 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 Dispositions that has not yet been converted into
    cash, Cash Equivalents or Marketable Securities, does not exceed
    $25&#160;million; <I>provided, however</I>, that when any
    non-cash consideration is converted into cash, Cash Equivalents
    or Marketable Securities, such cash shall constitute Net Cash
    Proceeds and be subject to the preceding paragraph.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    59
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Limitations
    on liens.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Indenture provides that 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.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Limitations
    on restrictions affecting restricted subsidiaries.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Indenture provides that 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:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;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,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;make loans or advances to the Company or any other
    Restricted Subsidiary,&#160;or
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (3)&#160;transfer any of its property or assets to the Company
    or any other Restricted Subsidiary, except for:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (a)&#160;encumbrances or restrictions existing under or by
    reason of applicable law,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (b)&#160;contractual encumbrances or restrictions in effect at
    or entered into on the Issue Date and any amendments,
    modifications, restatements, renewals, supplements, refundings,
    replacements or refinancings thereof, <I>provided </I>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 at or
    entered into on the Issue Date,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (c)&#160;any restrictions or encumbrances arising under Acquired
    Indebtedness; <I>provided</I>, 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,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (d)&#160;any restrictions or encumbrances arising in connection
    with Refinancing Indebtedness; <I>provided, however</I>, that
    any restrictions and encumbrances of the type described in this
    clause&#160;(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,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (e)&#160;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,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (f)&#160;reasonable and customary borrowing base covenants set
    forth in agreements evidencing Indebtedness otherwise permitted
    by the Indenture,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (g)&#160;customary non-assignment provisions in leases,
    licenses, encumbrances, contracts or similar assets entered into
    or acquired in the ordinary course of business,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (h)&#160;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,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (i)&#160;encumbrances or restrictions existing under or by
    reason of the Indenture, the Notes or the Guarantees,
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    60
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (j)&#160;purchase money obligations that impose restrictions on
    the property so acquired of the nature described in
    clause&#160;(3) of this covenant,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (k)&#160;Liens permitted under the Indenture securing
    Indebtedness that limit the right of the debtor to dispose of
    the assets subject to such Lien,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (l)&#160;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,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (m)&#160;customary provisions of any franchise, distribution or
    similar agreements,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (n)&#160;restrictions on cash or other deposits or net worth
    imposed by contracts entered into in the ordinary course of
    business,&#160;and
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (o)&#160;any encumbrance or restrictions of the type referred to
    in clauses (1), (2)&#160;or (3)&#160;of this covenant imposed by
    any amendments, modifications, restatements, renewals,
    supplements, refundings, replacements or refinancings of the
    contracts, instruments or obligations referred to in
    clauses&#160;(a) through (n)&#160;of this covenant, <I>provided,
    </I>that such amendments, modifications, restatements, renewals,
    supplements, refundings, replacements or refinancings are, in
    the good faith judgment of the Company&#146;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.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Limitations
    on mergers, consolidations and sales of assets.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Indenture provides that neither 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 Guarantees 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:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;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
    <B>&#147;Successor&#148;</B>), 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
    and the Security Documents,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;immediately after giving effect to such transaction, no
    Default or Event of Default has occurred and is
    continuing,&#160;and
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (3)&#160;immediately after giving effect to such transaction,
    the Company (or its Successor) could incur at least $1.00 of
    Indebtedness pursuant to the first paragraph of the
    &#147;Limitations on indebtedness&#148; covenant.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The foregoing provisions shall not apply to:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (a)&#160;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 as provided under &#147;&#151; The
    Guarantees&#148; above,&#160;or
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (b)&#160;a transaction the purpose of which is to change the
    state of incorporation of the Company, the Issuer or any
    Guarantor.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    61
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Reports
    to holders of Notes.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company shall file with the Commission the annual reports
    and the information, documents and other reports required to be
    filed pursuant to Section&#160;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&#160;days after it files them with the Commission. In
    the event that the Company is no longer subject to these
    periodic reporting 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 Company will
    cause its consolidated financial statements and a
    &#147;Management&#146;s Discussion and Analysis of Results of
    Operations and Financial Condition&#148; written report, similar
    to those that would have been required to appear in annual or
    quarterly reports, to be delivered to Holders of Notes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The posting of the reports, information and documents referred
    to above on the Company&#146;s website or one maintained on its
    behalf for such purpose shall be deemed to satisfy the
    Company&#146;s delivery obligations to the Trustee and the
    Holders. In addition, availability of the foregoing materials on
    the SEC&#146;s EDGAR service shall be deemed to satisfy the
    Company&#146;s delivery obligations to the Trustee and the
    Holders.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Delivery of such reports, information and documents to the
    Trustee is for informational purposes only and the
    Trustee&#146;s receipt of them will not constitute constructive
    notice of any information contained therein or determinable from
    information contained therein, including the Issuer&#146;s
    <FONT style="white-space: nowrap">and/or</FONT> the
    Company&#146;s compliance with any of its covenants in the
    Indenture (as to which the Trustee is entitled to rely
    exclusively on Officers&#146; Certificates).
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Condition
    for Release of the Issuer</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Indenture provides that the Issuer may be released from its
    obligations under the Indenture and the Notes, without the
    consent of the Holders of the Notes, if (1)&#160;the Company or
    any successor to the Company has assumed the obligations of the
    Issuer under the Indenture and the Notes, (2)&#160;the Company
    delivers an opinion of counsel to the Trustee to the effect that
    Holders will not recognize income, gain or loss for federal
    income tax purposes as a result of the release 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 and (3)&#160;the Issuer becomes a Guarantor of the
    Notes at such time, until such time, if any, as such Guarantee
    may be released as described above under the caption
    &#147;&#151;&#160;The Guarantees.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Events of
    default</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following are Events of Default under the Indenture:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;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&#160;days;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;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;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (3)&#160;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 Guarantees or the
    Indenture and such failure continues for the period and after
    the notice specified below (except in the case of a default
    under covenants described under &#147;&#151; Certain
    covenants&#160;&#151; Repurchase of Notes upon Change of
    Control&#148; and &#147;&#151; Certain covenants&#160;&#151;
    Limitations on mergers, consolidations and sales of
    assets,&#148; which will constitute Events of Default with
    notice but without passage of time);
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (4)&#160;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&#160;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&#160;days after such acceleration;
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    62
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (5)&#160;the failure by the Company, the Issuer or any
    Restricted Subsidiary to make any principal or interest payment
    in an amount of $10&#160;million or more, individually or in the
    aggregate, in respect of Indebtedness (other than Non-Recourse
    Indebtedness) of the Company or any Restricted Subsidiary within
    30&#160;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);
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (6)&#160;a final judgment or judgments that exceed
    $10&#160;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&#160;days
    of being entered;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (7)&#160;the Company, the Issuer or any Restricted Subsidiary
    that is a Significant Subsidiary pursuant to or within the
    meaning of any Bankruptcy Law:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (a)&#160;commences a voluntary case,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (b)&#160;consents to the entry of an order for relief against it
    in an involuntary case,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (c)&#160;consents to the appointment of a Custodian of it or for
    all or substantially all of its property,&#160;or
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (d)&#160;makes a general assignment for the benefit of its
    creditors;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (8)&#160;a court of competent jurisdiction enters an order or
    decree under any Bankruptcy Law that:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (a)&#160;is for relief against the Company, the Issuer or any
    Restricted Subsidiary that is a Significant Subsidiary as debtor
    in an involuntary case,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (b)&#160;appoints a Custodian of the Company, the Issuer 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,&#160;or
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (c)&#160;orders the liquidation of the Company, the Issuer or
    any Restricted Subsidiary that is a Significant Subsidiary,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    and the order or decree remains unstayed and in effect for
    60&#160;days;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (9)&#160;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);&#160;or
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (10)&#160;the Liens created by the Security Documents shall at
    any time not constitute valid and perfected Liens on any
    material portion of the Collateral intended to be covered
    thereby (to the extent perfection by filing, registration,
    recordation or possession is required by the Indenture or the
    Security Documents) other than in accordance with the terms of
    the relevant Security Document and the Indenture and other than
    the satisfaction in full of all Obligations under the Indenture
    or the release or amendment of any such Lien in accordance with
    the terms of the Indenture or the Security Documents, or, except
    for expiration in accordance with its terms or amendment,
    modification, waiver, termination or release in accordance with
    the terms of the Indenture and the relevant Security Document,
    any of the Security Documents shall for whatever reason be
    terminated or cease to be in full force and effect, if in either
    case, such default continues for 30&#160;days after notice, or
    the enforceability thereof shall be contested by the Issuer or
    any Guarantor.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A Default as described in subclause&#160;(3) above will not be
    deemed an Event of Default until the Trustee notifies the
    Company, or the Holders of at least 25&#160;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 covenants described under &#147;&#151; Certain
    covenants&#160;&#151; Repurchase of Notes upon Change of
    Control&#148; and &#147;&#151; Certain covenants&#160;&#151;
    Limitations on mergers, consolidations and sales of
    assets&#148;) the Company does not cure the Default
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    63
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    within 60&#160;days after receipt of the notice. The notice must
    specify the Default, demand that it be remedied and state that
    the notice is a &#147;Notice of Default.&#148; If such a Default
    is cured within such time period, it ceases.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If an Event of Default (other than an Event of Default with
    respect to the Company or the Issuer resulting from
    subclauses&#160;(7) or (8)&#160;above), shall have occurred and
    be continuing under the Indenture, the Trustee by notice to the
    Company, or the Holders of at least 25&#160;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
    or the Issuer specified in subclauses&#160;(7) or (8)&#160;above
    occurs, such an amount will <I>ipso facto </I>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.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    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, if the Issuer has paid or
    deposited with the Trustee a sum sufficient to pay the
    reasonable compensation, disbursements, expenses and
    advancements of the Trustee and if all existing Events of
    Default (other than the non-payment of accelerated principal)
    have been cured or waived.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Holders may not enforce the provisions of the Indenture, the
    Notes or the Guarantees 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
    Trustee in its exercise of any trust or power, <I>provided,
    however</I>, 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 the covenant entitled &#147;&#151; Certain
    covenants&#160;&#151; Repurchase of Notes upon Change of
    Control&#148;) if the Trustee determines that withholding such
    notice is in the Holders&#146; interest.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    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.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Discharge
    and defeasance of Indenture</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company, the Issuer and the Guarantors may discharge their
    obligations under the Notes, the Guarantees, the Indenture and
    the Security Documents and cause the release of all Liens on the
    Collateral granted under the Security Documents by irrevocably
    depositing in trust with the Trustee money or
    U.S.&#160;Government Obligations sufficient to pay principal of,
    premium and interest on the Notes to maturity or redemption and
    the Notes mature or are to be called for redemption within one
    year, subject to meeting certain other conditions.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Indenture will permit the Company, the Issuer and the
    Guarantors to terminate all of their respective obligations
    under the Indenture with respect to the Notes and the Guarantees
    and under the Security Documents and cause the release of all
    Liens on the Collateral granted under the Security Documents,
    other than the obligation to pay interest on and the principal
    of the Notes and certain other obligations (<B>&#147;legal
    defeasance&#148;</B>), at any time by:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;depositing in trust with the Trustee, under an
    irrevocable trust agreement, money or U.S.&#160;government
    obligations in an amount sufficient to pay principal of and
    premium and interest on the Notes to their maturity or
    redemption, as the case may be,&#160;and
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;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
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    64
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    recognize income, gain or loss for federal income tax purposes
    as a result of the 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 Issue Date.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    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 certain covenants and Events of
    Default specified in the Indenture, and the Guarantors and the
    Liens on the Collateral granted under the Security Documents
    will be released (<B>&#147;covenant defeasance&#148;</B>), at
    any time by
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;depositing in trust with the Trustee, under an
    irrevocable trust agreement, money or U.S.&#160;government
    obligations in an amount sufficient to pay principal of, premium
    and interest on the Notes to their maturity or redemption, as
    the case may be,&#160;and
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;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 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.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Notwithstanding the foregoing, no discharge, legal defeasance or
    covenant defeasance described above will affect the following
    obligations to, or rights of, the Holders of the Notes:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    rights of registration of transfer and exchange of Notes;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    rights of substitution of mutilated, defaced, destroyed, lost or
    stolen Notes;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    rights of Holders of the Notes to receive payments of principal
    thereof, premium, if any, and interest thereon, upon the
    original due dates therefor, but not upon acceleration;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    rights, obligations, duties and immunities of the Trustee;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    rights of Holders of Notes that are beneficiaries with respect
    to property so deposited with the Trustee payable to all or any
    of them;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    obligations of the Company, the Issuer or the Guarantors to
    maintain an office or agency in respect of the Notes.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company, the Issuer or the Guarantors may exercise the legal
    defeasance option with respect to the Notes notwithstanding the
    prior exercise of the covenant defeasance option with respect to
    the Notes. If the Company, the Issuer or the Guarantors exercise
    the legal defeasance option with respect to the Notes, payment
    of the Notes may not be accelerated due to an Event of Default
    with respect to the Notes. If the Company, the Issuer or the
    Guarantors exercise the covenant defeasance option with respect
    to the Notes, payment of the Notes may not be accelerated due to
    an Event of Default with respect to the covenants to which such
    covenant defeasance is applicable. However, if acceleration were
    to occur by reason of another Event of Default, the realizable
    value at the acceleration date of the cash and
    U.S.&#160;Government Obligations in the defeasance trust could
    be less than the principal of, premium, if any, and interest
    then due on the Notes, in that the required deposit in the
    defeasance trust is based upon scheduled cash flow rather than
    market value, which will vary depending upon interest rates and
    other factors.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Transfer
    and exchange</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A Holder may transfer or exchange Notes only in accordance with
    the provisions of the Indenture. The Trustee 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.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    65
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Amendment,
    supplement and waiver</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Subject to certain exceptions, the Indenture, the Notes, the
    Guarantees or the Security Documents may be amended or
    supplemented with the consent (which may include written
    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 future
    compliance with any provision of the Indenture, the Notes, the
    Guarantees or the Security Documents 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 waivers 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.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Without the consent of, or notice to, any Holder, the Company,
    the Issuer, the Guarantors, the Trustee, the Collateral Agent
    and Wilmington Trust&#160;Company may amend or supplement the
    Indenture, the Notes, the Guarantees or the Security Documents:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (a)&#160;to cure any ambiguity, defect or inconsistency;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (b)&#160;to comply with the &#147;Limitations on mergers,
    consolidations and sales of assets&#148; covenant set forth in
    the Indenture;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (c)&#160;to comply with any requirements of the Commission in
    connection with the qualification of the Indenture under the
    Trust&#160;Indenture Act;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (d)&#160;to evidence and provide for the acceptance of
    appointment under the Indenture by a successor or replacement
    Trustee or under the Security Documents of a successor or
    replacement Collateral Agent;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (e)&#160;to provide for uncertificated Notes in addition to or
    in place of certificated Notes;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (f)&#160;to provide for any Guarantee of the Notes;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (g)&#160;to add security to or for the benefit of the Notes and,
    in the case of the Security Documents, to or for the benefit of
    the other secured parties named therein or to confirm and
    evidence the release, termination or discharge of any Guarantee
    of or Lien securing the Notes when such release, termination or
    discharge is permitted by the Indenture and the Security
    Documents;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (h)&#160;to make any change that does not adversely affect the
    legal rights of any Holder;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (i)&#160;to evidence the assumption by the Company (or its
    successor entity) or a successor entity of the Issuer of the
    obligations of the Issuer under the Indenture and the Notes;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (j)&#160;to add covenants or new events of default for the
    protection of the Holders of the Notes;&#160;or
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (k)&#160;to conform any provision of the Indenture, the Notes,
    the Guarantees or the Security Documents to the
    &#147;Description of Notes&#148; contained in the Issuer&#146;s
    Confidential Offering Circular dated October&#160;5, 2009 to the
    extent that the &#147;Description of Notes&#148; was intended to
    be a verbatim recitation of a provision in the Indenture, the
    Notes, the Guarantees or the Security Documents.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, the Collateral Agent, the Trustee and Wilmington
    Trust&#160;Company will be authorized to amend the Security
    Documents to add additional secured parties to the extent Liens
    securing Indebtedness and other Obligations held by such parties
    are permitted under the Indenture and that after so securing any
    such additional secured parties, the amount of First-Priority
    Lien Obligations does not exceed the amount set forth under
    clause&#160;9 of the definition of &#147;Permitted Liens&#148;.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Without the consent of each Holder affected, the Company, the
    Issuer, the Guarantors, the Trustee, the Collateral Agent and
    Wilmington Trust&#160;Company (when acting with respect to the
    Notes) may not:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;reduce the amount of Notes whose Holders must consent
    to an amendment, supplement or waiver,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;reduce the rate of or extend the time for payment of
    interest, including default interest, on any Note,
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    66
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (3)&#160;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
    &#147;&#151;&#160;Redemption&#148; or with respect to mandatory
    offers to repurchase Notes described under
    &#147;&#151;&#160;Certain covenants&#160;&#151; Limitations on
    dispositions of assets&#148; or &#147;&#151;&#160;Certain
    covenants&#160;&#151; Repurchase of Notes upon Change of
    Control,&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (4)&#160;make any Note payable in money other than that stated
    in the Note,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (5)&#160;make any change in the &#147;Waiver of Defaults by
    Majority of Holders&#148; or the &#147;Proceedings by
    Holders&#148; sections set forth in the Indenture,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (6)&#160;modify the ranking or priority of the Notes or any
    Guarantee,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (7)&#160;release any Guarantor from any of its obligations under
    its Guarantee or the Indenture otherwise than in accordance with
    the Indenture,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (8)&#160;waive a continuing Default or Event of Default in the
    payment of principal of or interest on the Notes,&#160;or
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (9)&#160;effect a release of all or substantially all of the
    Collateral other than pursuant to the terms of the Security
    Documents or as otherwise permitted by the Indenture.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The right of any Holder to participate in any consent required
    or sought pursuant to any provision of the Indenture (and our
    obligation 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.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Governing
    law</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Indenture, the Notes, the Guarantees, the Intercreditor
    Agreements and the Security Documents are governed by the laws
    of the State of New York.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Definitions
    of certain terms used in the Indenture</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Set forth below is a summary of certain of the defined terms
    used in the Indenture. Reference is made to the Indenture for
    the full definition of all terms used in the Indenture.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Acquired Indebtedness&#148;</I> means (1)&#160;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 (2)&#160;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&#160;(1) or (2)&#160;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&#160;(1) or at the time of the acquisition of such assets
    in the case of clause (2), but shall not be deemed Acquired
    Indebtedness.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Affiliate&#148;</I> means, when used with reference to
    a specified Person, any Person directly or indirectly
    controlling, or controlled by or under direct or indirect common
    control with the Person specified.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Asset Acquisition&#148;</I> means (1)&#160;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 (2)&#160;the
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    67
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    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.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Asset Disposition&#148;</I> 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 <B>&#147;transaction&#148;</B>) 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&#160;million. The term
    <B>&#147;Asset Disposition&#148;</B> shall not include:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;a transaction between the Company, the Issuer and any
    Restricted Subsidiary or a transaction between Restricted
    Subsidiaries,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;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)&#160;homes, improved land
    and unimproved land and (B)&#160;real estate (including related
    amenities and improvements),
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (3)&#160;a transaction involving the sale of Capital Stock of,
    or the disposition of assets in, an Unrestricted Subsidiary,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (4)&#160;any exchange or swap of assets of the Company, the
    Issuer or any Restricted Subsidiary for assets (including
    Capital Stock of any Person that is or will be a Restricted
    Subsidiary following receipt thereof) that (x)&#160;are to be
    used by the Company, the Issuer or any Restricted Subsidiary in
    the ordinary course of its Real Estate Business and
    (y)&#160;have a Fair Market Value not less than the Fair Market
    Value of the assets exchanged or swapped (<I>provided </I>that
    (except as permitted by clause&#160;(3) under the definition of
    &#147;Permitted Investments&#148;) to the extent that the assets
    exchanged or swapped were Collateral, the assets received are
    pledged as Collateral under the Security Documents substantially
    simultaneously with such exchange or swap, with the Lien on such
    assets received being of the same priority with respect to the
    Notes as the Lien on the assets disposed of),
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (5)&#160;any sale, transfer, conveyance, lease or other
    disposition of assets and properties that is governed by the
    provisions set forth under &#147;&#151; Certain
    covenants&#160;&#151; Limitations on mergers, consolidation and
    sales of assets,&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (6)&#160;dispositions of mortgage loans and related assets and
    mortgage-backed securities in the ordinary course of a mortgage
    lending business,&#160;or
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (7)&#160;the creation of a Permitted Lien and dispositions in
    connection with Permitted Liens.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Attributable Debt&#148;</I> means, with respect to any
    Capitalized Lease Obligations, the capitalized amount thereof
    determined in accordance with GAAP.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Bankruptcy Law&#148;</I> means Title&#160;11 of the
    United States Code, as amended, or any similar federal or state
    law for the relief of debtors.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Capital Stock&#148;</I> means, with respect to any
    Person, any and all shares, interests, participations or other
    equivalents (however designated) of or in such Person&#146;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.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Capitalized Lease Obligations&#148;</I> 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.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Cash Equivalents&#148;</I> means
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;U.S.&#160;dollars;
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    68
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;securities issued or directly and fully guaranteed or
    insured by the U.S.&#160;government or any agency or
    instrumentality thereof having maturities of one year or less
    from the date of acquisition;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (3)&#160;certificates of deposit and eurodollar time deposits
    with maturities of one year or less from the date of
    acquisition, bankers&#146; 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&#160;million;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (4)&#160;repurchase obligations with a term of not more than
    seven days for underlying securities of the types described in
    clauses&#160;(2) and (3)&#160;entered into with any financial
    institution meeting the qualifications specified in
    clause&#160;(3) above;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (5)&#160;commercial paper rated
    <FONT style="white-space: nowrap">P-1,</FONT>
    <FONT style="white-space: nowrap">A-1</FONT> or the
    equivalent thereof by Moody&#146;s or S&#038;P, respectively,
    and in each case maturing within six months after the date of
    acquisition;&#160;and
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (6)&#160;investments in money market funds substantially all of
    the assets of which consist of securities described in the
    foregoing clauses&#160;(1) through (5).
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Change of Control&#148;</I> means
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;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);
    <I>provided, however</I>, 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;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;a &#147;person&#148; or &#147;group&#148; (within the
    meaning of Section&#160;13(d) of the Exchange Act (other than
    (x)&#160;the Company or (y)&#160;the Permitted Hovnanian
    Holders)) becomes the &#147;beneficial owner&#148; (as defined
    in
    <FONT style="white-space: nowrap">Rule&#160;13d-3</FONT>
    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;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (3)&#160;Continuing Directors cease to constitute at least a
    majority of the Board of Directors of the Company;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (4)&#160;the stockholders of the Company approve any plan or
    proposal for the liquidation or dissolution of the Company;
    <I>provided, however</I>, 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&#160;(1) above shall not constitute a Change of
    Control;&#160;or
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (5)&#160;a change of control shall occur as defined in the
    instrument governing any publicly traded debt securities of the
    Company or the Issuer which requires the Company or the Issuer
    to repay or repurchase such debt securities.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Collateralized Debt&#148;</I> means (i)&#160;the
    aggregate principal amount of all Indebtedness and all letters
    of credit secured by Liens on the Collateral plus (ii)&#160;the
    aggregate amount of all unfunded commitments under all revolving
    credit facilities or revolving lines of credit secured by Liens
    on the Collateral plus (iii)&#160;without duplication, the
    aggregate principal amount of Indebtedness that at such time
    would be permitted to be incurred under the Indenture and
    secured by Liens on the Collateral pursuant to clauses&#160;9(a)
    and 9(b) of the definition of &#147;Permitted Liens&#148; but
    excluding Indebtedness, letters of credit and unfunded
    commitments secured by Liens on the Collateral that rank junior
    to the Liens on the Collateral securing the Notes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Common Equity&#148;</I> of any Person means Capital
    Stock of such Person that is generally entitled to (1)&#160;vote
    in the election of directors of such Person or (2)&#160;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.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    69
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Consolidated Cash Flow Available for Fixed
    Charges&#148;</I> 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:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;income taxes,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;Consolidated Interest Expense,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (3)&#160;depreciation and amortization expenses and other
    non-cash charges to earnings,&#160;and
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (4)&#160;interest and financing fees and expenses which were
    previously capitalized and which are amortized to cost of sales,
    <I>minus</I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    all other non-cash items (other than the receipt of notes
    receivable) increasing such Consolidated Net Income.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Consolidated Fixed Charge Coverage Ratio&#148;</I>
    means, with respect to any determination date, the ratio of
    (x)&#160;Consolidated Cash Flow Available for Fixed Charges for
    the prior four full fiscal quarters (the <B>&#147;Four Quarter
    Period&#148;</B>) for which financial results have been reported
    immediately preceding the determination date (the
    <B>&#147;Transaction Date&#148;</B>), to (y)&#160;the aggregate
    Consolidated Interest Incurred for the Four Quarter Period. For
    purposes of this definition, <B>&#147;Consolidated Cash Flow
    Available for Fixed Charges&#148;</B> and <B>&#147;Consolidated
    Interest Incurred&#148;</B> shall be calculated after giving
    effect on a <I>pro forma </I>basis for the period of such
    calculation to:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;the incurrence or the repayment, repurchase, defeasance
    or other discharge or the assumption by another Person that is
    not an Affiliate (collectively, <B>&#147;repayment&#148;</B>) of
    any Indebtedness of the Company, the Issuer or any Restricted
    Subsidiary (and the application of the proceeds thereof) 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 <I>pro forma </I>basis by the
    application of any proceeds of the incurrence of Indebtedness
    giving rise to the need to make such calculation);
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;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&#160;(2)
    of the definition of &#147;Consolidated Net Income,&#148; 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; <I>provided, however</I>, 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 &#147;Consolidated Net Income,&#148; other than
    clause&#160;(2) thereof, as if it applied to the Person or
    assets involved before they were acquired;&#160;and
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (3)&#160;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.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Furthermore, in calculating &#147;Consolidated Cash Flow
    Available for Fixed Charges&#148; for purposes of determining
    the denominator (but not the numerator) of this
    &#147;Consolidated Fixed Charge Coverage Ratio,&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (a)&#160;interest on Indebtedness in respect of which a <I>pro
    forma</I> 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 <I>per annum</I> equal to
    the rate of interest on such Indebtedness in effect on the
    Transaction Date,&#160;and
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    70
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (b)&#160;notwithstanding clause&#160;(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 deemed to accrue at the rate
    <I>per annum</I> resulting after giving effect to the operation
    of such agreements.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Consolidated Interest Expense&#148;</I> 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.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Consolidated Interest Incurred&#148;</I> 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.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Consolidated Net Income&#148;</I> 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; <I>provided</I>, that there will be
    excluded from such net income (loss) (to the extent otherwise
    included therein), without duplication:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;the net income (or loss) of (x)&#160;any Unrestricted
    Subsidiary (other than a Mortgage Subsidiary) or (y)&#160;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&#146;s, the
    Issuer&#146;s or such Restricted Subsidiary&#146;s (as
    applicable) <I>pro rata </I>share of such Unrestricted
    Subsidiary&#146;s or such other Person&#146;s net income earned
    during such period,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;except to the extent includable in Consolidated Net
    Income pursuant to the foregoing clause (1), the net income (or
    loss) of any Person that accrued prior to the date that
    (a)&#160;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 (b)&#160;the assets of such Person are
    acquired by the Company or any Restricted Subsidiary,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (3)&#160;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,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (4)&#160;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
    (a)&#160;the acquisition of securities, or extinguishment of
    Indebtedness, of the Company or any Restricted Subsidiary or
    (b)&#160;any Asset Disposition by the Company or any Restricted
    Subsidiary,&#160;and
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (5)&#160;any extraordinary gain or loss together with any
    related provision for taxes, realized by the Company, the Issuer
    or any Restricted Subsidiary;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>provided, further</I>, that for purposes of calculating
    Consolidated Net Income solely as it relates to clause&#160;(3)
    of the first paragraph of the &#147;&#151; Certain
    covenants&#160;&#151; Limitations on Restricted Payments&#148;
    covenant, clause (4)(b) above shall not be applicable.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Continuing Director&#148;</I> means a director who
    either was a member of the Board of Directors of the Company on
    the Issue Date or who became a director of the Company
    subsequent to such date and whose election or nomination for
    election by the Company&#146;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.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    71
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;control&#148;</I> 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; and the terms
    <B>&#147;controlling&#148;</B> and <B>&#147;controlled&#148;</B>
    have meanings correlative to the foregoing.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Credit Facilities&#148;</I> means, collectively, one or
    more credit 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.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Currency Agreement&#148;</I> 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.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Custodian&#148;</I> means any receiver, trustee,
    assignee, liquidator or similar official under any Bankruptcy
    Law.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Default&#148;</I> means any event, act or condition
    that is, or after notice or the passage of time or both would
    be, an Event of Default.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Designation Amount&#148;</I> has the meaning provided
    in the definition of Unrestricted Subsidiary.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Disqualified Stock&#148;</I> 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, (1)&#160;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 (2)&#160;is convertible into or exchangeable or exercisable
    for (whether at the option of the issuer or the holder thereof)
    (a)&#160;debt securities or (b)&#160;any Capital Stock referred
    to in (1)&#160;above, in each case, at any time prior to the
    final maturity date of the Notes; <I>provided, however</I>, 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 or asset disposition occurring
    prior to the final maturity date of the Notes shall not
    constitute Disqualified Stock if the change in control or asset
    disposition provision applicable to such Capital Stock are no
    more favorable to such holders than the provisions described
    under the captions &#147;&#151; Certain covenants&#160;&#151;
    Repurchase of Notes upon Change of Control&#148; or &#147;&#151;
    Certain covenants&#160;&#151; Limitations on dispositions of
    assets,&#148; as applicable, 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&#146;s repurchase of the Notes as are required pursuant
    to the provisions described under the captions
    &#147;&#151;&#160;Certain covenants&#160;&#151; Repurchase of
    Notes upon Change of Control&#148; or &#147;&#151; Certain
    covenants&#160;&#151; Limitations on dispositions of
    assets,&#148; as applicable.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Equity Offering&#148;</I> means any public or private
    sale, after the Issue Date, of Qualified Stock of the Company,
    other than (i)&#160;an Excluded Contribution, (ii)&#160;public
    offerings registered on
    <FONT style="white-space: nowrap">Form&#160;S-4</FONT>
    or <FONT style="white-space: nowrap">S-8</FONT> or
    any successor form thereto or (iii)&#160;any issuance pursuant
    to employee benefit plans or otherwise in compensation to
    officers, directors or employees.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Event of Default&#148;</I> has the meaning set forth in
    &#147;&#151; Events of Default.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Excluded Contribution&#148;</I> means cash or Cash
    Equivalents received by the Company as capital contributions to
    its equity (other than through the issuance of Disqualified
    Stock) or from the issuance or sale (other than to a Subsidiary)
    of Qualified Stock of the Company, in each case, after
    January&#160;31, 2008 and to the extent designated as an
    Excluded Contribution pursuant to an Officer&#146;s Certificate
    of the Company.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    72
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Fair Market Value&#148;</I> 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&#146;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.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;First-Priority Lien Obligations&#148;</I> means all
    Indebtedness secured by First Priority Liens on the Collateral,
    as permitted by clauses (9)(a) and (b)&#160;of the definition of
    &#147;Permitted Liens&#148;, and all Obligations in respect
    thereof.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;GAAP&#148;</I> 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.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;guarantee&#148;</I> means any obligation, contingent or
    otherwise, of any Person directly or indirectly guaranteeing any
    Indebtedness of any other Person and, without limiting the
    generality of the foregoing, any obligation, direct or indirect,
    contingent or otherwise, of such Person: (i)&#160;to purchase or
    pay (or advance or supply funds for the purchase or payment of)
    such Indebtedness of such other Person (whether arising by
    virtue of partnership arrangements, or by agreement to
    keep-well, to purchase assets, goods, securities or services, to
    take-or-pay, or to maintain financial statement conditions or
    otherwise) or (ii)&#160;entered into for purposes of assuring in
    any other manner the obligee of such Indebtedness of the payment
    thereof or to protect such obligee against loss in respect
    thereof, in whole or in part; <I>provided </I>that the term
    &#147;guarantee&#148; does not include endorsements for
    collection or deposit in the ordinary course of business. The
    term &#147;guarantee&#148; used as a verb has a corresponding
    meaning.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Guarantee&#148;</I> means the guarantee of the Notes by
    the Company and each other Guarantor under the Indenture.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Guarantors&#148;</I> means (i)&#160;initially, the
    Company and each of the Company&#146;s Restricted Subsidiaries
    in existence on the Issue Date, other than the Issuer and K.
    Hovnanian Poland, sp.zo.o., and (ii)&#160;each of the
    Company&#146;s Subsidiaries that becomes a Guarantor of the
    Notes pursuant to the provisions of the Indenture, and their
    successors, in each case until released from its respective
    Guarantee pursuant to the Indenture.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Holder&#148; or &#147;Holders of Notes&#148;</I> means
    the Person in whose name a Note is registered in the books of
    the Registrar for the Notes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Indebtedness&#148;</I> of any Person means, without
    duplication,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;any liability of such Person (a)&#160;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 instruments issued for the benefit
    of, or surety, performance, completion or payment bonds, earnest
    money notes or similar purpose undertakings or indemnifications
    issued by, such Person in the ordinary course of business),
    (b)&#160;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 (c)&#160;in respect of Capitalized
    Lease Obligations (to the extent of the Attributable Debt in
    respect thereof),
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;any Indebtedness of others that such Person has
    guaranteed to the extent of the guarantee; <I>provided,
    however</I>, 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
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    73
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    acquired, will constitute Restricted Payments subject to the
    &#147;&#151; Certain covenants&#160;&#151; Limitations on
    restricted payments&#148; covenant,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (3)&#160;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,&#160;and
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (4)&#160;all Indebtedness of others secured by a Lien on any
    asset of such Person, whether or not such Indebtedness is
    assumed by such Person;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>provided</I>, 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
    (a)&#160;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, (b)&#160;the maximum liability of such
    Person for any contingent obligations under clause&#160;(1)
    above at such date, net of an unamortized discount to be
    accounted for as Interest Expense in accordance with GAAP, and
    (c)&#160;in the case of clause&#160;(4) above, the lesser of
    (x)&#160;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)&#160;the amount of the Indebtedness secured.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Intercreditor Agreements&#148;</I> mean the
    Intercreditor Agreements as amended as of the Issue Date among
    the Collateral Agent, Wilmington Trust&#160;Company, the Junior
    Collateral Agents, the Trustee, the Junior Trustees, the Issuer,
    the Company and each other Guarantor named therein, as
    applicable, as such agreements may be amended, restated,
    supplemented or otherwise modified from time to time.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Interest Expense&#148;</I> of any Person for any period
    means, without duplication, the aggregate amount of
    (i)&#160;interest which, in conformity with GAAP, would be set
    opposite the caption &#147;interest expense&#148; 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&#146;
    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 (ii)&#160;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; <I>provided</I>, 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.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Interest Incurred&#148;</I> of any Person for any
    period means, without duplication, the aggregate amount of
    (1)&#160;Interest Expense and (2)&#160;all capitalized interest
    and amortized debt issuance costs.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Interest Protection Agreement&#148;</I> 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 Indebtedness permitted to be incurred under the Indenture.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Investments&#148;</I> of any Person means (i)&#160;all
    investments by such Person in any other Person in the form of
    loans, advances or capital contributions, (ii)&#160;all
    guarantees of Indebtedness or other obligations of any other
    Person by such Person, (iii)&#160;all purchases (or other
    acquisitions for consideration) by such Person of Indebtedness,
    Capital Stock or other securities of any other Person and
    (iv)&#160;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.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Issue Date&#148;</I> means October&#160;20, 2009.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Junior-Priority Lien Obligations&#148;</I> means all
    Indebtedness and other obligations permitted to be incurred and
    secured by Liens on the Collateral ranking junior to the
    First-Priority Liens pursuant to clause&#160;9(c) of the
    definition of &#147;Permitted Liens&#148;.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    74
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Lien&#148;</I> 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.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Marketable Securities&#148;</I> means (a)&#160;equity
    securities that are listed on the New York Stock Exchange, the
    American Stock Exchange or The Nasdaq Stock Market and
    (b)&#160;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.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Moody&#146;s&#148;</I> means Moody&#146;s Investors
    Service, Inc. or any successor to its debt rating business.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Mortgage Subsidiary&#148;</I> means any Subsidiary of
    the Company substantially all of whose operations consist of the
    mortgage lending business.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Net Cash Proceeds&#148;</I> means with respect to an
    Asset Disposition, payments received in cash (including any such
    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&#146;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
    (other than Indebtedness secured by Liens on the Collateral) in
    accordance with the terms of any Lien or agreement upon or with
    respect to such Property or which such Indebtedness 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.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Non-Recourse Indebtedness&#148;</I> with respect to any
    Person means Indebtedness of such Person for which (1)&#160;the
    sole legal recourse for collection of principal and interest on
    such Indebtedness is against the 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&#160;days after the acquisition of such property and
    (2)&#160;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 (a)&#160;environmental warranties and indemnities, or
    (b)&#160;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&#146; liens.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Obligations&#148;</I> means with respect to any
    Indebtedness, all obligations (whether in existence on the Issue
    Date or arising afterwards, absolute or contingent, direct or
    indirect) for or in respect of principal (when due, upon
    acceleration, upon redemption, upon mandatory repayment or
    repurchase pursuant to a mandatory offer to purchase, or
    otherwise), premium, interest, penalties, fees, indemnification,
    reimbursement and other amounts payable and liabilities with
    respect to such Indebtedness, including all interest accrued or
    accruing after the commencement of any bankruptcy, insolvency or
    reorganization or similar case or proceeding at the contract
    rate (including, without limitation, any contract rate
    applicable upon default) specified in the relevant
    documentation, whether or not the claim for such interest is
    allowed as a claim in such case or proceeding.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    75
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Permitted Hovnanian Holders&#148;</I> means,
    collectively, Ara K. Hovnanian, the members of his immediate
    family and the members of the immediate family of the late
    Kevork S. Hovnanian, the respective estates, spouses, heirs,
    ancestors, lineal descendants, legatees and legal
    representatives of any of the foregoing and the trustee of any
    <I>bona fide </I>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.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Permitted Indebtedness&#148;</I> means
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;Indebtedness under the Notes (and Exchange Notes and
    Guarantees thereof), other than Additional Notes;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;Indebtedness of the Company, the Issuer or any
    Guarantor that is (A)&#160;secured by Liens permitted by
    clause&#160;9(a) of the definition of Permitted Liens, in an
    aggregate principal amount that, after giving effect to the
    incurrence of such Indebtedness, does not result in outstanding
    Indebtedness, so secured, in excess of the amount permitted by
    the proviso in clause&#160;9(a)(ii) of the definition of
    Permitted Liens and (B)&#160;scheduled to mature on or after the
    maturity date of the Notes (except with respect to Indebtedness
    incurred pursuant to this clause (2)&#160;under Credit
    Facilities, which may be scheduled to mature on or prior to the
    maturity date of the Notes; <I>provided </I>that such
    Indebtedness, together with any Refinancing Indebtedness
    permitted by the proviso of paragraph (2)&#160;of the definition
    thereof then outstanding, does not exceed $150.0&#160;million in
    aggregate principal amount);
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (3)&#160;Indebtedness in respect of obligations of the Company
    and its Subsidiaries to the trustees under indentures for debt
    securities;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (4)&#160;intercompany debt obligations of (i)&#160;the Company
    to the Issuer, (ii)&#160;the Issuer to the Company,
    (iii)&#160;the Company or the Issuer to any Restricted
    Subsidiary and (iv)&#160;any Restricted Subsidiary to the
    Company or the Issuer or any other Restricted Subsidiary;
    <I>provided, however</I>, 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 the first paragraph
    of the covenant described under &#147;&#151; Certain
    covenants&#160;&#151; Limitations on indebtedness&#148; at the
    time the Restricted Subsidiary in question ceases to be a
    Restricted Subsidiary;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (5)&#160;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;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (6)&#160;Purchase Money Indebtedness and Capitalized Lease
    Obligations in an aggregate principal amount outstanding at any
    one time not to exceed $25.0&#160;million;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (7)&#160;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;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (8)&#160;Indebtedness secured only by office buildings owned or
    occupied by the Company or any Restricted Subsidiary, which
    Indebtedness does not exceed $10&#160;million aggregate
    principal amount outstanding at any one time;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (9)&#160;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;&#160;and
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (10)&#160;Indebtedness of the Company or any Restricted
    Subsidiary which, together with all other Indebtedness under
    this clause (10), does not exceed $50&#160;million aggregate
    principal amount outstanding at any one time.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    76
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Permitted Investment&#148;</I> means
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;Cash Equivalents;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;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;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (3)&#160;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; <I>provided </I>that non-cash consideration received
    in an Asset Disposition or an exchange or swap of assets shall
    be pledged as Collateral under the Security Documents to the
    extent the assets subject to such Asset Disposition or exchange
    or swap of assets constituted Collateral, with the Lien on such
    Collateral securing the Notes being of the same priority with
    respect to the Notes as the Lien on the assets disposed of;
    <I>provided further</I> that notwithstanding the foregoing
    clause, up to an aggregate of $50.0&#160;million of
    (x)&#160;non-cash consideration and consideration received as
    referred to in clause&#160;(ii) of the second paragraph under
    &#147;&#151; Certain covenants&#160;&#151; Limitations on
    dispositions of assets,&#148; (y)&#160;assets invested in
    pursuant to the third paragraph under &#147;&#151; Certain
    covenants&#160;&#151; Limitations on dispositions of
    assets&#148; and (z)&#160;assets received pursuant to
    clause&#160;(4) under the definition of &#147;Asset
    Disposition&#148; may be designated by the Company or the Issuer
    as Excluded Property not required to be pledged as Collateral;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (4)&#160;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;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (5)&#160;Investments in Currency Agreements or Interest
    Protection Agreements described in the definition of
    &#147;Permitted Indebtedness;&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (6)&#160;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; <I>provided, however</I>, that any such loan or
    advance exceeding $1&#160;million shall have been approved by
    the Board of Directors of the Company or a committee thereof
    consisting of disinterested members;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (7)&#160;Investments in interests in issuances of collateralized
    mortgage obligations, mortgages, mortgage loan servicing, or
    other mortgage related assets;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (8)&#160;obligations of the Company or a Restricted Subsidiary
    under warehouse lines of credit of Mortgage Subsidiaries to
    repurchase mortgages;&#160;and
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (9)&#160;Investments in an aggregate amount outstanding not to
    exceed $10&#160;million.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Permitted Liens&#148;</I> means
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;Liens for taxes, assessments or governmental or
    quasi-government charges or claims that (a)&#160;are not yet
    delinquent, (b)&#160;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 (c)&#160;encumber solely
    property abandoned or in the process of being abandoned,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;statutory Liens of landlords and carriers&#146;,
    warehousemen&#146;s, mechanics&#146;, suppliers&#146;,
    materialmen&#146;s, repairmen&#146;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
    (a)&#160;are not yet delinquent or (b)&#160;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,
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    77
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (3)&#160;Liens (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&#146; compensation, unemployment insurance and
    other types of social security,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (4)&#160;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&#146;s or other obligations to make
    <FONT style="white-space: nowrap">on-site</FONT> 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 parenthetical in clause
    (1)(a) of the definition of &#147;Indebtedness&#148;), in each
    case incurred in the ordinary course of business of the Company,
    the Issuer and the Restricted Subsidiaries,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (5)&#160;attachment or judgment Liens not giving rise to a
    Default or an Event of Default,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (6)&#160;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,
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (7)&#160;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,
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (8)&#160;Liens securing Indebtedness incurred pursuant to
    clause&#160;(8) or (9)&#160;of the definition of Permitted
    Indebtedness,
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (9)&#160;Liens on the Collateral and other assets not
    constituting Collateral pursuant to clause&#160;(a) of the
    definition of &#147;Excluded Property&#148; securing:
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (a)&#160;(i)&#160;the Notes (other than Additional Notes) and
    Exchange Notes, the Guarantees thereof and other Obligations
    under the Indenture and the Security Documents and in respect
    thereof and any obligations owing to the Trustee or the
    Collateral Agent under the Indenture or the Security Documents,
    (ii) other Indebtedness otherwise permitted to be incurred under
    the Indenture (and all Obligations in respect thereof),
    <I>provided</I> that the Indebtedness so secured pursuant to
    this clause (a)(ii), when taken together with any Indebtedness
    secured pursuant to this clause (a) outstanding at the time such
    other Indebtedness is incurred and so secured, does not exceed
    $785.0&#160;million and (iii) any Refinancing Indebtedness
    (including pursuant to Credit Facilities) in respect of clauses
    (a)(i) and (a)(ii);
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (b)&#160;(i)&#160;up to an additional $25.0&#160;million of
    Indebtedness otherwise permitted to be incurred under the
    Indenture (and all Obligations arising thereunder) and any
    Refinancing Indebtedness in respect thereof (including pursuant
    to Credit Facilities) and (ii)&#160;Refinancing Indebtedness
    (including pursuant to Credit Facilities) in respect of
    Outstanding Junior Secured Notes and any Refinancing
    Indebtedness in respect thereof (including pursuant to Credit
    Facilities), which Liens incurred under this clause&#160;(b) may
    be on a first-lien priority basis ranking equally with the Liens
    securing the Indebtedness and other Obligations referred to in
    clause&#160;(a) above;&#160;and
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (c)&#160;(i)&#160;any Outstanding Junior Secured Notes, the
    Guarantees thereof and other Obligations under the related
    indentures and security documents and in respect thereof and any
    obligations owing to the Junior Trustees or the Junior
    Collateral Agents under the applicable indentures and security
    documents and (ii)&#160;any other Indebtedness permitted to be
    incurred under the Indenture (and all Obligations in respect
    thereof); and any Refinancing Indebtedness (including pursuant
    to Credit Facilities) in respect of the Indebtedness referred to
    in this clause (c), <I>provided </I>that the Liens securing
    Indebtedness referred to in this clause&#160;(c) rank junior to
    the Liens on the Collateral securing the Notes pursuant to the
    Intercreditor Agreements,
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    78
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (10)&#160;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&#160;days
    after the incurrence of such Non-Recourse Indebtedness,
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (11)&#160;Liens securing Purchase Money Indebtedness;
    <I>provided</I>, that such Liens apply only to the property
    acquired, constructed or improved with the proceeds of such
    Purchase Money Indebtedness within 90&#160;days after the
    incurrence of such Purchase Money Indebtedness,
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (12)&#160;Liens on property or assets of the Company, the Issuer
    or any Restricted Subsidiary securing Indebtedness of the
    Company, the Issuer or any Restricted Subsidiary owing to the
    Company, the Issuer or one or more Restricted Subsidiaries
    (other than K. Hovnanian Poland, sp.z.o.o.),
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (13)&#160;leases or subleases granted to others not materially
    interfering with the ordinary course of business of the Company
    and the Restricted Subsidiaries,
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (14)&#160;purchase money security interests (including, without
    limitation, Capitalized Lease Obligations); <I>provided</I>,
    that such Liens apply only to the Property acquired and the
    related Indebtedness is incurred within 90&#160;days after the
    acquisition of such Property,
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (15)&#160;any right of first refusal, right of first offer,
    option, contract or other agreement to sell an asset;
    <I>provided </I>that such sale is not otherwise prohibited under
    the Indenture,
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (16)&#160;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,
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (17)&#160;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 earnest money obligations, escrows or similar
    purpose undertakings or indemnifications in the ordinary course
    of business of the Company, the Issuer and the Restricted
    Subsidiaries,
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (18)&#160;Liens for homeowner and property owner association
    developments and assessments,
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (19)&#160;Liens securing Refinancing Indebtedness;
    <I>provided</I>, that such Liens extend only to the assets
    securing the Indebtedness being refinanced and have the same or
    junior priority as the initial Liens; <I>provided further
    </I>that no Liens may be incurred under this clause&#160;(19) in
    respect of Refinancing Indebtedness incurred to refinance
    Indebtedness that is secured by Liens incurred under
    clause&#160;(9) above,
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (20)&#160;Liens 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,
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (21)&#160;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; <I>provided</I>, 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 merged into or consolidated with
    the Company or the Subsidiary or acquired by the Company or its
    Subsidiaries,
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (22)&#160;Liens on property existing at the time of acquisition
    thereof by the Company or any Subsidiary of the Company,
    <I>provided</I>, that such Liens were in existence prior to the
    contemplation of such acquisition,
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (23)&#160;Liens existing on the Issue Date (other than Liens
    securing Obligations under the Notes and the Outstanding Junior
    Secured Notes) and any extensions, renewals or replacements
    thereof,&#160;and
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    79
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (24)&#160;Liens on specific items of inventory or other goods
    and proceeds of any Person securing such Person&#146;s
    obligations in respect of bankers&#146; acceptances issued or
    created for the account of such Person to facilitate the
    purchase, shipment or storage of such inventory or other goods.
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Person&#148;</I> 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.
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Preferred Stock&#148;</I> of any Person means all
    Capital Stock of such Person which has a preference in
    liquidation or with respect to the payment of dividends.
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Property&#148;</I> 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.
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Purchase Money Indebtedness&#148;</I> 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; <I>provided, however</I>, that (1)&#160;the
    aggregate principal amount of such Indebtedness shall not exceed
    such purchase price or cost and (2)&#160;such Indebtedness shall
    be incurred no later than 90&#160;days after the acquisition of
    such property or completion of such construction or improvement.
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Qualified Stock&#148;</I> means Capital Stock of the
    Company other than Disqualified Stock.
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Real Estate Business&#148;</I> means homebuilding,
    housing construction, real estate development or construction
    and the sale of homes and related real estate activities,
    including the provision of mortgage financing or title insurance.
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Refinancing Indebtedness&#148;</I> 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:
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;the Refinancing Indebtedness is subordinated, if at
    all, to the Notes or the Guarantees, as the case may be, to the
    same extent as the Indebtedness being refunded, refinanced or
    extended (<I>provided </I>that Refinancing Indebtedness issued
    to refund, refinance or extend Subordinated Indebtedness
    outstanding as of the Issue Date (such Subordinated
    Indebtedness, excluding the Outstanding Junior Secured Notes,
    <B>&#147;Existing Subordinated Debt&#148;</B>) need not be
    subordinated to the Notes or the Guarantees, as the case may, so
    long as any Liens securing such Indebtedness are junior to the
    Liens securing the Notes or the Guarantees, as the case may be),
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;the Refinancing Indebtedness is scheduled to mature
    either (a)&#160;no earlier than the Indebtedness being refunded,
    refinanced or extended or (b)&#160;after the maturity date of
    the Notes (unless the Refinancing Indebtedness is in respect of
    (i) Existing Subordinated Debt and is secured by Liens on the
    Collateral in which case the Refinancing Indebtedness must be
    scheduled to mature after the maturity date of the Notes or (ii)
    Outstanding Junior Secured Notes (which Refinancing Indebtedness
    will be secured on a first-lien priority basis by Liens on the
    Collateral) in which case the Refinancing Indebtedness must be
    scheduled to mature on or after the maturity date of the Notes),
    <I>provided </I>that up to a total of $150.0&#160;million at any
    one time outstanding of Indebtedness under Credit Facilities
    incurred pursuant to clause (2) under the definition of
    Permitted Indebtedness, together with any Refinancing
    Indebtedness that refinances the First-Priority Lien Obligations
    or Outstanding Junior Secured Notes (which Refinancing
    Indebtedness will be secured on a first-lien priority basis by
    Liens on the Collateral) pursuant to Credit Facilities, may be
    scheduled to mature on or prior to the maturity date of the
    Notes,
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    80
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (3)&#160;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,&#160;and
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (4)&#160;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 (plus all accrued interest
    thereon and the amount of any premiums (including tender
    premiums) and expenses incurred in connection with the
    refinancing thereof).
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Restricted Investment&#148;</I> means any Investment
    other than a Permitted Investment.
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Restricted Payment&#148;</I> means any of the following:
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;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 (a)&#160;dividends or distributions payable solely in
    Qualified Stock and (b)&#160;in the case of the Issuer or
    Restricted Subsidiaries, dividends or distributions payable to
    the Company, the Issuer or a Restricted Subsidiary);
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;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);
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (3)&#160;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&#160;(2) of the definition of Indebtedness;&#160;and
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (4)&#160;the purchase, repurchase, redemption, acquisition or
    retirement for value, prior to the date for any scheduled
    maturity, sinking fund or amortization or other principal
    installment payment, of any Subordinated Indebtedness (other
    than (a)&#160;Indebtedness permitted under clause&#160;(4) of
    the definition of Permitted Indebtedness or (b)&#160;the
    purchase, repurchase, redemption, defeasance, or other
    acquisition or retirement of Subordinated Indebtedness purchased
    in anticipation of satisfying a sinking fund obligation,
    amortization or principal installment or final maturity, in each
    case due within one year of the date of purchase, repurchase,
    redemption, defeasance or other acquisition or retirement).
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Restricted Subsidiary&#148;</I> means any Subsidiary of
    the Company which is not an Unrestricted Subsidiary.
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;S&#038;P&#148;</I> means Standard&#160;&#038;
    Poor&#146;s Ratings Services, a division of The McGraw Hill
    Companies, Inc., a New York corporation, or any successor to its
    debt rating business.
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Security Documents&#148;</I> means (i)&#160;the
    Intercreditor Agreement and (ii)&#160;the security documents
    granting a security interest in any assets of any Person to
    secure the Indebtedness and related Obligations under the Notes
    and the Guarantees as each may be amended, restated,
    supplemented or otherwise modified from time to time.
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Significant Subsidiary&#148;</I> means any Subsidiary
    of the Company which would constitute a &#147;significant
    subsidiary&#148; as defined in
    <FONT style="white-space: nowrap">Rule&#160;1-02(w)(1)</FONT>
    or (2)&#160;of
    <FONT style="white-space: nowrap">Regulation&#160;S-X</FONT>
    under the Securities Act and the Exchange Act as in effect on
    the Issue Date.
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Subordinated Indebtedness&#148;</I> means Indebtedness
    subordinated in right of payment to the Notes pursuant to a
    written agreement and includes any Indebtedness ranking equally
    in right of payment to the Notes but unsecured or secured by the
    Collateral on a basis entirely junior to that of the Notes.
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Subsidiary&#148;</I> 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.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    81
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Trustee&#148;</I> means the party named as such above
    until such time, if any, a successor replaces such party in
    accordance with the applicable provisions of the Indenture and
    thereafter means the successor serving as trustee under the
    Indenture in respect of the Notes.
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Unrestricted Subsidiary&#148;</I> 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; <I>provided </I>that (a)&#160;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 &#147;Non-Recourse
    Indebtedness,&#148; 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)&#160;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. As of the Issue Date, our home
    mortgage subsidiaries, our joint ventures and certain of our
    title insurance subsidiaries are designated as Unrestricted
    Subsidiaries under the Indenture.
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    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; <I>provided, however</I>, that
    (1)&#160;the net amount (the <B>&#147;Designation
    Amount&#148;</B>) 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 the &#147;Limitations on restricted
    payments&#148; covenant set forth in the Indenture, to the
    extent provided therein, (2)&#160;the Company must be permitted
    under the &#147;Limitations on restricted payments&#148;
    covenant set forth in the Indenture to make the Restricted
    Payment deemed to have been made pursuant to clause (1), and
    (3)&#160;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&#146;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.
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Board of Directors of the Company or a duly authorized
    committee thereof may also redesignate an Unrestricted
    Subsidiary to be a Restricted Subsidiary; <I>provided,
    however</I>, that (1)&#160;the Indebtedness of such Unrestricted
    Subsidiary as of the date of such redesignation could then be
    incurred under the &#147;Limitations on indebtedness&#148;
    covenant and (2)&#160;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 the first paragraph
    of the &#147;&#151; Certain covenants&#160;&#151; Limitations on
    indebtedness&#148; covenant. 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&#146; Certificate certifying that such designation or
    redesignation complied with the foregoing conditions and setting
    forth the underlying calculations of such Officers&#146;
    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;
    <I>provided, however</I>, that the ownership of the general
    partnership interest (or a similar member&#146;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.
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;U.S.&#160;Government Obligations&#148;</I> means
    non-callable, non-payable bonds, notes, bills or other similar
    obligations issued or guaranteed by the United States government
    or any agency thereof the full and timely payment of which are
    backed by the full faith and credit of the United States.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    82
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>&#147;Weighted Average Life to Maturity&#148;</I> means, when
    applied to any Indebtedness or portion thereof at any date, the
    number of years obtained by dividing (i)&#160;the sum of the
    products obtained by multiplying (a)&#160;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
    (b)&#160;the number of years (calculated to the nearest
    one-twelfth) that will elapse between such date and the making
    of such payment by (ii)&#160;the sum of all such payments
    described in clause (i)(a) above.
</DIV>

<DIV style="margin-top: 16pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Concerning
    the Trustee</FONT></B>
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Trustee is also the trustee with respect to the Outstanding
    Junior Secured Notes. The Indenture contains certain limitations
    on the rights of the Trustee, should it become a creditor of the
    Company, to obtain payment of claims in certain cases, or to
    realize on certain property received in respect of any such
    claim as security or otherwise. The Trustee will be permitted to
    engage in other transactions; however, if it acquires any
    conflicting interest during the continuance of any Default, it
    must, so long as such Default has not been cured or duly waived,
    eliminate that conflicting interest within 90&#160;days, apply
    to the Commission for permission to continue or resign.
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The holders of a majority in principal amount of the Notes then
    outstanding will have the right to direct the Trustee, subject
    to certain exceptions. The Indenture provides that in case an
    Event of Default shall occur (which shall not be cured), the
    Trustee will be required, in the exercise of its power, to use
    the degree of care of a prudent man in the conduct of his own
    affairs. Subject to such provisions, the Trustee will be under
    no obligation to exercise any of its rights or powers under the
    Indenture at the request of any holder of Notes, unless that
    holder shall have offered to the Trustee security and indemnity
    satisfactory to it against any loss, liability or expense.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    83
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='209'>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">EXCHANGE
    OFFER; REGISTRATION RIGHTS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Issuer, the Company and the other guarantors party thereto
    entered into a registration rights agreement on October&#160;20,
    2009, which we refer to as the <B>&#147;Registration Rights
    Agreement.&#148;</B> Pursuant to the Registration Rights
    Agreement, the Issuer, the Company and the guarantors party
    thereto agreed to file with the SEC the Exchange Offer
    Registration Statement on the appropriate form under the
    Securities Act with respect to the exchange offer. Upon the
    effectiveness of the Exchange Offer Registration Statement and
    pursuant to the exchange offer, the Issuer will offer to the
    holders of Transfer Restricted Securities (as defined below) who
    are able to make certain representations the opportunity to
    exchange their Transfer Restricted Securities for exchange
    notes. Capitalized terms used in this section but not otherwise
    defined have the meanings given to them in the Registration
    Rights Agreement.
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under the Registration Rights Agreement:
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;the Issuer, the Company and the guarantors agreed to
    file an Exchange Offer Registration Statement with the SEC on or
    prior to 120&#160;days after October&#160;20, 2009;
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;unless the exchange offer would not be permitted by
    applicable law or SEC policy, the Issuer, the Company and the
    guarantors agreed to commence the exchange offer, keep the
    exchange offer open for a period of not less than 20 business
    days and consummate the exchange offer on or prior to 235 days
    after October&#160;20, 2009, which we refer to as the
    <B>&#147;Consummation Deadline&#148;</B>; and
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (3)&#160;if obligated to file the Shelf Registration Statement,
    the Issuer, the Company and the guarantors will file the Shelf
    Registration Statement with the SEC on or prior to 30&#160;days
    after that filing obligation arises and use their reasonable
    best efforts to cause the Shelf Registration Statement to be
    declared effective by the SEC on or prior to 90&#160;days after
    that obligation arises.
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In the event that:
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;the Issuer is not required to file the Exchange Offer
    Registration Statement or permitted to consummate the exchange
    offer because the exchange offer is not permitted by applicable
    law or SEC policy;&#160;or
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;any holder of Transfer Restricted Securities notifies
    the Issuer in writing prior to the 20th&#160;business day
    following consummation of the exchange offer that:
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (a)&#160;based on an opinion of counsel, it is prohibited by law
    or SEC policy from participating in the exchange offer;&#160;or
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (b)&#160;it is a broker-dealer and owns notes acquired directly
    from the Issuer,
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    then, the Issuer, the Company and the guarantors have agreed to
    file with the SEC a Shelf Registration Statement to cover
    resales of the notes by the holders thereof who satisfy certain
    conditions relating to the provisions of information in
    connection with the Shelf Registration Statement.
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company, the Issuer and the guarantors have agreed to use
    their reasonable best efforts to cause the applicable
    registration statement to be declared effective as promptly as
    possible by the SEC.
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For purposes of the preceding, <B>&#147;Transfer Restricted
    Securities&#148;</B> means:
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;each outstanding note, until the earliest to occur of:
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (a)&#160;the date on which that outstanding note is exchanged in
    the exchange offer for an exchange note which is entitled to be
    resold to the public by the holder thereof without complying
    with the prospectus delivery requirements of the Securities Act;
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (b)&#160;the date on which that outstanding note has been
    disposed of in accordance with a Shelf Registration Statement
    (and purchasers thereof have been issued new exchange
    notes);&#160;or
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (c)&#160;the date on which the outstanding note is distributed
    to the public pursuant to Rule&#160;144 or Regulation&#160;S
    under the Securities Act (and purchasers thereof have been
    issued new exchange notes);&#160;and
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    84
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;exchange notes issued to a broker-dealer until the date
    on which those exchange notes are disposed of by that
    broker-dealer pursuant to the &#147;Plan of Distribution&#148;
    contemplated by the Exchange Offer Registration Statement
    (including the delivery of the prospectus contained therein).
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Issuer, the Company and guarantors have agreed to pay
    additional interest to each holder of Transfer Restricted
    Securities upon the occurrence of any of the following:
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;the Issuer, the Company and the guarantors fail to file
    any of the Registration Statements required by the Registration
    Rights Agreement on or before the date specified for that filing;
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;any Shelf Registration Statement is not declared
    effective by the SEC on or prior to the date specified for that
    effectiveness, which we refer to as the <B>&#147;Effectiveness
    Target Date&#148;</B>;
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (3)&#160;the Issuer fails to consummate the exchange offer on or
    prior to the Consummation Deadline;&#160;or
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (4)&#160;the Shelf Registration Statement or the Exchange Offer
    Registration Statement is declared effective but thereafter
    ceases to be effective or usable (without being succeeded
    immediately by a post-effective amendment to such Registration
    Statement) in connection with resales of Transfer Restricted
    Securities during the periods specified in the Registration
    Rights Agreement.
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We refer to each event referred to in clauses&#160;(1) through
    (4)&#160;above as a <B>&#147;Registration Default.&#148;</B>
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Such additional interest shall be:
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;with respect to the first
    <FONT style="white-space: nowrap">90-day</FONT>
    period immediately following the occurrence of the first
    Registration Default, an amount equal to $0.05 per week per
    $1,000 principal amount of Transfer Restricted Securities held
    by that holder;&#160;and
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;an additional $0.05 per week per $1,000 principal
    amount of Transfer Restricted Securities held by that holder
    with respect to each subsequent
    <FONT style="white-space: nowrap">90-day</FONT>
    period until all Registration Defaults have been cured, up to a
    maximum amount of additional interest for all Registration
    Defaults of $0.25 per week per $1,000 principal amount of
    Transfer Restricted Securities.
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    All accrued additional interest will be paid on each Interest
    Payment Date at the same time and in the same manner as
    interest. Following the cure of all Registration Defaults, the
    accrual of additional interest will cease. Additional interest
    will only be payable in respect of one Registration Default at
    any time.
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Holders of Transfer Restricted Securities will be required to
    make certain representations to the Issuer, the Company and the
    guarantors (as described in the Registration Rights Agreement)
    in order to participate in the exchange offer and will be
    required to deliver certain information to be used in connection
    with the Shelf Registration Statement and to provide comments on
    the Shelf Registration Statement within the time periods set
    forth in the Registration Rights Agreement in order to have
    their notes included in the Shelf Registration Statement and to
    benefit from the provisions regarding additional interest set
    forth above with respect to the Shelf Registration Statement.
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The outstanding notes and the exchange notes will constitute a
    single series of debt securities under the Indenture. If an
    exchange offer is consummated, holders of outstanding notes who
    do not exchange their outstanding notes in that exchange offer
    will vote together with the holders of the exchange notes for
    all relevant purposes under the Indenture. Accordingly, when
    determining whether the required holders have given notice,
    consent or waiver or taken any other action permitted under the
    Indenture, any outstanding notes that remain outstanding after
    the exchange offer will be aggregated with the exchange notes.
    All references herein to specified percentages in aggregate
    principal amount of notes outstanding shall be deemed to mean,
    at any time after the exchange offer is consummated, percentages
    in aggregate principal amount of outstanding notes and exchange
    notes outstanding.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    85
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='210'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">BOOK-ENTRY,
    DELIVERY AND FORM</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Book-Entry
    Procedures for the Global Notes</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The exchange notes will initially be represented in the form of
    one or more global notes in fully-registered book-entry form
    without interest coupons that will be deposited upon issuance
    with the trustee under the indenture, Wilmington
    Trust&#160;Company, as custodian for The Depository
    Trust&#160;Company, or &#147;DTC,&#148; and registered in the
    name of DTC or its nominee, in each case for credit to an
    account of a direct or indirect participant as described below.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Except as set forth below, the global notes may be transferred,
    in whole and not in part, only to another nominee of DTC or to a
    successor of DTC or its nominee. Beneficial interests in the
    global notes may not be exchanged for notes in certificated form
    except in the limited circumstances described below. See
    &#147;&#151;&#160;Exchange of Global Notes for Certificated
    Notes.&#148; In addition, transfer of beneficial interests in
    the global notes will be subject to the applicable rules and
    procedures of DTC and its direct or indirect participants, which
    may change from time to time. The notes may be presented for
    registration of transfer and exchange at the Corporate
    Trust&#160;Office of the trustee.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Depositary
    Procedures</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    DTC has advised the Issuer that it is a limited-purpose trust
    company created to hold securities for its participating
    organizations (collectively, the
    <B>&#147;Participants&#148;</B>) and to facilitate the clearance
    and settlement of transactions in those securities between
    Participants through electronic book-entry changes in accounts
    of Participants. The Participants include securities brokers and
    dealers, banks, trust companies, clearing corporations and
    certain other organizations. Access to DTC&#146;s system is also
    available to other entities such as banks, brokers, dealers and
    trust companies that clear through or maintain a custodial
    relationship with a Participant, either directly or indirectly
    (collectively, the <B>&#147;Indirect Participants&#148;</B>).
    Persons who are not Participants may beneficially own securities
    held by or on behalf of DTC only through the Participants or the
    Indirect Participants. The ownership interest and transfer of
    ownership interest of each actual purchaser of each security
    held by or on behalf of DTC are recorded on the records of the
    Participants and Indirect Participants.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    DTC has also advised the Issuer that, pursuant to procedures
    established by it,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;upon deposit of the global notes, DTC will credit the
    accounts of Participants with an interest in the global
    notes;&#160;and
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;ownership of such interests in the global notes will be
    shown on, and the transfer of ownership thereof will be effected
    only through, records maintained by DTC (with respect to
    Participants) or by Participants and the Indirect Participants
    (with respect to other owners of beneficial interests in the
    global notes).
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The laws of some states require that certain persons take
    physical delivery in definitive form of securities they own.
    Consequently, the ability to transfer beneficial interest in a
    global note to such persons may be limited to that extent.
    Because DTC can act only on behalf of Participants, which in
    turn act on behalf of Indirect Participants and certain banks,
    the ability of a person having a beneficial interest in a global
    note to pledge such interest to persons or entities that do not
    participate in the DTC system, or otherwise take actions in
    respect of such interests, may be affected by the lack of
    physical certificate evidencing such interests. For certain
    other restrictions on the transferability of the notes, see
    &#147;&#151;&#160;Exchange of Global Notes for Certificated
    Notes.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Except as described below, owners of interests in the global
    notes will not have notes registered in their names, will not
    receive physical delivery of notes in certificated form and will
    not be considered the registered owners or holders thereof under
    the indenture for any purpose.</B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Payments in respect of the principal and premium and additional
    interest, if any, and interest on a global note registered in
    the name of DTC or its nominee will be payable by the trustee to
    DTC or its nominee in its capacity as the registered holder
    under the indenture. Under the terms of the indenture, the
    indenture and the
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    86
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    trustee will treat the persons in whose names the notes,
    including the global notes, are registered as the owners thereof
    for the purpose of receiving such payments and for any and all
    other purposes whatsoever.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Consequently, none of the Issuer, the trustee nor any agent of
    the Issuer or the trustee has or will have any responsibility or
    liability for:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;any aspect of DTC&#146;s records or any
    Participant&#146;s or Indirect Participant&#146;s records
    relating to or payments made on account of beneficial ownership
    interests in the global notes, or for maintaining, supervising
    or reviewing any of DTC&#146;s records or any Participant&#146;s
    or Indirect Participant&#146;s records relating to the
    beneficial ownership interests in the global notes;&#160;or
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;any other matter relating to the actions and practices
    of DTC or any of its Participants or Indirect Participants.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    DTC has advised the Issuer that its current practice, upon
    receipt of any payment in respect of securities such as the
    exchange notes (including principal and interest), is to credit
    the accounts of the relevant Participants with the payment on
    the payment date unless DTC has reason to believe that it will
    not receive payment on such payment date. Each relevant
    Participant is credited with an amount proportionate to its
    beneficial ownership of an interest in the principal amount of
    the relevant security as shown on the records of DTC. Payments
    by Participants and the Indirect Participants to the beneficial
    owners of exchange notes will be governed by standing
    instructions and customary practices and will be the
    responsibility of the Participants or the Indirect Participants
    and will not be the responsibility of DTC, the trustee or the
    Issuer. Neither the Issuer nor the trustee will be liable for
    any delay by DTC or any of its Participants in identifying the
    beneficial owners of the exchange notes, and the Issuer and the
    trustee may conclusively rely on and will be protected in
    relying on instructions from DTC or its nominee for all purposes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Except for trades involving only Euroclear and Clearstream
    participants, interests in the global notes will trade in
    DTC&#146;s
    <FONT style="white-space: nowrap">Same-Day</FONT>
    Funds Settlement System and secondary market trading activity in
    such interests will therefore settle in immediately available
    funds, subject in all cases to the rules and procedures of DTC
    and its participants.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Transfers between Participants in DTC will be effected in
    accordance with DTC&#146;s procedures, and will be settled in
    <FONT style="white-space: nowrap">same-day</FONT>
    funds. Transfers between participants in Euroclear and
    Clearstream will be effected in the ordinary way in accordance
    with their respective rules and operating procedures.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Subject to compliance with the transfer restrictions applicable
    to the notes described herein, crossmarket transfers between
    Participants in DTC, on the one hand, and Euroclear or
    Clearstream participants, on the other hand, will be effected
    through DTC in accordance with DTC&#146;s rules on behalf of
    Euroclear or Clearstream, as the case may be, by its respective
    depositary; however, such cross-market transactions will require
    delivery of instructions to Euroclear or Clearstream, as the
    case may be, by the counterparty in such system in accordance
    with the rules and procedures and within the established
    deadlines (Brussels time) of such system. Euroclear or
    Clearstream, as the case may be, will, if the transaction meets
    its settlement requirements, deliver instructions to its
    respective depositary to take action to effect final settlement
    on its behalf by delivering or receiving interests in the
    relevant global note in DTC, and making or receiving payment in
    accordance with normal procedures for
    <FONT style="white-space: nowrap">same-day</FONT>
    funds settlement applicable to DTC. Euroclear and Clearstream
    participants may not deliver instructions directly to the
    depositaries for Euroclear or Clearstream.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Because of time zone differences, the securities accounts of a
    Euroclear or Clearstream Participant purchasing an interest in a
    note from a Participant in DTC will be credited, and any such
    crediting will be reported to the relevant Euroclear or
    Clearstream Participant, during the securities settlement
    processing day (which must be a business day for Euroclear or
    Clearstream) immediately following the settlement date of DTC.
    Cash received in Euroclear or Clearstream as a result of sales
    of interests in an exchange note by or through a Euroclear or
    Clearstream Participant to a Participant in DTC will be received
    with value on the settlement date of DTC but will be available
    in the relevant Euroclear or Clearstream cash account only as of
    the business day for Euroclear or Clearstream following
    DTC&#146;s settlement date. DTC has advised the Issuer that it
    will take any action permitted to be taken by a holder of
    exchange notes only at the direction of one or
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    87
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    more Participants to whose account DTC interests in the global
    notes are credited and only in respect of such portion of the
    aggregate principal amount of the notes as to which such
    Participant or Participants has or have given direction.
    However, if there is an Event of Default under the notes, DTC
    reserves the right to exchange global notes for legended
    exchange notes in certificated form, and to distribute such
    exchange notes to its Participants.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The information in this section concerning DTC, Euroclear and
    Clearstream and their book-entry systems has been obtained from
    sources that the Issuer believes to be reliable, but the Issuer
    takes no responsibility for the accuracy thereof.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Although DTC, Euroclear and Clearstream have agreed to the
    foregoing procedures to facilitate transfers of interests in the
    global notes among Participants in DTC, Euroclear and
    Clearstream, they are under no obligation to perform or to
    continue to perform such procedures, and such procedures may be
    discontinued at any time. Neither the Issuer nor the trustee
    will have any responsibility for the performance by DTC,
    Euroclear or Clearstream or their respective Participants or
    Indirect Participants of their respective obligations under the
    rules and procedures governing their operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Exchange
    of Global Notes for Certificated Notes</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A global note is exchangeable for a certificated exchange note
    if:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;DTC (a)&#160;notifies the Issuer that it is unwilling
    or unable to continue as depositary for the global notes and the
    Issuer thereupon fails to appoint a successor depositary within
    90&#160;days or (b)&#160;has ceased to be a clearing agency
    registered under the Exchange Act;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;the Issuer, at its option, notifies the trustee in
    writing that it elects to cause the issuance of the notes in
    certificated form (provided that the Issuer understands that
    under current industry practices, DTC would notify Participants
    of the Issuer&#146;s determination in this clause (2), but would
    only withdraw beneficial interests from a global note at the
    request of Participants);&#160;or
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (3)&#160;there shall have occurred and be continuing to occur a
    default or an event of default with respect to the notes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, beneficial interests in a global note may be
    exchanged for certificated exchange notes upon request but only
    upon at least 20&#160;days&#146; prior written notice given to
    the trustee by or on behalf of DTC in accordance with customary
    procedures. In all cases, certificated exchange notes delivered
    in exchange for any global note or beneficial interest therein
    will be registered in the names, and issued in any approved
    denominations, requested by or on behalf of the depositary (in
    accordance with its customary procedures).
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Same Day
    Settlement And Payment</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The indenture requires that payments in respect of notes
    represented by the global notes (including principal, premium,
    if any, interest and additional interest, if any) be made by
    wire transfer of immediately available funds to the accounts
    specified by DTC or its nominee. With respect to certificated
    notes, we will make all payments of principal, premium, if any,
    interest and additional interest, if any, by wire transfer of
    immediately available funds to the accounts specified by the
    holders thereof or, if no such account is specified, by mailing
    a check to each such holder&#146;s registered address. The notes
    represented by the global notes are expected to trade in
    DTC&#146;s
    <FONT style="white-space: nowrap">Same-Day</FONT>
    Funds Settlement System, and any permitted secondary market
    trading activity in such notes will, therefore, be required by
    DTC to be settled in immediately available funds. We expect that
    secondary trading in any certificated notes will also be settled
    in immediately available funds.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    88
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='211'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">CERTAIN
    UNITED STATES FEDERAL TAX CONSEQUENCES</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Exchange
    Offer</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The exchange of outstanding notes for exchange notes in the
    exchange offer will not constitute a taxable event to holders
    for United States federal income tax purposes. Consequently, no
    gain or loss will be recognized by a holder upon receipt of an
    exchange note, the holding period of the exchange note will
    include the holding period of the outstanding note exchanged
    therefor, and the basis of the exchange note will be the same as
    the basis of the outstanding note immediately before the
    exchange.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Persons considering the exchange of outstanding notes for
    exchange notes should consult their own tax advisors concerning
    the United States federal income tax consequences in light of
    their particular situations as well as any consequences arising
    under the laws of any other taxing jurisdiction.</B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Ownership
    of the Notes</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following is a summary of certain United States federal
    income and, in the case of
    <FONT style="white-space: nowrap">non-U.S.&#160;holders</FONT>
    (as defined below), estate tax consequences of the purchase,
    ownership and disposition of the notes as of the date hereof.
    Unless otherwise stated, this summary deals only with notes held
    as capital assets.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As used herein, a &#147;U.S.&#160;holder&#148; means a
    beneficial owner of the notes that is for United States federal
    income tax purposes any of the following:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    an individual citizen or resident of the United States;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a corporation (or any other entity treated as a corporation for
    United States federal income tax purposes) created or organized
    in or under the laws of the United States, any state thereof or
    the District of Columbia;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    an estate the income of which is subject to United States
    federal income taxation regardless of its source;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a trust if it (1)&#160;is subject to the primary supervision of
    a court within the United States and one or more United States
    persons have the authority to control all substantial decisions
    of the trust or (2)&#160;has a valid election in effect under
    applicable United States Treasury regulations to be treated as a
    United States person.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The term
    <FONT style="white-space: nowrap">&#147;non-U.S.&#160;holder&#148;</FONT>
    means a beneficial owner of the notes (other than a partnership
    or any other entity treated as a partnership for United States
    federal income tax purposes) that is not a U.S.&#160;holder.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This summary does not represent a detailed description of the
    United States federal income tax consequences applicable to you
    if you are a person subject to special tax treatment under the
    United States federal income tax laws, including, without
    limitation:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a dealer in securities or currencies;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a financial institution;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a regulated investment company;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a real estate investment trust;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a tax-exempt organization;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    an insurance company;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a person holding the notes as part of a hedging, integrated,
    conversion or constructive sale transaction or a straddle;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a trader in securities that has elected the
    <FONT style="white-space: nowrap">mark-to-market</FONT>
    method of accounting for your securities;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a person liable for alternative minimum tax;
</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    89
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a partnership or other pass-through entity for United States
    federal income tax purposes;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a U.S.&#160;holder whose &#147;functional currency&#148; is not
    the U.S.&#160;dollar;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a &#147;controlled foreign corporation&#148;;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a &#147;passive foreign investment company&#148;;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a United States expatriate.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This summary is based on the Internal Revenue Code of 1986, as
    amended (the &#147;Code&#148;), United States Treasury
    regulations, administrative rulings and judicial decisions as of
    the date hereof. Those authorities may be changed, possibly on a
    retroactive basis, so as to result in United States federal
    income and estate tax consequences different from those
    summarized below.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If a partnership (including any entity classified as a
    partnership for United States federal income tax purposes) holds
    notes, the tax treatment of a partner will generally depend upon
    the status of the partner and the activities of the partnership.
    If you are a partnership or a partner in a partnership holding
    notes, you should consult your own tax advisors.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This summary does not represent a detailed description of the
    United States federal income and estate tax consequences to you
    in light of your particular circumstances and does not address
    the effects of any state, local or
    <FONT style="white-space: nowrap">non-United</FONT>
    States tax laws. It is not intended to be, and should not be
    construed to be, legal or tax advice to any particular purchaser
    of notes. <B>You should consult your own tax advisors concerning
    the particular United States federal income and estate tax
    consequences to you of the ownership of the notes, as well as
    the consequences to you arising under the laws of any other
    taxing jurisdiction.</B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Certain
    Tax Consequences to U.S. Holders</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following is a summary of certain United States federal
    income tax consequences that will apply to U.S.&#160;holders of
    the notes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Payments of Interest.</I>&#160;&#160;Except as set forth
    below, &#147;qualified stated interest&#148; (as defined below)
    on a note generally will be taxable to you as ordinary income at
    the time it is paid or accrued in accordance with your method of
    accounting for tax purposes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Original Issue Discount.</I>&#160;&#160;Because the
    outstanding notes were issued with original issue discount
    (&#147;OID&#148;), you will be subject to special tax accounting
    rules, as described in greater detail below. You generally must
    include OID in gross income in advance of the receipt of cash
    attributable to that income.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The outstanding notes were issued with OID in an amount equal to
    the excess of their stated principal amount over their
    &#147;issue price.&#148; The &#147;issue price&#148; of a note
    is the first price at which a substantial amount of the notes
    was sold to investors for cash (excluding sales to bond houses,
    brokers or similar persons or organizations acting in the
    capacity of underwriter, placement agent or wholesaler).
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The term &#147;qualified stated interest&#148; means stated
    interest that is unconditionally payable in cash or in property,
    other than debt instruments of the issuer, and meets all of the
    following conditions:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    it is payable at least once per year;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    it is payable over the entire term of the note;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    it is payable at a single fixed rate or, subject to certain
    conditions, based on one or more interest indices.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The stated interest payments on the notes are qualified stated
    interest, and are treated as described above under
    &#147;&#151;&#160;Payments of Interest.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    You generally must include OID in income using the
    &#147;constant yield method.&#148; The amount of OID that you
    must include in income each taxable year is the sum of the
    &#147;daily portions&#148; of OID with respect to the note for
    each day during such taxable year or portion of such taxable
    year in which you held that note
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    90
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (&#147;accrued OID&#148;). The daily portion is determined by
    allocating to each day in any &#147;accrual period&#148; a pro
    rata portion of the OID allocable to that accrual period. The
    &#147;accrual period&#148; for a note may be of any length and
    may vary in length over the term of the note, provided that each
    accrual period is no longer than one year and each scheduled
    payment of principal or interest occurs on the first day or the
    final day of an accrual period. The amount of OID allocable to
    any accrual period other than the final accrual period is an
    amount equal to the excess, if any, of:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the note&#146;s &#147;adjusted issue price&#148; at the
    beginning of the accrual period multiplied by its yield to
    maturity, determined on the basis of compounding at the close of
    each accrual period and properly adjusted for the length of the
    accrual period, over
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the aggregate of all qualified stated interest allocable to the
    accrual period.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    OID allocable to a final accrual period is the difference
    between the amount payable at maturity, other than a payment of
    qualified stated interest, and the adjusted issue price at the
    beginning of the final accrual period. Special rules will apply
    for calculating OID for an initial short accrual period. The
    &#147;adjusted issue price&#148; of a note at the beginning of
    any accrual period is equal to its issue price increased by the
    accrued OID for each prior accrual period. Under these rules,
    you will have to include in income increasingly greater amounts
    of OID in successive accrual periods.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    You may elect to treat all interest on any note as OID and
    calculate the amount includible in gross income under the
    constant yield method described above. The election is to be
    made for the taxable year in which you acquired the note, and
    may not be revoked without the consent of the Internal Revenue
    Service (the &#147;IRS&#148;). You should consult with your own
    tax advisors about this election.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Market Discount.</I>&#160;&#160;If you purchase a note for an
    amount that is less than its principal amount, the amount of the
    difference will be treated as &#147;market discount&#148; for
    United States federal income tax purposes, unless that
    difference is less than a specified de minimis amount. Under the
    market discount rules, you will be required to treat any
    principal payment on, or any gain on the sale, exchange,
    retirement or other disposition of, a note as ordinary income to
    the extent of the market discount that you have not previously
    included in income and are treated as having accrued on the note
    at the time of the payment or disposition.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, you may be required to defer, until the maturity of
    the note or its earlier disposition in a taxable transaction,
    the deduction of all or a portion of the interest expense on any
    indebtedness attributable to the note. You may elect, on a
    <FONT style="white-space: nowrap">note-by-note</FONT>
    basis, to deduct the deferred interest expense in a tax year
    prior to the year of disposition. You should consult your own
    tax advisors before making this election.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Any market discount will be considered to accrue ratably during
    the period from the date of acquisition to the maturity date of
    the note, unless you elect to accrue on a constant interest
    method. You may elect to include market discount in income
    currently as it accrues, on either a ratable or constant
    interest method, in which case the rule described above
    regarding deferral of interest deductions will not apply.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Acquisition Premium, Amortizable Bond
    Premium.</I>&#160;&#160;If you purchase a note for an amount
    that is greater than its adjusted issue price but equal to or
    less than its principal amount, you will be considered to have
    purchased that note at an &#147;acquisition premium.&#148; Under
    the acquisition premium rules, the amount of OID that you must
    include in gross income with respect to the note for any taxable
    year will be reduced by the portion of the acquisition premium
    properly allocable to that year.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If you purchase a note for an amount in excess of its principal
    amount, you will be considered to have purchased the note at a
    premium and you will not be required to include any OID in
    income. You generally may elect to amortize the premium over the
    remaining term of the note on a constant yield method as an
    offset to interest when includible in income under your regular
    accounting method. If you do not elect to amortize bond premium,
    that premium will decrease the gain or increase the loss you
    would otherwise recognize on disposition of the note.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Sale, Exchange, Retirement, or Other Disposition of
    Notes.</I>&#160;&#160;Upon the sale, exchange, retirement, or
    other taxable disposition of a note, you generally will
    recognize gain or loss equal to the difference between the
    amount realized upon the sale, exchange, retirement, or other
    taxable disposition (less an amount equal to
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    91
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    any accrued and unpaid interest, which will be taxable as
    interest income to the extent not previously included in income)
    and the adjusted tax basis of the note. Your adjusted tax basis
    in a note will, in general, be your cost for the note increased
    by any OID or market discount previously included in income with
    respect to the note and reduced by any amortized premium. Except
    as described above with respect to market discount, any gain or
    loss will be capital gain or loss. Capital gains of
    non-corporate U.S.&#160;holders derived in respect of capital
    assets held for more than one year are eligible for reduced
    rates of taxation. The deductibility of capital losses is
    subject to limitations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Certain
    Tax Consequences to
    <FONT style="white-space: nowrap">Non-U.S.</FONT>
    Holders</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following is a summary of certain United States federal
    income and estate tax consequences that will apply to
    <FONT style="white-space: nowrap">non-U.S.&#160;holders</FONT>
    of the notes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>United States Federal Withholding Tax.</I>&#160;&#160;The 30%
    United States federal withholding tax will not apply to any
    payment of interest (which, for purposes of this discussion,
    includes any OID) on the notes under the &#147;portfolio
    interest rule,&#148; provided that:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    interest paid on the notes is not effectively connected with
    your conduct of a trade or business in the United States;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    you do not actually (or constructively) own 10% or more of the
    total combined voting power of all classes of our voting stock
    within the meaning of the Code and applicable United States
    Treasury regulations;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    you are not a controlled foreign corporation that is related to
    us (actually or constructively) through stock ownership;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    you are not a bank whose receipt of interest on the notes is
    described in Section 881(c)(3)(A) of the Code;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    either (a)&#160;you provide your name and address on an IRS
    <FONT style="white-space: nowrap">Form&#160;W-8BEN</FONT>
    (or other applicable form), and certify, under penalties of
    perjury, that you are not a United States person as defined
    under the Code or (b)&#160;you hold your notes through certain
    foreign intermediaries and satisfy the certification
    requirements of applicable United States Treasury regulations.
    Special certification rules apply to
    <FONT style="white-space: nowrap">non-U.S.&#160;holders</FONT>
    that are pass-through entities rather than corporations or
    individuals.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If you cannot satisfy the requirements described above, payments
    of interest (including any OID) made to you will be subject to
    the 30% United States federal withholding tax, unless you
    provide us with a properly executed:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    IRS
    <FONT style="white-space: nowrap">Form&#160;W-8BEN</FONT>
    (or other applicable form) certifying an exemption from or
    reduction in withholding under the benefit of an applicable
    income tax treaty;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    IRS
    <FONT style="white-space: nowrap">Form&#160;W-8ECI</FONT>
    (or other applicable form) certifying interest paid on the notes
    is not subject to withholding tax because it is effectively
    connected with your conduct of a trade or business in the United
    States (as discussed below under &#147;&#151;&#160;United States
    Federal Income Tax&#148;).
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The 30% United States federal withholding tax generally will not
    apply to any payment of principal or gain that you realize on
    the sale, exchange, retirement or other disposition of a note.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>United States Federal Income Tax.</I>&#160;&#160;If you are
    engaged in a trade or business in the United States and interest
    (including any OID) on the notes is effectively connected with
    the conduct of that trade or business (and, if required by an
    applicable income tax treaty, is attributable to a United States
    permanent establishment), then you will be subject to United
    States federal income tax on that interest (including any OID)
    on a net income basis (although you will be exempt from the 30%
    United States federal withholding tax, provided the
    certification requirements discussed above in
    &#147;&#151;&#160;United States Federal Withholding Tax&#148;
    are satisfied) in generally the same manner as if you were a
    United States person as defined under the Code, subject to an
    applicable income tax treaty providing otherwise. In addition,
    if you are a foreign corporation, you may be
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    92
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    subject to a branch profits tax equal to 30% (or lower
    applicable income tax treaty rate) of your effectively connected
    earnings and profits, subject to certain adjustments.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Any gain realized on the disposition of a note generally will
    not be subject to United States federal income tax unless:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the gain is effectively connected with your conduct of a trade
    or business in the United States (and, if required by an
    applicable income tax treaty, is attributable to a United States
    permanent establishment);&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    you are an individual who is present in the United States for
    183&#160;days or more in the taxable year of that disposition,
    and certain other conditions are met.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>United States Federal Estate Tax.</I>&#160;&#160;Your estate
    will not be subject to United States federal estate tax on notes
    beneficially owned by you at the time of your death, provided
    that any payment to you on the notes would be eligible for
    exemption from the 30% United States federal withholding tax
    under the &#147;portfolio interest rule&#148; described above
    under &#147;&#151;&#160;United States Federal Withholding
    Tax&#148; without regard to the statement requirement described
    in the fifth bullet point of that section.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Information
    Reporting and Backup Withholding</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>U.S.&#160;Holders.</I>&#160;&#160;In general, information
    reporting requirements will apply to certain payments of
    principal and interest (including any OID) paid on the notes and
    to the proceeds of the sale or other disposition of a note paid
    to you (unless you are an exempt recipient such as a
    corporation). Backup withholding may apply to such payments if
    you fail to provide a correct taxpayer identification number or
    a certification that you are not subject to backup withholding.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Backup withholding is not an additional tax and any amounts
    withheld under the backup withholding rules may be allowed as a
    refund or a credit against your United States federal income tax
    liability provided the required information is timely furnished
    to the IRS.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I><FONT style="white-space: nowrap">Non-U.S.&#160;Holders.</FONT></I>&#160;&#160;Generally,
    we must report to the IRS and to you the amount of interest
    (including any OID) paid to you and the amount of tax, if any,
    withheld with respect to those payments. Copies of the
    information returns reporting such interest payments and any
    withholding may also be made available to the tax authorities in
    the country in which you reside under the provisions of an
    applicable income tax treaty.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In general, you will not be subject to backup withholding with
    respect to payments of interest (including any OID) on the notes
    that we make to you provided that we do not have actual
    knowledge or reason to know that you are a United States person
    as defined under the Code, and we have received from you the
    required certification that you are a
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    described above in the fifth bullet point under
    &#147;&#151;&#160;Certain Tax Consequences To
    <FONT style="white-space: nowrap">Non-U.S.&#160;Holders&#160;&#151;</FONT>
    United States Federal Withholding Tax.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Information reporting and, depending on the circumstances,
    backup withholding will apply to the proceeds of a sale or other
    disposition (including a redemption) of notes within the United
    States or conducted through certain United States-related
    financial intermediaries, unless you certify to the payor under
    penalties of perjury that you are a
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    (and the payor does not have actual knowledge or reason to know
    that you are a United States person as defined under the Code),
    or you otherwise establish an exemption.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Backup withholding is not an additional tax and any amounts
    withheld under the backup withholding rules may be allowed as a
    refund or a credit against your United States federal income tax
    liability provided the required information is timely furnished
    to the IRS.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    93
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='212'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PLAN OF
    DISTRIBUTION</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Each broker-dealer that receives exchange notes for its own
    account pursuant to the exchange offer must acknowledge that it
    will deliver a prospectus in connection with any resale of the
    exchange notes. This prospectus, as it may be amended or
    supplemented from time to time, may be used by a broker-dealer
    in connection with resales of exchange notes received in
    exchange for outstanding notes where the outstanding notes were
    acquired as a result of market-making activities or other
    trading activities. To the extent that any such broker-dealer
    participates in the exchange offer and so notifies us, or causes
    us to be so notified in writing, we have agreed that for a
    period of up to 180&#160;days after the consummation of this
    offer to use our best efforts to make this prospectus, as
    amended or supplemented, available to such broker-dealer for use
    in connection with any such resale and will deliver as many
    additional copies of this prospectus and each amendment or
    supplement to this prospectus and any documents incorporated by
    reference in this prospectus as such broker-dealer may
    reasonably request.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We will not receive any proceeds from any sale of exchange notes
    by broker-dealers. Exchange notes received by broker-dealers for
    their own accounts pursuant to the exchange offer may be sold
    from time to time in one or more transactions in the
    over-the-counter market, in negotiated transactions, through the
    writing of options on the exchange notes or a combination of
    these methods of resale at market prices prevailing at the time
    of resale, at prices related to the prevailing market prices or
    at negotiated prices. Any resale may be made directly to
    purchasers or to or through brokers or dealers who may receive
    compensation in the form of commissions or concessions from any
    broker-dealer or the purchasers of any exchange notes. Any
    broker-dealer that resells exchange notes that were received by
    it for its own account pursuant to the exchange offer and any
    broker or dealer that participates in a distribution of the
    exchange notes may be deemed to be an &#147;underwriter&#148;
    within the meaning of the Securities Act and any profit on any
    resale of exchange notes and any commissions or concessions
    received by these persons may be deemed to be underwriting
    compensation under the Securities Act. The letter of transmittal
    states that by acknowledging that it will deliver and by
    delivering a prospectus, a broker-dealer will not be deemed to
    admit that it is an &#147;underwriter&#148; within the meaning
    of the Securities Act.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have also agreed to pay all expenses incident to the exchange
    offer, including the expenses of one counsel for the holders of
    all of the sellers of the outstanding notes, and will indemnify
    the holders of the outstanding notes, including any
    broker-dealers, against certain liabilities under the Securities
    Act.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    94
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='213'>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">LEGAL
    MATTERS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The validity and the legally binding effect of the exchange
    notes and related guarantees offered hereby will be passed upon
    for us by Peter S. Reinhart Esq., Senior Vice President and
    General Counsel for the Issuer and the Guarantors. Peter S.
    Reinhart, Esq. will rely, as to matters of New York law, on the
    opinion of Simpson Thacher &#038; Bartlett LLP.
</DIV>

<A name='214'>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">EXPERTS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The consolidated financial statements as of for the year ended
    October&#160;31, 2009 incorporated by reference in this
    prospectus from the Company&#146;s Annual Report on
    <FONT style="white-space: nowrap">Form&#160;10-K</FONT>
    for the year ended October&#160;31, 2009 and the effectiveness
    of Hovnanian Enterprises, Inc.&#146;s internal control over
    financial reporting as of October&#160;31, 2009, have been
    audited by Deloitte &#038; Touche LLP, an independent registered
    public accounting firm, as stated in their reports, which are
    incorporated herein by reference. Such consolidated financial
    statements are incorporated herein by reference in reliance upon
    the reports of such firm given on their authority as experts in
    accounting and auditing.
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The consolidated financial statements of Hovnanian Enterprises,
    Inc. as of October&#160;31, 2008 and for the years ended
    October&#160;31, 2008 and 2007 appearing in Hovnanian
    Enterprises, Inc.&#146;s Annual Report
    <FONT style="white-space: nowrap">(Form&#160;10-K)</FONT>
    for the year ended October 31, 2009 have been audited by Ernst
    &#038; Young LLP, independent registered public accounting firm,
    as set forth in their report thereon, included therein, and
    incorporated herein by reference. Such consolidated financial
    statements are incorporated herein by reference in reliance upon
    such report given on the authority of such firm as experts in
    accounting and auditing.
</DIV>

<A name='215'>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">AVAILABLE
    INFORMATION</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are subject to the informational requirements of the Exchange
    Act, and file reports, proxy statements and other information
    with the SEC. We have also filed a registration statement on
    <FONT style="white-space: nowrap">Form&#160;S-4</FONT>
    with the SEC. This prospectus, which forms a part of the
    registration statement, does not have all the information
    contained in the registration statement. You may read, free of
    charge, and copy, at the prescribed rates, any reports, proxy
    statements and other information, including the registration
    statement, at the SEC&#146;s public reference room at
    100&#160;F&#160;Street, N.E., Washington,&#160;D.C. 20549. You
    may obtain information on the operation of the public reference
    room by calling the SEC at
    <FONT style="white-space: nowrap">1-800-SEC-0330.</FONT>
    Copies of such material also can be obtained by mail from the
    Public Reference Section of the SEC, at 100&#160;F&#160;Street,
    N.E., Washington,&#160;D.C. 20549, at the prescribed rates. The
    SEC also maintains a website that contains reports, proxy and
    information statements and other information, including the
    registration statement. The website address is:
    <I><FONT style="white-space: nowrap">http://www.sec.gov</FONT></I>.
</DIV>

<A name='216'>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">INCORPORATION
    OF CERTAIN DOCUMENTS BY REFERENCE</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This prospectus is part of a registration statement filed with
    the SEC. The SEC allows us to &#147;incorporate by
    reference&#148; selected documents we file with it, which means
    that we can disclose important information to you by referring
    you to those documents. The information in the documents
    incorporated by reference is considered to be part of this
    prospectus, and information in documents that we file later with
    the SEC will automatically update and supersede this
    information. We incorporate by reference the documents listed
    below filed by Hovnanian under Section&#160;13(a), 13(c), 14 or
    15(d) of the Exchange Act.
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Annual Report on
    <FONT style="white-space: nowrap">Form&#160;10-K</FONT>
    for the fiscal year ended October&#160;31, 2009, Registration
    File
    <FONT style="white-space: nowrap">No.&#160;1-8551;</FONT>
    and
</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Current Report on Form 8-K filed on December&#160;21, 2009,
    Registration File No.&#160;1-8551.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    All documents filed by Hovnanian pursuant to Section&#160;13(a),
    13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
    this prospectus and prior to the termination of the offering
    made by this prospectus are to be incorporated herein by
    reference. Any statement contained in a document incorporated or
    deemed to be incorporated by reference herein shall be deemed to
    be modified or superseded for purposes of this prospectus to the
    extent that a statement contained herein or in any other
    subsequently filed document which also is incorporated or deemed
    to be incorporated by reference herein modifies or supersedes
    such statement. Any such statement so modified or superseded
    shall not be deemed, except as so modified or superseded, to
    constitute a part of this prospectus.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    95
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<CENTER style="font-size: 1pt; width: 100%; border-bottom: 2pt solid #000000"></CENTER><!-- callerid=999 iwidth=456 length=0 -->

<CENTER style="font-size: 1pt; width: 100%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=456 length=0 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 18pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">$785,000,000</FONT></B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 24pt">K. Hovnanian Enterprises,
    Inc.</FONT></B>
</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 18pt">Guaranteed by</FONT></B>
</DIV>

<DIV style="margin-top: 16pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 24pt">Hovnanian Enterprises,
    Inc.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 14pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Offer to
    Exchange All Outstanding<BR>
    10<FONT style="vertical-align: text-top; font-size: 70%;">5</FONT>/<FONT style="font-size: 70%;">8</FONT>%&#160;Senior
    Secured Notes due 2016<BR>
    ($785,000,000 aggregate principal amount outstanding)<BR>
    for
    10<FONT style="vertical-align: text-top; font-size: 70%;">5</FONT>/<FONT style="font-size: 70%;">8</FONT>%&#160;Senior
    Secured Notes due 2016, which have been registered<BR>
    under the Securities Act of 1933</FONT></B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Until February&#160;24, 2010, all dealers that effect
    transactions in these securities, whether or not participating
    in this offering, may be required to deliver a prospectus. This
    is in addition to the dealers&#146; obligation to deliver a
    prospectus when acting as underwriters with respect to their
    unsold allotments or subscriptions.
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 14%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=456 length=68 -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 12pt">PROSPECTUS</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 14%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=456 length=68 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    January&#160;11, 2010.
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 100%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=456 length=0 -->

<CENTER style="font-size: 1pt; width: 100%; border-bottom: 2pt solid #000000"></CENTER><!-- callerid=999 iwidth=456 length=0 -->
<!-- XBRL Pagebreak Begin -->

<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END PAGE WIDTH -->
</BODY>
</HTML>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
