SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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[_]|_| Soliciting Material Pursuant to Rule 14a-11(c)ss.240.14a-11(c) or Rule 14a-12ss.240.14a-12
HOVNANIAN ENTERPRISES, INC.
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(Name of Registrant as Specified In Its Charter)
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[LOGO][LETTERHEAD OF HOVNANIAN ENTERPRISES, INC.
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10 HIGHWAY 35, P.O. BOX 500, RED BANK, NEW JERSEY 07701 |_| (732) 747-7800]
January 15, 199926, 2000
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
which will be held on Friday,Thursday, March 5, 1999,16, 2000, in the Boardroom of the American
Stock Exchange, 13th Floor, 86 Trinity Place, New York, New York. The meeting
will start promptly at 10:30 a.m.
It is important that your shares be represented and voted at the meeting.
Therefore, we urge you to complete, sign, date and return the enclosed proxy
card in the envelope provided for this purpose. Of course, if you attend the
meeting, you may still choose to vote your shares personally, even though you
have already returned a signed proxy. Important items to be acted upon at the
meeting include the election of directors, and ratification of the selection of
independent accountants.accountants, the approval of amendments to the Company's 1983 Stock
Option Plan and the approval of the Company's Senior Executive Short Term
Incentive Plan.
We sincerely hope you will be able to attend and participate in the
Company's 19992000 Annual Meeting. We welcome the opportunity to meet with many of
you and give you a firsthand report on the progress of your Company.
Sincerely yours,
/s/ KEVORKKevork S. HOVNANIAN
----------------------------------Hovnanian
KEVORK S. HOVNANIAN
Chairman of the Board
HOVNANIAN ENTERPRISES, INC.
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Notice of Annual Meeting of Shareholders
January 15, 1999
---------------------------26, 2000
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NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Hovnanian Enterprises, Inc. will be held on Friday,Thursday, March 5, 1999,16, 2000, in the
Boardroom of the American Stock Exchange, 13th Floor, 86 Trinity Place, New
York, New York at 10:30 a.m. for the following purposes:
1. The election of Directors of the Company for the ensuing year, to
serve until the next Annual Meeting of Shareholders of the Company and
until their respective successors may be elected and qualified.
2. The ratification of the selection of Ernst & Young LLP as
independent accountants to examine financial statements for the Company
for the year ended October 31, 1999.2000.
3. The approval of amendments to the Company's 1983 Stock Option
Plan.
4. The approval of the Company's StockSenior Executive Short Term
Incentive Plan.
4.5. The transaction of such other business as may properly come
before the meeting and any adjournment thereof.
Only shareholders of record at the close of business on January 7, 199917, 2000
are entitled to notice of and to vote at the meeting.
Accompanying this Notice of Annual Meeting of Shareholders is a proxy
statement, a form of proxy and the Company's Annual Report for the year ended
October 31, 1998.1999.
All shareholders are urged to attend the meeting in person or by proxy.
Shareholders who do not expect to attend the meeting are requested to complete,
sign and date the enclosed proxy and return it promptly in the self-addressed
envelope provided.
By order of the Board of Directors,
PETER S. REINHART
Secretary
January 15, 199926, 2000
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PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE
AND SIGN IT, AND RETURN IT IN THE ENVELOPE PROVIDED. NO POSTAGE IS NECESSARY IF
MAILED IN THE UNITED STATES.
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HOVNANIAN ENTERPRISES, INC.
10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
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PROXY STATEMENT
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General
The accompanying proxy is solicited on behalf of the Board of Directors of
Hovnanian Enterprises, Inc. (the "Company") for use at the Annual Meeting of
Shareholders referred to in the foregoing notice and at any adjournment thereof.
It is expected that this Proxy Statement and the accompanying proxy will be
mailed commencing January 15, 199926, 2000 to each shareholder entitled to vote. The
Company's Annual Report for the year ended October 31, 19981999 accompanies this
Proxy Statement.
Shares represented by properly executed proxies, if such proxies are
received in time and not revoked, will be voted in accordance with the
specifications thereon. If no specifications are made, the persons named in the
accompanying proxy will vote such proxy for the Board of Directors' slate of
Directors, for the ratification of selected independent accountants, for
approval of the proposed amendments to the 1983 Stock Option Plan, for approval
of the Senior Executive Short Term Incentive Plan, and as recommended by the
Board of Directors unless contrary instructions are given. Any person executing
a proxy may revoke it at any time before it is exercised by delivering written
notice of revocation to the Secretary of the Company or by voting in person at
the meeting.
VOTING RIGHTS AND SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The record date for the determination of shareholders entitled to vote at
the meeting is the close of business on January 7, 1999.17, 2000. On January 7, 1999,17, 2000,
the voting securities of the Company outstanding consisted of 13,830,82014,903,225 shares
of Class A Common Stock, each share entitling the holder thereof to one vote and
7,688,6007,643,473 shares of Class B Common Stock, each share entitling the holder
thereof to ten votes.
Other than as set forth in the table below, there are no persons known to
the Company to own beneficially shares representing more than 5% of the
Company's Class A Common Stock or Class B Common Stock.
1
The following table sets forth as of January 7, 199917, 2000 the Class A Common
Stock and Class B Common Stock of the Company beneficially owned by each
Director and nominee for Director, by all Directors and officers of the Company
as a group (including the named individuals) and holders of more than 5%:
Class A Common Stock Class B Common Stock
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Amount and Amount and
Nature of Nature of
Directors, Nominees and Beneficial Percent Beneficial Percent
Holders of More Than 5% Ownership(1) of Class(2) Ownership(1) of Class(2)
--------------------------- ------------------------------------- ------------ ----------- -------------------------- -----------
Kevork S. Hovnanian(3)(5) ....................... 5,492,887 39.7%36.9% 5,843,837 76.0%76.5%
Ara K. Hovnanian(4) ................. 1,429,661 10.0%.................. 1,454,661 9.5% 1,234,096 15.6%15.7%
Paul W. Buchanan .................... 43,520..................... 46,020 .3% 21,480 .3%
Arthur M. Greenbaum ................. 6,833.................. 8,500 .1% 1,500 --
Desmond P. McDonald ................. 7,083.................. 8,750 .1% 3,750 .1%
Peter S. Reinhart ................... 43,897.................... 47,230 .3% 16,950 .2%
J. Larry Sorsby ..................... 75,493 .5%...................... 82,160 .6% 21,840 .3%
Stephen D. Weinroth ................. 21,083.................. 22,750 .2% 2,250 --
All Directors and officers as a group
(10 persons) .................. 7,120,457 49.4%................... 7,162,958 46.2% 7,145,703 89.8%90.3%
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Notes:
(1) The figures in the table in respect of Class A Common Stock do not include
the shares of Class B Common Stock beneficially owned by the specified
persons, which shares of Class B Common Stock are convertible at any time
on a share for share basis to Class A Common Stock. The figures in the
table represent beneficial ownership (including ownership of 576,739619,240 Class
A Common Stock Options and 268,260 Class B Common Stock Options, currently
exercisable or exercisable within 60 days) and sole voting power and sole
investment power except as noted in notes (3), (4) and (5) below.
(2) Based upon the number of shares outstanding plus options for such
director, nominee or holder.
(3) Includes 167,812 shares of Class A Common Stock and 320,012 shares of
Class B Common Stock as to which Kevork S. Hovnanian has shared voting
power and shared investment power. Kevork S. Hovnanian's address is 10 Hwy
35, P.O. Box 500, Red Bank, New Jersey 07701.
(4) Includes 35,217 shares of Class A Common Stock and 68,66779,167 shares of Class
B Common Stock as to which Ara K. Hovnanian has shared voting power and
shared investment power. Ara K. Hovnanian's address is 10 Hwy 35, P.O. Box
500, Red Bank, New Jersey 07701.
(5) Includes 2,829,413 shares of Class B Common Stock held by the Kevork S.
Hovnanian Family Limited Partnership, a Connecticut limited partnership
(the "Limited Partnership"), beneficial ownership of which is disclaimed
by Kevork S. Hovnanian. Kevork S. Hovnanian's wife, Sirwart Hovnanian, as
trustee of the Sirwart Hovnanian 1994 Marital Trust, is the Managing
General Partner of the Limited Partnership and as such has the sole power
to vote and dispose of the shares of Class B Common Stock held by the
Limited Partnership. Also includes 129,562 shares of Class A Common Stock
and 264,562 shares of Class B Common Stock held in trust for Mr.
Hovnanian's daughter over which Sirwart Hovnanian, as trustee, shares with
her daughter the power to dispose of and vote. In addition, includes
18,250 shares of Class A Common Stock and 55,450 shares of Class B Common
Stock held in trust for Mr. Hovnanian's grandchildren, over which Sirwart
Hovnanian, as trustee, has sole power to dispose of and vote and includes
20,000 shares of Class A Common Stock held in the name of Sirwart
Hovnanian over which she has sole power to dispose of and vote. Mr.
Hovnanian disclaims beneficial ownership of the shares described in the
preceding three sentences.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers, directors, persons who own more than ten
percent of a registered class of the Company's equity securities and certain
entities associated with the foregoing ("Reporting Persons") to file reports of
ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and
Exchange Commission (the "SEC") and the 2
American Stock Exchange (the "ASE").
These Reporting Persons are required by SEC regulation to furnish the Company
with copies of all Forms 3, 4 and 5 they file with the SEC and the ASE. Based
solely on the Company's review of the copies of such forms it has received, the
Company knows of no failure to file.
2
ELECTION OF DIRECTORS
The Company's By-laws provide that the Board of Directors shall consist of
eight Directors who shall be elected annually by the shareholders. The Company's
Certificate of Incorporation requires that, at any time when any shares of Class
B Common Stock are outstanding, one-third of the Directors shall be independent.
The following persons are proposed as Directors of the Company to hold office
until the next Annual Meeting of Shareholders and until their respective
successors have been duly elected and qualified. In the event that any of the
nominees for Directors should become unavailable, it is intended that the shares
represented by the proxies will be voted for such substitute nominees as may be
nominated by the Board of Directors, unless the number of Directors constituting
a full Board of Directors is reduced. The Company has no reason to believe,
however, that any of the nominees is, or will be, unavailable to serve as a
Director.
Year First
Became a
Name Age Company Affiliation Director
---- --- ------------------- --------
Kevork S. Hovnanian......... 75 Chairman of the Board, and 1967
Director of the Company.
Ara K. Hovnanian............ 41 President, Chief Executive 1981
Officer and Director
of the Company.
Paul W. Buchanan............ 48 Senior Vice President- 1982
Corporate Controller and
Director of the Company.
Arthur M. Greenbaum......... 73 Director of the Company. 1992
Desmond P. McDonald......... 71Year First
Became a
Name Age Company Affiliation Director
---- --- ------------------- --------
Kevork S. Hovnanian .... 76 Chairman of the Board, and 1967
Director of the Company.
Ara K. Hovnanian ....... 42 President, Chief Executive 1981
Officer and Director
of the Company.
Paul W. Buchanan ....... 49 Senior Vice President-- 1982
Corporate Controller and
Director of the Company.
Arthur M. Greenbaum .... 74 Director of the Company. 1992
Desmond P. McDonald .... 72 Director of the Company. 1982
Peter S. Reinhart ...... 49 Senior Vice President and 1981
General Counsel/Secretary
and Director of the Company.
J. Larry Sorsby ........ 44 Senior Vice President, 1998
Treasurer and Chief
Financial Officer and Director
of the Company.
Stephen D. Weinroth .... 61 Director of the Company. 1982
Peter S. Reinhart........... 48 Senior Vice President and 1981
General Counsel/Secretary
and Director of the Company.
J. Larry Sorsby............. 43 Senior Vice President, 1998
Treasurer and Chief
Financial Officer and Director
of the Company.
Stephen D. Weinroth......... 60 Director of the Company. 1982
Mr. K. Hovnanian founded the predecessor of the Company in 1959 and has
served as Chairman of the Board since its initial incorporation in 1967. Mr. K.
Hovnanian was also Chief Executive Officer of the Company from 1967 to July
1997.
3
Mr. A. Hovnanian was appointed President in April 1988, after serving as
Executive Vice President from March 1983. He has also served as Chief Executive
Officer since July 1997. Mr. A. Hovnanian is the son of Mr. K. Hovnanian.
Mr. Buchanan has been Senior Vice President -- Corporate Controller since
May 1990.
Mr. Greenbaum has been a senior partner of Greenbaum, Rowe, Smith, Ravin,
Davis & Himmel, a law firm since 1950. Mr. Greenbaum qualifies as an independent
Director as defined in the Company's Certificate of Incorporation.
3
Mr. McDonald was a Director of Midlantic Bank N.A. from 1976 to December,
1995, Executive Committee Chairman of Midlantic Bank N.A. from August 1992 to
December, 1995 and was President of Midlantic Bank N.A. from 1976 to June 1992.
He was also a Director of Midlantic Corporation to December, 1995 and was Vice
Chairman of Midlantic Corporation from June 1990 to July 1992. Mr. McDonald
qualifies as an independent Director as defined in the Company's Certificate of
Incorporation.
Mr. Reinhart has been Senior Vice President and General Counsel since
April 1985. He was elected Secretary of the Company in February 1997.
Mr. Sorsby was appointed Senior Vice President, Treasurer and Chief
Financial Officer of the Company in February, 1996 after serving as Senior Vice
President-Finance/Treasurer of the Company since March 1991.
Mr. Weinroth is Chairman of the Board of Core Laboratories N.V., a New
York Stock Exchange listed worldwide oil field services and manufacturing company. He is also a
senior partner in Andersen, Weinroth & Co., L.P. a merchant banking firm. He has
held such positions since 1994 and the beginning of 1996, respectively. From
November 1993 until December 1995, he was Co-Chairman and
Co-Chief Executive Officer of VETTA Sports, Inc., a supplier of bicycle parts
and accessories. From 1989 to the present, Mr. Weinroth has been Co-Chairman of the Board of Directors
and Chairman of the Investment Committee of First Brittania N.V., an
international buyout firm.mezzanine and equity fund. He is also a director of the Central
Asian-American Enterprise Fund, a development lender and investor in five
countries formerly in the Soviet Union; the Fund receives its capital from an
agency of the United States government. Mr. Weinroth qualifies as an independent
Director as defined in the Company's Certificate of Incorporation.
Meetings of Board of Directors
The members of the Audit Committee of the Board of Directors are Messrs.
McDonald, Weinroth and Reinhart. The Audit Committee is chaired by Mr. McDonald
and is responsible for reviewing and approving the scope of the annual audit
undertaken by the Company's independent accountants and meeting with them to
review the results of their work as well as their recommendations. The Audit
Committee has direct access to the Company's independent accountants and also
reviews the fees of independent accountants and recommends to the Board of
Directors the appointment of independent accountants.
The Internal Audit Manager for the Company reports directly to the Audit
Committee on, among other things, the Company's compliance with certain Company
procedures which are designed to enhance management's considerationunderstanding of alloperating
issues and the results of the Audit Department's approximately 50 audits
annually of the various aspects of major transactions involving the Company.Company's business. The Audit Committee
has
direct control overauthorizes staffing includingand compensation of the internal audit department. The
Company's Chief
4
Accounting Officer reports directly to the Audit Committee on
significant accounting issues. During the year ended October 31, 19981999 the Audit
Committee met twice.twice and had numerous telephonic meetings with the Internal Audit
Manager.
The Compensation Committee consists of Messrs. McDonald and Weinroth. The
Compensation Committee is currently chaired by Mr. Weinroth and is active in
reviewing salaries, bonuses and other forms of compensation for officers and key
employees of the Company, in establishing salaries and in other compensation and
personnel areas as the Board of Directors from time to time may request. For a
discussion of the criteria utilized
4
and factors considered by the Compensation Committee in reviewing and
establishing executive compensation, see "Report of the Compensation Committee"
below. During the year ended October 31, 19981999 the Compensation Committee met
once.
The Company has no executive or nominating committees. Procedures for
nominating persons for election to the Board of Directors are contained in the
Company's Bylaws.
During the year ended October 31, 19981999 the Board of Directors held four
regularly scheduled meetings and three telephonic meetings. In addition, the
directors considered Company matters and had numerous communications with the
Chairman of the Board of Directors and others wholly apart from the formal
meetings.
Director Compensation
Each director who is not an officer of the Company is paid $2,000 per
regularly scheduled meeting attended, $1,000 for each committee meeting attended
on a board meeting day, $2,000 for each committee meeting attended on a day
other than a board meeting day, $2,000 for special meetings attended and a
bonus. From time to time, these directors are also granted stock options. All
directors are reimbursed for expenses related to their attendance at Board of
Directors and committee meetings. During the year ended October 31, 1998,1999, Mr.
McDonald received $28,000,$32,000, Mr. Greenbaum received $25,000$28,000 and Mr. Weinroth
received $28,000$32,000 including a bonus paid in January 1999.2000. In addition, on June 4,
1999 these three directors were granted 5,000 stock options each at an exercise
price of $8.375 (market price on the date of the grant). The options vest 33.3%
a year starting on the first anniversary date of the grant and terminate June 3,
2009.
RATIFICATION OF THE SELECTION OF AND
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The selection of independent accountants to examine financial statements
of the Company made available or transmitted to shareholders and filed with the
Securities and Exchange Commission for the year ended October 31, 19992000 is to be
submitted to the meeting for ratification. Ernst & Young LLP has been selected
by the Board of Directors of the Company to examine such financial statements.
The Company has been advised that a representative of Ernst & Young LLP
will attend the Annual Meeting to respond to appropriate questions and will be
afforded the opportunity to make a statement if the representative so desires.
5
APPROVAL OF AMENDMENTS TO THE
1983 STOCK INCENTIVEOPTION PLAN
General Information
The purpose ofShareholders are being asked to consider and approve a proposal to amend
the 1989 Stock Option Plan is(the "Plan"), as set forth in Exhibit A hereto, to
aid the Company and its affiliates in
recruiting and retaining key employees and(1) allow certain amendments, alterations or discontinuation to motivate these employees to make
their best efforts on behalf of the Company and its affiliates by giving
incentives through the granting of Awards. The Plan will benefit the Company
because the employees will have an interest in the welfare of the Company due to
their ownership of Shares.
The Plan is not subject to the Employee Retirement Income Security Act of
1974 ("ERISA").
The total number of Shares which may be issued under the Plan is 1,500,000.
The maximum number of Shares for which Options or Stock Appreciation Rights may
be granted during a calendar year to any Participant shall be 300,000. The
Shares may consist, in whole or in part, of unissued Shares or treasury Shares.
Shares which are subject to Awards which terminate or lapse may be granted again
under the Plan.
The principal features of the Plan are summarized below, but the summary is
only an overview and you should refermade to the
Plan itself.
Administration
The Plan will be administered and interpreted bywithout obtaining approval of a Committeemajority of the Company's Boardshares entitled to vote
thereon and (2) to extend the term of Directors. Currently this is the Compensation Committee. The
Committee may delegate its duties and powers to any subcommittee consisting
solely of at least two individuals who are each "non-employee directors" within
the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended
(the "Act") and "outside directors" within the meaning of Section 162(m) of the
Internal Revenue Code (the "Code").
The Committee has the authority to interpret the Plan. The Committee may
also adopt, amend or rescind any rules and regulations it considers to be
helpful or necessary to carry out the purpose of the Plan. Any interpretation of
the Plan or any Award by the Committee is final. The Committee will require
payment if, under federal, state or local tax laws, you owe any taxes due to the
exercise or settlement of an Award.
If the chief executive officer of the Company is a member of the Board, the
Board by specific resolution may constitute such chief executive officer as a
committee of one which shall have the authority to grant Awards of up to an
aggregate of 300,000 Shares in each calendar year to Participants who are (i)
not subject to the rules promulgated under Section 16 of the Act (or any
successor section thereto) or (ii) covered employees (or anticipated to become
covered employees) as such term is defined in Section 162(m) of the Code;
provided however, that such chief executive officer shall notify the Committee
of any such grants made pursuant to this Section 4.
Eligibility
Employees, directors or consultants selected by the Committee are eligible
to participate in the Plan ("Participants"). The Committee will determine the
number of Shares that are covered by the Awards granted to an employee. No Award
may be granted under
6
the Plan anytime after the tenth anniversary of the effective date of the Plan.
The effective date is March 5, 1999, the date of the 1999 annual meeting of
stockholders.
Terms of Options
The Committee has the responsibility to determine the terms and conditions
of each optioncertain options previously granted under
the Plan. The options may be non-qualified,
incentive or other stock options and their terms and conditions are set forth in
the related Award agreements. Stock options granted under the Plan are subjectproposed changes to the termsAmendments and conditions herein and in the Plan, and to any other terms and
conditions that the Committee may determine.
1. The exercise priceTermination section of each option will be determined by the Committee.
The minimum exercise price will be the fair market value of the Shares
subject to the option on the date that the option is granted.
2. Options granted under the
Plan will be exercisable as determined byconform such section to the Committee. However, an option may not be exercised more than ten
years after it was granted.
3. An option may be exercised for allAmendments or from time-to-time, any partTermination Section of the
Shares to which it relates.1999 Hovnanian Enterprises, Inc. Stock Incentive Plan, as
5
approved on March 5, 1999. The exercise date of an option is the
later of the date the notice of exercise of an option is received by
the Company and, if applicable, the date payment is received by the
Company pursuant to clause (i), (ii), (iii) or (iv) in the following
sentence. The purchase price for the Shares purchased upon exercise of
an option is to be paid in full to the Company at the time of
exercise. Payment may be made (i) in cash;(ii) in Shares; (iii) partly
in cash and partly in Shares or (iv) by instructing a stockbroker to
deliver to the Company an amount equal to the option price.
The Committee may grant incentive stock options ("ISOs") which comply with
Section 422 of the Code. Participants who own more than ten percent of the total
voting power of all classes of stock of the Company or any affiliate may not be
granted ISOs unless the option price for such ISO is at least 110% of the ISOs
fair market value and such ISO shall terminate no later than the day preceding
the fifth anniversary of the day on which such ISO was granted. If a Participant
disposes of shares acquired upon the exercise of an ISO within two years after
the grant of such ISO or within one year after such shares were transferred to
the Participant, such Participant shall notify the Company of the disposition
and of the amount realized upon disposition.
Terms of Stock Appreciation Rights
Grants. The Committee may grant a stock appreciation right (an "SAR")
independent of an option or in connection with an option or portion of an
option. If an SAR is granted in connection with an option, the SAR
1. may be granted when the related option is granted, or at any time
prior to the exercise or cancellation of the option;
2. will cover the same number of Shares as covered by the option (or a
lesser number if the Committee so decides); and
3. areterms being extended, subject to
the same terms and conditions as the option, except as
set forth in the Plan.
7
Terms. The exercise price per share of an SAR will be determined by the
Committee. The exercise price will not be less than the greater of
1. the fair market value of a Share on the date that the SAR is granted,
or, for an SAR granted in conjunction with an option, the option price
of the related option, and
2. an amount permitted by applicable laws, rules, by-laws or policies of
regulators or stock exchanges.
Upon exercise of an SAR that is granted independent of an option, the
Participant will be entitled to an amount equal to the excess of the fair market
value of one Share on the exercise date over the exercise price per Share,
multiplied by the number of Shares covered by the SAR.
An SAR granted in conjunction with an option entitles the Participant to
surrender to the Company the unexercised option and to receive in return an
amount equal to the excess of the fair market value of one share on the exercise
date over the option price per share multiplied by the number of Shares covered
by the option surrendered.
The exercise date is the date a notice of exercise is received by the
Company. Payment must be made in cash, in Shares, or partly in cash and partly
in Shares. No fractional Shares will be issued in payment of SARs.
Limitations. The Committee may impose conditions on the exercise or
transfer of SARs.
Limited SARs. The Committee may grant limited SARs that may be exercised
only upon the occurrence of specified events.
Other Stock-Based Awards
Generally. The Committee has sole discretion to grant any of the following
awards:
1. Shares;
2. restricted Shares; and
3. awards valued in reference to the fair market value of Shares.
The Committee determines the terms and conditions of all stock-based awards
which include, but are not limited to:
1. the form of the award;
2. the right and manner in which a Participant can receive an award;
3. the timing of the award;
4. to whom an award will be granted; and
5. the amount of an award.
Performance-Based Awards. These stock-based awards may be granted in a
manner which is deductible by the Company under Section 162(m) of the Internal
Revenue Code. A "Performance-Based Award" is based on the Participant's reaching
certain written performance goals set forth by the Committee. The performance
goals are based on certain
8
financial criteria, such as net income, stock price and return on stockholders'
equity, as described in the Plan. These criteria may relate to the Company, its
affiliates, divisions or units, or any combination thereof, as determined by the
Committee. The maximum amount of a Performance-Based Award will be $2,000,000
annually for any Participant. The Committee will determine whether particular
performance goals have been met and will certify the amount of the
performance-based award. No performance-based award will be paid without the
certification of the Committee. At the discretion of the Committee, the amount
paid may be less than the amount determined by the performance goal formula. The
amount of the performance-based award will be paid at a time determined by the
Committee; however, to the extent permitted by the Committee and consistent with
Section 162(m) of the Internal Revenue Code, a Participant may choose to defer
payment of a performance-based award.
Adjustments
If, after the effective date of the Plan, there is any change in the
outstanding shares of the Company's common stock due to any share dividend or
split, reorganization, recapitalization, merger, consolidation, spin-off,
combination or exchange of shares, other corporate exchange, any distribution to
stockholders of shares other than regular cash dividends or any similar event,
the Committee, in its sole discretion and without liability to any person, may
adjust
1. the number or kind of shares or other securities issued or reserved
for issuanceshareholder approval, pursuant to the Plan or pursuant to outstanding Awards;
2.proposed amendments are reflected in the
option price; or
3. any other affected terms of such Awards.
Change in Control. If there is a "Change in Control" (as defined below) of
the Company, the Committee has sole discretion to take such actions, if any, as
it deems necessary or desirable with respect to any Award, such as (i) the
acceleration of an Award, (ii) the payment of cash in exchange for the
cancellation of an Award and/or (iii) requiring the issuance of substitute
Awards to substantially preserve the value of any affected Award, as of the date
of the Change in Control.
A "Change in Control" of the Company generally is deemed to occur if:
1. any person (with certain exceptions, including the Company's current
controling shareholders and affiliates) becomes the owner of 50% of
the voting power of the Company's voting securities;
2. during any twenty-four month period the majority of the membership of
the Board of Directors changes without approval of two-thirds of the
directors who either were directors at the beginning of the period or
whose election was previously so approved;
3. the Company's stockholders approve a merger or consolidation with
another company where the Company's voting securities outstanding
priortable set forth below.
The proposed amendments to the transaction do not represent more than 65% of voting
power of the Company or the surviving entity; or
9
4. the Company undergoes a complete liquidation or sale or disposition of
all or substantially all of the Company's assets.
No Right to Continued Employment
Receiving grants of Awards under the Plan does not give a Participant any
right to continued employment with the Company or with any of its subsidiaries.
Also, receiving grants of Awards under the Plan does not limit the right of the
Company or any of its affiliates to terminate the employment of a Participant
with the Company or with any of its affiliates.
Nontransferability of Awards
Unless otherwise determined by the Committee, Awards may be transferred
only by the laws of descentplan are briefly summarized as follows:
9. Amendments and distribution. During a Participant's lifetime,
the Participant is the only person who may exercise an Award. In certain
circumstances, this section may be waived by the Committee.
AmendmentsTermination.
The Board may amend, alter or discontinue the Plan, from time-to-time as it
sees fit, except that
1. shareholderbut no amendment,
alteration or discontinuation shall be made which, (a) without the approval is required if such action increasesof
the shareholders of the Company, would increase the total number of shares
reserved for the purposes of the Plan or change the maximum number of shares for
which Options may be issued under the Plan;
2.granted to any Optionee or (b) without the consent of a Participant, no amendment will be allowed if
it has a material effect onan
Optionee, would impair any of the rights or obligations under an Award; and
3.any Option
theretofore granted to such Optionee under the Plan; provided, however, that the
Compensation Committee may amend the Plan in any waysuch manner as it sees fit in order fordeems necessary
to permit the Awards to comply withgranting of Options meeting the requirements of the Code or other
applicable law.
The Committee may not amend the termslaws.
Effects of the Plan relating to Changes in
Control (Section 9(b) of the Plan) after there has been a Change in Control.
Certain Federal Income Tax ConsequencesProposed Amendments
The following is a summarytable provides information on previously granted options
which will be affected by the proposed amendments.
Expiration Date
Current Giving Effect
Dollar Number Expiration To Proposed
Name and Position Value of Options Date Amendments
----------------- ----- ---------- ---- ----------
Ara K. Hovnanian
President, CEO ............. $5.125 225,000 5/4/00 5/4/05
Paul W. Buchanan
SVP - Corporate Controller . $5.125 30,000 5/4/00 5/4/05
Peter S. Reinhart
SVP and General
Counsel/Secretary .......... $5.125 24,000 5/4/00 5/4/05
J. Larry Sorsby
SVP, Treasurer and CFO ..... $5.125 21,000 5/4/00 5/4/05
Other Non-Hovnanian
Executives ................. $5.125 46,000 5/4/00 5/4/05
The Company's Board of certain United States federal income tax
rules with respectDirectors has approved the amendment to the Plan
and recommends that shareholders vote for the Awards granted thereunder. This summary
is not intended to be a complete description of all possible tax consequencesapproval of the Plan andamendment to the
Awards, and Participants will be urgedPlan. Accordingly, the persons named in the enclosed proxy intend to consult their own tax
advisor concerningvote at the
federal, state, local and other tax implicationsmeeting for the approval of the amendment to the Plan unless otherwise directed
by the shareholder appointing them.
APPROVAL OF THE EXECUTIVE SHORT-TERM INCENTIVE PLAN
Shareholders are being asked to consider and, if deemed advisable, to
approve an Executive Short-Term Incentive Plan (the "Incentive Plan") for
executive officers of the Awards granted thereunder.
Incentive Stock Options ("ISOs"). Under present law, Participants will not
realize taxable income upon eitherCompany and its subsidiaries. The Company currently
has a cash bonus plan, in which Messrs. Kevork and Ara Hovnanian participate,
under which annual cash awards are made based on a formula tied to the grant or the exercise of an ISO, and the
Company will not receive an income tax deduction at either time, if Participants
do not sell the Shares acquired by exercising an ISO within either:
10Company's
annual return on equity. Shareholder
6
1. two years after the date of grant of an ISO, or
2. one year after the date of exercise of an ISO,
a subsequent sale will be taxed as mid-term or long-term capital gain or loss.
If, within eitherapproval of the above periods, a Participant disposes ofIncentive Plan is required so that these cash awards to any
"covered employee" can be excluded from the shares
acquired by exercising an ISO, a Participant will, generally, realize as
ordinary income an amount equal to the lesser of:
1. the gain realized$1 million limit on such disposition, or
2. the excess of the fair market value of the shares on the date of
exercise over the exercise price.
In this instance, the Company generally would be entitled to an income tax
deduction equal to the amount recognized as ordinary income, subject to
compliance with Section 162(m) of the Code. Any gain in excess of such amount
that a Participant realizes as ordinary income will be taxed as a short-term,
mid- term or long-term capital gain (depending on the holding period).
Nonqualified Stock Options ("NQSOs"). Under present law, a Participant will
not realize taxable income upon the grant of a NQSO and the Company will not
receive an income tax deduction at such time. Upon exercise of a NQSO, a
Participant will generally realize ordinary income in an amount equal to the
excess of the fair market value of the shares on the date of exercise over the
exercise price. Upon sale of the shares, a Participant will recognize
short-term, mid-term or long-term capital gain depending upon how long the
Participant held the shares. The Company is generally allowed an income tax
deduction equal to the amount recognized as ordinary income, subject, where
applicable, to compliance with Section 162(m) of the Code.
SARs. Amounts received upon exercise of an SAR are taxed as ordinary income
received. The Company is generally allowed an income tax deduction equal to the
amount recognized as ordinary income.
Other Awards. Amounts received upon the grant of Other Awards are
ordinarily taxed at ordinary rates when received. However, if the Other Awards
consist of property subject to a substantial risk of forfeiture the amounts
generally will not be taxed until the substantial risk of forfeiture lapses or
until an election is made under Section 83(b) of the Code. Under Section 162(m)
of the Code, the Company is generally allowed an income tax deduction equal to
the amount recognized as ordinary income.
Compliance with Section 162(m). The Plan should allow certain ISOs, NQSOs,
SARs and Performance-Based Awards granted under the Plan to be treated as
qualified performance-baseddeductible
compensation under Section 162(m) of the Code.
However,Internal Revenue Code of 1986, as
amended (the "Code"). (A "covered employee" is an executive officer named in the
Committee may, from time-to-time, award"Summary Compensation Table" who is acting in such capacity on the last day of
the applicable tax year of the Company and its subsidiaries.) If Incentive Plan
awards do not comply with the requirements of Section 162(m), the Company would
lose the benefit of a compensation deduction to the extent that total
compensation earned by an individual executive officer, including compensation
earned as a result of such Incentive Plan awards, exceeds $1 million in any one
year.
Summary of the Incentive Plan
The following is a brief summary of the terms of the Incentive Plan. The
summary does not deductiblepurport to be complete and is qualified in its entirety by the
full text of the Plan set forth in Exhibit B to this Proxy Statement.
The purpose of the Incentive Plan is to promote the interests of the
Company and its shareholders by providing incentives in the form of periodic
bonus awards ("Awards") to certain senior executive employees of the Company and
its subsidiaries, thereby motivating such executives to attain corporate
performance goals described below while preserving for the benefit of the
Company and its subsidiaries the associated U.S. federal income tax deduction.
Administration
The Incentive Plan is administered by a committee of two or more "outside
directors" as defined under Section 162(m) of the Code.
11Code, unless otherwise
determined by the Company's Board of Directors, who have been designated by the
Board of Directors to act as such a committee. This function currently is
performed by the Company's Compensation Committee. The Compensation Committee,
or its delegate, may select senior executives, who are covered employees or who
the Company anticipates may be covered employees of the Company and its
subsidiaries (the "Participants"), to be granted Awards under the Incentive
Plan.
Awards
A Participant's Award shall be determined based on the achievement of
written performance goals approved by the Compensation Committee. Within 90 days
after the start of a designated performance period, or such lesser time as
permitted by the Incentive Plan, the Committee will establish the objective
performance goals for each Participant. The performance goals for Awards will be
based upon one or more of the following criteria, which may be determined by
reference to the performance of the Company, a subsidiary, or a division or unit
of the Company or a subsidiary: (i) earnings before or after taxes (including
earnings before interest, taxes, depreciation and amortization); (ii) net
income; (iii) operating income; (iv) earnings per share; (v) book value per
share; (vi) return on stockholders' equity; (vii) expense management; (viii)
return on investment before or after the cost of capital; (ix) improvement in
capital structure; (x) profitability of an identifiable business unit or
product; (xi) maintenance or improvement of profit margins;
7
(xii) stock price; (xiii) market share; (xiv) revenue or sales; (xv) costs;
(xvi) cash flow; (xvii) working capital; (xviii) changes in net assets (whether
or not multiplied by a constant percentage intended to represent the cost of
capital); (xix) return on assets; and (xx) independent industry ratings or
assessments. The performance goals may be calculated without regard to
extraordinary items or accounting changes.
Prior to payment of any Award, the Compensation Committee, or its
delegate, will certify that the applicable performance goals have been met. In
connection with such certification, the Compensation Committee, or its delegate,
may decide to pay amounts which are less than the Award otherwise payable for
achievement of the applicable performance goals. The Compensation Committee may
base the decision to reduce the Award on any criteria it deems relevant. Payment
of an Award to a Participant will occur only after such certification and will
be made as determined by the Compensation Committee in its sole discretion after
the end of such performance period. The Compensation Committee may permit a
Participant to defer payment of an Award.
Individual Limit
The maximum Award to any Participant with respect to any fiscal year shall
be $3 million.
Amendment and Termination
The Compensation Committee may at any time amend, suspend or terminate the
Incentive Plan in whole or in part. An amendment, suspension or termination of
the Incentive Plan will not adversely affect the rights or obligations under any
Award granted to a Participant before the amendment, suspension or termination
of the Incentive Plan.
Miscellaneous
A Participant's rights and interest under the Incentive Plan generally may
not be assigned, transferred or encumbered, except in the event of a
Participant's death or as may be approved by the Compensation Committee. No
Award under the Incentive Plan will be construed as giving any employee a right
to continued employment with the Company or its subsidiaries.
Shareholder Approval
Approval of the Incentive Plan requires the affirmative vote of the
holders of a majority of the shares present, or represented by proxy, and
entitled to vote at the meeting.
The Company's Board of Directors has approved the Incentive Plan and
recommends that shareholders vote for the approval of the Incentive Plan.
Accordingly, the persons named in the enclosed proxy intend to vote at the
meeting for the approval of the Incentive Plan unless otherwise directed by the
shareholder appointing them. The Incentive Plan is effective as of November 1,
1999, subject to shareholder approval.
8
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes the compensation paid or accrued by the
Company for the chief executive officer and the other four most highly
compensated executives during the years ended October 31, 1999, 1998 1997 and 1996.1997.
Long-Term Compensation
----------------------------------- -------------------------------------------------- --------------------------------
Annual Compensation Awards
----------------------------------- -------------------------------------------------- --------------------------------
Number of
Other Securities All
Year Annual Restricted Underlying Other
or Compen- Stock Options/ LTIP Compen-
Name and Principal Position Period Salary Bonus(1) sation(2) Awards SARs(3)Awards(3) SARs(4) Payouts sation(4)
------------------------------ ------- ---------- ----------sation(5)
--------------------------- ------ ------ -------- --------- ---------- ---------- ------- ---------
Kevork S. Hovnanian.................Hovnanian ............. 1999 $831,299 $720,000 -- $0 0 N/A $12,313
Chairman of the Board, 1998 $800,232 $668,800 -- $ 0$0 0 N/A $ 9,973
Chairmanand Director of the Board,Company 1997 $778,485 $ 0 -- $ 0$0 0 N/A $ 10,621
and Director of the Company 1996 $786,067 $200,000 -- $ 0 0 N/A $ 10,115$10,621
Ara K. Hovnanian....................Hovnanian ................ 1999 $771,827 $627,321 -- $172,800 75,000 N/A $60,118
President, Chief Executive 1998 $756,107 $668,800 -- $ 0$0 75,000 N/A $ 10,345
President, Chief Executive$10,345
Officer and Director 1997 $713,419 $ 0 -- $ 0$0 75,000 N/A $ 10,992
Officer and Director 1996 $678,610 $200,000 -- $ 0 0 N/A $ 10,481$10,992
of the Company
J. Larry Sorsby.....................Sorsby ................. 1999 $221,317 $156,992 -- $47,098 20,000 N/A $22,060
Senior Vice President, 1998 $232,277 $179,113 -- $ 0$0 20,000 N/A $ 17,601
Senior Vice President,$17,601
Treasurer and Chief 1997 $221,539 $ 0 -- $ 0$0 20,000 N/A $ 14,500
Treasurer and Chief 1996 $198,836 $ 69,997 -- $ 0 0 N/A $ 14,349$14,500
Financial Officer and
Director of the Company
Peter S. Reinhart...................Reinhart ............... 1999 $177,115 $ 76,800 -- $23,040 0 N/A $16,279
Senior Vice President/ 1998 $176,738 $ 86,240 -- $ 0$0 10,000 N/A $ 13,965
Senior Vice President/$13,965
General Counsel and 1997 $159,484 $ 0 -- $ 0$0 10,000 N/A $ 14,991
General Counsel and 1996 $156,804 $ 46,500 -- $ 0 0 N/A $ 12,822$14,991
Director of the Company
John D. Roberts(5)..................Roberts ................. 1999 $186,058 $ 70,000 -- $0 32,500 N/A $ 6,838
Vice President 1998 $138,462 $122,000 -- $ 0$0 0 N/A $ 71,345
Vice President$71,345
Process Redesign 1997 $ 0 $ 0 -- $ 0 0 N/A $ 0
Process Redesign 1996 $ 0 $ 0 -- $ 0$0 0 N/A $ 0
- ----------
Notes:
(1) Includes awards not paid until after year end.
(2) Includes perquisites and other personal benefits unless the aggregate
amount is lesserless than either $50,000 or 10% of the total of annual salary
and bonus reported for the named executive officer.
(3) Represents the right to receive Class A Common Stock after vesting 25% a
year for four years. Any Executive with 20 years of service or who reaches
the age of 58 vests immediately.
(4) The Company does not have a stock appreciation right ("SAR") program.
(4)(5) Includes accruals under the Company's savings and investment retirement
plan (the "Retirement Plan"), deferred compensation plan (the "Deferred
Plan") and term life insurance premiums for each of the named executive
officers for the year ended October 31, 19981999 as follows:
Retirement Deferred Term
Plan Plan Insurance Total
---------- -------- --------- ------------
K. Hovnanian........ $ 9,600Hovnanian ...... $12,000 $ 0 $ 373313 $12,313
A. Hovnanian ...... $12,000 $47,543 $ 9,973
A. Hovnanian........625 $60,168
Sorsby ............ $12,000 $ 9,6009,599 $ 461 $22,060
Reinhart .......... $12,000 $ 3,910 $ 369 $16,279
Roberts ........... $ 6,449 $ 0 $ 745 $10,345
Sorsby..............389 $ 9,600 $ 7,470 $ 531 $17,601
Reinhart............ $ 9,600 $ 3,955 $ 410 $13,965
Roberts............. $ 751 $ 0 $ 224 $ 975
(5) In addition to the compensation listed under note (4) above, Mr. Roberts'
Other Compensation includes $70,370 in relocation compensation.
126,838
9
Option Grants in Last Fiscal Year
The following table provides information on option grants in fiscal 19981999
to the named executive officers.
Individual Grants Potential
--------------------------------------------------------------------------------------------- Realized Value at
% of Total Assumed Annual
Number of Options Exercise Rates of Stock Price
Securities Granted to or Base Appreciation
Underlying Employees Price for Option Term(1)
Options in Fiscal Per Expiration ----------------------------------------------
Name Granted 19981999 Share Date 5% 10%
---- ---------- ----------- ---------- -------- ---------- ---------- ----------------- ------
Kevork S. Hovnanian.........Hovnanian ...... 0 N/A N/A N/A N/A N/A
Ara K. Hovnanian............Hovnanian ......... 75,000 25.7% $ 8.69 5/14/08 $ 409,764 $1,038,42330.5% $6.00 10/28/09 $283,003 $717,184
J. Larry Sorsby.............Sorsby .......... 20,000 6.9% $ 8.698.1% $8.25 5/14/08 $ 109,270 $ 276,9131/09 $103,768 $262,968
Peter S. Reinhart........... 10,000 3.4% $ 8.69 5/14/08 $ 54,635 $ 138,456
John D. Roberts.............Reinhart ........ 0 N/A N/A N/A N/A N/A
John D. Roberts .......... 7,500 3.0% $8.13 11/30/08 $ 38,323 $ 97,119
John D. Roberts .......... 25,000 10.2% $8.13 12/28/08 $127,744 $323,729
- ----------
Note:
(1) The potential realizable value is reported net of the option exercise
price, but before income taxes associated with exercise. These amounts
represent assumed annual compounded rates of appreciation of 5% and 10%
only from the date of grant to the end of the option. Actual gains, if
any, on stock option exercises are dependent on the future performance of
the Company's Class A Common Stock, overall stock market conditions, and
the optionee's continued employment through the vesting period. The
amounts reflected in this table may not necessarily be achieved.
Aggregated Option Exercises During the Year Ended
October 31, 19981999 and Option Values at October 31, 19981999
The following table provides information on option exercises during the
year ended October 31, 19981999 by the named executive officers and the value of
such officers' unexercised options at October 31, 1998.1999.
Securities Underlying
Number of Unexercised Value of Unexercised
Shares Options at In-the-Money Options at
Acquired October 31, 1998(1)1999(1) October 31, 1998(1)1999(1)
On Value --------------------------- --------------------------------------------- -------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
------- --------- --------- ------------ -------------- ---------------- -------- -------- ----------- ------------- ----------- -------------
Kevork S. Hovnanian.........Hovnanian ........ 0 $0 None None N/A N/A
Ara K. Hovnanian............Hovnanian ........... 0 $0 595,000 125,000 $800,898 $100,000620,000 175,0000 $283,008 $28,125
J. Larry Sorsby.............Sorsby ............ 0 $0 82,667 33,333 $137,95989,333 46,667 $ 26,66637,500 None
Peter S. Reinhart...........Reinhart .......... 0 $0 57,333 16,667 $127,97960,667 13,333 $ 13,33438,438 None
John D. Roberts.............Roberts ............ 0 $0 None None32,500 N/A N/ANone
- ----------
Note:
(1) The closing price of the Class A Common Stock on the last trading day of
October, 19981999 on the American Stock Exchange was $8.50.$6.375.
Ten-Year Option Repricings
For the year ended October 31, 1998,1999, there was no adjustment or amendment
to the exercise price of the stock options previously awarded.
Report of the Compensation Committee
The Compensation Committee is charged with the responsibility of
determining the cash and other incentive compensation, if any, to be paid to the
Company's executive
10
officers and key employees. The amount and nature of the compensation received
by the 13
Company's executives during the year ended October 31, 19981999 was
determined in accordance with the compensation program and policies described
below.
The executive compensation program is designed to attract, retain and
reward highly qualified executives while maintaining a strong and direct link
between executive pay, the Company's financial performance and total shareholder
return. The executive compensation program contains three major components: base
salaries, annual bonuses and stock options. In establishing the three major
components for each executive, the Compensation Committee reviews, as part of
its criteria, the compensation received by other executives in the homebuilding
industry.
Base Salary
The Compensation Committee believes that, due to the Company's success in
its principal markets, other companies seeking proven executives may view
members of the Company's highly experienced executive team as potential targets.
The base salaries paid to the Company's executive officers during the year ended
October 31, 19981999 generally were believed to be necessary to retain their
services.
Base salaries, including that of Mr. K. Hovnanian, the Company's Chairman
of the Board, are reviewed annually and are adjusted based on the performance of
the executive, any increased responsibilities assumed by the executive, average
salary increases or decreases in the industry and the going rate for similar
positions at comparable companies. Mr. A. Hovnanian set the year ended October
31, 19981999 base salaries of the Company's executive officers. Each executive
officer's base salary, including the base salary of Mr. K. Hovnanian, was
reviewed in accordance with the above criteria by the members of the
Compensation Committee and thereafter approved.
Annual Bonus Program
The Company maintains an annual bonus program under which executive
officers and other key management employees have the opportunity to earn cash
bonuses. The annual bonus program is intended to motivate and reward executives
for the achievement of individual performance objectives and for the attainment
by the Company of strategic and financial performance goals, including levels of
return on equity.
The bonus program for Mr. K. Hovnanian, Chairman of the Board and Mr. A.
Hovnanian, President and Chief Executive Officer pays a fixed amount bonus based
on the Company's Return on Equity ("ROE"). All other executive officers
participate in a plan based on ROE but instead of receiving a fixed amount, they
receive a percentage of their base salary. As the Company's ROE reaches higher
targeted levels, the bonus percentage of salary increases.
The Company's annual bonus program is designed to be cost and tax
effective. In accordance with section 162(m) of the Code, the bonus plan for
executives receiving compensation in excess of $1,000,000 was approved by
shareholders at the April 15, 19961997 Annual Meeting of Shareholders and reflects
the Compensation Committee's policies of maximizing corporate tax deductions,
wherever feasible.
1411
Stock OptionIncentive Plan
The OptionStock Incentive Plan established by the Board of Directors is intended
to align the interests of the Company's executives and shareholders in the
enhancement of shareholder value. The ultimate value received by option holders
is directly tied to increases in the Company's stock price and, therefore, stock
options serve to closely link the interests of management and shareholders and
motivate executives to make decisions that will serve to increase the long-term
total return to shareholders. Additionally, grants under the OptionStock Incentive
Plan include vesting and termination provisions which the Compensation Committee
believes will encourage option holders to remain employees of the Company.
The OptionStock Incentive Plan is administered by the Compensation Committee.
See "Option Grants in Last Fiscal Year" above. No member of the Compensation
Committee, while a member, is eligible to participate in the OptionStock Incentive
Plan.
COMPENSATION COMMITTEE
Stephen D. Weinroth
Desmond P. McDonald
Compensation Committee Interlocks and Insider Participation
Mr. Weinroth is Chairman of the Compensation Committee which also includes
Mr. McDonald. Both Messrs. McDonald and Weinroth are non-employee directors and
were never officers or employees of the Company. See "CERTAIN TRANSACTIONS" for
information concerning Mr. Greenbaum's business relationship with the Company.
Performance Graph
The following graph compares on a cumulative basis the yearly percentage
change over the onetwo and five year periods ending October 31, 19981999 in (i) the
total shareholder return on the Class A Common Stock of the Company with (ii)
the total return on the Standard & Poor's 500 Index and with (iii) the total
shareholder return on the peer group of eighteen companies. Such yearly
percentage change has been measured by dividing (i) the sum of (a) the amount of
dividends for the measurement period, assuming dividend reinvestment, and (b)
the price per share at the end of the measurement period less the price per
share at the beginning of the measurement period, by (ii) the price per share at
the beginning of the measurement period. The price of each unit has been set at
$100 on October 31, 19931997 and 19971994 for the preparation of the graphs. The peer
group index is composed of the following companies: Centex Corporation, D R
Horton, Inc., Engle Homes, Inc., Inco Homes Corporation, Kaufman & Broad Home
Corporation, Lennar Corporation, Orleans Homebuilders, Inc., Presley Companies,
Pulte Corporation, Rottlund, Inc., Ryland Group, Inc., Schuler Homes, Inc.,
Standard Pacific Corporation, Sundance Homes, Inc., Toll Brothers, Inc., U S
Home Corporation, Washington Homes, Inc., and Zaring National Corporation.
Note: The stock price performance shown on the following graph is not
necessarily indicative of future price performance.
1512
Comparison of One-YearTwo-Year Cumulative Total Return of Hovnanian Enterprises, Inc.,
the S&P 500 Index and a Peer Group Index (October 31)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
10/97 10/98
----- -----
Hovnanian Enterprises 100.00 114.286
Peer Group Index 100.00 116.967
S&P 500 Index 100.00 121.989[GRAPHIC OMITTED]
Comparison of Five-Year Cumulative Total Return of Hovnanian Enterprises, Inc.,
the S&P 500 Index and a Peer Group Index (October 31)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
1933 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
Hovnanian Enterprises 100.00 33.80 40.14 33.80 41.90 47.89
Peer Group Index 100.00 61.39 77.80 69.38 112.63 131.79
S&P 500 Index 100.00 103.87 131.33 162.98 215.32 262.66
16[GRAPHIC OMITTED]
13
CERTAIN TRANSACTIONS
The Company's Board of Directors has adopted a general policy providing
that it will not make loans to officers or directors of the Company or their
relatives at an interest rate less than the interest rate at the date of the
loan on six month U.S. Treasury Bills, that the aggregate of such loans will not
exceed $3,000,000 at any one time, and that such loans will be made only with
the approval of the members of the Company's Board of Directors who have no
interest in the transaction. At October 31, 1998,1999, there was one loanwere two loans under
this policy to Mr. K. Hovnanian, Chairman of the Board amounting to $311,000 and
Mr. A. Hovnanian, President, Chief Executive Officer and a Director of the
Company amounting to $2,407,000, both for personal matters, which amounted to $2,117,000 at an interest rate
equal to the six month U.S. Treasury Bill.
The Company provides property management services to various limited
partnerships including one partnership in which Mr. A. Hovnanian is general
partner, and members of his family and certain officers and directors of the
Company are limited partners. At October 31, 1998,1999, no amounts were due the
Company by these partnerships.
Mr. Arthur Greenbaum is a senior partner of Greenbaum, Rowe, Smith, Ravin,
Davis & Himmel, a law firm retained by the Company during the year ended October
31, 1998.1999.
GENERAL
The expense of this solicitation is to be borne by the Company. The
Company may also reimburse persons holding shares in their names or in the names
of their nominees for their expenses in sending proxies and proxy material to
their principals.
Unless otherwise directed, the persons named in the accompanying form of
proxy intend to vote all proxies received by them in favor of the election of
nominees to the Board of Directors of the Company named herein, and in favor of the
ratification of selected independent accountants.accountants, for approval of amendment to
the 1983 Stock Option Plan, and approval of the Senior Executive Short Term
Incentive Plan. All proxies will be voted as as~specified.
Each share of Class A Common Stock entitles the holder thereof to one vote
and each share of Class B Common Stock entitles the holder thereof to ten votes.
Votes of Class A Common Stock and Class B Common Stock will be counted together
without regard to class and will be certified by the Inspectors of Election, who
are employees of the Company. Notwithstanding the foregoing, the Company's
Certificate of Incorporation provides that each share of Class B Common Stock
held, to the extent of the Company's knowledge, in nominee name by a
stockbroker, bank or otherwise will be entitled to only one vote per share
unless the Company is satisfied that such shares have been held, since the date
of issuance, for the benefit or account of the same beneficial owner of such
shares or any permitted transferee. Beneficial owners of shares of Class B
Common Stock held in nominee name wishing to cast ten votes for each share of
such stock must (i) obtain from their nominee a proxy card designed for
beneficial owners of Class B Common Stock, (ii) complete the certification on
such card and (iii) execute the card and return it to their nominee. The Company
has also supplied nominee holders of Class B Common Stock with specially
designed proxy cards to accommodate the voting of the Class B Common Stock.
14
In accordance with the Company's Certificate of Incorporation, shares of Class B
Common Stock held in nominee name will be entitled to ten votes per share only
if the beneficial 17
owner proxy card or the nominee proxy card relating to such
shares is properly completed and received by Boston EquiServe, the Company's transfer
agent, not less than 3 nor more than 20 business days prior to March 5, 1999.16, 2000.
Completed proxy cards should be sent to P.O. Box 9379, Boston, Massachusetts
02205-9956, Attention: Proxy Department.
All items to be acted upon at this Annual Meeting of Shareholders will be
determined by a majority of the votes cast. Mr. K. Hovnanian and certain members
of his family have informed the Company that they intend to vote in favor of all
proposals submitted on behalf of the Company. Because of the voting power of Mr.
K. Hovnanian and such members of his family, all of the foregoing proposals are
assured passage.
Management does not intend to present any business at the meeting other
than that set forth in the accompanying Notice of Annual Meeting of
Shareholders, and it has no information that others will do so. If other matters
requiring the vote of the shareholders properly come before the meeting and any
adjournments thereof, it is the intention of the persons named in the
accompanying form of proxy to vote the proxies held by them in accordance with
their judgment on such matters.
SHAREHOLDER PROPOSALS FOR THE
20002001 ANNUAL MEETING
Shareholder proposals for inclusion in the proxy materials related to the
20002001 Annual Meeting of Shareholders must be received by the Company no later
than November 30, 1999.2000. To be properly brought before the Annual Meeting, any
proposal must be received 45 days prior to the 2001 Annual Meeting.
By Order of the Board of Directors
HOVNANIAN ENTERPRISES, INC.
Red Bank, New Jersey
January 26, 2000
15
1999
18
1999Exhibit A
HOVNANIAN ENTERPRISES, INC.
STOCK INCENTIVE PLAN
1. Purpose of the1983 Stock Option Plan
(As amended and restated May 4, 1990,
and amended through May 14, 1998)
The purpose of the 1983 Stock Option Plan (the "Plan") is to aid the Companymake stock
options for Common Stock of Hovnanian Enterprises, Inc. (the "Company")
available to certain officers and its Affiliates in
recruiting and retaining key employees directors or consultants of outstanding
ability and to motivate such employees, directors or consultants to exert their
best efforts on behalf of the Company and its
Affiliates by providing incentives
through the granting of Awards. The Company expects that it will benefit from
the added interest which such key employees, directors or consultants will have
in the welfare of the Company assubsidiaries to give them a result of their proprietarygreater personal interest in the success of the
enterprise and an added incentive to continue and advance in their employment.
1. AMOUNT AND SOURCE OF STOCK: Except as otherwise permitted pursuant to
paragraph 8 hereof, the total number of shares of the Company's success.
2. Definitions
The following capitalized terms used inCommon Stock
which may be issued under the Plan haveshall not exceed 1,000,000. These shares may
be authorized and unissued shares or issued and reacquired shares, as the respective
meanings set forth in this Section:
(a) Act: The Securities Exchange Act of 1934, as amended, or any successor
thereto.
(b) Affiliate: With respect to the Company, any entity directly or
indirectly controlling, controlled by, or under common control with,
the Company or any other entity designated by the Board in which the
Company or an Affiliate has an interest.
(c) Award: An Option, Stock Appreciation Right or Other Stock-Based Award
granted pursuant to the Plan.
(d) Beneficial Owner: A "beneficial owner", as such term is defined in
Rule 13d-3 under the Act (or any successor rule thereto).
(e) Board: The Board
of Directors of the Company.
(f) Change in Control:Company (the "Board of Directors") may from time to time
determine. The occurrencenumber of any of the following events:
(i) any Person (other than a Person holding securities representing
10% or more of the combined voting powershares of the Company's outstanding
securities asCommon Stock available for
grant of options under the Plan shall be decreased by the sum of the Effective Date,number of
shares with respect to which options have been issued and are then outstanding
and the number of shares issued upon exercise of options, and shall be increased
due to the expiration or any Family Membertermination of suchoptions which have not been exercised.
2. EFFECTIVE DATE AND TERM OF PLAN: This Plan (as amended and restated)
shall, subject to shareholder approval, be effective May 4, 1990. Options may be
granted under the Plan on or before May 3, 2000.
3. ADMINISTRATION: The Plan shall be administered by a Person,committee of the
Board of Directors (the "Committee") consisting of not less than three directors
of the Company any trusteeto be appointed by, and to serve at the pleasure of, the Board of
Directors. The Committee shall have full power to interpret the Plan and to
establish and amend rules and regulations for its administration. The Board of
Directors may from time to time appoint members of the Board of Directors in
substitution for or other fiduciary holding securities
under an employee benefit planin addition to members previously appointed and may fill
vacancies in the Committee. The Board of Directors or the Committee may
establish a subcommittee (the "Subcommittee") to award options to such key
employees (other than executive officers) as the Subcommittee shall determine
subject to such limitations as may be set by the Board of Directors. The
Subcommittee shall consist of one or more directors of the Company who shall be
appointed by the Board of Directors or by the Committee and who may but need not
be members of the Committee.
4. SELECTION: From time to time the Committee shall determine, from among
the key employees of the Company or any company owned,
directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock of the
Company), becomes the Beneficial Owner, directly or indirectly, of
securities of the Company, representing 50% or more of the combined
voting power of the Company's then-outstanding securities;
(ii) during any period of twenty-four consecutive months (not
including any period prior to the Effective Date), individuals who at
the beginningits subsidiaries, which of such period constituteemployees
shall be granted options under the Board,Plan (the "Optionees"), the number of shares
subject to each option, and any new
director (other than (A) a director nominated by a Person who has
entered into an agreementwhether each option shall comply with the A-1
Company to effect a transaction described in Sections 2(f)(i), (iii)
or (iv)provisions
of the Plan or (B) a director nominated by any Person
(including the Company) who publicly announces an intention to take or
to consider taking actions (including, but not limited to, an actual
or threatened proxy contest) which if consummated would constitute a
Change in Control) whose election by the Board or nomination for
election by the Company's shareholders was approved in advance by a
voteSection 422A of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority thereof;
(iii) the consummation of any transaction or series of transactions
under which the Company is merged or consolidated with any other
company, other than a merger or consolidation which would result in
the shareholders of the Company immediately prior thereto continuing
to own (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 65% of the
combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation; or
(iv) the Company undergoes a complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets, other than a liquidation of
the Company into a wholly-owned subsidiary.
(g) Code: The Internal Revenue Code of 1986, as amended (the "Code")
and be designated an Incentive Stock Option.
A-1
5. TERMS OF OPTIONS: (a) Option Period and Exercise of Options: The
Committee shall determine in its discretion the dates after which each option
granted under the Plan (an "Option") may be exercised in whole or any successor
thereto.
(h) Committee: The Compensation Committeein part and
the date after which such Option may no longer be exercised (the "Termination
Date"), which date shall not be later than the day preceding the tenth
anniversary of the Board.
(i) Company: Hovnanian Enterprises, Inc., a Delaware corporation.
(j) Disability: Inability of a Participant to performdate when granted. The Committee may, in all material
respects his duties and responsibilitiesits sole discretion,
accelerate the date after which an Option may be exercised in whole or in part.
In exercising an Option, the Optionee may exercise less than the full
installment available to the Company, or any
SubsidiaryOptionee, but the Optionee must exercise the Option
in full shares of Common Stock of the Company, by reason of a physicalCompany. An Option which has not been
exercised on or mental
disability or infirmity which inability is reasonably expectedprior to be
permanent and has continued (i) for a period of six consecutive months
or (ii) such shorter period as the Board may reasonably determine in
good faith. The Disability determinationits Termination Date shall be in the sole
discretion of the Board and a Participant (or his representative)
shall furnish the Board with medical evidence documenting the
Participant's disability or infirmity which is satisfactory to the
Board.
(k) Effective Date: March 5,1999
(l) Fair Market Value: On a given date, the arithmetic mean of the high
and low prices of the Shares as reported on such date on the Composite
Tape of the principal national securities exchange on which such
Shares are listed or admitted to trading, or, if no Composite Tape
exists for such national securities exchange on such date, then on the
principal national securities exchange on which such Shares are listed
or admitted to trading, or, if the
A-2
Shares are not listed or admitted on a national securities exchange,
the arithmetic mean of the per Share closing bid price and per Share
closing asked price on such date as quoted on the National Association
of Securities Dealers Automated Quotation System (or such market in
which such prices are regularly quoted), or, if there is no market on
which the Shares are regularly quoted, the Fair Market Value shall be
the value established by the Committee in good faith. If no sale of
Shares shall have been reported on such Composite Tape or such
national securities exchange on such date or quoted on the National
Association of Securities Dealer Automated Quotation System on such
date, then the immediately preceding date on which sales of the Shares
have been so reported or quoted shall be used.
(m) Family Member:
(i) any Person holding securities representing 10% or more of the
combined voting power of the Company's outstanding securities as of
the Effective Date;
(ii) any spouse of such a person;
(iii) any descendant of such a person;
(iv) any spouse of any descendant of such a person; or
(v) any trust for the benefit of any of the aforementioned persons.
(n) ISO: An Option that is also an incentive stock option granted pursuant
to Section 6(d) of the Plan.
(o) LSAR: A limited stock appreciation right granted pursuant to Section
7(d) of the Plan.
(p) Other Stock-Based Awards: Awards granted pursuant to Section 8 of the
Plan.
(q) Option: A stock option granted pursuant to Section 6 of the Plan.
(r)cancelled.
(b) Option Price: The purchase price per Shareshare of Common Stock purchased
under Options granted pursuant to the Plan (the "Option Price") shall be
determined by the Committee and shall not be less than the Fair Market Value of
the Common Stock of the Company on the date the Option is granted. The "Fair
Market Value" of the Common Stock of the Company on the date of the Company's
initial public offering of Common Stock shall be the public offering price. On
any subsequent date, the "Fair Market Value" shall be deemed, for all purposes
under this Plan, to be the mean between the high and low sale prices of the
Common Stock of the Company reported as having occurred on any Stock Exchange on
which the Company's Common Stock may be listed and traded on the date the Option
is granted, or if there is no such sale on that date, then on the last preceding
date on which such a sale was reported. The Option Price shall be paid in full
upon the exercise of the Option by certified or bank cashier's check payable to
the order of the Company, by the surrender or delivery to the Company of shares
of its Common Stock or by any other means acceptable to the Committee, and the
stock purchased shall thereupon be promptly delivered, provided, however, that
the Committee may, in its discretion, require that an Optionee pay to the
Company at the time of exercise, or at such later date as the Company shall
specify, such amount as the Committee deems necessary to satisfy the Company's
obligation to withhold Federal, state or local income or other taxes incurred by
reason of the exercise or the transfer of shares thereupon. No Optionee or his
legal representatives, legatees or distributees, as the case may be, will be
deemed to be a holder of any shares pursuant to exercise of an Option as determined
pursuant to Section 6(a)until the
date of the Plan.
(s) Participant: An employee, director or consultant who is selected by
the Committeeissuance of a stock certificate to participate in the Plan.
(t) Performance-Based Awards: Certain Other Stock-Based Awards granted
pursuant to Section 8(b)him for such shares. Any cash
proceeds of the Plan.
(u) Person: A "person", as such term issale of stock subject to Options are to be added to the general
funds of the Company and used for purposesits general corporate purposes. In no event
shall the Option Price be less than the par value of a share of Common Stock of
the Company.
(c) Special Rules Regarding Incentive Stock Options Granted to Certain
Employees: Notwithstanding the provisions of subsections (a) and (b) of this
section, no Incentive Stock Option shall be granted to any employee who, at the
time the Option is granted, owns (directly, or within the meaning of Section
13(d)
or 14(d)425(d) of the Act (or any successor section thereto).
(v) Plan: The 1999 Hovnanian Enterprises, Inc. Stock Incentive Plan.
(w) Shares: SharesCode) more than ten percent of commonthe total combined voting power of
all classes of stock of the Company.
(x) Stock Appreciation Right: A stock appreciation right granted pursuant
to Section 7Company or any subsidiary corporation, unless (a)
the Option Price under the Option is at least 110 percent of the Plan.
(y) Subsidiary: AFair Market
Value of the stock subject to the Option at the time of the grant and (b) the
Option by its terms is not exercisable after the expiration of five years from
the date it is granted.
A-2
(d) Escrow Account and Special Rules Regarding Incentive Stock Options
Granted Prior to May 4, 1990: Notwithstanding the foregoing paragraphs, the
Optionee may, in the sole dis cretion of the Committee, purchase the full number
of shares of Common Stock with respect to which the Option has been granted,
subject to the condition that any shares of Common Stock transferred to the
Optionee under installments of the Option which would not have been currently
exercisable (in accordance with the terms of the preceding paragraph) shall be
placed in an escrow account ("Escrow Account"). Shares held in the Escrow
Account shall be registered in the name of the Optionee, and all dividend,
voting, liquidation and other rights of ownership with respect to shares held in
the Escrow Account shall belong to the Optionee, except that the Optionee may
not sell, pledge, or otherwise transfer such shares. As shares held in the
Escrow Account would have become exercisable (in accordance with the terms of
the preceding paragraph) they shall be withdrawn from the Escrow Account. The
Optionee shall have free and clear title to all shares withdrawn from the Escrow
Account, including the right to sell, pledge or otherwise transfer the shares.
Upon termination of the Optionee's employment with the Company or a subsidiary
thereof, all shares held in the Escrow Account on the date of termination of
employment shall be subject to a right of repurchase in favor of the Company.
The period of the right of repurchase shall run for 30 days commencing with the
date the Optionee's employment with the Company or a subsidiary thereof
terminates. During the period of the right of repurchase the Company shall have
the right to repurchase from the Optionee at the Option Price all shares held in
the Escrow Account.
Notwithstanding the foregoing paragraphs, Incentive Stock Options granted
prior to May 4, 1990 shall, by their terms, not be exercisable while there is
outstanding any Incentive Stock Option which was granted, before the granting of
such option, to such Optionee to purchase stock in the Company or in a
corporation which at the time of the granting of such option is a subsidiary
corporation as definedof the Company or in a predecessor corporation of the Company or any
such subsidiary. For the purpose of this paragraph an Incentive stock Option is
outstanding until it is exercised in full or expires by reason of lapse of time.
For the purposes of this paragraph the term "predecessor corporation" means a
corporation which was a party to a transaction described in Section 424(f)425(a) of
the Code (or(irrespective of whether a substitution or assumption under such
section was in fact effected) with the Company or a corporation which at the
time the new Incentive Stock Option is granted is a related corporation of the
Company or a predecessor corporation of any successor section thereto).such corporations.
(e) Nontransferability of Options: Each option shall, during the
Optionee's lifetime, be exercisable only by the Optionee, and neither it nor any
right hereunder shall be transferable otherwise than by will or the laws of
descent and distribution or be subject to attachment, execution or other similar
process. In the event of any attempt by the Optionee to alienate, assign,
pledge, hypothecate or otherwise dispose of his Option or of any right
hereunder, except as provided for herein, or in the event of any levy or any
attachment, execution or similar process upon the rights or interest hereby
conferred, the Company may terminate his Option by notice to the Optionee and it
shall thereupon become null and void.
A-3
3. Shares Subject(f) Cessation of Employment of Optionee: If, prior to the Termination
Date, the Optionee ceases to be employed by the Company or a subsidiary thereof
(otherwise than by reason of death or disability within the meaning of Code
Section 22(e)(3)), each Option to the extent not previously exercised shall
immediately terminate together with all other rights hereunder.
(g) Death or Disability of Optionee: In the event of the death of the
Optionee, prior to the Termination Date, while employed by the Company or a
subsidiary thereof, each Option shall remain exercisable prior to the
Termination Date for a period of one year after the date of the Optionee's death
by the person or persons to whom the Optionee's rights under each Option shall
pass by will or by the applicable laws of descent and distribution to the extent
that the Optionee was entitled to exercise the option on the date of his death,
and thereafter all Options to the extent not previously exercised shall
terminate together with all other rights hereunder. If prior to the Termination
Date the Optionee ceases to be employed by the Company or a subsidiary thereof
by reason of disability within the meaning of Code section 22(e)(3), each Option
to the extent not previously exercised shall remain exercisable prior to the
Termination Date for a period of one year from the date of cessation of
employment, and thereafter all Options to the extent not previously exercised
shall terminate together with all other rights hereunder.
6. LIMITATION ON GRANTS OF INCENTIVE STOCK OPTIONS: With respect to
Incentive Stock Options granted prior to May 4, 1990, the aggregate fair market
value (determined as of the date the Option is granted) of the Common Stock for
which any employee may be granted Incentive Stock Options in any calendar year
under this and any other stock option plan maintained by the Company and/or its
subsidiaries shall not exceed (a) $100,000 plus (b) the "carryover amount" for
that calendar year. The "carryover amount" with respect to a calendar year shall
equal (a) one-half of the sum of the excess, for each of the preceding three
calendar years (excluding years prior to 1981) of $100,000 over the fair market
value (determined as of the time the option is granted) of the Common Stock for
which the employee was granted incentive stock options under this and any other
stock option plan maintained by the Company and/or its subsidiaries, minus (b)
the amount of any such excess used as a carryover amount in the grant of
incentive stock options in any preceding calendar year. For purposes of this
paragraph, the amount of options granted in any calendar year shall be treated
as first using up the $100,000 limitation for that year and any additional
grants shall be treated as using up unused carryover amounts in the order of the
calendar years in which the carryover amounts arose.
With respect to Incentive Stock Options granted subsequent to December 31,
1986, the aggregate fair market value (determined as of the date the Option is
granted) of the Common Stock with respect to which Incentive Stock Options are
exercisable for the first time in any calendar year under this and any other
stock option plan maintained by the Company and/or its subsidiaries shall not
exceed $100,000.
7. INSTRUMENT OF GRANT: The terms and conditions of each Option granted
under the Plan shall be set forth in an instrument designated "Incentive Stock
Option Agreement" substantially in the form of Exhibit 1 attached hereto and
made a part hereof if the Committee determines that such Option shall be an
Incentive Stock Option under the provisions of section 422A of the Code.
Otherwise, the terms and conditions of each Option granted under the Plan shall
be set forth in an instrument designated "Stock
A-4
Option Agreement" substantially in the form of Exhibit 2 attached hereto and
made a part hereof. The Committee may make such modifications in the provisions
of the instrument of grant as it shall deem advisable or as may be required by
any provision of the Code.
8. ADJUSTMENTS UPON CHANGES IN STOCK: If (a) the Company shall at any time
be involved in a transaction to which subsection (a) of section 425 of the Code
is applicable; (b) the Company shall declare a dividend payable in, or shall
subdivide or combine, its Common Stock; or (c) any other event shall occur which
in the judgment of the Board of Directors necessitates action by way of
adjusting the terms of the outstanding Options, the Board of Directors shall
forthwith take any such action as in its judgment shall be necessary to preserve
for the Optionees rights substantially proportionate to the rights existing
prior to such event and to the extent that such action shall include an increase
or decrease in the number of shares of Common Stock subject to outstanding
Options, the number of shares available under paragraph 1 above shall be
increased or decreased, as the case may be, proportionately. The judgment of the
Board of Directors with respect to any matter referred to in this paragraph
shall be conclusive and binding upon each Optionee.
9. AMENDMENTS AND TERMINATION: The Board of Directors may amend or
terminate the Plan but may not (i) without the consent of the Optionee alter or
impair any rights or obligations under any Option theretofore granted or (ii)
without the approval of the holders of a majority of the shares of the Company
voting thereon make any alteration in the Plan, except as provided in paragraph
8 hereof, which operates:
(a) to increase the total number of Sharesshares which may be issued under
the Plan is 1,500,000.
The maximum number of Shares forPlan;
(b) to extend the term during which Options or Stock Appreciation Rights may be granted duringunder the
Plan;
(c) to permit the exercise of an Option after the date on which such
Option would otherwise terminate pursuant to the terms hereof;
(d) to reduce the Option Price per share to less than the Fair
Market Value of the Common Stock on the date the Option is granted; or
(e) to change the class of persons eligible to receive Options under
the Plan.
10. PLAN DOES NOT CONFER EMPLOYMENT OR STOCKHOLDER RIGHTS: The right of
the Company or any subsidiary thereof to terminate (whether by dismissal,
discharge, retirement or otherwise) the Optionee's employment with it at any
time at will, or as otherwise provided by any agreement between the Company and
the Optionee, is specifically reserved. Neither the Optionee nor any person
entitled to exercise the Optionee's rights in the event of the Optionee's death
shall have any rights of a calendar yearstockholder with respect to any Participantthe shares subject to
each Option, except to the extent that a certificate for such shares shall be 300,000. The
Shares may consist, in whole or in part, of unissued Shares or treasury Shares.
The issuance of Shares or the payment of cashhave
been issued upon the exercise of an Award
shall reduce the total number of Shares available undereach Option as provided for herein.
11. DEFINITION: As used in the Plan as applicable.
Sharesthe term "subsidiary" shall have the
meaning assigned to such term in Section 425 of the Code and in addition shall
include both foreign and domestic subsidiaries and any corporation which are subjectbecomes
a subsidiary after the date of adoption of the Plan.
A-5
Exhibit B
HOVNANIAN ENTERPRISES, INC.
SENIOR EXECUTIVE SHORT-TERM INCENTIVE PLAN
1. Purpose. The purpose of the Senior Executive Short-Term Incentive Plan
(the "Plan") is to Awards which terminate or lapse may be granted againadvance the interests of K. Hovnanian (the "Company"), and
its shareholders by providing incentives in the form of periodic bonus awards
("Awards") to certain senior executive employees of the Company and its
affiliates, thereby motivating such executives to attain corporate performance
goals articulated under the Plan.
4. Administration2. Administration. (a) The Plan shall be administered by two or more
"outside directors" as defined under Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code"), unless otherwise determined by the Company's
Board of Directors, who have been designed by the Company's Board of Directors
to act as the committee (the "Committee").
(b) The Committee which may delegate its
duties and powers in whole or in partshall have the exclusive authority to any subcommittee thereof consisting
solely of at least two individuals who are each "non-employee directors" withinselect the meaning of Rule 16b-3senior
executives to be granted Awards under the Act (orPlan, to determine the size and terms
of the Award (subject to the limitations imposed on Awards in Section 4 below),
to modify the terms of any successor rule thereto)Award that has been granted (except for any
modification that would increase the amount of the Award payable to an
executive), to determine the time when Awards will be made and "outside directors" within the meaningperformance
period to which they relate, to establish performance objectives in respect of
such performance periods, and to certify that such performance objectives were
attained; provided, however, that any such action shall be consistent with the
applicable provisions of Section 162(m) of the Code (or any
successor section thereto); provided, however, that any action permitted to be
taken by the Committee may be taken by the Board, in its discretion.Code. The Committee is authorized
to interpret the Plan, to establish, amend and rescind any rules and regulations
relating to the Plan, and to make any other determinations that it deems
necessary or desirable for the administration of the Plan. The Committee may
correct any defect or supply any omission or reconcile any inconsistency in the
Plan in the manner and to the extent the Committee deems necessary or desirable.
Any decision of the Committee in the interpretation and administrationsadministration of the
Plan, as described herein, shall lie within its sole and
absolute discretion and shall be final, conclusive and binding on all parties
concerned (including, but not limited to Participants and their beneficiaries or
successors. Determinations made by the Committee under the Plan need not be
uniform andconcerned.
3. Participation. Awards may be made selectively among Participants, whether or not such
Participants are similarly situated. The Committee shall require payment of any
amount it may determinegranted to be necessary to withhold for federal, state, local or
other, taxes as a result of the exercise of an Award. Unless the Committee
specifies otherwise, the Participant may elect to pay a portion or all of such
withholding taxes by (a) delivery in Shares or (b) having Shares withheld by the
Company from any Shares that would have otherwise been received by the
Participant. The number of Shares so delivered or withheld shall have an
aggregate Fair Market Value sufficient to satisfy the applicable withholding
taxes. If the chief executive officersenior executives of the
Company is a member of the Board,
the Board by specific resolution may constitute such chief executive officer as
a committee of one which shall have the authority to grant Awards of up to an
aggregate of 300,000 Shares in each calendar year to Participantsand its affiliates who are (i)
not subject to the rules promulgated under Section 16 of the Act (or any
successor section thereto) or (ii) covered employees (or anticipated to become
covered employees)"covered employees", as such term is defined in Section
162(m) of the Code;
provided, however, that such chief executive officer shall notifyCode, or who the Committee of any such grants made pursuantanticipates may become covered
employees. An Executive to this Section 4.
5. Limitations
Nowhom an Award may beis granted under the Plan after the tenth anniversary of the
Effective Date, but Awards theretofore granted may extend beyond that date.
A-4
6. Terms and Conditions of Options
Options granted under the Plan shall be as determined by the Committee,
non-qualified or incentive stock options for federal income tax purposes, as
evidenced by the related Award agreements, and shall be subject to the foregoing
and the following terms and conditions and to such other terms and conditions,
not inconsistent therewith, as the Committee shall determine:
(a) Option Price. The Option Price per Share shall be determined by the
Committee, but shall not be less than 100% of the Fair Market Value of the
Shares on the date an Option is granted.
(b) Exercisability. Options granted under the Plan shall be exercisable at
such time and upon such terms and conditions as may be determined by the
Committee, but in no event shall an Option be exercisable more than ten years
after the date it is granted.
(c) Exercise of Options. Except as otherwise provided in the Plan or in an
Award agreement, an Option may be exercised for all, or from time to time any
part, of the Shares for which it is then exercisable. For purposes of Section 6
of the Plan, the exercise date of an Option shall be the later of the date a notice of exercise is received by the Company and, if applicable, the date
payment is received by the Company pursuant to clauses (i), (ii), (iii) or (iv)
in the following sentence. The purchase price for the Shares as to which an
Option is exercised shall be paid to the Company in full at the time of exercise
at the election of the Participant (i) in cash, (ii) in Shares having a Fair
Market Value equal to the aggregate Option Price for the Shares being purchased
and satisfying such other requirements as may be imposed by the Committee;
provided, that such Shares have been held by the Participant for no less than
six months, (iii) partly in cash and partly in such Shares or (iv) through the
delivery of irrevocable instruments to a broker to deliver promptly to the
Company an amount equal to the aggregate option price for the shares being
purchased. No Participant shall have any rights to dividends or other rights of
a stockholder with respect to Shares subject to an Option until the Participant
has given written notice of exercise of the Option, paid in full for such Shares
and, if applicable, has satisfied any other conditions imposed by the Committee
pursuant to the Plan.
(d) ISOs. The Committee may grant Options under the Plan that are intended
to be ISOs. Such ISOs shall comply with the requirements of Section 422 of the
Code (or any successor section thereto)"Participant".
No ISO may be granted to any
Participant who at the time of such grant, owns more than ten percent of the
total combined voting power of all classes of stock of the Company or of any
Subsidiary, unless (i) the Option Price for such ISO is at least 110% of the
Fair Market Value of a Share on the date the ISO is granted and (ii) the date on
which such ISO terminates is a date not later than the day preceding the fifth
anniversary of the date on which the ISO is granted. Any Participant who
disposes of Shares acquired upon the exercise of an ISO either (i) within two
years after the date of grant of such ISO or (ii) within one year after the
transfer of such Shares to the Participant, shall notify the Company of such
disposition and of the amount realized upon such disposition.
A-5
7. Terms and Conditions of Stock Appreciation Rights
(a) Grants. The Committee also may grant (i) a Stock Appreciation Right
independent of an Option or (ii) a Stock Appreciation Right in connection with
an Option, or a portion thereof. A Stock Appreciation Right granted pursuant to
clause (ii) of the preceding sentence (A) may be granted at the time the related
Option is granted or at any time prior to the exercise or cancellation of the
related Option, (B) shall cover the same Shares covered by an Option (or such
lesser number of Shares as the Committee may determine) and (C) shall be subject
to the same terms and conditions as such Option except for such additional
limitations as are contemplated by this Section 8 (or such additional
limitations as may be included in an Award agreement).
(b) Terms. The exercise price per Share of a Stock Appreciation Right shall
be an amount determined by the Committee but in no event shall such amount be
less than the greater of (i) the Fair Market Value of a Share on the date the
Stock Appreciation Right is granted or, in the case of a Stock Appreciation
Right granted in conjunction with an Option, or a portion thereof, the Option
Price of the related Option and (ii) an amount permitted by applicable laws,
rules, by-laws or policies of regulatory authorities or stock exchanges. Each
Stock Appreciation Right granted independent of an Option shall entitle a
Participant upon exercise to an amount equal to (i) the excess of (A) the Fair
Market Value on the exercise date of one Share over (B) the exercise price per
Share, times (ii) the number of Shares covered by the Stock Appreciation Right.
Each Stock Appreciation Right granted in conjunction with an Option, or a
portion thereof, shall entitle a Participant to surrender to the Company the
unexercised Option, or any portion thereof, and to receive from the Company in
exchange therefor an amount equal to (i) the excess of (A) the Fair Market Value
on the exercise date of one Share over (B) the Option Price per Share, times
(ii) the number of Shares covered by the Option, or portion thereof, which is
surrendered. The date a notice of exercise is received by the Company shall be
the exercise date. Payment shall be made in Shares or in cash, or partly in
Shares and partly in cash (any such Shares valued at such Fair Market Value),
all as shall be determined by the Committee. Stock Appreciation Rights may be
exercised from time to time upon actual receipt by the Company of written notice
of exercise stating the number of Shares with respect to which the Stock
Appreciation Right is being exercised. No fractional Shares will be issued in
payment for Stock Appreciation Rights, but instead cash will be paid for a
fraction or, if the Committee should so determine, the number of Shares will be
rounded downward to the next whole Share.
(c) Limitations. The Committee may impose, in its discretion, such
conditions upon the exercisability or transferability of Stock Appreciation
Rights as it may deem fit.
(d) Limited Stock Appreciation Rights. The Committee may grant LSARs that
are exercisable upon the occurrence of specified contingent events. Such LSARs
may provide for a different method of determining appreciation, may specify that
payment will be made only in cash and may provide that any related4. Awards are
not exercisable while such LSARs are exercisable. Unless the context otherwise
requires, whenever the term "Stock Appreciation Right" is used in the Plan, such
term shall include LSARs.
A-6
8. Other Stock-Based Awards
(a) Generally. The Committee, in its sole discretion, may grant Awards of
Shares, Awards of restricted Shares and Awards that are valued in whole or in
part by reference to, or are otherwise based on the Fair Market Value of, Shares
("Other Stock-Based Awards"). Such Other Stock-Based Awards shall be in such
form, and dependent on such conditions, as the Committee shall determine,
including, without limitation, the right to receive one or more Shares (or the
equivalent cash value of such Shares) upon the completion of a specified period
of service, the occurrence of an event and/or the attainment of performance
objectives. Other Stock-Based Awards may be granted alone or in addition to any
other Awards granted under the Plan. Subject to the provisions of the Plan, the
Committee shall determine to whom and when Other Stock-Based Awards will be
made, the number of Shares to be awarded under (or otherwise related to) such
Other Stock-Based Awards; whether such Other Stock-Based Awards shall be settled
in cash, Shares or a combination of cash and Shares; and all other terms and
conditions of such Awards (including, without limitation, the vesting provisions
thereof and provisions ensuring that all Shares so awarded and issued shall be
fully paid and non-assessable).
(b) Performance-Based Awards. Notwithstanding anything to the contrary
herein, certain Other Stock-Based Awards granted under this Section 8 may be
granted in a manner which is deductible by the Company under Section 162(m) of
the Code (or any successor section thereto) ("Performance-Based Awards").(a) A Participant's Performance-Based Award shall be determined
based on the attainment of written performance goals approved by the Committee
forin respect of a performancespecified period of service (a "performance period"), which is
established by the Committee (i) while the outcome for that performance period
is substantially uncertain and (ii) nonot more than 90 daysday after the commencement
of thethat performance period to which the performance goal
relates or, if less, the number of days which is equal to 25
percent of the
relevantthat performance period. The performance goals which must be objective, shall be based upon
one or more of the following criteria: (i) consolidated earnings before or after taxes
(including earnings before interest, taxes, depreciation and amortization); (ii)
net income; (iii) operating income; (iv) earnings per Share;share; (v) book value per
Share;share; (vi) return on shareholders'stockholders' equity; (vii) expense management; (viii)
return on investment;investment before or
B-1
after the cost of capital; (ix) improvements in capital structure; (x)
profitability of an identifiable business unit or product; (xi) maintenance or
improvement of profit margins; (xii) stock price; (xiii) market share; (xiv)
revenues or sales; (xv) costs; (xvi) cash flow; (xvii) working capitalcapital; (xviii)
changes in net assets (whether or not multiplied by a constant percentage
intended to represent to cost of capital); and (xviii)(xix) return on assets. The
foregoing criteria may relate to the Company, one or more of its Subsidiariesaffiliates or
one or more of its divisions or units, or any combination of the foregoing, and
may be applied on an absolute basis and/or be relative to one or more peer group
companies or other indices, or any combination thereof, all as the Committee
shall determine. In addition, to the degree consistent with Section 162(m) of
the Code, (or any
successor section thereto), the performance goals may be calculated without regard to
extraordinary items. In any event, the performance goals shall be based on a
objective formula or standard. The maximum amount of a Performance-Basedan Award
during a calendar year to any Participant
with respect to a fiscal year of the Company shall be $2,000,000.$3 million.
(b) The Committee shall determine whether with respect to a performance period, the applicablespecified performance goals
have been met with respect to a givenany Participant and, if theysuch goals have tobeen met,
shall so certify and shall ascertain the amount of the applicable Performance-Based
Award. No Performance-Based
Awards will be paid for suchany performance period until such applicable
certification is made by the Committee. The amount of the Performance-Based Award
A-7
actually paid to
a givenany Participant may, at the discretion of the Committee, be less than the amount
determined by the applicable performance goal formula, at the discretion of the Committee.formula. The amount of the Performance-Based Award
determined by the Committee forin respect of a performance period shall be paid to
the Participant at such time after the end of such performance period as shall
be determined by the Committee in its sole discretion after the end of such performance
period;discretion; provided, however, that a
Participant may, if and to the extent permitted by the Committee, and consistent with theelect to defer
receipt of an Award.
(c) The provisions of this Section 4 shall be administered and interpreted
in accordance with Section 162(m) of the Code electand all supporting regulations to
defer payment of a Performance-Based Award.
9. Adjustments Upon Certain Events
Notwithstanding any other provisions inensure the Plan to the contrary, the
following provisions shall apply to all Awards granted under the Plan:
(a) Generally. In the event of any change in the outstanding Shares after
the Effective Datedeductibility by reason of any Share dividend or split, reorganization,
recapitalization, merger, consolidation, spin-off, combination or exchange of
Shares or other corporate exchange, any distribution to shareholders of Shares
other than regular cash dividends or any similar event, the Committee in its
sole discretion and without liability to any person may make such substitution
or adjustment, if any, as it deems to be equitable, as to (i) the number or kind
of Shares or other securities issued or reserved for issuance pursuant to the
Plan or pursuant to outstanding Awards, (ii) the Option Price and/or (iii) any
other affected terms of such Awards.
(b) Change in Control. Except as otherwise provided in an Award agreement,
in the event of a Change in Control, the Committee in its sole discretion and
without liability to any person may take such actions, if any, as it deems
necessary or desirable with respect to any Award (including, without limitation,
(i) the acceleration of an Award, (ii) the payment of a cash amount in exchange
for the cancellation of an Award and/or (iii) the requiring of the issuance of
substitute Awards that will substantially preserve the value, rights and
benefits of any affected Awards previously granted hereunder) as of the date of
the consummation of the Change in Control.
10. No Right to Employment
The granting of an Award under the Plan shall impose no obligation on the Company or any Subsidiaryof its affiliates of the payment
of Awards.
5. Amendment and Termination of the Plan.
(a) The Committee may at any time, or from time to continue the employment of a Participant and shall
not lessentime, suspend or affect the Company's or Subsidiary's right to
terminate the employment ofPlan in whole or in part or amend it in such Participant.
11. Successors and Assigns
The Plan shall be binding on all successors and assigns of the Company and
a Participant, including without limitation, the estate of such Participant and
the executor, administrator or trustee of such estate, or any receiver or
trustee in bankruptcy or representative of the Participant's creditors.
A-8
12. Nontransferability of Awards
Unless otherwise determined byrespects as the
Committee an Award shall not be
transferablemay deem appropriate.
(b) No amendment, suspension or assignable by the Participant otherwise than by will or by the
laws of descent and distribution. An Award exercisable after the death of a
Participant may be exercised by the legatees, personal representatives or
distributees of the Participant.
13. Amendments or Termination
The Board may amend, alter or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which, (a) without the approval of
the shareholders of the Company, would (except as is provided in Section 10 of
the Plan), increase the total number of Shares reserved for the purposestermination of the Plan or change the maximum number of Shares for which Awards may be granted to
any Participant or (b)shall, without the
Participant's consent, of a Participant, would impair any of the rights or obligations under any Award
theretofore granted to sucha Participant under the Plan;Plan.
6. Miscellaneous Provisions.
(a) Determination made by the Committee under the Plan need not be uniform
and may be made selectively among eligible individuals under the Plan, whether
or not such eligible individuals are similarly situated. Neither the Plan nor
any action taken hereunder shall be construed as giving any right to be retained
as an employee of to Company or any affiliate thereof.
(b) A Participant's rights and interest under the Plan may not be assigned
or transferred, hypothecated or encumbered in whole or in part either directly
or by operation of law or otherwise (except in the event of a Participant's
death) including, but not by way of limitation, execution, levy, garnishment,
attachment, pledge, bankruptcy or
B-2
in any other manner; provided, however, that, subject to applicable law, any
amounts payable to any Participant hereunder are subject to reduction to satisfy
any liabilities owed to the Committee may amendCompany or any of its affiliates by the Participant.
Any attempted assignment or transfer, hypothecation or encumbrance shall be void
and of no effect.
(c) The Company and its affiliates shall have the right to deduct from any
payment made under the Plan in such manner as it deems necessary to permit the granting of Awards
meeting the requirements of the Codeany federal, state, local or foreign income or other
applicable laws. Notwithstanding
anythingtaxes required by law to the contrary herein, the Board may not amend, alter or discontinue
the provisions relating to Section 9(b) of the Plan after the occurrence of a
Change in Control.
14. International Participants
With respect to Participants who reside or work outside the United States
of America and who are not (and who are not expected to be) "covered employees"
within the meaning of Section 162(m) of the Code, the Committee may, in its sole
discretion, amend the terms of the Plan or Awardsbe withheld with respect to such Participantspayment.
(d) Each person who is or at any time serves as a member of the Committee
or the Company's Board of Directors shall be indemnified and held harmless by
the Company against and from: (i) any loss, cost, liability or expense that may
be imposed upon or reasonably incurred by such person in orderconnection with or
resulting from any claim, action, suit or proceeding to conformwhich such termsperson may be
a party or in which such person may be involved by reason of any action or
failure to act under the Plan; and (ii) any and all amounts paid by such person
in satisfaction of judgment in any such action, suit or proceeding relating to
the Plan. Each person covered by this indemnification shall give the Company an
opportunity, at its own expense, to handle and defend the same before such
person undertakes to handle and defend it on such person's own behalf. The
foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the bylaws of the
Company, as a matter of law, or otherwise, or any power that the Company may
have to indemnify such person or hold such person harmless.
(e) Each member of the Committee and the Company's Board of Directors
shall be fully justified in relying or acting in good faith upon any report made
by to independent public accountants of, or counsel for, the Company and upon
any other information furnished in connection with the requirementsPlan. In no event shall
any person who is or shall have been a member of local law.
15. Choicethe Committee or the Company's
Board of Law
TheDirectors be liable for any determination made or other action taken or
any failure to act in reliance upon any such report or information or for any
action taken, including without limitation the furnishing of information, or
failure to act, if in good faith.
(f) All matters relating to the Plan or to Awards granted hereunder shall
be governed by and construed in accordance with the laws of the State of Delaware.
16. EffectivenessNew York without regard to its conflict
of the Planlaws principles.
(g) The Plan shall be effective as of the Effective Date. IfNovember 1, 1999. However, if the
Plan is not approved, prior to the payment of any Awards, by the shareholdersaffirmative
vote of holders of a majority of the shares of the Company priorpresent or
represented by proxy without payment therefor and entitled to vote, the first anniversary of
the Effective Date, noPlan
shall terminate and all Awards may be granted thereafter.thereunder shall terminate.
B-3
HV263BHV239B DETACH HERE
PROXY
HOVNANIAN ENTERPRISES, INC.
Nominee Holder of Class B Common Stock
This Proxy is Solicited on Behalf of the Board of Directors
The undesignedundersigned hereby constitutes and appoints Kevork S. Hovnanian, Ara K.
Hovnanian and Desmond P. McDonald, and each of them, his true and lawful agents
and proxies with full power of substitution in each, to represent the
undersigned at the Annual Meeting of Shareholders of HOVNANIAN ENTERPRISES, INC.
to be held in the Boardroom of the American Stock Exchange, 13th Floor, 86
Trinity Place, New York, New York, at 10:30 a.m.A.M. on March 5, 1999,16, 2000, and at any
adjournments thereof, upon the matters set forth in the notice of meeting and
Proxy Statement dated January 15, 199926, 2000 and upon all other matters properly
coming before said meeting.
- ----------- -----------
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ----------- -----------
HV263AHV239A DETACH HERE
|X| Please mark
votes as in
this example.
This proxy when properly executed will be voted (1) for the election of the
nominees of the Board of Directors; (2) for the ratification of the selection of
Ernst & Young LLP as independent accountants; (3) for the approval of amendments
to the Company's 1983 Stock Option Plan; (4) for the approval of the Company's
Senior Executive Short Term Incentive Plan; and (4)(5) on any other matters in
accordance with the discretion of the named attorneys and agents, if no
instructions to the contrary are indicated in itemsItems (1), (2), (3), (4) and (4)(5).
1. Election of Directors.
Nominees: (01) K. Hovnanian, (02) A. Hovnanian, (03) P. Buchanan,
(04) A. Greenbaum, (05) D. McDonald, (06) P. Reinhart, (07) J. Sorsby,
(08) S. Weinroth
FOR WITHHELD
|_| |_|
|_| ______________________________________
For all nominees except as noted above
2. Ratification of the selection of FOR AGAINST ABSTAIN
Ernst & Young LLP as independent |_| |_| |_|
accountants for the year ended
October 31, 1999.2000.
3. Approval of amendments to the
Company's 1983 Stock Option Plan. |_| |_| |_|
4. Approval of the Company's Stock FOR AGAINST ABSTAINSenior
Executive Short Term Incentive Plan. |_| |_| |_|
4.5. In their discretion, upon other
matters as may properly come before
the meeting.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT |_|
Please mark, sign, date and return the proxy card promptly using the enclosed
envelope. This Proxy must be signed exactly as name appears hereon. Executors,
administrators, trustees, etc., should give full title as such. If the signer is
a corporation, please sign full corporate name by duly authorized officer.
Signature:__________________Date:_________________ Date:______ Signature:__________________Date:_________________ Date:_______
HV364BHV138B DETACH HERE
PROXY
HOVNANIAN ENTERPRISES, INC.
Class BA Common Stock
This Proxy is Solicited on Behalf of the Board of Directors
The undesignedundersigned hereby constitutes and appoints Kevork S. Hovnanian, Ara K.
Hovnanian and Desmond P. McDonald, and each of them, his true and lawful agents
and proxies with full power of substitution in each, to represent the
undersigned at the Annual Meeting of Shareholders of HOVNANIAN ENTERPRISES, INC.
to be held in the Boardroom of the American Stock Exchange, 13th Floor, 86
Trinity Place, New York, New York, at 10:30 a.m.A.M. on March 5, 1999,16, 2000, and at any
adjournments thereof, upon the matters set forth in the notice of meeting and
Proxy Statement dated January 15, 199926, 2000 and upon all other matters properly
coming before said meeting.
- ----------- -----------
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ----------- -----------
HV364AHV138A DETACH HERE
|X| Please mark
votes as in
this example.
This proxy when properly executed will be voted (1) for the election of the
nominees of the Board of Directors; (2) for the ratification of the selection of
Ernst & Young LLP as independent accountants; (3) for the approval of amendments
to the Company's 1983 Stock Option Plan; (4) for the approval of the Company's
Senior Executive Short Term Incentive Plan; and (4)(5) on any other matters in
accordance with the discretion of the named attorneys and agents, if no
instructions to the contrary are indicated in itemsItems (1), (2), (3), (4) and (4)(5).
1. Election of Directors.
Nominees: (01) K. Hovnanian, (02) A. Hovnanian, (03) P. Buchanan,
(04) A. Greenbaum, (05) D. McDonald, (06) P. Reinhart, (07) J. Sorsby,
(08) S. Weinroth
FOR WITHHELD
|_| |_|
|_| ______________________________________
For all nominees except as noted above
2. Ratification of the selection of FOR AGAINST ABSTAIN
Ernst & Young LLP as independent |_| |_| |_|
accountants for the year ended
October 31, 1999.2000.
3. Approval of amendments to the
Company's 1983 Stock Option Plan. |_| |_| |_|
4. Approval of the Company's Stock FOR AGAINST ABSTAINSenior
Executive Short Term Incentive Plan. |_| |_| |_|
4.5. In their discretion, upon other
matters as may properly come before
the meeting.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT |_|
Please mark, sign, date and return the proxy card promptly using the enclosed
envelope. This Proxy must be signed exactly as name appears hereon. Executors,
administrators, trustees, etc., should give full title as such. If the signer is
a corporation, please sign full corporate name by duly authorized officer.
Signature:__________________Date:_________________ Date:______ Signature:__________________Date:_________________ Date:_______
HVN62BHV441B DETACH HERE
PROXY
HOVNANIAN ENTERPRISES, INC.
Beneficial Owner of Class AB Common Stock
This Proxy is Solicited on Behalf of the Board of Directors
The undesignedundersigned hereby constitutes and appoints Kevork S. Hovnanian, Ara K.
Hovnanian and Desmond P. McDonald, and each of them, his true and lawful agents
and proxies with full power of substitution in each, to represent the
undersigned at the Annual Meeting of Shareholders of HOVNANIAN ENTERPRISES, INC.
to be held in the Boardroom of the American Stock Exchange, 13th Floor, 86
Trinity Place, New York, New York, at 10:30 a.m.A.M. on March 5, 1999,16, 2000, and at any
adjournments thereof, upon the matters set forth in the notice of meeting and
Proxy Statement dated January 15, 1999 and upon all other matters properly
coming before said meeting.
- ----------- -----------
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
- ----------- -----------
HVN62A DETACH HERE
|X| Please mark
votes as in
this example.
This proxy when properly executed will be voted (1) for the election of the
nominees of the Board of Directors; (2) for the ratification of the selection of
Ernst & Young LLP as independent accountants; (3) for the approval of the
Company's Stock Incentive Plan; and (4) on any other matters in accordance with
the discretion of the named attorneys and agents, if no instructions to the
contrary are indicated in items (1), (2), (3) and (4).
1. Election of Directors.
Nominees: K. Hovnanian, A. Hovnanian, P. Buchanan, A. Greenbaum,
D. McDonald, P. Reinhart, J. Sorsby, S. Weinroth
FOR WITHHELD
|_| |_|
|_| ______________________________________
For all nominees except as noted above
2. Ratification of the selection of FOR AGAINST ABSTAIN
Ernst & Young LLP as independent |_| |_| |_|
accountants for the year ended
October 31, 1999.
3. Approval of the Company's Stock FOR AGAINST ABSTAIN
Incentive Plan. |_| |_| |_|
4. In their discretion, upon other
matters as may properly come before
the meeting.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT |_|
Please mark, sign, date and return the proxy card promptly using the enclosed
envelope. This Proxy must be signed exactly as name appears hereon. Executors,
administrators, trustees, etc., should give full title as such. If the signer is
a corporation, please sign full corporate name by duly authorized officer.
Signature:__________________Date:______ Signature:__________________Date:_______
HV465B DETACH HERE
PROXY
HOVNANIAN ENTERPRISES, INC.
Beneficial Owner of Class B Common Stock
This Proxy is Solicited on Behalf of the Board of Directors
The undesigned hereby constitutes and appoints Kevork S. Hovnanian, Ara K.
Hovnanian and Desmond P. McDonald, and each of them, his true and lawful agents
and proxies with full power of substitution in each, to represent the
undersigned at the Annual Meeting of Shareholders of HOVNANIAN ENTERPRISES, INC.
to be held in the Boardroom of the American Stock Exchange, 13th Floor, 86
Trinity Place, New York, New York, at 10:30 a.m. on March 5, 1999, and at any
adjournments thereof, upon the matters set forth in the notice of meeting and
Proxy Statement dated January 15, 199926, 2000 and upon all other matters properly
coming before said meeting.
By signing on the reverse hereof, the undersigned certifies that (A) with
respect to _________________ of the shares represented by this proxy, the undersigned
has been the beneficial owner of such shares since the date of their issuance or
is a Permitted Transferee (as defined in paragraph 4(A) of Article FOURTH of the
Company's Certificate of Incorporation) of any such beneficial owner and (B)
with respect to the remaining ____________________ shares represented by this proxy,
the undersigned has not been the beneficial owner of such shares since the date
of their issuance nor is the undersigned a Permitted Transferee of any such
beneficial owner.
If no certification is made, it will be deemed that all shares of Class B Common
Stock represented by this proxy have not been held, since the date of issuance,
for the benefit or account of the same benefit or account of the same beneficial
owner of such shareshares or any Permitted Transferee.
- ----------- -----------
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ----------- -----------
HV465AHV441A DETACH HERE
|X| Please mark
votes as in
this example.
This proxy when properly executed will be voted (1) for the election of the
nominees of the Board of Directors; (2) for the ratification of the selection of
Ernst & Young LLP as independent accountants; (3) for the approval of amendments
to the Company's 1983 Stock Option Plan; (4) for the approval of the Company's
Senior Executive Short Term Incentive Plan; and (4)(5) on any other matters in
accordance with the discretion of the named attorneys and agents, if no
instructions to the contrary are indicated in itemsItems (1), (2), (3), (4) and (4)(5).
1. Election of Directors.
Nominees: (01) K. Hovnanian, (02) A. Hovnanian, (03) P. Buchanan,
(04) A. Greenbaum, (05) D. McDonald, (06) P. Reinhart, (07) J. Sorsby,
(08) S. Weinroth
FOR WITHHELD
|_| |_|
|_| ______________________________________
For all nominees except as noted above
2. Ratification of the selection of FOR AGAINST ABSTAIN
Ernst & Young LLP as independent |_| |_| |_|
accountants for the year ended
October 31, 1999.2000.
3. Approval of amendments to the
Company's 1983 Stock Option Plan. |_| |_| |_|
4. Approval of the Company's Stock FOR AGAINST ABSTAINSenior
Executive Short Term Incentive Plan. |_| |_| |_|
4.5. In their discretion, upon other
matters as may properly come before
the meeting.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT |_|
Please mark, sign, date and return the proxy card promptly using the enclosed
envelope. This Proxy must be signed exactly as name appears hereon. Executors,
administrators, trustees, etc., should give full title as such. If the signer is
a corporation, please sign full corporate name by duly authorized officer.
Signature:__________________Date:_________________ Date:______ Signature:__________________Date:_________________ Date:_______
HV340B DETACH HERE
PROXY
HOVNANIAN ENTERPRISES, INC.
Class B Common Stock
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby constitutes and appoints Kevork S. Hovnanian, Ara K.
Hovnanian and Desmond P. McDonald, and each of them, his true and lawful agents
and proxies with full power of substitution in each, to represent the
undersigned at the Annual Meeting of Shareholders of HOVNANIAN ENTERPRISES, INC.
to be held in the Boardroom of the American Stock Exchange, 13th Floor, 86
Trinity Place, New York, New York, at 10:30 A.M. on March 16, 2000, and at any
adjournments thereof, upon the matters set forth in the notice of meeting and
Proxy Statement dated January 26, 2000 and upon all other matters properly
coming before said meeting.
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SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
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HV340A DETACH HERE
|X| Please mark
votes as in
this example.
This proxy when properly executed will be voted (1) for the election of the
nominees of the Board of Directors; (2) for the ratification of the selection of
Ernst & Young LLP as independent accountants; (3) for the approval of amendments
to the Company's 1983 Stock Option Plan; (4) for the approval of the Company's
Senior Executive Short Term Incentive Plan; and (5) on any other matters in
accordance with the discretion of the named attorneys and agents, if no
instructions to the contrary are indicated in Items (1), (2), (3), (4) and (5).
1. Election of Directors.
Nominees: (01) K. Hovnanian, (02) A. Hovnanian, (03) P. Buchanan,
(04) A. Greenbaum, (05) D. McDonald, (06) P. Reinhart, (07) J. Sorsby,
(08) S. Weinroth
FOR WITHHELD
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|_| ______________________________________
For all nominees except as noted above
2. Ratification of the selection of FOR AGAINST ABSTAIN
Ernst & Young LLP as independent |_| |_| |_|
accountants for the year ended
October 31, 2000.
3. Approval of amendments to the
Company's 1983 Stock Option Plan. |_| |_| |_|
4. Approval of the Company's Senior
Executive Short Term Incentive Plan. |_| |_| |_|
5. In their discretion, upon other
matters as may properly come before
the meeting.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT |_|
Please mark, sign, date and return the proxy card promptly using the enclosed
envelope. This Proxy must be signed exactly as name appears hereon. Executors,
administrators, trustees, etc., should give full title as such. If the signer is
a corporation, please sign full corporate name by duly authorized officer.
Signature:_________________ Date:______ Signature:_________________ Date:_______