<SEC-DOCUMENT>0000950123-11-043984.txt : 20110503
<SEC-HEADER>0000950123-11-043984.hdr.sgml : 20110503
<ACCEPTANCE-DATETIME>20110503172915
ACCESSION NUMBER:		0000950123-11-043984
CONFORMED SUBMISSION TYPE:	424B5
PUBLIC DOCUMENT COUNT:		4
FILED AS OF DATE:		20110503
DATE AS OF CHANGE:		20110503

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:		424B5
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-173365
		FILM NUMBER:		11807214

	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

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:		424B5
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-173365-01
		FILM NUMBER:		11807215

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

	MAIL ADDRESS:	
		STREET 1:		10 HIGHWAY 35
		CITY:			RED BANK
		STATE:			NJ
		ZIP:			07701
</SEC-HEADER>
<DOCUMENT>
<TYPE>424B5
<SEQUENCE>1
<FILENAME>y91037b5e424b5.htm
<DESCRIPTION>424B5
<TEXT>
<HTML>
<HEAD>
<TITLE>e424b5</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#Y91037tocpage">Table of Contents</A></H5><P>

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

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

    <B><FONT style="font-family: 'Times New Roman', Times">Filed
    Pursuant to Rule&#160;424(b)(5)<BR>
    Registration
    <FONT style="white-space: nowrap">No.&#160;333-173365</FONT></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: transparent">
    <B><FONT style="font-size: 16pt">$12,000,000</FONT></B>
</DIV>

<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: transparent">
    <IMG src="y91037b5y9103701.gif" alt="(K. HOVNANIAN ENTERPRISES, INC. LOGO)"><B><FONT style="font-size: 16pt">
    </FONT></B>
</DIV>

<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: transparent">
    <B><FONT style="font-size: 18pt; font-family: Arial, Helvetica">K.
    Hovnanian Enterprises, Inc.</FONT></B>
</DIV>

<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: transparent">
    <FONT style="font-size: 16pt; font-family: Arial, Helvetica">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
    </FONT>
</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: transparent">
    <FONT style="font-size: 16pt; font-family: Arial, Helvetica">guaranteed
    by
    </FONT>
</DIV>

<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: transparent">
    <B><FONT style="font-size: 18pt; font-family: Arial, Helvetica">Hovnanian
    Enterprises, Inc.</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: transparent">
    <FONT style="font-family: Arial, Helvetica">The notes are being
    issued as additional
    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 under the indenture dated as of
    October&#160;20, 2009. There are $785&#160;million 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 already outstanding under the indenture.
    The additional notes offered hereby will be treated as a single
    class with 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. The notes 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 year. Interest on the notes is payable on April 15 and
    October 15 of each year, beginning on October&#160;15, 2011. The
    notes will mature on October&#160;15, 2016. We may redeem some
    or all of the notes at any time on or after October&#160;15,
    2012 at the redemption prices specified under &#147;Description
    of Notes&#160;&#151; Redemption&#148; plus accrued and unpaid
    interest. In addition, we may redeem up to 35% of the aggregate
    principal amount of the notes (including the existing 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. There is no sinking fund for, or mandatory redemption of,
    the notes.
    </FONT>
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <FONT style="font-family: Arial, Helvetica">The obligations
    under the notes will be fully and unconditionally guaranteed by
    our parent company, Hovnanian Enterprises, Inc., and
    substantially all of its restricted subsidiaries. The notes and
    guarantees will be secured by a first-priority lien on
    substantially all of our and the guarantors&#146; assets,
    subject to permitted liens and certain exceptions.
    </FONT>
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <B><FONT style="font-family: Arial, Helvetica">Investing in the
    notes involves risks. See &#147;Risk Factors&#148; beginning on
    <FONT style="white-space: nowrap">page&#160;S-8.</FONT></FONT></B>
</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: transparent">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="52%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="16%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="13%">&nbsp;</TD>	<!-- colindex=03 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="16%">&nbsp;</TD>	<!-- colindex=04 type=maindata -->
</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 nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <B><FONT style="font-family: Arial, Helvetica">Underwriting<BR>
    </FONT></B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <B><FONT style="font-family: Arial, Helvetica">Price to<BR>
    </FONT></B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <B><FONT style="font-family: Arial, Helvetica">Discounts and<BR>
    </FONT></B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <B><FONT style="font-family: Arial, Helvetica">Proceeds to Us<BR>
    </FONT></B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B><FONT style="font-family: Arial, Helvetica">Public(1)</FONT></B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B><FONT style="font-family: Arial, Helvetica">Commissions</FONT></B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B><FONT style="font-family: Arial, Helvetica">Before
    Expenses</FONT></B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="font-family: Arial, Helvetica">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Per Note
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="font-family: Arial, Helvetica">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;105.500%
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="font-family: Arial, Helvetica">
    &#160;&#160;&#160;&#160;&#160;&#160;2.500%
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="font-family: Arial, Helvetica">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;103.000%
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="font-family: Arial, Helvetica">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="font-family: Arial, Helvetica">
    $12,660,000
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="font-family: Arial, Helvetica">
    $300,000
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="font-family: Arial, Helvetica">
    $12,360,000
</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: transparent">

</DIV>

<DIV style="margin-top: 12pt; 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: transparent">

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

<TR>
    <TD align="right" valign="top">
    <FONT style="font-family: Arial, Helvetica">(1)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-family: Arial, Helvetica">Plus accrued
    interest from April&#160;15, 2011.
    </FONT></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: transparent">
    <FONT style="font-family: Arial, Helvetica">The notes have not
    been and will not be listed on any exchange.
    </FONT>
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <FONT style="font-family: Arial, Helvetica">The underwriter
    expects to deliver the notes to purchasers on or about May 4,
    2011.
    </FONT>
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <FONT style="font-family: Arial, Helvetica">Neither the
    Securities and Exchange Commission nor any state securities
    commission has approved or disapproved these securities or
    determined if this prospectus supplement or the accompanying
    prospectus is truthful or complete. Any representation to the
    contrary is a criminal offense.
    </FONT>
</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: transparent">
    <B><FONT style="font-size: 18pt; font-family: Arial, Helvetica">Credit
    Suisse</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: transparent">
    <FONT style="font-family: Arial, Helvetica">April 29, 2011
    </FONT>
</DIV>
<!-- XBRL Pagebreak Begin -->

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

</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</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: transparent">
    <B>We have not authorized anyone to provide you with any
    information other than that contained in this prospectus
    supplement, the accompanying prospectus, any free writing
    prospectus prepared by or on behalf of us and the documents
    incorporated by reference herein. We take no responsibility for,
    and can provide no assurance as to the reliability of, any other
    information that others may give you. This prospectus supplement
    and the accompanying prospectus may only be used where it is
    legal to sell these securities. The information in this
    prospectus supplement and the accompanying prospectus may only
    be accurate on the date of this prospectus supplement or such
    incorporated document.</B>
</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: transparent">

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

<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: transparent">

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

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

<DIV align="left">
<A name="Y91037tocpage"></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: transparent">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="88%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="4%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=02 type=quadleft -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=02 type=quadright -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<!-- TableOutputBody -->
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#Y91037151'><FONT style="font-variant: SMALL-CAPS">Summary</FONT></A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    S-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='#Y91037152'><FONT style="font-variant: SMALL-CAPS">Risk
    Factors</FONT></A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    S-8
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#Y91037153'><FONT style="font-variant: SMALL-CAPS">Use of
    Proceeds</FONT></A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    S-25
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#Y91037154'><FONT style="font-variant: SMALL-CAPS">Capitalization</FONT></A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    S-26
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#Y91037155'><FONT style="font-variant: SMALL-CAPS">Description
    of Notes</FONT></A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    S-28
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#Y91037156'><FONT style="font-variant: SMALL-CAPS">Certain
    United States Federal Tax Consequences</FONT></A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    S-68
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#Y91037157'><FONT style="font-variant: SMALL-CAPS">Certain
    ERISA Considerations</FONT></A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    S-73
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#Y91037158'><FONT style="font-variant: SMALL-CAPS">Underwriting</FONT></A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    S-75
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#Y91037159'><FONT style="font-variant: SMALL-CAPS">Legal
    Matters</FONT></A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    S-77
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#Y91037160'><FONT style="font-variant: SMALL-CAPS">Experts</FONT></A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    S-77
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#Y91037161'><FONT style="font-variant: SMALL-CAPS">Available
    Information</FONT></A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    S-77
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#Y91037162'><FONT style="font-variant: SMALL-CAPS">Incorporation
    of Certain Documents by Reference</FONT></A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    S-77
</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: transparent">

</DIV>

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

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

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

    <B><FONT style="font-family: 'Times New Roman', Times">Prospectus
    dated April&#160;18, 2011</FONT></B>
</DIV>

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

<DIV align="left">
<A name="Y91037tocpage"></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: transparent">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="95%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="4%">&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 -->
<!-- TableOutputBody -->
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#Y91037101'><FONT style="font-variant: SMALL-CAPS">About This
    Prospectus</FONT></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='#Y91037102'><FONT style="font-variant: SMALL-CAPS">Forward-Looking
    Statements</FONT></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='#Y91037103'><FONT style="font-variant: SMALL-CAPS">Available
    Information</FONT></A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#Y91037104'><FONT style="font-variant: SMALL-CAPS">Incorporation
    of Certain Documents By Reference</FONT></A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#Y91037105'><FONT style="font-variant: SMALL-CAPS">The
    Company</FONT></A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#Y91037106'><FONT style="font-variant: SMALL-CAPS">Risk
    Factors</FONT></A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#Y91037107'><FONT style="font-variant: SMALL-CAPS">Ratios of
    Earnings to Fixed Charges and Earnings to Combined Fixed Charges
    and Preferred Stock Dividends</FONT></A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#Y91037108'><FONT style="font-variant: SMALL-CAPS">Use of
    Proceeds</FONT></A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#Y91037109'><FONT style="font-variant: SMALL-CAPS">Description
    of Debt Securities</FONT></A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#Y91037110'><FONT style="font-variant: SMALL-CAPS">Description
    of Capital Stock</FONT></A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    18
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#Y91037111'><FONT style="font-variant: SMALL-CAPS">Description
    of Depositary Shares</FONT></A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    22
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#Y91037112'><FONT style="font-variant: SMALL-CAPS">Description
    of Stock Purchase Contracts and Stock Purchase Units</FONT></A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    25
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#Y91037113'><FONT style="font-variant: SMALL-CAPS">Description
    of Units</FONT></A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#Y91037114'><FONT style="font-variant: SMALL-CAPS">Description
    of Warrants</FONT></A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#Y91037115'><FONT style="font-variant: SMALL-CAPS">Plan of
    Distribution</FONT></A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#Y91037116'><FONT style="font-variant: SMALL-CAPS">Legal
    Matters</FONT></A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    28
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#Y91037117'><FONT style="font-variant: SMALL-CAPS">Experts</FONT></A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    28
</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: transparent">

</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <BR>
    S-i
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#Y91037tocpage">Table of Contents</A></H5><P>

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

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

    <B><FONT style="font-family: 'Times New Roman', Times">ABOUT
    THIS PROSPECTUS SUPPLEMENT</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: transparent">
    This prospectus supplement is part of a registration statement
    that we have filed with the Securities and Exchange Commission
    (&#147;SEC&#148;) utilizing a &#147;shelf&#148; registration
    process. Under this shelf process, we are offering to sell the
    securities described in this prospectus supplement, using this
    prospectus supplement and the accompanying prospectus. When we
    refer to &#147;prospectus&#148; we are referring to both this
    prospectus supplement as well as the accompanying prospectus.
    This prospectus supplement describes the specific terms of this
    offering. The accompanying prospectus and the information
    incorporated by reference therein describes our business and
    gives more general information, some of which may not apply to
    this offering. You should read this prospectus supplement
    together with the accompanying prospectus, including the
    documents incorporated by reference therein and herein, before
    making an investment in the securities offered by this
    prospectus supplement. If the information in this prospectus
    supplement or the information incorporated by reference in this
    prospectus supplement is inconsistent with the accompanying
    prospectus, the information in this prospectus supplement or the
    information incorporated by reference in this prospectus
    supplement will apply and will supersede that information in the
    accompanying prospectus.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    Except in the section under the caption &#147;Description of
    Notes&#148; and unless the context otherwise requires, all
    references in this prospectus supplement 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    &#147;Issuer&#148; or &#147;K. Hovnanian&#148; are to 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: transparent">
    <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; are to Hovnanian
    Enterprises, Inc., a Delaware corporation, together with its
    consolidated subsidiaries, including K. Hovnanian;&#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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    &#147;Guarantors&#148; are to Hovnanian and its restricted
    subsidiaries that will guarantee the notes offered hereby.
</TD>
</TR>

</TABLE>

<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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">INDUSTRY
    AND MARKET DATA</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: transparent">
    We obtained the market and competitive position data used
    throughout this prospectus supplement, the accompanying
    prospectus and the documents incorporated by reference in this
    prospectus supplement and the accompanying prospectus from our
    own research, surveys or studies conducted by third parties and
    industry or general publications. Industry publications and
    surveys generally state that they have obtained information from
    sources believed to be reliable, but do not guarantee the
    accuracy and completeness of such information. While we believe
    that each of these studies and publications is reliable, neither
    we nor the underwriter has independently verified such data and
    neither we nor the underwriter makes any representation as to
    the accuracy of such information. Similarly, we believe our
    internal research is reliable, but it has not been verified by
    any independent sources.
</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: transparent">

    <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: transparent">
    This prospectus supplement, the accompanying prospectus and the
    documents incorporated by reference include
    &#147;forward-looking statements.&#148; 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:
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    changes in general and local economic and industry and business
    conditions and impacts of the sustained homebuilding downturn;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    adverse weather conditions and natural disasters;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    changes in market conditions and other environmental conditions
    and seasonality of the Company&#146;s business;
</TD>
</TR>

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

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <BR>
    S-ii
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#Y91037tocpage">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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    changes in home prices and sales activity in the markets where
    the Company builds homes;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    government regulation, including regulations concerning
    development of land, the home building, sales and customer
    financing processes, tax laws and the environment;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    fluctuations in interest rates and the availability of mortgage
    financing;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    shortages in, and price fluctuations of, raw materials and labor;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the availability and cost of suitable land and improved lots;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    levels of competition;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    availability of financing to the 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    utility shortages and outages or rate fluctuations;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    levels of indebtedness and restrictions on the Company&#146;s
    operations and activities imposed by the agreements governing
    the Company&#146;s outstanding indebtedness;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the Company&#146;s sources of liquidity;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    changes in credit ratings;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    availability of net operating loss carryforwards;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    operations through joint ventures with 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    product liability litigation and warranty claims;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    successful identification and integration of acquisitions;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    significant influence of the Company&#146;s controlling
    stockholders;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    geopolitical risks, terrorist acts and other acts of
    war;&#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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    other factors described in detail in our Amendment No.&#160;1 to
    the Annual Report on
    <FONT style="white-space: nowrap">Form&#160;10-K/A</FONT>
    for the year ended October&#160;31, 2010, our quarterly report
    on
    <FONT style="white-space: nowrap">Form&#160;10-Q</FONT>
    for the quarter ended January&#160;31, 2011 and in this
    prospectus supplement.
</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: transparent">
    All forward-looking statements attributable to us 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>
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    <BR>
    S-iii
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<H5 align="left" style="page-break-before:always"><A HREF="#Y91037tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<A name='Y91037151'>
<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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">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: transparent">
    <I>The following summary contains information about us and the
    offering of the notes. It does not contain all of the
    information that may be important to you in making a decision to
    purchase the notes. For a more complete understanding of us and
    the offering of the notes, we urge you to read this entire
    prospectus supplement, the accompanying prospectus and the
    documents incorporated by reference carefully, including the
    &#147;Risk Factors&#148; sections and our financial statements
    and the notes to those statements incorporated by reference
    herein.</I>
</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: transparent">

    <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: transparent">
    We design, construct, market, and sell single-family detached
    homes, attached townhomes and condominiums, mid-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
    291,000 homes, including 5,009 homes in fiscal 2010. 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: transparent">
    We are currently, excluding unconsolidated joint ventures,
    offering homes for sale in 188 communities in 40 markets in
    18&#160;states throughout the United States. Our operations span
    all significant aspects of the home-buying process&#160;&#151;
    from design, construction, and sale, to mortgage origination and
    title services. 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
    $34,000 (low income housing) to $1,660,000 with an average sales
    price, including options, of $281,000 nationwide in fiscal 2010.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    We market and build homes that are constructed in 20 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: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <I>Northeast:</I>&#160;&#160;New Jersey, New York, and
    Pennsylvania
</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: transparent">
    <I>Mid-Atlantic:</I>&#160;&#160;Delaware, Maryland, Virginia,
    West Virginia, and Washington,&#160;D.C.
</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: transparent">
    <I>Midwest:</I>&#160;&#160;Illinois, Kentucky, Minnesota, and
    Ohio
</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: transparent">
    <I>Southeast:</I>&#160;&#160;Florida, Georgia, North Carolina,
    and South Carolina
</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: transparent">
    <I>Southwest:</I>&#160;&#160;Arizona and Texas
</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: transparent">
    <I>West:</I>&#160;&#160;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: transparent">
    Our corporate offices are located at 110&#160;West Front Street,
    P.O.&#160;Box&#160;500, Red Bank, New Jersey 07701, our
    telephone number is
    <FONT style="white-space: nowrap">732-747-7800,</FONT>
    and our Internet web site address is www.khov.com. Information
    on or accessible through our website is not a part of, or
    incorporated by reference in, this prospectus.
</DIV>
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    <BR>
    S-1
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<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 -->
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<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">Recent
    Developments and Related Transactions</FONT></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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">February
    2011 Transactions</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: transparent">
    On February&#160;9, 2011, we completed an underwritten public
    offering (the &#147;February 2011 Common Stock Offering&#148;)
    of 13,512,500&#160;shares of our Class&#160;A Common Stock,
    including 1,762,500&#160;shares issued pursuant to the
    over-allotment option granted to the underwriters, at a price of
    $4.30 per share. Also on February&#160;9, 2011, we and K.
    Hovnanian completed an underwritten public offering (the
    &#147;February 2011 Units Offering&#148;) of 3,000,000 7.25%
    Tangible Equity Units (the &#147;Units&#148;), and on
    February&#160;14, 2011, we and K. Hovnanian issued an additional
    450,000 Units pursuant to the over-allotment option granted to
    the underwriters. On February&#160;14, 2011, K. Hovnanian
    completed an underwritten public offering (the &#147;February
    2011 Notes Offering&#148;) of $155.0&#160;million aggregate
    principal amount of
    11<FONT style="vertical-align: text-top; font-size: 70%;">7</FONT>/<FONT style="font-size: 70%;">8</FONT>%&#160;Senior
    Notes due 2015. We refer to the February 2011 Common Stock
    Offering, the February 2011 Units Offering and the February 2011
    Notes Offering collectively, as the &#147;February 2011
    Offerings.&#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: transparent">
    The net proceeds from the February 2011 Offerings were
    approximately $286.2&#160;million, a portion of which were used
    to fund the purchase, on February&#160;14, 2011, of certain of
    K. Hovnanian&#146;s senior and senior subordinated notes in
    tender offers for any and all of such notes as follows:
    approximately $24.6&#160;million aggregate principal amount of
    8%&#160;Senior Notes due 2012 (the &#147;2012 Senior
    Notes&#148;), $44.1&#160;million aggregate principal amount of
    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 (the &#147;2012 Senior Subordinated
    Notes&#148;) and $29.2&#160;million aggregate principal amount
    of
    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 (the &#147;2013 Notes&#148; and,
    together with the 2012 Senior Notes and the 2012 Senior
    Subordinated Notes, the &#147;Tender Offer Notes&#148;). Also on
    February&#160;14, 2011, K. Hovnanian called for redemption on
    March&#160;15, 2011 all Tender Offer Notes that were not
    tendered in the tender offers for an aggregate redemption price
    of approximately $60.1&#160;million. Such redemptions were
    funded with proceeds from the February 2011 Offerings. We refer
    to the February 2011 Offerings together with the repurchase and
    redemption of the Tender Offer Notes described above as the
    &#147;February 2011 Transactions.&#148; See our Quarterly Report
    on
    <FONT style="white-space: nowrap">Form&#160;10-Q</FONT>
    for the quarter ended January&#160;31, 2011, incorporated by
    reference into this prospectus for additional information.
</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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">Redemption
    of the Junior Lien 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: transparent">
    We intend to use the net proceeds from this offering together
    with cash on hand to fund the redemption of all of K.
    Hovnanian&#146;s outstanding
    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 (the &#147;Second Lien Notes&#148;) and
    18.0%&#160;Senior Secured Notes due 2017 (the &#147;Third Lien
    Notes&#148; and, together with the Second Lien Notes, the
    &#147;Junior Lien Notes&#148;). As of January&#160;31, 2011,
    there were approximately $0.5&#160;million aggregate principal
    amount of Second Lien Notes outstanding and approximately
    $11.7&#160;million aggregate principal amount of Third Lien
    Notes outstanding. Beginning May&#160;1, 2011, the Second Lien
    Notes may be called for redemption at K. Hovnanian&#146;s option
    at a redemption price of 101% of the principal amount thereof
    plus accrued and unpaid interest thereon, if any, to the
    redemption date, and the Third Lien Notes may be called for
    redemption at K. Hovnanian&#146;s option at a redemption price
    of 102% of the principal amount thereof plus accrued and unpaid
    interest thereon, if any, to the redemption date. We currently
    expect to issue notices of redemption to holders of the Junior
    Lien Notes concurrently with the closing of this offering,
    specifying a redemption date for the Junior Lien Notes that is
    30&#160;days after the date of such notice. We refer to the
    anticipated redemptions of the Junior Lien Notes as the
    &#147;Redemptions.&#148;
</DIV>
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    <BR>
    S-2
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<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 -->
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    <B><FONT style="font-family: 'Times New Roman', Times">The
    Offering</FONT></B>
</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: transparent">

<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">
    We are offering $12.0&#160;million 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. The notes offered hereby (the &#147;New
    Notes&#148;) are being issued as additional
    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 under an indenture dated as of
    October&#160;20, 2009. There are $785.0&#160;million 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 already outstanding under that indenture
    (the &#147;Existing Notes&#148; and together with the New Notes,
    the &#147;Notes&#148;). The New Notes we are offering hereby
    constitute &#147;Additional Notes&#148; under the indenture and
    will be treated with the Existing Notes as a single class.</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 15 and October&#160;15, beginning October&#160;15,
    2011.</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">
    We 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, we 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 are Hovnanian Enterprises, Inc., the parent
    corporation of the Issuer, and most 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 supplement, our foreign subsidiary is not a
    Guarantor, and 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. In addition, three of our
    restricted subsidiaries, which we expect to sell prior to the
    closing of this offering, will not be Guarantors upon the
    closing of such sale.</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 Notes and the guarantees thereof will be the Issuer&#146;s
    and the Guarantors&#146; general senior secured obligations and
    will:</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="36%"></TD>
    <TD width="3%"></TD>
    <TD width="61%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#160;&#160;&#149;&#160;&#160;
</TD>
    <TD align="left">
    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;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#160;&#160;&#149;&#160;&#160;
</TD>
    <TD align="left">
    rank equally in right of payment to all of the Issuer&#146;s and
    the Guarantors&#146; existing and future unsubordinated debt;
</TD>
</TR>

</TABLE>
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    <BR>
    S-3
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<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 -->
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<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: transparent">

<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 senior to all of the Issuer&#146;s
    and the Guarantors&#146; debt that is unsecured or secured by
    junior-priority liens, 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;be effectively subordinated to any of the
    Issuer&#146;s or any Guarantor&#146;s 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;&#160;Collateral&#148; below); 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;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, we have entered into certain stand alone letter of
    credit agreements and facilities, which require us to maintain
    specified amounts of cash as collateral in segregated accounts
    to support the letters of credit issued thereunder. We refer to
    the collateral that secures these letter of credit agreements
    and facilities, and that will secure any future such agreements,
    facilities or similar instruments as the &#147;L/C
    Collateral.&#148; 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 L/C Collateral that collateralizes our
    letter of credit agreements and facilities and any future
    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 L/C Collateral 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 January&#160;31, 2011, on a pro forma basis, after giving
    effect to (i)&#160;the February 2011 Transactions and
    (ii)&#160;the completion of this offering and the Redemptions,
    the Issuer and the Guarantors would have 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 $797.0&#160;million of secured
    indebtedness outstanding ($784.8&#160;million, net of discount),
    all of which would be represented by 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">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;approximately $828.8&#160;million of senior
    unsecured notes ($827.2&#160;million, net of discount); 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;approximately $15.6&#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 January&#160;31, 2011, we had a total of
    $86.3&#160;million of letters of credit outstanding issued under
    our letter of credit agreements and 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">
    In addition, as of January&#160;31, 2011, our non-guarantor
    subsidiaries had approximately $38.2&#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 the section &#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 Notes and the guarantees thereof will be secured by a
    first-priority lien on substantially all the assets owned by the
    Issuer and </TD>
</TR>
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    <BR>
    S-4
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<H5 align="left" style="page-break-before:always"><A HREF="#Y91037tocpage">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 -->
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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">

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

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    the Guarantors on the issue date of the Notes or thereafter
    acquired, subject to permitted liens and certain exceptions.</TD>
</TR>


<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. Hovnanian
    JV Holdings, L.L.C., our wholly owned holding company subsidiary
    that owns our equity interests in substantially all of our joint
    ventures, to the extent such pledge would result in separate
    financial statements of such Guarantor or of K. Hovnanian JV
    Holdings, L.L.C. being required in SEC filings;</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;personal property where the cost of obtaining a
    security interest or perfection thereof exceeds its benefits;</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;real property subject to a lien securing
    indebtedness incurred for the purpose of financing the
    acquisition thereof;</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;real property located outside of the United States;</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;unentitled land;</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;real property which is leased or held for the
    purpose of leasing to unaffiliated third parties;</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;equity interests in subsidiaries other than
    restricted subsidiaries, except for K. Hovnanian JV Holdings,
    L.L.C., and subject to future grants under certain circumstances
    as required under 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">
<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: 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;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: 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;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: 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;up to $25.0&#160;million of L/C Collateral, 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
    <FONT style="white-space: nowrap">L/C</FONT>
    Collateral secure the 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 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 January&#160;31, 2011, the aggregate book value of the real
    property that constituted part of the collateral securing the
    Notes was approximately $757.5&#160;million, which does not
    include the impact of inventory investments, home deliveries, or
    impairments </TD>
</TR>
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    <BR>
    S-5
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<H5 align="left" style="page-break-before:always"><A HREF="#Y91037tocpage">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 -->
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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">

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

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    thereafter and which may differ from the appraised value. In
    addition, cash collateral that constituted part of the
    collateral securing the Notes was $273.3&#160;million as of
    January&#160;31, 2011, which includes $88.3&#160;million of
    restricted cash also 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.</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 the section &#147;Description of
    Notes&#160;&#151; Security.&#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">
    Subject to limitations in our debt instruments, we may secure
    indebtedness and other obligations, including our letter of
    credit agreements and facilities, permitted to be incurred under
    the indenture governing the Notes by granting liens upon any or
    all of the collateral securing the Notes. Such indebtedness and
    other obligations may be secured, subject to certain limits, on
    an equal or a junior basis with respect to the Notes.</TD>
</TR>


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

<TR>
    <TD valign="top">
    Certain Covenants</TD>
    <TD></TD>
    <TD valign="bottom">
    The Notes will be issued under an indenture dated as of
    October&#160;20, 2009, which, among other things, restricts the
    Issuer&#146;s ability and the ability of the Guarantors to:</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;borrow money;</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;pay dividends and distributions on our common and
    preferred stock;</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;repurchase certain senior and senior subordinated
    notes and common and preferred stock;</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;make investments in subsidiaries and joint ventures
    that are not restricted subsidiaries;</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;sell certain assets;</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;incur certain liens;</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;merge with or into other companies; 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;enter into certain transactions with our affiliates.</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">
    These covenants are subject to a number of important exceptions
    and qualifications. For more details, see the section
    &#147;Description of Notes&#160;&#151; Certain covenants.&#148;</TD>
</TR>


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

<TR>
    <TD valign="top">
    Qualified Reopening</TD>
    <TD></TD>
    <TD valign="bottom">
    We will treat the New Notes as having been issued in a
    &#147;qualified reopening&#148; for United States federal income
    tax purposes, and the following discussion assumes such
    treatment will be respected. Consequently, the New Notes will be
    part of the same issue as the Existing Notes. Because the
    Existing Notes were issued with original issue discount
    (&#147;OID&#148;) for United States federal income tax purposes,
    the New Notes also will have OID. However, as discussed in
    further detail below under &#147;Certain United States Federal
    Tax Consequences&#160;&#151; Certain Tax Consequences to U.S.
    Holders&#160;&#151; Amortizable Premium,&#148; since the initial
    offering price of the New </TD>
</TR>
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    <BR>
    S-6
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#Y91037tocpage">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 -->
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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">

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

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    Notes is greater than their stated principal amount, investors
    purchasing New Notes pursuant to this offering at their initial
    offering price will not be required to include any OID in
    income. 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 intend to use the net proceeds from this offering together
    with cash on hand to fund the Redemptions and to pay related
    fees and expenses.</TD>
</TR>


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

<TR>
    <TD valign="top">
    Risk Factors</TD>
    <TD></TD>
    <TD valign="bottom">
    See &#147;Risk Factors&#148; beginning on
    <FONT style="white-space: nowrap">page&#160;S-8</FONT>
    of this prospectus supplement for a discussion of risks you
    should carefully consider before deciding to invest in the New
    Notes.</TD>
</TR>

</TABLE>
</DIV><!-- End box 1 -->
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    <BR>
    S-7
</DIV><!-- END PAGE WIDTH -->
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<H5 align="left" style="page-break-before:always"><A HREF="#Y91037tocpage">Table of Contents</A></H5><P>

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

<A name='Y91037152'>
<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: transparent">

    <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: transparent">
    <I>An investment in the New Notes involves a high degree of
    risk. Before making a decision to invest in the New Notes, you
    should carefully consider the following:</I>
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>the risk factors described below and those contained in the
    documents incorporated by reference in this prospectus
    supplement; and</I>
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>the other information included in this prospectus supplement,
    the accompanying prospectus and the documents incorporated by
    reference in this prospectus supplement.</I>
</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: transparent">

    <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: transparent">

    <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 and other environmental 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: transparent">
    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: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Foreclosure 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: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Housing demand;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Population growth;&#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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Availability of water supply in locations in which we operate.
</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: transparent">
    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 may 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: transparent">
    Weather conditions and natural disasters such as hurricanes,
    tornadoes, earthquakes, floods, droughts, fires and other
    environmental conditions can harm the local homebuilding
    business. Our business in Florida was adversely affected in late
    2005 and into 2006 due to the effect of Hurricane Wilma on
    materials and labor availability and pricing. Conversely,
    Hurricane Ike, which hit Houston in September 2008, did not have
    an effect on materials and labor availability or pricing, but
    did affect the volume of home sales in subsequent weeks.
</DIV>
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    <BR>
    S-8
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    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: transparent">

    <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: transparent">
    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
    availability of mortgage financing, and large supplies of resale
    and new home inventories, among other factors. 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 in fiscal years 2007 through 2010 and may
    continue to materially adversely affect our business and results
    of operations in fiscal 2011. 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.
    Looking forward, if the housing market continues to deteriorate
    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
    several years, 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. 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>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    In addition, an increase in the default rate on the mortgages we
    originate may adversely affect our ability to sell mortgages or
    the pricing we receive upon the sale of mortgages. Although
    substantially all of the mortgage loans we originate are sold in
    the secondary mortgage market on a servicing released,
    non-recourse basis, we remain liable for certain limited
    representations, such as fraud, and warranties related to loan
    sales. As default rates rise, this may increase our potential
    exposure regarding mortgage loan sales because investors may
    seek to have us buy back or make whole investors for mortgages
    we previously sold. To date, we have not made significant
    payments related to our mortgage loans but because of the
    uncertainties inherent to these matters, actual future payments
    could differ significantly from our currently estimated amounts.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    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. 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: transparent">
    <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: transparent">
    <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: transparent">
    These programs are expected to wind down over time; for example
    the California tax credit ended in the fourth quarter of fiscal
    2009 and the federal tax credit expired in April 2010. In
    addition, in fiscal 2010, the U.S.&#160;Department of Housing
    and Urban Development (&#147;HUD&#148;) tightened FHA
    underwriting standards. Housing markets may further decline as
    these programs are modified or terminated.
</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: transparent">

    <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: transparent">
    We have a significant amount of debt.
</DIV>
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    <BR>
    S-9
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<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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Our debt, as of January&#160;31, 2011, including the debt of the
    subsidiaries that guarantee our debt, was $1,630.6&#160;million
    ($1,616.8&#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: transparent">
    <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 January&#160;31, 2011 were $150.1&#160;million, all
    of which represents interest incurred as there were no mandatory
    principal payments on our corporate debt under the terms of our
    indentures, but does not include principal and interest on
    nonrecourse secured debt, debt of our financial subsidiaries and
    fees under our letter of credit facilities and agreements.
</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: transparent">
    In addition, as of January&#160;31, 2011, we had
    $86.3&#160;million in aggregate outstanding face amount of
    letters of credit issued under various letter of credit
    facilities and agreements, which were collateralized by
    $88.3&#160;million of cash. Our fees for these letters of credit
    for the 12&#160;months ended January&#160;31, 2011, which are
    based on both the used and unused portion of the facilities and
    agreements, were $1.3&#160;million. We also had substantial
    contractual commitments and contingent obligations, including
    approximately $360.9&#160;million of performance bonds as of
    January&#160;31, 2011.
</DIV>

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

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

<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: transparent">

    <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: transparent">
    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. In addition, 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>
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    <BR>
    S-10
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent">

    <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 undertake transactions within the restrictions 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: transparent">
    The indentures governing our outstanding debt securities impose
    certain restrictions on our operations and activities. The most
    significant restrictions relate to debt incurrence, creating
    liens, 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: transparent">
    The restrictions in our debt instruments could prohibit or
    restrict our activities such as undertaking capital, raising or
    restructuring activities or entering into other transactions. In
    such a situation, we may be unable to amend the instrument or
    obtain a waiver. In addition, if we fail to make timely payments
    on this debt and other material indebtedness, our debt under
    these debt instruments could 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: transparent">

    <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: transparent">
    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: transparent">

    <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: transparent">
    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 Ratings lowered the Company&#146;s
    issuer default rating to CCC from B-. On April&#160;7, 2009,
    Moody&#146;s Investor Services affirmed our corporate family
    rating of Caa1, with a negative outlook. On April&#160;1, 2009,
    Standard&#160;&#038; Poor&#146;s (&#147;S&#038;P&#148;) lowered
    our B-corporate credit rating to CCC, with a negative outlook.
    On September&#160;14, 2010, S&#038;P affirmed our corporate
    credit rating of CCC+ but revised our outlook from developing to
    negative. Downgrades may make it more difficult and costly 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: transparent">

    <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: transparent">
    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 fall, 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 effect on
    our sales and revenues. Due to these factors, our quarterly
    operating results will likely 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: transparent">

    <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: transparent">
    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
</DIV>
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<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: transparent">
    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: 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: transparent">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Raw
    material and 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: transparent">
    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 to offset increased costs.
</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: transparent">

    <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: transparent">
    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/A</FONT>
    incorporated by reference herein. For example, during 2010,
    2009, and 2008, 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
    $13.2&#160;million, $45.4&#160;million and $114.1&#160;million,
    respectively. Also, in 2010, 2009, and 2008, as a result of the
    difficult market conditions, we recorded inventory impairment
    losses on owned property of $122.5&#160;million,
    $614.1&#160;million, and $596.0&#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: 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: transparent">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Home
    prices and sales activities in the California, Maryland, New
    Jersey, Texas and Virginia 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: transparent">
    We presently conduct a significant portion of our business in
    the California, Maryland, New Jersey, Texas and Virginia
    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, market conditions in California,
    Maryland, New Jersey and Virginia 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: 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: transparent">

    <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: transparent">
    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
</DIV>
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    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 its
    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: transparent">
    Starting in 2007, many lenders have been significantly
    tightening 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. In addition, in fiscal 2010, HUD
    tightened FHA underwriting standards. 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: transparent">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Increases
    in the costs of owning a home could prevent potential customers
    from buying our homes and adversely affect our business or
    financial 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: transparent">
    Significant expenses of owning a home, including mortgage
    interest expenses and real estate taxes, generally are
    deductible expenses for an individual&#146;s federal, and in
    some cases state, income taxes, subject to limitations under
    current tax law and policy. If the federal government or a state
    government were to change its income tax laws to eliminate or
    substantially limit these income tax deductions, as has been
    discussed from time to time, the after-tax cost of owning a new
    home would increase for many of our potential customers. The
    loss or reduction of these homeowner tax deductions, if such tax
    law changes were enacted without any offsetting legislation,
    would adversely impact demand for and sales prices of new homes,
    including ours. In addition, increases in property tax rates or
    fees on developers by local governmental authorities, as
    experienced in response to reduced federal and state funding or
    to fund local initiatives such as funding schools or road
    improvements, can adversely affect the ability of potential
    customers to obtain financing or their desire to purchase new
    homes, and can have an adverse impact on our business and
    financial results.
</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: transparent">

    <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: transparent">
    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 January&#160;31, 2011, we had invested an aggregate
    of $57.8&#160;million in these joint ventures, including
    advances to these joint ventures of approximately
    $13.9&#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: transparent">
    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 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>
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    <BR>
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    <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: transparent">
    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: transparent">
    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 that 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: transparent">
    For example, the Company was engaged in discussions with the
    U.S.&#160;Environmental Protection Agency (EPA) and the
    U.S.&#160;Department of Justice (DOJ) regarding alleged
    violations of storm water discharge requirements. In resolution
    of this matter, in April 2010 we agreed to the terms of a
    consent decree with the EPA, DOJ and the states of Virginia,
    Maryland, West Virginia and the District of Columbia
    (collectively the States). The consent decree was approved by
    the federal district court in August 2010. Under the terms of
    the consent decree, we have paid a fine of $1.0&#160;million
    collectively to the United States and the States named above and
    have agreed to perform under the terms of the consent decree for
    a minimum of three years, which includes implementing certain
    operational and training measures nationwide to facilitate
    ongoing compliance with storm water regulations. More recently,
    the New York State Department of Environmental Conservation
    assessed a $161,000 civil penalty (of which $96,000 was
    suspended) against us and required us to perform certain
    measures in connection with notices of violation for allegedly
    failing to comply with a storm water permit at an incomplete
    project in the state of New York; we have paid the $65,000
    penalty and anticipate timely completion of the required
    measures without material expense, although if we do not
    complete the required measures on time some or all of the
    suspended penalty could be imposed. Although we do not know the
    final outcome, we believe any penalties and any other impacts of
    this matter will not have a material adverse effect on 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: transparent">
    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: 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: transparent">

    <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: transparent">
    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
</DIV>
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<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: transparent">
    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 Alabama, Florida, Louisiana, Mississippi
    and Texas 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
    currently identified 13&#160;homes with Chinese Drywall that
    must be remediated, and we have been notified of 22 more homes
    that potentially have Chinese Drywall that may need remediation.
    These homes are located in our Florida and Houston markets. The
    estimated costs of the remediations of these homes are reserved.
    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: transparent">

    <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: transparent">
    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: transparent">
    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>

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

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    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: transparent">

    <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: transparent">
    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 in the future and our ability to pay
    dividends on equity. 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: transparent">

    <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: transparent">
    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>
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    <BR>
    S-15
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<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent">

    <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: transparent">
    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, the limited
    partnership established for members of Mr.&#160;Hovnanian&#146;s
    family and family trusts, 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 the
    Board 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: transparent">

    <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: transparent">
    Based on recent impairments and our current financial
    performance, we generated a federal net operating loss
    carryforward of $904.9&#160;million through the year ended
    October&#160;31, 2010, 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: transparent">
    Section&#160;382 of the Internal Revenue Code (the
    &#147;Code&#148;) 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 shifts 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: transparent">
    If we undergo an ownership change for purposes of
    Section&#160;382 as a result of future transactions involving
    our 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. A limitation imposed under Section&#160;382 on our ability
    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: transparent">
    In August 2008, we announced that the Board adopted a
    shareholder rights plan (the &#147;Rights Plan&#148;) 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 Code, and on
    December&#160;5, 2008, our stockholders approved the
    Board&#146;s decision to adopt the Rights Plan. The Rights Plan
    is intended to act as a deterrent to any person or group
    acquiring 4.9% or more of our outstanding Class&#160;A common
    stock (any such person an &#147;Acquiring Person&#148;), without
    the approval of the Company&#146;s board of directors. Subject
    to the terms, provisions and conditions of the Rights Plan, if
    and when they become exercisable, each right would entitle its
    holder to purchase from the Company one ten-thousandth of a
    share of the Company&#146;s Series&#160;B Junior Preferred Stock
    for a purchase price of $35.00. The rights will not be
    exercisable until the earlier of (i)&#160;10 business days after
    a public announcement by us that a person or group has become an
    Acquiring Person and (ii)&#160;10 business days after the
    commencement of a tender or exchange offer by a person or group
    for 4.9% of the Class&#160;A common stock. If issued, each
    fractional share of Series&#160;B Junior Preferred Stock would
    give the stockholder approximately the same dividend, voting and
    liquidation rights as does one share of the Company&#146;s
    Class&#160;A common stock. However, prior to exercise, a right
    does not give its holder any rights as a stockholder of the
    Company, including without limitation any dividend, voting or
    liquidation rights. See &#147;Description of Capital
    Stock&#160;&#151; Rights Plan&#148; in the accompanying
    prospectus for more information.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    In addition, on December&#160;5, 2008, our stockholders approved
    an amendment to our Certificate of Incorporation to restrict
    certain transfers of our stock in order to preserve the tax
    treatment of our net operating loss carryforwards and built-in
    losses under Section&#160;382 of the Code. Subject to certain
    exceptions pertaining to pre-existing 5% stockholders and
    Class&#160;B stockholders, the transfer restrictions in the
    amended
</DIV>
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    <BR>
    S-16
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<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: transparent">
    Certificate of Incorporation generally restrict any direct or
    indirect transfer (such as transfers of the Company&#146;s stock
    that result from the transfer of interests in other entities
    that own the Company&#146;s stock) if the effect would be to:
    (i)&#160;increase the direct or indirect ownership of the
    Company&#146;s stock by any person (or public group) from less
    than 5% to 5% or more of the Company&#146;s stock;
    (ii)&#160;increase the percentage of the Company&#146;s stock
    owned directly or indirectly by a person (or public group)
    owning or deemed to own 5% or more of the Company&#146;s stock;
    or (iii)&#160;create a new &#147;public group&#148; (as defined
    in the applicable Treasury regulations). See &#147;Description
    of Capital Stock&#160;&#151; Transfer Restrictions in the
    Certificate of Incorporation&#148; in the accompanying
    prospectus for more information.
</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: transparent">

    <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: transparent">
    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: 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: transparent">

    <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: transparent">
    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: transparent">

    <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: transparent">

    <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: transparent">
    At January&#160;31, 2011, on a pro forma basis, after giving
    effect to (i)&#160;the February 2011 Transactions and
    (ii)&#160;the completion of this offering and the anticipated
    Redemptions, the Issuer and the Guarantors would have had
    approximately $1,682.8&#160;million ($1,669.0&#160;million, net
    of discount) of debt (including the Notes) outstanding. We and
    our subsidiaries may incur additional indebtedness in the
    future. While the terms of the indenture under which the 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: transparent">

    <B><I><FONT style="font-family: 'Times New Roman', Times">The
    Notes and the guarantees thereof will be structurally
    subordinated to indebtedness of our non-guarantor 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: transparent">
    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 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 January&#160;31, 2011,
    non-guarantor subsidiaries and joint ventures had approximately
    $38.2&#160;million and $226.8&#160;million, respectively, of
    outstanding liabilities, including trade payables.
</DIV>
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    <BR>
    S-17
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<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent">

    <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 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: transparent">
    Certain of our subsidiaries and all of our joint venture
    operations are not subject to the restrictive covenants in the
    indenture under which the 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 the 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: transparent">

    <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: transparent">
    Substantially all the assets owned by the Issuer and the
    Guarantors, and all proceeds therefrom, are subject to
    first-priority liens in favor of the collateral agent for the
    benefit of the trustee and the holders of the Notes pursuant to
    the security documents entered into, and the mortgages
    delivered, in connection with the Existing Notes. Under the
    indenture governing 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 L/C Collateral that collateralizes such letter
    of credit agreements and facilities and any future 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 L/C Collateral 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: transparent">
    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 non-New York 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: transparent">
    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
    does 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: transparent">
    <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>

</TABLE>
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    <BR>
    S-18
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<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: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    equity interests in subsidiaries other than restricted
    subsidiaries, 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: transparent">
    <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 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: transparent">
    <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>


<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: transparent">
    <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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    up to $25.0&#160;million of L/C Collateral, 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 L/C Collateral 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: transparent">
    In addition, the Issuer and the Guarantors are not 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: transparent">
    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: transparent">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Absent
    the occurrence and continuance of an event of default under the
    indenture governing the Notes, we 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: transparent">
    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: transparent">

    <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: transparent">
    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
</DIV>
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    <BR>
    S-19
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<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: transparent">
    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: transparent">
    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: transparent">
    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>

<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: transparent">

    <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: transparent">
    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: transparent">
    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: transparent">
    The indenture also permits, 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: transparent">

    <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: transparent">
    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: transparent">
    <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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    we could be forced into bankruptcy or liquidation.
</TD>
</TR>

</TABLE>
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    <BR>
    S-20
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

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

    <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: transparent">
    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
    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 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: transparent">

    <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 New Notes and we will have a limited obligation to record
    mortgage modifications in connection with such collateral. In
    addition, the priority of the security interests of the existing
    mortgages in so far as they secure the New Notes will not, in
    almost all cases, relate back to the date of the original
    recording of such mortgages.</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: transparent">
    Certain security may not be in place on the issue date of the
    New Notes or will not be perfected on such date. In particular,
    we believe that in most jurisdictions the New Notes constitute
    secured obligations under the mortgages delivered in connection
    with the Existing Notes. We do not intend to record
    modifications to such mortgages in any jurisdiction unless local
    counsel in such jurisdiction advises that without recording a
    modification in the real property records, the New Notes will
    not be secured by the existing mortgage(s) recorded in such
    jurisdiction, in which case we will record such modifications no
    later than 120&#160;days after the issue date of the New Notes.
    Local counsel in Florida, Georgia, Minnesota, New Jersey, North
    Carolina and Virginia have indicated, and others may indicate,
    that mortgage modifications will (or depending on mortgage tax
    analysis, may) be required. As a result, perfection of security
    interests under existing mortgages in such jurisdictions may not
    occur immediately or for some time. Consequently, if a default
    should occur prior to the perfection of such security interests,
    holders of the New Notes may not benefit from such security
    interests. Furthermore, the liens securing the Notes are not
    insured by title insurance and no title comprehensive lien
    searches will be performed to confirm that no liens not
    permitted to exist under the Indenture exist, including those
    that have arisen from and after October&#160;20, 2009.
</DIV>
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    <BR>
    S-21
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    In addition, although we believe that in most jurisdictions the
    New Notes constitute secured obligations under the mortgages
    delivered in connection with the Existing Notes, the priority of
    the security interests of such mortgages in so far as they
    secure the New Notes will not, in almost all cases, relate back
    to the date of the original recording of such mortgages.
    Consequently, with respect to the assets encumbered by such
    mortgages, the New Notes may, in certain circumstances, be
    effectively subordinated to any of the Issuer&#146;s or any
    Guarantor&#146;s debt that is secured by security interests that
    are perfected prior to the issue date of the New Notes (or such
    later date that the security interests of the New Notes are
    perfected). In such circumstances, we would expect bankruptcy
    courts to treat the holders of the Existing Notes and the
    holders of the New Notes as a single class, and to subordinate a
    pro rata portion of the claim of all holders of Notes to claims
    secured by the intervening security interests to the extent of
    the value of the assets securing such claims.
</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: transparent">

    <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: transparent">
    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
    constitutes 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&#160;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&#160;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: transparent">

    <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: transparent">
    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. This limit may not be effective to protect the
    guarantees from being voided under fraudulent transfer laws or
    may eliminate any Guarantor&#146;s Obligations or reduce such
    obligations to an amount that effectively makes the guarantee
    worthless. 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>

<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: transparent">

    <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: transparent">
    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: transparent">
    <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>

</TABLE>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <BR>
    S-22
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#Y91037tocpage">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: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    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: transparent">
    <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: transparent">
    <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: transparent">
    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: transparent">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Federal,
    state, and local 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: transparent">
    The Notes and guarantees are secured by liens on real property
    that may be subject to both known and unknown environmental
    risks, and these risks may reduce or eliminate the value of the
    real property pledged as collateral for the Notes and the
    guarantees or 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, 2010, 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: transparent">
    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.
    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
    agree 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 agree 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
</DIV>
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    <BR>
    S-23
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#Y91037tocpage">Table of Contents</A></H5><P>

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

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

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

    <B><I><FONT style="font-family: 'Times New Roman', Times">An
    active trading market may not develop for 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: transparent">
    There is no active public trading market for the Notes. The
    Issuer has not and does not intend to apply for listing of the
    Notes on a security exchange. We cannot assure you that an
    active trading market will develop for the Notes. In addition,
    the liquidity of the trading market in the Notes and the market
    prices quoted for the 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 Notes, you may
    not be able to sell your Notes, or, even if you can sell your
    Notes, you may not be able to sell them at an acceptable price.
</DIV>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <BR>
    S-24
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#Y91037tocpage">Table of Contents</A></H5><P>

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

<A name='Y91037153'>
<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: transparent">

    <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: transparent">
    We expect to receive net proceeds from this offering of
    approximately $11.6&#160;million, after deducting underwriting
    discounts and estimated transaction expenses payable by us. We
    intend to use the net proceeds from this offering together with
    cash on hand to fund the Redemptions and to pay related fees and
    expenses.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <BR>
    S-25
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#Y91037tocpage">Table of Contents</A></H5><P>

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

<A name='Y91037154'>
<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: transparent">

    <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: transparent">
    The following table sets forth our capitalization as of
    January&#160;31, 2011 and on an as adjusted basis to give effect
    to (i)&#160;the February 2011 Transactions and (ii)&#160;this
    offering and the application of the estimated net proceeds from
    this offering together with cash on hand to fund the Redemptions
    and pay related fees and 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: transparent">
    This information should be read in conjunction with
    &#147;Management&#146;s Discussion and Analysis of Financial
    Condition and Results of Operations&#148; in our Annual Report
    on
    <FONT style="white-space: nowrap">Form&#160;10-K/A</FONT>
    incorporated by reference herein and our financial statements
    and related notes 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: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="75%">&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 -->
</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" style="border-bottom: 1px solid #000000">
    <B>As of January&#160;31, 2011</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>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>As Adjusted</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">
    <B>(Unaudited)<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">
    <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
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    311,032
</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">
    434,067
</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">
    Restricted Cash(1)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    105,579
</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">
    105,579
</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">
    Total Homebuilding Cash and Cash Equivalents(2)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    416,611
</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">
    539,646
</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>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Debt(3):
</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>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Nonrecourse Land Mortgages
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    20,946
</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">
    20,946
</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">
    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">
    20,435
</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">
    20,435
</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">
    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">
&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">
    Existing Notes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    772,801
</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">
    772,801
</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">
    New Notes offered hereby(4)
</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">
    12,660
</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: 30pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    772,801
</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">
    785,461
</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>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    11<FONT style="vertical-align: text-top; font-size: 70%;">1</FONT>/<FONT style="font-size: 70%;">2</FONT>
    Senior Secured Notes due 2013
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    476
</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">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    18%&#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>
<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">
    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">
    35,488
</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">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    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">
    54,373
</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">
    54,373
</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">
    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">
    29,214
</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">
    29,214
</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">
    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">
    52,720
</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">
    52,720
</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">
    11<FONT style="vertical-align: text-top; font-size: 70%;">7</FONT>/<FONT style="font-size: 70%;">8</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">
    &#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">
    151,052
</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">
    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">
    171,680
</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">
    171,680
</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">
    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>
<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: 10pt">
    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>
<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: 10pt">
    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">
    66,639
</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">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    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">
    53,531
</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">
    12.072%&#160;Senior Subordinated Notes due 2014(5)
</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">
    15,615
</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>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total Debt(3)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,658,192
</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">
    1,669,683
</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>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Equity:
</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>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Preferred Stock, $.01&#160;par value; 100,000&#160;Shares
    authorized; 5,600&#160;Shares of 7.625% Series&#160;A Preferred
    Stock issued at January&#160;31, 2011 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>
<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, $.01&#160;par value;
    200,000,000&#160;Shares authorized; 75,189,506&#160;Shares
    issued at January&#160;31, 2011, actual (including
    11,694,720&#160;shares held in treasury) and
    88,702,006&#160;Shares issued as adjusted (including
    11,694,720&#160;Shares held in treasury)(6)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    752
</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">
    887
</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, $.01&#160;par value (Convertible to
    Class&#160;A at time of sale); 30,000,000&#160;Shares
    authorized; 15,255,969&#160;Shares issued at January&#160;31,
    2011 (including 691,748&#160;Shares held in treasury)
</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>
<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(7)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    464,579
</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">
    587,614
</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">
    (887,561
</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">
    (889,446
</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>
<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>
<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">
    Total Hovnanian Enterprises, Inc. Stockholders&#146; Equity
    Deficit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (402,035
</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">
    (280,750
</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>
<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">
    Noncontrolling Interest in Consolidated Joint Ventures
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    736
</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">
    736
</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>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total Equity Deficit(6)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (401,299
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (280,014
</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>
<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">
    Total Capitalization
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,256,893
</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">
    1,389,669
</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>
</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: transparent">

</DIV>
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    <BR>
    S-26
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<H5 align="left" style="page-break-before:always"><A HREF="#Y91037tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<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: transparent">

<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">
    As of January&#160;31, 2011, Restricted Cash includes
    $88.3&#160;million of cash collateralizing our letter of credit
    agreements and facilities, $14.5&#160;million of cash
    collateralizing our surety bonds and $2.8&#160;million for
    customers&#146; deposits, which are restricted from our use.</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">
    As of January&#160;31, 2011, cash of the Issuer and the
    Guarantors collateralizing our secured indebtedness was
    $273.3&#160;million (which includes $88.3&#160;million of
    restricted cash collateralizing certain letters of credit).</TD>
</TR>


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

<TR>
    <TD align="right" valign="top">
    (3) </TD>
    <TD></TD>
    <TD valign="bottom">
    References to our consolidated debt in this prospectus
    supplement exclude debt under our secured master repurchase
    agreements, which are short-term borrowing facilities used by
    our mortgage banking subsidiary. As of January&#160;31, 2011,
    the aggregate principal amount of all borrowings under such
    secured master repurchase agreements was $24.1&#160;million.</TD>
</TR>


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

<TR>
    <TD align="right" valign="top">
    (4) </TD>
    <TD></TD>
    <TD valign="bottom">
    As adjusted, reflects the $12.0&#160;million aggregate principal
    amount of New Notes issued at a price of 105.5% resulting in
    approximately $12.7&#160;million of gross proceeds. The
    $0.7&#160;million premium will amortize over the life of the
    Notes and reduce interest expense. Does not reflect the
    underwriter&#146;s discount.</TD>
</TR>


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

<TR>
    <TD align="right" valign="top">
    (5) </TD>
    <TD></TD>
    <TD valign="bottom">
    As adjusted reflects the initial aggregate principal amount of
    the amortizing notes that are initially components of the Units
    offered in the February 2011 Units Offering and does not reflect
    amortization of principal to date.</TD>
</TR>


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

<TR>
    <TD align="right" valign="top">
    (6) </TD>
    <TD></TD>
    <TD valign="bottom">
    As adjusted, (a)&#160;includes shares of our Class&#160;A common
    stock issued in the February 2011 Common Stock Offering and
    (b)&#160;excludes shares of our Class&#160;A common stock
    issuable, as well as shares that have been issued to date, upon
    settlement of the purchase contracts that are initially
    components of the Units offered in the February 2011 Units
    Offering.</TD>
</TR>


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

<TR>
    <TD align="right" valign="top">
    (7) </TD>
    <TD></TD>
    <TD valign="bottom">
    We have accounted for the purchase contracts that are components
    of the Units offered in the February 2011 Units Offering as
    equity and recorded $68.3&#160;million, the initial fair value
    of these contracts, as additional paid in capital as of
    January&#160;31, 2011.</TD>
</TR>

</TABLE>
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    <BR>
    S-27
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#Y91037tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<A name='Y91037155'>
<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: transparent">

    <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: transparent">
    <I>In this section, references to the <B>&#147;Company&#148;
    </B>mean Hovnanian Enterprises, Inc., a Delaware corporation,
    and do not include K. Hovnanian Enterprises, Inc. or any of its
    subsidiaries, and references to the <B>&#147;Issuer,&#148;
    &#147;us,&#148; &#147;we&#148; </B>or <B>&#147;our&#148;
    </B>mean K. Hovnanian Enterprises, Inc., a California
    corporation.</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: transparent">
    The Notes will be issued under the indenture, 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>), as supplemented by
    a supplemental indenture to be dated the issue date of the New
    Notes (as supplemented, the <B>&#147;Indenture&#148;</B>). We
    will issue $12.0&#160;million 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 (the &#147;<B>New Notes</B>&#148;) under
    the Indenture. There are $785&#160;million 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 (the <B>&#147;Existing Notes&#148;</B>)
    already outstanding under the Indenture. As a result, the term
    <B>&#147;Issue Date&#148;</B> refers to October&#160;20, 2009,
    the date of issue of the Existing Notes. As used in this
    &#147;Description of Notes&#148;, except as otherwise specified,
    the term <B>&#147;Notes&#148;</B> means the Existing Notes
    together with the New Notes. All such Notes will vote together
    and will be treated as a single class for all purposes of the
    Indenture. 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 purchasers of the Notes are referred to
    the Indenture and the Trust&#160;Indenture Act for a statement
    of such terms.
</DIV>

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

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

    <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: transparent">
    The New Notes will bear interest from April&#160;15, 2011 at the
    rate of
    10<FONT style="vertical-align: text-top; font-size: 70%;">5</FONT>/<FONT style="font-size: 70%;">8</FONT>%
    <I>per annum </I>and the initial offering price of the New Notes
    will include accrued interest from April&#160;15, 2011 to the
    date of issuance of the New Notes. Interest will be payable
    semi-annually on April 15 and October 15 of each year,
    commencing October&#160;15, 2011, 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: transparent">
    Subject to the covenants described below, including
    &#147;Limitations on indebtedness&#148; and &#147;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 New Notes
    offered hereby constitute Additional Notes under the Indenture.
    The Notes offered hereby and any Additional Notes 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: transparent">
    The 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>

<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: transparent">

    <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: transparent">
    The 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;
    The Guarantees will be general secured obligations of the
    Guarantors and will rank senior in right of payment to all
    existing and future Indebtedness of the
</DIV>
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    <BR>
    S-28
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<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: transparent">
    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: transparent">
    At January&#160;31, 2011, on a pro forma basis, after giving
    effect to (i)&#160;the February 2011 Transactions and
    (ii)&#160;the completion of this offering and the Redemptions,
    the Issuer and the Guarantors would have had approximately
    $797.0&#160;million of secured indebtedness outstanding
    ($784.8&#160;million, net of discount), all of which would be
    represented by the Notes; $828.8&#160;million of senior
    unsecured notes ($827.2&#160;million, net of discount) and
    $15.6&#160;million senior subordinated 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: transparent">
    In addition, as of January&#160;31, 2011, we had a total of
    $86.3&#160;million of letters of credit issued under our
    existing letter of credit agreements and facilities. We are
    required to cash collateralize such letters of credit, and the
    Indenture permits such grant of collateral as a Permitted Lien.
    The Indenture requires (except with respect to Excluded
    Property) that the Holders of the Notes have a security interest
    in the cash and cash equivalents that collateralize such letters
    of credit 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 collateral
    will be applied first to satisfy such letter of credit
    obligations and then to satisfy obligations on the Notes.
</DIV>

<DIV style="margin-top: 9pt; 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: transparent">

    <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: transparent">

    <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: transparent">
    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>). The
    New Notes and any subsequent issue of Additional Notes will be
    secured, equally and ratably, with the Existing Notes. As a
    result, the issuance of Additional Notes will have the effect of
    diluting the security interest in the Collateral for the then
    outstanding Notes. Certain security will not be in place on the
    issue date of the New Notes or will not be perfected on the
    issue date of the New Notes. In particular, we will only record
    modifications to existing mortgages within 120&#160;days after
    the issue date of the New Notes in jurisdictions in which local
    counsel in such jurisdictions advises that without recording a
    modification in the real property records, the New Notes will
    not be secured by the existing mortgage(s) recorded in such
    jurisdiction. Local counsel in Florida, Georgia, Minnesota, New
    Jersey, North Carolina and Virginia have indicated, and others
    may indicate, that mortgage modifications will (or depending on
    mortgage tax analysis, may) be required.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    The Collateral does not include (collectively, the
    <B>&#147;Excluded Property&#148;</B>) (a)&#160;any pledges of
    stock of a Guarantor or of 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, 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. Hovnanian JV Holdings, L.L.C. that are not otherwise required
    to be filed, but only to the 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., and subject to
    future grants under certain circumstances as required under the
    Indenture, (i)&#160;any real property in a
</DIV>
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    <BR>
    S-29
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<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: transparent">
    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 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, 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 are also not 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: transparent">
    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: transparent">
    In addition, the Indenture permits 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;Ranking&#148; 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: transparent">
    The Collateral is 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 the Second Lien Notes, Wilmington
    Trust&#160;Company, as collateral agent, on a junior-priority
    basis, for the benefit of the holders of the Third Lien Notes
    (collectively, the <B>&#147;Outstanding Junior Secured
    Notes&#148;</B>) , until the Outstanding Junior Secured Notes
    are redeemed in the Redemptions, 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 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>) are junior to the
    First-Priority Liens. In certain states, mortgages are (and will
    be) granted solely to a single collateral agent, which holds
    (and will hold) such mortgages for the benefit of the holders of
    the First-Priority Liens and the Junior Priority Liens.
</DIV>

<DIV style="margin-top: 9pt; 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: transparent">

    <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: transparent">
    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>
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    <BR>
    S-30
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    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: 3pt; 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: transparent">
    <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: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <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: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <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: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <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: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <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: transparent">
    The Collateral has not been appraised in connection with this
    offering. At January&#160;31, 2011, the aggregate book value of
    the real property that constituted part of the Collateral was
    approximately $757.5&#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 collateral that constituted part of the
    Collateral was $273.3&#160;million as of January&#160;31, 2011,
    which includes $88.3&#160;million of restricted cash also
    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 constitutes 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: transparent">
    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 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: transparent">

    <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: transparent">
    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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (b)&#160;upon payment in full of principal, interest and all
    other Obligations on the Notes issued under the Indenture,
</DIV>
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    <BR>
    S-31
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: transparent">
    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: transparent">
    To the extent applicable, the Issuer will comply with
    Section&#160;313(b) of the TIA, relating to reports, and
    Section&#160;314(d) of the TIA, 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 TIA may be made by an
    Officer of the Issuer except in cases where Section&#160;314(d)
    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 TIA 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 TIA 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 TIA 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 TIA. In addition, under
    interpretations provided by the SEC, to the extent that a
    release of a Lien is made without the need for consent by the
    Holders or the Trustee, the provisions of Section&#160;314(d)
    may be inapplicable to the release.
</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: transparent">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Intercreditor
    Agreement</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: transparent">
    The Issuer and the Guarantors have entered into Intercreditor
    Agreements governing the relationship among the Notes and any
    other First-Priority Lien Obligations and the Outstanding Junior
    Secured Notes. In addition to the provisions described above
    with respect to control of remedies and release of Collateral,
    the Intercreditor Agreements 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: transparent">
    <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: transparent">
    <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
</TD>
</TR>
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    <BR>
    S-32
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<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: transparent">
    <TD>&nbsp;</TD>
    <TD>
</TD>
    <TD align="left">
    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>

</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: transparent">
    <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: transparent">
    <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 repay 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: transparent">
    <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: transparent">
    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: transparent">
    <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>


<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: transparent">
    <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: transparent">
    <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: transparent">
    <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
</TD>
</TR>
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</TABLE>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <BR>
    S-33
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<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: transparent">
    <TD>&nbsp;</TD>
    <TD>
</TD>
    <TD align="left">
    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>

</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: transparent">
    <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: transparent">
    <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: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    The Issuer intends to use the net proceeds from this offering
    together with cash on hand to fund the redemption of the
    Outstanding Junior Secured Notes in the Redemptions, as
    described above under &#147;Summary&#160;&#151; Recent
    Developments and Related Transactions&#160;&#151; Redemption of
    the Junior Lien Notes.&#148; Accordingly, upon the consummation
    of the Redemptions, the Issuer will not have any Junior Priority
    Lien Obligations outstanding. The Issuer may incur Junior
    Priority Lien Obligations in the future, which will be subject
    to the Intercreditor Agreements.
</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: transparent">

    <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: transparent">
    Neither the Issuer nor any of the Guarantors are 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: transparent">
    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: transparent">

    <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: transparent">
    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 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: transparent">
    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: transparent">
    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
</DIV>
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    <BR>
    S-34
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<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: transparent">
    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: transparent">
    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: transparent">
    A sale of assets or Capital Stock of a Guarantor may constitute
    an Asset Disposition subject to the &#147;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: transparent">

    <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: transparent">
    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: transparent">
    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: transparent">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="90%">&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="6%" 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="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="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Percentage</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">
    October&#160;15, 2012
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" 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="left" 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="left" 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="left" 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: transparent">

</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    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: transparent">
    (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: transparent">
    (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: transparent">
    There is no sinking fund for, or mandatory redemption 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: transparent">

    <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: transparent">
    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: transparent">
    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: transparent">
    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>
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    <BR>
    S-35
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<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: transparent">

    <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: transparent">
    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;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: transparent">

    <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: transparent">
    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: transparent">
    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: transparent">
    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: transparent">
    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;&#160;Certain
    covenants&#160;&#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: transparent">
    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, 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: transparent">
    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>
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    <BR>
    S-36
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    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: transparent">
    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: transparent">

    <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: transparent">
    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: transparent">
    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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (5)&#160;any guarantee of Indebtedness incurred under Credit
    Facilities in compliance with the Indenture,&#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: transparent">
    (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: transparent">
    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: transparent">
    (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: transparent">
    (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: transparent">
    (3)&#160;may elect to comply with such paragraphs (or
    definitions), as applicable, in any order.
</DIV>

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

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

    <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: transparent">
    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: transparent">
    (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>
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    <BR>
    S-37
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<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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (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>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    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: transparent">
    (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: transparent">
    (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: transparent">
    (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>
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    <BR>
    S-38
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<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: transparent">
    (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: transparent">
    (a)&#160;in an aggregate amount not to exceed $50.0&#160;million
    since the Issue Date (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: transparent">
    (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: transparent">
    (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 since the Issue Date
    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
    <B>&#147;Collateral Ratio&#148;</B>) 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)&#160;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)&#160;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: transparent">
    (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: transparent">
    (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 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: transparent">
    (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 Existing Notes as described in the Issuer&#146;s
    Confidential Offering Circular dated October&#160;5, 2009 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: transparent">
    <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: transparent">
    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>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    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: transparent">
    Solely for the purpose of making Restricted Payments under
    clause (C)(iii) above, the Indenture provides 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: transparent">
    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
    other guarantors party thereto and Wilmington Trust&#160;Company
    (as successor to Deutsche Bank National Trust&#160;Company), as
    trustee) that were made on or after May&#160;27, 2008 and prior
    to the Issue Date under the provisions of the Indenture dated as
    of May&#160;27, 2008, among the Issuer, the Company, the other
    guarantors party thereto and Wilmington Trust&#160;Company (as
    successor to Deutsche Bank National Trust&#160;Company), as
    trustee, 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: transparent">

    <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: transparent">
    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-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: transparent">
    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: transparent">
    (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: transparent">
    (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
</DIV>
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<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: transparent">
    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: transparent">
    The Indenture will also provide 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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">

    <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: transparent">
    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: transparent">
    (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: transparent">
    (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>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    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 <B>&#147;Permitted Investments&#148;</B>)
    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>
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    <BR>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    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: transparent">
    Notwithstanding the foregoing, (A)&#160;the Company is not
    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>

<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: transparent">

    <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: transparent">
    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: transparent">

    <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: transparent">
    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
</DIV>
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    <BR>
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<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: transparent">
    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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (i)&#160;encumbrances or restrictions existing under or by
    reason of the Indenture, the Notes or the Guarantees,
</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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (m)&#160;customary provisions of any franchise, distribution or
    similar agreements,
</DIV>
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<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: transparent">
    (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: transparent">
    (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: transparent">

    <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: transparent">
    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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    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: transparent">
    (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;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: transparent">
    (b)&#160;a transaction the purpose of which is to change the
    state of incorporation of the Company, the Issuer or any
    Guarantor.
</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: transparent">

    <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: transparent">
    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
</DIV>
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<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: transparent">
    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: transparent">
    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: transparent">
    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: transparent">

    <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: transparent">
    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: transparent">

    <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: transparent">
    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: transparent">
    (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: transparent">
    (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: transparent">
    (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;Certain
    covenants&#160;&#151; Repurchase of Notes upon Change of
    Control&#148; and &#147;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: transparent">
    (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>

<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: transparent">
    (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: transparent">
    (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
</DIV>
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<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: transparent">
    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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (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: 4%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    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: transparent">
    (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: transparent">
    (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: transparent">
    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;Certain
    covenants&#160;&#151; Repurchase of Notes upon Change of
    Control&#148; and &#147;Certain covenants&#160;&#151;
    Limitations on mergers, consolidations and sales of
    assets&#148;) the Company does not cure the Default 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: transparent">
    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
</DIV>
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    <BR>
    S-46
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<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: transparent">
    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: transparent">
    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: transparent">
    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;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: transparent">
    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: transparent">

    <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: transparent">
    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: transparent">
    The Indenture permits 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: transparent">
    (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: transparent">
    (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, 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: transparent">
    In addition, the Indenture permits 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
</DIV>
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    <BR>
    S-47
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<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: transparent">
    Indenture, and the Guarantees 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: transparent">
    (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: transparent">
    (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: transparent">
    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: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    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: transparent">

    <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: transparent">
    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>

<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: transparent">

    <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: transparent">
    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>
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    <BR>
    S-48
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (k)&#160;to conform any provision of the Indenture, the Notes,
    the Guarantees or the Security Documents to this
    &#147;Description of Notes&#148; to the extent that this
    &#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: transparent">
    In addition, the Collateral Agent, the Trustee and Wilmington
    Trust&#160;Company are 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: transparent">
    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: transparent">
    (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: transparent">
    (2)&#160;reduce the rate of or extend the time for payment of
    interest, including default interest, on any 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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (6)&#160;modify the ranking or priority of the Notes or any
    Guarantee,
</DIV>
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    <BR>
    S-49
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    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: transparent">

    <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: transparent">
    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: transparent">

    <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: transparent">
    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: transparent">
    <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: transparent">
    <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: transparent">
    <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 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: transparent">
    <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
</DIV>
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    <BR>
    S-50
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<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: transparent">
    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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (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: transparent">
    (5)&#160;any sale, transfer, conveyance, lease or other
    disposition of assets and properties that is governed by the
    provisions set forth under &#147;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: transparent">
    (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: transparent">
    (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: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    <I>&#147;Cash Equivalents&#148; </I>means
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (1)&#160;U.S.&#160;dollars;
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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>
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    <BR>
    S-51
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: transparent">
    <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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: transparent">
    <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: transparent">
    <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>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <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: transparent">
    (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: transparent">
    (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: transparent">
    (3)&#160;depreciation and amortization expenses and other
    non-cash charges to earnings,&#160;and
</DIV>
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<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: transparent">
    (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: transparent">
    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: transparent">
    <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: transparent">
    (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: transparent">
    (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: transparent">
    (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: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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>

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

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

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <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: transparent">
    <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
</DIV>
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<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: transparent">
    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: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    <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;Certain covenants&#160;&#151;
    Repurchase of Notes upon Change of Control&#148; or
    &#147;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;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: transparent">
    <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: transparent">
    <I>&#147;Event of Default&#148; </I>has the meaning set forth in
    &#147;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: transparent">
    <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>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <I>&#147;Existing Revolving Credit Agreement&#148; </I>means
    that certain Seventh Amended and Restated Credit Agreement dated
    as of March&#160;7, 2008, as amended by Amendment No.&#160;1
    thereto dated May&#160;16, 2008, among the Issuer, the Company,
    the Administrative Agent named therein, and a syndicate of
    lenders.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <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>
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    <BR>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <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: transparent">
    <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: transparent">
    <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
    <FONT style="white-space: nowrap">take-or-pay,</FONT>
    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: transparent">
    <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: transparent">
    <I>&#147;Guarantors&#148; </I>means (i)&#160;the Company and
    each of the Company&#146;s Restricted Subsidiaries that was 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: transparent">
    <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: transparent">
    <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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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 acquired, will
    constitute Restricted Payments subject to 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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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>
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    <BR>
    S-56
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<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: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    <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>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <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: transparent">
    <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
</DIV>
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    <BR>
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<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: transparent">
    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: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    <I>&#147;Notes&#148; </I>means the
    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 pursuant to this prospectus
    supplement and the Existing 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: transparent">
    <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>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <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>
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    <BR>
    S-58
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <I>&#147;Permitted Indebtedness&#148; </I>means
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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&#160;(2) 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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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;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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <I>&#147;Permitted Investment&#148; </I>means
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (1)&#160;Cash Equivalents;
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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
</DIV>
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    <BR>
    S-59
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<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: transparent">
    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;Certain covenants&#160;&#151;
    Limitations on dispositions of assets,&#148; (y)&#160;assets
    invested in pursuant to the third paragraph under &#147;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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: transparent">
    <I>&#147;Permitted Liens&#148; </I>means
</DIV>

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

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

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (5)&#160;attachment or judgment Liens not giving rise to a
    Default or an Event of Default,
</DIV>
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    <BR>
    S-60
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (6)&#160;easements, dedications, assessment district or similar
    Liens in connection with municipal or special district
    financing,
    <FONT style="white-space: nowrap">rights-of-way,</FONT>
    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: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 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: transparent">
    (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)&#160;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&#160;(a) outstanding at the time
    such other Indebtedness is incurred and so secured, does not
    exceed $785.0&#160;million and (iii)&#160;any Refinancing
    Indebtedness (including pursuant to Credit Facilities) in
    respect of clauses (a)(i) and (a)(ii);
</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: transparent">
    (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: 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: transparent">
    (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>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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>
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    <BR>
    S-61
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (18)&#160;Liens for homeowner and property owner association
    developments and assessments,
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 6pt; font-size: 1pt">&nbsp;</DIV>

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

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (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: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <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: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <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: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <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: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <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>
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    <BR>
    S-62
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <I>&#147;Qualified Stock&#148; </I>means Capital Stock of the
    Company other than Disqualified 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: transparent">
    <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: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <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: 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: transparent">
    (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: 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: transparent">
    (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)&#160;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)&#160;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&#160;(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>

<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: transparent">
    (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: 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: transparent">
    (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: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <I>&#147;Restricted Investment&#148; </I>means any Investment
    other than a Permitted Investment.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <I>&#147;Restricted Payment&#148; </I>means any of the following:
</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: transparent">
    (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: 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: transparent">
    (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>
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    <BR>
    S-63
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<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: transparent">
    (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: 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: transparent">
    (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: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <I>&#147;Restricted Subsidiary&#148; </I>means any Subsidiary of
    the Company which is not an 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: transparent">
    <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: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <I>&#147;Second Lien Notes&#148; </I>means the aggregate
    principal amount of 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 that were outstanding 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: transparent">
    <I>&#147;Security Documents&#148; </I>means (i)&#160;the
    Intercreditor Agreements 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: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <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: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <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: 6pt; font-size: 1pt">&nbsp;</DIV>

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

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <I>&#147;Third Lien Notes&#148; </I>means the aggregate
    principal amount of the Issuer&#146;s 18%&#160;Senior Secured
    Notes due 2017 that were outstanding 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: transparent">
    <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: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <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 date of this prospectus
</DIV>
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    <BR>
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<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: transparent">
    supplement, 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: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    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: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    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;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: 6pt; font-size: 1pt">&nbsp;</DIV>

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

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

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

    <B><FONT style="font-family: 'Times New Roman', Times">Concerning
    the Trustee</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: transparent">
    The Trustee is also the trustee with respect to the Outstanding
    Junior Secured Notes. The Indenture will contain 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>
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    <BR>
    S-65
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    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>

<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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">Additional
    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: transparent">
    Anyone who receives this prospectus supplement may obtain a copy
    of the Indenture without charge by writing to the Company at
    110&#160;West Front Street, P.O.&#160;Box&#160;500, Red Bank, NJ
    07701, Attention: Corporate Controller.
</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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">Book
    Entry Issuance</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: transparent">
    The Notes will be represented by one or more global Notes
    (&#147;Global Notes&#148;) that will be deposited with and
    registered in the name of DTC or its nominee. We will not issue
    certificated Notes (&#147;Certificated Notes&#148;) to you,
    except in the limited circumstance described below. Each Global
    Note will be issued to DTC, which will keep a computerized
    record of its participants whose clients have purchased the
    Notes. Each participant will then keep a record of its own
    clients. Unless it is exchanged in whole or in part for a
    Certificated Note, a Global Note may not be transferred. DTC,
    its nominees and their successors may, however, transfer a
    Global Note as a whole to one another, and these transfers are
    required to be recorded on our records or a register to be
    maintained by the Trustee.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    Beneficial interests in a Global Note will be shown on, and
    transfers of beneficial interests in the Global Note will be
    made only through, records maintained by DTC and its
    participants. DTC has provided us with the following
    information: DTC is a limited-purpose trust company organized
    under the New York Banking Law, a &#147;banking
    organization&#148; within the meaning of the New York Banking
    Law, a member of the Federal Reserve System, a &#147;clearing
    corporation&#148; within the meaning of the New York Uniform
    Commercial Code and a &#147;clearing agency&#148; registered
    under the provisions of Section&#160;17A of the Securities
    Exchange Act of 1934. DTC holds securities that its direct
    participants deposit with DTC. DTC also records the settlements
    among direct participants of securities transactions, such as
    transfers and pledges, in deposited securities through
    computerized records for direct participants&#146; accounts.
    This book-entry system eliminates the need to exchange
    certificated securities. Direct participants include securities
    brokers and dealers, banks, trust companies, clearing
    corporations and certain other organizations.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    DTC&#146;s book-entry system is also used by other organizations
    such as securities brokers and dealers, banks and trust
    companies that work through a direct participant. The rules that
    apply to DTC and its participants are on file with the SEC.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    When you purchase Notes through the DTC system, the purchases
    must be made by or through a direct participant, which will
    receive credit for the Notes on DTC&#146;s records. When you
    actually purchase the Notes, you will become their beneficial
    owner. Your ownership interest will be recorded only on the
    direct or indirect participants&#146; records. DTC will have no
    knowledge of your individual ownership of the Notes. DTC&#146;s
    records will show only the identity of the direct participants
    and the principal amount of the Notes held by or through them.
    You will not receive a written confirmation of your purchase or
    sale or any periodic account statement directly from DTC. You
    should instead receive these from your direct or indirect
    participant. As a result, the direct or indirect participants
    are responsible for keeping accurate account of the holdings of
    their customers. Neither we nor the Trustee nor any agent of
    ours or the Trustee&#146;s will have any responsibility or
    liability for any aspect of the records relating to beneficial
    ownership interests in the Global Notes or for maintaining,
    supervising or reviewing any records relating to such beneficial
    ownership interests or for any other aspect of the relationship
    between DTC and its participants or the relationship between
    such participants and the owners of beneficial interests in the
    Global Notes owned through such participants. The Trustee will
    wire payments on the Notes to DTC&#146;s nominee. We and the
    Trustee will treat DTC&#146;s nominee as the owner of each
    Global Note
</DIV>
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    <BR>
    S-66
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<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: transparent">
    for all purposes. Accordingly, we, the Trustee and any paying
    agent will have no direct responsibility or liability to pay
    amounts due on a Global Note to you or any other beneficial
    owners in that 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: transparent">
    It is DTC&#146;s current practice, upon receipt of any payment
    of distributions or liquidation amounts, to proportionately
    credit direct participants&#146; accounts on the payment date
    based on their holdings. In addition, it is DTC&#146;s current
    practice to pass through any consenting or voting rights to such
    participants by using an omnibus proxy. Those participants will,
    in turn, make payments to and solicit votes from you, the
    ultimate owner of Notes, based on their customary practices.
    Payments to you will be the responsibility of the participants
    and not of DTC, the Trustee or our 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: transparent">
    No beneficial owner of an interest in a Global Senior Note will
    be able to transfer such interest except in accordance with
    DTC&#146;s applicable procedures, in addition to those provided
    for under the Indenture. Because DTC can only act on behalf of
    participants, who in turn act on behalf of others, the ability
    of a person having a beneficial interest in a Global Senior Note
    to pledge that interest to persons that do not participate in
    the DTC system, or otherwise to take actions in respect of that
    interest, may be impaired by the lack of a physical certificate
    representing that interest.
</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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">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: transparent">
    Subject to certain conditions, any person having a beneficial
    interest in the Global Note may, upon request to the Trustee,
    exchange such beneficial interest for Notes in the form of
    Certificated Notes. Upon any such issuance, the Trustee is
    required to register such Certificated Notes in the name of, and
    cause the same to be delivered to, such person or persons (or
    the nominee of any thereof). In addition, if:
</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: transparent">
    (1)&#160;DTC is unwilling or unable to continue as a depository
    or ceases to be a clearing agency registered under applicable
    law, and a successor is not appointed by us within
    90&#160;days;&#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: transparent">
    (2)&#160;we decide to discontinue the book-entry system.
</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: transparent">
    then, upon surrender by the Global Note holder of its Global
    Note, Certificated Notes will be issued to each person that the
    Global Note holder and the Depositary identify as being the
    beneficial owner of the related 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: transparent">
    Neither we nor the Trustee will be liable for any delay by the
    Global Note holder or the Depositary in identifying the
    beneficial owners of the Notes and we and the Trustee may
    conclusively rely on, and will be protected in relying on,
    instructions from the Global Note holder or the Depositary 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: transparent">
    If a Global Note is exchanged for certificated Notes, the
    Trustee will keep the registration books for the Notes at its
    corporate office and follow customary practices and procedures
    regarding those certificated Notes. No service charge will be
    made for any transfer or exchange of any Note but the Issuer or
    the Trustee may require payment of a sum sufficient to cover any
    tax or other governmental charge, payable in connection
    therewith.
</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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">Legends</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: transparent">
    Each Global Note
    <FONT style="white-space: nowrap">and/or</FONT>
    Certificated Note shall bear the following legend:
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    THIS NOTE&#160;WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT
    (&#147;OID&#148;) FOR UNITED STATES FEDERAL INCOME TAX PURPOSES.
    UPON REQUEST, THE ISSUER WILL PROMPTLY MAKE AVAILABLE TO A
    HOLDER OF THIS NOTE&#160;INFORMATION REGARDING THE ISSUE PRICE,
    THE AMOUNT OF OID, THE ISSUE DATE AND THE YIELD TO MATURITY OF
    THIS NOTE. HOLDERS SHOULD CONTACT THE CORPORATE CONTROLLER AT
    110 WEST FRONT STREET, P.O. BOX 500, RED BANK, NEW JERSEY 07701.
</DIV>
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    <BR>
    S-67
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<A name='Y91037156'>
<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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">CERTAIN
    UNITED STATES FEDERAL TAX CONSEQUENCES</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: transparent">
    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 New Notes as of the date of
    this prospectus supplement. Unless otherwise stated, this
    summary deals only with New Notes held as capital assets by
    persons who purchase the New Notes for cash pursuant to this
    offering at their initial offering price.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    As used herein, a &#147;U.S.&#160;holder&#148; means a
    beneficial owner of the New 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: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    The term
    <FONT style="white-space: nowrap">&#147;non-U.S.&#160;holder&#148;</FONT>
    means a beneficial owner of the New 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: transparent">
    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: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a person holding the New 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: transparent">
    <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 tax 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a person liable for alternative minimum tax;
</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: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    <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: transparent">
    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
</DIV>
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    <BR>
    S-68
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<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: transparent">
    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: transparent">
    If a partnership (including any entity classified as a
    partnership for United States federal income tax purposes) holds
    New 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 New 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: transparent">
    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 New Notes. <B>If you are considering the purchase of New
    Notes, 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 New 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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">Qualified
    Reopening</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: transparent">
    We will treat the New Notes as having been issued in a
    &#147;qualified reopening&#148; for United States federal income
    tax purposes, and the following discussion assumes such
    treatment will be respected. Consequently, the New Notes will be
    part of the same issue as the Existing Notes. Because the
    Existing Notes were issued with original issue discount
    (&#147;OID&#148;) for United States federal income tax purposes,
    the New Notes also will have OID. However, as discussed in
    further detail below under <I>&#147;&#151;&#160;Certain Tax
    Consequences to U.S.&#160;Holders</I>&#160;&#151; <I>Amortizable
    Premium,&#148;</I> since the initial offering price of the New
    Notes is greater than their stated principal amount, investors
    purchasing New Notes pursuant to this offering at their initial
    offering price will not be required to include any OID in income.
</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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">Pre-issuance
    Accrued Interest</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: transparent">
    The initial offering price for the New Notes will include
    amounts attributable to interest accrued from April&#160;15,
    2011, which we call &#147;pre-issuance accrued interest.&#148;
    Pre-issuance accrued interest will be included in the accrued
    interest to be paid on the New Notes on the first interest
    payment date after the issuance of the New Notes. In accordance
    with applicable United States Treasury regulations, for United
    States federal income tax purposes, we will treat the New Notes
    as having been purchased for a price that does not include any
    pre-issuance accrued interest. If the New Notes are so treated,
    the portion of the first stated interest payment equal to the
    pre-issuance accrued interest will be deemed to be a non-taxable
    return of pre-issuance accrued interest and, accordingly, will
    not be taxable as interest on the New 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: transparent">

    <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: transparent">
    The following is a summary of certain United States federal
    income tax consequences that will apply to U.S.&#160;holders of
    the New 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: transparent">
    <I>Payments of Interest.</I>&#160;&#160;Stated interest on a New
    Note (other than any pre-issuance accrued interest excluded from
    the purchase price of the New Notes, as discussed above under
    <I>&#145;&#145;&#151; Pre-issuance Accrued Interest&#148;</I>)
    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: transparent">
    <I>Amortizable Premium.</I>&#160;&#160;The New Notes are being
    issued at a &#147;premium&#148; equal to the difference between
    their stated principal amount and their initial purchase price
    (excluding any amounts attributable to pre-issuance accrued
    interest, as discussed above under
    <I>&#147;&#151;&#160;Pre-issuance Accrued Interest&#148;</I>).
    Accordingly, even though the New Notes are treated as having OID
    (as a result of being treated as issued in a qualified
    reopening, as discussed above under
    <I>&#147;&#151;&#160;Qualified Reopening&#148;</I>), you will
    not be required to include any OID with respect to the New Notes
    in your income. In addition, you generally may elect to amortize
    the premium over the remaining term of the New Notes on a
    constant yield method as an offset to interest when includible
    in income under your regular accounting method. If you make this
    election, you will be required to reduce
</DIV>
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    <BR>
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<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: transparent">
    your adjusted tax basis in the New Notes by the amount of the
    premium amortized. If you do not elect to amortize the premium,
    that premium will decrease the gain or increase the loss you
    would otherwise recognize on disposition of the New Notes. An
    election to amortize premium on a constant yield method will
    also apply to all other taxable debt instruments held or
    subsequently acquired by you on or after the first day of the
    first taxable year for which the election is made. Such an
    election may not be revoked without the consent of the IRS. It
    is not entirely clear how to apply these amortizable premium
    rules in the case of debt instruments, such as the New Notes,
    that are subject to optional redemption. You should consult your
    own tax advisors regarding these rules, including whether to
    make an election to treat all interest that accrues on the New
    Notes (including stated interest, OID and market discount, as
    adjusted by any amortizable premium) in accordance with a
    constant yield method based on the compounding of interest. You
    should consult 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: transparent">
    <I>Sale, Exchange, Retirement, or Other Disposition of New
    Notes.</I>&#160;&#160;Upon the sale, exchange, retirement, or
    other taxable disposition of a New 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 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 New Note. Your adjusted tax basis in a New Note
    will, in general, be your cost for the New Note (less any amount
    attributable to pre-issuance accrued interest that is excluded
    from the purchase price of the New Note, as discussed above
    under &#147;<I>&#160;&#151; Pre-issuance Accrued
    Interest</I>&#148;), reduced by any amortized premium. Any such
    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: transparent">

    <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: transparent">
    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 New Notes. For purposes of the following discussion,
    interest does not include any pre-issuance accrued interest
    excluded from the purchase price of the New Notes, as discussed
    above under <I>&#147;&#151; Pre-issuance Accrued
    Interest.&#148;</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: transparent">
    <I>United States Federal Withholding Tax.</I>&#160;&#160;A 30%
    United States federal withholding tax will not apply to any
    payment to you of interest on the New 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    interest paid on the New 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: transparent">
    <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: transparent">
    <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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    you are not a bank whose receipt of interest on the New Notes is
    described in Section&#160;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: transparent">
    <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 New 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: transparent">
    If you cannot satisfy the requirements described above, payments
    of interest 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: transparent">
    <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>

</TABLE>
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    <BR>
    S-70
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<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: transparent">
    <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 New
    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;<I>United States Federal Income Tax</I>&#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: transparent">
    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 New
    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: transparent">
    <I>United States Federal Income Tax.</I>&#160;&#160;If you are
    engaged in a trade or business in the United States and interest
    on the New 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 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;<I>United States Federal
    Withholding Tax</I>&#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 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: transparent">
    Any gain realized on the disposition of a New 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: transparent">
    <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: transparent">
    <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: transparent">
    <I>United States Federal Estate Tax.</I>&#160;&#160;Your estate
    will not be subject to United States federal estate tax on New
    Notes beneficially owned by you at the time of your death,
    provided that any payment to you on the New 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;<I>United States Federal
    Withholding Tax</I>&#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: transparent">

    <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: transparent">
    <I>U.S.&#160;Holders.</I>&#160;&#160;In general, information
    reporting requirements will apply to certain payments of
    principal and interest paid on the New Notes and to the proceeds
    of the sale or other disposition (including a redemption) of a
    New Note paid to you (unless you are an exempt recipient).
    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: transparent">
    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: transparent">
    <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 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: transparent">
    In general, you will not be subject to backup withholding with
    respect to payments of interest on the New 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
    <I>&#147;&#151;&#160;Certain Tax Consequences to
    <FONT style="white-space: nowrap">Non-U.S.&#160;Holders</FONT></I>&#160;&#151;
    <I>United States Federal Withholding Tax.&#148;</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: transparent">
    Information reporting and, depending on the circumstances,
    backup withholding will apply to the proceeds of a sale or other
    disposition (including a redemption) of New Notes within the
    United States or conducted through
</DIV>
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    <BR>
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<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: transparent">
    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: transparent">
    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>
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    <BR>
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<A name='Y91037157'>
<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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">CERTAIN
    ERISA CONSIDERATIONS</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: transparent">
    The following is a summary of certain considerations associated
    with the purchase of the Notes by employee benefit plans that
    are subject to Title&#160;I of the U.S.&#160;Employee Retirement
    Income Security Act of 1974, as amended (&#147;ERISA&#148;),
    plans, individual retirement accounts and other arrangements
    that are subject to Section&#160;4975 of the Code or provisions
    under any federal, state, local,
    <FONT style="white-space: nowrap">non-U.S.&#160;or</FONT>
    other laws or regulations that are similar to such provisions of
    the Code or ERISA (collectively, &#147;Similar Laws&#148;), and
    entities whose underlying assets are considered to include
    &#147;plan assets&#148; of any such plan, account or arrangement
    (each, a &#147;Plan&#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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">General
    Fiduciary Matters</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: transparent">
    ERISA and the Code impose certain duties on persons who are
    fiduciaries of a Plan subject to Title&#160;I of ERISA or
    Section&#160;4975 of the Code (an &#147;ERISA Plan&#148;) and
    prohibit certain transactions involving the assets of an ERISA
    Plan and its fiduciaries or other interested parties. Under
    ERISA and the Code, any person who exercises any discretionary
    authority or control over the administration of such an ERISA
    Plan or the management or disposition of the assets of such an
    ERISA Plan, or who renders investment advice for a fee or other
    compensation to such an ERISA Plan, is generally considered to
    be a fiduciary of the ERISA Plan.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    In considering an investment in the Notes of a portion of the
    assets of any Plan, a fiduciary should determine whether the
    investment is in accordance with the documents and instruments
    governing the Plan and the applicable provisions of ERISA, the
    Code or any Similar Law relating to a fiduciary&#146;s duties to
    the Plan including, without limitation, the prudence,
    diversification, delegation of control and prohibited
    transaction provisions of ERISA, the Code and any other
    applicable Similar Laws.
</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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">Prohibited
    Transaction Issues</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: transparent">
    Section&#160;406 of ERISA and Section&#160;4975 of the Code
    prohibit ERISA Plans from engaging in specified transactions
    involving plan assets with persons or entities who are
    &#147;parties in interest,&#148; within the meaning of ERISA, or
    &#147;disqualified persons,&#148; within the meaning of
    Section&#160;4975 of the Code, unless an exemption is available.
    A party in interest or disqualified person who engaged in a
    non-exempt prohibited transaction may be subject to excise taxes
    and other penalties and liabilities under ERISA and the Code. In
    addition, the fiduciary of the ERISA Plan that engaged in such a
    non-exempt prohibited transaction may be subject to penalties
    and liabilities under ERISA and the Code. The acquisition
    <FONT style="white-space: nowrap">and/or</FONT>
    holding of the Notes by an ERISA Plan with respect to which the
    Issuer, an underwriter, or a Guarantor, is considered a party in
    interest or a disqualified person may constitute or result in a
    direct or indirect prohibited transaction under Section&#160;406
    of ERISA
    <FONT style="white-space: nowrap">and/or</FONT>
    Section&#160;4975 of the Code, unless the investment is acquired
    and is held in accordance with an applicable statutory, class or
    individual prohibited transaction exemption. In this regard, the
    U.S.&#160;Department of Labor (the &#147;DOL&#148;) has issued
    prohibited transaction class exemptions, or &#147;PTCEs,&#148;
    that may apply to the acquisition and holding of the Notes.
    These class exemptions include, without limitation,
    <FONT style="white-space: nowrap">PTCE&#160;84-14</FONT>
    respecting transactions determined by independent qualified
    professional asset managers,
    <FONT style="white-space: nowrap">PTCE&#160;90-1</FONT>
    respecting insurance company pooled separate accounts,
    <FONT style="white-space: nowrap">PTCE&#160;91-38</FONT>
    respecting bank collective investment funds,
    <FONT style="white-space: nowrap">PTCE&#160;95-60</FONT>
    respecting life insurance company general accounts and
    <FONT style="white-space: nowrap">PTCE&#160;96-23</FONT>
    respecting transactions determined by in-house asset managers.
    In addition, Section&#160;408(b)(17) of ERISA and
    Section&#160;4975(d)(20) of the Code provide relief from the
    prohibited transaction provisions of ERISA and Section&#160;4975
    of the Code for certain transactions, provided that neither the
    issuer of the securities nor any of its affiliates (directly or
    indirectly) have or exercise any discretionary authority or
    control or render any investment advice with respect to the
    assets of any ERISA Plan involved in the transaction and
    provided further that the ERISA Plan pays no more than adequate
    consideration in connection with the transaction. There can be
    no assurance that all of the conditions of any such exemptions
    will be satisfied.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    Because of the foregoing, the Notes should not be purchased or
    held by any person investing &#147;plan assets&#148; of any
    Plan, unless such purchase and holding will not constitute a
    non-exempt prohibited transaction under ERISA and the Code or
    similar violation of any applicable Similar Laws.
</DIV>
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    <BR>
    S-73
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">Representation</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: transparent">
    Accordingly, by acceptance of a Note, each purchaser and
    subsequent transferee of a Note will be deemed to have
    represented and warranted that either (i)&#160;no portion of the
    assets used by such purchaser or transferee to acquire and hold
    the Notes constitutes assets of any Plan or (ii)&#160;the
    purchase and holding of the Notes by such purchaser or
    transferee will not constitute a non-exempt prohibited
    transaction under Section&#160;406 of ERISA or Section&#160;4975
    of the Code or similar violation under any applicable Similar
    Laws.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    The foregoing discussion is general in nature and is not
    intended to be all inclusive. Due to the complexity of these
    rules and the penalties that may be imposed upon persons
    involved in non-exempt prohibited transactions, it is
    particularly important that fiduciaries, or other persons
    considering purchasing the Notes on behalf of, or with the
    assets of, any Plan, consult with their counsel regarding the
    potential applicability of ERISA, Section&#160;4975 of the Code
    and any Similar Laws to such investment and whether an exemption
    would be applicable to the purchase and holding of the Notes.
</DIV>
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    <BR>
    S-74
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<A name='Y91037158'>
<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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">UNDERWRITING</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: transparent">
    Under the terms and subject to the conditions contained in an
    underwriting agreement dated the date of this prospectus
    supplement, we have agreed to sell to Credit Suisse Securities
    (USA) LLC (the &#147;underwriter&#148;) and the underwriter has
    agreed to purchase, the entire principal amount of the New 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: transparent">
    The underwriting agreement provides that the underwriter is
    obligated to purchase all of the New Notes if any are purchased.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    The underwriter proposes to offer the New Notes initially at the
    public offering price on the cover page of this prospectus
    supplement. After the initial public offering, the underwriter
    may change the public offering price. The offering of the New
    Notes by the underwriter is subject to receipt and acceptance of
    the New Notes and subject to the underwriter&#146;s right to
    reject any order in whole or in part.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    We estimate that our out of pocket expenses for this offering
    will be approximately $0.8&#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: transparent">
    The underwriter intends to make a secondary market for the New
    Notes. However, it is not obligated to do so and may discontinue
    making a secondary market for the New Notes at any time without
    notice. No assurance can be given as to how liquid the trading
    market for the New Notes will 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: transparent">
    We have agreed that, for a period beginning on the date of this
    prospectus and continuing to and including the date 10&#160;days
    following the closing date, we will not, without the prior
    written consent of Credit Suisse Securities (USA) LLC, offer,
    sell, contract to sell or otherwise transfer or dispose of any
    debt securities of the Issuer or any guarantor or any warrants,
    rights or options to purchase or otherwise acquire debt
    securities of the Issuer or any guarantor that are substantially
    similar to the New Notes and the guarantees other than
    (1)&#160;the New Notes and the guarantees or (2)&#160;debt
    facilities or commercial paper issued in the ordinary course of
    business. Credit Suisse Securities (USA) LLC in its sole
    discretion may release any of the securities subject to this
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreement at any time without notice.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    We have agreed to indemnify the underwriter against certain
    liabilities, including certain liabilities under the Securities
    Act, or to contribute to payments the underwriter may be
    required to make in respect of those liabilities.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    The underwriter and its affiliates have performed investment
    banking, commercial banking and advisory services for us from
    time to time for which it has received customary fees and
    expenses. The underwriter may, from time to time, engage in
    transactions with and perform services for us in the ordinary
    course of its 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: transparent">
    In connection with the offering, the underwriter may engage in
    stabilizing transactions, over-allotment transactions and
    syndicate covering transactions in accordance with
    Regulation&#160;M under the Securities Exchange Act of 1934 (the
    &#147;Exchange Act&#148;).
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Stabilizing transactions permit bids to purchase the underlying
    security so long as the stabilizing bids do not exceed a
    specified maximum.
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Over-allotment involves sales by the underwriter of New Notes in
    excess of the principal amount of the New Notes the underwriter
    is obligated to purchase, which creates a syndicate short
    position.
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Syndicate covering transactions involve purchases of the New
    Notes in the open market after the distribution has been
    completed in order to cover syndicate short positions. A short
    position is more likely to be created if the underwriter is
    concerned that there may be downward pressure on the price of
    the New Notes in the open market after pricing that could
    adversely affect investors who purchase in the offering.
</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: transparent">
    These stabilizing transactions, syndicate covering transactions
    and penalty bids may have the effect of raising or maintaining
    the market price of the New Notes or preventing or retarding a
    decline in the market price of the New Notes. As a result, the
    price of the New Notes may be higher than the price that might
    otherwise exist in the open market. These transactions, if
    commenced, may be discontinued at any time.
</DIV>
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    <BR>
    S-75
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    In relation to each Member State of the European Economic Area
    which has implemented the Prospectus Directive (each, a
    &#147;Relevant Member State&#148;), each underwriter has
    represented and agreed that with effect from and including the
    date on which the Prospectus Directive is implemented in that
    Relevant Member State (the &#147;Relevant Implementation
    Date&#148;) it has not made and will not make an offer of New
    Notes which are the subject of the offering contemplated by this
    prospectus supplement to the public in that Relevant Member
    State other than:
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (a)&#160;to any legal entity which is a qualified investor as
    defined in the Prospectus Directive;
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (b)&#160;to fewer than 100 or, if the Relevant Member State has
    implemented the relevant provision of the 2010 PD Amending
    Directive, 150, natural or legal persons (other than qualified
    investors as defined in the Prospectus Directive), as permitted
    under the Prospectus Directive, subject to obtaining the prior
    consent of the representatives for any such offer;&#160;or
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (c)&#160;in any other circumstances falling within
    Article&#160;3(2) of the Prospectus Directive,
</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: transparent">
    <I>provided </I>that no such offer of New Notes shall require us
    or any underwriter to publish a prospectus pursuant to
    Article&#160;3 of the Prospectus Directive.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    For the purposes of this provision, the expression an
    &#147;offer of notes to the public&#148; in relation to any New
    Notes in any Relevant Member State means the communication in
    any form and by any means of sufficient information on the terms
    of the offer and the New Notes to be offered so as to enable an
    investor to decide to purchase or subscribe for the notes, as
    the same may be varied in that Member State by any measure
    implementing the Prospectus Directive in that Member State, the
    expression &#147;Prospectus Directive&#148; means Directive
    2003/71/EC (and amendments thereto, including the 2010 PD
    Amending Directive, to the extent implemented in the Relevant
    Member State), and includes any relevant implementing measure in
    the Relevant Member State and the expression &#147;2010 PD
    Amending Directive&#148; means Directive 2010/73/EU.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    The underwriter has represented and agreed that:
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (a)&#160;it has only communicated or caused to be communicated
    and will only communicate or cause to be communicated an
    invitation or inducement to engage in investment activity
    (within the meaning of Section&#160;21 of the Financial Services
    and Markets Act 2000 (the &#147;FSMA&#148;)) received by it in
    connection with the issue or sale of the New Notes in
    circumstances in which Section&#160;21(1) of the FSMA does not
    apply to us or the Guarantors;&#160;and
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    (b)&#160;it has complied and will comply with all applicable
    provisions of the FSMA with respect to anything done by it in
    relation to the New Notes in, from or otherwise involving the
    United Kingdom.
</DIV>
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    <BR>
    S-76
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<A name='Y91037159'>
<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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">LEGAL
    MATTERS</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: transparent">
    The validity of the New Notes is being passed upon for us by
    Simpson Thacher&#160;&#038; Bartlett LLP, New York, New York.
    Certain legal matters relating to the offering of the New Notes
    will be passed upon and for the underwriter by Davis
    Polk&#160;&#038; Wardwell LLP, New York, New York. Simpson
    Thacher&#160;&#038; Bartlett LLP will rely, as to matters of
    California law, on the opinion of Peter S. Reinhart,&#160;Esq.,
    Senior Vice President and General Counsel for the Company.
</DIV>

<A name='Y91037160'>
<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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">EXPERTS</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: transparent">
    The consolidated financial statements as of October&#160;31,
    2010 and 2009, and for the years then ended incorporated by
    reference in this prospectus supplement from the Company&#146;s
    Amendment No.&#160;1 to the Annual Report on
    <FONT style="white-space: nowrap">Form&#160;10-K/A</FONT>
    for the year ended October&#160;31, 2010 and the effectiveness
    of Hovnanian&#146;s internal control over financial reporting as
    of October&#160;31, 2010, have been audited by
    Deloitte&#160;&#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: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    The consolidated financial statements of Hovnanian for the year
    ended October&#160;31, 2008 appearing in Hovnanian&#146;s
    Amendment No.&#160;1 to the Annual Report
    <FONT style="white-space: nowrap">(Form&#160;10-K/A)&#160;for</FONT>
    the year ended October&#160;31, 2010 have been audited by
    Ernst&#160;&#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='Y91037161'>
<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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">AVAILABLE
    INFORMATION</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: transparent">
    We are subject to the informational requirements of the
    Securities Exchange Act of 1934, as amended, and file reports,
    proxy statements and other information with the SEC. You may
    read, free of charge, and copy, at the prescribed rates, any
    reports, proxy statements and other information 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. The website
    address is:
    <FONT style="white-space: nowrap">http://www.sec.gov.</FONT>
    Hovnanian&#146;s Class&#160;A common stock is listed on the New
    York Stock Exchange, and reports, proxy statements and other
    information also can be inspected at the offices of the New York
    Stock Exchange, 20&#160;Broad Street, New York, New York 10005.
</DIV>

<A name='Y91037162'>
<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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">INCORPORATION
    OF CERTAIN DOCUMENTS BY REFERENCE</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: transparent">
    We incorporate by reference the documents listed below filed
    under Section&#160;13(a), 13(c), 14 or 15(d) of the Exchange
    Act. Information furnished under Item&#160;2.02 or
    Item&#160;7.01 of our Current Reports on
    <FONT style="white-space: nowrap">Form&#160;8-K</FONT>
    is not incorporated by reference in this prospectus.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    Hovnanian has filed the following documents with the SEC and
    these documents are incorporated herein by reference:
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Amendment No.&#160;1 to Annual Report on
    <FONT style="white-space: nowrap">Form&#160;10-K/A</FONT>
    for fiscal year ended October&#160;31, 2010, Registration File
    <FONT style="white-space: nowrap">No.&#160;1-8551.</FONT>
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    The portions of Hovnanian&#146;s definitive proxy statement on
    Schedule&#160;14A that were deemed &#147;filed&#148; with the
    Commission under the Exchange Act on January&#160;31, 2011;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Quarterly Report on
    <FONT style="white-space: nowrap">Form&#160;10-Q</FONT>
    for the quarter ended January&#160;31, 2011, Registration File
    <FONT style="white-space: nowrap">No.&#160;1-8551;&#160;and</FONT>
</TD>
</TR>

</TABLE>
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    <BR>
    S-77
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Current Reports on
    <FONT style="white-space: nowrap">Form&#160;8-K</FONT>
    filed on February&#160;9, 2011, February&#160;15, 2011,
    February&#160;28, 2011 and March&#160;17, 2011, Registration
    File Nos. 1-8551;
</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: transparent">
    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 supplement and prior to the termination of the
    offering made by this prospectus supplement 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>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    Hovnanian will provide without charge to each person, including
    any beneficial owner, to whom a copy of this prospectus
    supplement 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 supplement, 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 Brad O&#146;Connor, Vice President and Corporate
    Controller, 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>
</DIV>
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    <BR>
    S-78
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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</DIV><!-- END PAGE WIDTH -->
<DIV style="width: 91%; margin-left: 4%"><!-- BEGIN PAGE WIDTH -->



<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: transparent">
    <B>PROSPECTUS</B>
</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: transparent">
    <IMG src="y91037b5x9103700.gif" alt="(K. HOVNANIAN COMPANIES LOGO)"><B>
    </B>
</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: transparent">
    <B><FONT style="font-size: 14pt">$200,000,000</FONT></B>
</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: transparent">
    <B><FONT style="font-size: 24pt">Hovnanian Enterprises,
    Inc.</FONT></B>
</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: transparent">
    <B><FONT style="font-size: 13pt">Preferred Stock</FONT></B>
</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: transparent">
    <B><FONT style="font-size: 13pt">Class&#160;A Common
    Stock</FONT></B>
</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: transparent">
    <B><FONT style="font-size: 13pt">Depositary Shares</FONT></B>
</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: transparent">
    <B><FONT style="font-size: 13pt">Warrants to Purchase Preferred
    Stock</FONT></B>
</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: transparent">
    <B><FONT style="font-size: 13pt">Warrants to Purchase
    Class&#160;A Common Stock</FONT></B>
</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: transparent">
    <B><FONT style="font-size: 13pt">Warrants to Purchase Depositary
    Shares</FONT></B>
</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: transparent">
    <B><FONT style="font-size: 13pt">Debt Securities</FONT></B>
</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: transparent">
    <B><FONT style="font-size: 13pt">Warrants to Purchase Debt
    Securities</FONT></B>
</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: transparent">
    <B><FONT style="font-size: 13pt">Stock Purchase
    Contracts</FONT></B>
</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: transparent">
    <B><FONT style="font-size: 13pt">Stock Purchase Units</FONT></B>
</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: transparent">
    <B><FONT style="font-size: 13pt">Units</FONT></B>
</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: transparent">
    <B><FONT style="font-size: 24pt">K.&#160;Hovnanian Enterprises,
    Inc.</FONT></B>
</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: transparent">
    <B><FONT style="font-size: 13pt">Debt Securities</FONT></B>
</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: transparent">
    <B><FONT style="font-size: 13pt">Warrants to Purchase Debt
    Securities</FONT></B>
</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: transparent">
    <B><FONT style="font-size: 13pt">Units</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: 16%; border-bottom: 1pt solid #000000"></CENTER>

<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: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    We, Hovnanian Enterprises, Inc., may offer and sell from time to
    time, in one or more series:
</DIV>

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

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

<TR>
    <TD width="3%"></TD>
    <TD width="2%"></TD>
    <TD width="95%"></TD>
</TR>

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


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


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Class&#160;A Common Stock (along with Preferred Stock Purchase
    Rights),
</TD>
</TR>


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


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


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


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    debt securities consisting of notes, debentures or other
    evidences of indebtedness, which may be senior debt securities,
    senior subordinated debt securities or subordinated debt
    securities, and which may be convertible into, or exchangeable
    or exercisable for, any of the other securities referred to
    herein,
</TD>
</TR>


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


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    warrants to purchase our Preferred Stock, our Class&#160;A
    Common Stock, our Depositary Shares or our debt securities,
</TD>
</TR>


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


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


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


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


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


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Units, comprised of two or more of any of the securities
    referred to herein, in any combination;
</TD>
</TR>

</TABLE>

<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: transparent">
    together or separately, in amounts, at prices and on terms that
    will be determined at the time of the offering.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    Our wholly-owned subsidiary, K.&#160;Hovnanian Enterprises,
    Inc., may offer and sell from time to time, in one or more
    series:
</DIV>

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

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

<TR>
    <TD width="3%"></TD>
    <TD width="2%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    debt securities, consisting of notes, debentures or other
    evidences of indebtedness, which may be senior debt securities,
    senior subordinated debt securities or subordinated debt
    securities, which in each case will be fully and unconditionally
    guaranteed by Hovnanian Enterprises, Inc., and which may be
    convertible into, or exchangeable or exercisable for, any of the
    other securities referred to herein,
</TD>
</TR>


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


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    warrants to purchase K.&#160;Hovnanian Enterprises, Inc. debt
    securities, which will be fully and unconditionally guaranteed
    by Hovnanian Enterprises, Inc.,&#160;and
</TD>
</TR>


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


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Units, comprised of two or more of any of the securities
    referred to herein, in any combination;
</TD>
</TR>

</TABLE>

<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: transparent">
    together or separately, in amounts, at prices and on terms that
    will be determined at the time of the offering.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    Hovnanian Enterprises, Inc. debt securities or warrants or the
    debt securities or warrants issued by K.&#160;Hovnanian
    Enterprises, Inc. may be guaranteed by substantially all of our
    wholly-owned subsidiaries and may be issued either separately,
    or together with, upon conversion of, or in exchange for, other
    securities.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    We may offer and sell the securities directly to you, through
    agents, underwriters or dealers. The prospectus supplement for
    each offering will describe in detail the plan of distribution
    for that offering and will set forth the names of any agents,
    dealers or underwriters involved in the offering and any
    applicable fees, commissions or discount arrangements. The net
    proceeds we expect to receive from sales will be set forth in
    the prospectus supplement.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    This prospectus describes some of the general terms that may
    apply to these securities. The specific terms of the securities
    to be offered, and any other information relating to a specific
    offering, will be set forth in a post-effective amendment to the
    registration statement of which this prospectus is a part or in
    a supplement to this prospectus.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <B><FONT style="font-size: 12pt">Investing in our securities
    involves risks. See &#147;Risk Factors&#148; beginning on
    page&#160;4 of this prospectus and in the documents that we
    incorporate by reference.</FONT></B>
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    Our common stock is traded on the New York Stock Exchange under
    the symbol &#147;HOV.&#148;
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    Neither the Securities and Exchange Commission nor any state
    securities commission has approved or disapproved of these
    securities or passed upon the accuracy or adequacy of this
    prospectus. Any representation to the contrary is a criminal
    offense.
</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: 16%; border-bottom: 1pt solid #000000"></CENTER>

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

<DIV style="margin-top: 1pt; 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: transparent">
    The date of the prospectus is April&#160;18, 2011.
</DIV>
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<DIV style="width: 91%; margin-left: 4%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent">

    <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="X91037tocpage"></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: transparent">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="97%">&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 align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#X91037101'>About This Prospectus</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='#X91037102'>Forward-Looking Statements</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='#X91037103'>Available Information</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#X91037104'>Incorporation of Certain Documents By
    Reference</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#X91037105'>The Company</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#X91037106'>Risk Factors</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#X91037107'>Ratios of Earnings to Fixed Charges and Earnings
    to Combined Fixed Charges and Preferred Stock Dividends</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#X91037108'>Use of Proceeds</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#X91037109'>Description of Debt Securities</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#X91037110'>Description of Capital Stock</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    18
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#X91037111'>Description of Depositary Shares</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    22
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#X91037112'>Description of Stock Purchase Contracts and Stock
    Purchase Units</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    25
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#X91037113'>Description of Units</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#X91037114'>Description of Warrants</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#X91037115'>Plan of Distribution</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#X91037116'>Legal Matters</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    28
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#X91037117'>Experts</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    28
</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: transparent">

</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>
<!-- XBRL Pagebreak Begin -->

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

</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#X91037tocpage">Table of Contents</A></H5><P>

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

<A name='X91037101'>
<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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">ABOUT
    THIS PROSPECTUS</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: transparent">
    This prospectus is part of a registration statement we filed
    with the Securities and Exchange Commission, or the
    &#147;Commission&#148;, using the &#147;shelf&#148; registration
    process. Under the shelf registration process, using this
    prospectus, together with a prospectus supplement, we may sell
    from time to time any combination of the securities described in
    this prospectus in one or more offerings. This prospectus
    provides you with a general description of the securities that
    may be offered. Each time we sell securities pursuant to this
    prospectus, we will provide a prospectus supplement that will
    contain specific information about the terms of the securities
    being offered. A prospectus supplement may include a discussion
    of any risk factors or other special considerations applicable
    to those securities or to us. The prospectus supplement may also
    add to, update or change information contained in this
    prospectus and, accordingly, to the extent inconsistent, the
    information in this prospectus will be superseded by the
    information in the prospectus supplement. You should read this
    prospectus, any applicable prospectus supplement and the
    additional information incorporated by reference in this
    prospectus described below under &#147;Available
    Information&#148; and &#147;Incorporation of Certain Documents
    by Reference&#148; before making an investment in our 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: transparent">
    This prospectus contains summaries of certain provisions
    contained in some of the documents described herein, but
    reference is made to the actual documents for complete
    information. All of the summaries are qualified in their
    entirety by the actual documents. Copies of the documents
    referred to herein have been filed, or will be filed or
    incorporated by reference as exhibits to the registration
    statement of which this prospectus is a part, and you may obtain
    copies of those documents as described below under
    &#147;Available Information.&#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: transparent">
    <B>Neither the delivery of this prospectus nor any sale made
    under it implies that there has been no change in our affairs or
    that the information in this prospectus is correct as of any
    date after the date of this prospectus. You should not assume
    that the information in this prospectus, including any
    information incorporated in this prospectus by reference, the
    accompanying prospectus supplement or any free writing
    prospectus prepared by us, is accurate as of any date other than
    the date on the front of those documents. Our business,
    financial condition, results of operations and prospects may
    have changed since that date.</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: transparent">
    We have not authorized anyone to provide any information other
    than that contained or incorporated by reference in this
    prospectus, a prospectus supplement or in any free writing
    prospectus prepared by or on behalf of us or to which we have
    referred you. We take no responsibility for, and can provide no
    assurance as to the reliability of, any other information that
    others may give you. We are not making an offer to sell
    securities in any jurisdiction where the offer or sale of such
    securities is not permitted.
</DIV>

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

<CENTER style="font-size: 1pt; width: 18%; border-bottom: 1pt solid #000000"></CENTER>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    Unless otherwise stated or context otherwise requires, 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    &#147;K.&#160;Hovnanian&#148; are to K.&#160;Hovnanian
    Enterprises, Inc., a California corporation;&#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: transparent">
    <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; are to Hovnanian
    Enterprises, Inc., a Delaware corporation, together with its
    consolidated subsidiaries, including K.&#160;Hovnanian.
</TD>
</TR>

</TABLE>

<A name='X91037102'>
<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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">FORWARD-LOOKING
    STATEMENTS</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: transparent">
    All statements in this prospectus and the documents incorporated
    by reference that are not historical facts should be considered
    as &#147;Forward Looking Statements&#148; within the meaning of
    the &#147;Safe Harbor&#148; provisions 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:
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Changes in general and local economic and industry and business
    conditions and impacts of the sustained homebuilding downturn;
</TD>
</TR>

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

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <BR>
    1
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#X91037tocpage">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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Adverse weather and other environmental conditions and natural
    disasters;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Changes in market conditions and seasonality of the
    Company&#146;s 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Changes in home prices and sales activity in the markets where
    the Company builds homes;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Government regulation, including regulations concerning
    development of land, the home building, sales and customer
    financing processes, tax laws and the environment;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Fluctuations in interest rates and the availability of mortgage
    financing;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Shortages in, and price fluctuations of, raw materials and labor;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    The availability and cost of suitable land and improved lots;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Levels of competition;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Availability of financing to the 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Utility shortages and outages or rate fluctuations;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Levels of indebtedness and restrictions on the Company&#146;s
    operations and activities imposed by the agreements governing
    the Company&#146;s outstanding indebtedness;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    The Company&#146;s sources of liquidity;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Changes in credit ratings;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Availability of net operating loss carryforwards;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Operations through joint ventures with 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Product liability litigation and warranty claims;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Successful identification and integration of acquisitions;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Significant influence of the Company&#146;s controlling
    stockholders; 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Geopolitical risks, terrorist acts and other acts of war.
</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: transparent">
    Certain risks, uncertainties, and other factors are incorporated
    herein by reference to Amendment No.&#160;1 to our most recent
    Annual Report on
    <FONT style="white-space: nowrap">Form&#160;10-K/A</FONT>
    and our subsequent Quarterly Reports on
    <FONT style="white-space: nowrap">Form&#160;10-Q,</FONT>
    along with the other information contained in this prospectus,
    as updated by our subsequent filings under the Securities
    Exchange Act of 1934, as amended (the &#147;Exchange Act&#148;).
    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, after the date of this prospectus.
</DIV>

<A name='X91037103'>
<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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">AVAILABLE
    INFORMATION</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: transparent">
    We are subject to the informational requirements of the Exchange
    Act, and file reports, proxy statements and other information
    with the Commission. We have also filed a registration statement
    on
    <FONT style="white-space: nowrap">Form&#160;S-3</FONT>
    with the Commission. This prospectus, which forms part of the
    registration statement, does not have all of 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 Commission&#146;s Public Reference Room at
    100&#160;F&#160;Street, N.E., Washington,&#160;D.C. 20549. The
    public may obtain information concerning the operation of the
    Public Reference Room by calling the Commission at
    <FONT style="white-space: nowrap">1-800-SEC-0330.</FONT>
    The Commission also maintains a website that contains reports,
    proxy statements and other information, including the
    registration statement. The website address is:
    <FONT style="white-space: nowrap">http://www.sec.gov.</FONT>
    Hovnanian&#146;s Class&#160;A Common Stock is listed on the New
    York Stock Exchange, and reports, proxy statements and other
    information also can be inspected at the offices of the New York
    Stock Exchange, 20&#160;Broad Street, New York, New York 10005.
</DIV>
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    <BR>
    2
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<H5 align="left" style="page-break-before:always"><A HREF="#X91037tocpage">Table of Contents</A></H5><P>

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

<A name='X91037104'>
<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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">INCORPORATION
    OF CERTAIN DOCUMENTS BY REFERENCE</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: transparent">
    This prospectus is part of a registration statement filed with
    the Commission. The Commission 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 Commission will automatically update and supersede this
    information.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    We incorporate by reference the documents listed below filed
    under Section&#160;13(a), 13(c), 14 or 15(d) of the Exchange
    Act. Information furnished under Item&#160;2.02 or
    Item&#160;7.01 of our Current Reports on
    <FONT style="white-space: nowrap">Form&#160;8-K</FONT>
    is not incorporated by reference in this prospectus.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    Hovnanian has filed the following documents with the Commission
    and these documents are incorporated herein by reference:
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Amendment No.&#160;1 to Annual Report on
    <FONT style="white-space: nowrap">Form&#160;10-K/A</FONT>
    for the fiscal year ended October&#160;31, 2010, Registration
    File
    <FONT style="white-space: nowrap">No.&#160;1-8551;</FONT></I>
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>The portions of Hovnanian&#146;s definitive proxy statement
    on Schedule&#160;14A that were deemed &#147;filed&#148; with the
    Commission under the Exchange Act on January&#160;31, 2011;</I>
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Quarterly Report on
    <FONT style="white-space: nowrap">Form&#160;10-Q</FONT>
    for the quarter ended January&#160;31, 2010, Registration File
    <FONT style="white-space: nowrap">No.&#160;1-8551;</FONT></I>
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Current Reports on
    <FONT style="white-space: nowrap">Form&#160;8-K</FONT>
    filed on February&#160;9, 2011, February&#160;15, 2011,
    February&#160;28, 2011 and March&#160;17, 2011, Registration
    File Nos. 1-8551;</I>
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>The description of the Company&#146;s Class&#160;A Common
    Stock contained in the Registration Statement on
    <FONT style="white-space: nowrap">Form&#160;8-A</FONT>
    filed on March&#160;13, 2001, including any amendment or reports
    filed for the purpose of updating such description, Registration
    File
    <FONT style="white-space: nowrap">No.&#160;1-8551;</FONT>
    and</I>
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>The description of the Company&#146;s Preferred Stock
    Purchase Rights contained in the Registration Statement on
    <FONT style="white-space: nowrap">Form&#160;8-A</FONT>
    filed on August&#160;14, 2008, Registration File
    <FONT style="white-space: nowrap">No.&#160;1-8551.</FONT></I>
</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: transparent">
    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 registration statement and prior to the effectiveness of
    this registration statement, and all such documents filed by
    Hovnanian subsequent to the date of this prospectus and prior to
    the termination of the offerings 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 registration statement and 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>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    Hovnanian makes available through its website its annual report
    on
    <FONT style="white-space: nowrap">Form&#160;10-K,</FONT>
    quarterly reports on
    <FONT style="white-space: nowrap">Form&#160;10-Q,</FONT>
    current reports on
    <FONT style="white-space: nowrap">Form&#160;8-K,</FONT>
    and amendments to these reports filed or furnished pursuant to
    Section&#160;13(d) or 15(d) of the Exchange Act as soon as
    reasonably practicable after they are filed with, or furnished
    to, the Commission. In addition, 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 Brad O&#146;Connor, Vice President and Corporate
    Controller, 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>
</DIV>
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    <BR>
    3
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='X91037105'>
<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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">THE
    COMPANY</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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">Overview</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: transparent">
    We design, construct, market, and sell single-family detached
    homes, attached townhomes and condominiums, mid-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, the Company 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 291,000 homes,
    including 5,009 homes in fiscal 2010. 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: transparent">
    We are currently, excluding unconsolidated joint ventures,
    offering homes for sale in 192 communities in 40 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
    $34,000 (low income housing) to $1,660,000 with an average sales
    price, including options, of $281,000 nationwide in fiscal 2010.
</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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">Corporate
    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: transparent">
    Our principal executive offices are located at 110&#160;West
    Front Street, P.O.&#160;Box&#160;500, Red Bank, New Jersey
    07701, our telephone number is (732)747-7800, and our Internet
    website address is www.khov.com. Information on or accessible
    through our website is not a part of this prospectus.
</DIV>

<A name='X91037106'>
<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: transparent">

    <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: transparent">
    An investment in our securities involves a high degree of risk.
    Certain risks relating to us and our business are described
    under the headings &#147;Business&#148; and &#147;Risk
    Factors&#148; in Amendment No.&#160;1 to our Annual Report on
    <FONT style="white-space: nowrap">Form&#160;10-K/A</FONT>
    for the year ended October&#160;31, 2010, filed with the
    Commission on January&#160;25, 2011, and under the heading
    &#147;Risk Factors&#148; in our Quarterly Report on
    <FONT style="white-space: nowrap">Form&#160;10-Q</FONT>
    for the quarter ended January&#160;31, 2011, filed with the
    Commission on March&#160;4, 2011, which are incorporated by
    reference into this prospectus and which you should carefully
    review and consider, along with the other information contained
    in this prospectus or incorporated by reference herein, as
    updated by our subsequent filings under the Exchange Act, before
    making an investment in any of our securities. Additional risks,
    as well as updates or changes to the risks described in the
    documents incorporated by reference herein, may be included in
    any applicable prospectus supplement. Our business, financial
    condition or results of operations could be materially adversely
    affected by any of these risks. The market or trading price of
    our securities could decline due to any of these risks, and you
    may lose all or part of your investment. In addition, please
    read the section of this prospectus captioned
    &#147;Forward-Looking Statements&#148;, in which we describe
    additional uncertainties associated with our business and the
    forward-looking statements included or incorporated by reference
    in this prospectus. Please note that additional risks not
    presently known to us or that we currently deem immaterial may
    also impair our business and 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: transparent">
    Investment in any securities offered pursuant to this prospectus
    involves risks and uncertainties. If one or more of the events
    discussed in the risk factors were to occur, our business,
    financial condition, results of operations or liquidity, as well
    as the value of an investment in our securities, could be
    materially adversely affected.
</DIV>

<A name='X91037107'>
<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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">RATIOS OF
    EARNINGS TO FIXED CHARGES AND<BR>
    EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK
    DIVIDENDS</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: transparent">
    For purposes of computing the ratio of earnings to fixed charges
    and the ratio of earnings to combined fixed charges and
    preferred stock dividends, 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 that portion of operating
    lease rental expense (33%)
</DIV>
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    <BR>
    4
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<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: transparent">
    deemed to be representative of interest, plus the amortization
    of debt issuance costs and bond discounts. Combined fixed
    charges and preferred stock dividends consist of fixed charges
    and preferred stock dividends declared. Due to covenant
    restrictions, we have been prohibited from paying dividends
    beginning with the first quarter of fiscal year 2008. The
    following table sets forth the ratios of earnings to fixed
    charges and the ratios of earnings to combined fixed charges and
    preferred stock dividends 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: transparent">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="53%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="7%" 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 -->
    <TD width="3%">&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 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 7pt" 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>Three Months Ended</B>
</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: 7pt" 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>January&#160;31, 2011</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2010</B>
</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>
</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">
    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">
    (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">
    1.8
</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">
    Ratio of earnings to combined fixed charges and preferred stock
    dividends
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (b
</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">
    (b
</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">
    (b
</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">
    (b
</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">
    (b
</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">
    1.7
</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: transparent">

</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>

<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: transparent">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR>
    <TD valign="top">
    (a) </TD>
    <TD></TD>
    <TD valign="bottom">
    Earnings for the three months ended January&#160;31, 2011 and
    the years ended October&#160;31, 2010, 2009, 2008 and 2007 were
    insufficient to cover fixed charges for such period by
    $63.1&#160;million, $273.8&#160;million, $628.3&#160;million,
    $1,153.5&#160;million and $684.6&#160;million, respectively.</TD>
</TR>


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

<TR>
    <TD valign="top">
    (b) </TD>
    <TD></TD>
    <TD valign="bottom">
    Earnings for the three months ended January&#160;31, 2011 and
    the years ended October&#160;31, 2010, 2009, 2008 and 2007 were
    insufficient to cover fixed charges and preferred stock
    dividends for such period by $63.1&#160;million,
    $273.8&#160;million, $628.3&#160;million, $1,153.5&#160;million
    and $695.6&#160;million, respectively. Due to restrictions in
    our indentures on our senior secured, senior, and senior
    subordinated notes, we are currently prohibited from paying
    dividends on our preferred stock and did not make any dividend
    payments in the first quarter of fiscal 2011 or in fiscal 2010,
    2009 and 2008. In fiscal 2007 and 2006, we paid
    $10.7&#160;million of dividends on our preferred stock.</TD>
</TR>

</TABLE>

<A name='X91037108'>
<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: transparent">

    <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: transparent">
    Unless otherwise provided in the applicable prospectus
    supplement, the net proceeds from the sale of the securities
    offered by this prospectus and each prospectus supplement, the
    &#147;offered securities&#148;, will be used for general
    corporate purposes, which may include working capital needs, the
    refinancing or repayment of existing indebtedness, capital
    expenditures, expansion of the business and acquisitions. If any
    of the net proceeds from the offered securities will be used for
    acquisitions, we will identify the acquisition in the applicable
    prospectus supplement. The net proceeds may be invested
    temporarily in short-term securities or to repay short-term debt
    until they are used for their stated purpose.
</DIV>

<A name='X91037109'>
<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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">DESCRIPTION
    OF DEBT SECURITIES</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: transparent">
    The following description of the terms of the debt securities
    sets forth certain general terms that may apply to the debt
    securities that may be offered from time to time pursuant to
    this prospectus. The particular terms of any debt securities
    will be described in the prospectus supplement relating to those
    debt securities. Accordingly, for a description of the terms of
    a particular issue of debt securities, reference must be made to
    both the prospectus supplement relating thereto and the
    following description. The specific terms of debt securities as
    described in the applicable prospectus supplement will
    supplement and, if applicable, may modify or replace the general
    terms described in this prospectus.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    In this section, references to &#147;Hovnanian&#148; mean
    Hovnanian Enterprises, Inc. and do not include K.&#160;Hovnanian
    or any of its subsidiaries and references to
    &#147;K.&#160;Hovnanian&#148; mean K.&#160;Hovnanian
    Enterprises, Inc. and do not include any of its 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: transparent">
    The debt securities issued by K.&#160;Hovnanian, which we refer
    to as the &#147;K.&#160;Hovnanian Debt Securities&#148; may be
    issued either separately, or together with, upon conversion of
    or in exchange for, other securities. The K.&#160;Hovnanian Debt
    Securities will either be secured or unsecured senior
    obligations, which we refer to as the &#147;K&#160;Hovnanian
    Senior Debt Securities&#148;, unsecured senior subordinated
    obligations, which we refer to as the &#147;K.&#160;Hovnanian
    Senior Subordinated Debt Securities&#148; or unsecured
    subordinated obligations, which we refer to as the
    &#147;K.&#160;Hovnanian
</DIV>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <BR>
    5
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#X91037tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<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: transparent">
    Subordinated Debt Securities&#148;, of K.&#160;Hovnanian. The
    K.&#160;Hovnanian Debt Securities will be guaranteed by
    Hovnanian, may be guaranteed by other subsidiaries of Hovnanian
    and will be issued:
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    in the case of K.&#160;Hovnanian Senior Debt Securities, under
    one or more Senior Indentures, each a &#147;K.&#160;Hovnanian
    Senior Debt Indenture&#148;, among K.&#160;Hovnanian, Hovnanian
    and any subsidiaries of Hovnanian, as guarantors, and the
    trustee specified in the applicable prospectus supplement;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    in the case of K.&#160;Hovnanian Senior Subordinated Debt
    Securities, under a Senior Subordinated Indenture, the
    &#147;K.&#160;Hovnanian Senior Subordinated Debt
    Indenture&#148;, among K.&#160;Hovnanian, Hovnanian and any
    subsidiaries of Hovnanian, as guarantors, and the trustee
    specified in the applicable prospectus supplement;&#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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    in the case of K.&#160;Hovnanian Subordinated Debt Securities,
    under a Subordinated Indenture, the &#147;K.&#160;Hovnanian
    Subordinated Debt Indenture&#148;, among K.&#160;Hovnanian,
    Hovnanian and any subsidiaries of Hovnanian, as guarantors, and
    the trustee specified in the applicable prospectus supplement.
</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: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    Each K.&#160;Hovnanian Senior Debt Indenture, the
    K.&#160;Hovnanian Senior Subordinated Debt Indenture and the
    K.&#160;Hovnanian Subordinated Debt Indenture are sometimes
    referred to in this description individually as a
    &#147;K.&#160;Hovnanian Indenture&#148; and collectively as the
    &#147;K.&#160;Hovnanian Indentures&#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: transparent">
    The debt securities issued by Hovnanian, which we refer to as
    the &#147;Hovnanian Debt Securities&#148; may be issued either
    separately, or together with, upon conversion of or in exchange
    for, other securities. The Hovnanian Debt Securities will either
    be unsecured senior obligations, which we refer to as the
    &#147;Hovnanian Senior Debt Securities&#148; and together with
    the &#147;K.&#160;Hovnanian Senior Debt Securities, the
    &#147;Senior Debt Securities&#148;, unsecured senior
    subordinated obligations, which we refer to as the
    &#147;Hovnanian Senior Subordinated Debt Securities&#148; and
    together with the &#147;K.&#160;Hovnanian Senior Subordinated
    Debt Securities, the &#147;Senior Subordinated Debt
    Securities&#148;, or unsecured subordinated obligations, which
    we refer to as the &#147;Hovnanian Subordinated Debt
    Securities&#148; and together with the &#147;K.&#160;Hovnanian
    Subordinated Debt Securities, the &#147;Subordinated Debt
    Securities&#148;, of Hovnanian. The Hovnanian Debt Securities
    may be guaranteed by subsidiaries of Hovnanian and will be
    issued:
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    in the case of Hovnanian Senior Debt Securities, under a Senior
    Indenture, the &#147;Hovnanian Senior Debt Indenture&#148;,
    among Hovnanian, any subsidiaries of Hovnanian, as guarantors,
    and the trustee specified in the applicable prospectus
    supplement;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    in the case of Hovnanian Senior Subordinated Debt Securities,
    under a Senior Subordinated Indenture, the &#147;Hovnanian
    Senior Subordinated Debt Indenture&#148;, among Hovnanian, any
    subsidiaries of Hovnanian, as guarantors, and the trustee
    specified in the applicable prospectus supplement;&#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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    in the case of Hovnanian Subordinated Debt Securities, under a
    Subordinated Indenture, the &#147;Hovnanian Subordinated Debt
    Indenture&#148;, among Hovnanian, any subsidiaries of Hovnanian,
    as guarantors, and the trustee specified in the applicable
    prospectus supplement.
</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: transparent">
    The Hovnanian Senior Debt Indenture, the Hovnanian Senior
    Subordinated Debt Indenture and the Hovnanian Subordinated Debt
    Indenture are sometimes referred to in this description
    individually as a &#147;Hovnanian Indenture&#148; and
    collectively as the &#147;Hovnanian Indentures&#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: transparent">
    Each K.&#160;Hovnanian Senior Indenture and the Hovnanian Senior
    Indenture are sometimes referred to in this description
    individually as a &#147;Senior Debt Indenture&#148; and
    collectively as the &#147;Senior Debt Indentures&#148;. The
    K.&#160;Hovnanian Senior Subordinated Debt Indenture and the
    Hovnanian Senior Subordinated Debt Indenture are sometimes
    referred to in this description individually as a &#147;Senior
    Subordinated Debt Indenture&#148; and collectively as the
    &#147;Senior Subordinated Debt Indentures&#148;. The
    K.&#160;Hovnanian Subordinated Debt Indenture and the Hovnanian
    Subordinated Debt Indenture are sometimes referred to
    individually as a &#147;Subordinated Debt Indenture&#148; and
    collectively as the &#147;Subordinated Debt Indentures&#148;.
    The K.&#160;Hovnanian Indentures and the Hovnanian Indentures
    are sometimes referred to in this description individually as an
    &#147;Indenture&#148; and collectively as the
    &#147;Indentures&#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: transparent">
    This summary of the terms and provisions of the debt securities
    and the Indentures is not complete, and we refer you to the
    copies of the Indentures, which are filed as exhibits to the
    registration statement of which this
</DIV>
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    <BR>
    6
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<H5 align="left" style="page-break-before:always"><A HREF="#X91037tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<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: transparent">
    prospectus forms a part. Whenever we refer to particular defined
    terms of the Indentures in this section or in a prospectus
    supplement, we are incorporating these definitions into this
    prospectus or the prospectus supplement.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    None of the Indentures limits the amount of debt securities that
    may be issued thereunder, and the unsecured Indentures provide
    that the debt securities may be issued from time to time in one
    or more series. The unsecured Indentures permit the appointment
    of a different trustee for each series of debt securities.
    Wherever particular sections or defined terms of the applicable
    Indenture are referred to, those sections or defined terms are
    incorporated herein by reference as part of the statement made,
    and the statement is qualified in its entirety by the reference.
    For purposes of the summaries set forth below,
    &#147;issuer&#148; shall refer to K.&#160;Hovnanian in the case
    of the K.&#160;Hovnanian Debt Securities and the
    K.&#160;Hovnanian Indentures and to Hovnanian in the case of the
    Hovnanian Debt Securities and the Hovnanian Indentures.
    &#147;Obligors&#148; refers to Hovnanian and any subsidiaries of
    Hovnanian, as guarantors, the &#147;guarantors&#148;, in the
    case of the Hovnanian Debt Securities and the Hovnanian
    Indentures, and to K.&#160;Hovnanian and Hovnanian and any
    subsidiaries of Hovnanian, as guarantors, the
    &#147;guarantors&#148;, in the case of the K.&#160;Hovnanian
    Debt Securities and the K.&#160;Hovnanian Indentures.
</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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">Provisions
    Applicable to Senior, Senior Subordinated and Subordinated Debt
    Securities</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: transparent">
    <I>General.</I>&#160;&#160;The Hovnanian Debt Securities will be
    unsecured senior, senior subordinated or subordinated
    obligations of Hovnanian and the K.&#160;Hovnanian Debt
    Securities will be secured or unsecured senior, unsecured senior
    subordinated or unsecured subordinated obligations of
    K.&#160;Hovnanian, except that, under specified circumstances,
    K.&#160;Hovnanian may be released from these obligations. See
    &#147;Conditions for Release of K.&#160;Hovnanian&#148;. Unless
    otherwise specified in any prospectus supplement, the Senior
    Debt Securities will rank equally in right of payment with all
    of the other senior obligations of Hovnanian or
    K.&#160;Hovnanian, as applicable, and the Senior Subordinated
    Debt Securities and the Subordinated Debt Securities will have
    such terms with respect to rank and priority as described under
    &#147;Provisions Applicable Solely to Senior Subordinated Debt
    Securities and Subordinated Debt Securities&#160;&#151;
    Subordination&#148;. Except to the extent described in any
    prospectus supplement, the Indentures do not, and the debt
    securities will not, contain any covenants or other provisions
    that are intended to afford holders of the debt securities
    special protection in the event of either a change of control of
    Hovnanian (except with respect to secured senior obligations of
    K.&#160;Hovnanian) or a highly leveraged transaction by
    Hovnanian.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    We refer you to the applicable prospectus supplement for the
    following terms of, and information relating to, the debt
    securities being offered, the &#147;Offered Debt
    Securities&#148;, to the extent these terms are applicable to
    Offered Debt Securities:
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the title of the Offered Debt 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the lien priority and collateral securing secured senior
    obligations of K.&#160;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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    classification as K.&#160;Hovnanian Senior Debt Securities,
    K.&#160;Hovnanian Senior Subordinated Debt Securities,
    K.&#160;Hovnanian Subordinated Debt Securities, Hovnanian Senior
    Debt Securities, Hovnanian Senior Subordinated Debt Securities
    or Hovnanian Subordinated Debt Securities, aggregate principal
    amount, purchase price and denomination, and whether the Offered
    Debt Securities will be guaranteed by Hovnanian
    <FONT style="white-space: nowrap">and/or</FONT> by
    the subsidiary guarantors of Hovnanian as described under
    &#147;&#151;&#160;Description of Guarantees&#148; below;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the date or dates on which the principal of the Offered Debt
    Securities is payable;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the method by which amounts payable in respect of principal,
    premium, if any, or interest, if any, on or upon the redemption
    of the Offered Debt Securities may be calculated;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the interest rate or rates, or the method by which it will be
    determined, and the date or dates from which the interest, if
    any, will accrue;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the date or dates on which the interest, if any, will be payable;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the place or places where and the manner in which the principal
    of, premium, if any, and interest, if any, on the Offered Debt
    Securities will be payable and the place or places where the
    Offered Debt Securities may be presented for transfer;
</TD>
</TR>

</TABLE>
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    <BR>
    7
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#X91037tocpage">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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the right, if any, or obligation, if any, of Hovnanian or
    K.&#160;Hovnanian to redeem, repay or purchase the Offered Debt
    Securities pursuant to any sinking fund, amortization payments
    or analogous provisions, at the option of Hovnanian or
    K.&#160;Hovnanian or at the option of a holder thereof, and the
    period or periods within which, the price or prices or the
    method by which such price or prices will be determined, or both
    at which, the form or method of payment therefor if other than
    in cash and the terms and conditions upon which the Offered Debt
    Securities will be redeemed, repaid or purchased pursuant to the
    obligation;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the terms for conversion or exchange, if any, of the Offered
    Debt 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    any provision relating to the issuance of the Offered Debt
    Securities at an original issue discount;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    if the amounts of payments of principal of, premium, if any, and
    interest, if any, on the Offered Debt Securities are to be
    determined with reference to an index, the manner in which those
    amounts will be determined;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    any applicable United States federal income tax consequences;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the currency or currencies for which the Offered Debt Securities
    may be purchased and the currency or currencies in which
    principal, premium, if any, and interest, if any, may be payable;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the trustee with respect to the series of Offered Debt
    Securities;&#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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    any other specific terms of the Offered Debt Securities,
    including any deleted, modified or additional Events of Default
    or remedies or additional covenants provided with respect to the
    Offered Debt Securities, and any terms that may be required by
    or advisable under applicable laws or regulations.
</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: transparent">
    Unless otherwise specified in any prospectus supplement, the
    debt securities will be issuable in registered form and in
    denominations of $2,000 and integral multiples of $1,000 in
    excess thereof. No service charge will be made for any transfer
    or exchange of any debt securities but the issuer or trustee may
    require payment of a sum sufficient to cover any tax or other
    governmental charge, payable in connection therewith.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    Debt securities may bear interest at a fixed rate or a floating
    rate. Debt securities bearing no interest or interest at a rate
    that at the time of issuance is below the prevailing market rate
    may be issued at an initial offering price below their stated
    principal amount. Special United States federal income tax
    considerations applicable to discounted debt securities or to
    other debt securities that are treated as having been issued at
    a discount for United States federal income tax purposes will be
    described in the applicable prospectus supplement.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    Unless otherwise specified in any prospectus supplement, in
    determining whether the holders of the requisite aggregate
    principal amount of outstanding debt securities of any series
    have given any request, demand, authorization, direction,
    notice, consent or waiver under the Indentures, the principal
    amount of any series of debt securities originally issued at a
    discount from their stated principal amount that will be deemed
    to be outstanding for such purposes will be the amount of the
    principal thereof that would be due and payable as of the date
    of the determination upon a declaration of acceleration of the
    maturity 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: transparent">
    <I>Description of Guarantees.</I>&#160;&#160;Hovnanian will
    fully and unconditionally guarantee, pursuant to the
    K.&#160;Hovnanian Indentures, the due and prompt payment of the
    principal of and premium, if any, and interest on the
    K.&#160;Hovnanian Debt Securities and all other obligations of
    K.&#160;Hovnanian to the holders of the K.&#160;Hovnanian Debt
    Securities and the trustee under the K.&#160;Hovnanian
    Indentures when and as the same shall become due and payable,
    whether at the stated maturity, by declaration of acceleration,
    call for redemption or otherwise. Any series of debt securities
    of Hovnanian may be guaranteed by, and any series of debt
    securities of K.&#160;Hovnanian may be further guaranteed by,
    certain subsidiaries of Hovnanian, the &#147;subsidiary
    guarantees&#148;, as provided in the applicable prospectus
    supplement relating to such series. If debt securities are
    guaranteed by subsidiary guarantors, that subsidiary guarantee
    will be set forth in the applicable indenture or in a
    supplemental 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: transparent">
    Payments with respect to the guarantee by Hovnanian of the
    K.&#160;Hovnanian Senior Subordinated Debt Securities and
    K.&#160;Hovnanian Subordinated Debt Securities will be
    subordinated in right of payment to the prior payment in full of
    all Senior Indebtedness of Hovnanian to the same extent and
    manner that payments with respect to the K.&#160;Hovnanian
    Senior Subordinated Debt Securities and K.&#160;Hovnanian
    Subordinated Debt Securities are subordinated in right of
    payment to the prior payment in full of all Senior Indebtedness
    of K.&#160;Hovnanian as
</DIV>
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    <BR>
    8
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#X91037tocpage">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: transparent">
    described under &#147;Provisions Applicable Solely to Senior
    Subordinated Debt Securities and Subordinated Debt
    Securities&#148; below. Likewise, payments with respect to
    subsidiary guarantees of Senior Subordinated Debt Securities and
    Subordinated Debt Securities will be subordinated in right of
    payment to the prior payment in full of all Senior Indebtedness
    of each such subsidiary guarantor to the same extent and manner
    that payments with respect to the Senior Subordinated Debt
    Securities and Subordinated Debt Securities are subordinated in
    right of payment to the prior payment in full of all Senior
    Indebtedness of the issuer of such debt securities as described
    under &#147;Provisions Applicable Solely to Senior Subordinated
    Debt Securities and Subordinated Debt Securities&#148; 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: transparent">
    <I>Global Securities.</I>&#160;&#160;The Offered Debt Securities
    may be issued in whole or in part in the form of one or more
    global securities, the &#147;global securities&#148;, that will
    be deposited with or on behalf of a depositary, &#147;the
    depositary&#148;, identified in the prospectus supplement
    relating to such series. Global securities may be issued only in
    fully registered form and in either temporary or permanent form.
    Unless and until it is exchanged in whole or in part for the
    individual debt securities represented thereby, a global
    security:
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    may not be transferred except as a whole; 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    may only be transferred
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    <B>&#149;&#160;</B>
</TD>
    <TD align="left">
    by the depositary for the global security to its nominee,
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    <B>&#149;&#160;</B>
</TD>
    <TD align="left">
    by a nominee of the depositary to the depositary or another
    nominee of the depositary, 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    <B>&#149;&#160;</B>
</TD>
    <TD align="left">
    by the depositary or any nominee to a successor depositary or
    nominee of the successor depositary.
</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: transparent">
    The specific terms of the depositary arrangement with respect to
    Offered Debt Securities will be described in the prospectus
    supplement relating to such series. Hovnanian and
    K.&#160;Hovnanian anticipate that the following provisions
    generally will apply to all depositary arrangements.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    Upon the issuance of a global security, the depositary for that
    global security or its nominee will credit, on its book-entry
    registration and transfer system, the respective principal
    amounts of the individual debt securities represented by that
    global security to the accounts of persons that have accounts
    with such depositary. Those accounts will be designated by the
    dealers, underwriters or agents with respect to those debt
    securities or by the issuer if the debt securities are offered
    and sold directly by the issuer. Ownership of beneficial
    interests in a global security will be limited to persons that
    have accounts with the applicable depositary, participants, or
    persons that may hold interests through participants. Ownership
    of beneficial interests in a global security will be shown on,
    and the transfer of that ownership will be effected only
    through, records maintained by the applicable depositary or its
    nominee, with respect to interests of participants, and the
    records of participants, with respect to interests of persons
    other than participants. The laws of some states require that
    certain purchasers of securities take physical delivery of these
    securities in definitive form. These limits and laws may impair
    the ability to transfer beneficial interests in a global
    security.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    As long as the depositary for a global security or its nominee
    is the registered owner of the global security, the depositary
    or its nominee, as the case may be, will be considered the sole
    owner or holder of the debt securities of the series represented
    by that global security for all purposes under the Indenture
    governing those debt securities. Except as provided below,
    owners of beneficial interests in a global security will not be
    entitled to have any of the individual debt securities of the
    series represented by the global security registered in their
    names, will not receive or be entitled to receive physical
    delivery of any of those debt securities in definitive form and
    will not be considered the owners or holders thereof under the
    Indenture governing those 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: transparent">
    Payment of principal of, premium, if any, and interest, if any,
    on individual debt securities represented by a global security
    registered in the name of a depositary or its nominee will be
    made to the depositary or its nominee, as the case may be, as
    the registered owner of the global security representing the
    debt securities. Hovnanian and K.&#160;Hovnanian expect that the
    depositary for a series of debt securities or its nominee, upon
    receipt of any payment of principal, premium, if any, and
    interest, if any, in respect of a global security representing
    any of those debt securities, will immediately credit
    participants&#146; accounts with payments in amounts
    proportionate to their respective beneficial interests in the
    principal amount of the global security for those securities as
    shown on the records of such depositary or its nominee.
    Hovnanian and K.&#160;Hovnanian also expect that payments by
</DIV>
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    <BR>
    9
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#X91037tocpage">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: transparent">
    participants to owners of beneficial interests in the global
    security held through the participants will be governed by
    standing instructions and customary practices, as is now the
    case with securities held for the accounts of customers in
    bearer form or registered in &#147;street name.&#148; These
    payments will be the responsibility of the participants. Neither
    Hovnanian, K.&#160;Hovnanian, the trustee for such debt
    securities, any paying agent nor the registrar for the debt
    securities will have any responsibility or liability for any
    aspect of the records relating to or payments made on account of
    beneficial ownership interests of the global security for the
    debt securities or for maintaining, supervising or reviewing any
    records relating to beneficial ownership interests.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    If the depositary for a series of debt securities is at any time
    unwilling, unable or ineligible to continue as depositary and a
    successor depositary is not appointed by the issuer within
    90&#160;days, the issuer will issue individual debt securities
    of the applicable series in exchange for the global security
    representing the applicable series of debt securities. In
    addition, an issuer may at any time and in its sole discretion,
    subject to any limitations described in the prospectus
    supplement relating to such debt securities, determine not to
    have any debt securities of a series represented by a global
    security and, in such event, will issue individual debt
    securities of the applicable series in exchange for the global
    security representing the applicable series of debt securities.
    Further, if an issuer so specifies with respect to the debt
    securities of a series, an owner of a beneficial interest in a
    global security representing debt securities of that series may,
    on terms acceptable to the issuer, the trustee and the
    depositary for the global security, receive individual debt
    securities of the applicable series in exchange for beneficial
    interests, subject to any limitations described in the
    prospectus supplement relating to the debt securities. In this
    instance, an owner of a beneficial interest in a global security
    will be entitled to physical delivery of individual debt
    securities of the series represented by the applicable global
    security equal in principal amount to the beneficial interest
    and to have the debt securities registered in its name.
    Individual debt securities of the series so issued will be
    issued in registered form and in denominations, unless otherwise
    specified in the applicable prospectus supplement relating to
    that series of debt securities, of $2,000 and integral multiples
    of $1,000 in excess 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: transparent">
    <I>Events of Default.</I>&#160;&#160;Unless otherwise specified
    in the applicable prospectus supplement, an Event of Default is
    defined under each Indenture with respect to the debt securities
    of any series issued under the applicable Indenture as being:
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    default in the payment of principal of or premium, if any, with
    respect to debt securities of the applicable series when due;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    default in the payment of any installment of interest on any of
    the debt securities of that series when due, continued for
    30&#160;days;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    default in the payment or satisfaction of any sinking fund or
    other purchase obligation with respect to debt securities of
    that series when due;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    default in the performance of any other covenant of any of the
    obligors&#146; applicable to debt securities of that series
    after written notice to the obligors by the trustee or to the
    obligors and the trustee, by the holders of at least 25% in
    aggregate principal amount of the debt securities of that series
    then outstanding requiring the same to be remedied and after
    giving effect to any applicable grace period; 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    specified events of bankruptcy, insolvency or reorganization of
    the issuer.
</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: transparent">
    An Event of Default with respect to secured senior obligations
    of K.&#160;Hovnanian is also defined under the applicable
    K.&#160;Hovnanian Senior Debt Indenture to include the
    following, as further described in the applicable prospectus
    supplement:
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    with respect to any obligor, acceleration of principal payments
    of indebtedness (other than non-recourse indebtedness), payment
    defaults on principal or interest on indebtedness (other than
    non-recourse indebtedness), or one or more final judgments, in
    each case in amounts aggregating $10&#160;million or more, after
    giving effect to the applicable grace period;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the failure of any guarantee of certain significant subsidiaries
    of Hovnanian to be in full force and effect or the denial by any
    guarantor of its liability under its guarantee;&#160;and
</TD>
</TR>

</TABLE>
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    <BR>
    10
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#X91037tocpage">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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the termination of or failure of the liens securing any material
    portion of the collateral securing such secured senior
    obligations of K.&#160;Hovnanian to be valid and perfected or
    the termination of or failure of the applicable security
    documents to be in full force and effect, after giving effect to
    the applicable grace period (in each case with certain
    exceptions).
</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: transparent">
    If any Event of Default shall occur and be continuing, the
    trustee or the holders of not less than 25% in aggregate
    principal amount of the debt securities of that series then
    outstanding, by notice in writing to Hovnanian or
    K.&#160;Hovnanian, as applicable, and to the trustee, if given
    by the holders, may declare the principal, or, in the case of
    any series of debt securities originally issued at a discount
    from their stated principal amount, the portion of the principal
    amount as may be specified in the terms of that series, of all
    of the debt securities of that series and the interest, if any,
    accrued thereon to be due and payable immediately. Subject to
    the conditions set forth in each Indenture, the declaration
    described in the preceding sentence may be rescinded by notice
    in writing to Hovnanian or K.&#160;Hovnanian, as applicable, and
    the trustee by holders of a majority in aggregate principal
    amount of the debt securities of the series then outstanding.
    This rescission will rescind and annul any declaration made
    pursuant to the first sentence of this paragraph and its
    consequences if all defaults under such Indenture are 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: transparent">
    Each Indenture provides that no holder of any series of debt
    securities then outstanding may institute any suit, action or
    proceeding with respect to, or otherwise attempt to enforce,
    that Indenture, 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the holder previously gave the trustee written notice of default
    and of the continuance 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the holders of not less than 25% in aggregate principal amount
    of the applicable series of debt securities then outstanding
    made written request to the trustee to institute the suit,
    action or proceeding and offered to the trustee reasonable
    indemnity as it may require with respect thereto;&#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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the trustee, for 60&#160;days after its receipt of the notice,
    request and offer of indemnity, neglected or refused to
    institute any action, suit or proceeding.
</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: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    Subject to the subordination provisions applicable to the Senior
    Subordinated Debt Securities and the Subordinated Debt
    Securities, the right, described in the above bullet points, of
    any holder of any debt security to receive payment of the
    principal of, premium, if any, or interest, if any, on that debt
    security, on or after the respective due dates, or to institute
    suit for the enforcement of any payment shall not be impaired or
    affected without the consent of the 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: transparent">
    The holders of a majority in aggregate principal amount of the
    debt securities of the series then outstanding may direct the
    time, method and place of conducting any proceeding for any
    remedy available to the trustee or exercising any trust or power
    conferred on the trustee with respect to the debt securities of
    that series, provided that the trustee may decline to follow
    that direction if the trustee determines that the action or
    proceeding is unlawful or would involve the trustee in personal
    liability.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    Hovnanian
    <FONT style="white-space: nowrap">and/or</FONT>
    K.&#160;Hovnanian, as applicable, are required to furnish
    annually to the trustee a certificate as to compliance by
    Hovnanian
    <FONT style="white-space: nowrap">and/or</FONT>
    K.&#160;Hovnanian, as applicable, with all conditions and
    covenants under each 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: transparent">
    <I>Covenants.</I>&#160;&#160;The covenants, if any, that will
    apply to the particular Offered Debt Securities will be as
    described in the applicable prospectus supplement relating to
    such Offered Debt Securities. Except as described herein and as
    otherwise specified in the applicable prospectus supplement with
    respect to any Offered Debt Securities, Hovnanian
    <FONT style="white-space: nowrap">and/or</FONT>
    K.&#160;Hovnanian as applicable may remove or add covenants
    without the consent of holders of the 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: transparent">
    <I>Discharge and Defeasance.</I>&#160;&#160;Unless otherwise
    specified in the applicable prospectus supplement, Hovnanian
    <FONT style="white-space: nowrap">and/or</FONT>
    K.&#160;Hovnanian, as applicable, can discharge or defease their
    respective obligations with respect to any series of debt
    securities 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: transparent">
    Unless otherwise specified in any prospectus supplement,
    Hovnanian or K.&#160;Hovnanian, as applicable, may discharge all
    of its obligations, except those described below, to holders of
    any series of debt securities issued under any Indenture that
    have not already been delivered to the trustee for cancellation
    and that have either become due and payable, or are by their
    terms due and payable within one year or are to be called for
    redemption within one year, by irrevocably depositing with the
    trustee cash or U.S.&#160;Government Obligations, as defined in
    the Indenture, or a
</DIV>
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    <BR>
    11
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<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: transparent">
    combination thereof, as trust funds in an amount to be
    sufficient to pay when due the principal of, premium, if any,
    and interest, if any, on all outstanding debt securities of that
    series and to make any mandatory sinking fund payments, if any,
    thereon when due.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    Unless otherwise provided in the applicable prospectus
    supplement, Hovnanian or K.&#160;Hovnanian, as applicable, may
    also elect at any time to defease and be discharged from all of
    its obligations, except those described below, to holders of any
    series of debt securities issued under each Indenture,
    &#147;defeasance&#148;, or be released from all of their
    obligations with respect to specified covenants and certain
    events of default applicable to any series of debt securities
    issued under each Indenture, &#147;covenant defeasance&#148;,
    if, 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Hovnanian or K.&#160;Hovnanian, as applicable, irrevocably
    deposit with the trustee cash or U.S.&#160;Government
    Obligations, or a combination thereof, as trust funds in an
    amount to be sufficient to pay when due the principal of,
    premium, if any, and interest, if any, on all outstanding debt
    securities of the applicable series and to make any mandatory
    sinking fund payments, if any, thereon when due;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the deposit will not result in a breach or violation of, or
    cause a default under, any material agreement or instrument
    (other than the Indenture) to which either Hovnanian or
    K.&#160;Hovnanian, as applicable, is a party or by which it is
    bound;&#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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Hovnanian or K.&#160;Hovnanian, as applicable, deliver to the
    trustee an opinion of counsel to the effect that the holders of
    the applicable series of debt securities will not recognize
    income, gain or loss for United States federal income tax
    purposes as a result of the defeasance or covenant defeasance
    and that defeasance will not otherwise alter the United States
    federal income tax treatment of the holders&#146; principal of
    and interest payments, if any, on that series of debt securities.
</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: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    In the case of defeasance, the opinion must be based on a ruling
    of the Internal Revenue Service or a change in United States
    federal income tax law occurring after the date of the Indenture
    relating to the debt securities of such series, because this
    result would not occur under current tax 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: transparent">
    Notwithstanding the foregoing, no discharge, defeasance or
    covenant defeasance described above will affect the following
    obligations to, or rights of, the holders of any series of debt
    securities:
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    rights of registration of transfer and exchange of debt
    securities of the applicable series;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    rights of substitution of mutilated, defaced, destroyed, lost or
    stolen debt securities of the applicable series;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    rights of holders of debt securities of the applicable series to
    receive payments of principal thereof, premium, if any, and
    interest, if any, thereon, upon the original due dates
    therefore, but not upon acceleration, and to receive mandatory
    sinking fund payments thereon when due, if any;
</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: transparent">
    <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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    rights of holders of debt securities of a series as
    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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    obligations of Hovnanian or K.&#160;Hovnanian, as applicable, to
    maintain an office or agency in respect of debt securities of
    the series.
</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: transparent">
    Hovnanian or K.&#160;Hovnanian, as applicable, may exercise the
    defeasance option with respect to any series of debt securities
    notwithstanding the prior exercise of the covenant defeasance
    option with respect to any series of debt securities. If
    Hovnanian or K.&#160;Hovnanian, as applicable, exercises the
    defeasance option with respect to any series of debt securities,
    payment of that series of debt securities may not be accelerated
    because of an Event of Default with respect to that series of
    debt securities. If Hovnanian or K.&#160;Hovnanian, as
    applicable, exercises the covenant defeasance option with
    respect to any series of debt securities, payment of that series
    of debt securities may not be accelerated by reason of 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, if any, and any
    mandatory sinking fund payments, if any, then due on the series
    of debt securities, in that the required deposit in the
    defeasance trust is based upon scheduled
</DIV>
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    <BR>
    12
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<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: transparent">
    cash flow rather than market value, which will vary depending
    upon interest rates and other factors. In addition, if
    K.&#160;Hovnanian exercises its defeasance or covenant
    defeasance option with respect to senior secured obligations of
    K.&#160;Hovnanian, the liens on the collateral granted under the
    security documents 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: transparent">
    <I>Modification of the Indenture.</I>&#160;&#160;Except as
    otherwise provided in the applicable prospectus supplement, each
    Indenture provides that the obligors and the trustee may enter
    into supplemental indentures without the consent of the holders
    of the debt securities 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    evidence the assumption by a successor entity of the obligations
    of any of the obligors under that Indenture, including in
    connection with a transaction described under
    &#147;&#151;&#160;Consolidation, Merger, Sale or
    Conveyance&#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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    add covenants or new events of default for the protection of the
    holders of the debt 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    cure any ambiguity or defect or correct any inconsistency;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    establish the form and terms of debt securities of any series;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    evidence the acceptance of appointment by a successor trustee
    or, in the case of secured senior obligations of
    K.&#160;Hovnanian, a successor collateral agent;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    secure, or add security for, the debt securities of the
    applicable series or provide for, or add, guarantees of the debt
    securities of any series and evidence the termination or
    discharge of any guarantee of or lien securing the debt
    securities of such series when permitted under the applicable
    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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    designate a bank or trust company other than the trustee
    specified in the applicable prospectus supplement to act as
    trustee for a series of debt 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    subject to the following paragraph, modify the existing
    covenants and events of default solely in respect of, or add new
    covenants and events of default that apply solely to, debt
    securities not yet issued and outstanding on the date of the
    supplemental indenture, if applicable;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    provide for the issuance of debt securities of any series in
    uncertificated form in addition to or in place of certificated
    debt securities of any series and exchangeability of those debt
    securities for fully registered debt 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    modify, eliminate or add to the provisions of the Indenture as
    necessary to effect the qualification of the Indenture under the
    Trust&#160;Indenture Act of 1939 and to add provisions expressly
    permitted by that 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    modify the provisions to provide for the denomination of debt
    securities in foreign currencies that will not adversely affect
    the interests of the holders of the debt securities in any
    material respect;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    to conform the text of the applicable Indenture, Offered Debt
    Securities or guarantees to this &#147;Description of Debt
    Securities&#148; or the comparable provisions in the applicable
    prospectus supplement to the extent this &#147;Description of
    Debt Securities&#148; or such comparable provision in a
    prospectus supplement was intended to be a verbatim recitation
    of a provision of such Indenture, Offered Debt Securities or
    guarantees;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    make any other change with respect to the debt securities of any
    series that does not adversely affect the legal rights of
    holders of the debt securities of such series;&#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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    in the case of secured senior obligations of K.&#160;Hovnanian,
    make certain amendments to the security documents relating
    thereto as permitted by the applicable K.&#160;Hovnanian Senior
    Debt Indenture and as further described in the applicable
    prospectus supplement.
</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: transparent">
    Each Indenture also contains provisions permitting the obligors
    and the trustee, with the consent of the holders of not less
    than a majority in aggregate principal amount of debt securities
    of each series then outstanding and affected, to add any
    provisions to, or change in any manner or eliminate any of the
    provisions of, the applicable Indenture or any supplemental
    indenture or modify in any manner the rights of the holders of
    the debt securities of
</DIV>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <BR>
    13
</DIV><!-- END PAGE WIDTH -->
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<H5 align="left" style="page-break-before:always"><A HREF="#X91037tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<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: transparent">
    that series; provided that the obligors and the trustee may not,
    without the consent of the holder of each outstanding debt
    security affected thereby:
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    change the stated final maturity of any debt security, reduce
    the principal amount thereof, reduce the rate or extend the time
    of payment of interest (including default interest), if any,
    thereon, reduce or alter the method of computation of any amount
    payable on redemption, repayment or purchase by the issuer, or
    in the case of secured senior obligations of K.&#160;Hovnanian,
    alter the provisions relating to redemption and offers to
    repurchase provided in the applicable K.&#160;Hovnanian Senior
    Debt Indenture and as further described in the applicable
    prospectus supplement, change the coin or currency in which
    principal, premium, if any, and interest, if any, are payable,
    reduce the amount of the principal of any original issue
    discount security payable upon acceleration or provable in
    bankruptcy, waive certain defaults or Events of Default, impair
    or affect the right to institute suit for the enforcement of any
    payment or repayment thereof or, if applicable, adversely affect
    any right of prepayment at the option of the holder or make any
    change adverse to the interests of the holders in the terms and
    conditions of the guarantee by Hovnanian or by the subsidiary
    guarantors, release any guarantee or all or substantially all of
    the collateral (as applicable) otherwise than in accordance with
    the indenture and the security documents or modify the ranking
    or priority of the debt securities of any series or any
    guarantees of the debt securities of such series;&#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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    reduce the stated percentage in aggregate principal amount of
    debt securities of any series issued under the Indenture, the
    consent of which is required for any such amendment or waiver.
</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: transparent">
    <I>Consolidation, Merger, Sale or
    Conveyance.</I>&#160;&#160;Except as otherwise provided in the
    applicable prospectus supplement, the K.&#160;Hovnanian
    Indentures provide that K.&#160;Hovnanian or Hovnanian may, and
    the Hovnanian Indentures provide that Hovnanian may, without the
    consent of the holders of debt securities, consolidate with,
    merge into or transfer, exchange or dispose of all of its
    properties to, any other corporation or partnership (or other
    legal entity in the case of secured senior obligations of
    K.&#160;Hovnanian) organized under the laws of the United
    States, any state thereof or the District of Columbia, 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the successor corporation or partnership (or other legal entity
    in the case of secured senior obligations of K.&#160;Hovnanian)
    assumes all obligations of K.&#160;Hovnanian or Hovnanian, as
    the case may be, by supplemental indenture satisfactory in form
    to the applicable trustee executed and delivered to that
    trustee, under the Indentures and the debt 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    immediately after giving effect to the consolidation, merger,
    exchange or other disposition, no Event of Default, and no event
    which, after notice or lapse of time or both, would become an
    Event of Default, will have occurred and be continuing; 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    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: transparent">
    <I>Conditions for Release of
    K.&#160;Hovnanian.</I>&#160;&#160;Except as otherwise provided
    in a prospectus supplement, each K.&#160;Hovnanian Indenture
    provides that K.&#160;Hovnanian may be released from its
    obligations under the K.&#160;Hovnanian Indenture and the
    K.&#160;Hovnanian Debt Securities, without the consent of the
    holders of the K.&#160;Hovnanian Debt Securities of any series,
    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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Hovnanian or any successor to Hovnanian has assumed the
    obligations of K.&#160;Hovnanian under the K.&#160;Hovnanian
    Indenture and the K.&#160;Hovnanian Debt Securities by
    supplemental indenture satisfactory in form to the applicable
    trustee executed and delivered to that 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Hovnanian delivers to the trustee an opinion of counsel to the
    effect that the holders of K.&#160;Hovnanian Debt Securities
    will not recognize income, gain or loss for United States
    federal income tax purposes as a result of the release of
    K.&#160;Hovnanian from its obligations under the
    K.&#160;Hovnanian Indenture and the K.&#160;Hovnanian Debt
    Securities and that such release will not otherwise alter the
    United States federal income tax treatment of the holders of the
    K.&#160;Hovnanian Debt Securities; 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    certain other conditions are met.
</TD>
</TR>

</TABLE>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <BR>
    14
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#X91037tocpage">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>

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

    <B><FONT style="font-family: 'Times New Roman', Times">Provisions
    Applicable Solely to Senior Subordinated Debt Securities and
    Subordinated Debt Securities</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: transparent">
    <I>Subordination.</I>&#160;&#160;The Subordinated Debt
    Securities will be subordinate and junior in right of payment,
    to the extent described in the Subordinated Debt Indentures, to
    all Senior Indebtedness of the obligors. The Senior Subordinated
    Debt Securities will be subordinate and junior in right of
    payment, to the extent described in the Senior Subordinated Debt
    Indentures, to all Senior Indebtedness of the obligors. The
    Senior Subordinated Debt Securities will rank senior to all
    existing and future Indebtedness of the obligors that is neither
    Senior Indebtedness of the obligors nor Senior Subordinated
    Indebtedness and only Indebtedness of the obligors that is
    Senior Indebtedness of the obligors will rank senior to the
    Senior Subordinated Debt Securities in accordance with the
    subordination provisions of the Senior Subordinated Debt
    Indentures.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    Except as otherwise provided in the applicable prospectus
    supplement:
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    &#147;Senior Indebtedness&#148; of the obligors is defined in
    the Subordinated Debt Indentures and the Senior Subordinated
    Debt Indentures as Indebtedness of the obligors outstanding at
    any time, other than the Indebtedness evidenced by such debt
    securities, except:
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    any Indebtedness as to which, by the terms of the instrument
    creating or evidencing the same, it is provided that the
    Indebtedness is not senior or prior in right of payment to such
    debt securities or is <I>pari passu </I>or subordinate by its
    terms in right of payment to such debt 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    renewals, extensions and modifications of any such Indebtedness;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    any Indebtedness of the obligors to a wholly-owned Subsidiary of
    the obligors;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    any liability for federal, state or local taxes;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    interest accruing after the filing of a petition initiating
    certain events of bankruptcy or insolvency unless that interest
    is an allowed claim enforceable against the obligor in a
    proceeding under federal or state bankruptcy laws; 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    trade payables.
</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: transparent">
    &#147;Senior Subordinated Indebtedness&#148; of Hovnanian or
    K.&#160;Hovnanian, as applicable, is defined in the Senior
    Subordinated Debt Indentures as the applicable Senior
    Subordinated Debt Securities and any other Indebtedness of
    Hovnanian or K.&#160;Hovnanian, as applicable, that ranks
    <I>pari passu </I>with such Senior Subordinated Debt Securities.
    Any Indebtedness of Hovnanian or K.&#160;Hovnanian, as
    applicable, that is subordinate or junior by its terms in right
    of payment to any other Indebtedness of Hovnanian or
    K.&#160;Hovnanian, as applicable, will be subordinate to Senior
    Subordinated Indebtedness of Hovnanian or K.&#160;Hovnanian, as
    applicable, unless the instrument creating or evidencing the
    same or pursuant to which the same is outstanding specifically
    provides that this Indebtedness is to rank <I>pari passu
    </I>with other Senior Subordinated Indebtedness of Hovnanian or
    K.&#160;Hovnanian, as applicable, and is not subordinated by its
    terms to any Indebtedness of Hovnanian that is not Senior
    Indebtedness of Hovnanian or K.&#160;Hovnanian, 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: transparent">
    Senior Subordinated Indebtedness of Hovnanian as a guarantor of
    K.&#160;Hovnanian Senior Subordinated Debt Securities or of a
    subsidiary guarantor will have a similar 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: transparent">
    Except as otherwise provided in the applicable prospectus
    supplement, the following subordination provisions will apply to
    the Senior Subordinated Debt Securities and the Subordinated
    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: transparent">
    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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Hovnanian or K.&#160;Hovnanian, as applicable, should default in
    the payment of any principal of, premium, if any, or interest,
    if any, on any Senior Indebtedness of Hovnanian or
    K.&#160;Hovnanian, as applicable, when the same becomes due and
    payable, whether at maturity or at a date fixed for prepayment
    or by declaration of acceleration or otherwise,&#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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    any other default with respect to Senior Indebtedness of
    Hovnanian or K.&#160;Hovnanian, as applicable, occurs and the
    maturity of the Senior Indebtedness has been accelerated in
    accordance with its terms, then, upon written notice of the
    default to Hovnanian or K.&#160;Hovnanian, as applicable, by the
    holders of the Senior
</TD>
</TR>
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</TABLE>
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    <BR>
    15
</DIV><!-- END PAGE WIDTH -->
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<H5 align="left" style="page-break-before:always"><A HREF="#X91037tocpage">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: transparent">
    <TD>&nbsp;</TD>
    <TD>
</TD>
    <TD align="left">
    Indebtedness or any trustee therefor, unless and until the
    default is cured or waived or has ceased to exist or the
    acceleration has been rescinded, no direct or indirect payment,
    in cash, property or securities, by set-off or otherwise, will
    be made or agreed to be made for principal of, premium, if any,
    or interest, if any, on any of the Senior Subordinated Debt
    Securities or the Subordinated Debt Securities, or in respect of
    any redemption, retirement, purchase or other acquisition of the
    Senior Subordinated Debt Securities or the Subordinated Debt
    Securities other than those made in capital stock of Hovnanian,
    or cash in lieu of fractional shares thereof.
</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: transparent">
    If any default, other than a default described in the bullet
    points directly above, occurs under the Senior Indebtedness of
    Hovnanian or K.&#160;Hovnanian, as applicable, pursuant to which
    the maturity thereof may be accelerated immediately or the
    expiration of any applicable grace periods occurs, a
    &#147;Senior Nonmonetary Default&#148;, then, upon the receipt
    by Hovnanian or K.&#160;Hovnanian, as applicable, and the
    trustee of written notice thereof, a &#147;payment notice&#148;,
    from or on behalf of holders of 25% or more of the aggregate
    principal amount of Senior Indebtedness specifying an election
    to prohibit the payment and other action by Hovnanian or
    K.&#160;Hovnanian, as applicable, in accordance with the
    following provisions of this paragraph&#160;Hovnanian or
    K.&#160;Hovnanian, as applicable, may not make any payment or
    take any other action that would be prohibited by the bullet
    points directly above during the period, the &#147;payment
    blockage period&#148; commencing on the date of receipt of the
    payment notice and ending on the earlier 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the date, if any, on which the holders of such Senior
    Indebtedness or their representative notify the trustee that the
    Senior Nonmonetary Default is cured, waived or ceases to exist
    or the Senior Indebtedness to which the Senior Nonmonetary
    Default relates is discharged, 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the 120th&#160;day after the date of receipt of the payment
    notice.
</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: transparent">
    Notwithstanding the provisions described in the immediately
    preceding bullet points, Hovnanian or K.&#160;Hovnanian, as
    applicable, may resume payments on the Senior Subordinated Debt
    Securities and the Subordinated Debt Securities after the
    payment blockage period. After the expiration of the initial
    payment blockage period, no subsequent payment blockage period
    may be commenced on the basis of a Senior Nonmonetary Default
    which existed or was continuing on the date of the commencement
    of the initial payment blockage period until at least 270
    consecutive days have elapsed from the last day of the initial
    payment blockage period.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    without the consent of Hovnanian or K.&#160;Hovnanian, as
    applicable, a receiver, conservator, liquidator or trustee of
    Hovnanian or K.&#160;Hovnanian, as applicable, or of any of its
    property is appointed by the order or decree of any court or
    agency or supervisory authority having jurisdiction, and the
    decree or order remains in effect for more than 60&#160;days,
    Hovnanian or K.&#160;Hovnanian, as applicable, is adjudicated
    bankrupt or insolvent, any of its property is sequestered by
    court order and that order remains in effect for more than
    60&#160;days, or a petition is filed against Hovnanian or
    K.&#160;Hovnanian, as applicable, under any state or federal
    bankruptcy, reorganization, arrangement, insolvency,
    readjustment of debt, dissolution, liquidation or receivership
    law of any jurisdiction whether now or hereafter in effect, and
    is not dismissed within 60&#160;days after such filing;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Hovnanian or K.&#160;Hovnanian, as applicable:
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    <B>&#149;&#160;</B>
</TD>
    <TD align="left">
    commences a voluntary case or other proceeding seeking
    liquidation, reorganization, arrangement, insolvency,
    readjustment of debt, dissolution, liquidation or other relief
    with respect to itself or its debt or other liabilities under
    any bankruptcy, insolvency or other similar law now or hereafter
    in effect or seeking the appointment of a trustee, receiver,
    liquidator, custodian or other similar official of it or any
    substantial part of its property;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    <B>&#149;&#160;</B>
</TD>
    <TD align="left">
    consents to any such relief or to the appointment of or taking
    possession by any of the above officials in an involuntary case
    or other proceeding commenced against it;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    <B>&#149;&#160;</B>
</TD>
    <TD align="left">
    fails generally to, or cannot, pay its debts generally as they
    become due;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    <B>&#149;&#160;</B>
</TD>
    <TD align="left">
    takes any corporate action to authorize or effect any of the
    foregoing;&#160;or
</TD>
</TR>

</TABLE>
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    <BR>
    16
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<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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    any Subsidiary of the obligor takes, suffers or permits to exist
    any of the events or conditions referred to in any of the above
    bullet points,
</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: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    then all Senior Indebtedness of Hovnanian or K.&#160;Hovnanian,
    as applicable, including any interest thereon accruing after the
    commencement of any proceedings, will first be paid in full
    before any payment or distribution, whether in cash, securities
    or other property, is made by the obligor to any holder of
    Senior Subordinated Debt Securities or Subordinated Debt
    Securities on account of the principal of, premium, if any, or
    interest, if any, on the Senior Subordinated Debt Securities or
    Subordinated Debt Securities, 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: transparent">
    Any payment or distribution, whether in cash, securities or
    other property, other than securities of Hovnanian or
    K.&#160;Hovnanian, as applicable, or any other corporation
    provided for by a plan of reorganization or readjustment the
    payment of which is subordinate, at least to the extent provided
    in the subordination provisions with respect to the indebtedness
    evidenced by the Senior Subordinated Debt Securities or the
    Subordinated Debt Securities, to the payment of all Senior
    Indebtedness of the obligor then outstanding and to any
    securities issued in respect thereof under a plan of
    reorganization or readjustment, that would otherwise, but for
    the subordination provisions, be payable or deliverable in
    respect of the Senior Subordinated Debt Securities or the
    Subordinated Debt Securities of any series will be paid or
    delivered directly to the holders of Senior Indebtedness of the
    obligor in accordance with the priorities then existing among
    such holders until all Senior Indebtedness of Hovnanian or
    K.&#160;Hovnanian, as applicable, including any interest thereon
    accruing after the commencement of proceedings, has been paid in
    full. In the event of any proceeding, after payment in full of
    all sums owing with respect to Senior Indebtedness of the
    obligor, the holders of Senior Subordinated Debt Securities,
    together with the holders of any obligations of the obligor
    ranking on a parity with the Senior Subordinated Debt
    Securities, will be entitled to be repaid from the remaining
    assets of Hovnanian or K.&#160;Hovnanian, as applicable, the
    amounts at that time due and owing on account of unpaid
    principal of, premium, if any, or interest, if any, on the
    Senior Subordinated Debt Securities and such other obligations
    before any payment or other distribution, whether in cash,
    property or otherwise, shall be made on account of any capital
    stock or obligations of the obligor ranking junior to the Senior
    Subordinated Debt Securities, including the Subordinated Debt
    Securities, and such other obligations.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    If any payment or distribution of any character, whether in
    cash, securities or other property, other than securities of
    Hovnanian or K.&#160;Hovnanian, as applicable, or any other
    corporation provided for by a plan of reorganization or
    readjustment the payment of which is subordinate, at least to
    the extent provided in the subordination provisions with respect
    to the Senior Subordinated Debt Securities or the Subordinated
    Debt Securities, to the payment of all Senior Indebtedness of
    Hovnanian or K.&#160;Hovnanian, as applicable, then outstanding
    and to any securities issued in respect thereof under the plan
    of reorganization or readjustment, will be received by the
    trustee, or any holder of any Senior Subordinated Debt
    Securities or Subordinated Debt Securities in contravention of
    any of the terms of the Senior Subordinated Debt Indenture or
    the Subordinated Debt Indenture, as the case may be, such
    payment or distribution of securities will be received in trust
    for the benefit of, and will be paid over or delivered and
    transferred to, the holders of the Senior Indebtedness of
    Hovnanian or K.&#160;Hovnanian, as applicable, then outstanding
    in accordance with the priorities then existing among the
    holders for application to the payment of all Senior
    Indebtedness of Hovnanian or K.&#160;Hovnanian, as applicable,
    remaining unpaid to the extent necessary to pay all the Senior
    Indebtedness of Hovnanian or K.&#160;Hovnanian, as applicable,
    in full.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    By reason of the subordination, in the event of the insolvency
    of Hovnanian or K.&#160;Hovnanian, as applicable, holders of
    Senior Indebtedness of Hovnanian or K.&#160;Hovnanian, as
    applicable, may receive more, ratably, than holders of the
    Senior Subordinated Debt Securities or Subordinated Debt
    Securities of Hovnanian or K.&#160;Hovnanian, as applicable.
    Subordination will not prevent the occurrence of any Event of
    Default, as defined in the Indentures, or limit the right of
    acceleration in respect of the Senior Subordinated Debt
    Securities or Subordinated Debt Securities.
</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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">Concerning
    the Trustee</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: transparent">
    Information concerning the trustee for the Offered Debt
    Securities will be set forth in the prospectus supplement
    relating to that series of debt securities. Hovnanian,
    K.&#160;Hovnanian and certain of Hovnanian&#146;s other
    subsidiaries may maintain bank accounts, borrow money and have
    other commercial banking, investment banking and other business
    relationships with the trustee under an Indenture and its
    affiliates in the ordinary course of
</DIV>
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    <BR>
    17
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<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: transparent">
    business. The trustee under an Indenture or its affiliates may
    participate as underwriters, agents or dealers in any offering
    of K.&#160;Hovnanian debt securities
    <FONT style="white-space: nowrap">and/or</FONT>
    Hovnanian debt securities.
</DIV>

<A name='X91037110'>
<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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">DESCRIPTION
    OF CAPITAL STOCK</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: transparent">
    The following description of our common stock and preferred
    stock, together with the additional information we include in
    any applicable prospectus supplement, summarizes the material
    terms and provisions of the common stock and the preferred stock
    that may be offered from time to time pursuant to this
    prospectus. While the terms we have summarized below will apply
    generally to any future common stock or preferred stock that we
    may offer, we will describe the particular terms of any class or
    series of these securities in more detail in the applicable
    prospectus supplement. For the complete terms of our common
    stock and preferred stock, please refer to Hovnanian&#146;s
    amended certificate of incorporation, the &#147;Certificate of
    Incorporation&#148; and restated bylaws, the &#147;Restated
    By-Laws&#148; that are incorporated by reference as exhibits to
    the registration statement of which this prospectus is a part.
    The terms of these securities may also be affected by the
    General Corporation Law of the State of Delaware. The summary
    below and that contained in any prospectus supplement is
    qualified in its entirety by reference to the Certificate of
    Incorporation and Restated By-laws.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    The authorized capital stock of Hovnanian is
    230,100,000&#160;shares consisting of 200,000,000&#160;shares of
    Class&#160;A Common Stock, par value $.01 per share, the
    &#147;Class&#160;A Common Stock&#148;, 30,000,000&#160;shares of
    Class&#160;B Common Stock, par value $.01 per share, the
    &#147;Class&#160;B Common Stock&#148;, and 100,000&#160;shares
    of preferred stock, par value $.01 per share, in the series and
    with the voting powers, designations, preferences and relative,
    participating, optional or other special rights, and
    qualifications, limitations or restrictions thereof, as may be
    fixed from time to time by the Board of Directors of Hovnanian
    for each series.
</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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">Common
    Stock</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: transparent">
    As of March&#160;1, 2011, 77,962,543&#160;shares of Class&#160;A
    Common Stock and 14,562,064&#160;shares of Class&#160;B Common
    Stock were issued and outstanding. The Class&#160;A Common Stock
    is traded on the New York Stock Exchange under the symbol
    &#147;HOV&#148;. There is no established public trading market
    for the Class&#160;B Common Stock. In order to trade
    Class&#160;B Common Stock, the shares must be converted into
    Class&#160;A Common Stock on a
    <FONT style="white-space: nowrap">one-for-one</FONT>
    basis. Any offering of common stock made hereby will consist
    only of Class&#160;A Common Stock. The outstanding Class&#160;A
    Common Stock is, and any Class&#160;A Common Stock offered
    pursuant to this prospectus and any prospectus supplement when
    issued and paid for will be, fully paid and non-assessable.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <I>Dividends.</I>&#160;&#160;Dividends on the Class&#160;A
    Common Stock will be paid if, when and as determined by the
    Board of Directors of Hovnanian out of funds legally available
    for this purpose. Certain debt instruments to which Hovnanian is
    a party contain restrictions on the payment of cash dividends.
    As a result of the most restrictive of these provisions,
    Hovnanian is not currently able to pay any cash dividends and
    anticipates that it will be prohibited from doing so for the
    foreseeable future. Hovnanian has never paid cash dividends on
    its Class&#160;A Common Stock nor does it currently intend to
    pay cash dividends on its Class&#160;A Common Stock. If and when
    declared, the amount of any regular cash dividend payable on a
    share of Class&#160;A Common Stock will be an amount equal to
    110% of the corresponding regular cash dividend payable on a
    share of Class&#160;B Common 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: transparent">
    <I>Voting Rights.</I>&#160;&#160;Holders of Class&#160;A Common
    Stock are entitled to one vote for each share held by them on
    all matters presented to shareholders. Holders of Class&#160;B
    Common Stock are generally entitled to ten votes per share.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <I>Liquidation Rights.</I>&#160;&#160;After satisfaction of the
    preferential liquidation rights of any preferred stock, the
    holders of the Class&#160;A Common Stock and Class&#160;B Common
    Stock are entitled to share ratably as a single class in the
    distribution of all remaining net 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: transparent">
    <I>Preemptive and Other Rights.</I>&#160;&#160;The holders of
    Class&#160;A Common Stock do not have preemptive rights as to
    additional issues of common stock or conversion rights. The
    shares of Class&#160;A Common Stock are not subject to
    redemption or to any further calls or assessments and are not
    entitled to the benefit of any sinking fund provisions. The
    rights, preferences and privileges of holders of Class&#160;A
    Common Stock are subject to, and may be adversely affected by,
    the rights of the holder of shares of any series of preferred
    stock that Hovnanian may designate and issue in the future.
</DIV>
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    <BR>
    18
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<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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">Preferred
    Stock</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: transparent">
    The Certificate of Incorporation authorizes the Board of
    Directors of Hovnanian to issue from time to time up to
    100,000&#160;shares of preferred stock, in one or more series,
    and with the voting powers, designations, preferences and
    relative, participating, optional or other special rights, and
    qualifications, limitations or restrictions thereof, as may be
    fixed from time to time by the Board of Directors of Hovnanian
    for each series. The preferred stock may be used by the Board of
    Directors of Hovnanian without further action by
    Hovnanian&#146;s stockholders as an anti-takeover device. As of
    March&#160;1, 2011, 5,600&#160;shares of Hovnanian&#146;s
    preferred stock were issued and outstanding, consisting of
    entirely of Hovnanian&#146;s 7.625% Series&#160;A Preferred
    Stock (liquidation preference $25,000.00 per share) par value
    $.01 per share, the &#147;Series&#160;A Preferred Stock&#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: transparent">
    The applicable prospectus supplement will describe the terms of
    any preferred stock that may be offered, including the number of
    shares, dividend rate and dividend period, liquidation value,
    voting rights, conversion rights (if any), dividend and
    liquidation preferences, redemption terms, whether depositary
    shares representing fractional interests will be offered, and
    any other rights, privileges and limitations thereof.
</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: transparent">

    <B><I><FONT style="font-family: 'Times New Roman', Times">7.625%
    Series&#160;A Preferred Stock</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: transparent">
    Dividends on the Series&#160;A Preferred Stock are not
    cumulative. The Series&#160;A Preferred Stock ranks senior to
    Hovnanian&#146;s common stock with respect to the payment of
    dividends to the extent provided in the Certificate of
    Designations, Powers, Preferences and Rights of the 7.625%
    Series&#160;A Preferred Stock (the &#147;Certificate&#148;). The
    Certificate provides that unless dividends have been declared
    and paid or set apart for payment on the Series&#160;A Preferred
    Stock for the then-currently quarterly dividend period, no
    dividend may be declared or paid or set apart for payment on
    Hovnanian&#146;s common stock for that period, other than
    dividends or distributions paid in shares of, or options,
    warrants or rights to subscribe for or purchase shares of, the
    common stock of Hovnanian or any other stock of Hovnanian
    ranking, as to the payment of dividends and the distribution of
    assets upon dissolution, liquidation or winding up of Hovnanian,
    junior to the Series&#160;A 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: transparent">
    The Series&#160;A Preferred Stock is traded as depositary
    shares, with each depositary share representing
    <FONT style="white-space: nowrap">1/1000th&#160;of</FONT>
    a share of Series&#160;A Preferred Stock, and is listed on the
    NASDAQ Global Market under the symbol &#147;HOVNP&#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: transparent">
    The Series&#160;A Preferred Stock has no voting rights except as
    provided for in the Certificate or as otherwise required by law.
    However, so long as any shares of Series&#160;A Preferred Stock
    are outstanding, Hovnanian will not, without the vote of the
    holders of at least a majority of the shares of the
    Series&#160;A Preferred Stock, (1)&#160;authorize, create or
    issue any capital stock of Hovnanian ranking, as to dividends or
    upon liquidation, dissolution or winding up, senior to the
    Series&#160;A Preferred Stock, or reclassify any authorized
    capital stock of Hovnanian into any such shares of such capital
    stock, or issue any obligation or security convertible into or
    evidencing the right to purchase any such shares, or
    (2)&#160;amend, alter or repeal the Certificate, or the
    certificate of incorporation of Hovnanian, whether by merger,
    consolidation or otherwise, in a way that adversely affects the
    powers, preferences or special rights of the Series&#160;A
    Preferred Stock. Any increase in the amount of authorized common
    stock or preferred stock or any increase or decrease in the
    number of shares of any series of preferred stock or the
    authorization, creation and issuance of other classes or series
    of stock, in each case ranking equally with or junior to the
    Series&#160;A Preferred Stock will not be deemed to adversely
    affect such powers, preferences or special rights.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    The Series&#160;A Preferred Stock has liquidation preferences
    over Hovnanian&#146;s common stock. Upon any liquidation,
    dissolution or winding up of Hovnanian, the holders of the
    Series&#160;A Preferred Stock will be entitled to receive out of
    the assets of Hovnanian available for distribution to its
    stockholders, an amount equal to the liquidation preference of
    $25,000.00 per share plus all accrued and unpaid dividends
    before any payment or distribution out of Hovnanian&#146;s
    assets may be made to or set apart for the holders of
    Hovnanian&#146;s common stock or other junior equity. If, upon
    any liquidation, dissolution or winding up of Hovnanian, the
    assets of Hovnanian, or proceeds thereof, distributable among
    the holders of shares Series&#160;A Preferred Stock and any
    stock ranking equally with the Series&#160;A Preferred Stock
    shall be insufficient to pay in full the preferential amounts to
    which such stock would be entitled, then such assets, or the
    proceeds thereof, shall be distributable among such holders
    ratably in accordance with the respective amounts which would be
    payable on such shares if all amounts payable thereon were
</DIV>
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<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: transparent">
    paid in full. Neither a consolidation nor merger of Hovnanian,
    nor a sale, lease, exchange or transfer of all or substantially
    all of Hovnanian&#146;s assets will be deemed to be a
    liquidation, dissolution or winding up of Hovnanian.
</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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">Rights
    Plan</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: transparent">
    On July&#160;29, 2008, the Board of Directors of Hovnanian
    adopted a shareholder rights plan, the &#147;Rights Plan,&#148;
    and declared a dividend of one preferred share purchase right
    for each outstanding share of Class&#160;A Common Stock and
    Class&#160;B Common Stock, which was subsequently paid to
    stockholders of record as of August&#160;15, 2008. Subject to
    the terms, provisions and conditions of the rights plan, if and
    when they become exercisable, each right would entitle its
    holder to purchase from Hovnanian one ten-thousandth of a share
    of Hovnanian&#146;s Series&#160;B Junior Preferred Stock for a
    purchase price of $35.00, the &#147;Purchase Price.&#148; If
    issued, each fractional share of Preferred Stock would give the
    stockholder approximately the same dividend, voting and
    liquidation rights as does one share of Hovnanian&#146;s
    Class&#160;A Common Stock. However, prior to exercise, a right
    does not give its holder any rights as a stockholder of
    Hovnanian, including without limitation any dividend, voting or
    liquidation rights.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    The Board of Directors of Hovnanian adopted the Rights Plan in
    an effort to protect stockholder value by attempting to protect
    against a possible limitation on Hovnanian&#146;s ability to use
    our net operating loss carryforwards, &#147;NOLs,&#148; to
    reduce potential future federal income tax obligations.
    Hovnanian has experienced and continues to experience
    substantial operating losses, and under the Internal Revenue
    Code and rules promulgated by the Internal Revenue Service,
    Hovnanian may &#147;carry forward&#148; these losses in certain
    circumstances to offset any current and future earnings and thus
    reduce its federal income tax liability, subject to certain
    requirements and restrictions. To the extent that the NOLs do
    not otherwise become limited, Hovnanian believes that it will be
    able to carry forward a significant amount of NOLs, and
    therefore these NOLs could be a substantial asset to Hovnanian.
    However, if Hovnanian experiences an &#147;Ownership
    Change,&#148; as defined in Section&#160;382 of the Internal
    Revenue Code, Hovnanian&#146;s ability to use the NOLs will be
    substantially limited, and the timing of the usage of the NOLs
    could be substantially delayed, which could therefore
    significantly impair the value of that asset. The Rights Plan is
    intended to act as a deterrent to any person or group acquiring
    4.9% or more of our outstanding Class&#160;A Common Stock, an
    &#147;Acquiring Person,&#148; without the approval of
    Hovnanian&#146;s Board.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <I>Exercisability.</I>&#160;&#160;The rights will not be
    exercisable until the earlier of (i)&#160;10 business days after
    a public announcement by us that a person or group has become an
    Acquiring Person and (ii)&#160;10 business days after the
    commencement of a tender or exchange offer by a person or group
    for 4.9% of the Class&#160;A Common 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: transparent">
    Until the date that the rights become exercisable, the
    &#147;Distribution Date,&#148; the rights are evidenced by
    Hovnanian&#146;s Class&#160;A Common Stock and Class&#160;B
    Common Stock certificates which contain a notation to that
    effect. Any transfer of shares of Class&#160;A Common Stock
    <FONT style="white-space: nowrap">and/or</FONT>
    Class&#160;B Common Stock prior to the Distribution Date
    constitutes a transfer of the associated rights. After the
    Distribution Date, the rights may be transferred separately from
    the transfer of the underlying shares of Class&#160;A Common
    Stock or Class&#160;B Common Stock. After the Distribution Date,
    each holder of a right, other than rights beneficially owned by
    the Acquiring Person (which will thereupon become void), will
    thereafter have the right to receive upon exercise of a right
    and payment of the Purchase Price, that number of shares of
    Class&#160;A Common Stock or Class&#160;B Common Stock, as the
    case may be, having a market value of two times the Purchase
    Price.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <I>Exchange.</I>&#160;&#160;After the Distribution Date, the
    Board of Directors may exchange the rights (other than rights
    owned by an Acquiring Person which will have become void), in
    whole or in part, at an exchange ratio of one share of Common
    Stock, or a fractional share of Series&#160;B Preferred Stock
    (or of a share of a similar class or series of Hovnanian&#146;s
    preferred stock having similar rights, preferences and
    privileges) of equivalent value, per right (subject to
    adjustment).
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <I>Expiration.</I>&#160;&#160;The rights and the Rights Plan
    will expire on the earliest of (i)&#160;August&#160;14, 2018,
    (ii)&#160;the time at which the rights are redeemed pursuant to
    the Rights Agreement, (iii)&#160;the time at which the rights
    are exchanged pursuant to the Rights Agreement, (iv)&#160;the
    repeal of Section&#160;382 of the Internal Revenue Code or any
    successor statute if the Board of Directors determines that the
    Rights Agreement is no longer necessary for the preservation of
    tax benefits, and (v)&#160;the beginning of a taxable year of
    Hovnanian to which the Board of Directors determines that no tax
    benefits may be carried forward.
</DIV>
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <I>Redemption.</I>&#160;&#160;At any time prior to the time an
    Acquiring Person becomes such, the Board of Directors may redeem
    the rights in whole, but not in part, at a price of $0.01 per
    right, the &#147;Redemption&#160;Price.&#148; The redemption of
    the rights may be made effective at such time, on such basis and
    with such conditions as the Board of Directors in its sole
    discretion may establish. Immediately upon any redemption of the
    rights, the right to exercise the rights will terminate and the
    only right of the holders of rights will be to receive the
    Redemption&#160;Price.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <I>Anti-Dilution Provisions.</I>&#160;&#160;The Board of
    Directors may adjust the purchase price of the preferred shares,
    the number of preferred shares issuable and the number of
    outstanding rights to prevent dilution that may occur as a
    result of certain events, including among others, a stock
    dividend, a stock split or a reclassification of the preferred
    shares or Hovnanian&#146;s Class&#160;A Common Stock or
    Class&#160;B Common Stock. No adjustments to the purchase price
    of less than 1% will be made.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <I>Amendments.</I>&#160;&#160;Before the Distribution Date, the
    Board of Directors may amend or supplement the Rights Plan
    without the consent of the holders of the rights. After the
    Distribution Date, the Board of Directors may amend or
    supplement the rights Plan only to cure an ambiguity, to alter
    time period provisions, to correct inconsistent provisions, or
    to make any additional changes to the Rights Plan, but only to
    the extent that those changes do not impair or adversely affect
    any rights holder.
</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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">Transfer
    Restrictions in the Certificate of Incorporation</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: transparent">
    At a special meeting of stockholders held on December&#160;5,
    2008, Hovnanian&#146;s stockholders approved an amendment to its
    Certificate of Incorporation to restrict certain transfers of
    Class&#160;A Common Stock in order to preserve the tax treatment
    of Hovnanian&#146;s NOLs under Section&#160;382 of the Internal
    Revenue Code. Subject to certain exceptions pertaining to
    pre-existing 5% stockholders and Class&#160;B stockholders, the
    transfer restrictions in the amended Certificate of
    Incorporation generally restrict any direct or indirect transfer
    (such as transfers of Hovnanian&#146;s stock that result from
    the transfer of interests in other entities that own
    Hovnanian&#146;s stock) if the effect would be to:
    (i)&#160;increase the direct or indirect ownership of
    Hovnanian&#146;s stock by any person (or public group) from less
    than 5% to 5% or more of Hovnanian&#146;s common stock;
    (ii)&#160;increase the percentage of Hovnanian&#146;s common
    stock owned directly or indirectly by a person (or public group)
    owning or deemed to own 5% or more of Hovnanian&#146;s common
    stock; or (iii)&#160;create a new &#147;public group&#148; (as
    defined in the applicable Treasury regulations). Transfers
    included under the transfer restrictions include sales to
    persons (or public groups) whose resulting percentage ownership
    (direct or indirect) of common stock would exceed the 5%
    thresholds discussed above, or to persons whose direct or
    indirect ownership of common stock would by attribution cause
    another person (or public group) to exceed such threshold.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <I>Consequences of Prohibited Transfers.</I>&#160;&#160;In
    accordance with Hovnanian&#146;s amended Certificate of
    Incorporation, any direct or indirect transfer attempted in
    violation of the restrictions would be void as of the date of
    the purported transfer as to the purported transferee (or, in
    the case of an indirect transfer, the ownership of the direct
    owner of Class&#160;A Common Stock would terminate
    simultaneously with the transfer), and the purported transferee
    (or in the case of any indirect transfer, the direct owner)
    would not be recognized as the owner of the shares owned in
    violation of the restrictions for any purpose, including for
    purposes of voting and receiving dividends or other
    distributions in respect of such Class&#160;A Common Stock, or
    in the case of options, receiving Class&#160;A Common Stock in
    respect of their exercise. In this prospectus, Class&#160;A
    Common Stock purportedly acquired in violation of the transfer
    restrictions is referred to as &#147;excess stock.&#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: transparent">
    In addition to the purported transfer being void as of the date
    of the purported transfer, upon demand, the purported transferee
    must transfer the excess stock to Hovnanian&#146;s agent along
    with any dividends or other distributions paid with respect to
    such excess stock. Hovnanian&#146;s agent is required to sell
    such excess stock in an arms&#146; length transaction (or series
    of transactions) that would not constitute a violation under the
    transfer restrictions. The net proceeds of the sale, together
    with any other distributions with respect to such excess stock
    received by Hovnanian&#146;s agent, after deduction of all costs
    incurred by the agent, will be distributed first to the
    purported transferee in an amount, if any, up to the cost (or in
    the case of gift, inheritance or similar transfer, the fair
    market value of the excess stock on the date of the violative
    transfer) incurred by the purported transferee to acquire such
    excess stock, and the balance of the proceeds, if any, will be
    distributed to a charitable beneficiary. If the excess stock is
    sold by the purported transferee, such person will be treated as
    having sold the excess stock on behalf of the
</DIV>
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<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: transparent">
    agent, and will be required to remit all proceeds to
    Hovnanian&#146;s agent (except to the extent Hovnanian grants
    written permission to the purported transferee to retain an
    amount not to exceed the amount such person otherwise would have
    been entitled to retain had Hovnanian&#146;s agent sold such
    shares).
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    To the extent permitted by law, any stockholder who knowingly
    violates the transfer restrictions will be liable for any and
    all damages suffered by Hovnanian as a result of such violation,
    including damages resulting from a reduction in or elimination
    of the ability to utilize the NOLs and any professional fees
    incurred in connection with addressing such violation.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    With respect to any transfer of Class&#160;A Common Stock which
    does not involve a transfer of &#147;securities&#148; of
    Hovnanian within the meaning of the General Corporation Law of
    the State of Delaware but which would cause any 5% stockholder
    to violate the transfer restrictions, the following procedure
    will apply in lieu of those described above. In such case, no
    such 5% stockholder shall be required to dispose of any interest
    that is not a security of Hovnanian, but such 5% stockholder
    <FONT style="white-space: nowrap">and/or</FONT> any
    person whose ownership of securities of Hovnanian is attributed
    to such 5% stockholder will be deemed to have disposed of (and
    will be required to dispose of) sufficient securities,
    simultaneously with the transfer, to cause such 5% stockholder
    not to be in violation of the transfer restrictions, and such
    securities will be treated as excess stock to be disposed of
    through the agent under the provisions summarized above, with
    the maximum amount payable to such 5% stockholder or such other
    person that was the direct holder of such excess stock from the
    proceeds of sale by the agent being the fair market value of
    such excess stock at the time of the prohibited transfer.
</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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">Exceptions</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: transparent">
    The Board of Directors will have the discretion to approve
    transfers that would otherwise be restricted by the amended
    Certificate of Incorporation and may exempt any person or group
    from triggering the dilutive effect of the Rights Plan.
</DIV>

<A name='X91037111'>
<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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">DESCRIPTION
    OF DEPOSITARY SHARES</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: transparent">
    The following description of depositary shares representing
    shares of our preferred stock sets forth certain general terms
    and provisions of depositary agreements, depositary shares and
    depositary receipts. The particular terms of the depositary
    shares and related agreements and receipts will be described in
    the prospectus supplement relating to those depositary shares.
    The description set forth below and in any prospectus supplement
    is not complete, and is subject to, and qualified in its
    entirety by reference to, the applicable depositary agreement, a
    form of which has been incorporated by reference as an exhibit
    to the Registration Statement of which this prospectus forms a
    part, and the depositary receipts, which will be filed as
    exhibits to the Registration Statement or filed as exhibits to
    one or more current reports on
    <FONT style="white-space: nowrap">Form&#160;8-K</FONT>
    and incorporated by reference herein. The specific terms of the
    depositary shares as described in the applicable prospectus
    supplement will supplement and, if applicable, may modify or
    replace the general terms described 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: transparent">

    <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: transparent">
    Hovnanian may, at its option, elect to offer fractional shares
    of preferred stock, rather than full shares of preferred stock.
    In such event, Hovnanian will issue receipts for depositary
    shares, each of which will represent a fraction of a share of a
    particular series of 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: transparent">
    The shares of any series of preferred stock represented by
    depositary shares will be deposited under a deposit agreement
    between Hovnanian and a bank or trust company selected by
    Hovnanian having its principal office in the United States and
    having a combined capital and surplus of at least $50,000,000,
    as preferred stock depositary. Each owner of a depositary share
    will be entitled to all the rights and preferences of the
    underlying preferred stock, including dividend, voting,
    redemption, conversion and liquidation rights, in proportion to
    the applicable fraction of a share of preferred stock
    represented by such depositary share.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    The depositary shares will be evidenced by depositary receipts
    issued pursuant to the deposit agreement. Depositary receipts
    will be distributed to the registered holder purchasing the
    fractional shares of preferred stock in accordance with the
    terms of the applicable prospectus supplement.
</DIV>
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    Shares of preferred stock represented by depositary shares may
    be withdrawn from the depositary arrangement upon surrender of
    depositary receipts at the principal office of the preferred
    stock depositary and upon payment of the taxes, charges and fees
    provided for in the deposit agreement. Subject to the terms of
    the deposit agreement, the holder of depositary receipts will
    receive the appropriate number of shares of preferred stock and
    any money or property represented by such depositary shares.
    Only whole shares of preferred stock may be withdrawn; if a
    holder holds an amount of depositary shares in excess of whole
    shares of preferred stock, the preferred stock depositary will
    deliver along with the withdrawn shares of preferred stock a new
    depositary receipt evidencing the excess number of depositary
    shares. Except as described in the deposit agreement, holders of
    withdrawn shares of preferred stock will not be entitled to
    redeposit such shares or to receive depositary shares.
</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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">Dividends
    and Other Distributions</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: transparent">
    The preferred stock depositary will distribute all cash
    dividends or other cash distributions received in respect of the
    deposited preferred stock to the record holders of depositary
    shares relating to such preferred stock in proportion to the
    number of such depositary shares owned by such 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: transparent">
    The preferred stock depositary will distribute any property
    received by it other than cash to the record holders of
    depositary shares entitled thereto. If the preferred stock
    depositary determines that it is not feasible to make such
    distribution, it may, with Hovnanian&#146;s approval, sell such
    property and distribute the net proceeds from such sale to such
    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: transparent">
    If Hovnanian offers to the holders of a series of preferred
    stock represented by the depositary shares any rights,
    preferences or privileges to subscribe for or to purchase any
    securities or of any other nature, the preferred stock
    depositary will make such rights, preferences or privileges
    available to the record holders of depositary shares either by
    the issue of warrants representing such rights, preferences or
    privileges or by such other method as approved by the preferred
    stock depositary and Hovnanian. If the preferred stock
    depositary determines that this is not lawful or feasible or if
    it is instructed by a holder that such holder does not want to
    exercise such rights, preferences or privileges, it may, with
    Hovnanian&#146;s approval, sell such rights, preferences or
    privileges and distribute the net proceeds from such sale to the
    holders of depositary shares entitled thereto.
</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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">Redemption
    of Preferred Stock</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: transparent">
    If a series of preferred stock represented by depositary shares
    is to be redeemed, the depositary shares will be redeemed from
    the proceeds received by the preferred stock depositary
    resulting from the redemption, in whole or in part, of such
    series of preferred stock. The depositary shares will be
    redeemed by the preferred stock depositary at a price per
    depositary share equal to the applicable fraction of the
    redemption price per share payable in respect of the shares of
    preferred stock so redeemed.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    Whenever Hovnanian redeems shares of preferred stock held by the
    preferred stock depositary, the preferred stock depositary will
    redeem as of the same date the number of depositary shares
    representing shares of preferred stock so redeemed. If fewer
    than all the depositary shares are to be redeemed, the
    depositary shares to be redeemed will be selected by the
    preferred stock depositary by lot or ratably or by such other
    equitable method as the preferred stock depositary may decide.
</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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">Voting
    Deposited Preferred Stock</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: transparent">
    Upon receipt of notice of any meeting at which the holders of
    any series of deposited preferred stock are entitled to vote,
    the preferred stock depositary will mail the information
    contained in such notice of meeting to the record holders of the
    depositary shares relating to such series of preferred stock.
    Each record holder of such depositary shares on the record date
    will be entitled to instruct the preferred stock depositary to
    vote the amount of the preferred stock represented by such
    holder&#146;s depositary shares. The preferred stock depositary
    will endeavor, as practicable, to vote the amount of such series
    of preferred stock represented by such depositary shares in
    accordance with such instructions.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    Hovnanian will agree to take all actions that the preferred
    stock depositary may deem necessary to enable the preferred
    stock depositary to vote as instructed. The preferred stock
    depositary will abstain from voting shares of
</DIV>
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    <BR>
    23
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<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: transparent">
    any series of preferred stock held by it for which it does not
    receive specific instructions from the holders of depositary
    shares representing such shares.
</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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">Changes
    Affecting Preferred Stock</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: transparent">
    Upon any change in par or stated value,
    <FONT style="white-space: nowrap">split-up,</FONT>
    combination or any other reclassification of the series of
    preferred stock represented by the depositary shares, or upon
    any recapitalization, reorganization, merger, amalgamation or
    consolidation affecting Hovnanian or to which it is a party, the
    preferred stock depositary may in its discretion, with the
    approval and instructions of Hovnanian, and in such manner as
    the preferred stock depositary may deem equitable, treat any
    securities which shall be received by the preferred stock
    depositary in exchange for or upon conversion of or in respect
    of such preferred stock as new deposited securities received in
    exchange for or upon conversion or in respect of such preferred
    stock and make such adjustments 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the fraction of an interest represented by one depositary share
    in one share of such preferred stock;&#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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the ratio of the redemption price per depositary share to the
    redemption price of a share of such preferred stock,
</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: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    in each case as may be necessary to fully reflect the effects of
    such change.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    With the approval of Hovnanian, the preferred stock depositary
    may execute and deliver additional depositary receipts, or may
    call for the surrender of all outstanding depositary receipts to
    be exchanged for new depositary receipts specifically describing
    such new deposited securities.
</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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">Amendment
    and Termination of the Deposit Agreement</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: transparent">
    The form of depositary receipt evidencing the depositary shares
    and any provision of the deposit agreement may at any time be
    amended by agreement between Hovnanian and the preferred stock
    depositary. However, any amendment that materially and adversely
    alters any existing right of the holders of depositary shares
    will not be effective unless such amendment has been approved by
    the holders of at least a majority of the depositary shares then
    outstanding. Every holder of an outstanding depositary receipt
    at the time any such amendment becomes effective shall be
    deemed, by continuing to hold such depositary receipt, to
    consent and agree to such amendment and to be bound by the
    deposit agreement, which has been amended thereby. The deposit
    agreement may be terminated only 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    all outstanding depositary shares have been redeemed;&#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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a final distribution in respect of the preferred stock has been
    made to the holders of depositary shares in connection with any
    liquidation, dissolution or winding up of Hovnanian.
</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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">Charges
    of Preferred Stock Depositary; Taxes and Other Governmental
    Charges</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: transparent">
    Hovnanian will pay all transfer and other taxes and governmental
    charges arising solely from the existence of the depositary
    arrangements. Hovnanian also will pay charges of the depositary
    in connection with the deposit of preferred stock and any
    redemption of preferred stock. The amount paid as dividends or
    otherwise distributable by the preferred stock depositary with
    respect to the depositary shares or the underlying preferred
    stock will be reduced by any amounts required to be withheld by
    Hovnanian or the preferred stock depositary on account of taxes
    or other governmental charges. Holders of depositary receipts
    will pay other transfer and other taxes and governmental charges
    and such other charges, including a fee for the withdrawal of
    shares of preferred stock upon surrender of depositary receipts,
    as are expressly provided in the deposit agreement to be for
    their accounts. The preferred stock depositary may refuse to
    make any payment or distribution, or any transfer, exchange or
    withdrawal of any depositary shares or shares of preferred
    stock, until such taxes or other governmental charges are paid.
</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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">Transfer,
    Surrender 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: transparent">
    Depositary receipts may be transferred, surrendered or exchanged
    in accordance with the deposit agreement. The preferred stock
    depositary, its agents or Hovnanian may require a holder, among
    other things, to furnish appropriate endorsements and transfer
    documents. The preferred stock depositary is not required to
    accept deposits
</DIV>
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    <BR>
    24
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<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: transparent">
    of preferred stock or to register transfers, surrenders or
    exchanges of depositary shares during any period when the
    register of stockholders of Hovnanian is closed or in order to
    comply with any requirement of law, government or governmental
    body, commission or the deposit agreement.
</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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">Resignation
    and Removal of Depositary</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: transparent">
    The preferred stock depositary may resign at any time by
    delivering to Hovnanian notice of its intent to do so, and
    Hovnanian may at any time remove the preferred stock depositary,
    any such resignation or removal to take effect upon the
    appointment of a successor preferred stock depositary and its
    acceptance of such appointment. Such successor preferred stock
    depositary must be appointed within 60&#160;days after delivery
    of the notice of resignation or removal and must be a bank or
    trust company having its principal office in the United States
    and having a combined capital and surplus of at least
    $50,000,000.
</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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">Miscellaneous</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: transparent">
    The preferred stock depositary will forward all reports and
    communications from Hovnanian which are delivered to the
    preferred stock depositary and which Hovnanian is required to
    furnish to the holders of the deposited 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: transparent">
    Neither the preferred stock depositary nor Hovnanian will be
    liable if it or Hovnanian are prevented or delayed by law or any
    circumstances beyond its or Hovnanian&#146;s control in
    performing its or Hovnanian&#146;s obligations under the deposit
    agreement. Hovnanian&#146;s obligations and the obligations of
    the preferred stock depositary under the deposit agreement will
    be limited to performance in good faith of Hovnanian&#146;s and
    their duties thereunder, and neither Hovnanian nor they will be
    obligated to prosecute or defend any legal proceeding in respect
    of any depositary shares, depositary receipts or shares of
    preferred stock unless satisfactory indemnity is furnished.
    Hovnanian and the preferred stock depositary may rely upon
    written advice of counsel or accountants, or upon information
    provided by holders of depositary receipts or other persons
    believed to be competent and on documents believed to be genuine.
</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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">Concerning
    the Preferred Stock Depositary</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: transparent">
    Information concerning the preferred stock depositary for a
    series of preferred stock represented by depositary shares will
    be set forth in the prospectus supplement relating to that
    series of preferred stock. Hovnanian and certain of its
    subsidiaries may maintain bank accounts, borrow money and have
    other commercial banking, investment banking and other business
    relationships with the preferred stock depositary and its
    affiliates in the ordinary course of business. The preferred
    stock depositary or its affiliates may participate as
    underwriters, agents or dealers in any offering of depositary
    shares.
</DIV>

<A name='X91037112'>
<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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">DESCRIPTION
    OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS</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: transparent">
    The following description of stock purchase contracts and stock
    purchase units sets forth certain general terms of the stock
    purchase contracts
    <FONT style="white-space: nowrap">and/or</FONT> stock
    purchase units that Hovnanian may issue. The particular terms of
    any stock purchase contracts or stock purchase units will be
    described in the prospectus supplement relating to the stock
    purchase contracts or stock purchase units. The description set
    forth below and in any prospectus supplement is not complete,
    and is subject to, and qualified in its entirety by reference
    to, the stock purchase contracts, the collateral arrangements
    and any depositary arrangements relating to such stock purchase
    contracts or stock purchase units and, if applicable, the
    prepaid securities and the document pursuant to which the
    prepaid securities will be issued which will be filed with the
    Commission promptly after the offering of such stock purchase
    contracts or stock purchase units and, if applicable, prepaid
    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: transparent">
    Hovnanian may issue stock purchase contracts representing
    contracts obligating holders to purchase from Hovnanian and
    Hovnanian to sell to the holders shares of Class&#160;A Common
    Stock, shares of preferred stock or depositary shares at a
    future date or dates. The price per share of Class&#160;A Common
    Stock, preferred stock or depositary shares may be fixed at the
    time the stock purchase contracts are issued or may be
    determined by reference to a specific formula set forth in the
    stock purchase contracts.
</DIV>
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    <BR>
    25
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    The stock purchase contracts may be issued separately or as a
    part of units, often known as stock purchase units, consisting
    of a stock purchase contract and 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    debt securities issued by either Hovnanian or K.&#160;Hovnanian,
    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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    debt obligations of third parties, including U.S.&#160;Treasury
    securities,
</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: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    securing the holder&#146;s obligations to purchase the
    Class&#160;A Common Stock, preferred stock or depositary shares
    under the stock purchase contracts. The stock purchase contracts
    may require us to make periodic payments to the holders of the
    stock purchase units or vice versa, and such payments may be
    unsecured or prefunded on some basis. The stock purchase
    contracts may require holders to secure their obligations in a
    specified manner and in certain circumstances we may deliver
    newly issued prepaid stock purchase contracts, often known as
    prepaid securities, upon release to a holder of any collateral
    securing each holder&#146;s obligations under the original stock
    purchase contract.
</DIV>

<A name='X91037113'>
<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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">DESCRIPTION
    OF UNITS</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: transparent">
    As specified in the applicable prospectus supplement, Hovnanian
    or K.&#160;Hovnanian may issue units consisting of one or more
    warrants, debt securities, shares of Class&#160;A Common Stock
    or preferred stock, depositary shares or any combination of such
    securities. The applicable prospectus supplement will describe:
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the terms of the Units and of the warrants, debt securities,
    common stock, depository shares and preferred stock comprising
    the units, including whether and under what circumstances the
    securities comprising the units may be traded separately;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a description of the terms of any unit agreement governing the
    units; 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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a description of the provisions for the payment, settlement,
    transfer or exchange or the units.
</TD>
</TR>

</TABLE>

<A name='X91037114'>
<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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">DESCRIPTION
    OF WARRANTS</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: transparent">
    The following description of the terms of the warrants sets
    forth certain general terms that may apply to the warrants that
    Hovnanian or K.&#160;Hovnanian may offer. The particular terms
    of any warrants will be described in the applicable prospectus
    supplement accompanying this prospectus. The description set
    forth below and in any prospectus supplement is not complete,
    and is subject to, and qualified in its entirety by reference
    to, the applicable warrant agreement, a form of which has been
    incorporated by reference as an exhibit to the Registration
    Statement of which this prospectus forms a part. The specific
    terms of warrants as described in the applicable prospectus
    supplement will supplement and, if applicable, may modify or
    replace the general terms described in this prospectus.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    Hovnanian may issue warrants, including warrants to purchase
    Class&#160;A Common Stock, preferred stock or Depositary Shares
    and warrants to purchase Hovnanian Debt Securities.
    K.&#160;Hovnanian may issue warrants to purchase
    K.&#160;Hovnanian Debt Securities. All obligations of
    K.&#160;Hovnanian under the K.&#160;Hovnanian warrants will be
    fully and unconditionally guaranteed by Hovnanian. Warrants may
    be issued independently of or together with any other securities
    and may be attached to or separate from such securities.
    Obligations of Hovnanian and K.&#160;Hovnanian under the
    warrants may be guaranteed by the subsidiary guarantors. Each
    series of warrants will be issued under a separate warrant
    agreement, each a &#147;warrant agreement&#148; to be entered
    into among Hovnanian
    <FONT style="white-space: nowrap">and/or</FONT>
    K.&#160;Hovnanian and any subsidiary guarantors and a warrant
    agent, the &#147;warrant agent&#148;. The warrant agent will act
    solely as an agent of Hovnanian
    <FONT style="white-space: nowrap">and/or</FONT>
    K.&#160;Hovnanian in connection with the warrants of that series
    and will not assume any obligation or relationship of agency or
    trust for or with holders or beneficial owners of warrants. The
    following describes some general terms and provisions of the
    warrants offered hereby. Further terms of the warrants and the
    applicable warrant agreement will be described in the applicable
    prospectus supplement.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    The applicable prospectus supplement will describe the following
    terms, where applicable, of the warrants in respect of which
    this prospectus is being delivered:
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the title of the warrants;
</TD>
</TR>

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

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    <BR>
    26
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#X91037tocpage">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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the aggregate number of the warrants;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the price or prices at which the warrants will be issued;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the designation, aggregate principal amount and terms of the
    securities purchasable upon exercise of the warrants;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the designation and terms of the securities with which the
    warrants are issued and the number of the warrants issued with
    each such security;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    if applicable, the date on and after which the warrants and the
    related securities will be separately transferable;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the price at which the securities purchasable upon exercise of
    the warrants may be purchased, and any provisions for changes to
    or adjustments in such exercise price;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the date on which the right to exercise the warrants will
    commence and the date on which the right will expire;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the minimum or maximum amount of the warrants that may be
    exercised at any one time;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    information with respect to book-entry procedures, if any;
</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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a discussion of certain United States Federal income tax
    considerations;&#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: transparent">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    any other terms of the warrants, including terms, procedures and
    limitations relating to the exercise of the warrants.
</TD>
</TR>

</TABLE>

<A name='X91037115'>
<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: transparent">

    <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: transparent">
    Hovnanian and K.&#160;Hovnanian may sell the securities to or
    through underwriters or dealers, and also may sell the offered
    securities directly to one or more other purchasers or through
    agents. The applicable prospectus supplement will list the names
    of any underwriters or agents involved in the sale of the
    offered securities and any applicable commissions or discounts,
    and will also describe the method of distribution of the
    securities offered thereby, the purchase price and the proceeds
    to be received from the sale, and any securities exchanges on
    which the securities of such series may be listed.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    Hovnanian, K.&#160;Hovnanian or any of their agents may directly
    solicit offers to purchase these securities. The applicable
    prospectus supplement will name any agent, who may be deemed to
    be an underwriter as that term is defined in the Securities Act,
    involved in the offer or sale of the securities in respect of
    which this prospectus is delivered, and will set forth any
    commissions payable to that agent by Hovnanian or
    K.&#160;Hovnanian, as the case may be. Unless otherwise
    indicated in the prospectus supplement, any such agency will be
    acting in a best efforts basis for the period of its appointment
    (ordinarily five business days or less). Agents, dealers and
    underwriters may be customers of, engage in transactions with,
    or perform services for Hovnanian or K.&#160;Hovnanian in 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: transparent">
    If Hovnanian or K.&#160;Hovnanian utilizes an underwriter or
    underwriters in the sale, they will execute an underwriting
    agreement with such underwriters at the time of sale to them and
    will set forth in the applicable prospectus supplement the names
    of the underwriters and the terms of the transaction. The
    underwriters will use the prospectus supplement to make releases
    of the securities in respect of which this prospectus is
    delivered to the public.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    If Hovnanian or K.&#160;Hovnanian utilizes a dealer in the sale
    of the securities in respect of which this prospectus is
    delivered, Hovnanian or K.&#160;Hovnanian, as the case may be,
    will sell the securities to the dealer, as principal. The dealer
    may then resell the securities to the public at varying prices
    to be determined by the dealer at the time of resale. The
    prospectus supplement will set forth the name of the dealer and
    the terms of the transaction.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    Underwriters, dealers or agents may offer and sell the offered
    securities at a fixed price or prices, which may be changed, or
    from time to time at market prices prevailing at the time of
    sale, at prices related to the prevailing market prices or at
    negotiated prices. In connection with the sale of the
    securities, underwriters or agents may be deemed to
</DIV>
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    <BR>
    27
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<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: transparent">
    have received compensation from Hovnanian or K.&#160;Hovnanian
    in the form of underwriting discounts or commissions and may
    also receive commissions from purchasers of the securities for
    whom they may act as agent. Underwriters or agents may sell the
    securities to or through dealers, and such dealers may receive
    compensation in the form of discounts, concessions or
    commissions from the underwriters or commissions from the
    purchasers for whom they may act as agent.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    The preferred stock, depositary shares, debt securities, stock
    purchase contracts, stock purchase units, units and warrants,
    when first issued, will have no established trading market. Any
    underwriters or agents to or through whom offered securities are
    sold by Hovnanian or K.&#160;Hovnanian for public offering and
    sale may make a market in such offered securities, but the
    underwriters or agents will not be obligated to do so and may
    discontinue any market making at any time without notice. No
    assurance can be given as to the liquidity of the trading market
    for any offered securities. The applicable prospectus supplement
    set forth whether or not underwriters or agents may over-allot
    or effect transactions that stabilize, maintain or otherwise
    affect the market price of debt securities offered thereby at
    levels above those that might otherwise prevail in the open
    market, including, for example, by entering stabilizing bids,
    effecting syndicate covering transactions or imposing penalty
    bids.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    Any underwriters, dealers or agents participating in the
    distribution of the offered securities may be deemed to be
    underwriters, and any discounts and commissions received by them
    and any profit realized by them on resale of the offered
    securities may be deemed to be underwriting discounts and
    commissions under the Securities Act. Underwriters, dealers or
    agents may be entitled, under agreements entered into with
    Hovnanian or K.&#160;Hovnanian, to indemnification against or
    contribution toward certain civil liabilities, including
    liabilities under 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: transparent">
    If so indicated in the prospectus supplement, Hovnanian or
    K.&#160;Hovnanian will authorize underwriters or other persons
    acting as its or their agents to solicit offers by certain
    institutions to purchase securities from it or them pursuant to
    contracts providing for payment and delivery on a future date.
    Institutions with which contracts may be made include commercial
    and savings banks, insurance companies, pension funds,
    investment companies, educational and charitable institutions
    and others, but in all cases will be subject to the condition
    that the purchase of the securities will not at the time of
    delivery be prohibited under the laws of the jurisdiction to
    which such purchaser is subject. The underwriters and agents
    will not have any responsibility in respect of the validity or
    performance of such contracts.
</DIV>

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

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
    The applicable prospectus supplement will set forth the place
    and time of delivery for the securities in respect of which this
    prospectus is delivered.
</DIV>

<A name='X91037116'>
<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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">LEGAL
    MATTERS</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: transparent">
    Certain legal matters with respect to the validity of the
    offered securities will be passed upon for Hovnanian and
    K.&#160;Hovnanian by Simpson Thacher&#160;&#038; Bartlett LLP,
    New York, New York, and will also be passed upon for
    K.&#160;Hovnanian by Peter S. Reinhart,&#160;Esq., Senior
    Vice-President and General Counsel for Hovnanian and
    K.&#160;Hovnanian. Peter S. Reinhart,&#160;Esq., beneficially
    owns, directly and indirectly, less than 1% of the common stock
    of Hovnanian, which does not include any shares of common stock
    over which Mr.&#160;Reinhart may have investment or voting power
    in his capacity as trustee of a trust in which he has no
    financial interest. Certain legal matters in connection with the
    offered securities may also be passed upon for any agents or
    underwriters by counsel specified in the prospectus supplement.
</DIV>

<A name='X91037117'>
<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: transparent">

    <B><FONT style="font-family: 'Times New Roman', Times">EXPERTS</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: transparent">
    The consolidated financial statements as of October&#160;31,
    2010 and 2009, and for the years then ended incorporated by
    reference in this prospectus from Hovnanian&#146;s Amendment
    No.&#160;1 to Annual Report on
    <FONT style="white-space: nowrap">Form&#160;10-K/A</FONT>
    for the year ended October&#160;31, 2010 and the effectiveness
    of Hovnanian&#146;s internal control over financial reporting as
    of October&#160;31, 2010, have been audited by
    Deloitte&#160;&#038; Touche LLP, an independent registered
    public accounting firm, as stated in their reports, which are
    incorporated herein by reference. Such consolidated financial
    statements have been so incorporated in reliance upon the
    reports of such firm given upon their authority as experts in
    accounting and auditing.
</DIV>
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    <BR>
    28
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<H5 align="left" style="page-break-before:always"><A HREF="#X91037tocpage">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: transparent">
    The consolidated financial statements of Hovnanian Enterprises,
    Inc. for the year ended October&#160;31, 2008 appearing in
    Hovnanian Enterprises, Inc.&#146;s Amendment No.&#160;1 to the
    Annual Report
    <FONT style="white-space: nowrap">(Form&#160;10-K/A)&#160;for</FONT>
    the year ended October&#160;31, 2010 have been audited by
    Ernst&#160;&#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>
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    <BR>
    29
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<DIV style="width: 91%; margin-left: 4%"><!-- BEGIN PAGE WIDTH -->
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<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: transparent">
    <IMG src="y91037b5x9103700a.gif" alt="(K. HOVNANIAN LOGO)">
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>
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<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">

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`
end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
