S | Preliminary Proxy Statement. | |
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HOVNANIAN ENTERPRISES, INC. | |
110 West Front Street, P.O. Box 500, Red Bank, N.J. 07701 (732) 747-7800 | |
Sincerely yours, | |
![]() | |
Ara K. Hovnanian | |
Chairman of the Board |
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· | Date and sign your name exactly as it appears on your proxy card. |
· | Mail the proxy card in the postage-paid envelope that will be provided to you. |
· | Mailed proxy cards must be received no later than March 11, 2013 to be counted for the Annual Meeting. |
· | Nominees of shareholders of Class B Common Stock may only appoint proxies by signing, dating and returning the enclosed proxy card in the envelope provided. |
· | Shares of Class B Common Stock held in nominee name will be entitled to ten votes per share only if the beneficial owner voting instruction card and the nominee proxy card relating to such shares is properly completed, mailed and received not less than 3 nor more than 20 business days prior to March 12, 2013. |
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 Deloitte & Touche LLP, an independent registered public accounting firm, to examine the financial statements of the Company for the year ending October 31, |
3. |
4. | To approve an amendment to the Company’s Certificate of Incorporation to increase the number of authorized shares of Class B Common Stock; |
5. | To approve, in a non-binding advisory vote, the compensation of the Company’s named executive officers; and |
6. | The transaction of such other business as may properly come before the meeting and any adjournment thereof. |
By order of the Board of Directors, | |
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MICHAEL DISCAFANI Secretary | |
If you are a shareholder of record and you plan to attend the Annual Meeting, please mark the appropriate box on your proxy card or, if applicable, so indicate when designating a proxy via the Internet or by telephone. If your shares are held by a bank, broker or other intermediary and you plan to attend, please send written notice to Hovnanian Enterprises, Inc., 110 West Front Street, P.O. Box 500, Red Bank, New Jersey 07701, Attention: |
GENERAL | 1 |
VOTING RIGHTS AND SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | 2 |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE | 3 |
(1) ELECTION OF DIRECTORS | 4 |
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS | 7 |
(2) RATIFICATION OF THE SELECTION OF AN INDEPENDENT REGISTERED PUBIC ACCOUNTING FIRM | 9 |
(3) APPROVAL OF AN AMENDMENT TO THE COMPANY’S CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF CLASS A COMMON STOCK | 9 |
(4) APPROVAL OF AN AMENDMENT TO THE COMPANY’S CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF CLASS B COMMON STOCK | 12 |
(5) ADVISORY VOTE ON EXECUTIVE COMPENSATION | 14 |
THE COMPENSATION COMMITTEE | 16 |
COMPENSATION DISCUSSION AND ANALYSIS | 18 |
Executive Summary | 18 |
Compensation Philosophy and Objectives | 22 |
Fiscal 2012 Compensation Elements and Compensation Mix | 24 |
Details of Compensation Elements | 25 |
Actions for Fiscal 2013 | 35 |
Tax Deductibility and Accounting Implications | 36 |
Timing and Pricing of Stock Options | 36 |
Stock Ownership Guidelines | 36 |
EXECUTIVE COMPENSATION | 37 |
37 | |
Grants of Plan-Based Awards in Fiscal 2012 | 41 |
Outstanding Equity Awards at Fiscal 2012 Year-End | 44 |
Option Exercises and Stock Vested in Fiscal 2012 | 47 |
Nonqualified Deferred Compensation for Fiscal 2012 | 47 |
Potential Payments Upon Termination or Change-in-Control Table | 49 |
NON-EMPLOYEE DIRECTOR COMPENSATION | 51 |
THE AUDIT COMMITTEE | 56 |
THE AUDIT COMMITTEE REPORT | 57 |
FEES PAID TO PRINCIPAL ACCOUNTANT | 57 |
PRINCIPAL ACCOUNTANT INDEPENDENCE | 58 |
CORPORATE GOVERNANCE | 58 |
OVERSIGHT OF RISK MANAGEMENT | 59 |
LEADERSHIP STRUCTURE | 60 |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS | 60 |
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON MARCH 12, 2013 | 62 |
GENERAL | 62 |
SHAREHOLDER PROPOSALS FOR THE 2014 ANNUAL MEETING | 63 |
Class A Common Stock (1) | Class B Common Stock (1) | Depositary Shares (1)(3) | ||||||||||||||||||||||
Amount and | Amount and | Amount and | ||||||||||||||||||||||
Directors, Nominees for Director, Certain | Nature of | Percent | Nature of | Percent | Nature of | Percent | ||||||||||||||||||
Executive Officers, Directors and Executive | Beneficial | of | Beneficial | of | Beneficial | of | ||||||||||||||||||
Officers as a Group and Holders of More Than 5% | Ownership | Class (2) | Ownership | Class (2) | Ownership | Class (2) | ||||||||||||||||||
Estate of Kevork S. Hovnanian (4) | 7,567,392 | 12.04 | % | 7,138,646 | 48.99 | % | — | — | ||||||||||||||||
Ara K. Hovnanian (5) | 5,615,056 | 8.71 | % | 988,915 | 6.79 | % | — | — | ||||||||||||||||
Paul W. Buchanan (6) | 121,956 | .19 | % | — | — | — | — | |||||||||||||||||
Robert B. Coutts | 28,704 | .05 | % | — | — | — | — | |||||||||||||||||
Edward A. Kangas | 73,023 | .12 | % | — | — | — | — | |||||||||||||||||
Joseph A. Marengi | 38,704 | .06 | % | — | — | — | — | |||||||||||||||||
Peter S. Reinhart | 114,957 | .18 | % | — | — | 3,000 | 0.1 | % | ||||||||||||||||
Peter S. Reinhart as Trustee of the | ||||||||||||||||||||||||
Sirwart Hovnanian 1994 Marital Trust (7) | — | — | 5,210,091 | 35.75 | % | — | — | |||||||||||||||||
John J. Robbins | 51,260 | .08 | % | — | — | — | — | |||||||||||||||||
J. Larry Sorsby | 271,802 | .43 | % | — | — | — | — | |||||||||||||||||
David G. Valiaveedan (8) | 4,526 | .01 | % | — | — | 2,000 | — | |||||||||||||||||
Stephen D. Weinroth | 113,523 | .18 | % | 4,500 | .03 | % | — | — | ||||||||||||||||
All Directors and executive officers as a | ||||||||||||||||||||||||
group (11 persons) | 14,000,903 | 21.60 | % | 13,342,152 | 91.56 | % | 5,000 | 0.1 | % |
Class A Common Stock (1) | Class B Common Stock (1) | Depositary Shares (1) (3) | ||||||||||||||||||||||
Directors, Nominees for Director, Certain Executive Officers, Directors and Executive Officers as a Group and Holders of More Than 5% | Amount and Nature of Beneficial Ownership | Percent of Class (2) | Amount and Nature of Beneficial Ownership | Percent of Class (2) | Amount and Nature of Beneficial Ownership | Percent of Class (2) | ||||||||||||||||||
Estate of Kevork S. Hovnanian (4) | 7,567,392 | 6.40 | % | 7,138,646 | 48.70 | % | — | — | ||||||||||||||||
Ara K. Hovnanian (5) | 4,137,001 | 3.50 | % | 1,856,314 | 12.05 | % | — | — | ||||||||||||||||
Robert B. Coutts | 131,112 | 0.11 | % | — | — | — | — | |||||||||||||||||
Edward A. Kangas | 231,217 | 0.20 | % | — | — | — | — | |||||||||||||||||
Joseph A. Marengi | 121,512 | 0.10 | % | — | — | — | — | |||||||||||||||||
Brad G. O’Connor | 38,895 | 0.03 | % | — | — | — | — | |||||||||||||||||
Vincent Pagano Jr. | — | — | — | — | — | — | ||||||||||||||||||
Thomas J. Pellerito | 1,243,668 | 1.05 | % | — | — | — | — | |||||||||||||||||
Peter S. Reinhart as Trustee of the Sirwart Hovnanian 1994 Marital Trust (6) | — | — | 5,210,091 | 35.54 | % | — | — | |||||||||||||||||
John J. Robbins | 160,705 | 0.14 | % | — | — | — | — | |||||||||||||||||
J. Larry Sorsby | 274,302 | 0.23 | % | — | — | — | — | |||||||||||||||||
David G. Valiaveedan | 26,105 | 0.02 | % | — | — | 2,000 | 0.04 | % | ||||||||||||||||
Stephen D. Weinroth | 279,309 | 0.24 | % | 4,500 | 0.03 | % | — | — | ||||||||||||||||
All Directors and executive officers as a group (10 persons) | 13,771,218 | 11.55 | % | 8,999,460 | 58.41 | % | 2,000 | 0.04 | % |
(1) | The figures in the table with respect to Class A Common Stock do not include the shares of Class B Common Stock beneficially owned by the specified persons. Shares of Class B Common Stock are convertible at any time on a share for share basis to Class A Common Stock. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission, |
On July 29, 2008, the Company’s Board of Directors declared a dividend of one Preferred Stock Purchase Right for each outstanding share of Class A Common Stock and Class B Common Stock. The dividend was paid to stockholders of record on August 15, 2008. Subject to the terms, provisions and conditions of the Rights Plan, if the Preferred Stock Purchase Rights become exercisable, each Preferred Stock Purchase Right would initially represent the right to purchase from the Company one ten-thousandth of a share of Series B Junior Preferred Stock for a purchase price of |
(2) | Based upon the number of shares outstanding plus options currently exercisable or exercisable within 60 days of November 1, 2012, held by |
(3) | Each Depositary Share represents 1/1,000th of a share of 7.625% Series A Preferred Stock. |
(4) | Includes 7,127,392 shares of Class A Common Stock and 7,138,646 shares of Class B Common Stock held by the Executors of the Estate of Kevork S. Hovnanian, |
(5) | Includes | |
(6) | Includes 4,833,826 shares of Class B Common Stock held by the Kevork S. Hovnanian Family Limited Partnership, a Connecticut limited partnership (the “Limited Partnership”). Peter S. Reinhart, as trustee of the Sirwart Hovnanian 1994 Marital Trust (the “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, as well as of the 376,265 shares of Class B Common Stock held directly by the Marital Trust. Mr. Reinhart disclaims beneficial ownership of the shares held by the Limited Partnership and the Marital Trust. | |
Board of Directors | |||
Year First Became | |||
Name | Age | Company Affiliation | a Director |
Ara K. Hovnanian | 52 | President, Chief Executive Officer, | 1981 |
Chairman of the Board & Director | |||
Robert B. Coutts | 59 | Director | 2006 |
Edward A. Kangas | 65 | Director | 2002 |
Joseph A. Marengi | 56 | Director | 2006 |
John J. Robbins | 70 | Director | 2001 |
J. Larry Sorsby | 54 | Executive Vice President, Chief Financial | 1997 |
Officer & Director | |||
Stephen D. Weinroth | 71 | Director | 1982 |
Name | Age | Company Affiliation | Year First Became a Director | |||
Ara K. Hovnanian | 55 | President, Chief Executive Officer, Chairman of the Board & Director | 1981 | |||
Robert B. Coutts | 62 | Director | 2006 | |||
Edward A. Kangas | 68 | Director | 2002 | |||
Joseph A. Marengi | 59 | Director | 2006 | |||
Vincent Pagano Jr. | 62 | Director Nominee | — | |||
J. Larry Sorsby | 57 | Executive Vice President, Chief Financial Officer & Director | 1997 | |||
Stephen D. Weinroth | 74 | Director | 1982 |
![]() ![]() | Mr. |
![]() | ![]() | Mr. Coutts retired from the position of Executive Vice President of Lockheed Martin Corporation (NYSE), which he held from 2000 to 2008. Mr. Coutts was President and COO of the former Electronics Sector of Lockheed Martin. He was elected an officer by the Board of Directors of Lockheed Martin in December 1996. Mr. Coutts held management positions with General Electric Corporation (NYSE) from |
![]() | ![]() | Mr. Kangas was the Global Chairman and Chief Executive Officer of Deloitte Touche Tohmatsu from December 1989 to May 2000, when he retired. He also serves on the Boards of Directors of United Technologies Corp. (NYSE) |
![]() | ||
![]() | Mr. Marengi, | |
![]() ![]() | Mr. | |
![]() | ![]() | Mr. Sorsby has been Chief Financial Officer of Hovnanian Enterprises, Inc. since 1996, and Executive Vice President since November 2000. Mr. Sorsby was also Senior Vice President from March 1991 to November 2000 and was elected as a Director of the Company in 1997. He is Chairman of the Board of Visitors for Urology at The Children’s Hospital of Philadelphia (“CHOP”) and also serves on the Institutional Advancement Committee at CHOP. |
![]() ![]() | Mr. Weinroth He is Chairman of the Board He is also |
Restricted Stock | |||||
Unit and | Total of All | ||||
Stock Option | Deferred Share | Columns in | |||
Grants | Grants | Table | |||
# of Shares | # of Shares | # of Shares | |||
Name & Position | Covered | Covered | Covered | ||
Kevork S. Hovnanian, Chairman of the Board | — | — | — | ||
Ara K. Hovnanian, President and Chief Executive Officer | 1,125,000 | — | 1,125,000 | ||
J. Larry Sorsby, Executive Vice President and Chief Financial Officer | 225,000 | — | 225,000 | ||
Paul W. Buchanan, Senior Vice President and Chief Accounting Officer | 40,000 | 14,098 | 54,098 | ||
Peter S. Reinhart, Senior Vice President and General Counsel | 40,000 | 10,070 | 50,070 | ||
David G. Valiaveedan, Vice President — Finance and Treasurer | 20,625 | 9,676 | 30,301 | ||
Executive Officer Group | 1,450,625 | 33,844 | 1,484,469 | ||
Robert B. Coutts, Director | 28,000 | 17,904 | 45,904 | ||
Edward A. Kangas, Director | 44,000 | 29,841 | 73,841 | ||
Joseph A. Marengi, Director | 28,000 | 17,904 | 45,904 | ||
John J. Robbins, Director | 28,000 | 17,904 | 45,904 | ||
Stephen D. Weinroth, Director | 44,000 | 29,841 | 73,841 | ||
All Current Non-Executive Directors as a Group | 172,000 | 113,394 | 285,394 | ||
All Non-Executive Officer Employees as a Group | 1,377,563 | 1,129,229 | 2,506,792 | ||
All Directors and Employees | 3,000,188 | 1,276,467 | 4,276,655 |
Number of | ||||||||||||||
Number of | Number of | securities | ||||||||||||
Class A | Class | Weighted | Weighted | remaining | ||||||||||
Common | Stock B | average | average | available for | ||||||||||
Stock | Common | exercise | exercise | future issuance | ||||||||||
securities to be | securities to be | price of | price of | under equity | ||||||||||
issued upon | issued upon | outstanding | outstanding | compensation | ||||||||||
exercise of | exercise of | Class A | Class B | plans | ||||||||||
outstanding | outstanding | Common | Common | (excluding | ||||||||||
options, | options, | Stock | Stock | securities | ||||||||||
warrants and | warrants and | options, | options, | reflected in | ||||||||||
rights (in | rights (in | warrants and | warrants and | columns (a)) (in | ||||||||||
Plan Category | thousands) | thousands) | rights(2) | rights(3) | thousands)(1) | |||||||||
(a) | (a) | (b) | (b) | (c) | ||||||||||
Equity compensation plans | ||||||||||||||
approved by security holders | 6,352 | 1,584 | $10.77 | $3.85 | 5,861 | |||||||||
Equity compensation plans | ||||||||||||||
not approved by security holders | — | — | — | — | — | |||||||||
Total | 6,352 | 1,584 | $10.77 | $3.85 | 5,861 |
· | Significant reductions in annual bonus opportunity, where, on average, the maximum award for all named executive officers is approximately 92% lower than the maximum award during the last ten years and approximately 39% lower than the maximum award during the last four years; |
· | Focus on improving EBITDA through a bonus component for our Chairman of the Board, President and Chief Executive Officer, our Executive Vice President and Chief Financial Officer and our Chief Operating Officer that is only earned if EBITDA improvement performance goals are met; |
· | Focus on a return to profitability and lowering net debt over a three-year performance period through a long-term incentive award for all named executive officers in fiscal 2010; |
· | Policy of generally targeting a fixed number of stock options rather than a specific option value as part of the annual compensation program (since the number of stock options generally was not increased as stock prices in the homebuilding industry declined, the value of stock option grants to our named executive officers has declined significantly); and |
· | Reduction in shareholder dilution through the Compensation Committee’s active management of both equity award levels and the number of shares available for new equity awards. |
· | Reviewing, at least annually, the salaries, bonuses and other forms of compensation, including stock option grants, for the Company’s senior executives (which include the Chairman of the Board, President and Chief Executive Officer (the “CEO”), the Executive Vice President and Chief Financial Officer (the “CFO”), the Chief Operating Officer (the “COO”) and the other named executive officers (“NEOs”) for whom compensation is reported in the tables below); |
· | Reviewing, at least annually, compensation paid to the Company’s non-employee Directors; |
· | Participating in the review of compensation of other designated key employees of the Company; |
· | Periodically reviewing the Company’s policies and procedures pertaining to the Company’s equity award plans and forms of equity grants to all employees and non-employee Directors, employee benefit plans (for example, the 401(k) plan and deferred compensation plans), severance agreements, executive perquisites, and forms of equity grants to all employees and non-employee directors; |
· | Fostering good corporate governance practices as they relate to executive compensation; and |
· | Reviewing, at least annually, as part of the Board of Directors’ oversight responsibilities, the Company's compensation program and reports from the Company’s CFO regarding his assessment of whether there are any compensation risks that are reasonably likely to result in a material adverse effect on the Company (see "Oversight of Risk Management" below). In addition, the Committee regularly considers business and compensation risks as part of its process for establishing performance goals and determining incentive awards for each of the NEOs. |
COMPENSATION COMMITTEE |
· | Total revenues for fiscal 2012 were $1.5 billion, up 30.9% from $1.1 billion during all of fiscal 2011; |
· | During fiscal 2012, the dollar value of net contracts, including unconsolidated joint ventures, increased 43.9% to $1.9 billion compared with $1.3 billion for fiscal 2011, and the number of net contracts increased 30.1% to 5,838 homes compared with 4,488 homes in the previous year; |
· | During fiscal 2012, deliveries, including those in our unconsolidated joint ventures, were 5,356 homes compared with 4,216 homes during fiscal 2011, representing an increase of 27.0%; |
· | Contract backlog as of October 31, 2012, including that in our unconsolidated joint ventures, was $742.2 million for 2,145 homes, which was an increase of 34.4% and 29.0%, respectively, compared to October 31, 2011; |
· | During all of fiscal 2012, homebuilding gross margin percentage, before interest expense included in cost of sales, was 17.8% compared with 15.6% in 2011; |
· | During all of fiscal 2012, total selling, general and administrative expenses were $190.3 million, or 12.8% of total revenues, compared with $211.4 million, or 18.6% of total revenues, for fiscal 2011; |
· | The Company refinanced $797 million of secured senior notes during the fourth quarter of fiscal 2012, which reduces annual cash interest payments by approximately $17 million and extends the maturity of the refinanced debt from 2016 until 2020; and |
· | The fiscal year-end closing price of a share of Class A Common Stock increased 199% compared to 2011. |
· | Pay-for-Performance: The Compensation Committee (“Committee”) ties increases or decreases in overall compensation with the overall financial performance of the Company. During fiscal years when the Company’s profitability has been higher, total compensation has been higher. During more recent years when the Company’s performance has been lower due in part to the economic downturn and recession, which is particularly significant in the housing industry, the overall compensation has been lower. The Committee seeks to motivate management to achieve improved financial performance of the Company through bonus plans that reward higher performance with increased bonus opportunities. In its selection of metrics to measure bonus achievement, the Committee has selected metrics to correspond to the financial needs of the Company during the relevant period. During periods of profitability, the bonus metrics were focused on profitability and return on shareholders’ equity measures. During recent periods when there was little or no likelihood of profits, bonus metrics were focused on opportunities that would reduce the Company’s debt obligations and improve cash flow and liquidity to enable the Company to weather the difficult economic conditions and return to profitability. |
The following graph demonstrates the link between the CEO’s annual realized pay and the Company’s Total Shareholder Return (“TSR”). Annual realized pay includes salary, annual bonus, perquisites and other compensation plus the realized value of options exercised and shares vesting during the fiscal year. |
(1) | The TSR Index measures the change in the Company's stock price relative to fiscal 2006. The index for each fiscal year is determined by comparing the fiscal year-ending stock price to the ending stock price in fiscal 2006 which is set at 100. |
· | Emphasis on Long-Term Value Creation and Retention: The Committee seeks to align the interests of management with the long-term interests of the shareholders by granting a significant portion of the total compensation in the form of stock options that increase in value as the Company’s financial performance improves. The Committee also seeks to retain management through the utilization of compensation methods that require executives to be employed through various vesting periods in order to receive the full financial benefits of stock option grants that vest over multiple years, deferred shares as part of an annual bonus, and the Long-Term Incentive Program implemented in fiscal 2010. |
· | Maintaining Appropriate Peer Group: In constructing the Peer Group, the Committee selected those companies that compete directly with the Company in the homebuilding industry, are of comparable size and complexity in operations to the Company and are generally in the markets in which the Company competes. The Committee reviews the composition of the Peer Group on an annual basis and makes adjustments, if needed. The Committee reviews the executive compensation of the Peer Group companies and seeks to award total compensation opportunity for our NEOs near the median of the Peer Group, with variation in actual compensation earned both above and below the median, depending on performance. |
· | No Excise Tax Gross-Ups, SERPs or Defined Benefit Plans: The Company does not maintain employment or other agreements that provide contractual rights to employees upon termination of employment (other than upon death or disability), except for the change in control severance agreements the Company entered into with Messrs. O’Connor and Valiaveedan in January 2012 discussed below and in footnote (5) to the “Potential Payments Upon Termination Or Change-In-Control Table,” and the Company does not provide excise tax gross-ups, supplemental executive retirement plans or defined benefit pension plans for any NEOs. |
· | Maintenance and Enforcement of Stock Ownership Guidelines: The Board of Directors has established stock ownership guidelines pursuant to which the CEO, CFO and COO are requested to achieve and maintain recommended minimum levels of stock ownership as set forth below under “Stock Ownership Guidelines.” |
· | Perquisites: The Committee has provided NEOs only a few perquisites in addition to typical medical, dental and life insurance benefits. The Company limits the personal use of Company automobiles and its fractional aircraft share, reimbursement for country club dues and personal income tax preparation and accounting services to the CEO. Our perquisites do not include any tax gross-ups. |
· | Base Salaries: The CEO and CFO received no base salary increase for fiscal 2012. The remaining three NEOs received a salary increase. In December 2011, the Committee approved fiscal 2012 increases for Messrs. Pellerito, Valiaveedan and O’Connor. The increases for Messrs. Pellerito and Valiaveedan were approved in order to move them closer to the Peer Group median and, in the case of Mr. Valiaveedan, to further align him with the median level for the broad-based compensation survey data (as described further under “Compensation Philosophy and Objectives – Peer Group Considerations”). Mr. O’Connor received an increase as a result of his promotion to Vice President — Chief Accounting Officer and Corporate Controller. See “Details of Compensation Elements – Base Salaries” below for additional information on base salaries. |
· | Annual Bonuses: Consistent with the achievement of specified financial or personal objectives, fiscal 2012 bonuses were paid to all NEOs. Bonuses for the CEO, CFO and COO were the same as for fiscal 2011. Bonuses for the other NEOs increased in proportion to the amount of their annual salary increases, as their bonus calculations are a percentage of base salary. Additional details are described below under “Details of Compensation Elements – Annual Bonuses – Regular Bonuses.” |
· | Discretionary Bonuses: Discretionary bonuses were awarded to Mr. O’Connor and Mr. Valiaveedan in fiscal 2013 in respect of their performance in fiscal 2012, as described further under “Details of Compensation Elements – Annual Bonuses – Discretionary Bonuses.” |
· | Long-Term Awards, including stock options and participation in the Long-Term Incentive Program (described below): Grants of equity awards made to NEOs in fiscal 2012 and the annualized target value of the Company’s Long-Term Incentive Program fell considerably below median Peer Group long-term incentive compensation levels. The Long-Term Incentive Program was implemented in fiscal 2010 as a multi-year award with a three-year performance period (fiscal 2011-2013), with additional vesting conditions in fiscal 2014 and 2015. In fiscal 2012, the Committee determined that stock options granted in June 2012 to the CEO, CFO and COO would have an exercise price 33 1/3% above the closing stock price on the grant date. In determining to grant options with an exercise price at this premium level, the Committee sought to provide a stronger link with increased shareholder value, as these executives have more significant responsibility for the Company’s long-term strategy as compared to the other NEOs. The Committee also determined to increase the number of options awarded in recognition of the premium pricing and its determination that the CEO, CFO and COO’s long-term incentive values on the grant date (including recent annual option grants and the annualized fiscal 2010 value of the LTIP at target, discussed below) were considerably below the median value of long-term incentive awards granted to the Peer Group chief executive officers, chief financial officers and chief operating officers. Additional details are described below under “Details of Compensation Elements – Stock Grants.” |
· | Change in Control and Severance Agreements: In January 2012, the Company entered into change in control severance protection agreements with Messrs. O’Connor and Valiaveedan. The Committee considers the continued services of these key executives whose skills are not specifically tied to the homebuilding industry to be in the best interests of the Company and its shareholders. The agreements are designed to reinforce and encourage their continued attention and dedication to their duties of employment without personal distraction or conflict of interest in circumstances which could arise from the occurrence of a change in control of the Company. These agreements provide benefits following a change in control only if the executive is terminated involuntarily or terminates with Good Reason. Neither of these agreements provide for excise tax gross-ups. The provisions of such agreements are described below under “Potential Payments Upon Termination Or Change-In-Control Table.” |
· | Impact on CEO Total Direct Compensation: The following graphs compare fiscal 2012 CEO total direct compensation (the sum of base salary, annual bonus/incentive and long-term incentive awards, excluding all other compensation elements) to the most recently published Peer Group median data available to the Committee when finalizing fiscal 2012 CEO compensation. |
(1) | Reflects the most recently published Peer Group Median data available to the Committee when finalizing fiscal 2012 CEO compensation. Note that the annual incentive and long-term incentive compensation levels for two of the eleven peer group CEOs reflected in the Peer Group Median were substantially lower than their prior year levels because these CEOs were no longer serving in such positions during or just after the end of the year for which the data was gathered. Had these two CEOs been excluded from the Peer Group CEO Median, the Peer Group CEO Median would have been higher and, consequently, the CEO’s Total Direct Compensation would have been further below the Peer Group CEO Median Total Direct Compensation. |
(1) | Reflects the most recently published Peer Group Median data available to the Committee when finalizing fiscal 2012 CEO compensation. Note that the annual incentive and long-term incentive compensation levels for two of the eleven peer group CEOs reflected in the Peer Group Median were substantially lower than their prior year levels because these CEOs were no longer serving in such positions during or just after the end of the year for which the data was gathered. Had these two CEOs been excluded from the Peer Group CEO Median, the Peer Group CEO Median would have been higher and, consequently, the CEO’s Total Direct Compensation would have been further below the Peer Group CEO Median Total Direct Compensation. |
1. | To fairly compensate its executives in a manner that is appropriate with respect to their performance, level of responsibilities, abilities and skills; |
2. | To offer compensation that guides, motivates, retains and rewards its executives for the achievement of the Company’s financial performance, strategic initiatives and individual |
3. | To align the executive’s interests with the interests of the shareholders; |
4. | To maintain competitive pay opportunities for its executives so that it retains its talent pool and, at the same time, has the ability to attract new and highly-qualified individuals to join the organization as it grows or in the event of succession or replacement of an executive; | ||
5. | To safeguard that the reward system is appropriately designed in the context of a challenging business environment; and |
6. | To ensure that compensation plans do not incentivize a level of risk that is reasonably likely to have a material adverse effect on the Company. |
· | CEO, CFO and COO: The compensation package of the CEO, Mr. Ara K. Hovnanian, the CFO, Mr. J. Larry Sorsby, and the COO, Mr. Thomas J. Pellerito, differ from that of the other NEOs due to their unique roles and elevated set of responsibilities. Because the CEO, CFO and COO make executive decisions that influence the direction, stability and profitability of the Company, their overall compensation is intended to strongly align with objective financial measures of the Company. | |
· | Other NEOs: The Company’s Vice President — Chief Accounting Officer and Corporate Controller, Mr. Brad G. O’Connor, and Vice President — Finance and Treasurer, Mr. David G. Valiaveedan, have, as result of their respective positions, less direct influence on the Company’s strategic and operational decisions. Therefore, overall compensation levels for these NEOs reflect both objective financial measures of the Company and the attainment of personal objectives (as determined by the Committee, which may consult with the CFO, the CEO and other members of senior management). |
· | CEO: For fiscal 2007 through 2012, the CEO did not receive any adjustments in his existing annual base salary. This reflects the Company’s budget cuts and downsizing due to industry conditions. Based on discussions with PM&P and peer group market data gathered by management, the Committee determined that the CEO’s fiscal 2012 base salary was near the median base salary level of other chief executive officers at Peer Group companies. |
· | CFO: For fiscal 2011 and 2012, the CFO did not receive any adjustments in his annual base salary. The Committee determined that the CFO’s fiscal 2012 base salary was near the median base salary level of other chief financial officers at Peer Group companies. |
· | COO: For fiscal 2012, the COO received a 10% increase in his annual base salary to move him closer to the Peer Group median. Notwithstanding that increase, the Committee determined that Mr. Pellerito’s base salary remains below the median base salary level of other chief operating officers at Peer Group companies. |
· | Other NEOs: For fiscal 2012, Mr. O’Connor received an 8.5% salary increase as a result of his promotion to Vice President – Chief Accounting Officer and Corporate Controller and Mr. Valiaveedan received a 5.3% salary increase to move him closer to the Peer Group median and to further align him with the median level in the broad-based compensation survey data. |
CEO | CFO | COO | Vice President — Chief Accounting Officer and Corporate Controller | Vice President — Finance and Treasurer | ||||||
Return on Average Common Equity ("ROACE") (1) | % of Pre-tax Income based on ROACE | $ Bonus based on ROACE | N/A | $ Bonus based on ROACE | $ Bonus based on ROACE | |||||
EBITDA Improvement | $ Bonus based on EBITDA Improvement | $ Bonus based on EBITDA Improvement | $ Bonus based on EBITDA Improvement | N/A | N/A | |||||
Positive Pre-tax Profit in Both the Third and Fourth Fiscal Quarters (1) | N/A | N/A | $ Bonus based on achievement of Positive Pre-tax Profit in Both the Third and Fourth Fiscal Quarters | N/A | N/A | |||||
Tailored Personal Objectives | N/A | N/A | N/A | $ Bonus based on achievement of specific goals | $ Bonus based on achievement of specific goals | |||||
Formula | Total award is greater of ROACE or EBITDA improvement factors, with maximum of $949,500 | Total award is greater of ROACE or EBITDA improvement factors, with maximum of $350,000 | Total award is sum of EBITDA improvement and Positive Pre-tax Profit factors, with a maximum of $350,000 | Total award is sum of ROACE and personal objectives factors, with maximum of 30% of base salary | Total award is sum of ROACE and personal objectives factors, with maximum of 25% of base salary |
THE GREATER OF: | ||||
(a) ROACE Calculation Method* | ||||
ROACE percentage | Bonus | |||
0.0% | $ | 0 | ||
1.0% | $ | 150,000 | ||
5.0% | $ | 444,700 | ||
10.0% | $ | 444,700 | ||
15.0% | $ | 444,700 | ||
20.0% | $ | 444,700 | ||
25.0% | $ | 444,700 |
AND | ||||||||||||
(b) Net Debt Amount Calculation Method* | ||||||||||||
Greater | ||||||||||||
than | ||||||||||||
Net Debt (millions) | $ | 1,900 | $ | 1,900 | $ | 1,850 | $ | 1,800 | ||||
Bonus (thousands) | $ | 0 | $ | 345.0 | $ | 385.0 | $ | 444.7 |
THE GREATER OF: | ||||
(a) ROACE Calculation Method* | ||||
ROACE percentage | % Pre-tax Income | |||
0.0% | 0% | |||
5.0% | 1.00% | |||
10.0% | 1.25% | |||
15.0% | 1.50% | |||
20.0% | 2.00% |
AND | ||||||||||||
(b) Net Debt Amount Calculation Method* | ||||||||||||
Greater | ||||||||||||
than | ||||||||||||
Net Debt (millions) | $ | 1,900 | $ | 1,900 | $ | 1,850 | $ | 1,800 | ||||
Bonus (thousands) | $ | 0 | $ | 530.0 | $ | 600.0 | $ | 699.5 |
THE GREATER OF: | ||||
(a) ROACE Calculation Method* | ||||
ROACE percentage | Bonus | |||
0.0% | $ | 0 | ||
5.0% | $ | 254,800 | ||
10.0% | $ | 254,800 | ||
15.0% | $ | 254,800 | ||
20.0% | $ | 254,800 | ||
25.0% | $ | 254,800 |
AND | ||||||||||||
(b) Net Debt Amount Calculation Method* | ||||||||||||
Greater | ||||||||||||
than | ||||||||||||
Net Debt (millions) | $ | 1,900 | $ | 1,900 | $ | 1,850 | $ | 1,800 | ||||
Bonus (thousands) | $ | 0 | $ | 190.0 | $ | 215.0 | $ | 254.8 |
BOTH | ||||||
(a) Calculation Method – for Achievement of Financial Performance Measure* | ||||||
ROACE Percentage | Paul Buchanan | Peter Reinhart | David Valiaveedan | |||
0.0% | $0 | $0 | $0 | |||
5.0% | 10% of base salary | 10% of base salary | 15% of base salary | |||
10.0% | 20% of base salary | 20% of base salary | 30% of base salary | |||
15.0% | 40% of base salary | 30% of base salary | 40% of base salary | |||
20.0% | 60% of base salary | 40% of base salary | 50% of base salary | |||
25.0% | 90% of base salary | 80% of base salary |
· | CEO: The CEO’s bonus formula for fiscal 2012 provided for a bonus award equal to the greater of (a) a fixed percentage of pre-tax income based on the Company’s ROACE and (b) a fixed dollar amount based on the Company’s EBITDA improvement, with his final bonus not to exceed $949,500, the amount of his annual bonus for fiscal 2011. The methodology underlying the ROACE portion of the formula was historically designed to yield an annual bonus that would result in a Total Direct Compensation opportunity that falls within the median range of the Peer Group for comparable financial performance as well as supporting the financial objectives of the Company. Prior to fiscal 2009, there was no imposed cap on the CEO’s bonus. The Committee intends to consider removing or increasing the cap as the Company’s financial results improve. |
ROACE percentage | % Pre-tax Income |
0.0% | 0.00% |
5.0% | 1.00% |
10.0% | 1.25% |
15.0% | 1.50% |
20.0% | 2.00% |
* | The bonus is interpolated on a linear basis between the points shown in the table, and may be extrapolated beyond the maximum ROACE percentage shown at a rate of 0.10% of pre-tax income per percentage point increase in ROACE, which is the rate applied between the last two tiers of the above chart, but was capped at $949,500 and was also subject to the maximum bonus payable under the Short-Term Incentive Plan. |
EBITDA Improvement (millions) | $ | 0.0 | $ | 37.5 | $ | 75.0 | ||||||
Bonus (thousands) | $ | 0.0 | $ | 474.8 | $ | 949.5 |
* | The bonus is interpolated on a linear basis between the points shown in the table. The bonus was capped at $949,500, and was also subject to the maximum payout under the Short-Term Incentive Plan. |
· | CFO: The CFO’s bonus formula for fiscal 2012 provided for a bonus amount equal to the greater of (a) a fixed dollar amount based on the Company’s ROACE and (b) a fixed dollar amount based on the Company’s EBITDA improvement, with his final bonus not to exceed $350,000, the amount of the annual bonus for fiscal 2011. The ROACE portion of the formula was historically designed to yield an annual bonus that would result in a Total Direct Compensation opportunity that falls within the median range of the Peer Group for comparable financial performance. Prior to fiscal 2009, there was no imposed cap on the CFO’s bonus. The Committee intends to consider removing or increasing the cap as the Company’s financial results improve. |
ROACE percentage | Bonus (thousands) | ||||
0.0% | $ | 0.0 | |||
4.7% 5.0% 10.0% 15.0% 20.0% 25.0% | ![]() | $ | 350.0 |
* | The bonus is interpolated on a linear basis between the first two percentage points shown in the table, but was capped at $350,000 and was also subject to the maximum payment under the Short-Term Incentive Plan. |
EBITDA Improvement (millions) | $ | 0.0 | $ | 37.5 | $ | 75.0 | ||||||
Bonus (thousands) | $ | 0.0 | $ | 175.0 | $ | 350.0 |
* | The bonus is interpolated on a linear basis between the points shown in the table. The bonus was capped at $350,000, and was also subject to the maximum payout under the Short-Term Incentive Plan. |
· | COO: The COO’s bonus formula for fiscal 2012 provided for a bonus amount equal to a fixed dollar amount based on the Company’s EBITDA improvement, with his EBITDA improvement bonus not to exceed $250,000, the amount of the annual bonus for fiscal 2011. Mr. Pellerito also had the opportunity to earn an additional $100,000 bonus if the Company achieved positive Pre-tax Profit (as defined above) in both the third and fourth quarters of fiscal 2012. The Committee intends to consider removing or increasing the COO’s total bonus cap of $350,000 as the Company’s financial results improve. |
EBITDA Improvement (millions) | $ | 0.0 | $ | 37.5 | $ | 75.0 | ||||||
Bonus (thousands) | $ | 0.0 | $ | 125.0 | $ | 250.0 |
* | The bonus is interpolated on a linear basis between the points shown in the table. The EBITDA improvement bonus was capped at $250,000 and was also subject to the maximum payout under the Short-Term Incentive Plan. |
Pre-tax Profit | Greater than zero in both third and fourth quarters | |||
Bonus (thousands) | $ | 100.0 |
* | The Pre-tax Profit bonus was capped at $100,000 and was also subject to the maximum payout under the Short-Term Incentive Plan. |
· | Other NEOs: Fiscal 2012 incentive opportunities for Messrs. O’Connor and Valiaveedan were based on a combination of Company performance and individual performance factors that were within each of these executives’ control and that would have a positive impact on the Company. Therefore, the bonus program for these NEOs targeted the achievement of both (a) ROACE financial performance objectives for the Company and (b) personal objectives, and, for fiscal 2012, the total bonuses payable under both components were capped at 50% of the maximum percentages of base salary they could otherwise achieve under the personal objectives portion of their respective bonus formulas (the caps were 30% and 25% of base salary, respectively). The Committee intends to consider removing or increasing the caps as the Company’s financial results improve. |
ROACE Percentage | Brad O’Connor | David Valiaveedan | ||||||
0.0% | $0 | $0 | ||||||
5.0% | 10% of base salary | 15% of base salary | ||||||
10.0% | 20% of base salary | 30% of base salary | ||||||
15.0% | 40% of base salary | 40% of base salary | ||||||
20.0% | 60% of base salary | 50% of base salary |
* | The bonuses are interpolated on a linear basis between the points shown in the table. The total bonuses payable under both components were capped at 50% of the maximum percentages of base salary these NEOs could otherwise achieve under the personal objectives portion of their respective bonus formulas (the caps were 30% and 25% of base salary, respectively) and were subject to the maximum bonus payable under the Short-Term Incentive Plan. |
Goals | Brad O’Connor | David Valiaveedan |
Threshold | Up to 20% of base salary | Up to 30% of base salary |
Target | Up to 40% of base salary | Up to 40% of base salary |
Outstanding | Up to 60% of base salary | Up to 50% of base salary |
* | “Threshold,” “target,” and “outstanding” levels are determined by the CFO and the CEO, who may consult with other members of senior management, and are used for internal evaluation purposes only. As stated above, the total bonuses payable under both components were capped at 50% of the maximum percentages of base salary these NEOs could otherwise achieve under the personal objectives portion of their respective bonus formulas (the caps were 30% and 25% of base salary, respectively) and were subject to the maximum bonus payable under the Short-Term Incentive Plan. |
· | CEO, CFO and COO. The CEO, CFO and COO were granted 600,000, 120,000 and 80,000 stock options, respectively. These grants represented a higher award level than fiscal 2011, in recognition that these options have a premium exercise price 33 1/3% above the closing stock price on the grant date. In contrast, the 2011 option grants for these NEOs had an exercise price set at the fair market value as of the grant date. In determining to grant options with an exercise price at this premium level, the Committee sought to provide a stronger link with increased shareholder value, as these executives have more significant responsibility for the Company’s long-term strategy as compared to the other NEOs. The Committee also determined to increase the number of options awarded based on its determination that the CEO, CFO and COO’s long-term incentive values on the grant date (including recent annual option grants and the annualized fiscal 2010 value of the LTIP at target, discussed below) were considerably below the median value of long-term incentive awards granted to the Peer Group chief executive officers, chief financial officers and chief operating officers. Additional details are described above under “– Stock Grants.” |
· | Other NEOs. In fiscal 2012, Mr. O’Connor was granted 20,000 stock options and Mr. Valiaveedan was granted 15,000 stock options, both with exercise prices set at the fair market value on the date of grant. The number of options granted to Mr. O’Connor was higher than fiscal 2011 due to his promotion, and the number of options granted to Mr. Valiaveedan was the same as fiscal 2011. These awards for fiscal 2012 were considerably below the median levels for the Peer Group and broad-based compensation surveys. |
Target Multiple | |||||
of 2010 Base Salary | Payout Method | ||||
CEO | 3.00 | 20% cash / 80% shares | |||
CFO | 2.00 | 20% cash / 80% shares | |||
COO | 2.00 | 20% cash / 80% shares | |||
Other NEOs | 1.00 | 20% cash / 80% shares |
Homebuilding Debt as of 10/31/2013 (in billions) | |||||||
Greater than $1.70 | $1.65 | $1.60 | $1.55 | $1.50 | $1.40 or less | ||
$100 or more | 100% of target award | 125% of target award | 150% of target award | 175% of target award | 200% of target award | 250% of target award | |
$75 | 75% of target award | 100% of target award | 125% of target award | 150% of target award | 175% of target award | 225% of target award | |
FY 2013 Pre-tax Profit (in millions) | $50 | 50% of target award | 75% of target award | 100% of target award | 125% of target award | 150% of target award | 200% of target award |
$25 | 25% of target award | 50% of target award | 75% of target award | 100% of target award | 125% of target award | 175% of target award | |
Less than $0 | 0% of target award | 25% of target award | 50% of target award | 75% of target award | 100% of target award | 150% of target award |
50% of the award will become vested on October 31, 2013 and payable in January 2014; |
30% of the award will become vested on October 31, 2014 and payable in January 2015; and |
3. | 20% of the award will become vested on October 31, 2015 and payable in January 2016. |
· | Auto allowance, including car maintenance and fuel expense; |
· | Personal use of the Company’s automobiles (including driver’s compensation) and a fractional share in an aircraft; |
· | Executive term life insurance; |
· | Annual Executive Physical Exam Program; |
· | Golf membership or country club fee reimbursement; |
· | Personal income tax preparation services; and |
· | Personal accounting services. |
Change in | ||||||||||||||||||||||||||
Pension | ||||||||||||||||||||||||||
Value and | ||||||||||||||||||||||||||
Non-Equity | Nonqualified | |||||||||||||||||||||||||
Incentive Plan | Deferred | |||||||||||||||||||||||||
Stock | Option | Compensation | Compensation | All Other | ||||||||||||||||||||||
Name and Principal Position | Year | Salary | Bonus (1) | Awards (2) | Awards (3) | (4) | Earnings | Compensation (5) | Total (6) | |||||||||||||||||
Kevork S. Hovnanian, | 2009 | $ | 1,058,911 | — | — | — | $ | 444,700 | — | $ | 82,740 | $ | 1,586,351 | |||||||||||||
Former Chairman | 2008 | $ | 1,128,433 | — | — | — | $ | 889,402 | — | $ | 110,136 | $ | 2,127,971 | |||||||||||||
of the Board | 2007 | $ | 1,128,433 | — | — | — | — | — | $ | 134,902 | $ | 1,263,335 | ||||||||||||||
- deceased | ||||||||||||||||||||||||||
Ara K. Hovnanian, | 2009 | $ | 1,092,606 | — | — | $ | 1,380,000 | $ | 699,500 | — | $ | 267,015 | $ | 3,439,121 | ||||||||||||
President, Chief | 2008 | $ | 1,092,606 | — | $ | 503,641 | $ | 1,256,250 | $ | 979,302 | — | $ | 336,344 | $ | 4,168,143 | |||||||||||
Executive Officer and | 2007 | $ | 1,092,606 | — | — | $ | 3,915,000 | — | — | $ | 375,334 | $ | 5,382,940 | |||||||||||||
Chairman of | ||||||||||||||||||||||||||
the Board | ||||||||||||||||||||||||||
J. Larry Sorsby, | 2009 | $ | 500,000 | $ | 75,000 | — | $ | 276,000 | $ | 254,800 | — | $ | 58,822 | $ | 1,164,622 | |||||||||||
Executive Vice President | 2008 | $ | 499,023 | $ | 75,000 | $ | 183,456 | $ | 251,250 | $ | 356,721 | — | $ | 182,059 | $ | 1,547,509 | ||||||||||
and Chief | 2007 | $ | 321,291 | $ | 188,000 | — | $ | 522,000 | — | — | $ | 67,855 | $ | 1,099,146 | ||||||||||||
Financial Officer | ||||||||||||||||||||||||||
Paul W. Buchanan, | 2009 | $ | 286,192 | $ | 50,000 | — | $ | 46,000 | $ | 86,100 | — | $ | 34,331 | $ | 502,623 | |||||||||||
Senior Vice President/ | 2008 | $ | 280,000 | $ | 50,000 | $ | 60,480 | $ | 50,250 | $ | 117,600 | — | $ | 46,880 | $ | 605,210 | ||||||||||
Chief Accounting | 2007 | $ | 271,925 | — | $ | 167,730 | — | $ | 117,600 | — | $ | 34,263 | $ | 591,518 | ||||||||||||
Officer | ||||||||||||||||||||||||||
Peter S. Reinhart, | 2009 | $ | 306,635 | $ | 50,000 | — | $ | 46,000 | $ | 61,500 | — | $ | 69,461 | $ | 533,596 | |||||||||||
Senior Vice President/ | 2008 | $ | 300,000 | $ | 50,000 | $ | 43,200 | $ | 50,250 | $ | 84,000 | — | $ | 48,646 | $ | 576,096 | ||||||||||
General | 2007 | $ | 300,000 | — | $ | 150,450 | — | $ | 84,000 | — | $ | 41,493 | $ | 575,943 | ||||||||||||
Counsel | ||||||||||||||||||||||||||
David G. Valiaveedan, | 2009 | $ | 267,692 | $ | 35,000 | $ | 3,718 | $ | 24,150 | $ | 67,500 | — | $ | 6,321 | $ | 404,381 | ||||||||||
Vice President – Finance | 2008 | $ | 218,615 | $ | 35,000 | $ | 37,061 | $ | 25,125 | $ | 61,600 | — | $ | 4,966 | $ | 382,367 | ||||||||||
and Treasurer |
Name and Principal Position | Year | Salary (1) | Bonus (2) | Stock Awards (3) | Option Awards (4) | Non-Equity Incentive Plan Compensa-tion (5) | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensa-tion (6) | Total (7) | ||||||||||||||||||||||||
Ara K. Hovnanian, (8) | 2012 | $ | 1,092,606 | — | $ | — | $ | 1,032,000 | $ | 949,500 | — | $ | 181,582 | $ | 3,255,688 | ||||||||||||||||||
President, Chief | 2011 | $ | 1,092,606 | — | $ | 24,125 | $ | 529,875 | $ | 949,500 | — | $ | 170,049 | $ | 2,766,155 | ||||||||||||||||||
Executive Officer and Chairman of the Board | 2010 | $ | 1,092,606 | — | $ | 2,622,255 | $ | 1,413,750 | $ | 949,500 | — | $ | 188,189 | $ | 6,266,300 | ||||||||||||||||||
J. Larry Sorsby, | 2012 | $ | 600,000 | — | $ | — | $ | 206,400 | $ | 350,000 | — | $ | 50,433 | $ | 1,206,833 | ||||||||||||||||||
Executive | 2011 | $ | 600,000 | — | $ | 4,825 | $ | 105,975 | $ | 350,000 | — | $ | 48,259 | $ | 1,109,059 | ||||||||||||||||||
Vice President and Chief Financial Officer | 2010 | $ | 572,308 | — | $ | 960,001 | $ | 282,750 | $ | 350,000 | — | $ | 52,229 | $ | 2,217,288 | ||||||||||||||||||
Thomas J. Pellerito, | 2012 | $ | 538,462 | — | $ | — | $ | 137,600 | $ | 250,000 | — | $ | 46,406 | $ | 972,468 | ||||||||||||||||||
Chief Operating | 2011 | $ | 500,000 | — | $ | 3,217 | $ | 70,650 | $ | 250,000 | — | $ | 42,913 | $ | 866,780 | ||||||||||||||||||
Officer | 2010 | $ | 468,870 | $ | 28,750 | $ | 799,999 | $ | 188,500 | $ | 203,548 | — | $ | 38,276 | $ | 1,727,943 | |||||||||||||||||
Brad G. O’Connor, | 2012 | $ | 308,029 | $ | 50,000 | $ | — | $ | 35,600 | $ | 93,000 | — | $ | 28,303 | $ | 514,932 | |||||||||||||||||
Vice President — Chief Accounting Officer and Corporate Controller | 2011 | $ | 284,523 | — | $ | 965 | $ | 21,195 | $ | 85,680 | — | $ | 27,401 | $ | 419,764 | ||||||||||||||||||
David G. Valiaveedan, | 2012 | $ | 288,821 | $ | 50,000 | $ | — | $ | 26,700 | $ | 72,500 | — | $ | 28,269 | $ | 466,290 | |||||||||||||||||
Vice President — | 2011 | $ | 274,361 | $ | — | $ | 2,413 | $ | 17,663 | $ | 68,850 | — | $ | 27,357 | $ | 390,644 | |||||||||||||||||
Finance and Treasurer | 2010 | $ | 270,000 | $ | — | $ | 221,913 | $ | 42,413 | $ | 67,500 | — | $ | 24,696 | $ | 626,522 |
(1) |
(2) | The “Bonus” Column. In accordance with SEC rules, the “Bonus” column discloses discretionary cash bonus awards. |
(3) | The “Stock Awards” Column. This column reflects the aggregate grant date fair |
The “Option Awards” Column. Similar to the “Stock Awards” column, this column reflects the aggregate grant date fair values of stock options awarded in the fiscal year indicated, which were computed in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts are set forth in Footnotes 3 and 15 to the Company’s audited financial statements |
“Non-Equity Incentive Plan Compensation” Column. This column represents the cash portion of the |
“All Other Compensation” Column.This column discloses all other compensation for the fiscal year indicated, including reportable perquisites and other personal benefits. | ||
Fiscal 2012 Perquisites (Supplemental Table) | |||||||||||||||||
Total Perquisites and Description | Fiscal 2012 Perquisites that Exceeded the Greater of $25,000 or 10% of Total Perquisites | ||||||||||||||||
Name | Total Fiscal 2012 Perquisites | Types of Perquisites (a) | Personal Use of Company’s Fractional Aircraft Share | Personal Use of Company’s Automobiles (c) | Personal Income Tax Preparation (d) | ||||||||||||
Ara K. Hovnanian | $ | 180,230 | (1) (2) (4) (5) (6) (7) (8) | (b) | $ | 86,658 | $ | 30,843 | |||||||||
J. Larry Sorsby | $ | 49,081 | (3) (4) (5) | N/A | N/A | N/A | |||||||||||
Thomas J. Pellerito | $ | 45,054 | (3) (4) (5) | N/A | N/A | N/A | |||||||||||
Brad G. O’Connor | $ | 26,954 | (3) (4) (5) | N/A | N/A | N/A | |||||||||||
David G. Valiaveedan | $ | 26,934 | (3) (4) (5) | N/A | N/A | N/A |
Fiscal 2009 Perquisites (Supplemental Table) | ||||||||||||||
Fiscal 2009 Perquisites that Exceeded the Greater of $25,000 | ||||||||||||||
Total Perquisites and Description | or 10% of Total Perquisites | |||||||||||||
Total Fiscal 2009 | Types of Perquisites | Personal Use of Company’s | Personal Use of Company’s | |||||||||||
Name | Perquisites | (a) | Aircraft (b) | Automobiles (c) | ||||||||||
Kevork S. Hovnanian | $ | 75,165 | (2) (4) | $ | N/A | $ | 64,575 | |||||||
Ara K. Hovnanian | $ | 249,129 | (1) (2) (4) (5) (6) (7) | $ | 57,975 | $ | 149,716 | |||||||
J. Larry Sorsby | $ | 46,407 | (3) (4) (5) | N/A | N/A | |||||||||
Paul W. Buchanan | $ | 24,212 | (2) (4) (5) | N/A | N/A | |||||||||
Peter S. Reinhart | $ | 60,783 | (3) (4) (5) | N/A | N/A | |||||||||
David G. Valiaveedan | $ | 2,200 | (5) | N/A | N/A |
(a) | (1) Personal use of the Company’s |
(b) | The incremental costs of Mr. Hovnanian’s personal use of the Company’s fractional aircraft |
(c) | The incremental costs of personal use of the Company’s automobiles are calculated as the allocable share of all costs of the automobiles for the fiscal year (including |
Reflects reimbursement of actual tax preparation expenses incurred by Mr. Hovnanian. |
Company Contributions | |||||||||||||||||||||||
Company’s | to the Executive | ||||||||||||||||||||||
Term Life | Contributions | Deferred | |||||||||||||||||||||
Charitable Cash | Insurance | to the Executive’s | Compensation Plan | ||||||||||||||||||||
Name | Contribution (a) | Premiums | Retirement Plan (401(k)) | (“EDCP”) (b) | Term Life Insurance Premiums | Company Contributions to the Executive’s Retirement Plan (401(k)) (a) | Company Contributions to the Executive Deferred Compensation Plan (“EDCP”) | ||||||||||||||||
Kevork S. Hovnanian | — | $225 | $ | 7,350 | — | ||||||||||||||||||
Ara K. Hovnanian | — | $450 | $ | 7,350 | $ | 10,086 | $427 | $925 | — | ||||||||||||||
J. Larry Sorsby | $ | 50,000 | $450 | $ | 7,350 | $ | 4,615 | $427 | $925 | — | |||||||||||||
Paul W. Buchanan | — | $429 | $ | 7,090 | $ | 2,601 | |||||||||||||||||
Peter S. Reinhart | $ | 34,615 | $450 | $ | 5,441 | $ | 2,787 | ||||||||||||||||
Thomas J. Pellerito | $427 | $925 | — | ||||||||||||||||||||
Brad G. O’Connor | $423 | $925 | — | ||||||||||||||||||||
David G. Valiaveedan | — | $398 | $ | 3,722 | — | $410 | $925 | — |
(a) | ||
401(k) plan. |
(7) | “Total” Compensation Column. This column reflects the sum of all the columns (the Salary, Bonus, Stock Awards, Option Awards, Non-Equity Incentive Plan Compensation, Change in Pension Value and Nonqualified Deferred Compensation Earnings, and All Other Compensation columns) of the Summary Compensation Table. | ||
Fiscal |
Intrinsic | Change in | |||||||||||||||||||||||||||||||||||||||||||||||||
Expense | Pension | |||||||||||||||||||||||||||||||||||||||||||||||||
Value of | Value and | |||||||||||||||||||||||||||||||||||||||||||||||||
Cash Awards | Outstanding | Nonqualified | Total of All | |||||||||||||||||||||||||||||||||||||||||||||||
Fiscal 2009 | of Fiscal 2009 | Options in | Deferred | All Other | Columns of | |||||||||||||||||||||||||||||||||||||||||||||
Fiscal 2009 | Retention | Performance | Fiscal 2009 | Compensation | Compensation | Supplemental | ||||||||||||||||||||||||||||||||||||||||||||
Name | Salary | Cash Bonus | Bonus | (a) | Earnings | in Fiscal 2009 | Table | Fiscal 2012 Salary | Cash Awards of Fiscal 2012 Bonus | Stock Awards (a) | Intrinsic Expense Value of Outstanding Options in Fiscal 2012 (b) | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation in Fiscal 2012 | Total of All Columns of Supplemental Table | ||||||||||||||||||||||||||||||||||||
Kevork S. Hovnanian | $ | 1,058,991 | $ | 0 | $ | 444,700 | $0 | $0 | $ | 82,740 | $ | 1,586,431 | ||||||||||||||||||||||||||||||||||||||
Ara K. Hovnanian | $ | 1,092,606 | $ | 0 | $ | 699,500 | $0 | $0 | $ | 267,015 | $ | 2,059,121 | $ | 1,092,606 | $ | 949,500 | — | — | — | $ | 181,582 | $ | 2,223,688 | |||||||||||||||||||||||||||
J. Larry Sorsby | $ | 500,000 | $ | 75,000 | $ | 254,800 | $0 | $0 | $ | 58,822 | $ | 888,622 | $ | 600,000 | $ | 350,000 | — | — | — | $ | 50,433 | $ | 1,000,433 | |||||||||||||||||||||||||||
Paul W. Buchanan | $ | 286,192 | $ | 50,000 | $ | 86,100 | $0 | $0 | $ | 34,331 | $ | 456,623 | ||||||||||||||||||||||||||||||||||||||
Peter S. Reinhart | $ | 306,635 | $ | 50,000 | $ | 61,500 | $0 | $0 | $ | 69,461 | $ | 487,596 | ||||||||||||||||||||||||||||||||||||||
Thomas J. Pellerito | $ | 538,462 | $ | 250,000 | $ | 1,851 | — | — | $ | 46,406 | $ | 836,719 | ||||||||||||||||||||||||||||||||||||||
Brad G. O’Connor | $ | 308,029 | $ | 143,000 | $ | 5,083 | — | — | $ | 28,303 | $ | 484,415 | ||||||||||||||||||||||||||||||||||||||
David G. Valiaveedan | $ | 267,692 | $ | 35,000 | $ | 67,500 | $0 | $0 | $ | 6,321 | $ | 376,513 | $ | 288,821 | $ | 122,500 | $ | 5,180 | — | — | $ | 28,269 | $ | 444,770 |
(a) | "Stock Awards" in this column, for Mr. Pellerito, represent the portion of the RSU award granted to him on June 13, 2008, which vested and was issued in fiscal 2012 at the stock price on the date of issue. For Mr. O’Connor, the amount represents the portion of the RSU award granted to him on May 19, 2006 and the deferred shares awards granted for service performed in fiscal years 2007 and 2008, which vested and were issued in fiscal 2012 at the stock price on the date of issue. For Mr. Valiaveedan, the amount represents the portion of RSU awards granted to him on June 13, 2008, June 12, 2009 and June 11, 2010 and the deferred shares awards granted for service performed in fiscal years 2007 and 2008, which vested and were issued in fiscal 2012 at the stock price on the date of issue. | |
(b) | The “Intrinsic Expense Value of Outstanding Options in Fiscal |
(8) | Beginning in fiscal 2010, the Committee approved a $250,000 increase in the maximum annual bonus amount for the CEO, reported under “Non-Equity Incentive Plan Compensation,” in recognition of his increased responsibilities in assuming the position of Chairman of the Board. |
All Other | Grant | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards (#) | All Other Stock Awards: Number of Shares of Stock or Units | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
All Other | Option | Exercise | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock | Awards: | or Base | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Awards: | Number of | Price of | Grant Date | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number | Securities | Option | Fair Value | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Estimated Future Payouts Under | of Shares | Underlying | Awards | of Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Estimated Future Payouts Under | Equity Incentive Plan Awards | of Stock or | Options | ($/Sh) | and Option | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-Equity Incentive Plan Awards | Number of Shares of Stock (3) | Units (4) | (#)(5) | (6) | Awards (7) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Grant | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Date | Threshold | Target | Maximum | Threshold | Target | Maximum | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Kevork S. | N/A | — | (1) | $ | 444,700 | (1) | $ | 444,700 | (1) | N/A | N/A | N/A | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Date | Threshold | Target | Maximum | Threshold | Target | Maximum | (#) | (4) | (5) | (6) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ara K. | (1) | $0 | — | $949,500 | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Hovnanian | 02/10/2012 | (2) | 0 | 337,500 | 337,500 | $1.93 | $0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
06/08/2012 | (3) | 600,000 | $2.88 | $1,032,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ara K. | 6/12/09 | — | (1) | (1) | $ | 699,500 | (1) | N/A | 375,000 | N/A | — | 375,000 | $ | 2.55 | $ | 690,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Hovnanian | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
J. Larry | 6/12/09 | — | (1) | $ | 254,800 | (1) | $ | 254,800 | (1) | N/A | 75,000 | N/A | — | 75,000 | $ | 2.55 | $ | 138,000 | (1) | $0 | $350,000 | $350,000 | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||||||||||||||||
Sorsby | 02/10/2012 | (2) | 0 | 67,500 | 67,500 | $1.93 | $0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
06/08/2012 | (3) | 120,000 | $2.88 | $206,400 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Paul W. | 6/12/09 | $ | 57,400 | (2) | $ | 86,100 | (2) | $ | 86,100 | (2) | N/A | N/A | N/A | — | 25,000 | $ | 2.55 | $ | 46,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Buchanan | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Peter S. | 6/12/09 | $ | 61,500 | (2) | $ | 61,500 | (2) | $ | 61,500 | (2) | N/A | N/A | N/A | — | 25,000 | $ | 2.55 | $ | 46,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Reinhart | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Thomas J. | (1) | $0 | $225,000 | $350,000 | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pellerito | 06/08/2012 | (3) | 80,000 | $2.88 | $137,600 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Brad G. | (1) | $62,000 | $93,000 | $93,000 | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
O’Connor | 06/08/2012 | (3) | 20,000 | $2.16 | $35,600 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
David G. | 6/12/09 | $ | 67,500 | (2) | $ | 67,500 | (2) | $ | 67,500 | (2) | N/A | N/A | N/A | 1,458 | 13,125 | $ | 2.55 | $ | 27,868 | (1) | $72,500 | $72,500 | $72,500 | N/A | N/A | N/A | N/A | |||||||||||||||||||||||||||||||||||||||||||||
Valiaveedan | 06/08/2012 | (3) | 15,000 | $2.16 | $26,700 |
(1) | For purposes of the above table presentation, bonuses earned at the “target” levels for |
The maximum cash bonuses that could be earned by Messrs. Regular Bonus for COO. As stated above under “Regular Bonuses” in the Compensation Discussion and Analysis, the fiscal 2012 bonus formula for Mr. Pellerito was based on the EBITDA Improvement calculation method, provided that his bonus could not exceed $250,000. Mr. Pellerito would not earn any bonus under the EBITDA Improvement calculation method if the EBITDA improvement calculation (as discussed above under “Regular Bonuses” in the Compensation Discussion and Analysis) was $0 or lower. Because bonus amounts above that level, however, would be interpolated and because Mr. Pellerito would not earn any bonus under the Pre-tax Profit in Third and Fourth Fiscal Quarters component if the Company did not achieve pre-tax profitability in both the third and the fourth quarters of fiscal 2012, $0 has been disclosed at the “threshold” level for purposes of the above table for this NEO. |
The maximum cash bonus that could be earned by Mr. Pellerito for fiscal 2012 was $350,000, which consisted of the maximum bonus of $250,000 based on the EBITDA Improvement calculation method plus an additional $100,000 if the Company achieved positive pre-tax profit in both the third and fourth quarters of fiscal 2012. Regular Bonuses for the Vice President — Chief Accounting Officer formulas (the caps were 30% and 25% of base salary, respectively). For purposes of the above table presentation, the “threshold” level is defined as when the ROACE percentage is at or below zero and the “threshold” achievement of the personal objectives established for Messrs. Since the payout based on Mr. Valiaveedan’s “target” level would exceed 50% of the maximum percentage of base salary he could otherwise achieve under the personal objectives portion of his bonus formula, the bonus for Mr. Valiaveedan at this level would be capped at $72,500 which is 25% of his base salary. For purposes of this table presentation, the “target” level $72,500, respectively (the caps were 30% and 25% of base salary, respectively). For purposes of this table presentation, the “maximum” level is defined as the maximum award earned under the ROACE calculation method and the maximum award if all or an “outstanding” percentage of the personal objectives established for Messrs. |
(2) | Awards reported reflect the options modified on February 10, 2012. On February 10, 2012, the June 10, 2011 option awards of 337,500 and 67,500 for the CEO and CFO, respectively, and the June 10, 2011 RSU awards of 12,500 and 2,500 for the CEO and CFO, respectively, were amended to require that, as a condition of vesting, the Company’s Adjusted EBITDA must exceed “fiscal 2011 actual EBITDA” for two consecutive fiscal years, in the case of options, during the option term and, in the case of RSUs, prior to the tenth anniversary of the grant date. Regardless of when the performance criteria are met, vesting will not occur sooner than 25% per year beginning on the second anniversary of the grant date. For this purpose, “fiscal 2011 actual EBITDA” is the amount from our consolidated financial statements for the year ended October 31, 2011. Adjusted EBITDA will be based on EBITDA from the consolidated financial statements for the applicable fiscal year-end, excluding inventory impairment losses and land option write-offs and gains or losses on extinguishment of debt. At the end of fiscal 2012, the Committee determined that the Company’s Adjusted EBITDA exceeded fiscal 2011 actual EBITDA. No incremental fair value was recognized under FASB AFC Topic 718 in connection with the modification of these options or RSU awards. |
(3) | Stock Option Awards. These rows represent the number of stock options awarded each NEO in fiscal 2012. For the |
(4) | ||
“All Other Option Awards: Number of Securities Underlying Options” Column. This column discloses the number of stock options (not tied to any financial or personal objectives performance measure) awarded to an NEO in fiscal |
“Exercise or Base Price of Option Awards” |
“Grant Date Fair Value of Stock and Option Awards” |
OPTION AWARDS | STOCK AWARDS | |||||||||||||||||||||||||||||
Equity | ||||||||||||||||||||||||||||||
Incentive | Equity | |||||||||||||||||||||||||||||
Plan | Equity | Incentive | ||||||||||||||||||||||||||||
Awards: | Incentive | Plan Awards: | ||||||||||||||||||||||||||||
Number of | Plan Awards: | Market or | ||||||||||||||||||||||||||||
Number of | Number of | Securities | Number of | Payout Value | ||||||||||||||||||||||||||
Securities | Securities | Underlying | Market Value | Unearned | of Unearned | |||||||||||||||||||||||||
Underlying | Underlying | Unexercised | of Shares of | Shares or | Shares or | |||||||||||||||||||||||||
Unexercised | Unexercised | Unearned | Option | Stock that | other Rights | other Rights | ||||||||||||||||||||||||
Grant | Options # | Options # | Options | Exercise | Option | have not | that have not | that have not | ||||||||||||||||||||||
Name | Date (1) | Exercisable | Unexercisable | #(2) | Price ($) | Expiration Date | vested ($) | vested # | vested ($) | |||||||||||||||||||||
Kevork Hovnanian | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||
Ara Hovnanian | 03/13/00 | 250,000 | — | — | $ | 2.88 | 3/12/2010 | — | — | — | ||||||||||||||||||||
03/13/01 | 250,000 | — | — | $ | 6.35 | 3/12/2011 | — | — | — | |||||||||||||||||||||
11/06/01 | 500,000 | — | — | $ | 5.58 | 11/5/2011 | — | — | — | |||||||||||||||||||||
11/13/02 | 600,000 | — | $ | 15.90 | 11/12/2012 | — | — | — | ||||||||||||||||||||||
06/13/08 | — | 375,000 | — | $ | 6.46 | 6/12/2018 | — | — | — | |||||||||||||||||||||
6/12/09 | — | 375,000 | 375,000 | $ | 2.55 | 6/11/2019 | — | — | — | |||||||||||||||||||||
J. Larry Sorsby | 03/21/00 | 40,000 | — | — | $ | 2.97 | 3/20/2010 | — | — | — | ||||||||||||||||||||
03/01/01 | 50,000 | — | — | $ | 5.35 | 2/28/2011 | — | — | — | |||||||||||||||||||||
11/06/01 | 50,000 | — | — | $ | 5.58 | 11/5/2011 | — | — | — | |||||||||||||||||||||
11/08/02 | 50,000 | — | $ | 16.35 | 11/7/2012 | — | — | — | ||||||||||||||||||||||
06/13/08 | — | 75,000 | — | $ | 6.46 | 6/12/2018 | — | — | — | |||||||||||||||||||||
6/12/09 | — | 75,000 | 75,000 | $ | 2.55 | 6/11/2019 | — | — | — | |||||||||||||||||||||
Paul Buchanan | 08/28/00 | 15,000 | — | — | $ | 3.28 | 8/27/2010 | — | — | — | ||||||||||||||||||||
03/18/02 | 15,000 | — | — | $ | 12.13 | 3/17/2012 | — | — | — | |||||||||||||||||||||
06/13/08 | 15,000 | — | — | $ | 6.46 | 6/12/2018 | — | — | — | |||||||||||||||||||||
6/12/09 | 25,000 | — | — | $ | 2.55 | 6/11/2019 | — | — | — | |||||||||||||||||||||
Peter Reinhart | 08/28/00 | 5,000 | — | — | $ | 3.28 | 8/27/2010 | — | — | — | ||||||||||||||||||||
03/18/02 | 15,000 | — | — | $ | 12.13 | 3/17/2012 | — | — | — | |||||||||||||||||||||
06/13/08 | 15,000 | — | — | $ | 6.46 | 6/12/2018 | — | — | — | |||||||||||||||||||||
6/12/09 | 25,000 | — | — | $ | 2.55 | 6/11/2019 | — | — | — | |||||||||||||||||||||
David Valiaveedan(3) | 10/31/05 | — | — | — | — | — | 38 | $ | 149 | |||||||||||||||||||||
10/31/07 | — | — | — | — | — | 1,895 | $ | 7,409 | ||||||||||||||||||||||
10/31/08 | — | — | — | — | — | — | 7,385 | $ | 28,875 | |||||||||||||||||||||
6/13/08 | — | 7,500 | — | $ | 6.46 | 6/12/2018 | $ | 3,257 | — | — | ||||||||||||||||||||
6/12/09 | — | 13,125 | — | $ | 2.55 | 6/11/2019 | $ | 5,701 | — | — |
OPTION AWARDS | STOCK AWARDS | |||||||||||||||||||||||||||||||||||||
Name | Grant Date (1) | Number of Securities Underlying Unexercised Options # Exercisable | Number of Securities Underlying Unexercised Options # Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options # | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that have not vested (#) | Market Value of Shares or Units of Stock that have not vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares or other Rights that have not vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares or other Rights that have not vested ($) | ||||||||||||||||||||||||||||
Ara Hovnanian (4) | 06/13/08 | 281,250 | 93,750 | — | $ | 6.46 | 06/12/18 | — | $ | — | — | $ | — | |||||||||||||||||||||||||
06/12/09 | 375,000 | (2 | ) | 375,000 | (2 | ) | — | $ | 2.55 | 06/11/19 | — | $ | — | — | $ | — | ||||||||||||||||||||||
06/11/10 | 93,750 | 281,250 | — | $ | 4.73 | 06/10/20 | — | $ | — | 1,385,970 | (3 | ) | $ | 5,959,671 | (3 | ) | ||||||||||||||||||||||
06/10/11 | — | — | 337,500 | (5 | ) | $ | 1.93 | 06/09/21 | — | $ | — | 12,500 | (5 | ) | $ | 53,750 | ||||||||||||||||||||||
06/08/12 | — | 600,000 | — | $ | 2.88 | 06/07/22 | — | $ | — | — | $ | — | ||||||||||||||||||||||||||
J. Larry Sorsby (4) | 06/13/08 | 56,250 | 18,750 | — | $ | 6.46 | 06/12/18 | — | $ | — | — | $ | — | |||||||||||||||||||||||||
06/12/09 | 75,000 | (2 | ) | 75,000 | (2 | ) | — | $ | 2.55 | 06/11/19 | — | $ | — | — | $ | — | ||||||||||||||||||||||
06/11/10 | 18,750 | 56,250 | — | $ | 4.73 | 06/10/20 | — | $ | — | 507,400 | (3 | ) | $ | 2,181,820 | (3 | ) | ||||||||||||||||||||||
06/10/11 | — | — | 67,500 | (5 | ) | $ | 1.93 | 06/09/21 | — | $ | — | 2,500 | (5 | ) | $ | 10,750 | ||||||||||||||||||||||
06/08/12 | — | 120,000 | — | $ | 2.88 | 06/07/22 | — | $ | — | — | $ | — | ||||||||||||||||||||||||||
Thomas J. Pellerito | 01/23/03 | 20,000 | — | — | $ | 15.95 | 01/22/13 | — | $ | — | — | $ | — | |||||||||||||||||||||||||
06/13/08 | 10,000 | — | — | $ | 6.46 | 06/12/18 | — | $ | — | — | $ | — | ||||||||||||||||||||||||||
06/12/09 | 35,000 | — | — | $ | 2.55 | 06/11/19 | — | $ | — | — | $ | — | ||||||||||||||||||||||||||
06/11/10 | 50,000 | — | — | $ | 4.73 | 06/10/20 | — | $ | — | 422,833 | (3 | ) | $ | 1,818,182 | (3 | ) | ||||||||||||||||||||||
06/10/11 | 45,000 | — | — | $ | 1.93 | 06/09/21 | — | $ | — | — | $ | — | ||||||||||||||||||||||||||
06/08/12 | 80,000 | — | — | $ | 2.88 | 06/07/22 | — | $ | — | — | $ | — | ||||||||||||||||||||||||||
Brad G. O’Connor | 06/13/08 | 11,250 | 3,750 | — | $ | 6.46 | 06/12/18 | — | $ | — | — | $ | — | |||||||||||||||||||||||||
10/31/08 | — | — | — | $ | — | — | — | $ | — | 2,621 | $ | 11,270 | ||||||||||||||||||||||||||
06/12/09 | 12,500 | 12,500 | — | $ | 2.55 | 06/11/19 | — | $ | — | — | $ | — | ||||||||||||||||||||||||||
06/11/10 | 3,750 | 11,250 | — | $ | 4.73 | 06/10/20 | — | $ | — | 118,393 | (3 | ) | $ | 509,090 | (3 | ) | ||||||||||||||||||||||
06/10/11 | — | 13,500 | — | $ | 1.93 | 06/09/21 | 500 | $ | 2,150 | — | $ | — | ||||||||||||||||||||||||||
06/08/12 | — | 20,000 | — | $ | 2.16 | 06/07/22 | — | $ | — | — | $ | — | ||||||||||||||||||||||||||
David G. Valiaveedan | 06/13/08 | 5,625 | 1,875 | — | $ | 6.46 | 06/12/18 | 206 | $ | 886 | — | $ | — | |||||||||||||||||||||||||
10/31/08 | — | — | — | $ | — | — | — | $ | — | 1,844 | $ | 7,929 | ||||||||||||||||||||||||||
06/12/09 | 6,564 | 6,561 | — | $ | 2.55 | 06/11/19 | 728 | $ | 3,130 | — | $ | — | ||||||||||||||||||||||||||
06/11/10 | 2,813 | 8,437 | — | $ | 4.73 | 06/10/20 | 937 | $ | 4,029 | 114,165 | (3 | ) | $ | 490,910 | (3 | ) | ||||||||||||||||||||||
06/10/11 | — | 11,250 | — | $ | 1.93 | 06/09/21 | 1,250 | $ | 5,375 | — | $ | — | ||||||||||||||||||||||||||
06/08/12 | — | 15,000 | — | $ | 2.16 | 06/07/22 | — | $ | — | — | $ | — |
(1) | The options | |
Therefore, all of Mr. Pellerito’s outstanding options have been treated as immediately vested, and his RSUs are treated as vested on the first anniversary of the grant date for purposes of this table. In connection with the amendments to their options and RSUs awarded in fiscal 2011 described under footnote (5) below, Messrs. Hovnanian and Sorsby agreed to eliminate accelerated vesting of such RSUs on the basis of qualified retirement. In addition, following fiscal 2011 year-end, the Company entered into change in control severance agreements with Messrs. O’Connor and Valiaveedan pursuant to which their unvested options would become fully vested and exercisable if they are terminated under specified conditions following a change in control of the |
(2) | Included in these numbers are 375,000 and 75,000 performance-based options for Mr. Hovnanian and Mr. Sorsby, respectively (50% of the options reflected in each column). These performance-based options follow the same time vesting schedule as standard stock options, provided that the Committee determined that (1) the Company’s EBITDA for fiscal 2009 was at least $200,000,000 greater than the Company’s EBITDA for fiscal 2008 and (2) the Company’s EBITDA for fiscal 2010 was at least $300,000,000 greater than the Company’s EBITDA for fiscal 2008. For this purpose, “EBITDA” was defined as the Company’s consolidated earnings before interest expense, income taxes, depreciation and amortization (but including inventory impairment loss and land option write-offs and gain on extinguishment of debt), determined in a manner consistent with the Company’s ordinary course practices for quarterly press release financial reporting purposes. At the end of fiscal 2009, the Committee determined that the first performance hurdle was achieved since the Company’s EBITDA for fiscal 2009 was at least $200,000,000 greater than in fiscal 2008. At the end of fiscal 2010, the Committee determined that the second performance hurdle was achieved since the Company’s EBITDA for fiscal 2010 was at least $300,000,000 greater than in fiscal 2008. |
(3) | Represents the number and value of shares underlying the LTIP awards granted on June 11, 2010. Because performance through the end of fiscal 2012 was between the target and maximum levels, the number and value of shares underlying the awards are based on maximum performance. There is no assurance that the LTIP awards will |
(4) | In October 2011, in the interest of reducing the Company’s overall shareholder dilution, Messrs. Hovnanian and Sorsby voluntarily cancelled all of the outstanding options from their 2001 and 2002 grants to further reduce (as they did in fiscal 2008) a portion of the equity reserve “overhang” under the Company’s equity compensation plans. As a result, the total number of shares of common stock available for future issuance was reduced by 1,200,000 shares (1,100,000 and 100,000, for the options cancelled by Mr. Hovnanian and Mr. Sorsby, respectively). |
(5) |
Name | Grant Date | Number of Securities Underlying Unexercised Options Exercisable (#) | Value of Unexercised In The Money Options Exercisable ($) (a) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Value of Unexercised In The Money Options Unexercisable ($) (a) | ||||||||||||
Ara Hovnanian | 06/13/08 | 281,250 | $ | 0 | 93,750 | $ | 0 | ||||||||||
06/12/09 | 375,000 | $ | 656,250 | 375,000 | $ | 656,250 | |||||||||||
06/11/10 | 93,750 | $ | 0 | 281,250 | $ | 0 | |||||||||||
06/10/11 | — | $ | 0 | 337,500 | $ | 799,875 | |||||||||||
06/08/12 | — | $ | 0 | 600,000 | $ | 852,000 | |||||||||||
J. Larry Sorsby | 06/13/08 | 56,250 | $ | 0 | 18,750 | $ | 0 | ||||||||||
06/12/09 | 75,000 | $ | 131,250 | 75,000 | $ | 131,250 | |||||||||||
06/11/10 | 18,750 | $ | 0 | 56,250 | $ | 0 | |||||||||||
06/10/11 | — | $ | 0 | 67,500 | $ | 159,975 | |||||||||||
06/08/12 | — | $ | 0 | 120,000 | $ | 170,400 | |||||||||||
Thomas J. Pellerito | 01/23/03 | 20,000 | $ | 0 | — | $ | 0 | ||||||||||
06/13/08 | 10,000 | $ | 0 | — | $ | 0 | |||||||||||
06/12/09 | 35,000 | $ | 61,250 | — | $ | 0 | |||||||||||
06/11/10 | 50,000 | $ | 0 | — | $ | 0 | |||||||||||
06/10/11 | 45,000 | $ | 106,650 | — | $ | 0 | |||||||||||
06/08/12 | 80,000 | $ | 113,600 | — | $ | 0 | |||||||||||
Brad G. O’Connor | 06/13/08 | 11,250 | $ | 0 | 3,750 | $ | 0 | ||||||||||
06/12/09 | 12,500 | $ | 21,875 | 12,500 | $ | 21,875 | |||||||||||
06/11/10 | 3,750 | $ | 0 | 11,250 | $ | 0 | |||||||||||
06/10/11 | — | $ | 0 | 13,500 | $ | 31,995 | |||||||||||
06/08/12 | — | $ | 0 | 20,000 | $ | 42,800 | |||||||||||
David G. Valiaveedan | 06/13/08 | 5,625 | $ | 0 | 1,875 | $ | 0 | ||||||||||
06/12/09 | 6,564 | $ | 11,487 | 6,561 | $ | 11,482 | |||||||||||
06/11/10 | 2,813 | $ | 0 | 8,437 | $ | 0 | |||||||||||
06/10/11 | — | $ | 0 | 11,250 | $ | 26,663 | |||||||||||
06/08/12 | — | $ | 0 | 15,000 | $ | 32,100 |
(a) | Based on the difference between the closing market price of the Company’s Class A Common Stock on the NYSE at October 31, 2012 and the exercise price of the options. |
Option Awards | Stock Awards | ||||||||||||
Number of | Number of | ||||||||||||
Shares Acquired | Value Realized | Shares Acquired | Value Realized | ||||||||||
on Exercise | on Exercise | on Vesting | on Vesting | ||||||||||
Name | (#) | ($) (1) | (#) | ($) | |||||||||
Kevork S. Hovnanian | — | — | — | — | |||||||||
Ara K. Hovnanian (2) | 150,000 | $ | 645,000 | 117,399 | $ | 204,274 | |||||||
J. Larry Sorsby (3) | — | — | 42,764 | $ | 74,409 | ||||||||
Paul W. Buchanan | — | — | 15,348 | $ | 27,756 | ||||||||
Peter S. Reinhart (4) | — | — | 11,320 | $ | 20,747 | ||||||||
David G.Valiaveedan | — | — | 673 | $ | 2,921 |
Option Awards | Stock Awards | |||||||||||||||
Number of Shares Acquired on Exercise | Value Realized on Exercise | Number of Shares Acquired on Vesting | Value Realized on Vesting | |||||||||||||
Name | (#) | ($) | (#) | ($) | ||||||||||||
Ara K. Hovnanian | — | — | — | — | ||||||||||||
J. Larry Sorsby | — | — | — | — | ||||||||||||
Thomas J. Pellerito | — | — | 1,667 | $3,517 | (1) | |||||||||||
Brad G, O’Connor | — | — | 3,779 | $5,083 | (2) | |||||||||||
David G. Valiaveedan | — | — | 3,365 | $5,180 | (2) |
(1) | Represents 1,667 RSUs granted to Mr. Pellerito in fiscal 2011 that were considered vested in fiscal 2012 due to Mr. Pellerito’s “retirement eligibility,” but that were not delivered in fiscal 2012. These RSUs had a market value of $3,517 as of June 11, 2012, based on the closing price for shares of Class A Common Stock on the first business day after the June 10, 2012 deemed vesting date. |
(2) | Based on the | |
Executive | Registrant | Aggregate | Aggregate Balance | ||||||||||||||||||||||||||||||||||||
Contributions in | Contributions in | Aggregate Earnings in | Withdrawals/ | at Last Fiscal | |||||||||||||||||||||||||||||||||||
Name | Last Fiscal Year (1) | Last Fiscal Year (2) | Last Fiscal Year (3) | Distributions (4) | Year (5) | Executive Contributions in Last Fiscal Year | Registrant Contributions in Last Fiscal Year (1) | Aggregate Earnings in Last Fiscal Year (2) | Aggregate Withdrawals/ Distributions (3) | Aggregate Balance at Last Fiscal Year (4) | |||||||||||||||||||||||||||||
Kevork S. Hovnanian | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Ara K. Hovnanian | Ara K. Hovnanian | $ | 214,360 | $ | 10,086 | ($31,186 | ) | $ | 85,240 | $ | 3,388,883 | $ | — | $ | — | $ | 990,293 | $ | 181,968 | $ | 1,469,486 | ||||||||||||||||||
J. Larry Sorsby | J. Larry Sorsby | $ | 79,025 | $ | 4,615 | ($35,269 | ) | $ | 38,418 | $ | 752,292 | $ | — | $ | — | $ | 550,270 | $ | — | $ | 827,329 | ||||||||||||||||||
Paul W. Buchanan | $ | 2,601 | $ | 2,601 | ($15,524 | ) | $ | 26,032 | $ | 160,803 | |||||||||||||||||||||||||||||
Thomas J. Pellerito | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||
— | — | ($3,563 | ) | $ | 3,225 | $ | 14,663 | $ | — | $ | 3,517 | $ | 6,678 | $ | 1,851 | $ | 10,741 | ||||||||||||||||||||||
Peter S. Reinhart | $ | 20,308 | $ | 2,787 | ($10,291 | ) | $ | 59,611 | $ | — | |||||||||||||||||||||||||||||
— | — | ($3,563 | ) | $ | 3,225 | $ | 14,663 | ||||||||||||||||||||||||||||||||
Brad G. O’Connor | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||
David G. Valiaveedan | David G. Valiaveedan | — | — | — | — | — | $ | — | $ | — | $ | — | $ | — | $ | — |
(1) |
(2) | ||
“Aggregate Earnings in Last Fiscal Year” |
(3) | ||
“Aggregate Withdrawals/Distribution” |
(4) | ||
“Aggregate Balance at Last Fiscal Year” Column. |
Potential Payments Upon Termination Or Change-In-Control Table | ||||||||||||||
Named Executive Officer | Voluntary Termination | Involuntary Termination | Change in Control | |||||||||||
Without | With | |||||||||||||
With Good | Normal | Without | With | Death or | Qualified | Qualified | ||||||||
Form of Compensation | Reason | Retirement | Cause | Cause | Disability | Termination | Termination | |||||||
Kevork S. Hovnanian | ||||||||||||||
Accelerated vesting of cash | ||||||||||||||
performance-based awards (1) | $444,700 | $444,700 | $444,700 | — | $444,700 | — | — | |||||||
Accelerated vesting of equity awards (2) | — | — | — | — | — | — | — | |||||||
Contractual Disability/Death Payment (3) | — | — | — | — | — | — | — | |||||||
Total | $444,700 | $444,700 | $444,700 | — | $444,700 | — | — | |||||||
Ara K. Hovnanian | ||||||||||||||
Accelerated vesting of cash | ||||||||||||||
performance-based awards (1) | — | — | $699,500 | — | $699,500 | — | — | |||||||
Accelerated vesting of equity awards (2) | — | — | — | — | $510,000 | — | — | |||||||
Contractual Disability/Death Payment (3) | — | — | — | — | $10,000,000 | — | — | |||||||
Total | — | — | $699,500 | — | $11,209,500 | — | — | |||||||
J. Larry Sorsby | ||||||||||||||
Accelerated vesting of cash | ||||||||||||||
performance-based awards (1) | — | — | $254,800 | — | $254,800 | — | — | |||||||
Accelerated vesting of equity awards (2) | — | — | — | — | $102,000 | — | — | |||||||
Contractual Disability/Death Payment (3) | — | — | — | — | — | — | — | |||||||
Total | — | — | $254,800 | — | $356,800 | — | — | |||||||
Paul W. Buchanan | ||||||||||||||
Accelerated vesting of cash | ||||||||||||||
performance-based awards (1) | $86,100 | $86,100 | $86,100 | — | $86,100 | — | — | |||||||
Accelerated vesting of equity awards (2) | $48,663 | $48,663 | $48,663 | |||||||||||
Contractual Disability/Death Payment (3) | — | — | — | — | — | — | — | |||||||
Total | $134,763 | $134,763 | $86,100 | — | $134,763 | — | — | |||||||
Peter S. Reinhart | ||||||||||||||
Accelerated vesting of cash | ||||||||||||||
performance-based awards (1) | $61,500 | $61,500 | $61,500 | — | $61,500 | — | — | |||||||
Accelerated vesting of equity awards (2) | $48,663 | $48,663 | — | — | $48,663 | — | — | |||||||
Contractual Disability/Death Payment (3) | — | — | — | — | — | — | — | |||||||
Total | $110,163 | $110,163 | $61,500 | — | $110,163 | — | — | |||||||
David G. Valiaveedan | ||||||||||||||
Accelerated vesting of cash | ||||||||||||||
performance-based awards (1) | — | — | $67,500 | — | $67,500 | — | — | |||||||
Accelerated vesting of equity awards (2) | — | — | — | — | $63,241 | — | — | |||||||
Contractual Disability/Death Payment (3) | — | — | — | — | — | — | — | |||||||
Total | — | — | $67,500 | — | $130,741 | — | — |
Named Executive Officer | Voluntary Termination | Involuntary Termination | Change in Control (5) | |||||||||||||||||||||||||
Form of Compensation | With or Without Good Reason | Normal Retirement | Without Cause | With Cause | Death or Disability | Without Termination | With Involuntary Termination Other Than for Cause or Termination with Good Reason | |||||||||||||||||||||
Ara K. Hovnanian | ||||||||||||||||||||||||||||
Accelerated vesting of annual bonus awards (1) | — | — | $ | 949,500 | — | $ | 949,500 | — | — | |||||||||||||||||||
Accelerated vesting of equity awards (2) | — | — | — | — | $ | 2,361,875 | — | — | ||||||||||||||||||||
Accelerated vesting of LTIP awards (3) | — | — | — | — | $ | 2,634,177 | — | — | ||||||||||||||||||||
Contractual disability/death payment (4) | — | — | — | — | $ | 10,000,000 | — | |||||||||||||||||||||
Cash severance payment | — | — | — | — | — | — | — | |||||||||||||||||||||
Accrued and unpaid vacation (6) | — | — | — | — | — | — | — | |||||||||||||||||||||
Total | — | — | $ | 949,500 | — | $ | 15,945,552 | — | — | |||||||||||||||||||
J. Larry Sorsby | ||||||||||||||||||||||||||||
Accelerated vesting of annual bonus awards (1) | — | — | $ | 350,000 | — | $ | 350,000 | — | — | |||||||||||||||||||
Accelerated vesting of equity awards (2) | — | — | — | — | $ | 472,375 | — | — | ||||||||||||||||||||
Accelerated vesting of LTIP awards (3) | — | — | — | — | $ | 964.370 | — | — | ||||||||||||||||||||
Contractual disability/death payment | — | — | — | — | — | — | — | |||||||||||||||||||||
Cash severance payment | — | — | — | — | — | — | — | |||||||||||||||||||||
Accrued and unpaid vacation (6) | $ | 93,569 | $ | 93,569 | $ | 93,569 | $ | 93,569 | $ | 93,569 | — | $ | 93,569 | |||||||||||||||
Total | $ | 93,569 | $ | 93,569 | $ | 443,569 | $ | 93,569 | $ | 1,880,314 | — | $ | 93,569 | |||||||||||||||
Thomas J. Pellerito | ||||||||||||||||||||||||||||
Accelerated vesting of annual bonus awards (1) | $ | 250,000 | $ | 250,000 | $ | 250,000 | — | $ | 250,000 | — | — | |||||||||||||||||
Accelerated vesting of equity awards (2) | — | — | — | — | — | — | — | |||||||||||||||||||||
Accelerated vesting of LTIP awards (3) | — | — | — | — | $ | 803,640 | — | — | ||||||||||||||||||||
Contractual disability/death payment | — | — | — | — | — | — | — | |||||||||||||||||||||
Cash severance payment | — | — | — | — | — | — | — | |||||||||||||||||||||
Accrued and unpaid vacation (6) | $ | 32,682 | $ | 32,682 | $ | 32,682 | $ | 32,682 | $ | 32,682 | — | $ | 32,682 | |||||||||||||||
Total | $ | 282,682 | $ | 282,682 | $ | 282,682 | $ | 32,682 | $ | 1,086,322 | — | $ | 32,682 | |||||||||||||||
Brad G. O’Connor | ||||||||||||||||||||||||||||
Accelerated vesting of annual bonus awards (1) | — | — | $ | 93,000 | — | $ | 93,000 | — | — | |||||||||||||||||||
Accelerated vesting of equity awards (2) | — | — | — | — | $ | 110,090 | — | $ | 110,090 | |||||||||||||||||||
Accelerated vesting of LTIP awards (3) | — | — | — | — | $ | 225,023 | — | — | ||||||||||||||||||||
Contractual disability/death payment | — | — | — | — | — | — | — | |||||||||||||||||||||
Cash severance payment | — | — | — | — | — | — | $ | 397,560 | ||||||||||||||||||||
Accrued and unpaid vacation (6) | $ | 16,526 | $ | 16,526 | $ | 16,526 | $ | 16,526 | $ | 16,526 | — | $ | 16,526 | |||||||||||||||
Total | $ | 16,526 | $ | 16,526 | $ | 109,526 | $ | 16,526 | $ | 444,639 | — | $ | 524,176 | |||||||||||||||
David G. Valiaveedan | ||||||||||||||||||||||||||||
Accelerated vesting of annual bonus awards (1) | — | — | $ | 72,500 | — | $ | 72,500 | — | — | |||||||||||||||||||
Accelerated vesting of equity awards (2) | — | — | — | — | $ | 91,595 | — | $ | 91,595 | |||||||||||||||||||
Accelerated vesting of LTIP awards (3) | — | — | — | — | $ | 216,985 | — | — | ||||||||||||||||||||
Contractual disability/death payment | — | — | — | — | — | — | — | |||||||||||||||||||||
Cash severance payment | — | — | — | — | — | — | $ | 359,617 | ||||||||||||||||||||
Accrued and unpaid vacation (6) | $ | 19,920 | $ | 19,920 | $ | 19,920 | $ | 19,920 | $ | 19,920 | — | $ | 19,920 | |||||||||||||||
Total | $ | 19,920 | $ | 19,920 | $ | 92,420 | $ | 19,920 | $ | 401,001 | — | $ | 471,132 |
(1) | Accelerated vesting of |
(2) | Accelerated vesting of equity awards. Under circumstances other than death, disability or qualified retirement, any unvested stock options and RSUs are cancelled in accordance with the Company’s stock option and RSU agreements. Due to Mr. Pellerito's "retirement eligibility" under these agreements, all of Mr. Pellerito's outstanding options and RSUs are considered vested. The amounts in this table are calculated at the closing market price of the Company’s stock on October 31, 2012 ($4.30). |
(3) | Accelerated vesting of LTIP awards. Except in the case of death or disability, LTIP participants who terminate prior to the end of the performance period (October 31, 2013) forfeit all of their LTIP awards. Therefore, no amounts are shown under “Voluntary Termination.” Similarly, no amounts are shown under “Involuntary Termination” except in the case of death or disability. In the case of death prior to the end of the performance period, the participant is eligible to receive a prorated award payable in January 2014. In the case of disability, the participant is eligible to receive a prorated award in accordance with the following schedule: (1) 50% of the award will become vested on October 31, 2013 and payable in January 2014, (2) 30% of the award will become vested on October 31, 2014 and payable in January 2015 and (3) 20% of the award will become vested on October 31, 2015 and payable in January 2016. The values in the “Death or Disability” column represent two-thirds of the NEOs’ LTIP award based on performance through October 31, 2012 and, for the stock portion, based on the closing market price of the Company’s stock on October 31, 2012 ($4.30). |
(4) | Contractual Disability and Death Payment. The Company has an agreement with Mr. Hovnanian which provides that in the event of his disability or death during his employment with the Company he (or his designated beneficiary, estate or legal representative) will be entitled to receive a lump sum payment of $10 million. |
(5) | Change in Control. Following the end of fiscal 2011, the Company entered into change in control agreements with Messrs. O’Connor and Valiaveedan. Such agreements provide that if, within two years of the occurrence of a change in control, the NEO is involuntarily terminated other than for cause or the NEO terminates for good reason (a material reduction in duties, title or responsibilities or any reduction in base salary), the NEO, upon execution of the Company’s standard release, would receive a lump sum cash payment equal to one year’s annual base salary plus the average of the last three year’s bonuses and become 100% vested in all outstanding stock options, RSUs and deferred shares granted prior to the change in control, to the extent not previously vested. In addition, if the change in control occurs following the end of the LTIP performance period (October 31, 2013), the unpaid cash and stock portions of the LTIP award will continue to be paid to the NEO on the scheduled payout dates. The amounts in the table reflect the additional payments that Messrs. O’Connor and Valiaveedan would have received had a change in control occurred and Messrs. O’Connor’s and Valiaveedan’s employment were terminated involuntarily other than for cause or for good reason on the last business day of the fiscal year. Neither of these agreements provide for excise tax gross-ups. |
(6) | Accrued and Unpaid Vacation. Represents accrued but unpaid vacation payable upon termination for any reason. Mr. Hovnanian does not accrue vacation. |
· | Base salary continuation plan payments. The Company does not maintain such plans. |
· | Contractual disability/death payments. Only Mr. Hovnanian has this arrangement, which is described under footnote (4) above. |
· | Other perquisites and benefits. Except as noted above, there are no existing severance arrangements or policies which would extend perquisites or other benefits to the NEOs upon a triggering event that would not otherwise be also available to any employee of the Company. |
· | Annual retainer of $40,000 with an additional retainer of $20,000 for each committee on which a Director serves (each paid 100% in cash); |
· | Annual fixed value restricted share unit award valued at $50,000 for each Director plus an additional $15,000 for each committee on which a Director serves, based on the closing stock price on the date of grant, provided that, for fiscal 2012, Directors were given the opportunity to elect prior to the grant date to receive stock options in lieu of restricted share units at a ratio 1.4 stock options per restricted share unit. |
· | Meeting fees of $3,000 per board meeting held in person, $2,000 per telephonic board meeting, $5,000 per committee meeting held in person and $2,500 per telephonic committee meeting. |
Name | Fees Earned or Paid in Cash (1) | Stock Awards (2) | Option Awards (3) | Non-Equity Incentive Plan Compensation | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation | Total | |||||||||||||||||||||
Robert B. Coutts | $ | 94,000 | $ | 65,001 | $ | — | — | — | — | $ | 159,001 | |||||||||||||||||
Edward A. Kangas | $ | 201,500 | $ | 94,999 | $ | — | — | — | — | $ | 296,499 | |||||||||||||||||
Joseph A. Marengi | $ | 89,000 | $ | 65,001 | $ | — | — | — | — | $ | 154,001 | |||||||||||||||||
John J. Robbins | $ | 134,000 | $ | — | $ | 74,991 | — | — | — | $ | 208,991 | |||||||||||||||||
Stephen D. Weinroth | $ | 206,500 | $ | — | $ | 109,600 | — | — | — | $ | 316,100 |
Change in | |||||||||||||||||
Pension Value | |||||||||||||||||
Fees | and Nonqualified | ||||||||||||||||
Earned | Non-Equity | Deferred | |||||||||||||||
or Paid in | Stock | Option | Incentive Plan | Compensation | All Other | ||||||||||||
Name | Cash (1) | Awards (2) | Awards (3) | Compensation | Earnings | Compensation | Total | ||||||||||
Robert B. Coutts | $ | 73,501 | $ | 29,999 | $ | 38,640 | — | — | — | $ | 142,140 | ||||||
Edward A. Kangas | $ | 151,001 | $ | 49,999 | $ | 60,720 | — | — | — | $ | 261,720 | ||||||
Joseph A. Marengi | $ | 61,001 | $ | 29,999 | $ | 38,640 | — | — | — | $ | 129,640 | ||||||
John J. Robbins | $ | 91,001 | $ | 29,999 | $ | 38,640 | — | — | — | $ | 159,640 | ||||||
Stephen D. Weinroth | $ | 146,001 | $ | 49,999 | $ | 60,720 | — | — | — | $ | 256,720 |
(1) | “Fees Earned or Paid in Cash” Column. The amounts in this column represent the combined value of fiscal 2012 annual retainer and meeting fees paid in cash |
Name | FY12 Meeting Fees (a) | FY12 Annual Retainer Fees Cash Payment (represents 100% of the total Annual Retainer Fees) | Cash Total | |||||||||
Robert B. Coutts | $ | 34,000 | $ | 60,000 | $ | 94,000 | ||||||
Edward A. Kangas | $ | 101,500 | $ | 100,000 | $ | 201,500 | ||||||
Joseph A. Marengi | $ | 29,000 | $ | 60,000 | $ | 89,000 | ||||||
John J. Robbins | $ | 74,000 | $ | 60,000 | $ | 134,000 | ||||||
Stephen D. Weinroth | $ | 106,500 | $ | 100,000 | $ | 206,500 |
FY09 Annual Retainer Fees | |||||||
FY09 | Cash Payment | ||||||
Meeting | (represents 50% of the total | Cash | |||||
Name | Fees | Annual Retainer Fees) (a) | Total | ||||
Robert B. Coutts | $ | 43,500 | $30,001 | $ | 73,501 | ||
Edward A. Kangas | $ | 101,000 | $50,001 | $ | 151,001 | ||
Joseph A. Marengi | $ | 31,000 | $30,001 | $ | 61,001 | ||
John J. Robbins | $ | 61,000 | $30,001 | $ | 91,001 | ||
Stephen D. Weinroth | $ | 96,000 | $50,001 | $ | 146,001 | ||
(a) Subject to rounding. |
(a) | FY12 Meeting Fees include fees due to the Audit Committee members for Audit Committee Earnings Press Release and Form 10-Q telephonic meetings that occurred between the third quarter of fiscal 2010 through the first quarter of fiscal 2012. Such payments had not been paid to the Audit Committee members in prior years. The amounts related to prior years are $30,000, $35,000 and $32,500 for Messrs. Kangas, Robbins and Weinroth, respectively. |
(2) | “Stock Awards” Column. The amounts in this column represent the aggregate grant date fair value of RSUs awarded in fiscal 2012 and are computed in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts are set forth in Footnotes 3 and 15 to the Company’s audited financial statements |
Name | Grant Date | Number of RSUs Granted (a) | Total Grant Date Fair Value of RSUs | ||||||||||
Robert B. Coutts | 06/08/2012 | 30,093 | $ | 65,001 | |||||||||
Edward A. Kangas | 06/08/2012 | 43,981 | $ | 94,999 | |||||||||
Joseph A. Marengi | 06/08/2012 | 30,093 | $ | 65,001 | |||||||||
John J. Robbins | — | — | $ | — | |||||||||
Stephen D. Weinroth | — | — | $ | — |
(a) | For fiscal 2012, non-employee Directors were granted RSUs valued at $50,000 on the grant date for serving on the Company’s Board of Directors and additional RSUs valued at $15,000 on the grant date for each Board committee on which the non-employee Director served provided that Directors were given the opportunity to elect prior to the grant date to receive options to purchase shares of Class A Common Stock in lieu of RSUs at a ratio 1.4 stock options per RSU. |
(3) | “Option Awards” Column. The amounts in this column reflect options to purchase shares of Class A Common Stock awarded in fiscal 2012 and are based on the aggregate grant date fair value of the option awards computed in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts are set forth in Footnotes 3 and 15 to the Company’s audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2012. |
FY09 Annual Retainer | ||||||||
Fees Cash Payment | ||||||||
FY09 Annual Retainer Fees | (represents 50% of the | Total | ||||||
Stock Payment (represents | Number | total Annual Retainer | Annual | |||||
50% of the total Annual | of Shares | Fees; also shown in | Retainer for | |||||
Name | Retainer Fees) (a) (b) | Represented | footnote (1) above) (b) | Fiscal 2009 | ||||
Robert B. Coutts | $29,999 | 12,820 | $30,001 | $ | 60,000 | |||
Edward A. Kangas | $49,999 | 21,367 | $50,001 | $ | 100,000 | |||
Joseph A. Marengi | $29,999 | 12,820 | $30,001 | $ | 60,000 | |||
John J. Robbins | $29,999 | 12,820 | $30,001 | $ | 60,000 | |||
Stephen D. Weinroth | $49,999 | 21,367 | $50,001 | $ | 100,000 | |||
(a) Non-employee Director stock awards have no vesting restrictions and are valued as of the market value on the day of grant. | ||||||||
(b) Subject to rounding. |
Name | Grant Date | Number of Options Granted (a) | Total Grant Date Fair Value of Options | ||||||||||
Robert B. Coutts | — | — | $ | — | |||||||||
Edward A. Kangas | — | — | $ | — | |||||||||
Joseph A. Marengi | — | — | $ | — | |||||||||
John J. Robbins | 06/08/2012 | 42,130 | $ | 74,991 | |||||||||
Stephen D. Weinroth | 06/08/2012 | 61,573 | $ | 109,600 |
Number of Options | Option Fair | ||||
Granted (as of June 12, | Value per Share | Total Grant | |||
Non-Employee Director | 2009 grant date) (a) | at Grant Date | Date Fair Value | ||
Robert B. Coutts | 21,000 | $1.84 | $38,640 | ||
Edward A. Kangas | 33,000 | $1.84 | $60,720 | ||
Joseph A. Marengi | 21,000 | $1.84 | $38,640 | ||
John J. Robbins | 21,000 | $1.84 | $38,640 | ||
Stephen D. Weinroth | 33,000 | $1.84 | $60,720 | ||
(a) For fiscal 2009, non-employee Directors were granted 15,000 stock options for serving on the Company’s Board of Directors and an additional 6,000 stock options for each Board committee on which the non-employee director served. |
(a) | For fiscal 2012, non-employee Directors were given the opportunity to elect prior to the grant date to receive options to purchase shares of Class A Common Stock in lieu of RSUs at a ratio of 1.4 stock options per RSU. |
OPTION AWARDS | STOCK AWARDS | |||||||||||||||||||||||||||||||||||||||||
Name | Grant Date (a) | Number of Securities Underlying Unexercised Options Exercisable (#) | Value of Unexercised In The Money Options Exercisable ($) (b) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Value of Unexercised In The Money Options Unexercisable ($) (b) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that have not vested (#) | Market Value of Shares or Units of Stock that have not vested ($) | |||||||||||||||||||||||||||||||||
Robert B. Coutts | 06/13/08 | 7,000 | $ | 0 | — | $ | 0 | $ | 6.46 | 06/12/18 | — | $ | — | |||||||||||||||||||||||||||||
Number of | Number of | Equity Incentive | 06/12/09 | 21,000 | $ | 36,750 | — | $ | 0 | $ | 2.55 | 06/11/19 | — | $ | — | |||||||||||||||||||||||||||
Securities | Securities | Plan Awards: | 06/11/10 | 21,000 | $ | 0 | — | $ | 0 | $ | 4.73 | 06/10/20 | — | $ | — | |||||||||||||||||||||||||||
Underlying | Underlying | Number of Securities | 06/10/11 | 18,900 | $ | 44,793 | — | $ | 0 | $ | 1.93 | 06/09/21 | — | $ | — | |||||||||||||||||||||||||||
Unexercised | Unexercised | Underlying | Option | 06/08/12 | — | $ | 0 | — | $ | 0 | $ | 2.16 | 06/07/22 | 30,093 | $ | 129,400 | ||||||||||||||||||||||||||
Grant date | Options # | Options # | Unexercised Unearned | Exercise | Option | |||||||||||||||||||||||||||||||||||||
Name | (a) | Exercisable | Unexercisable | Options # | Price ($) | Expiration Date | ||||||||||||||||||||||||||||||||||||
Robert B. Coutts | 6/13/08 | 2,333 | 4,667 | — | $6.46 | 6/12/18 | ||||||||||||||||||||||||||||||||||||
6/12/09 | — | 21,000 | — | $2.55 | 6/11/19 | |||||||||||||||||||||||||||||||||||||
Edward A. Kangas | 6/13/08 | 3,667 | 7,333 | — | $6.46 | 6/12/18 | 06/13/08 | 11,000 | $ | 0 | — | $ | 0 | $ | 6.46 | 06/12/18 | — | $ | — | |||||||||||||||||||||||
6/12/09 | — | 33,000 | — | $2.55 | 6/11/19 | 06/12/09 | 33,000 | $ | 57,750 | — | $ | 0 | $ | 2.55 | 06/11/19 | — | $ | — | ||||||||||||||||||||||||
06/11/10 | 33,000 | $ | 0 | — | $ | 0 | $ | 4.73 | 06/10/20 | — | $ | — | ||||||||||||||||||||||||||||||
06/10/11 | 29,700 | $ | 70,389 | — | $ | 0 | $ | 1.93 | 06/09/21 | — | $ | — | ||||||||||||||||||||||||||||||
06/08/12 | — | $ | 0 | — | $ | 0 | $ | 2.16 | 06/07/22 | 43,981 | $ | 189,118 | ||||||||||||||||||||||||||||||
Joseph A. Marengi | 6/13/08 | 2,333 | 4,667 | — | $6.46 | 6/12/18 | 06/13/08 | 7,000 | $ | 0 | — | $ | 0 | $ | 6.46 | 06/12/18 | — | $ | — | |||||||||||||||||||||||
06/12/09 | 21,000 | $ | 36,750 | — | $ | 0 | $ | 2.55 | 06/11/19 | — | $ | — | ||||||||||||||||||||||||||||||
06/11/10 | 14,000 | $ | 0 | 7,000 | $ | 0 | $ | 4.73 | 06/10/20 | — | $ | — | ||||||||||||||||||||||||||||||
06/10/11 | 6,300 | $ | 14,931 | 12,600 | $ | 29,862 | $ | 1.93 | 06/09/21 | 466 | $ | 2,004 | ||||||||||||||||||||||||||||||
6/12/09 | — | 21,000 | — | $2.55 | 6/11/19 | 06/08/12 | — | $ | 0 | — | $ | 0 | $ | 2.16 | 06/07/22 | 30,093 | $ | 129,400 | ||||||||||||||||||||||||
John J. Robbins | 11/06/01 | 5,000 | — | — | $5.58 | 11/05/11 | 06/13/08 | 7,000 | $ | 0 | — | $ | 0 | $ | 6.46 | 06/12/18 | — | $ | — | |||||||||||||||||||||||
6/13/08 | 2,333 | 4,667 | — | $6.46 | 6/12/18 | 06/12/09 | 21,000 | $ | 36,750 | — | $ | 0 | $ | 2.55 | 06/11/19 | — | $ | — | ||||||||||||||||||||||||
6/12/09 | — | 21,000 | — | $2.55 | 6/11/19 | 06/11/10 | 21,000 | $ | 0 | — | $ | 0 | $ | 4.73 | 06/10/20 | — | $ | — | ||||||||||||||||||||||||
06/10/11 | 18,900 | $ | 44,793 | — | $ | 0 | $ | 1.93 | 06/09/21 | — | $ | — | ||||||||||||||||||||||||||||||
06/08/12 | 42,130 | $ | 90,158 | — | $ | 0 | $ | 2.16 | 06/07/22 | — | $ | — | ||||||||||||||||||||||||||||||
Stephen D. Weinroth | 11/06/01 | 10,000 | — | — | $5.58 | 11/05/11 | 06/13/08 | 11,000 | $ | 0 | — | $ | 0 | $ | 6.46 | 06/12/18 | — | $ | — | |||||||||||||||||||||||
6/13/08 | 3,667 | 7,333 | — | $6.46 | 6/12/18 | 06/12/09 | 33,000 | $ | 57,750 | — | $ | 0 | $ | 2.55 | 06/11/19 | — | $ | — | ||||||||||||||||||||||||
6/12/09 | — | 33,000 | — | $2.55 | 6/11/19 | 06/11/10 | 33,000 | $ | 0 | — | $ | 0 | $ | 4.73 | 06/10/20 | — | $ | — | ||||||||||||||||||||||||
06/10/11 | 29,700 | $ | 70,389 | — | $ | 0 | $ | 1.93 | 06/09/21 | — | $ | — | ||||||||||||||||||||||||||||||
06/08/12 | 61,573 | $ | 131,766 | — | $ | 0 | $ | 2.16 | 06/07/22 | — | $ | — |
(a) | Stock options vest one-third per year beginning on the first anniversary of the date of grant. If prior to the stock option termination date the |
(b) | Based on the difference between the closing market price of the Company’s Class A Common Stock on the NYSE at October 31, 2012 and the exercise price of the options. |
· | the overall scope and plans for such accounting firm’s respective audits of the Company, |
· | such accounting firm’s judgments as to the quality, not just the acceptability, of the Company’s accounting principles, |
· | such accounting firm’s independence from management and the Company, including matters in the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Accounting Oversight Board concerning independence and received by the Company, and |
· | such other matters as are required to be discussed with the Audit Committee under generally accepted auditing standards and under Statements on Auditing Standards No. 61, as amended (AICPA, Professional Standards Vol. I. AU Section 380), as adopted by the Public Company Accounting Oversight Board, which we refer to as the PCAOB, in Rule 3200T, other standards of the PCAOB, rules of the Securities and Exchange Commission, and other applicable regulations. |
AUDIT COMMITTEE | |
· | We do not provide guaranteed bonuses, nor have we awarded excessively large equity grants with unlimited upside but no downside risk; |
· | In recent years when ROACE bonuses were not attainable, bonuses based on net debt or EBITDA improvements have been capped based on specific dollar amounts; |
· | We maintain a balanced portfolio between long-term and short-term; fixed and variable; and cash and equity in our compensation program; |
· | A variety of performance measures are used in our short-term and long-term incentive plans; |
· | We do not provide lucrative severance packages or any supplemental pension plans; |
· | A large portion of our compensation program is tied to long-term and sustained company performance, and our LTIP grant requires a two-year holding period for full vesting even after awards are earned after a three-year performance period; |
· | Our incentive plans are not tied to formulas that could focus executives on specific short-term outcomes to the detriment of long-term results; |
· | The Compensation Committee reserves the right to apply negative discretion to bonus amounts calculated under the bonus formulas; |
· | Our CEO, CFO and COO are subject to our stock ownership and holding guidelines, discussed on page 36; and |
· | Our compensation programs do not provide high or inappropriate pay opportunities compared to our Peer Group and broad-based compensation survey data. |
· | the commercial reasonableness of the terms of the transaction; | |
· | the benefit and perceived benefit (or lack thereof) to the Company; | |
· | opportunity costs of alternate transactions; |
· | the materiality and character of the related person’s direct or indirect interest, and the actual or apparent conflict of interest of the related person; and | |
· | with respect to a non-employee director or nominee, whether the transaction would compromise the director’s (1) independence under the NYSE rules and Rule 10A-3 of the Exchange Act, if such non-employee director serves on the Audit Committee; (2) independence under the Company’s Certificate of Incorporation; (3) status as an “outside director” under Section 162(m) of the Internal Revenue Code if such non-employee director serves on the Compensation Committee; or (4) status as a “non-employee director” under Rule 16b-3 of the Exchange Act if such non-employee director serves on the Compensation Committee. |
· | the Company was or is to be a participant; | |
· | the amount involved exceeds $120,000; and | |
· | any related person had or will have a direct or indirect material interest. |
By Order of the Board of Directors | |
HOVNANIAN ENTERPRISES, INC. |
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