SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ORLEANS HOMEBUILDERS, INC.
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(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
1) Amount previously paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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ORLEANS HOMEBUILDERS, INC.
ONE GREENWOOD SQUARE, SUITE 101
3333 STREET ROAD
BENSALEM, PENNSYLVANIA 19020
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 2, 2004
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To the Stockholders of Orleans Homebuilders, Inc.:
The Annual Meeting of Stockholders of Orleans Homebuilders, Inc. (the
"Company") will be held on Thursday, December 2, 2004, at 11:00 a.m.,
Philadelphia time, at the offices of Wolf, Block, Schorr and Solis-Cohen LLP,
1650 Arch Street, 22nd Floor, Philadelphia, Pennsylvania 19103 (Conference Room
5), for the following purposes:
1. Election of directors;
2. Approval of an Amendment to the Company's Certificate of
Incorporation increasing the number of authorized shares from 20 million to 23
million;
3. Approval of the Orleans Homebuilders, Inc. 2004 Omnibus Stock
Incentive Plan; and
4. Transaction of such other business as properly may be brought before
the meeting or any adjournment thereof.
The board of directors has fixed the close of business on October 18,
2004 as the record date for determining the stockholders entitled to notice of
and to vote at the meeting. Only stockholders of record on the transfer books of
the Company at the close of business on that date are entitled to notice of and
to vote at the meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AND VOTED AT THE
MEETING. PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE
PROVIDED FOR THAT PURPOSE EVEN IF YOU PLAN TO ATTEND THE MEETING. A PERSON
GIVING A PROXY HAS THE POWER TO REVOKE IT BY WRITTEN NOTICE TO THE SECRETARY OF
THE COMPANY, AND ANY STOCKHOLDER WHO IS PRESENT AT THE MEETING MAY WITHDRAW THE
PROXY AND VOTE IN PERSON. STOCKHOLDERS WHO HOLD THEIR SHARES THROUGH A BROKER
(IN "STREET NAME") SHOULD FOLLOW THE VOTING INSTRUCTIONS PROVIDED BY THEIR
BROKER.
October 19, 2004
By Order of the Board of Directors
JOSEPH A. SANTANGELO,
Secretary-Treasurer and Chief Financial Officer
ORLEANS HOMEBUILDERS, INC.
CORPORATE HEADQUARTERS:
ONE GREENWOOD SQUARE, SUITE 101
3333 STREET ROAD
BENSALEM, PENNSYLVANIA 19020
TELEPHONE NUMBER: (215) 245-7500
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PROXY STATEMENT
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This proxy statement, which is being sent to stockholders on or about
October 29, 2004, is furnished to stockholders of Orleans Homebuilders, Inc. in
connection with the solicitation of proxies for the Annual Meeting of
Stockholders (the "Annual Meeting"), by order of the board of directors of the
Company. The meeting will be held on Thursday, December 2, 2004, at 11:00 a.m.,
Philadelphia time, at the offices of Wolf, Block, Schorr and Solis-Cohen LLP,
1650 Arch Street, 22nd Floor, Philadelphia, Pennsylvania, 19103 (Conference Room
5) for the purposes set forth in the accompanying Notice of Annual Meeting of
Stockholders.
The record date of stockholders entitled to notice of and to vote at
the meeting has been fixed as the close of business on October 18, 2004. Only
stockholders of record at the close of business on the record date shall be
entitled to notice of and to vote at the meeting.
As of September 30, 2004, the Company had outstanding 17,436,136 shares
of Common Stock, par value $.10 per share, which are eligible to be voted at the
Annual Meeting. Each share of Common Stock is entitled to one vote.
TABLE OF CONTENTS
VOTING AND REVOCABILITY OF PROXIES................................................................................1
ELECTION OF DIRECTORS.............................................................................................2
Directors................................................................................................3
Executive Officers.......................................................................................3
Committees and Meetings of the Board of Directors........................................................4
CORPORATE GOVERNANCE..............................................................................................6
Director Independence....................................................................................6
Audit Committee..........................................................................................6
Compensation Committee...................................................................................7
Nominating Committee.....................................................................................7
Code of Business Conduct & Ethics........................................................................7
Directors' Attendance at Annual Meetings of Stockholders.................................................7
Communication With the Board of Directors................................................................7
Compensation Committee Interlocks and Insider Participation..............................................8
Compensation of Directors................................................................................8
APPROVAL OF THE AMENDMENT TO THE ORLEANS HOMEBUILDERS, INC. CERTIFICATE OF INCORPORATION INCREASING THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK..............................................................8
APPROVAL OF THE ORLEANS HOMEBUILDERS, INC. 2004 OMNIBUS STOCK INCENTIVE PLAN......................................9
Equity Compensation Plan Information....................................................................18
OTHER MATTERS....................................................................................................18
ADDITIONAL INFORMATION...........................................................................................18
Section 16(a) Beneficial Ownership Reporting Compliance.................................................18
Security Ownership of Certain Beneficial Owners and Management..........................................19
EXECUTIVE COMPENSATION...........................................................................................20
Summary Compensation Table..............................................................................20
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values.......................21
Market for Registrant's Common Stock and Related Stockholder Matters....................................21
Option/SAR Grants Table.................................................................................22
Performance Graph.......................................................................................22
Employment Contracts with Named Executives..............................................................24
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION..........................................................25
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................................................................27
AUDIT COMMITTEE REPORT...........................................................................................30
ADDITIONAL INFORMATION REGARDING THE AUDITORS....................................................................30
DEADLINE FOR FILING STOCKHOLDER PROPOSALS FOR 2005 ANNUAL MEETING................................................31
PROCEDURES FOR NOMINATING OR RECOMMENDING FOR NOMINATION CANDIDATES FOR DIRECTOR.................................32
ANNUAL REPORT ON FORM 10-K.......................................................................................32
VOTING AND REVOCABILITY OF PROXIES
Each share of outstanding Orleans Homebuilders, Inc. (the "Company")
common stock, par value $.10 per share ("Common Stock"), entitles the holder to
one vote, without cumulation, on each matter to be voted upon at the Annual
Meeting. Under the Company's by-laws, the holders of a majority of the shares of
Common Stock issued and outstanding and entitled to vote at the Annual Meeting
shall constitute a quorum for the transaction of business at the Annual Meeting.
Shares of Common Stock present in person or represented by proxy (including
shares which abstain or do not vote with respect to one or more of the matters
presented for stockholder approval) will be counted for purposes of determining
whether a quorum exists.
Shares of the Company's Common Stock represented by any unrevoked proxy
in the enclosed form will be voted in accordance with the specifications made on
the proxy, if it is properly executed and received prior to voting at the Annual
Meeting. Any properly executed proxy received on a timely basis on which no
specification has been made by the stockholder will be voted (1) "FOR" the
election as directors of the nominees listed herein (or for such substitute
nominees as may be nominated in the event the initial nominees become
unavailable); (2) "FOR" approval of the Amendment to the Company's Certificate
of Incorporation Increasing the number of authorized shares of Common Stock; (3)
"FOR" approval of the Orleans Homebuilders, Inc. 2004 Omnibus Stock Incentive
Plan; and (4) in the discretion of the Proxy Committee of the board of
directors, upon all other matters requiring a vote of stockholders which may
properly come before the meeting and of which the board of directors was not
aware a reasonable time before this solicitation.
The enclosed proxy is being solicited on behalf of the board of
directors of the Company and any costs of solicitation will be borne by the
Company. Such costs include preparation, printing and mailing of the Notice of
Annual Meeting of Stockholders, the proxy, this proxy statement and the Annual
Report, which are herewith enclosed. The solicitation will be conducted
principally by mail, although directors, officers and regular employees of the
Company may solicit proxies personally or by telephone or facsimile.
Arrangements will be made with brokerage houses and other custodians, nominees
and fiduciaries for proxy material to be sent to their principals, and the
Company will reimburse such persons for their reasonable expenses in so doing.
The Proxy Committee, selected by the board of directors, consists of
Jeffrey P. Orleans, Chief Executive Officer and Chairman of the board of
directors of the Company, and Benjamin D. Goldman, Vice Chairman of the board of
directors of the Company. If the enclosed proxy is executed and returned, it
may, nevertheless, be revoked at any time before it has been exercised upon
written notice to the Secretary of the Company or by delivering a duly executed
proxy bearing a later date. The proxy shall be deemed revoked if a stockholder
is present at the meeting and elects to vote in person.
With regard to the election of directors, votes may be cast in favor of
or withheld from each nominee. Under applicable Delaware law, votes that are
withheld and broker non-votes will be excluded entirely from the vote and will
not affect the outcome of the election of directors, as directors are elected by
a plurality of votes cast. The proposals to approve the Amendment to the
Company's Certificate of Incorporation increasing the number of authorized
shares of Common Stock (the "Share Increase Proposal") and the Orleans
Homebuilders, Inc. 2004 Omnibus Stock Incentive Plan (the "Stock Incentive Plan
Proposal," and together with the Share Increase Proposal, the "Proposals")
require approval by a majority of the shares present, in person or by proxy, and
entitled to vote at the meeting. Under applicable Delaware law, abstentions with
respect to the Proposals will have the same effect as votes against the
proposals, and broker non-votes will have no effect on the outcome of the vote
on the Proposals. Jeffrey P. Orleans, Chairman of the board of directors and
Chief Executive Officer, controls a majority of the voting power of the Common
Stock. Mr. Orleans has informed the Company that he intends to vote his shares
of Common Stock in favor of the election as directors of the nominees listed in
this Proxy Statement and in favor of the Stock Incentive Proposal and the Share
Increase Proposal, which means that these proposals will be approved regardless
of the votes of the Company's other stockholders. Dissenters do not have any
appraisal or similar rights with respect to any of the proposals.
-1-
PROPOSAL ONE
ELECTION OF DIRECTORS
The stockholders are being asked to elect ten directors, who will
comprise the entire board of directors of the Company, to serve for the ensuing
year and until their successors are duly elected and qualified. The nominees are
Messrs. Benjamin D. Goldman, Jerome S. Goodman, Robert N. Goodman, Andrew N.
Heine, David Kaplan, Lewis Katz, Jeffrey P. Orleans, Robert M. Segal, John W.
Temple and Michael T. Vesey, all of whom are currently directors of the Company.
Assuming a quorum is present, the ten nominees receiving the highest number of
votes cast at the meeting will be elected directors. For such purposes, the
withholding of authority to vote or the specific direction not to cast a vote,
such as a broker non-vote, will not constitute the casting of a vote in the
election of directors.
In the event that any nominee for director should become unavailable,
which event the board of directors does not anticipate, it is intended that
votes will be cast pursuant to the enclosed proxy for such substitute nominee as
may be nominated by the board of directors, unless otherwise indicated by the
stockholder on the proxy.
Name Age Present Position with the Company Director Since
- ---- --- --------------------------------- --------------
Benjamin D. Goldman(1)(2) 58 Vice Chairman of the Board 1992
Jerome S. Goodman(5)(6)(7) 70 Director 2001
Robert N. Goodman(3)(5) 52 Director 1994
Andrew N. Heine(3)(7) 75 Director 1994
David Kaplan(4)(7) 60 Director 1994
Lewis Katz (6) 62 Director 1987
Jeffrey P. Orleans(1)(2)(6) 58 Chairman of the Board and Chief 1983
Executive Officer
Robert M. Segal 69 Director 2002
John W. Temple(3)(4)(5) 67 Director 2002
Michael T. Vesey 45 Director, President and Chief 2001
Operating Officer
- -------------------
(1) Member of the committee designated to administer the 1992 Stock Option Plan
for Non-Employee Directors (the "1992 Director Option Plan Committee").
(2) Member of the committee designated to administer the 1995 Stock Option Plan
for Non-Employee Directors (the "1995 Director Option Plan Committee").
(3) Member of the Audit Committee.
(4) Member of the Compensation Committee. The Compensation Committee has been
designated to administer the 2004 Omnibus Stock Incentive Plan.
(5) Member of the committee designated to administer the 1992 Incentive Stock
Option Plan (the "1992 Incentive Stock Option Committee").
(6) Member of the Executive Committee.
(7) Member of the Nominating Committee.
-2-
DIRECTORS
Benjamin D. Goldman was elected the Vice Chairman of the Board in April
1998 and has been a director since May 1992. From May 1992 until April 1998, he
served as the Company's President and Chief Operating Officer. Mr. Goldman has
been a director of Sterling Bank of New Jersey since March 2002.
Jerome S. Goodman has been a director since April 2001. Mr. Goodman was
a director of Aetna Inc. from 1988 to May 2001 and retired as Chairman of Travel
One upon the sale of that firm to American Express Company on November 15, 1998.
He was a trustee of Resource Asset Investment Trust, a real estate investment
trust, from 1997 to 1999. Mr. Goodman is a director of The Maine Merchant Bank,
LLC.
Robert N. Goodman has been a director since April 1994. Since 1998, he
has served as President of Resmark Equity Partners, LLC (formerly known as
Olympic Realty Advisors II, LLC), a finance company providing equity and debt
capital for single-family residential homebuilding projects in California. Mr.
Goodman owns a controlling equity interest in JDT Consulting Group, the sole
general partner of La Jolla Village Professional Center Associates, L.P., a
California limited partnership and is a director of Price Legacy Corporation.
Andrew N. Heine has been a director since April 1994. Mr. Heine is an
attorney, private investor and a director of Citizens Communications Company.
David Kaplan has been a director since April 1994. Since 1996, Mr.
Kaplan has been a principal in Autumn Hill Capital, Inc., a real estate advisory
and investment banking firm, and managing partner of Kingsbridge Partners LLC, a
real estate investment firm. Prior to that time, he was a principal of Victor
Capital Group, L.P., which engaged in real estate advisory services and
investment banking.
Lewis Katz has been a director since 1987. From 1972 to 1997, he was a
partner in the law firm of Katz, Ettin & Levine, P.A., Cherry Hill, New Jersey,
which has performed legal services for the Company in the past year, and he is
now Of Counsel to such law firm. Mr. Katz is a director of Central Parking
Corporation.
Jeffrey P. Orleans has been a director since 1983 and has served as our
Chairman of the Board and Chief Executive Officer since September 1986. From
September 1986 to May 1992, he also served as our President. In addition, Mr.
Orleans was a trustee of Pennsylvania Real Estate Investment Trust from 1986
until June 2004.
Robert M. Segal has been a director since August 2002. For more than
five years, Mr. Segal has been a partner in the law firm Wolf, Block, Schorr and
Solis-Cohen LLP, which serves as the Company's general counsel.
John W. Temple has been a director since April 2002. For more than five
years, Mr. Temple has been the President and Chief Executive Officer of Temple
Development Company, a real estate development company.
Michael T. Vesey has been a director since September 2001 and has
served as our President and Chief Operating Officer since April 1998.
EXECUTIVE OFFICERS
In addition to Messrs. Orleans, Goldman and Vesey, the following
persons serve as executive officers of the Company:
Joseph A. Santangelo, 50, is the Chief Financial Officer, Treasurer and
Secretary. He has held the position as Chief Financial Officer since July 1994,
and he has been Treasurer and Secretary since 1987.
Robert Fitzsimmons, 51, has been the President of Masterpiece Homes, a
wholly-owned subsidiary, since the Company's acquisition of Masterpiece Homes in
July 2003. Prior to the Company's acquisition of Masterpiece Homes, Mr.
Fitzsimmons had been the President and a member of the board of directors of
Masterpiece Homes.
-3-
Thomas Gancsos, 51, has been the Company's Division Manager for
Richmond, Virginia, since the Company acquired Parker & Lancaster Corporation in
October 2000. Prior to that, he had been the Division Manager for Parker &
Lancaster Corporation since December 1999. From January 1998 through November
1999, Mr. Gancsos was self-employed as a consultant and builder of custom homes.
Jeffrey Guernier, 44, has been the Company's Division Manager for
Greensboro, North Carolina since September 1, 2003. Prior to that, he had been
the Executive Vice President for Parker & Lancaster Corporation since July 1997.
J. Russell Parker, III, 59, has been the President of Parker &
Lancaster Corporation and Parker & Orleans Homebuilders, Inc., both wholly-owned
subsidiaries of the Company, since the Company's acquisition of Parker &
Lancaster Corporation in October 2000. Prior to the Company's acquisition of
Parker & Lancaster Corporation, Mr. Parker had been the President and Chief
Executive Officer of Parker & Lancaster Corporation since 1997.
L. Anthony Piccola, 60, has been the Company's Division Manager for
Raleigh, North Carolina, since the Company acquired Parker & Lancaster
Corporation in October 2000. Prior to that, he was employed by Parker &
Lancaster Corporation as the Division Manager for Raleigh for more than five
years.
Gary G. Schaal, 53, is the Company's Executive Vice President-Sales and
Marketing. He has held that position since September 1995.
Thomas Vesey, 39, has been the Company's Division Manager for
Charlotte, North Carolina, since January 2002. Prior to that, he had been
employed by the Company from March 2000 to December 2001 to assist the Company
in evaluating and identifying opportunities for expansion into additional
markets and to assimilate acquisitions into the Company's operations. From April
1997 to March 2000, Mr. Vesey was employed by Hovnanian Enterprises, Inc. as the
Northeast Region Purchasing Manager. Mr. Vesey is the brother of Michael T.
Vesey, the Company's President and Chief Operating Officer.
Gary J. Stefanoni, 52, has been the Company's Senior Executive Vice
President and President of the Company's Northern Region since March 2004. From
February 1995 until March 2004, Mr. Stefanoni was the Vice President of
Operations of Pulte Homes, a builder of residential homes.
Kyle Upper, 38, has been the Company's Vice President-Land Acquisition
since July 2004. From May 1997 to July 2004 he had been the Company's Director
of Land Acquisition.
All of the Company's executive officers serve at the discretion of the
board of directors.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The board of directors held five meetings and acted three times by
unanimous consent during the fiscal year ended June 30, 2004 ("Fiscal 2004").
During Fiscal 2004 all incumbent directors attended in person or by conference
call at least 75% of the total number of meetings of the board of directors and
meetings of the committees of the board of directors on which they served during
their incumbency.
The Company has standing Executive, Audit, Compensation, Nominating,
1992 Incentive Stock Option, 1992 Director Option Plan and 1995 Director Option
Plan Committees.
The Executive Committee is comprised of Jeffrey P. Orleans (Chairman),
Jerome S. Goodman and Lewis Katz. The Executive Committee has and exercises the
authority of the board of directors in the management of the business and
affairs of the Company between meetings of the board of directors.
The Audit Committee is comprised of John W. Temple (Chairman), Robert
N. Goodman and Andrew N. Heine. During Fiscal 2004, the Audit Committee met five
times.
-4-
The Audit Committee is governed by the Company's Audit Committee
Charter. The charter has been attached as Appendix A to this Proxy Statement.
Copies of the charter can also be obtained free of charge by contacting the
Company at the address appearing on the first page of this Proxy Statement to
the attention of the Chief Financial Officer. As set forth in the charter, the
principal purpose of the Audit Committee is to assist the board of directors in
fulfilling its oversight responsibility to the stockholders, potential
stockholders, the investment community and others relating to the integrity and
audits of the Company's financial statements, the Company's compliance with
legal and regulatory requirements, the performance of the Company's systems of
internal accounting and financial controls and financial reporting processes,
and the qualifications and independence of the Company's outside auditor. In
discharging its oversight role, the Audit Committee is empowered to address any
matter brought to its attention with full access to all books, records,
facilities and personnel of the Company.
The Audit Committee has the sole authority to select the outside
auditors who will perform the audit of the Company's financial statements or
other audit, review or attest services, considering independence and
effectiveness, and to approve the fees and other compensation to be paid to the
outside auditors. The Audit Committee is also responsible for overseeing the
audit and audit-related services performed by the outside auditors, including
the responsibility and authority to resolve disagreements between management and
the auditors regarding financial reporting. The outside auditors are to report
directly to the Audit Committee and the Audit Committee is to provide an open
avenue of communication among management, appropriate Company personnel, the
outside auditors and the board of directors.
The Compensation Committee is comprised of David Kaplan (Chairman) and
John W. Temple. The Compensation Committee reviews and makes recommendations to
the board of directors with respect to the Company's compensation plans,
including incentive-compensation and equity-based plans, policies and programs.
Under the Compensation Committee charter, the Compensation Committee is also
directly responsible for establishing the salary, bonus and other compensation
of the Company's executive officers other than the Chief Executive Officer. With
respect to the Chief Executive Officer, the Committee is responsible for making
recommendations to the board of directors with respect to his salary, bonus and
other compensation. The Compensation Committee met once during Fiscal 2004 to
discuss and approve bonuses payable to the Company's executive officers and
other key employees. The Compensation Committee charter was adopted in August
2004. Copies of the charter can be obtained free of charge by contacting the
Company at the address appearing on the first page of this Proxy Statement to
the attention of the Chief Financial Officer.
The Nominating Committee was organized in August 2004 after the
nominees for director identified in this Proxy were selected and approved by the
board of directors. The Nominating Committee considers and makes recommendations
to the board of directors with respect to board qualifications, structure and
membership. The Nominating Committee is comprised of Andrew N. Heine, David
Kaplan and Jerome S. Goodman. A charter governing the Nominating Committee was
recently adopted by the board of directors in August 2004 and a copy of the
charter is attached as Appendix B to this Proxy Statement, but is not available
on the Company's website. Copies of the charter can also be obtained free of
charge by contacting the Company at the address appearing on the first page of
this Proxy Statement to the attention of the Chief Financial Officer. The
Committee did not hold any meetings during Fiscal 2004.
None of the committees that administer the Company's stock incentive
plans held meetings in Fiscal 2004.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE ELECTION OF EACH OF THE
NOMINEES FOR DIRECTOR.
-5-
CORPORATE GOVERNANCE
DIRECTOR INDEPENDENCE
Under the applicable rules of the American Stock Exchange, for a
director to be considered independent, the board of directors must affirmatively
determine that the director does not have a material relationship with the
Company that would interfere with the exercise of independent judgment. The
applicable rules of the American Stock Exchange also provide that the following
persons cannot be considered independent: (i) a director who is, or during the
past three years was, employed by the Company or by any parent or subsidiary of
the Company, other than prior employment as an interim Chairman or CEO; (ii) a
director who accepts, or has an immediate family member who accepts, any
payments from the Company or any parent or subsidiary of the Company in excess
of $60,000 during the current or any of the past three fiscal years, other than
the following: (1) compensation for board service, (2) payments arising solely
from investments in the Company's securities, (3) compensation paid to an
immediate family member who is a non-executive employee of the Company or a
parent or subsidiary of the Company, (4) compensation received for former
service as an interim Chairman or CEO, (5) benefits under a tax-qualified
retirement plan, or non-discretionary compensation or loans permitted under
Section 13(k) of the Securities Exchange Act of 1934, (6) loans from a financial
institution provided that the loans (a) were made in the ordinary course of
business, (b) were made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with the general public, (c) did not involve more than a normal
degree of risk or other unfavorable factors, and (d) were not otherwise subject
to the specific disclosure requirements of SEC Regulation S-K, Item 404, or (7)
payments from a financial institution in connection with the deposit of funds or
the financial institution acting in an agency capacity, provided such payments
were (x) made in the ordinary course of business, (y) made on substantially the
same terms as those prevailing at the time for comparable transactions with the
general public, and (z) not otherwise subject to the disclosure requirements of
SEC Regulation S-K, Item 404; (iii) a director who is an immediate family member
of an individual who is, or has been in any of the past three years, employed by
the Company or any parent or subsidiary of the Company as an executive officer;
(iv) a director who is, or has an immediate family member who is, a partner in,
or a controlling stockholder or an executive officer of, any organization to
which the Company made, or from which the Company received, payments (other than
those arising solely from investments in the Company's securities or payments
under non-discretionary charitable contribution matching programs) that exceed
5% of the organization's consolidated gross revenues for that year, or $200,000,
whichever is more, in any of the most recent three fiscal years; (v) a director
of the Company who is, or has an immediate family member who is, employed as an
executive officer of another entity where at any time during the most recent
three fiscal years any of the Company's executive officers serve on that
entity's compensation committee; and (vi) a director who is, or has an immediate
family member who is, a current partner of the Company's outside auditor, or
was a partner or employee of the Company's outside auditor who worked on the
Company s audit at any time during any of the past three years.
The board of directors, in applying the above-referenced rules, has
affirmatively determined that each of the following individuals is an
"independent" director of the Company: Jerome S. Goodman, Robert N. Goodman,
Andrew N. Heine, David Kaplan, Lewis Katz and John W. Temple. Accordingly, a
majority of the members of the Company's board of directors have been determined
to meet the American Stock Exchange's standards for independence.
The Company's independent directors will meet in executive session as
often as necessary to fulfill their duties, but no less than annually. Mr.
Temple is expected to act as Chairman at the meetings of the independent
directors.
AUDIT COMMITTEE
o All members of the Audit Committee have been determined to meet the
standards of independence required of audit committee members by The
American Stock Exchange and applicable Securities and Exchange
Commission rules. See "Director Independence" above.
o The board of directors has determined that: (i) all of the members of
the Audit Committee are able to read and understand fundamental
financial statements, including the Company's balance sheet, income
statement, and cash flow statement, and (ii) John W. Temple has past
employment experience in finance or accounting, requisite professional
certification in accounting, or other comparable experience or
background which results in his financial sophistication, and is an
"audit committee financial expert" within the meaning of applicable
Securities and Exchange Commission rules.
-6-
COMPENSATION COMMITTEE
o All members of the Compensation Committee have been determined to meet
the American Stock Exchange's standards for independence. See "Director
Independence" above. Further, each member is a "non-employee director"
as defined under Rule 16b-3(b)(3) of the Securities Exchange Act of
1934 and an "outside director" as defined in Treasury Regulations
Section 1.162-27, promulgated under the Internal Revenue Code of 1986,
as amended.
NOMINATING COMMITTEE
o All members of the Nominating Committee have been determined to meet
the American Stock Exchange's standards for independence. See "Director
Independence" above.
o The Nominating Committee considers candidates for board membership
suggested by its members and other board members, as well as management
and stockholders. In accordance with the policy adopted by the board of
directors, any director candidate shall, at a minimum, possess a
background that includes a solid education, extensive business,
professional or academic experience and the requisite reputation,
character, integrity, skills, judgment and temperament, which have
prepared him or her with dealing with the multi-faceted financial,
business and other issues that confront a board of directors of a
corporation with a size, complexity, reputation and success of the
Company. A stockholder who wishes to recommend a prospective nominee
for election to the board of directors should follow the procedures
described in this proxy statement under the caption "Procedures for
Nominating or Recommending for Nomination Candidates for Director."
Pursuant to those procedures, once the Nominating Committee has
identified prospective nominees, background information will be
elicited about the candidates, following which they will be
investigated, interviewed and evaluated by the Committee, which will
then report to the board of directors. In recommending nominees for
director, the Nominating Committee considers the nominee's integrity,
skill, leadership ability, financial sophistication, capacity to help
guide the Company, and such other considerations as the Committee deems
appropriate. In addition, the Committee considers the applicable
requirements of the Securities and Exchange Commission and the
applicable rules of the American Stock Exchange. No distinctions will
be made as between internally-recommended candidates and those
recommended by stockholders.
CODE OF BUSINESS CONDUCT & ETHICS
o The Company has adopted a Code of Business Conduct & Ethics that
includes provisions ranging from restrictions on gifts to conflicts of
interest, and portions of which code are intended to meet the
definition of a "code of ethics" under applicable SEC rules. All
directors, officers and managers, including the principal executive
officer, principal financial officer, controller and persons performing
similar functions, are required to affirm in writing their acceptance
of the code. Copies of the code can be obtained free of charge by
contacting the Company at the address appearing on the first page of
this proxy statement to the attention of the Company's Chief Financial
Officer.
DIRECTORS' ATTENDANCE AT ANNUAL MEETINGS OF STOCKHOLDERS
It is the policy of Company's board of directors to expect that all
directors attend annual meetings of stockholders except where the failure to
attend is due to unavoidable circumstances or conflicts. All members of the
board of directors attended, either in person or via teleconference, the
Company's Annual Meeting of Stockholders held on December 5, 2003.
COMMUNICATION WITH THE BOARD OF DIRECTORS
A stockholder who wishes to communicate with the board of directors, or
individual directors, may do so in writing by directing correspondence to a
director or directors at the address appearing on the first page of this proxy
statement.
-7-
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For Fiscal 2004, no employee or officer or former employee or officer
of the Company was a member of the Compensation Committee and there were no
relationships involving Messers Kaplan and Temple, the members of the Company's
Compensation Committee, required to be reported pursuant to Item 402(j) of
Regulation S-K.
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Company is entitled to
receive a basic fee of $6,000 annually for his service on the Company's board of
directors. In addition, each non-employee director is entitled to receive an
attendance fee of $5,000 for each board meeting ($2,500 if attending via
teleconference) and $500 for each committee meeting. Any director who is also an
employee of the Company is not separately compensated for his service as a
director.
In addition to cash compensation, the Company has in the past granted
directors options to acquire Common Stock.
PROPOSAL TWO
APPROVAL OF THE AMENDMENT TO THE
ORLEANS HOMEBUILDERS, INC. CERTIFICATE OF INCORPORATION INCREASING THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The board of directors has unanimously approved, and recommends that
the stockholders approve, the amendment to the Company's Certificate of
Incorporation to authorize the issuance of up to 23 million shares of Common
Stock. The Company's Certificate of Incorporation currently authorizes the
issuance of up to 20 million shares of Common Stock.
On September 30, 2004 the Company had 20 million authorized shares of
Common Stock, $.10 par value, of which (i) 17,436,136 shares were issued and
outstanding (net of treasury shares); (ii) 582,500 shares were reserved for
issuance pursuant to the exercise of vested stock options granted under the 1992
Stock Incentive Option Plan, the Non-Employee Directors Stock Option Plan, and
the 1995 Stock Option Plan for Non-Employee Directors; (iii) 400,0000 were
reserved for issuance pursuant to the grant of stock awards under the Orleans
Homebuilders, Inc. Stock Award Plan; (iv) 45,000 shares were reserved for
issuance pursuant to the exercise of stock options granted in connection with
the acquisition of Masterpiece Homes; and (v) 50,000 shares were reserved for
issuance pursuant to the grant and exercise of stock options under the 2004
Omnibus Stock Incentive Plan. If no action is taken to increase the authorized
shares of Common Stock, based on the number of shares currently outstanding, the
Company would be able to issue no more than 1,486,364 additional shares of
Common Stock after excluding shares reserved for issuance. If the proposal to
increase the authorized number of shares is approved by the stockholders, the
Company will have 4,486,364 unissued and unreserved shares of Common Stock
available for issuance in the future. The additional shares of Common Stock will
have identical rights to the currently outstanding shares of Common Stock, and
the adoption of the proposed amendment would not affect the rights of the
holders of the currently outstanding Common Stock.
The board of directors is of the opinion that the proposed increase in
the number of authorized shares of Common Stock is in the best interest of the
Company and its stockholders. The board of directors believes that the Company
should have sufficient authorized shares for issuance in connection with
possible future stock splits, stock dividends, financings, joint ventures,
acquisitions and other general corporate purposes. Currently, there are no
existing plans, understandings or agreements for the issuance of any shares of
Common Stock in connection with any such corporate actions except shares of the
Common Stock may be issued in connection with the acquisition of Peachtree
Residential Properties, Inc., which is under negotiation. If the amendment is
adopted by the Company's stockholders, the board of directors will have the
authority to issue shares of Common Stock without the necessity of further
stockholder action, except as may be required by law or applicable regulations.
The proposed amendment is not intended to have any anti-takeover effect and is
not part of any series of anti-takeover measures contained in the Company's
Certificate of Incorporation or By-laws in effect on the date of this Proxy
Statement. Although the amendment was proposed for business and financial
considerations, stockholders should note that the availability of additional
authorized and unissued shares of Common Stock could make any attempt to gain
control of the Company, or the board of directors, more difficult or time
consuming. The Company has no present intention to use the increased authorized
Common Stock for anti-takeover purposes.
-8-
If the proposal to increase the authorized shares of Common Stock is
approved by the stockholders, the Company will file an amendment to its
Certificate of Incorporation with the Delaware Secretary of State in order to
effect the increase in authorized Common Stock. Holders of the Common Stock have
no preemptive rights with respect to any shares that may be issued in the
future.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR"
THE PROPOSAL TO APPROVE THE AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION INCREASING ITS AUTHORIZED COMMON STOCK.
PROPOSAL THREE
APPROVAL OF THE ORLEANS HOMEBUILDERS, INC.
2004 OMNIBUS STOCK INCENTIVE PLAN
On August 26, 2004, the board of directors of the Company adopted,
subject to stockholder approval, the Orleans Homebuilders, Inc. 2004 Omnibus
Stock Incentive Plan, (the "2004 Stock Incentive Plan"), which is intended to
function as an amendment and restatement combination of all other stock option
and award plans of the Company other than the Orleans Homebuilders, Inc. Stock
Award Plan. Subject to stockholder approval, the Company has granted to an
executive officer an option to acquire 20,000 shares of Common Stock and granted
to a non-executive officer an option to acquire 7,500 shares of Common Stock.
The options vest in four equal annual installments starting in June 2005, and
have an exercise price of $21.60 per share, the fair market value on the date of
grant, and expire in 2014.
The 2004 Stock Incentive Plan is intended to recognize the
contributions made to the Company by employees (including employees who are
members of the board of directors) of the Company or any Affiliates
(collectively, "Employees"), to provide Employees with additional incentive to
devote themselves to the future success of the Company or an Affiliate, and to
improve the ability of the Company or an Affiliate to attract, retain, and
motivate individuals upon whom the Company's sustained growth and financial
success depend by awarding them grants under the 2004 Stock Incentive Plan
consisting of options ("Options") for the purchase of shares of the Company's
common stock, awards of common stock ("Awards") and/or awards of stock
appreciation rights ("SARs," and grants of Options, Awards and SARs are each
referred to individually as a "Grant" and collectively as "Grants"). "Affiliate"
means a corporation which is a parent corporation or a subsidiary corporation
with respect to the Company within the meaning of Section 424(e) or (f) of the
Internal Revenue Code of 1986, as amended (the "Code") or any successor
provision, and, for purposes of Grants other than ISOs (as defined below), any
corporation, partnership, joint venture or other entity in which the Company,
directly or indirectly, has an equity interest and which the Plan Administration
Committee (as defined below) determines should be treated as an Affiliate for
purposes of the 2004 Stock Incentive Plan. The 2004 Stock Incentive Plan also is
intended to provide an additional incentive to directors of the Company who are
not employees to serve on the board of directors of the Company or the board(s)
of directors (or similar governing bodies) of an Affiliate and to devote
themselves to the future success of the Company through Grants. In addition, the
2004 Stock Incentive Plan may be used to encourage consultants and advisors of
the Company to further the success of the Company.
Section 162 (m) of the Internal Revenue Code of 1986 (the "Code")
denies a tax deduction to a publicly held corporation for compensation in excess
of $1,000,000 paid to the Chief Executive Officer and to any of the four most
highly compensated officers (in addition to the Chief Executive Officer) whose
compensation is required to be disclosed to stockholders under the Securities
Exchange Act of 1934, as amended (the "1934 Act") unless the compensation is
"performance-based." The 2004 Stock Incentive Plan is intended to permit the
grant of stock options and/or stock appreciation rights pursuant to such terms
and conditions so that the compensation recognized on exercise of such stock
options qualifies as "performance-based" compensation for these purposes.
-9-
KEY PROVISIONS OF THE 2004 STOCK INCENTIVE PLAN
The key provisions of the 2004 Stock Incentive Plan are as follows:
Administration
The board of directors of the Company may administer the 2004 Stock
Incentive Plan and/or it may designate a committee or committees composed of two
or more of directors to operate and administer the 2004 Stock Incentive Plan
with respect to all or a designated portion of the participants. To the extent
that the Plan Administration Committee (as defined below) is empowered to grant
Options to Section 16 Officers (as defined below) or persons whose compensation
might have limits on deductibility under Section 162(m) of the Code, the board
of directors of the Company may, at its discretion, appoint a separate
non-employee director to administer the 2004 Stock Incentive Plan with respect
to those persons. Any committee designated by the board of directors of the
Company to administer the 2004 Stock Incentive Plan, and the board of directors
itself in its administrative capacity with respect to the 2004 Stock Incentive
Plan, is referred to as the "Plan Administration Committee." "Section 16
Officer" means any person who is an "officer" within the meaning of Rule
16a-1(f) promulgated under the 1934 Act or any successor rule, and who is
subject to the reporting requirements under Section 16 of the 1934 Act with
respect to the Common Stock.
The Plan Administration Committee has the power and authority to: (a)
interpret the 2004 Stock Incentive Plan; (b) adopt, amend and revoke policies,
rules and/or regulations for administration of the 2004 Stock Incentive Plan
that are not inconsistent with its express terms; and (c) waive requirements
relating to formalities or other matters that do not either modify the substance
of the rights intended to be granted by Grants or constitute a material
amendment for any purpose under the Code. In addition, the Plan Administration
Committee has the authority, subject to any specific provisions or limitations
applicable under the 2004 Stock Incentive Plan, to make such adjustments to the
terms and conditions of any Grants in order to take into account any facts and
circumstances that influence the effectiveness of the 2004 Stock Incentive Plan
as a method of providing appropriate current performance incentives for
recipients of Grants, including, but not limited to, any facts and circumstances
related to levels of compensation and bonuses paid by other similarly situated
employers, and current needs of the Company to encourage the retention of valued
Employees and to reward high levels of performance by such Employees.
The 2004 Stock Incentive Plan provides that no member of the board of
directors of the Company will be personally liable for monetary damages for any
action taken or any failure to take any action in connection with the
administration of the 2004 Stock Incentive Plan or the making of any Grants
under the 2004 Stock Incentive Plan, except in the case of (a) any breach of
such member's duty of loyalty to the Company or its stockholders, (b) acts or
omissions not in good faith or involving intentional misconduct or a knowing
violation of law, (c) acts or omissions that would result in liability under
Section 174 of the General Corporation Law of the State of Delaware, as amended,
concerning unlawful payment of dividends and unlawful stock purchases and
redemptions, and (d) any transaction from which the member derived an improper
personal benefit. In addition, the 2004 Stock Incentive Plan provides that
service on the Plan Administration Committee constitutes service as a member of
the board of directors of the Company and that each member of the Plan
Administration Committee is entitled, without further act on the member's part,
to indemnity from the Company and limitation of liability to the fullest extent
provided by applicable law and by the Company's Articles of Incorporation and/or
By-laws in connection with or arising out of any action, suit or proceeding with
respect to the administration of the 2004 Stock Incentive Plan or the making of
any Grants under the 2004 Stock Incentive Plan in which the member may be
involved by reason of the member being or having been a member of the Plan
Administration Committee, whether or not the member continues to be a member of
the Plan Administration Committee at the time of the action, suit or proceeding.
-10-
Eligibility
All Employees, members of the board of directors of the Company,
members of the boards of directors (or similar governing bodies) of the
Company's Affiliates and consultants and advisors to the Company or any
Affiliate who render bona fide services to the Company unrelated to the offer or
sale of securities will be eligible to receive Grants under the 2004 Stock
Incentive Plan. The Plan Administration Committee will determine whether an
individual qualifies as an Employee. As of September 30, 2004, approximately 650
Employees and 7 non-employee members of the board of directors and the boards of
directors (or similar governing bodies) of the Company's Affiliates were
eligible to participate in the 2004 Stock Incentive Plan.
Number of Shares of Common Stock Subject to the 2004 Stock Incentive
Plan
The aggregate maximum number of shares of Common Stock for which Grants
may be issued under the 2004 Stock Incentive Plan is 50,000 (subject to a
permitted Capitalization Adjustment, as described below). "Shares" means the
shares of Common Stock (including hypothetical shares of Common Stock referenced
under the terms of a Grant Document applicable to an SAR) which are subject to
any Grant made under the 2004 Stock Incentive Plan. "Grant Document" means the
document provided to a grantee by the Company describing and establishing the
terms of any Grant made pursuant to the 2004 Stock Incentive Plan. The Shares
will be issued from authorized and unissued common stock or common stock held in
or hereafter acquired for the treasury of the Company. If an Option or SAR
terminates or expires without having been fully exercised for any reason or if
Shares subject to an Award have been conveyed back to the Company pursuant to
the terms of a Grant Document, the Shares for which the Option or SAR was not
exercised or the Shares that were conveyed back to the Company will again be
available for issuance under the 2004 Stock Incentive Plan. On September 30,
2004, the closing price of the Common Stock as reported on the American Stock
Exchange was $22.52 per share and the fair market value of the Shares subject to
the Plan was $1,126,000.
Fiscal Year Grant Limitation
No grantee will be issued Grants during any one fiscal year for more
than 50,000 Shares (the "Fiscal Year Grant Limitation"), subject to a permitted
Capitalization Adjustment, as described below.
Term of the 2004 Stock Incentive Plan
The 2004 Stock Incentive Plan became effective as of August 26, 2004,
the date on which it was adopted by the board of directors, subject to the
approval of the 2004 Stock Incentive Plan within one year after that date by the
stockholders. If the 2004 Stock Incentive Plan is not so approved by the
stockholders, all Grants issued under the 2004 Stock Incentive Plan will be null
and void. No Grants may be made under the 2004 Stock Incentive Plan on or after
August 26, 2014. As of the date of this Proxy Statement Grants for 27,500 Shares
have been issued under the 2004 Stock Incentive Plan.
Options
The 2004 Stock Incentive Plan authorizes grants of Options, including
Options that are intended to qualify as "incentive stock options," as defined
under Section 422 of the Code ("ISOs") and Options that are not intended to so
qualify ("Non-qualified Stock Options"). Each Option granted under the 2004
Stock Incentive Plan will be a Non-qualified Stock Option unless the Option is
specifically designated at the time of grant as an ISO. Options granted under
the 2004 Stock Incentive Plan will be evidenced by Grant Documents in such form
as the Plan Administration Committee shall approve from time to time, consistent
with the terms of the 2004 Stock Incentive Plan.
-11-
Option Price. The price at which Shares may be purchased upon
exercise of an Option (the "Option Price") will be set forth in the applicable
Grant Document along with the number of shares subject to the Option. The Option
Price of each ISO will be at least 100% of the fair market value of a share of
the Company's Common Stock on the date the Option is granted. The Option Price
of a Non-qualified Stock Option, unless otherwise specified in the Grant
Document, will be the fair market value of a share of our common stock on the
date the Option is granted.
Exercise. No Option will be deemed to have been exercised
prior to the receipt by the Company of written notice (that complies with the
requirements set forth in the 2004 Stock Incentive Plan) of the exercise and
payment in full of the Option Price, unless arrangements satisfactory to the
Company have been made for payment through a broker. Subject to the terms of the
Grant Document, payment of the Option Price may be made in cash, by certified
check or by such other mode of payment as the Plan Administration Committee may
approve, including payment through a broker in accordance with procedures
permitted by rules or regulations of the Federal Reserve Board. In addition, the
Plan Administration Committee may provide in a Grant Document that payment may
be made in whole or in part in Shares held by the grantee, although the Plan
Administration Committee may impose from time to time limitations and
prohibitions on the use of Shares to exercise an Option.
Expiration. In general, Options expire and are no longer
exercisable after ten years from the date of grant. In addition, under the 2004
Stock Incentive Plan, each Option will expire earlier upon the first to occur of
the following: (a) immediately upon a finding by the 2004 Stock Incentive Plan
Administration Committee that the grantee engaged in disloyalty of any type to
the Company or an Affiliate or has disclosed trade secrets or confidential
information of the Company or an Affiliate; (b) the date, if any, set by the
Plan Administration Committee as an accelerated expiration date in the event of
the liquidation or dissolution of the Company; (c) the occurrence of any other
event or events set forth in the 2004 Stock Incentive Plan or the relevant Grant
Document as causing an accelerated expiration of the Option; or (d) the
applicable date set forth below in connection with the grantee's termination of
employment or service with the Company or any Affiliate. For these purposes the
applicable date referred to above in subparagraph (d) of this paragraph is: (i)
where the grantee resigns from his or her employment or service with the Company
or any Affiliate without such resignation having been solicited by the Company
or the Affiliate, as the case may be, the date of resignation; (ii) where the
grantee's termination of employment or service with the Company or any Affiliate
is due to the grantee's death or disability, the date that is 180 days following
termination; (iii) where the grantee's termination of employment or service with
the Company or any Affiliate is due to the grantee's retirement, the second
anniversary of termination; (iv) where the grantee is a member of the board of
directors of the Company or of any board of directors (or similar governing
body) of an Affiliate and is not an Employee and such grantee's service is
terminated for any reason other than disability or death, 90 days following the
date of termination of service; and (v) in all other cases, 30 days after the
grantee's termination of employment or service with the Company or any
Affiliate. The only Options that may be exercised subsequent to the grantee's
termination of employment or service with the Company or an Affiliate are those
Options that were exercisable on the last date of employment or service and not
Options which, if the grantee were still employed or rendering service during
the post-termination period, would become exercisable, unless the relevant Grant
Document specifically provides to the contrary or the Plan Administration
Committee otherwise approves.
Transferability. Except as described below, no Option granted
under the 2004 Stock Incentive Plan may be transferred, except by will or by the
laws of descent and distribution, and, during the lifetime of the person to whom
an Option is granted, such Option may be exercised only by the grantee. An
Option, other than an ISO, also is transferable (a) pursuant to a domestic
relations order as defined in the Code or Title I of the Employee Retirement
Income Security Act of 1974, as amended, or the rules thereunder; and (b)
without payment of consideration, to (i) immediate family members of the holder,
(ii) trusts for the benefit of immediate family members, (iii) partnerships
whose only partners are such family members, and (iv) any transferee permitted
by a rule adopted by the Plan Administration Committee or approved by the Plan
Administration Committee in an individual case. Any transferee will be subject
to all of the conditions set forth in the Option before its transfer.
Other Provisions. Subject to the provisions of the 2004 Stock
Incentive Plan, the Grant Documents will contain such other provisions as the
Plan Administration Committee deems advisable, including, without limitation,
provisions authorizing the Plan Administration Committee to accelerate the
exercisability of all or any portion of an Option granted pursuant to the 2004
Stock Incentive Plan, additional restrictions upon the exercise of the Option or
additional limitations upon the term of the Option.
-12-
Stock Appreciation Rights (SARS)
The Plan Administration Committee may grant to optionees SARs, which
may or may not be granted in conjunction with an Option, each of which SAR will
entitle the grantee to receive a payment upon exercise equal to the excess of
the fair market value of a specified number of Shares, determined as of the date
the SAR is exercised, over the "purchase price" specified in the Grant Document
applicable to the SAR. The SAR may be exercisable in whole or in part, and at
such times and under such circumstances as are set forth in the Grant Document
applicable to the SAR. In the event an SAR is granted in conjunction with an
Option, the exercise of the SAR will result in a cancellation of the Option to
the same extent as the SAR is exercised, and the exercise of the Option will
result in a cancellation of the SAR to the same extent as the Option is
exercised, and the terms and conditions, including the number of Shares subject
to the SAR, the "purchase price" (which will be equal to the Option Price) and
the times and circumstances in which the SAR may be exercised, will be the same
as are applicable to the Option. Except as may otherwise be provided in a Grant
Document, such payment may be made, as determined by the Plan Administration
Committee in accordance with the 2004 Stock Incentive Plan and set forth in the
applicable Grant Document, either in Shares or in cash or in any combination
thereof. For purposes of the annual and aggregate limitations on Shares that may
be subject to Grants under the 2004 Stock Incentive Plan, the grant of an SAR
not in conjunction with an Option will be treated as though such SAR constituted
an Option.
Each SAR will relate either to a specific Option granted under the 2004
Stock Incentive Plan or to a hypothetical Option that could have been granted
under the 2004 Stock Incentive Plan. Where an SAR is granted in conjunction with
an Option granted under the 2004 Stock Incentive Plan, the Grant Document
applicable to the Option will include provisions indicating the SAR rights.
Where an SAR is granted independent of an Option granted under the 2004 Stock
Incentive Plan, the Grant Document applicable to such SAR will indicate the
relevant terms and conditions applicable to the SAR, including, but not limited
to, the number of hypothetical Shares subject to the terms of the SAR, the
"purchase price" to be taken into account upon exercise of the SAR, and such
other terms and conditions as would be permitted or as are required with respect
to the grant of an Option under the 2004 Stock Incentive Plan.
SARs will be exercisable at such times and under such terms and
conditions as the Plan Administration Committee, in its sole and absolute
discretion, determines; provided, however, that an SAR that is granted
concurrent with an Option will be exercisable only at such times and by such
individuals as the related Option may be exercised under the 2004 Stock
Incentive Plan and applicable Grant Document.
Awards
Awards granted pursuant to the 2004 Stock Incentive Plan will be
evidenced by a written Grant Document in such form as the Plan Administration
Committee from time to time approves. Each Grant Document will specify the
purchase price, if any, that applies to the Award. If a purchase price is
specified, the grantee will be required to make payment on or before the payment
date provided in the Grant Document. Payment may be made in cash, by certified
check payable to the order of Company or by such other mode of payment as the
Plan Administration Committee may approve. In the case of an Award that provides
for a grant of Shares without any payment by the grantee, the grant will take
place on the date specified in the Grant Document. In the case of an Award that
provides for payment of the purchase price by the grantee, the grant will take
place on the date the initial payment is delivered to Company, unless the Plan
Administration Committee or the Grant Document specifies otherwise.
The Plan Administration Committee may specify in a Grant Document any
conditions under which the grantee will be required to convey to the Company the
Shares covered by the Award. In addition, the Plan Administration Committee, in
its discretion, may provide that certificates for Shares transferred pursuant to
an Award be held in escrow by the Company until all of the conditions have
lapsed. Unless otherwise provided in the Grant Document or determined by the
Plan Administration Committee, dividends and other distributions made on Shares
held in escrow will be deposited in escrow, and held in escrow until such time
as the Shares on which the distributions were made are released from escrow.
Stock certificates evidencing the Shares subject to conditions will bear a
legend to the effect that the Shares are subject to repurchase by, or conveyance
to, the Company in accordance with the terms of the Grant Document and that the
Shares may not be sold or otherwise transferred.
-13-
Upon payment of the purchase price, if any, for shares covered by an
Award, the grantee will have all of the rights of a stockholder with respect to
the Shares covered by the Award, including the right to vote the Shares and
(except as described above with respect to escrowed Shares) receive all
dividends and other distributions paid or made with respect to the Common Stock,
except to the extent otherwise provided by the Plan Administration Committee or
in the Grant Document.
Adjustments on Changes in Capitalization
In the event that the outstanding shares of Common Stock are changed by
reason of a reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, combination or exchange of shares and the like
(not including the issuance of common stock on the conversion of other
securities of Company which are convertible into common stock) or dividends
payable in shares of common stock, a Capitalization Adjustment (defined below)
may be made by the Plan Administration Committee as it deems appropriate in the
aggregate number and/or class of shares available under the 2004 Stock Incentive
Plan and in the number of shares, class of shares and price per share subject to
outstanding Grants. Unless the Plan Administration Committee makes other
provisions for the equitable settlement of outstanding Grants, if the Company is
reorganized, consolidated, or merged with another corporation, or if all or
substantially all of the assets of Company are sold or exchanged, a grantee will
at the time of issuance of the stock under such corporate event be entitled to
receive, with respect to or upon the exercise of his or her Grant, as the case
may be, the same number and kind of shares of stock or the same amount of
property, cash or securities as the grantee would have been entitled to receive
upon the occurrence of any such corporate event if the grantee had been,
immediately prior to such event, the holder of the number of Shares covered by
his or her Grant; provided, however, that with respect to an SAR, the grantee
will only be entitled to receive payment in the form of property other than cash
to the extent such settlement of the SAR is provided for in the applicable Grant
Document. Any such adjustment under the provisions described in this paragraph
will apply proportionately to only the unexercised portion of any Options or
SARs. The Plan Administration Committee has authority to determine the
Capitalization Adjustments to be made under the 2004 Stock Incentive Plan, which
adjustments may include both adjustments to the number of shares and class of
Company stock to be issued in connection with or on the exercise of Grants and
that are available generally for Grants under the 2004 Stock Incentive Plan. Any
such determination by the Plan Administration Committee will be final, binding
and conclusive. "Capitalization Adjustment" means the adjustment to the number
or class of shares subject to any Grant and the Option Price, exercise price,
purchase price or other payment or deemed payment required in connection with
any Grant, as permitted to be made pursuant to the provisions described above in
this paragraph.
Change of Control
In the event of a Change of Control (defined below), Options and SARs
granted pursuant to the 2004 Stock Incentive Plan will become immediately
exercisable in full, and all Awards will become fully vested, but only if such
vesting is specified in the applicable Grant Document. In addition, the Plan
Administration Committee may take whatever action it deems necessary or
desirable with respect to outstanding Grants, including, without limitation,
with respect to Options and SARs, accelerating the expiration or termination
date in the applicable Grant Document to a date no earlier than 30 days after
notice of such acceleration is given to the grantees; provided, however, that
such accelerated expiration or termination date may not be earlier than the date
as of which the Grant has become fully vested and exercisable.
Under the 2004 Stock Incentive Plan, a "Change of Control" will be
deemed to have occurred upon the earliest to occur of the following dates: (a)
the date the stockholders of the Company (or the board of directors, if
stockholder action is not required) approve a plan or other arrangement pursuant
to which the Company will be dissolved or liquidated; (b) the date the
stockholders of the Company (or the board of directors, if stockholder action is
not required) approve a definitive agreement to sell or otherwise dispose of
substantially all of the assets of the Company; (c) the date the stockholders of
the Company (or the board of directors, if stockholder action is not required)
and the stockholders of the other constituent corporation (or its board of
directors if stockholder action is not required) have approved a definitive
agreement to merge or consolidate the Company with or into such other
corporation, other than, in either case, a merger or consolidation of the
Company in which holders of shares of the Company's Common Stock immediately
prior to the merger or consolidation will have at least a majority of the voting
power of the surviving corporation's voting securities immediately after the
merger or consolidation, which voting securities are to be held in the same
proportion as such holders' ownership of Common Stock of the Company immediately
before the merger or consolidation; or (d) the date any entity, person or group,
within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities
Exchange Act of 1934, as amended, (other than (A) the Company or any of its
subsidiaries or any employee benefit plan (or related trust) sponsored or
maintained by the Company or any of its subsidiaries, (B) Jeffrey P. Orleans or
family members of Jeffrey P. Orleans (all such persons being referred to as
"Orleans Family Members"), (C) any entity a majority of the equity in which is
owned by Orleans Family Members, or (D) any trust as to which a majority of the
beneficiaries are Orleans Family Members) becomes the beneficial owner of, or
obtains voting control over, more than fifty percent (50%) of the outstanding
shares of the Company's Common Stock.
-14-
Amendments
The board of directors of the Company may amend the 2004 Stock
Incentive Plan as it deems advisable from time to time. However, the board of
directors may not change the class of persons eligible to receive an ISO or
increase the maximum number of Shares as to which Grants may be granted under
the 2004 Stock Incentive Plan, or to any individual under the 2004 Stock
Incentive Plan in any year, without obtaining stockholder approval within twelve
months before or after such action. No amendment to the 2004 Stock Incentive
Plan may adversely affect any outstanding Grants without the consent of the
affected grantee(s).
The Plan Administration Committee has the right to amend any Grant
Document issued to a grantee, subject to the grantee's consent if the amendment
is not favorable to the grantee or if such amendment has the effect of changing
an ISO to a Non-qualified Stock Option; provided, however, that the consent of
the grantee will not be required for any amendment made in connection with a
Change of Control (as discussed above) or any amendment to accelerate the
expiration of an Option or SAR in the event of liquidation or dissolution of the
Company.
WITHHOLDING OF TAXES
In connection with any event relating to a Grant under the 2004 Stock
Incentive Plan, the Company will have the right to (a) require the recipient to
remit or otherwise make available to the Company an amount sufficient to satisfy
any federal, state and/or local withholding tax requirements before the delivery
or transfer of any certificates for such Shares, or (b) take whatever other
action it deems necessary to protect its interests with respect to tax
liabilities, including, without limitation, withholding any Shares, funds or
other property otherwise due to the grantee(s). The Company's obligations under
the 2004 Stock Incentive Plan will be conditioned on the grantee's or grantees'
compliance with any withholding requirements.
CERTAIN FEDERAL INCOME TAX ASPECTS OF THE 2004 STOCK INCENTIVE PLAN
The following discussion summarizes, as of the date of this Proxy
Statement, general principles of federal income tax law applicable to the 2004
Stock Incentive Plan and the Shares acquired under the 2004 Stock Incentive
Plan. Participants should consult their own tax advisors concerning the tax
consequences of participation in the 2004 Stock Incentive Plan and the
disposition of the Shares acquired under the 2004 Stock Incentive Plan, since
federal tax laws are subject to change, individual tax situations differ and the
effect of state and local taxation may be material.
ISOs.
An ISO, or incentive stock option, is an Option that meets certain
requirements under the Code and which is subject to special tax treatment
provided the recipient complies with certain holding requirements applicable to
the Shares acquired on its exercise. In general, the grantee of an ISO will not
recognize regular taxable income upon either the grant or the exercise of the
Option. The grantee will recognize capital gain or loss on a disposition of the
Shares acquired upon exercise of an ISO, provided the grantee does not dispose
of any of the Shares within two years from the date the Option was granted or
within one year from the date the Shares were transferred to the grantee. For
regular federal income tax purposes, the maximum rate of tax applicable to
capital gains is dependent on the length of time the Shares have been held at
the time of sale. If the Shares have been held for more than one year, the
maximum regular federal tax rate applicable to the gain on the sale generally
will be 15% or 20% (or 18% if the gain qualifies as a 5-year capital gain). If
the Shares have been held for one year or less, the gain on the sale will be
taxed at the same maximum tax rate (currently, 38.6% for 2004 and 2003, 37.6%
for 2004 and 2005, and 35% thereafter) applicable to other taxable income
generally. If the Option holder satisfies both of the foregoing holding periods,
then the Company will not be allowed a deduction by reason of the grant or
exercise of an ISO.
-15-
As a general rule, if the grantee disposes of Shares acquired through
the exercise of an ISO before satisfying both holding period requirements (a
"disqualifying disposition"), the gain recognized by the grantee on the
disposition will be taxed as ordinary income to the extent of the difference
between the fair market value of the Shares on the date of exercise and the
Option Price of the Common Stock, and the Company will be entitled to a
deduction in that amount. The income recognized will not, however exceed the
difference between the amount actually realized on the disposition and the
Option Price of the Shares (which would limit the amount of income recognized
if, for example, the value of the Shares declined subsequent to the date the
Option was exercised). The gain (if any) in excess of the amount treated as
ordinary income will be treated as a long or short-term capital gain (based on
the length of time the grantee held the Shares as of the date of the
disposition).
The amount by which the fair market value of a Share at the time of
exercise exceeds the Option Price will be included in the computation of such
Option holder's "alternative minimum taxable income" in the year the Option
holder exercises the ISO. Currently, the maximum alternative minimum tax rate is
28%. If an Option holder pays alternative minimum tax with respect to the
exercise of an ISO, then the amount of such tax paid may be allowed as a credit
against any regular tax liability in subsequent years. The Option holder's basis
in the Shares for purposes of the alternative minimum tax will be adjusted when
income from a disposition of the Shares is included in alternative minimum
taxable income.
Non-qualified Stock Options.
A grantee of a Non-qualified Stock Option will not recognize taxable
income at the time of the Grant, and the Company will not be allowed a deduction
by reason of the Grant. The grantee will generally recognize ordinary income in
the taxable year in which he or she exercises the Options. The amount of income
will be generally equal to the excess of the fair market value of the Shares
received upon exercise (determined at the time of exercise) over the Option
Price paid for the shares. The Company will, subject to various limitations, be
allowed a deduction in the same amount. Upon disposition of these Shares, the
grantee will recognize a long or short-term capital gain or loss equal to the
difference between the amount realized on disposition and the grantee's basis in
the Shares (which ordinarily would be the fair market value of the shares on the
date the Option was exercised).
Awards.
The recipient of an Award will become vested as provided for by the
Committee when making the Award. Under applicable provisions of the Code, absent
a special election under Code Section 83(b), as explained below, the recipient
will, for federal income tax purposes, be required to include in his or her
taxable income (as ordinary compensation income) the value of the Shares subject
to the Award as of the time it becomes vested (reduced by the amount, if any,
that was required to be paid for the Shares). The fair market value of the
Shares as of the vesting date establishes the basis for determining capital
gains or losses on a subsequent sale of the Shares, and the holding period for
purposes of determining the long or short-term character of a capital gain
starts on the vesting date (not on the date the Shares were granted).
If a recipient of an Award makes a special election under Section 83(b)
of the Code, however, he or she will recognize as ordinary compensation income
the fair market value of the Shares subject to the Award as of the date the
Shares are granted, even though the Shares have not yet vested. An election
under this Code provision must be made within 30 days of the transfer of the
Shares, and the fair market value of the Shares must be determined without
regard to the vesting restrictions that otherwise could cause the Shares to be
forfeited. In addition, if the Shares are forfeited, the Award recipient will
not be able to claim a tax loss for the forfeiture except to the extent he or
she was required to pay a purchase price for the Shares. As a consequence of
making a Section 83(b) election, however, the Award recipient will have no
income as a result of the later vesting of the Shares, and when the Shares are
sold, the difference between the amount realized from the sale and the fair
market value on the date of grant (i.e., the value used in reporting income as a
result of the Section 83(b) election), will be a capital gain or loss, and will
be either long or short-term by reference to the original grant date.
-16-
In order to make an election under Section 83(b) of the Code, the
recipient of an Award must file the election no later than 30 days after the
grant date in the form of a written statement sent to the IRS office where the
individual files his or her returns, and provide a copy to the Company. A copy
of the filing must also be included in the individual's tax return for the year
in which the grant occurs. The Section 83(b) election statement must contain the
following information: the name, address and social security number of the
taxpayer, a description of the Shares, the grant date of the Shares and the
taxable year for which the election is made, the nature of the restrictions on
the Shares, the fair market value of the Shares as of the grant date, the
purchase price paid for the Shares, if any, and a statement indicating that
copies of the election have been furnished to other persons as required. The
statement must be signed and must indicate that it is made under Section 83(b)
of the Code.
SARS.
An SAR permits the grantee to exercise that right (either by surrender
of the Option associated with the SAR or, in the case of an SAR that is
independent of any Option, by surrender of the SAR) and receive a payment equal
to the excess of the fair market value of the Shares underlying the Option (or
hypothetically underlying an independent SAR) as of the date the grantee
exercises the SAR over the Option Price of the underlying Option (or of the
hypothetical option in the case of an independent SAR). This payment may be
either in cash or in stock, or a combination of cash and stock, as determined by
the Plan Administrator Committee, unless there are specific provisions in the
Grant Document that address the form of payment. The amount of the payment made
to the grantee will constitute taxable compensation income to the grantee,
subject to ordinary income taxation in the year in which the payment with
respect to the SAR is made. The amount of income recognized by the grantee will
also constitute a compensation expense for federal income tax purposes,
deductible by the Company, subject to various limitations on the deductibility
of such compensation expense.
Deductibility of Executive Compensation Under Code Section 162(m).
Section 162(m) of the Code sets limits on the deductibility of
compensation in excess of $1,000,000 paid by publicly held companies to certain
employees (the "million dollar cap"). The IRS has also issued Treasury
Regulations which provide rules for the application of the "million dollar cap"
deduction limitations. Income which is treated as "performance-based
compensation" under these rules will not be subject to the limitation on
deductibility imposed by Code Section 162(m).
The 2004 Stock Incentive Plan has been designed to permit grants of
Options and SARs issued under the 2004 Stock Incentive Plan to qualify under the
performance-based compensation rules so that income attributable to the exercise
of a Non-qualified Stock Option or an SAR may be exempt from the million dollar
cap limits on deduction. The 2004 Stock Incentive Plan's provisions are
consistent in form with the performance-based compensation rules, so that if the
Committee that grants Options or SARs consists exclusively of members of the
board of directors of the Company who qualify as "outside directors," and the
exercise price (or deemed exercise price, with respect to SARs, is not less than
the fair market value of the Shares to which such Grants relate, the
compensation income arising on exercise of those Options or SARs should qualify
as performance-based compensation which is deductible even if that income would
be in excess of the otherwise applicable limits on deductible compensation
income under Code Section 162(m).
-17-
EQUITY COMPENSATION PLAN INFORMATION
The table below sets forth information about the Company's Equity
Compensation Plans as of the end of Fiscal 2004.
Number of securities Number of securities
to be issued upon remaining available for
exercise of Weighted-average future issuance under
outstanding options, exercise price of equity compensation plans
warrants outstanding options, (excluding securities
Plan category and rights warrants and rights reflected in column (a))
- -------------------------------------------------------------------------------------------------------------------
(a) (b) (c)
Equity compensation plans approved
by security holders 582,500 $1.41 400,000
Equity compensation plans not
approved by security holders (1) 45,000 $10.64 0
Total........................... 627,500 $2.07 400,000
(1) In connection with the acquisition of Masterpiece Homes on July 28, 2003,
the Company granted 45,000 stock options to Mr. Fitzsimmons, the President
of Masterpiece Homes. The stock options have an exercise price of $10.64 per
share and vest in three equal annual installments on December 31, 2004, 2005
and 2006.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE PROPOSAL TO APPROVE
THE COMPANY'S 2004 OMNIBUS STOCK INCENTIVE PLAN.
OTHER MATTERS
The board of directors is not aware at present of any other matters
which will or may come before the meeting and which require a vote of the
stockholders. If any such matter is properly brought before the meeting, the
Proxy Committee will vote thereon in its discretion, to the extent permitted by
the rules and regulations of the Securities and Exchange Commission and Delaware
corporate law. You are urged to mark, sign and date your proxy and return it
immediately.
ADDITIONAL INFORMATION
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors and persons who own more than ten
percent of a registered class of the Company's equity securities (collectively,
the "reporting persons") to file reports of ownership and changes in ownership
with the Securities and Exchange Commission and to furnish the Company with
copies of these reports.
Based on the Company's review of the copies of the reports received by
it, and written representations, if any, received from reporting persons with
respect to the filing of reports on Forms 3, 4 and 5, the Company believes that
all filings required to be made by the reporting persons for Fiscal 2004 were
made on a timely basis except that: Mr. Jeffrey C. Guernier failed to timely
report on Form 3 his status as a reporting person in September 2003; Mr. Michael
T. Vesey failed to timely report on Form 5 his disposition by gift of 200 shares
of Common Stock in July 2001; and Mr. Joseph A. Santangelo failed to timely
report on Form 4 his exercise of options to acquire 20,000 shares of Common
Stock in February 2004. Messrs. Guernier, Vesey and Santangelo have since filed
the appropriate Section 16(a) reports with respect to these transactions.
-18-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the close of business on
September 30, 2004, certain information with respect to the holdings of (i) each
director or nominee for director and each of the executive officers named in the
Summary Compensation Table, (ii) all executive officers, directors and nominees
for director as a group, and (iii) each stockholder who was known to the Company
to be the beneficial owner, as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, of more than 5% of the Company's shares of Common Stock,
based upon Company records or Securities and Exchange Commission records. Each
of the persons listed below has sole voting and investment power with respect to
such shares, unless otherwise indicated.
NUMBER OF
SHARES
BENEFICIALLY PERCENT OF
NAME OF BENEFICIAL OWNER OWNED CLASS
- ------------------------ ------------ ----------
Jeffrey P. Orleans, Chairman of the Board and Chief Executive Officer...... 11,315,478(1) 62.5%
Michael T. Vesey, Director and President and Chief Operating Officer....... 496,243(2) 2.8%
Benjamin D. Goldman, Vice Chairman of the Board............................ 1,136,221(3) 6.5%
Jerome S. Goodman, Director................................................ 368,000 2.1%
Robert N. Goodman, Director................................................ 50,000(4) *
Andrew N. Heine, Director.................................................. 35,000(4) *
David Kaplan, Director..................................................... 69,000(4) *
Lewis Katz, Director....................................................... 489,000(5) 2.8%
Robert M. Segal, Director.................................................. 68,000 *
John W. Temple, Director................................................... 26,000 *
Joseph A. Santangelo, Chief Financial Officer, Treasurer and Secretary .... 99,990(6) *
Thomas Gancsos, Division Manager........................................... -0- *
All directors and executive officers as a group (20 persons)............... 14,523,004(7) 78.0%
- -----------
* Less than 1% of the outstanding shares of our common stock.
(1) The shares reflected include (a) 10,000 shares owned by a privately-held
corporation, of which Mr. Orleans is a 50% stockholder, (b) 666,668 shares
which continue to be issuable upon conversion of the $1,000,000 remaining on
Company's $3,000,000 Convertible Subordinated 7% Note, (c) 42,000 shares
owned by a privately held partnership, of which Mr. Orleans is a majority
partner, and (d) 46,000 shares (for which Mr. Orleans disclaims beneficial
ownership) owned by the Jeffrey P. Orleans Charitable Foundation. Mr.
Orleans' business address is 3333 Street Road, Bensalem, PA 19020.
(2) The shares reflected include (a) 700 shares (for which Mr. Vesey disclaims
beneficial ownership) held as custodian for Mr. Vesey's minor children, and
(b) 310,000 shares subject to options that are currently exercisable or will
become exercisable within 60 days of September 30, 2004.
(3) The shares reflected include 606,282 shares (for which Mr. Goldman disclaims
beneficial ownership) held in separate trusts and custodial accounts for the
benefit of the children of Mr. Orleans, as to which Mr. Goldman is, in each
case, sole trustee or custodian. Mr. Goldman's business address is 3333
Street Road, Bensalem, PA 19020.
(4) The shares reflected include 35,000 shares subject to options that are
currently exercisable or will become exercisable within 60 days of September
30, 2004.
-19-
(5) The shares reflected include 10,000 shares subject to options that are
currently exercisable or will become exercisable within 60 days of September
30, 2004.
(6) The shares reflected include 30,000 shares subject to options that are
currently exercisable or will become exercisable within 60 days of September
30, 2004.
(7) The shares reflected consist of (a) 525,000 shares subject to options that
are currently exercisable or will become exercisable with 60 days of
September 30, 2004, and (b) 666,668 shares which continue to be issuable
upon conversion of the $1,000,000 remaining on Company's $3,000,000
Convertible Subordinated 7% Note.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information as to all compensation paid
by the Company for services in each of the Company's last three fiscal years
ended June 30 to: (i) the Company's Chief Executive Officer and (ii) the four
most highly compensated officers other than the Chief Executive Officer who were
serving as executive officers at the end of Fiscal 2004 and whose total annual
salary and bonus exceeded $100,000 in Fiscal 2004 (together with the Chief
Executive Officer, the "Named Executive Officers").
Annual Compensation
Other Annual
Name and Principal Position Fiscal Year Salary Bonus Compensation
- --------------------------- ----------- ------ ----- ------------
Jeffrey P. Orleans 2004 $300,000 $2,136,720 $387,983(1)
Chairman and CEO 2003 300,000 1,486,350 114,378(2)
2002 300,000 954,570 3,400(3)(4)
Benjamin D. Goldman 2004 $225,000 $525,000 $6,000(3)(4)
Vice Chairman of the Board 2003 225,000 525,000 3,667(3)(4)
2002 225,000 416,500 3,400(3)(4)
Michael T. Vesey 2004 $235,000 $1,100,860 $6,000(3)(4)
President and Chief Operating Officer 2003 235,000 743,175 3,667(3)(4)
2002 217,500 477,285 3,400(3)(4)
Joseph A. Santangelo 2004 $160,000 $390,000 $6,000(3)(4)
Chief Financial Officer, Treasurer and 2003 160,000 215,000 3,667(3)(4)
Secretary 2002 160,000 165,000 3,400(3)(4)
Thomas Gancsos 2004 $152,000 $279,398 $4,500(3)(4)
Division Manager 2003 152,000 279,398(5) 4,209(3)(4)
2002 152,000 200,577(5) 4,565(3)(4)
- ---------------
(1) In Fiscal 2004, the Company capitalized approximately $1,946,000 in costs
attributable to the purchase of partial ownership interests in three
corporate jets. The Company incurred approximately $738,000 in costs
associated with the use of the aircrafts of which $350,199 was attributable
to Mr. Orleans' personal use. Included in Other Annual Compensation for
Fiscal 2004 is the $350,199 for Mr. Orleans' personal use the aircrafts;
Company contributions to a 401(k) plan on behalf of Mr. Orleans; and amounts
paid by the Company for group life insurance, medical insurance and certain
automobile expenses.
-20-
(2) The amount shown includes $94,844 for Mr. Orleans' personal use of aircraft
owned or paid for by the Company; Company contributions to a 401(k) plan on
behalf of Mr. Orleans; and amounts paid by the Company for group life
insurance, medical insurance and certain automobile expenses.
(3) The amount shown is the amount contributed by the Company to a 40l(k)
(defined contribution) retirement plan.
(4) The Named Executive Officers also received various other personal benefits,
the value of which did not exceed for any fiscal year as to such person the
lesser of $50,000 or 10% of his annual salary and bonus.
(5) Excludes amounts paid by Mr. Parker to Mr. Gancsos pursuant to an
arrangement between Mr. Parker and Mr. Gancsos entered into prior to the
Company's acquisition of PLC in the fiscal year ended June 30, 2001. For the
fiscal year ended June 30, 2002, the amount paid by Mr. Parker was $48,180
and for the fiscal year ended June 30, 2003, the amount was $24,460.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth individual exercises of stock options
during Fiscal 2004 and year-end values by the Named Executive Officers.
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options
June 30, 2004 (#) At June 30, 2004($)(1)
----------------------------------------------------------
Shares
Acquired on Value
Name Exercise(#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- -----------------------------------------------------------------------------------------------------------------------------
Jeffrey P. Orleans -- -- -- -- -- --
Benjamin D. Goldman -- -- -- -- -- --
Michael T. Vesey 25,000 529,575 310,000 -- 5,493,700 --
Joseph A. Santangelo 20,000 362,600 30,000 -- 542,457 --
Thomas Gancsos -- -- -- -- -- --
- --------
(1) In-the-money options are those where the fair market value of the underlying
securities exceeds the exercise price of the option. The closing market
price of the Company's Common Stock on June 30, 2004 was $19.27 per share.
MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The principal market on which the Company's Common Stock is traded is
the American Stock Exchange, Inc. (Symbol: OHB).
The intra-day high and low sales prices for the Company's common stock
as reported by the American Stock Exchange for the periods indicated below are
as follows:
-21-
FISCAL YEAR ENDED JUNE 30, HIGH LOW
- -------------------------- ---- ---
2004 First Quarter $12.09 $ 9.60
Second Quarter 35.00 11.95
Third Quarter 29.08 19.50
Fourth Quarter 24.10 14.77
2003 First Quarter $ 8.65 $ 6.00
Second Quarter 8.43 6.31
Third Quarter 8.85 6.90
Fourth Quarter 12.24 6.82
The number of common stockholders of record of the Company as of
September 30, 2004 was approximately 200. The Company has not paid a cash
dividend since December 1982 and it is the current policy of the Company's board
of directors to retain earnings to finance the growth and development of the
Company's business. Therefore, there are no current plans to pay any cash
dividends. Any change in this policy will depend on the Company's future
earnings, capital requirements and market conditions. While the Company may
consider paying a cash dividend on its common stock in the future, there is no
assurance that the Company will do so. In addition, under one or more of the
Company's lending facilities, the Company may not distribute as dividends any
more than 5% of each year's net income.
OPTION/SAR GRANTS TABLE
Neither the Chief Executive Officer nor the other Named Executive
Officers were granted stock options or stock appreciation rights during Fiscal
2004.
PERFORMANCE GRAPH
The graph set forth below compares the yearly percentage change in the
cumulative total stockholder return on the Common Stock of the Company during
the five years ended June 30, 2004 with (1) the cumulative total return on the
American Stock Exchange Index and (2) the cumulative total return on a selected
peer group index. The Company's peer group is the Standard & Poor's Homebuilding
Index. The comparison assumes $100 was invested on June 30, 1999 in the
Company's Common Stock and in each of the foregoing indices and assumes the
reinvestment of any dividends. The closing market price of the Company's Common
Stock as of June 30, 2004 was $19.27 per share.
-22-
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG ORLEANS HOMEBUILDERS, INC., THE AMEX MARKET VALUE (U.S. & FOREIGN)
INDEX
AND THE S & P HOMEBUILDING INDEX
[Chart Omitted]
---------------------------------------------------
-[ ]- ORLEANS HOMEBUILDERS, INC.
- ^ - AMEX MARKET VALUE (U.S. & FOREIGN)
- o - S & P HOMEBUILDING
---------------------------------------------------
*$100 invested on 6/30/99 in stock or index-including reinvestment of dividends.
Fiscal year ending June 30.
Copyright (C) 2002, Standard & Poor's, a division of The McGraw-Hill Companies,
Inc. All rights reserved.
www.researchdatagroup.com/S&P.htm
-23-
YEARS ENDING
June 1999 June 2000 June 2001 June 2002 June 2003 June 2004
--------- --------- --------- --------- --------- ---------
ORLEANS HOMEBUILDERS, INC. 100.00 83.36 160.53 456.00 570.67 1027.73
AMEX MARKET VALUE (U.S. & FOREIGN) 100.00 108.32 98.11 96.99 109.12 144.79
S & P HOMEBUILDING 100.00 73.57 129.05 190.60 231.61 324.52
EMPLOYMENT CONTRACTS WITH NAMED EXECUTIVES
JEFFREY P. ORLEANS. The Company entered into an employment agreement
with Jeffrey P. Orleans in June 1987. While the initial term of the agreement
has expired, it automatically renews for successive one year terms, unless
either the Company or Mr. Orleans gives notice of termination at least 180 days
prior to the end of the then current term. Pursuant to this employment
agreement, Mr. Orleans is to serve as the Chairman of the Company's board of
directors and our Chief Executive Officer and is to be paid a base salary, which
until July 1, 2004 was set at $300,000, with the prospect of being increased
from time to time. Currently, Mr. Orleans' base salary is set at $720,000. In
addition, Mr. Orleans is entitled to receive bonus compensation equal to 3% of
certain of the Company's pre-tax profits as defined by the agreement. This bonus
compensation is awarded in a manner consistent with the Orleans Homebuilders,
Inc. Incentive Compensation Plan.
Mr. Orleans' employment agreement also provides that if his employment
terminates as a result of his death or disability, he or his estate is entitled
to receive his base salary for the lesser of (a) a period of 120 days following
such termination and (b) the balance of the then existing term together with a
prorated portion (based on the number of days employed) of bonus compensation he
would have received had his employment not terminated.
Under Mr. Orleans' employment agreement, he is also entitled to certain
fringe benefits, including health, travel and accident, long-term disability and
life insurance generally available to our senior officers. The Company also pays
certain vehicle expenses for Mr. Orleans and paid certain air travel expenses
for Mr. Orleans prior to the July 1, 2004 base salary increase described above.
ROBERT FITZSIMMONS. Masterpiece Homes, a wholly-owned subsidiary of the
Company, entered into an employment agreement with Robert Fitzsimmons in July
2003 in connection with the Company's acquisition of Masterpiece Homes. Mr.
Fitzsimmons' employment agreement has no pre-set term. However, Masterpiece
Homes may terminate Mr. Fitzsimmons' employment agreement at any time for any or
no reason upon 14 days prior written notice, subject to certain severance
payments under certain circumstances. Pursuant to his employment agreement, Mr.
Fitzsimmons is to serve as the President of Masterpiece Homes, and is to be paid
a base salary of $150,000 and is also entitled to receive certain other
incentive compensation.
In accordance with his employment agreement and the agreement pursuant
to which the Company acquired Masterpiece Homes, Mr. Fitzsimmons is entitled to
receive $710,000 within ten days after January 1, 2005 as part of the Company's
payment of the Masterpiece Homes purchase price, unless his employment with
Masterpiece Homes is terminated for "cause" or he terminates his employment
without "good reason" before December 31, 2004. "Cause" and "good reason" are
each defined by Mr. Fitzsimmons' employment agreement. Mr. Fitzsimmons is also
entitled to receive an amount equal to 25% of certain pre-tax profits
attributable to the operations of Masterpiece Homes for the calendar years 2004,
2005 and 2006, unless Mr. Fitzsimmons is terminated for "cause" or terminates
his employment without "good reason" prior to December 31, 2004, 2005 or 2006,
as applicable. In addition, Mr. Fitzsimmons is also entitled to receive on a
yearly basis a bonus or other additional compensation, the amount of which is to
be determined by the Company in its sole discretion based upon certain pre-tax
profits attributable to the operations of Masterpiece Homes. Mr. Fitzsimmons'
employment agreement also provides that he is entitled to certain fringe
benefits, including health insurance, participation in the Company's 401(k)
plan, use of a vehicle and disability insurance.
-24-
Pursuant to his employment agreement, Mr. Fitzsimmons also acquired
options to purchase up to 45,000 shares of the Company's Common Stock at an
exercise price of $10.64 per share. Subject to certain conditions relating to
his employment as set forth in his employment agreement, the options vest in
three equal installments on December 31, 2004, 2005 and 2006. Under certain
circumstances, vesting of the options may be accelerated. The number of shares
subject to the options also may be adjusted to reflect any stock splits,
subdivisions, combinations or similar transactions.
If Mr. Fitzsimmons' employment is terminated by Masterpiece Homes
without "cause" or he terminates his employment for "good reason" prior to
January 28, 2007, then he is entitled to certain severance compensation
consisting of his base salary until January 28, 2007 and the cash equivalent of
his monthly medical insurance premium paid by Masterpiece Homes for 42 months
less the number of full months he was employed by Masterpiece Homes subsequent
to July 2003.
In addition to the terms and conditions described above, Mr.
Fitzsimmons' employment agreement also contains terms and conditions the Company
believes are typical of employment agreements with executive officers of
companies of comparable size and in the homebuilding industry.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
Compensation Committee.
The Compensation Committee consists of Messrs. Kaplan and Temple and is
chaired by Mr. Kaplan. Prior to August 2004, the Compensation Committee reviewed
and recommended salaries, bonuses and other forms of compensation for executive
officers and other key employees of the Company, which it will continue to do.
With the adoption of the Company's Compensation Committee charter in August
2004, the Compensation Committee will determine the salaries, bonuses and other
compensation for executive officers other than the Chief Executive Officer and,
with respect to the Chief Executive Officer, the Compensation Committee will
recommend to the board of directors his salary, bonus and other compensation.
The Compensation Committee also approves grants and awards of equity-based
compensation. Copies of the charter can be obtained free of charge by contacting
the Company at the address appearing on the first page of this proxy statement
to the attention of the Company's Chief Financial Officer.
Overview and Philosophy.
The Compensation Committee is mindful of the need to align the
interests of management with the interests of the Company's stockholders. The
Compensation Committee believes that the objectives of the stockholders will be
best achieved by having a substantial portion of executive cash compensation
tied to annual corporate earnings and by providing incentives to management
through the use of stock options and other equity-based compensation. Consistent
with this philosophy, compensation for the Company's executives consists of a
base salary, a bonus and, in some cases, stock awards, stock options or other
equity-based compensation.
-25-
Senior Executive Officers' Compensation.
For Fiscal 2004, the compensation of the Company's three most senior
executive officers, Messrs. Orleans, Goldman and Vesey, was reviewed by the
Compensation Committee and approved by the board of directors. For Fiscal 2004,
Mr. Orleans' base salary was $300,000, Mr. Goldman's base salary was $225,000
and Mr. Vesey's base salary was $235,000. Mr. Orleans' compensation is also
subject to his employment agreement with the Company discussed above under the
caption "Employment Contracts with Named Executives." In addition, these
officers also received incentive compensation as described below.
Other Executive Officers' Compensation.
For Fiscal 2004, the Compensation Committee assumed the responsibility
for establishing the cash and other compensation to be paid to Messrs.
Santangelo and Schaal, except for any compensation under the Company's incentive
stock plans. The compensation of Mr. Parker was set by his employment agreement
with Parker & Lancaster Corporation which expired in October 2003. For Fiscal
2004, the amount and nature of compensation to be received by the Company's
other executive officers was determined in accordance with the recommendations
of the Chief Executive Officer and the President.
Base Salary.
The compensation to executive officers of the Company is generally in
the low range of base salary amounts paid to comparable executive officers at
similar companies. Increases in base salaries have been limited over the last
several fiscal years and are adjusted based on the performance of an individual
executive, increased responsibilities assumed by such executive, compensation
trends in the real estate industry and general market compensation levels for
comparable positions. The base salary for Mr. Parker for Fiscal 2004 was set by
his employment agreement with Parker & Lancaster Corporation which expired in
October 2003. The base salary of Mr. Fitzsimmons for Fiscal 2004 was set by his
employment agreement with Masterpiece Homes.
Incentive Compensation Programs.
The Compensation Committee believes that it is important for the
Company to further align the interests of its executive officers and key
employees with the interests of the stockholders by establishing a direct link
between executive pay and the Company's operating financial performance.
Accordingly, effective as of July 1, 2002, the board of directors adopted the
Orleans Homebuilders, Inc. Incentive Compensation Plan, which was an amendment
and restatement of the incentive compensation plan initially adopted by the
board of directors in 1994. As of October 1, 2003, the board of directors has
also adopted an amendment to the Incentive Compensation Plan allowing payment of
all or a part of bonus awards under the Incentive Compensation Plan to be made
in shares of Common Stock, which may be subject to various restrictions and
terms.
For Fiscal 2004, the board of directors continued its use of management
performance goals, which included continued growth in profitability, reduction
of unproductive assets, acquisition and financing of new and existing assets,
and improvements by management to reduce overhead and increase efficiency. With
respect to Fiscal 2004, pursuant to the Incentive Compensation Plan, 3.0% of
pre-tax profits were awarded to Mr. Orleans, 0.8% of pre-tax profits were
awarded to Mr. Goldman and 1.5% of pre-tax profits were awarded to Mr. Vesey. An
aggregate of approximately 2.7% of pre-tax profits were awarded to the Company's
other senior officers based upon their attainment of certain performance goals.
The incentive compensation plan discussed above does not apply to
Messrs. Gancsos, Parker or Anthony L. Piccola, executive officers in the
Company's southern region, or other key employees in the Company's southern
region. Similarly, the incentive compensation plan does not apply to Mr.
Fitzsimmons in the Company's Florida region. Any bonus compensation awarded to
Messrs. Gancsos, Piccola and Parker for Fiscal 2004 was awarded at the
discretion of the Company.
-26-
In accordance with his Employment Agreement, for calendar years 2004
and 2005, Mr. Fitzsimmons is entitled to receive an amount equal to 25% of
certain pre-tax profits attributable to the operations of Masterpiece Homes,
subject to certain conditions. Mr. Fitzsimmons may, in the Company's discretion,
also receive additional incentive compensation based on certain pre-tax profits
attributable to the operations of Masterpiece Homes.
Equity-Based Compensation
Awards of equity-based compensation, such as stock options, restricted
stock awards and stock appreciation rights, are intended to align directly the
interests of the Company's executives and the stockholders in the enhancement of
stockholder value. The ultimate value of stock options, restricted stock awards
and stock appreciation rights that have been awarded, or that may in the future
be awarded, is directly tied to increases in the Company's stock price.
Therefore, such equity-based compensation serves to link closely the interests
of management and stockholders by motivating executives to make decisions that
will serve to increase the long-term return to stockholders. In addition, grants
of equity-based compensation typically include vesting and termination
provisions, which the Compensation Committee believes will encourage recipients
to remain employees of the Company. No consistent criteria are used from year to
year in the granting of equity-based compensation. In the recent past,
equity-based compensation has been awarded largely in connection with
acquisitions and as an inducement to hire certain individuals.
Deductibility of Compensation in Excess of $1,000,000
Section 162(m) of the Internal Revenue Code of 1986, as amended, limits
the deductibility of compensation in excess of $1,000,000 paid to corporation's
chief executive officer and each of the other four highest-paid executive
officers unless this compensation qualifies as "performance-based." The
Committee intends to take such actions as are appropriate to qualify
compensation paid to executives for deductibility under Code.
Other Benefits.
The Company makes available health care benefits and a 401(k) plan for
executive officers on terms generally available to all Company employees. The
Compensation Committee believes that such benefits are comparable to those
offered by other real estate developers of similar size. Except for benefits to
Mr. Orleans, the amount of perquisites, as determined in accordance with the
rules of the Securities and Exchange Commission relating to executive
compensation, did not exceed $50,000 or 10% of the salary of any executive
officer in the last fiscal year.
The Compensation Committee
David Kaplan, Chairman
John W. Temple
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Convertible Note
In 1996, Mr. Orleans advanced $3 million to the Company evidenced by a
$3 million Convertible Subordinated 7% Note. The issuance of the $3 million
Convertible Subordinated 7% Note was approved in advance by a Special Committee
of non-employee directors after receiving an opinion from an investment-banking
firm that the terms were fair to the Company's stockholders, other than Mr.
Orleans, from a financial point of view. During the fiscal year ended June 30,
2002, the maturity date of the $3 million Convertible Subordinated 7% Note was
extended one year to January 1, 2005. The $3 million Convertible Subordinated 7%
Note, as modified by certain deferral agreements, provides for interest payable
quarterly at 7% per annum and annual principal payments of $1 million beginning
January 1, 2003. The $3 million Convertible Subordinated 7% Note contains
commercially standard default and other provisions. The holder of the $3 million
Convertible Subordinated 7% Note may convert all or any portion (in integral
multiples of $1 million) of the principal amount of the $3 million Convertible
Subordinated 7% Note into shares of the Company's Common Stock at a conversion
price of $1.50 per share, subject to adjustment for splits, combinations, and
other capital changes. The closing price of the Company's Common Stock on the
American Stock Exchange on July 8, 1996, the date the board of directors
approved the terms of the borrowing, was $1.125 per share. In January 2003 and
December 2003, respectively, Mr. Orleans exercised his right to convert the
first and second annual principal payments of $1 million each into shares of
Common Stock and received 666,666 shares of Common Stock with respect to each
conversion. At September 30, 2004, there was $1 million in principal amount of
this Note outstanding.
-27-
Series D Preferred Stock
In October 1998, the Company and Mr. Orleans entered into an Exchange
Agreement pursuant to which Mr. Orleans exchanged notes he held evidencing $3
million payable by the Company for 100,000 shares of Series D Preferred Stock.
The terms of the proposed exchange were approved by the Company's board of
directors after receiving an opinion from an investment-banking firm that the
terms were fair to the Company's stockholders, other than Mr. Orleans, from a
financial point of view.
The Series D Preferred Stock had a liquidation value of $3 million, or
$30.00 per share, and required annual dividends of 7% of the liquidation value.
The dividends were cumulative and payable quarterly. The Series D Preferred
Stock was redeemable by the Company at any time after December 31, 2003, in
whole or in part, at a cash redemption price equal to the liquidation value plus
all accrued and unpaid dividends on the redeemed shares to the date of
redemption. The Series D Preferred Stock was convertible into 2,000,000 shares
of the Company's Common Stock at a conversion price of $1.50 per share. The
closing price of the Company's Common Stock on the American Stock Exchange on
April 20, 1998 (the date of board of directors approval of the issuance of the
Series D Preferred Stock) was $1.19.
In December 2003, Mr. Orleans converted all 100,000 shares of the
Series D Preferred Stock into 2,000,000 shares of the Company's Common Stock.
Line of Credit
During its fiscal year ended June 30, 1999, the Company entered into an
agreement with Mr. Orleans for a $4 million unsecured line of credit. The line
of credit expired on June 30, 2004. The agreement provided for an annual review
by Mr. Orleans for a one-year extension and, with annual interest at LIBOR plus
4%, payable monthly. There were no principal or interest balances outstanding as
of June 30, 2004 and 2003.
Relationship with A.P. Orleans Insurance Agency, Inc.
The Company places a majority of its corporate insurance through A.P.
Orleans Insurance Agency, Inc., of which Mr. Orleans is the sole stockholder.
The Company also uses A.P. Orleans Insurance Agency, Inc. to purchase surety
bonds that the Company is required to maintain with various municipalities as
part of its ongoing operations as a developer on specific projects in those
municipalities. The Company incurred aggregate expenses of approximately
$2,961,000 and $2,350,000 for Fiscal 2004 and the fiscal year ended June 30,
2003 ("Fiscal 2003"), respectively, for these insurance policies. A.P. Orleans
Insurance Agency, Inc. received customary commissions from the insurance
companies for serving as broker.
Relationship with Title Insurer
Mr. Goldman and Mr. Orleans each own a 31% equity interest in a limited
partnership that has a consulting agreement with a third party real estate title
insurance company. The Company purchases real estate title insurance and related
closing services from that third party real estate title insurance company for
various parcels of land the Company acquires. The Company paid the third party
real estate title insurance company approximately $178,000 and $80,000 for
Fiscal 2004 and Fiscal 2003, respectively. In addition, the Company's homebuyers
may elect to utilize the third party real estate title insurance company for the
purchase of real estate title insurance and real estate closing services but,
the homebuyers are under no obligation to do so.
-28-
Under the terms of the consulting agreement, which expires in July
2007, the limited partnership providing the consulting services is entitled to
receive 50% of the pre-tax profits attributable to certain operations of the
third party real estate title insurance company, subject to certain adjustments.
In addition, the limited partnership and the principals of the limited
partnership, including Mr. Goldman and Mr. Orleans, have agreed not to engage in
the real estate title insurance business or the real estate closing business
during the term of the consulting agreement.
Other
The Company through its wholly-owned subsidiary Orleans Affordable
Housing LP, is a limited partner in OKKS Development LP, a Pennsylvania limited
partnership, and a member of OKK LLC, a Pennsylvania limited liability company.
OKK LLC is the general partner of OKKS Development LP. In the aggregate, the
Company indirectly owns a 28.33% equity interest in OKKS Development LP. OKKS
Development LP was formed for the purpose of engaging in certain residential
development activities which are primarily government assisted. The other
limited partners of OKKS Development LP and other members of OKK LLC include a
trust for the benefit of certain members of the family of Mr. Lewis Katz, a
member of the Company's board of directors. In Fiscal 2003, OKKS Development LP
was capitalized with initial contributions by the limited partners of $50,000
each and each partner contributed an additional $50,000 in Fiscal 2004. During
Fiscal 2004 and Fiscal 2003 no profits were distributed to the limited partners
of OKKS Development LP or the members of OKK LLC.
Mr. Orleans owns a 33.5% equity interest in Marne Associates, LLC and
trusts for the benefit of certain members of his family collectively own a 16.5%
equity interest in Marne Associates, LLC. Mr. Benjamin Goldman, the Company's
Vice Chairman, is the trustee of each of the trusts. The Company has executed a
lease with Marne Associates, LLC for 8,000 square feet of office space in a
shopping center constructed by Marne Associates, LLC. The initial term is five
years at $14 per square foot. The Company has the option to renew the lease at
the end of the initial term for an additional five years at $16 per square foot.
Mr. Orleans owns a 40% equity interest in Gold-Or-Air, Inc., a
corporation that has a 6.25% ownership interest in a corporate jet. The Company
paid Gold-Or-Air, Inc., approximately $26,000 in operating and management fees
for Mr. Orleans' business and personal use of the aircraft for Fiscal 2004.
On March 20, 2000, Thomas Vesey, the brother of Michael T. Vesey, the
Company's President and Chief Operating Officer, was hired to assist the Company
in evaluating and identifying opportunities for expansion into additional market
areas. Presently, Mr. Vesey is the Division Manager for Charlotte, North
Carolina. During Fiscal 2004, Mr. Thomas Vesey's annual salary was $150,000 and
he received a performance related bonus of approximately $94,800.
J. Russell Parker, III, President, Parker Lancaster Corporation and
Parker & Orleans Homebuilders, Inc. and Jeffrey C. Guernier, Greensboro Division
Manager, own 52% and 8%, respectively, of the equity of Moorefield Title, Inc.
The Company made payments to Moorefield Title, Inc. of approximately $95,924 in
Fiscal 2004 and $88,860 in Fiscal 2003 for title insurance and related services
and to reimburse Moorefield Title, Inc. for certain expenses relating to
Moorefield Title, Inc. employees that perform services for the Company from time
to time.
Mr. Robert M. Segal, one of the Company's directors, is a partner in
the law firm Wolf, Block, Schorr and Solis-Cohen LLP, which serves as the
Company's general counsel. Mr. Katz, also the Company's director, is Of Counsel
to the law firm Katz, Ettin & Levine, P.A., which has performed legal services
for the Company in the past year.
In the opinion of the board of directors, all of the transactions
described above, insofar as they involve transactions by affiliates of the
Company, are on terms that are comparable to or not less favorable than, terms
which would have been obtainable by the Company from unaffiliated third parties.
-29-
AUDIT COMMITTEE REPORT
The Audit Committee of the board of directors is composed of three
independent directors, in accordance with the requirements of Section 121(A) of
the American Stock Exchange listing standards and the applicable standards of
the Securities and Exchange Commission, and operates under a written charter
adopted by the board of directors. The charter is reproduced as Appendix A to
this proxy statement. Copies of the charter can be obtained free of charge by
contacting the Company at the address appearing on the first page of this proxy
statement to the attention of the Company's Chief Financial Officer.
The Audit Committee of the board of directors oversees the Company's
financial reporting process on behalf of the board of directors. Management has
the primary responsibility for the financial statements and the reporting
process, including the system of internal control. In fulfilling its oversight
responsibilities, the Audit Committee reviewed the Company's quarterly and
annual audited financial statements with management, including a discussion of
the quality, not just the acceptability, of accounting principles, the
reasonableness of significant judgments, and the clarity of disclosures in the
financial statements. The Audit Committee also reviewed and discussed the
Company's audited financial statements for Fiscal 2004 with the Company's
independent public accountants. Specifically, the Audit Committee has discussed
with the independent public accountants the matters required to be discussed by
SAS 61 (Codification of Statements on Auditing Standards, AU Section 380).
The Audit Committee has received the written disclosures and the letter
from the Company's independent public accountants, PricewaterhouseCoopers LLP,
required by Independence Standards Board No. 1, Independence Discussions with
Audit Committees, and has discussed with the independent public accountants
their independence.
The Audit Committee discussed with the Company's independent public
accountants the overall scope and plans for the audit. The Audit Committee met
with the independent public accountants, with and without management present, to
discuss the results of their examination, their evaluation of the Company's
system of internal control, and the overall quality of the Company's financial
reporting. The Committee, consistent with Section 302 of the Sarbanes-Oxley Act
of 2002 and the rules adopted thereunder, has met with management and the
Company's independent public accountants prior to the filing of officers'
certifications required by that statute to receive any information concerning
(a) significant deficiencies in the design or operation of internal controls
which could adversely affect the Company's ability to record, process, summarize
and report financial data and (b) any fraud, whether or not material, that
involves management or other employees who have a significant role in the
Company's internal control over financial reporting.
Based on the reviews and discussions referred to above, the Audit
Committee recommended to the Board that the Company's audited financial
statements be included in the Company's Annual Report on Form 10-K for Fiscal
2004. The Audit Committee's recommendation was considered and accepted by the
board of directors.
Audit Committee
John W. Temple, Chairman
Robert N. Goodman
Andrew N. Heine
ADDITIONAL INFORMATION REGARDING THE AUDITORS
PricewaterhouseCoopers LLP has been selected to be the independent
accountants for the Company for its fiscal year ended June 30, 2005. A
representative of PricewaterhouseCoopers LLP is expected to be present at the
Annual Meeting to make a statement if desired and to be available to respond to
any appropriate questions.
-30-
Audit Fees.
The aggregate fees and expenses charged to the Company by
PricewaterhouseCoopers LLP for audit and audit-related services totaled
approximately $203,000 and $150,000 for Fiscal 2004 and Fiscal 2003,
respectively. These fees include fees associated with the audit of the Company's
financial statements for Fiscal 2004, for the review of financial statements
included in the Company's quarterly reports on Form l0-Q for Fiscal 2004 and,
for Fiscal 2004, a registration statement filed with the SEC.
Audit-Related Fees.
All fees for audit-related services were disclosed under the caption
"Audit Fees" above.
Tax Fees
Fees for tax services, including tax compliance, tax advice, and tax
planning, total approximately $8,500 and $7,900 for Fiscal 2004 and Fiscal 2003,
respectively.
All Other Fees.
The aggregate fees and expenses charged to the Company by
PricewaterhouseCoopers LLP for all other services, which include fees related to
business acquisitions were approximately $80,000 and $60,500 for Fiscal 2004 and
Fiscal 2003, respectively.
The Audit Committee has considered the nature of the above-listed
services provided by PricewaterhouseCoopers LLP and determined that such
services are compatible with their provision of independent audit services.
The Audit Committee approves the annual budget for all audit and
non-audit services and pre-approves all engagements of the Company's independent
public accountants to provide non-audit services. All fees of
PricewaterhouseCoopers LLP were approved by the Audit Committee for Fiscal 2004.
DEADLINE FOR FILING STOCKHOLDER PROPOSALS FOR 2005 ANNUAL MEETING
Pursuant to Securities Exchange Act of 1934 Rule 14a-8(e), proposals
which stockholders desire to have included in the Company's proxy statement for
the annual meeting in 2005 must be submitted in writing and received by the
Company at its principal executive officers on or before June 22, 2005. Any
Stockholder wishing to propose a nominee for membership on the Company's board
of directors should submit a recommendation in writing in accordance with the
foregoing, for consideration by the board of directors, indicating the nominee's
qualifications and other biographical information and providing confirmation of
the nominee's consent to serve as a director.
A stockholder may wish to have a proposal presented at the 2005 annual
meeting, but not to have such proposal included in the Company's proxy statement
and form of proxy relating to that meeting. If notice of any such proposal is
not received by the Company at its principal executive offices on or before
September 14, 2005 (45 calendar days prior to the anniversary of the mailing
date of this proxy statement), then such proposal shall be deemed "untimely" for
purposes of Securities and Exchange Commission Rule 14a-4(c). Therefore, the
Company's Proxy Committee will be allowed to use its discretionary voting
authority to vote against the stockholder proposal when and if the proposal is
raised at the 2005 Annual Meeting of Stockholders.
The Company has not been notified by any stockholder of such
stockholder's intent to present a stockholder proposal from the floor at this
year's Annual Meeting. The enclosed proxy grants the Proxy Committee
discretionary authority to vote on any matter properly brought before this
year's Annual Meeting.
-31-
PROCEDURES FOR NOMINATING OR RECOMMENDING FOR NOMINATION CANDIDATES FOR
DIRECTOR
Any stockholder of record, owning at least one percent of stock
entitled to vote in the election of directors who is a stockholder at the record
date of the meeting and also on the date of the meeting at which directors are
to be elected, may submit a nomination for director by following the procedures
outlined in Section 2.13 of the Company's By-laws. In general, Section 2.13
provides that a stockholder must provide timely written notice to the Secretary
of the Company not less than 120 days nor more than 150 days prior to the date
of the Company's proxy statement released to stockholders in connection with the
previous year's annual meeting. Each such written notice must set forth: (i) the
name and address of the stockholder who intends to make the nomination
("Nominating Stockholder"); (ii) the name and address of the beneficial owner,
if different than the Nominating Stockholder, of any of the shares owned of
record by the Nominating Stockholder ("Beneficial Holder"); (iii) the number of
shares of each class and series of shares of the Company which are owned of
record and beneficially by the Nominating Stockholder and the number which are
owned beneficially by any Beneficial Holder; (iv) a description of all
arrangements and understandings between the Nominating Stockholder and any
Beneficial Holder and any other person or persons (naming such person or
persons) pursuant to which the nomination is being made; (v) the name and
address of the person or persons to be nominated; (vi) a representation that the
Nominating Stockholder is at the time of giving of the notice, was or will be on
the record date for the meeting, and will be on the meeting date a holder of
record of shares of the Company entitled to vote at such meeting, and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice; (vii) such other information regarding each nominee
proposed by the Nominating Stockholder as would have been required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had the nominee been nominated, or intended
to be nominated, by the board of directors; and (viii) the written consent of
each nominee to serve as a director of the Company if so elected.
ANNUAL REPORT ON FORM 10-K
THE COMPANY, UPON REQUEST, WILL FURNISH TO RECORD AND BENEFICIAL
HOLDERS OF ITS COMMON STOCK, FREE OF CHARGE, A COPY OF ITS ANNUAL REPORT ON FORM
10-K (INCLUDING FINANCIAL STATEMENTS AND SCHEDULES BUT WITHOUT EXHIBITS) FOR
FISCAL 2004. COPIES OF EXHIBITS TO THE FORM 10-K ALSO WILL BE FURNISHED UPON
REQUEST AND UPON PAYMENT OF A REASONABLE FEE. ALL REQUESTS SHOULD BE DIRECTED TO
JOSEPH A. SANTANGELO, SECRETARY-TREASURER AND CHIEF FINANCIAL OFFICER, AT THE
OFFICES OF THE COMPANY SET FORTH ON PAGE ONE OF THIS PROXY STATEMENT.
October 19, 2004
By Order of the Board of Directors
JOSEPH A. SANTANGELO,
Chief Financial Officer, Secretary and Treasurer
-32-
APPENDIX A
ORLEANS HOMEBUILDERS, INC.
AUDIT COMMITTEE CHARTER
(AS OF AUGUST 26, 2004)
This Charter has been adopted by the Board of Directors (the "Board")
of Orleans Homebuilders, Inc. (the "Company") to govern its Audit Committee (the
"Committee"), which shall have the authority, responsibility and powers
described below.
I. PURPOSE
The principal purpose of the Committee is to assist the Board in
fulfilling its oversight responsibility to the stockholders, potential
stockholders, the investment community and others relating to the integrity and
audits of the Company's financial statements, the Company's compliance with
legal and regulatory requirements, the performance of the Company's systems of
internal accounting and financial controls and financial reporting processes,
and the qualifications and independence of the Company's outside auditor.
In discharging its oversight role, the Committee is empowered to
address any matter brought to its attention with full access to all books,
records, facilities and personnel of the Company. Specifically, in accordance
with the Sarbanes-Oxley Act of 2002 (the "Act"), rules promulgated by the U.S.
Securities and Exchange Commission (the "Commission") thereunder and the rules
of The American Stock Exchange ("AMEX"), the Committee shall be responsible for
the receipt, retention and treatment of complaints received by the Company
regarding accounting, internal accounting controls or auditing matters. The
Committee shall treat such complaints confidentially and anonymously, as
required by the Act, the rules promulgated thereunder and the rules of AMEX.
II. MEMBERSHIP
The Committee shall be comprised of no fewer than three members of the
Board. The Committee's composition and members shall meet the requirements of
the rules of the Commission and AMEX. All of the members shall meet the
independence and experience requirements of the Commission and AMEX, and at
least one member of the Committee shall be an "audit committee financial expert"
as defined by the Commission and be "financially sophisticated" as defined by
AMEX. Determinations as to whether a particular director satisfies the
requirements for membership on the Committee shall be made by the Board.
The members of the Committee shall be elected by the Board at its
annual organizational meeting and shall serve until their successors have been
duly elected and qualified. Unless a chairperson is elected by the Board, the
members of the Committee shall designate a chairperson by majority vote of the
full Committee membership. The Committee shall report through its chairperson to
the Board following meetings of the Committee.
III. KEY RESPONSIBILITIES
The Committee shall have the sole authority to select the outside
auditors who will perform the audit of the Company's financial statements or
other audit, review or attest services, considering independence and
effectiveness, and approve the fees and other compensation to be paid to the
outside auditors. The Company shall provide for appropriate funding, as
determined by the Committee, for payment of compensation to the outside auditors
for the performance of such services. The Committee shall be responsible for
overseeing the audit and audit-related services performed by the outside
auditors, including the responsibility and authority to resolve disagreements
between management and the auditors regarding financial reporting. The outside
auditors shall report directly to the Committee.
1
At least annually, the Committee shall obtain and review a report by
the outside auditors describing the following: (1) the auditing firm's internal
quality-control procedures; (2) any material issues raised by the most recent
internal quality-control review, or peer review, of the auditing firm, or by any
inquiry or investigation by governmental or professional authorities, within the
preceding five years, respecting one or more independent audits carried out by
the firm, consistent with Independence Standards Board Standard 1 (or any
subsequently applicable standard), and any steps taken to deal with any such
issues; and (3) in order to assess the outside auditors' independence, all
relationships between the outside auditors and the Company. The Committee shall
be responsible for actively engaging in a dialogue with the outside auditors
with respect to any disclosed relationships or services that may impact the
objectivity and independence of the auditors and for taking, or recommending
that the full Board take, appropriate action to oversee the independence of the
outside auditors.
The Committee shall pre-approve or establish policies and procedures
pre-approving all audit, internal control-related services and permitted
non-audit services provided by the outside auditors, both as to the
permissibility of the auditors performing such services and as to the amount of
fees to be paid in connection therewith, subject to the de minimis exceptions
for non-audit services described in Section 10A(i)(1)(B) of the Securities
Exchange Act of 1934 (the "Exchange Act") which are approved by the Committee
prior to the completion of the audit. The Committee may delegate pre-approval
authority to one or more members when appropriate, including the authority to
grant pre-approvals of audit and permitted non-audit services, provided that
decisions of such designee(s) to grant pre-appovals shall be presented to the
full Committee at its next scheduled meeting. Policies and procedures for the
pre-approval of audit and permitted non-audit services must be detailed as to
the particular service and must not delegate the Committee's responsibilities to
management. The Committee must be informed of each service rendered pursuant to
any such pre-approval policies or procedures.
The Committee shall have the authority to engage and determine funding
for outside legal, accounting or other advisors to advise the Committee and
shall, as appropriate, obtain advice and assistance from such advisors. The
Company shall provide for appropriate funding, as determined by the Committee,
for payment of (i) compensation to the outside auditors for the purpose of
rendering or issuing an audit report or related work or performing other audit,
review or attest services, (ii) compensation to any outside legal, accounting or
other advisors employed by the Committee, and (iii) ordinary administrative
expenses of the Committee that are necessary or appropriate in carrying out its
duties.
The Committee shall meet as often as it determines, but not less than
quarterly. The Committee may request any officer or employee of the Company or
the Company's outside counsel or outside auditor to attend a meeting of the
Committee or to meet with any members of, or advisors to, the Committee.
All related-party transactions shall be subject to appropriate review
and oversight by the Committee.
The Committee shall make regular reports to the Board. The Committee
shall review and reassess this Charter at least annually and recommend any
proposed changes to the Board for approval. The Committee shall have this
Charter published, in its then current form, at least every three years in
accordance with, and to the extent required by, regulations promulgated by the
Commission. The Committee shall annually review the Committee's own performance.
Consistent with the above, the Committee shall, to the extent it deems
necessary or appropriate:
A. FINANCIAL STATEMENT AND DISCLOSURE MATTERS
Provide an open avenue of communication among management, appropriate
Company personnel, the outside auditors and the Board.
Review with management and the outside auditors the audited financial
statements and disclosures under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" to
be included in the Company's Annual Report on Form 10-K (or
the Annual Report to Stockholders if distributed prior to the
filing of the Form 10-K) including their judgment about the
quality, not just the acceptability, of accounting principles,
the reasonableness of significant judgments, and the clarity
of the disclosures in the financial statements. In connection
therewith, the Committee shall review and consider with the
outside auditors the matters required to be discussed by
Statement of Auditing Standards ("SAS") No. 61, as it may be
modified or supplemented.
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Prior to the Company's filing of each quarterly report on Form 10-Q
with the Commission, review with the outside auditors the
Company's interim financial statements and disclosures under
"Management's Discussion and Analysis of Financial Condition
and Results of Operations" to be included in such Form 10-Q
and the matters required to be discussed by SAS No. 71, as it
may be modified or supplemented.
Discuss with management and the outside auditors significant financial
reporting issues and judgments made in connection with the
preparation of the Company's financial statements, including
any significant changes in the Company's selection or
application of accounting principles, any major issues as to
the adequacy of the Company's internal controls, disclosure
controls and procedures and/or internal control over financial
reporting and any special steps adopted in light of material
control deficiencies.
Receive and review regular reports from the outside auditors with
respect to: (1) the critical accounting policies and practices
of the Company; (2) all alternative treatments of financial
information within generally accepted accounting principles
that have been discussed with management, ramifications of the
use of such alternative disclosures and treatments, and the
treatment preferred by the outside auditors; and (3) other
material written communications between the outside auditors
and management, such as any management letter or schedule of
unadjusted differences.
Discuss with management earnings press releases, including the use of
"pro forma" or "adjusted" non-GAAP information, as well as
financial information and earnings guidance provided to
analysts and ratings agencies.
Discuss with management and the outside auditors the effect of
regulatory and accounting initiatives as well as off-balance
sheet structures, if any, on the Company's financial
statements.
Discuss policies with respect to risk assessment and risk management.
Review disclosures made to the Committee by the Company's CEO and CFO
during their certification process for the Form 10-K and Form
10-Q about any significant deficiencies in the design or
operation of internal control over financial reporting or
material weaknesses therein and any fraud involving management
or other employees who have a significant role in the
Company's internal control over financial reporting.
B. OVERSIGHT OF THE COMPANY'S RELATIONSHIP WITH ITS OUTSIDE AUDITORS
Review the proposed scope of the audit, the proposed staffing of the
audit to ensure adequate coverage, as well as appropriate
coverage consistent with Sections 203 and 206 of the Act, and
the fees proposed to be charged for such audit.
Ensure the rotation of the audit partners as required by law.
Consider whether, in order to assure continuing auditor
independence, it is appropriate to adopt a policy of rotating
the outside auditors on a regular basis.
Set clear hiring policies for employees or former employees of the
Company's outside auditors.
C. FINANCIAL REPORTING PROCESS
Discuss with management, appropriate Company personnel and, without
management present, the outside auditors, the quality and
adequacy of the Company's internal accounting and financial
controls, including internal control over financial reporting
and disclosure controls and procedures, and elicit any
recommendations for the improvement of such controls or
particular areas where new or more detailed controls or
procedures are desirable.
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Review management's assertion on its assessment of the effectiveness
of the Company's internal control over financial reporting as
of the end of the most recent fiscal year and the outside
auditors' report on management's assertions.
In consultation with the outside auditors, review the integrity
of the financial reporting processes, both internal and
external.
Consider the outside auditors' judgments about the quality and
appropriateness of the Company's accounting principles as
applied in its financial reporting.
Consider and, if appropriate, make changes to the Company's auditing
and accounting principles and practices as suggested by the
outside auditors or management.
D. PROCESS IMPROVEMENT
Review with the Company's outside auditors any audit problems or
difficulties and management's response.
Review any significant disagreement between management and the
outside auditors in connection with the preparation of the
financial statements.
Review with the outside auditors and with management the extent to
which changes or improvements in financial or accounting
practices, as approved by the Committee, have been
implemented; this review should be conducted at an appropriate
time subsequent to implementation of changes or improvements,
as determined by the Committee.
E. ETHICAL AND LEGAL COMPLIANCE
Obtain from the outside auditors assurance that Section 10A(b) of the
Exchange Act has not been implicated.
Review management's monitoring of the Company's compliance with the
Company's Code of Business Conduct & Ethics and periodically
determine that management has the proper review system in
place to ensure that the Company's financial statements,
reports and other financial information disseminated to
governmental organizations and the public satisfy legal
requirements.
Review legal compliance matters, including corporate securities
trading policies, with Company counsel.
Review with Company counsel any legal matter that could have a
significant impact on the financial statements.
Establish, review and update periodically the Company's procedures for
the receipt, retention, and treatment of complaints received
by the Company regarding accounting, internal accounting
controls or auditing matters, and the confidential, anonymous
submission by employees of the Company of concerns regarding
questionable accounting or audit matters.
Annually prepare a report to the Company's stockholders as required by
Item 306 of Regulation S-K, and submit such report for
inclusion in the Company's annual proxy statement.
Maintain minutes of meetings of the Committee and periodically report
to the Board on significant results of the foregoing
activities.
Perform any other activities consistent with this Charter, the
Company's By-laws, and governing law, as the Committee or the
Board deems necessary or appropriate.
4
IV. LIMITATION OF COMMITTEE'S ROLE
The Committee is to serve in an oversight capacity and is not intended
to be part of the Company's operational or managerial decision-making process.
The Company's management is responsible for preparing the Company's financial
statements and the outside auditors are responsible for auditing the financial
statements. Additionally, the Committee recognizes that the Company's financial
management, as well as the Company's outside auditors, have more time, knowledge
and detailed information concerning the Company than do Committee members;
consequently, in carrying out its oversight responsibilities, the Committee is
not providing any expert or special assurance as to the Company's financial
statements or any certification as to the outside auditors' work.
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APPENDIX B
ORLEANS HOMEBUILDERS, INC.
NOMINATING COMMITTEE CHARTER
(AS OF AUGUST 26, 2004)
This Charter has been adopted by the Board of Directors (the "Board")
of Orleans Homebuilders, Inc. (the "Company") to govern its Nominating Committee
(the "Committee"), which shall have the authority, responsibility and powers
described below.
PURPOSE
The Committee's purposes are to identify individuals qualified to
become members of the Board and to make recommendations to the Board for
director nominees to stand for election at the next annual meeting of
stockholders, all in accordance with the Company's Certificate of Incorporation
and By-Laws, applicable laws, regulations of the Securities and Exchange
Commission and other governmental authorities, applicable rules of the American
Stock Exchange ("AMEX") and/or any other stock exchange where the Company's
securities are from time to time listed (collectively, "Applicable
Requirements").
GOALS AND RESPONSIBILITIES
The Committee shall perform its duties in a manner consistent with the
criteria set forth in this Charter for selecting new directors.
The Committee shall: conduct searches for new candidates for Board
membership as necessary or advisable; establish policies and procedures
for the consideration of nominees for Board membership recommended by
stockholders; and recommend to the Board a slate of director nominees
to be elected at each annual meeting of the Company's stockholders.
The Committee shall, from time to time: evaluate the appropriate size
of the Board and recommend any increase or decrease with respect
thereto; evaluate the composition of the Board and recommend any
changes to such composition so as to best reflect the objectives of the
Company and the Board; and recommend candidates to fill vacancies or
new positions on the Board, as necessary or advisable.
The Committee shall review this Charter from time to time for adequacy
and recommend any changes to the Board for approval. This Charter shall
be published or otherwise made publicly available to the extent
required by Applicable Requirements.
CRITERIA FOR SELECTING NEW DIRECTORS
The Committee, in recommending a nominee for director, shall do so
based on the nominee's integrity, skill, leadership ability, financial
sophistication and capacity to help guide the Company, and based on such other
considerations as the Committee shall deem appropriate. In addition, the
Committee shall consider all Applicable Requirements with regard thereto. To the
extent the Committee establishes any specific, minimum qualifications that must
be met by any nominee for membership on the Board, or any specific qualities or
skills any such nominee must possess, the Committee will insure that such
qualifications, qualities or skills are described in the Company's proxy
statement or elsewhere as mandated by Applicable Requirements.
1
COMMITTEE MEMBERSHIP AND MEETINGS
The Committee shall be comprised of at least three members, each of
whom shall satisfy any Applicable Requirements, including the "independence"
requirements of AMEX from time to time in effect and applicable to the Company.
Committee members shall be appointed and may be removed by the Board. A member
of the Committee shall be selected by the Board, or the Committee if the Board
does not do so, to serve as the Committee's chairperson. The Committee shall
meet at least annually or more often if the Chairperson or a majority of the
members deem it appropriate. The Committee shall make regular reports to the
Board as it deems appropriate.
ADVISORS
The Committee, with the approval of the Board, shall have the authority
to retain and terminate any search firm or other advisors it deems appropriate
to be used to identify or evaluate director candidates.
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APPENDIX C
ORLEANS HOMEBUILDERS, INC. 2004 OMNIBUS
STOCK INCENTIVE PLAN
AS ADOPTED BY THE BOARD OF DIRECTORS
(EFFECTIVE AS OF AUGUST 26, 2004)
Purpose. Orleans Homebuilders, Inc., a Delaware corporation (the "Company"),
hereby adopts the Orleans Homebuilders, Inc. 2004 Omnibus Stock Incentive Plan
(the "Plan"), which is intended to replace all other stock option and award
plans of the Company (other than the Orleans Homebuilders, Inc. Stock Award
Plan), which plans shall be, as of the date the Plan is approved by the
Company's shareholders, deemed to have been amended and restated and
incorporated into the Plan, as set forth herein, so that outstanding grants made
under any such prior plan, if forfeited, shall result in the shares that were
subject to such grants being again available for grants under the Plan, as
provided pursuant to Section 6, below. The Plan is intended to recognize the
contributions made to the Company by employees (including employees who are
members of the Board of Directors) of the Company or any Affiliate (as defined
herein), to provide such persons with additional incentive to devote themselves
to the future success of the Company or an Affiliate, and to improve the ability
of the Company or an Affiliate to attract, retain, and motivate individuals upon
whom the Company's sustained growth and financial success depend. Through the
Plan, the Company will provide such persons with an opportunity to acquire or
increase their proprietary interest in the Company, and to align their interest
with the interests of shareholders, through receipt of rights to acquire the
Company's Common Stock, par value $0.10 per share (the "Common Stock") and
through the transfer or issuance of Common Stock or other Awards (as defined
herein). In addition, the Plan is intended as an additional incentive to
directors of the Company or of any Affiliate who are not employees of the
Company or an Affiliate to serve on the Board of Directors of the Company or on
the boards of directors (or any similar governing body) of an Affiliate and to
devote themselves to the future success of the Company by providing them with an
opportunity to acquire or increase their proprietary interest in the Company
through the receipt of rights to acquire Common Stock. Furthermore, the Plan may
be used to encourage consultants and advisors of the Company to further the
success of the Company.
Definitions. Unless the context clearly indicates otherwise, the following
capitalized terms when used in the Plan shall have the following meanings:
"Affiliate" means a corporation which is a parent corporation or a
subsidiary corporation with respect to the Company within the meaning
of Section 424(e) or (f) of the Code, of any successor provision, and,
for purposes of Grants other than ISOs, any corporation, partnership,
joint venture or other entity in which the Company, directly or
indirectly, has an equity interest and which the Committee determines
should be treated as an Affiliate for purposes of the Plan.
"Award" shall mean a transfer of Common Stock made pursuant to the
terms of the Plan subject to such terms, benefits or restrictions as
the Committee shall specify in the Grant Document.
"Board" or "Board of Directors" means the Board of Directors of the
Company.
"Capitalization Adjustment" means the adjustment to the number or class
of shares subject to any Grant and the Option Price, exercise price,
purchase price or other payment or deemed payment required in
connection with any Grant, as permitted to be made pursuant to the
provisions of Section 13 of the Plan.
"Change of Control" shall be deemed to have occurred upon the earliest
to occur of the following dates:
the date the stockholders of the Company (or the Board of
Directors, if stockholder action is not required) approve a
plan or other arrangement pursuant to which the Company will
be dissolved or liquidated; or
1
the date the stockholders of the Company (or the Board of
Directors, if stockholder action is not required) approve a
definitive agreement to sell or otherwise dispose of
substantially all of the assets of the Company; or
the date the stockholders of the Company (or the Board of
Directors, if stockholder action is not required) and the
stockholders of the other constituent corporation (or its
board of directors if stockholder action is not required) have
approved a definitive agreement to merge or consolidate the
Company with or into such other corporation, other than, in
either case, a merger or consolidation of the Company in which
holders of shares of the Company's Common Stock immediately
prior to the merger or consolidation will have at least a
majority of the voting power of the surviving corporation's
voting securities immediately after the merger or
consolidation, which voting securities are to be held in the
same proportion as such holders' ownership of Common Stock of
the Company immediately before the merger or consolidation; or
the date any entity, person or group, within the meaning of
Section 13(d)(3) or Section 14(d)(2) of the Exchange Act
(other than (A) the Company or any of its subsidiaries or any
employee benefit plan (or related trust) sponsored or
maintained by the Company or any of its subsidiaries, (B)
Jeffrey P. Orleans or family members of Jeffrey P. Orleans
(all such persons being referred to as "Orleans Family
Members"), (C) any entity a majority of the equity in which is
owned by Orleans Family Members), or (D) any trust as to which
a majority of the beneficiaries are Orleans Family Members),
shall have become the beneficial owner of, or shall have
obtained voting control over, more than fifty percent (50%) of
the outstanding shares of the Company's Common Stock.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor statute, and the rules and regulations issued pursuant to
that statute or any successor statute.
"Committee" shall have the meaning set forth in Section 3 of the Plan.
"Covered Employee" means any Employee who is treated as a "covered
employee" for purposes of Code Section 162(m).
"Disability" means a condition of a Grantee that constitutes a
"disability" as that term is defined in Section 22(e)(3) of the Code.
"Employee" means an employee of the Company or an Affiliate.
"Fair Market Value" means, with respect to a share of the Common Stock:
if the Common Stock is listed on a national securities
exchange or included in the NASDAQ National Market System, the
closing price thereof on the relevant date; or
if the Common Stock is not so listed or included, the mean
between the last reported "bid" and "asked" prices thereof on
the relevant date, as reported on NASDAQ; or
if not so reported, as reported by the National Daily
Quotation Bureau, Inc. or as reported in a customary financial
reporting service, as applicable and as the Committee
determines.
Provided, however, that if the Common Stock is not traded in a public market,
the Fair Market Value of a share shall be as determined in good faith by the
Committee, taking into account all relevant facts and circumstances.
2
"Fiscal Year Grant Limitation" means the limitation on the number of
shares of Common Stock that may be subject to Grants made to any one
person during any one fiscal year of the Company, which limitation
shall be 50,000 shares, subject to a permitted Capitalization
Adjustment.
"Grant" shall mean any Option, Award or SAR granted under the Plan.
"Grantee" shall mean a person to whom an Option, Award or SAR has been
granted pursuant to the Plan.
"Grant Document" shall mean the document provided to a Grantee by the
Company describing and establishing the terms of any Grant made
pursuant to the Plan.
"ISO" means an Option granted under the Plan which is intended to
qualify as an "incentive stock option" within the meaning of Section
422(b) of the Code.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute, and the rules and regulations issued pursuant
to that statute or any successor statute.
"Non-Employee Director" shall mean a member of the Board who is a
"non-employee director" as that term is defined in paragraph (b)(3) of
Rule 16b-3 (as defined herein) and an "outside director" as that term
is defined in Treasury Regulations Section 1.162-27 promulgated under
the Code.
"Non-Employee Director Committee" means a committee designated by the
Board to act as the Committee with respect to the Plan that consists
solely of two or more Non-Employee Directors.
"Non-qualified Stock Option" means an Option granted under the Plan
which is not intended to qualify, or otherwise does not qualify, as an
ISO. The term Non-qualified Stock Option shall also be applicable to
any portion of an option that does not qualify for treatment as an ISO.
"Option" means either an ISO or a Non-qualified Stock Option granted
under the Plan.
"Option Price" means the price at which Shares may be purchased upon
exercise of an Option, as set forth in the Grant Document.
"Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act, or
any successor rule.
"SAR" means a stock appreciation right granted under the Plan, as
defined in Section 11 hereof.
"Section 16 Officers" means any person who is an "officer" within the
meaning of Rule 16a-1(f) promulgated under the Exchange Act or any
successor rule, and who is subject to the reporting requirements under
Section 16 of the Exchange Act with respect to the Company's Common
Stock.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute, and the rules and regulations issued pursuant to
that statute or any successor statute.
"Shares" means the shares of Common Stock (including hypothetical
shares of Common Stock referenced under the terms of a Grant Document
applicable to an SAR) which are subject to any Grant made under the
Plan.
Administration of the Plan. The Board may administer the Plan and/or it may, in
its discretion, designate a committee or committees composed of two or more of
directors to operate and administer the Plan with respect to all or a designated
portion of the participants. To the extent that the Committee is empowered to
grant options to Section 16 Officers or persons whose compensation might have
limits on deductibility under Code Section 162(m), the Board may, at its
discretion, appoint a separate Non-Employee Director to administer the Plan with
respect to those persons. Any such committee designated by the Board, and the
Board itself in its administrative capacity with respect to the Plan, is
referred to as the "Committee."
3
Meetings. The Committee shall hold meetings at such times and places as
it may determine. The Committee may take action only upon the agreement
of a majority of the whole Committee. Any action which the Committee
shall take through a written instrument signed by all its members shall
be as effective as though it had been taken at a meeting duly called
and held.
Exculpation. No member of the Board of Directors shall be personally
liable for monetary damages for any action taken or any failure to take
any action in connection with the administration of the Plan or making
any Grants under the Plan, provided that this Subsection 3(b) shall not
apply to (i) any breach of such member's duty of loyalty to the Company
or its stockholders, (ii) acts or omissions not in good faith or
involving intentional misconduct or a knowing violation of law, (iii)
acts or omissions that would result in liability under Section 174 of
the General Corporation Law of the State of Delaware, as amended, and
(iv) any transaction from which the member derived an improper personal
benefit.
Indemnification. Service on the Committee shall constitute service as a
member of the Board. Each member of the Committee shall be entitled,
without further act on the member's part, to indemnity from the Company
and limitation of liability to the fullest extent provided by
applicable law and by the Company's Articles of Incorporation and/or
Bylaws in connection with or arising out of any action, suit or
proceeding with respect to the administration of the Plan or the
issuance of any Grant thereunder in which the member may be involved by
reason of the member being or having been a member of the Committee,
whether or not the member continues to be such member of the Committee
at the time of the action, suit or proceeding.
Interpretation and Authority of the Committee. The Committee shall have
the power and authority to (i) interpret the Plan, (ii) adopt, amend
and revoke policies, rules and/or regulations for its administration
that are not inconsistent with the express terms of the Plan, and (iii)
waive requirements relating to formalities or other matters that do not
either modify the substance of the rights intended to be granted by
means of Grants made under the Plan or constitute a material amendment
for any purpose under the Code. In addition, the Committee shall,
subject to any specific provisions or limitations applicable under the
Plan, have the authority to make such adjustments to the terms and
conditions of any Grants made under the Plan in order to take into
account any facts and circumstances that influence the effectiveness of
the Plan as a method of providing appropriate current performance
incentives for recipients of Grants, including, but not limited to, any
facts and circumstances related to levels of compensation and bonuses
paid by other similarly situated employers, and current needs of the
Company to encourage the retention of valued Employees and to reward
high levels of performance by such Employees. Any such actions by the
Committee shall be final, binding and conclusive on all parties in
interest.
Grants of Options under the Plan. Grants of Options under the Plan may be in the
form of a Non-qualified Stock Option, an ISO or a combination thereof, at the
discretion of the Committee.
Eligibility. All Employees, members of the Board, members of the boards of
directors (or any similar governing body) of any Affiliate and consultants and
advisors to the Company or any Affiliate shall be eligible to receive Grants
hereunder. Consultants and advisors shall be eligible only if they render bona
fide services to the Company unrelated to the offer or sale of securities. The
Committee, in its sole discretion, shall determine whether an individual
qualifies as an Employee.
Shares Subject to Plan. The aggregate maximum number of Shares as to which
Grants may be issued pursuant to the Plan is 50,000 (subject to a permitted
Capitalization Adjustment). The Shares shall be issued from authorized and
unissued Common Stock or Common Stock held in or hereafter acquired for the
treasury of the Company. If a Grant terminates or expires without having been
fully exercised for any reason or has been conveyed back to the Company pursuant
to the terms of a Grant Document, the Shares as to which the Grant was not
exercised or the Shares that were conveyed back to the Company shall again be
available for issuance pursuant to the terms of one or more Grants pursuant to
the Plan.
Fiscal Year Grant Limitation. Notwithstanding anything herein to the contrary,
no Grantee shall be issued Grants during any one fiscal year of the Company for
shares of Common Stock in excess of the Fiscal Year Grant Limitation.
4
Term of the Plan. The Plan is effective as of August 26, 2004, the date on which
it was adopted by the Board, subject to the approval of the Plan within one year
after such date by the shareholders in the manner required by state law. If the
Plan is not so approved by the shareholders, all Grants issued under the Plan
shall be null and void. No Grants may be issued under the Plan on or after
August 26, 2014.
Options. Each Option granted under the Plan shall be a Non-qualified Stock
Option unless the Option shall be specifically designated at the time of grant
to be an ISO. If any Option designated an ISO is determined for any reason not
to qualify as an incentive stock option within the meaning of Section 422 of the
Code, such Option shall be treated as a Non-qualified Stock Option for all
purposes under the provisions of the Plan. Options granted pursuant to the Plan
shall be evidenced by the Grant Documents in such form as the Committee shall
approve from time to time, which Grant Documents shall comply with and be
subject to the following terms and conditions and such other terms and
conditions as the Committee shall require from time to time which are not
inconsistent with the terms of the Plan. No ISO shall be granted to any person
who does not qualify as an employee of the Company or an Affiliate within the
meaning of Code Section 422.
Number of Option Shares. Each Grant Document shall state the number of
Shares to which it pertains. A Grantee may receive more than one
Option, which may include Options which are intended to be ISOs and
Options which are not intended to be ISOs, but only on the terms and
subject to the conditions and restrictions of the Plan. Notwithstanding
anything herein to the contrary, no Grantee shall be granted Options
during any one fiscal year of the Company for more than the Fiscal Year
Grant Limitation.
Option Price. Each Grant Document shall state the Option Price, which,
for a Non-qualified Stock Option, shall, unless otherwise specified in
the Grant Document, be the Fair Market Value of the Shares on the date
the Option is granted and, for an ISO, shall in all cases be at least
100% of the Fair Market Value of the Shares on the date the Option is
granted as determined by the Committee in accordance with this
Subsection 9(b); and provided, further, that if an ISO is granted to a
Grantee who then owns, directly or by attribution under Section 424(d)
of the Code, shares possessing more than ten percent of the total
combined voting power of all classes of stock of the Company or an
Affiliate, then, to the extent required by Section 424(d) of the Code,
the Option Price shall be at least 110% of the Fair Market Value of the
Shares on the date the Option is granted.
Exercise. No Option shall be deemed to have been exercised prior to the
receipt by the Company of written notice of such exercise and, unless
arrangements satisfactory to the Company have been made for payment
through a broker in accordance with procedures permitted by rules or
regulations of the Federal Reserve Board, receipt of payment in full of
the Option Price for the Shares to be purchased. Each such notice shall
specify the number of Shares to be purchased and, unless the Shares are
covered by a then current registration statement or a Notification
under Regulation A under the Securities Act, shall contain the
Grantee's acknowledgment, in form and substance satisfactory to the
Company, that (i) such Shares are being purchased for investment and
not for distribution or resale (other than a distribution or resale
which, in the opinion of counsel satisfactory to the Company, may be
made without violating the registration provisions of the Securities
Act), (ii) the Grantee has been advised and understands that (A) the
Shares have not been registered under the Securities Act and are
"restricted securities" within the meaning of Rule 144 under the
Securities Act and are subject to restrictions on transfer, and (B) the
Company is under no obligation to register the Shares under the
Securities Act or to take any action which would make available to the
Grantee any exemption from such registration, (iii) such Shares may not
be transferred without compliance with all applicable federal and state
securities laws, and (iv) an appropriate legend referring to the
foregoing restrictions on transfer and any other restrictions imposed
under the Grant Documents may be endorsed on the certificates.
Notwithstanding the foregoing, if the Company determines that issuance
of Shares should be delayed pending registration under federal or state
securities laws, the receipt of an opinion of counsel satisfactory to
the Company that an appropriate exemption from such registration is
available, the listing or inclusion of the Shares on any securities
exchange or an automated quotation system, or the consent or approval
of any governmental regulatory body whose consent or approval is
necessary in connection with the issuance of such Shares, the Company
may defer exercise of any Option granted hereunder until any of the
events described in this sentence has occurred.
5
Medium of Payment. Subject to the terms of the applicable Grant
Document, a Grantee shall pay for Shares (i) in cash, (ii) by certified
or cashier's check payable to the order of the Company, or (iii) by
such other mode of payment as the Committee may approve, including
payment through a broker in accordance with procedures permitted by
rules or regulations of the Federal Reserve Board. The Grantee may also
exercise the Option in any other manner as is approved by the Committee
or as specifically provided for in the applicable Grant Document.
Furthermore, the Committee may provide in a Grant Document that payment
may be made in whole or in part in shares of the Company's Common Stock
held by the Grantee. If payment is made in whole or in part in shares
of the Company's Common Stock, then the Grantee shall deliver to the
Company certificates registered in the name of such Grantee
representing the shares owned by such Grantee, free of all liens,
claims and encumbrances of every kind and having an aggregate Fair
Market Value on the date of delivery that is at least as great as the
Option Price of the Shares (or relevant portion thereof) with respect
to which such Option is to be exercised by the payment in shares of
Common Stock, endorsed in blank or accompanied by stock powers duly
endorsed in blank by the Grantee. In the event that certificates for
shares of the Company's Common Stock delivered to the Company represent
a number of shares in excess of the number of shares required to make
payment for the Option Price of the Shares (or relevant portion
thereof) with respect to which such Option is to be exercised by
payment in shares of Common Stock, the stock certificate or
certificates issued to the Grantee shall represent (i) the Shares in
respect of which payment is made, and (ii) such excess number of
shares. Notwithstanding the foregoing, the Committee may impose from
time to time such limitations and prohibitions on the use of shares of
the Common Stock to exercise an Option as it deems appropriate.
Termination of Options.
No Option shall be exercisable after the first to occur of the
following:
Expiration of the Option term specified in the Grant
Document, which, in the case of an ISO, shall not
occur after (i) ten (10) years from the date of
grant, or (ii) five (5) years from the date of grant
if the Grantee on the date of grant owns, directly or
by attribution under Section 424(d) of the Code,
shares possessing more than ten percent of the total
combined voting power of all classes of stock of the
Company or of an Affiliate;
Except to the extent otherwise provided in a
Grantee's Grant Document, a finding by the Committee,
after full consideration of the facts presented on
behalf of both the Company and the Grantee, that the
Grantee has been engaged in disloyalty to the Company
or an Affiliate, including, without limitation,
fraud, embezzlement, theft, commission of a felony or
proven dishonesty in the course of his employment or
service, or has disclosed trade secrets or
confidential information of the Company or an
Affiliate. In such event, in addition to immediate
termination of the Option, the Grantee shall
automatically forfeit all Shares for which the
Company has not yet delivered the share certificates
upon refund by the Company of the Option Price.
Notwithstanding anything herein to the contrary, the
Company may withhold delivery of share certificates
pending the resolution of any inquiry that could lead
to a finding resulting in a forfeiture;
The date, if any, set by the Committee as an
accelerated expiration date in the event of the
liquidation or dissolution of the Company;
The occurrence of such other event or events as may
be set forth in this Plan or the Grant Document as
causing an accelerated expiration of the Option; or
6
Except as otherwise set forth in the Grant Document
and subject to the foregoing provisions of this
Subsection 9(e)(i), the applicable date set forth
below in connection with the Grantee's termination of
employment or service with the Company or any
Affiliate. For these purposes the applicable date is:
(1) where the Grantee resigns from his or her
employment or service with the Company or any
Affiliate without such resignation having been
solicited by the Company or the Affiliate, as the
case may be, the date of such resignation; (2) where
the Grantee's termination of employment or service
with the Company or any Affiliate is due to the
Grantee's death or Disability, the date that is one
hundred eighty (180) days following such termination;
(3) where the Grantee's termination of employment or
service with the Company or any Affiliate is due to
the Grantee's retirement, the second anniversary of
such termination; (4) where the Grantee is a member
of the Board or of any board of directors (or similar
governing body) of an Affiliate and is not an
Employee and such Grantee's service is terminated for
any reason other than Disability or death, 90 days
following the date of such termination of service;
and (5) in all other cases, 30 days after the
Grantee's termination of employment or service with
the Company or any Affiliate. The only Options that
may be exercised subsequent to the Grantee's
termination of employment or service with the Company
or an Affiliate are those Options which were
exercisable on the last date of such employment or
service and not Options which, if the Grantee were
still employed or rendering service during such post
termination period, would become exercisable, unless
the Grant Document specifically provides to the
contrary or the Committee otherwise approves. The
terms of an executive severance agreement or other
agreement between the Company and a Grantee, approved
by the Committee or the Board, whether entered into
prior or subsequent to the grant of an Option, which
provide for Option exercise dates later than those
set forth in Subsection 9(e)(i) shall be deemed to be
Option terms approved by the Committee and consented
to by the Grantee.
Notwithstanding the foregoing, the Committee may extend the
period during which all or any portion of an Option may be
exercised to a date no later than the Option term specified in
the Grant Document; provided, however, that any change
pursuant to this Subsection 9(e)(ii) which would cause an ISO
to become a Non-qualified Stock Option may be made only with
the consent of the Grantee.
Notwithstanding anything to the contrary contained in the Plan
or a Grant Document, an ISO shall be treated as a
Non-qualified Stock Option to the extent such ISO is exercised
at any time after the expiration of the time period permitted
under the Code for the exercise of an ISO.
Transfers. Except as otherwise provided in this Subsection 9(f), no
Option granted under the Plan may be transferred, except by will or by
the laws of descent and distribution, and, during the lifetime of the
person to whom an Option is granted, such Option may be exercised only
by the Grantee. Notwithstanding the foregoing, an Option, other than an
ISO, shall be transferable pursuant to a "domestic relations order" as
defined in the Code or Title I of the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder, and also
shall be transferable, without payment of consideration, to (a)
immediate family members of the holder (i.e., spouse or former spouse,
parents, issue, including adopted and "step" issue, or siblings), (b)
trusts for the benefit of immediate family members, and (c)
partnerships whose only partners are such family members, and (d) to
any transferee permitted by a rule adopted by the Committee or approved
by the Committee in an individual case. Any transferee will be subject
to all of the conditions set forth in the Option prior to its transfer.
Limitation on ISO Grants. To the extent that the aggregate Fair Market
Value of the shares of Common Stock (determined at the time the ISO is
granted) with respect to which ISOs under all incentive stock option
plans of the Company or its Affiliates are exercisable for the first
time by the Grantee during any calendar year exceeds $100,000, such
ISOs shall, to the extent of such excess, be treated as Non-qualified
Stock Options.
Other Provisions. Subject to the provisions of the Plan, the Grant
Documents shall contain such other provisions, including, without
limitation, provisions authorizing the Committee to accelerate the
exercisability of all or any portion of an Option granted pursuant to
the Plan, additional restrictions upon the exercise of the Option or
additional limitations upon the term of the Option, as the Committee
deems advisable.
7
Change of Control. In the event of a Change of Control, Options and SARs granted
pursuant to the Plan shall become immediately exercisable in full, and all
Awards shall become fully vested, but only if such vesting is specified in the
applicable Grant Document. In addition, the Committee may take whatever action
it deems necessary or desirable with respect to outstanding Grants, including,
without limitation, with respect to Options and SARs, accelerating the
expiration or termination date in the applicable Grant Document to a date no
earlier than thirty (30) days after notice of such acceleration is given to the
Grantees; provided, however, that such accelerated expiration date may not be
earlier than the date as of which the Grant has become fully vested and
exercisable.
Stock Appreciation Rights (SARs).
General. Subject to the terms and conditions of the Plan, the Committee
may, in its sole and absolute discretion, grant a right (which right
shall be referred to as an "SAR"), which may or may not be granted in
conjunction with an Option, which right shall entitle the Grantee to
receive a payment upon exercise equal to the excess of the Fair Market
Value of a specified number of Shares, determined as of the date the
SAR is exercised, over the "purchase price" specified in the Grant
Document applicable to the SAR. The SAR may be exercisable in whole or
in part, and at such times and under such circumstances as are set
forth in the Grant Document applicable to the SAR. In the event an SAR
is granted in conjunction with an Option, the exercise of the SAR shall
result in a cancellation of the Option to the same extent as the SAR is
exercised, and the exercise of the Option shall result in a
cancellation of the SAR to the same extent as the Option is exercised,
and the terms and conditions, including the number of Shares subject to
the SAR, the "purchase price" and the times and circumstances in which
the SAR may be exercised, shall be the same as are applicable to the
Option. Except as may otherwise be provided in a Grant Document, such
payment may be made, as determined by the Committee in accordance with
Subsection 12(c) below and set forth in the applicable Grant Document,
either in Shares or in cash or in any combination thereof. For purposes
of the annual and aggregate limitations on shares of Common Stock that
may be subject to Grants under the Plan, the grant of an SAR not in
conjunction with an Option shall be treated as though such SAR
constituted an Option.
Grant. Each SAR shall relate either to a specific Option granted under
the Plan or to a hypothetical Option that could have been granted under
the Plan. Where an SAR is granted in conjunction with an Option granted
under the Plan, the Grant Document applicable to the Option shall
include provisions indicating the SAR rights. Where an SAR is granted
independent of an Option granted under the Plan, the Grant Document
applicable to such SAR shall indicate the relevant terms and conditions
applicable to the SAR, including, but not limited to, the number of
hypothetical Shares subject to the terms of the SAR, the "purchase
price" to be taken into account upon exercise of the SAR, and such
other terms and conditions as would be permitted or as are required
with respect to the grant of an Option under the Plan. SARs shall be
exercisable at such times and under such terms and conditions as the
Committee, in its sole and absolute discretion, shall determine;
provided, however, that an SAR that is granted concurrent with an
Option shall be exercisable only at such times and by such individuals
as the related Option may be exercised under the Plan and the Grant
Document.
Payment. The Committee shall have sole discretion to determine whether
payment in respect of SARs exercised by any Grantee shall be made in
shares of Common Stock, or in cash, or in a combination thereof. If
payment is made in Common Stock, the number of shares which shall be
issued pursuant to the exercise of SARs shall be determined by dividing
the amount of the payment provided for in Section 11(a) above by the
Fair Market Value of a share of Common Stock on the exercise date of
the SARs. No fractional share of Common Stock shall be issued on
exercise of an SAR; cash may be paid by the Company to the person
exercising an SAR in lieu of any such fractional share, if the
Committee so determines. If payment on exercise of an SAR is to be made
in cash, the person exercising the SAR shall receive such cash payment
as soon as practicable following the date of exercise.
Terms and Conditions of Awards. Awards granted pursuant to the Plan shall be
evidenced by written Grant Documents in such form as the Committee shall from
time to time approve, which Grant Documents shall comply with and be subject to
the following terms and conditions and such other terms and conditions which the
Committee shall from time to time require which are not inconsistent with the
terms of the Plan.
Number of Shares. Each Grant Document shall state the number of Shares
or other units or rights to which it pertains.
8
Purchase Price. Each Grant Document shall specify the purchase price,
if any, which applies to the Award. If the Board specifies a purchase
price, the Grantee shall be required to make payment on or before the
payment date specified in the Grant Document. A Grantee shall make
payment (i) in cash, (ii) by certified check payable to the order of
the Company, or (iii) by such other mode of payment as the Committee
may approve.
Grant. In the case of an Award which provides for a grant of Shares
without any payment by the Grantee, the grant shall take place on the
date specified in the Grant Document. In the case of an Award which
provides for a payment, the grant shall take place on the date the
initial payment is delivered to the Company, unless the Committee or
the Grant Document otherwise specifies. Stock certificates evidencing
Shares granted pursuant to an Award shall be issued in the sole name of
the Grantee. Notwithstanding the foregoing, as a precondition to a
grant, the Company may require an acknowledgment by the Grantee as
required with respect to Options under Subsection 9(c).
Conditions. The Committee may specify in a Grant Document any
conditions under which the Grantee of that Award shall be required to
convey to the Company the Shares covered by the Award. Upon the
occurrence of any such specified condition, the Grantee shall forthwith
surrender and deliver to the Company the certificates evidencing such
Shares as well as completely executed instruments of conveyance. The
Committee, in its discretion, may provide that certificates for Shares
transferred pursuant to an Award be held in escrow by the Company or
its designee until such time as each and every condition has lapsed and
that the Grantee be required, as a condition of the Award, to deliver
to such escrow agent or the Company officer stock transfer powers
covering the Shares subject to the Award duly endorsed by the Grantee.
Unless otherwise provided in the Grant Document or determined by the
Committee, dividends and other distributions made on Shares held in
escrow shall be deposited in escrow, and held in escrow until such time
as the Shares on which the distributions were made are released from
escrow. Stock certificates evidencing Shares subject to conditions
shall bear a legend to the effect that the Shares evidenced thereby are
subject to repurchase by, or conveyance to, the Company in accordance
with the terms applicable to such Shares under an Award made pursuant
to the Plan, and that the Shares may not be sold or otherwise
transferred.
Lapse of Conditions. Upon termination or lapse of all forfeiture
conditions, the Company shall cause certificates without the legend
referring to the Company's repurchase or acquisition right (but with
any other legends that may be appropriate) evidencing the Shares
covered by the Award to be issued to the Grantee upon the Grantee's
surrender to the Company of the legended certificates held by the
Grantee.
Rights as Shareholder. Upon payment of the purchase price, if any, for
Shares covered by an Award and compliance with the acknowledgment
requirement of Subsection 9(c), the Grantee shall have all of the
rights of a shareholder with respect to the Shares covered thereby,
including the right to vote the Shares and (subject to the provisions
of Subsection 12(d)) to receive all dividends and other distributions
paid or made with respect thereto, except to the extent otherwise
provided by the Committee or in the Grant Document.
9
Adjustments on Changes in Capitalization.
Capitalization Adjustments. In the event that the outstanding Shares
are changed by reason of a reorganization, merger, consolidation,
recapitalization, reclassification, stock split-up, combination or
exchange of shares and the like (not including the issuance of Common
Stock on the conversion of other securities of the Company which are
convertible into Common Stock) or dividends payable in shares of Common
Stock, a Capitalization Adjustment may be made by the Committee as it
deems appropriate in the aggregate number and/or class of shares
available under the Plan, in the number of shares, class of shares and
price per share subject to outstanding Grants and to any limitations on
grants set forth in the Plan and stated in terms of numbers of Shares.
Unless the Committee makes other provisions for the equitable
settlement of outstanding Grants, if the Company shall be reorganized,
consolidated, or merged with another corporation, or if all or
substantially all of the assets of the Company shall be sold or
exchanged, a Grantee shall at the time of issuance of the stock under
such corporate event be entitled to receive, with respect to or upon
the exercise of his or her Grant, as the case may be, the same number
and kind of shares of stock or the same amount of property, cash or
securities as the Grantee would have been entitled to receive upon the
occurrence of any such corporate event as if the Grantee had been,
immediately prior to such event, the holder of the number of shares
covered by his or her Grant; provided, however, that with respect to an
SAR, the Grantee shall only be entitled to receive payment in the form
of property other than cash to the extent such settlement of the SAR is
provided for in the applicable Grant Document.
Fractional Shares. Any adjustment under this Section 13 in the number
of Shares subject to Grants shall apply proportionately to only the
unexercised portion of any Option or SAR granted hereunder. If a
fraction of a Share would result from any such adjustment, the fraction
shall be eliminated, unless the Committee otherwise determines.
Committee Authority. The Committee shall have authority to determine
the Capitalization Adjustments to be made under this Section, which may
include both adjustments to the number of shares and class of the
Company stock to be issued in connection with or on the exercise of
Grants, all Plan grant limitations stated in terms of numbers of
Shares, and any such determination by the Committee shall be final,
binding and conclusive.
Amendments and Termination of Plan.
Amendment to and Termination of Plan. The Board may amend the Plan from
time to time in such manner as it may deem advisable or may terminate
the Plan, at its discretion. Nevertheless, the Board may not change the
class of persons eligible to receive an ISO or increase the maximum
number of Shares as to which Grants may be issued under the Plan, or to
any individual under the Plan in any year, without obtaining approval,
within twelve months before or after such action, by the shareholders
in the manner required by state law. No amendment to or termination of
the Plan shall adversely affect any outstanding Grant, however, without
the consent of the Grantee.
Amendment to Grant Documents. Subject to the provisions of the Plan,
the Committee shall have the right to amend any Grant Document issued
to a Grantee, subject to the Grantee's consent, if such amendment is
not favorable to the Grantee or if such amendment has the effect of
changing an ISO to a Non-qualified Stock Option; provided, however,
that the consent of the Grantee shall not be required for any amendment
made pursuant to Subsection 9(e)(i)(C) or Section 10 of the Plan, as
applicable.
No Commitment to Retain. The making of a Grant pursuant to the Plan shall not be
construed to imply or to constitute evidence of any agreement, express or
implied, on the part of the Company or any Affiliate to retain the Grantee as an
employee, director, consultant or advisor of the Company or any Affiliate, or in
any other capacity.
Withholding of Taxes. In connection with any event relating to any Grant under
the Plan, the Company shall have the right to (a) require the recipient to remit
or otherwise make available to the Company an amount sufficient to satisfy any
federal, state and/or local withholding tax requirements prior to the delivery
or transfer of any certificates for such Shares, or (b) take whatever other
action it deems necessary to protect its interests with respect to tax
liabilities, including, without limitation, withholding any Shares, funds or
other property otherwise due to the Grantee. The Company's obligations under the
Plan shall be conditioned on the Grantee's compliance, to the Company's
satisfaction, with any withholding requirement.
10
APPENDIX D
[X] PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE ORLEANS HOMEBUILDERS, INC.
ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, DECEMBER 2, 2004
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies, hereby appoints Jeffrey P.
Orleans and Benjamin D. Goldman, or any of them, with full power of
substitution, as the undersigned's proxies and hereby authorizes them to
represent and to vote, as designated herein, all the Common Stock of Orleans
Homebuilders, Inc. held of record by the undersigned on the close of business on
October 18, 2004, at the Annual Meeting of Stockholders to be held on Thursday,
December 2, 2004 and at any adjournment or postponement thereof.
UNLESS OTHERWISE SPECIFIED, ALL SHARES WILL BE VOTED "FOR" THE ELECTION
OF ALL NOMINEES FOR DIRECTOR LISTED, "FOR" THE PROPOSAL TO APPROVE THE AMENDMENT
TO THE ORLEANS HOMEBUILDERS, INC. CERTIFICATE OF INCORPORATION INCREASING THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK AND "FOR" THE PROPOSAL TO APPROVE
THE ORLEANS HOMEBUILDERS, INC. 2004 OMNIBUS STOCK INCENTIVE PLAN. THIS PROXY
ALSO DELEGATES DISCRETIONARY AUTHORITY TO VOTE WITH RESPECT TO ANY OTHER
BUSINESS WHICH MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT OF
POSTPONEMENT THEREOF.
--------------------------------------
Please be sure to sign and date Date
this Proxy in the box below.
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Stockholder sign above Co-holder (if any) sign above
For All
1. ELECTION OF DIRECTORS For Withhold Except
[ ] [ ] [ ]
Nominees: Benjamin D. Goldman, Jerome S. Goodman, Robert N. Goodman,
Andrew N. Heine, David Kaplan, Lewis Katz, Jeffrey P. Orleans, Robert M.
Segal, John W. Temple and Michael T. Vesey.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK "FOR
ALL EXCEPT" AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
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2. APPROVAL OF THE AMENDMENT TO THE ORLEANS HOMEBUILDERS, INC. CERTIFICATE OF
INCORPORATION INCREASING THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK.
For Against Abstain
[ ] [ ] [ ]
3. APPROVAL OF THE ORLEANS HOMEBUILDERS, INC. 2004 OMNIBUS STOCK INCENTIVE PLAN.
For Against Abstain
[ ] [ ] [ ]
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
You are urged to sign and return this proxy so that you may be sure that your
shares will be voted.
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DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED.
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Please sign exactly as your name appears hereon, date and return
promptly. When shares are held by joint tenants, both should sign. Executors,
administrators, trustees and other fiduciaries should indicate their capacity
when signing.
The above signed acknowledges receipt from Orleans Homebuilders, Inc.
prior to the execution of this proxy, of a Notice of the Annual Meeting of
Stockholders, a Proxy Statement and an Annual Report to Stockholders.
PLEASE ACT PROMPTLY
SIGN, DATE AND MAIL YOUR PROXY CARD TODAY
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IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
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