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Sale Participation Agreement
Sale Participation Agreement (31K)
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SALE PARTICIPATION AGREEMENT
SALE PARTICIPATION AGREEMENT (hereinafter called this
"AGREEMENT"), dated as of August 28, 2000, between Kevork S. Hovnanian and Ara
K. Hovnanian (the "HOVNANIANS"), on the one hand, and each of the stockholders
of the Company (as hereinafter defined) set forth on the signature pages hereto
(each, an "Investor"), on the other hand.
RECITALS
WHEREAS, the Hovnanians are the beneficial owners of shares of
Class A Common Stock, par value $.01 per share ("CLASS A COMMON STOCK"), and
Class B Common Stock, par value $.01 per share ("CLASS B COMMON STOCK" and,
collectively with Class A Common Stock, "COMMON STOCK"), of Hovnanian
Enterprises, Inc., a Delaware corporation (the "COMPANY");
WHEREAS, the Investors are the beneficial owners of shares of
common stock, par value $.01 per share ("WHI COMMON STOCK"), of Washington
Homes, Inc., a Maryland corporation ("WHI");
WHEREAS, the Company, WHI Holding Co., Inc., a Delaware
corporation and a wholly owned subsidiary of the Company ("MERGER SUB"), and WHI
have entered into an Agreement and Plan of Merger of even date herewith (the
"MERGER AGREEMENT"), pursuant to which WHI will be merged (the "MERGER") with
and into Merger Sub;
WHEREAS, as a result of the Merger, certain of the shares of
WHI Common Stock beneficially owned by the Investors will be converted at the
effective time of the Merger (the "EFFECTIVE TIME") into the right to receive,
and thereafter the Investors shall become the beneficial owners of, shares of
Class A Common Stock;
WHEREAS, in connection with the Merger, the Company and
certain of the Investors are contemporaneously entering into Voting Agreements
of even date herewith, pursuant to which each such Investor, as one of a limited
number of related shareholders of WHI, has agreed, among other things, subject
to the terms and conditions thereof, to vote his, her or its shares of WHI
Common Stock for approval and adoption of the Merger Agreement; and
WHEREAS, incident to the Investors' ownership of shares of
Class A Common Stock, the Hovnanians and the Investors propose to agree to
certain provisions with respect to the future sale, upon certain terms and
subject to certain conditions, of their respective shares of Common Stock.
NOW, THEREFORE, to implement the foregoing and in
consideration of the premises and of the mutual agreements contained herein, the
parties hereto agree as follows:
{PAGE}
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1. TAKE-ALONG RIGHTS.
(a) In the event that at any time after the Effective Time
(i) either of the Hovnanians, their respective spouses, the estates of either
of the Hovnanians or their respective spouses, any corporation, partnership,
or other business entity if substantially all the beneficial ownership
thereof is held by the Hovnanians and/or their respective spouses, or any
trust in respect of either of the Hovnanians, their spouses or any lineal
descendants (including any adopted children) if one or more of the Hovnanians
and/or their respective spouses, and no other person, is trustee thereof
(including, without limitation, the Kevork S. Hovnanian Family Limited
Partnership, a Connecticut limited partnership, and the Sirwart Hovnanian
1994 Marital Trust, but, for the avoidance of any doubt, excluding the
Company or any of its subsidiaries), as the case may be (each, a "SELLING
ENTITY"), proposes to sell for cash or any other consideration, either
directly or indirectly (by way of the sale of beneficial ownership interest
in any such affiliated entity or otherwise), any shares of Common Stock owned
by it, in any transaction other than (x) a public offering of securities, (y)
a sale or other transfer of beneficial ownership to any "Permitted
Transferee" (as defined in the Certificate of Incorporation of the Company,
as amended) or (z) a bona fide pledge of shares as collateral security for
indebtedness due to the pledgee (a "PROPOSED SALE") and (ii) such Proposed
Sale, when considered together with previous direct or indirect sales of
Common Stock (other than the sales or other transfers referred to in clauses
(x), (y) and (z) above) by any Selling Entity, if any, that constitute part
of a series of related transactions with the Proposed Sale, would constitute
the sale of the direct or indirect beneficial ownership of more than 20% of
the outstanding shares of Common Stock collectively beneficially owned as of
the Effective Time by all persons coming within the definition of Selling
Entity, then the Selling Entity will notify each Investor or the executors,
administrators, testamentary trustees, legatees or beneficiaries to whom the
Investor's shares may have been transferred upon his or her death (an
"INVESTOR'S ESTATE") or any trust or custodianship the beneficiaries of which
include only an Investor, his or her spouse and the Investor's lineal
descendants (including any adopted children) (an "INVESTOR'S TRUST"), as the
case may be, in writing (a "NOTICE") of such proposed sale and the material
terms of the Proposed Sale as of the date of the Notice (the "MATERIAL
TERMS") promptly, and in any event not less than 15 days prior to the
consummation of the Proposed Sale and not more than 5 days after the
execution of the definitive agreement relating to the Proposed Sale, if any
(the "SALE AGREEMENT").
(b) If within 10 days of an Investor's or an Investor's
Estate's or Investor's Trust's, as the case may be, receipt of such Notice
the Selling Entity receives from an Investor or an Investor's Estate or
Investor's Trust, as the case may be, a written request (a "REQUEST") to
include shares of Common Stock held by the Investor or the Investor's Estate
or Investor's Trust, as the case may be, in the Proposed Sale (which Request
shall be irrevocable unless (x) there shall be a material adverse change in
the Material Terms (including, without limitation, a change in the Material
Terms that would result in the sale price being decreased by more than 10%
from that set forth in the Notice) or (y) if otherwise mutually agreed to in
writing by the Investor or the Investor's Estate or Investor's Trust, as the
case may be, and the Selling Entity), shares of Common Stock held by the
Investor, the Investor's Estate or Investor's Trust, as the case may be, will be
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Hovnanian
As referenced in this Sale Participation Agreement:
Hovnanian
Enterprises, Inc – per share ("CLASS A COMMON STOCK"), and
Class B Common Stock, par value $.01 per share ("CLASS B COMMON STOCK" and,
collectively with Class A Common Stock, "COMMON STOCK"), of Hovnanian
Enterprises, Inc ., a Delaware corporation (the "COMPANY");
WHEREAS, the Investors are the beneficial owners of shares of
common stock, par value $.01 per share ("WHI COMMON STOCK"), of Washington
Homes, Inc.,
_____________
Hovnanian Enterprises, Inc – to have been duly given when delivered to the
party to whom it is directed:
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(a) If to the Hovnanians, to them in care of the following
address:
Hovnanian Enterprises, Inc .
10 Highway 35, P.O. Box 500
Red Bank, New Jersey 07701
(b) If to an Investor, to him or her at the address set forth
below under his,
_____________
Hovnanian Enterprises, Inc – lawful attorney-in-fact and agent, with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to execute and deliver to Hovnanian Enterprises, Inc . (hereinafter
referred to a "Hovnanian") (i) the respective forms of Voting Agreement to which
the undersigned and Hovnanian Enterprises, Inc. ("Hovnanian"), dated as of
August 28, 2000, are parties, (
_____________
Hovnanian Enterprises, Inc – in any and all
capacities, to execute and deliver to Hovnanian Enterprises, Inc. (hereinafter
referred to a "Hovnanian") (i) the respective forms of Voting Agreement to which
the undersigned and Hovnanian Enterprises, Inc . ("Hovnanian"), dated as of
August 28, 2000, are parties, (ii) that certain Sale Participation Agreement,
dated as of August 28, 2000, between Kevork S. Hovnanian and Ara K. Hovnanian,
_____________
dt 1491097
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