<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [x]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Hovnanian Enterprises, Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Hovnanian Enterprises, Inc.
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(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):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] 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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
[LETTERHEAD OF HOVNANIAN ENTERPRISES, INC.]
March 15, 1995
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders which
will be held on Tuesday, May 2, 1995, in the Boardroom of the American Stock
Exchange, 13th Floor, 86 Trinity Place, New York, New York. The meeting will
start promptly at 10:30 a.m.
It is important that your shares be represented and voted at the meeting.
Therefore, we urge you to complete, sign, date and return the enclosed proxy
card in the envelope provided for this purpose. Of course, if you attend the
meeting, you may still choose to vote your shares personally, even though you
have already returned a signed proxy. Important items to be acted upon at the
meeting include the election of directors and the ratification of the selection
of independent accountants.
We sincerely hope you will be able to attend and participate in the Company's
1995 Annual Meeting. We welcome the opportunity to meet with many of you and
give you a firsthand report on the progress of your Company.
Sincerely yours,
/s/ Kevork S. Hovnanian
Kevork S. Hovnanian
Chairman of the Board
and
Chief Executive Officer
<PAGE>
HOVNANIAN ENTERPRISES, INC.
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MARCH 15, 1995
----------------
Notice is Hereby Given that the Annual Meeting of Shareholders of Hovnanian
Enterprises, Inc. will be held on Tuesday, May 2, 1995, in the Board Room of
the American Stock Exchange, 13th Floor, 86 Trinity Place, New York, New York
at 10:30 a.m. for the following purposes:
1. The election of Directors of the Company for the ensuing year, to
serve until the next Annual Meeting of Shareholders of the Company and
until their respective successors may be elected and qualified.
2. The ratification of the selection of Kenneth Leventhal & Company as
independent accountants to examine financial statements for the Company for
the year ended October 31, 1995.
3. The transaction of such other business as may properly come before the
meeting and any adjournment thereof.
Only shareholders of record at the close of business on March 8, 1995 are
entitled to notice of and to vote at the meeting.
Accompanying this Notice of Annual Meeting of Shareholders is a proxy
statement, a form of proxy and the Company's Annual Report for the eight month
transition period ended October 31, 1995.
All shareholders are urged to attend the meeting in person or by proxy.
Shareholders who do not expect to attend the meeting are requested to complete,
sign and date the enclosed proxy and return it promptly in the self-addressed
envelope provided.
By order of the Board of Directors,
Timothy P. Mason
Secretary
March 15, 1995
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD,
DATE AND SIGN IT, AND RETURN IT IN THE ENVELOPE PROVIDED. NO POSTAGE IS
NECESSARY IF MAILED IN THE UNITED STATES.
<PAGE>
HOVNANIAN ENTERPRISES, INC.
10 HIGHWAY 35
P.O. BOX 500
RED BANK, NEW JERSEY 07701
----------------
PROXY STATEMENT
----------------
GENERAL
The accompanying proxy is solicited on behalf of the Board of Directors of
Hovnanian Enterprises, Inc. (the "Company") for use at the Annual Meeting of
Shareholders referred to in the foregoing notice and at any adjournment
thereof. It is expected that this Proxy Statement and the accompanying proxy
will be mailed commencing March 15, 1995 to each shareholder entitled to vote.
On May 10, 1994, the Board of Directors of the Company adopted a resolution
providing that the date for the end of the fiscal year of the Company be
changed from the last day of February to October 31. The Company's Annual
Report for the eight month transition period ended October 31, 1995 accompanies
this Proxy Statement.
Shares represented by properly executed proxies, if such proxies are received
in time and not revoked, will be voted in accordance with the specifications
thereon. If no specifications are made, the persons named in the accompanying
proxy will vote such proxy for the Board of Directors' slate of Directors, for
the ratification of selected independent accountants and as recommended by the
Board of Directors unless contrary instructions are given. Any person executing
a proxy may revoke it at any time before it is exercised by delivering written
notice of revocation to the Secretary of the Company or by voting in person at
the meeting.
VOTING RIGHTS AND SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The record date for the determination of shareholders entitled to vote at the
meeting is the close of business on March 8, 1995. On March 8, 1995, the voting
securities of the Company outstanding consisted of 14,847,335 shares of Class A
Common Stock, each share entitling the holder thereof to one vote and 8,189,718
shares of Class B Common Stock, each share entitling the holder thereof to ten
votes.
Other than as set forth in the table below, there are no persons known to the
Company to own beneficially shares representing more than 5% of the Company's
Class A Common Stock or Class B Common Stock.
<PAGE>
The following table sets forth as of March 8, 1995 the Class A Common Stock
and Class B Common Stock of the Company beneficially owned by each Director and
nominee for Director, by all Directors and officers of the Company as a group
(including the named individuals) and holders of more than 5%:
<TABLE>
<CAPTION>
CLASS A COMMON STOCK CLASS B COMMON STOCK
-------------------- --------------------
AMOUNT AND AMOUNT AND
NATURE OF NATURE OF
DIRECTORS, NOMINEES AND BENEFICIAL PERCENT BENEFICIAL PERCENT
HOLDERS OF MORE THAN 5% OWNERSHIP(1) OF CLASS(2) OWNERSHIP(1) OF CLASS(2)
----------------------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Kevork S. Hovnanian(3).... 5,635,887 38.0% 5,843,837(5) 71.4%
Ara K. Hovnanian(4)....... 1,343,088 8.9% 1,202,236 14.4%
Paul W. Buchanan.......... 24,013 .2% 19,320 .2%
Arthur M. Greenbaum....... 1,500 -- 1,500 --
Timothy P. Mason.......... 20,904 .1% 14,257 .2%
Desmond P. McDonald....... 3,750 -- 3,750 --
Peter S. Reinhart......... 18,855 .1% 15,335 .2%
John J. Schimpf........... 85,419 .6% 45,492 .6%
Stephen D. Weinroth....... 2,250 -- 2,250 --
All Directors and officers
as a group
(10 persons)............. 7,164,939 47.0% 7,166,037 84.5%
</TABLE>
--------
Notes:
(1) The figures in the table in respect of Class A Common Stock do not include
the shares of Class B Common Stock beneficially owned by the specified
persons, which shares of Class B Common Stock are convertible at any time
on a share for share basis to Class A Common Stock. The figures in the
table represent beneficial ownership (including ownership of 392,547 Class
A Common Stock Options and 288,120 Class B Common Stock Options, currently
exercisable or exercisable within 60 days) and sole voting power and sole
investment power except as noted in notes (3), (4) and (5) below.
(2) Based upon the number of shares outstanding plus options for such director,
nominee or holder.
(3) Includes 297,812 shares of Class A Common Stock and 320,012 shares of Class
B Common Stock as to which Kevork S. Hovnanian has shared voting power and
shared investment power. Kevork S. Hovnanian's address is 10 Hwy 35, P.O.
Box 500, Red Bank, New Jersey 07701.
(4) Includes 8,350 shares of Class A Common Stock and 10,150 shares of Class B
Common Stock as to which Ara K. Hovnanian has shared voting power and
shared investment power. Ara K. Hovnanian's address is 10 Hwy 35, P.O. Box
500, Red Bank, New Jersey 07701.
(5) Includes 2,829,413 shares of Class B Common Stock held by the Kevork S.
Hovnanian Family Limited Partnership, a Connecticut limited partnership
(the "Limited Partnership"), beneficial ownership of which is disclaimed by
Kevork S. Hovnanian. Kevork S. Hovnanian's wife, Sirwart Hovnanian, as
trustee of the Sirwart Hovnanian 1994 Marital Trust, is the Managing
General Partner of the Limited Partnership and as such has the sole power
to vote and dispose of the shares of Class B Common Stock held by the
Limited Partnership.
2
<PAGE>
ELECTION OF DIRECTORS
The Company's By-laws provide that the Board of Directors shall consist of
nine Directors who shall be elected annually by the shareholders. The Company's
Certificate of Incorporation requires that, at any time when any shares of
Class B Common Stock are outstanding, one-third of the Directors shall be
independent. The following persons are proposed as Directors of the Company to
hold office until the next Annual Meeting of Shareholders and until their
respective successors have been duly elected and qualified. In the event that
any of the nominees for Directors should become unavailable, it is intended
that the shares represented by the proxies will be voted for such substitute
nominees as may be nominated by the Board of Directors, unless the number of
Directors constituting a full Board of Directors is reduced. The Company has no
reason to believe, however, that any of the nominees is, or will be,
unavailable to serve as a Director.
<TABLE>
<CAPTION>
YEAR FIRST
BECAME A
NAME AGE COMPANY AFFILIATION DIRECTOR
---- --- -------------------- ----------
<S> <C> <C> <C>
Kevork S. Hovnanian............. 71 Chairman of the Board, Chief 1967
Executive Officer and
Director of the Company.
Ara K. Hovnanian................ 37 President and Director of the 1981
Company.
Paul W. Buchanan................ 44 Senior Vice President-- 1982
Corporate Controller and
Director of the Company.
Arthur M. Greenbaum............. 69 Director of the Company. 1992
Timothy P. Mason................ 54 Senior Vice President-- 1980
Administration/Secretary and
Director of the Company.
Desmond P. McDonald............. 67 Director of the Company. 1982
Peter S. Reinhart............... 44 Senior Vice President and 1981
General Counsel and Director
of the Company.
John J. Schimpf................. 45 Executive Vice President and 1986
Director of the Company.
Stephen D. Weinroth............. 56 Director of the Company. 1982
</TABLE>
--------
Mr. K. Hovnanian founded the predecessor of the Company in 1959 and has
served as Chairman of the Board and Chief Executive Officer of the Company
since its initial incorporation in 1967. Mr. K. Hovnanian was also President of
the Company from 1967 to April 1988. Mr. K. Hovnanian is also a director of
Midlantic Corporation.
Mr. A. Hovnanian was appointed President in April 1988, after serving as
Executive Vice President from March 1983. Mr. A. Hovnanian is the son of Mr. K.
Hovnanian.
Mr. Buchanan was appointed Senior Vice President--Corporate Controller in May
1990, after serving as Vice President--Corporate Controller from March 1983.
Mr. Greenbaum has been a senior partner of Greenbaum, Rowe, Smith, Ravin &
Davis, a law firm since 1953. Mr. Greenbaum qualifies as an independent
Director as defined in the Company's Certificate of Incorporation.
3
<PAGE>
Mr. Mason was appointed Senior Vice President of Administration/Secretary in
March 1991 after serving as Vice President--Administration and
Secretary/Treasurer from March 1982.
Mr. McDonald has been a Director of Midlantic Bank N.A. since 1976, Executive
Committee Chairman of Midlantic Bank N.A. since August 1992 and was President
of Midlantic Bank N.A. from 1976 to June 1992. He is also a Director of
Midlantic Corporation and was Vice Chairman of Midlantic Corporation from June
1990 to July 1992. Mr. McDonald qualifies as an independent Director as defined
in the Company's Certificate of Incorporation.
Mr. Reinhart has been Senior Vice President and General Counsel since April
1985.
Mr. Schimpf has been Executive Vice President of the Company since April
1988.
Mr. Weinroth is Co-chairman of the Board and Chief Executive Officer of VETTA
Sports, Inc., a worldwide supplier of bicycle parts and accessories and Vice
Chairman of SCS Communications, Inc., a media company with publishing and
magazine interests. He has held such positions since November 1993 and August
1993 respectively. He is also an independent investor and financial advisor.
From July 1989 to April 1992 he was Chairman of the Board and Chief Executive
Officer of Integrated Resources, Inc. He was a Managing Director and a member
of the Board of Directors of Drexel Burnham Lambert Incorporated from 1981
until 1989. Mr. Weinroth was also Chairman and Chief Executive Officer of
Drexel Burnham Lambert Commercial Paper Incorporated during that time. He is a
director of Core Holdings B.V.; First Britannia Mezzanine N.V.; SCS
Communications, Inc. and VETTA Sports, Inc. In February 1990 and May 1990,
Integrated Resources, Inc. and Drexel Burnham Lambert Incorporated,
respectively, filed for protection under Chapter 11 of the Federal Bankruptcy
Code. Mr. Weinroth qualifies as an independent Director as defined in the
Company's Certificate of Incorporation.
MEETINGS OF BOARD OF DIRECTORS
The members of the Audit Committee of the Board of Directors currently are
Messrs. McDonald, Weinroth and Mason. The Audit Committee is chaired by Mr.
McDonald and is responsible for reviewing and approving the scope of the annual
audit undertaken by the Company's independent accountants and meeting with them
to review the results of their work as well as their recommendations. The Audit
Committee has direct access to the Company's independent accountants and also
reviews the fees of independent accountants and recommends to the Board of
Directors the appointment of independent accountants.
The Internal Audit Manager for the Company reports directly to the Audit
Committee on, among other things, the Company's compliance with certain Company
procedures which are designed to enhance management's consideration of all
aspects of major transactions involving the Company. The Audit Committee has
direct control over staffing, including compensation, of the internal audit
department. The Company's Chief Accounting Officer reports directly to the
Audit Committee on significant accounting issues. During the eight month
transition period ended October 31, 1994 the Audit Committee met twice.
The Compensation Committee consists currently of Messrs. McDonald and
Weinroth. Mr. K. Hovnanian resigned from the Compensation Committee on May 10,
1994. The Compensation Committee is currently chaired by Mr. Weinroth and is
active in reviewing salaries, bonuses and other forms of compensation for
officers and key employees of the Company, in establishing salaries and
4
<PAGE>
in other compensation and personnel areas as the Board of Directors from time
to time may request. For a discussion of the criteria utilized and factors
considered by the Compensation Committee in reviewing and establishing
executive compensation, see "Report of the Compensation Committee" below.
During the eight month transition period ended October 31, 1994 the
Compensation Committee met once.
The Company has no executive or nominating committees. Procedures for
nominating persons for election to the Board of Directors are contained in the
Company's Bylaws.
During the eight month transition period ended October 31, 1994 the Board of
Directors held three regularly scheduled meetings. In addition, the directors
considered Company matters and had numerous communications with the Chairman of
the Board of Directors and others wholly apart from the formal meetings.
DIRECTOR COMPENSATION
Each director who is not an officer of the Company is paid $2,000 per
regularly scheduled meeting, $1,000 for each committee meeting attended, $2,000
for special meetings attended and a bonus. All directors are reimbursed for
expenses related to his attendance at Board of Directors and committee
meetings. During the eight month transition period ended October 31, 1994,
including an accrued bonus paid on February 6, 1995, Mr. McDonald received
$18,500, Mr. Greenbaum received $15,500 and Mr. Weinroth received $18,500.
RATIFICATION OF THE SELECTION OF AND
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The selection of independent accountants to examine financial statements of
the Company made available or transmitted to shareholders and filed with the
Securities and Exchange Commission for the year ended October 31, 1995 is to be
submitted to the meeting for ratification. Kenneth Leventhal & Company has been
selected by the Board of Directors of the Company to examine such financial
statements.
The Company has been advised that a representative of Kenneth Leventhal &
Company will attend the Annual Meeting to respond to appropriate questions and
will be afforded the opportunity to make a statement if the representative so
desires.
5
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation paid or accrued by the
Company for the chief executive officer and the other four most highly
compensated executives during the eight month transition period ended October
31, 1995 and the year ended February 28(29), 1994, 1993 and 1992.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------
ANNUAL COMPENSATION AWARDS
--------------------------- -----------------------------
NUMBER OF
OTHER SECURITIES
YEAR ANNUAL RESTRICTED UNDERLYING ALL OTHER
NAME AND PRINCIPAL OR COMPEN- STOCK OPTIONS/ LTIP COMPEN-
POSITION PERIOD SALARY BONUS(1) SATION(2) AWARDS SARS(3) PAYOUTS SATION(4)
------------------ ------ -------- -------- --------- ---------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kevork S. Hovnanian..8
mos. 10/94 $536,219 $133,334 $0 $0 0 N/A $ 7,811
Chairman of the Board of 1994 $720,352 $300,000 $0 $0 0 N/A $11,038
Directors, Chief Execu-
tive 1993 $681,178 $150,000 $0 $0 0 N/A $ 9,744
Officer, and Director of 1992 $643,946 $50,000 $0 $0 0 N/A $ 9,661
the Company
Ara K. Hovnanian..8 mos. 10/94 $520,735 $133,334 $0 $0 0 N/A $ 6,932
President and Director 1994 $632,600 $300,000 $0 $0 0 N/A $16,143
of the Company 1993 $619,381 $200,000 $0 $0 295,000 N/A $ 947
1992 $524,954 $150,000 $0 $0 0 N/A $ 1,730
John J. Schimpf...8 mos. 10/94 $144,086 $ 48,251 $0 $0 0 N/A $18,443
Executive Vice President 1994 $200,277 $100,000 $0 $0 0 N/A $15,304
and Director of the 1993 $186,599 $ 80,000 $0 $0 70,000 N/A $11,463
Company 1992 $175,078 $ 35,000 $0 $0 0 N/A $18,479
J. Larry Sorsby...8 mos. 10/94 $121,403 $ 50,833 $0 $0 0 N/A $11,085
Senior Vice President/ 1994 $169,371 $ 82,500 $0 $0 0 N/A $ 7,953
Finance and Treasurer of 1993 $157,223 $ 60,000 $0 $0 35,000 N/A $ 5,264
the Company 1992 $144,675 $ 30,000 $0 $0 0 N/A $ 7,207
Peter S. Reinhart.8 mos. 10/94 $102,879 $ 29,394 $0 $0 0 N/A $13,748
Senior Vice President/ 1994 $152,022 $ 56,800 $0 $0 0 N/A $12,141
General Counsel and 1993 $137,945 $ 50,000 $0 $0 15,000 N/A $10,445
Director of the Company 1992 $147,936 $ 20,000 $0 $0 0 N/A $16,161
</TABLE>
--------
Notes:
(1) Includes awards not paid until after year end.
(2) Includes perquisites and other personal benefits unless the aggregate amount
is lesser than either $50,000 or 10% of the total of annual salary and bonus
reported for the named executive officer.
(3) The Company does not have a stock appreciation right ("SAR") program.
(4) Includes accruals under the Company's savings and investment retirement
plan (the "Retirement Plan"), deferred compensation plan (the "Deferred
Plan") and term life insurance premiums for each of the named executive
officers for the eight month transition period ended October 31, 1994 as
follows:
<TABLE>
<CAPTION>
RETIREMENT DEFERRED TERM
PLAN PLAN INSURANCE TOTAL
---------- -------- --------- -------
<S> <C> <C> <C> <C>
K. Hovnanian........................ $7,495 $ 0 $316 $ 7,811
A. Hovnanian........................ $6,301 $ 0 $631 $ 6,932
Schimpf............................. $9,486 $8,521 $436 $18,443
Sorsby.............................. $7,880 $2,839 $366 $11,085
Reinhart............................ $9,734 $3,702 $312 $13,748
</TABLE>
6
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
There were no options granted during the eight month transition period ended
October 31, 1994.
AGGREGATED OPTION EXERCISES DURING THE EIGHT MONTH TRANSITION PERIOD ENDED
OCTOBER 31, 1994 AND OPTION VALUES AT OCTOBER 31, 1994
The following table provides information on option exercises during the eight
month transition period ended October 31, 1994 by the named executive officers
and the value of such officers' unexercised options at October 31, 1994.
<TABLE>
<CAPTION>
SECURITIES UNDERLYING
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED OCTOBER 31, 1994(1) OCTOBER 31, 1994(1)
ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------------ -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kevork S. Hovnanian..... 0 $ 0 None None N/A N/A
Ara K. Hovnanian........ 0 $ 0 323,333 196,667 $ 81,563 $0
John J. Schimpf......... 0 $ 0 83,333 46,667 $ 52,500 $0
J. Larry Sorsby......... 0 $ 0 32,667 23,333 $ 18,375 $0
Peter S. Reinhart....... 0 $ 0 29,000 10,000 $ 21,000 $0
</TABLE>
--------
Notes:
(1) The closing price of the Class A Common Stock on the last trading day of
October, 1994 on the American Stock Exchange was $6.00.
TEN-YEAR OPTION REPRICINGS
For the eight month transition period ended October 31, 1994, there was no
adjustment or amendment to the exercise price of the stock options previously
awarded.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee is charged with the responsibility of determining
the cash and other incentive compensation, if any, to be paid to the Company's
executive officers and key employees. The amount and nature of the compensation
received by the Company's executives during the eight month transition period
ended October 31, 1994 was determined in accordance with the compensation
program and policies described below.
The executive compensation program is designed to attract, retain and reward
highly qualified executives while maintaining a strong and direct link between
executive pay, the Company's financial performance and total shareholder
return. The executive compensation program contains three major components:
base salaries, annual bonuses and stock options.
Base Salary
The Compensation Committee believes that, due to the Company's success in its
principal markets, other companies seeking proven executives may view members
of the Company's highly experienced executive team as potential targets. The
base salaries paid to the Company's executive officers during the eight month
transition period ended October 31, 1994 generally were believed to be
necessary to retain their services.
Base salaries, including that of Mr. K. Hovnanian, the Company's Chief
Executive Officer, are reviewed annually and are adjusted based on the
performance of the executive, any increased
7
<PAGE>
responsibilities assumed by the executive, average salary increases or
decreases in the industry and the going rate for similar positions at
comparable companies. Mr. K. Hovnanian set the eight month transition period
ended October 31, 1994 base salaries of the Company's executive officers. Each
executive officer's base salary, including the base salary of Mr. K. Hovnanian,
was reviewed in accordance with the above criteria by the members of the
Compensation Committee and thereafter approved.
Annual Bonus Program
The Company maintains an annual bonus program under which executive officers
and other key management employees have the opportunity to earn cash bonuses.
The annual bonus program is intended to motivate and reward executives for the
achievement of individual performance objectives and for the attainment by the
Company of strategic and financial performance goals, including levels of
return on equity.
For the eight month transition period ended October 31, 1994, the Company's
executives received a bonus based on the Company's overall Return on Equity
("ROE"). Mr. K. Hovnanian, Chairman of the Board and Chief Executive Officer
and Mr. A. Hovnanian, President and Chief Operating Officer received a fixed
amount bonus based on the Company's ROE. All other executive officers
participate in a plan based on ROE but instead of receiving a fixed amount,
they receive a percentage of their base salary. As the Company's ROE reaches
higher targeted levels, the bonus percentage of salary increases.
The Company's annual bonus program is designed to be cost and tax effective.
Accordingly, in light of recent federal tax law changes under the Omnibus
Budget Reconciliation Act of 1993, the bonus plan for executives receiving
compensation in excess of $1,000,000 was approved by shareholders at the July
13, 1994 Annual Meeting of Shareholders and reflects the Compensation
Committee's policies of maximizing corporate tax deductions, wherever feasible.
Stock Option Plan
The Option Plan established by the Board of Directors is intended to align
the interests of the Company's executives and shareholders in the enhancement
of shareholder value. The ultimate value received by option holders is directly
tied to increases in the Company's stock price and, therefore, stock options
serve to closely link the interests of management and shareholders and motivate
executives to make decisions that will serve to increase the long-term total
return to shareholders. Additionally, grants under the Option Plan include
vesting and termination provisions which the Compensation Committee believes
will encourage option holders to remain employees of the Company.
The Option Plan is administered by the Compensation Committee. See "Option
Grants in Last Fiscal Year" above. No member of the Compensation Committee,
while a member, is eligible to participate in the Option Plan.
COMPENSATION COMMITTEE
Stephen D. Weinroth
Desmond P. McDonald
8
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Weinroth is Chairman of the Compensation Committee which also includes
Mr. McDonald. Both Messrs. McDonald and Weinroth are non-employee directors and
were never officers or employees of the Company. Mr. K. Hovnanian who is
Chairman of the Board of Directors and Chief Executive Officer of the Company
resigned from the Compensation Committee on May 10, 1994. See "CERTAIN
TRANSACTIONS" for information concerning Messrs. McDonald's and Greenbaum's
business relationship with the Company.
PERFORMANCE GRAPH
The following graphs compare on a cumulative basis the yearly percentage
change over the three and five year period ending October 31, 1994 in (i) the
total shareholder return on the Common Stock of the Company with (ii) the total
return on the Standard & Poor's 500 Composite Stock Price Index and with (iii)
the total shareholder return on the common stocks of a peer group of twelve
companies. Such yearly percentage change has been measured by dividing (i) the
sum of (a) the amount of dividends for the measurement period, assuming
dividend reinvestment, and (b) the price per share at the end of the
measurement period less the price per share at the beginning of the measurement
period, by (ii) the price per share at the beginning of the measurement period.
The price of each unit has been set at $100 on October 31, 1991 and 1989,
respectively for the preparation of the graphs. The peer group index is
composed of the following peer companies: Hovnanian Enterprises, Inc., Centex
Corporation, PHM Corporation, U.S. Home Corporation, Standard Pacific Corp.,
The Ryland Group, Inc., MDC Holdings, Inc., NVR L.P., Toll Brothers, Inc.,
Kaufman and Broad Home Corporation, Lennar Corporation and UDC-Universal
Development L.P.
Note: The stock price performance shown on the following graphs is not
necessarily indicative of future price performance.
[GRAPH APPEARS HERE]
<TABLE>
Comparison of Three-Year Cumulative Total Returns of Hovnanian Enterprises, Inc.,
the S & P 500 Index and a Peer Group Index
(October 31)
<CAPTION>
Hovnanian
Measurement period Enterprises, Broad Market Peer Group
(Fiscal year Covered) Inc. Index Index
--------------------- ------------ ------------ ----------
<S> <C> <C> <C>
Measurement PT -
1991 $ 100 $ 100 $ 100
1992 $ 140.74 $ 109.97 $ 142.48
1993 $ 262.96 $ 126.42 $ 204.16
1994 $ 88.89 $ 131.31 $ 121.59
</TABLE>
9
<PAGE>
[GRAPH APPEARS HERE]
<TABLE>
Comparison of Five-Year Cumulative Total Returns of Hovnanian Enterprises, Inc.,
the S & P 500 Index and a Peer Group Index
(October 31)
<CAPTION>
Hovnanian
Measurement period Enterprises, Broad Market Peer Group
(Fiscal year Covered) Inc. Index Index
--------------------- ------------ ------------ ----------
<S> <C> <C> <C>
Measurement PT -
1989 $ 100 $ 100 $ 100
1990 $ 33.77 $ 92.51 $ 45.31
1991 $ 70.13 $ 123.51 $ 96.62
1992 $ 98.7 $ 135.83 $ 136.93
1993 $ 184.42 $ 156.14 $ 194.47
1994 $ 62.34 $ 162.18 $ 116.29
</TABLE>
CERTAIN TRANSACTIONS
The Company's Board of Directors has adopted a general policy providing that
it will not make loans to officers or directors of the Company or their
relatives at an interest rate less than the interest rate at the date of the
loan on six month U.S. Treasury Bills, that the aggregate of such loans will
not exceed $2,000,000 at any one time, and that such loans will be made only
with the approval of the members of the Company's Board of Directors who have
no interest in the transaction. At October 31, 1994, loans under this policy
amounted to $1,677,000. Notwithstanding the policy stated above, the Board of
Directors of the Company concluded that the following transactions were in the
best interests of the Company.
On March 1, 1990, the Company sold all of the assets and liabilities of its
wholly owned engineering subsidiary Najarian & Associates, Inc. ("N & A") for
$3,600,000 to Najarian & Associates L.P., a partnership consisting of the
employees of N & A. One of these employees and former President of N & A was
Tavit O. Najarian, the son-in-law of Mr. K. Hovnanian, Chairman of the Board of
the Company. At the closing, the Company received a cash payment of $720,000
and a $2,880,000 note. The sale was approved by disinterested members of the
Company's Board of Directors. Originally the note carried an annual interest
rate of 10% and was to amortize over ten
10
<PAGE>
years. As long as any portion of the note is outstanding, the Company receives
25% of the net cash flow of Najarian & Associates, L.P. During the year ended
February 29, 1992, Najarian & Associates, L.P. began to experience a
significant decrease in business activity. As a result, the note was modified
to change the interest rate to prime, to add accrued interest from September 1,
1991 to September 1, 1992 to principal and to reschedule principal payments
over the balance of the term of the note. As a result of continued financial
difficulties, a committee consisting of independent directors of the Board of
Directors of the Company (the "Committee") engaged an outside consultant to
determine the fair market value of the above note. Based on the consultant's
findings, the Committee recommended a reduction in the note including accrued
interest from $2,983,000 to $1,100,000 at February 28, 1994. This reduction of
the note was charged to operations during the year ended February 28, 1994. In
addition, the Committee recommended a new term of ten years with annual
interest on the note of 5% for the first two years adjusting to prime
thereafter. Amortization would begin in year three with an annual minimum
amount of 5%, ranging up to 30% in year 10, or 85% of cash flow after interest,
whichever is greater. The Committee also recommended a $300,000 discount if the
loan was paid in full during the first two years.
The Company provides property management services to various limited
partnerships including two partnerships in which Mr. A. Hovnanian, President
and a Director of the Company, is general partner, and members of his family
and certain officers and directors of the Company are limited partners. At
October 31, 1994, loans by the Company to these partnerships amounted to
$238,000.
On May 10, 1994, the Board of Directors approved the acquisition of the 10%
minority interest in certain Florida subsidiaries owned by Paul W. Asfahl,
President of the Company's Florida Division. For his 10% interest, the Company
issued 45,000 shares of Class A Common Stock to Mr. Asfahl.
On August 2, 1994, the Board of Directors approved the acquisition of the 15%
minority interest in the New Fortis Corporation owned primarily by Marvin D.
Gentry, President of the New Fortis Corporation. For the 15% interest, the
Company issued 135,000 shares of Class A Common Stock to Mr. Gentry and the
other owners.
Mr. Desmond McDonald, a Director of the Company, was the President of
Midlantic Bank N.A. ("Midlantic") until July 1992. Mr. McDonald currently owns
10,794 shares of common stock of Midlantic. From time to time the Company
obtains services and financing from Midlantic. The Company has a Revolving
Credit Agreement with a group of banks, including Midlantic. At October 31,
1994 the Company and its subsidiaries owed $32,129,000 to Midlantic pursuant to
a Revolving Credit Agreement and other financing arrangements.
Mr. Arthur Greenbaum is a senior partner of Greenbaum, Rowe, Smith, Ravin &
Davis, a law firm retained by the Company during the eight month transition
period October 31, 1994.
GENERAL
The expense of this solicitation is to be borne by the Company. The Company
may also reimburse persons holding shares in their names or in the names of
their nominees for their expenses in sending proxies and proxy material to
their principals.
Unless otherwise directed, the persons named in the accompanying form of
proxy intend to vote all proxies received by them in favor of the election of
nominees to the Board of Directors of the
11
<PAGE>
Company named herein and in favor of the ratification of selected independent
accountants. All proxies will be voted as specified.
Each share of Class A Common Stock entitles the holder thereof to one vote
and each share of Class B Common Stock entitles the holder thereof to ten
votes. Votes of Class A Common Stock and Class B Common Stock will be counted
together without regard to class and will be certified by the Inspectors of
Election, who are employees of the Company. Notwithstanding the foregoing, the
Company's Certificate of Incorporation provides that each share of Class B
Common Stock held, to the extent of the Company's knowledge, in nominee name by
a stockbroker, bank or otherwise will be entitled to only one vote per share
unless the Company is satisfied that such shares have been held, since the date
of issuance, for the benefit or account of the same beneficial owner of such
shares or any permitted transferee. Beneficial owners of shares of Class B
Common Stock held in nominee name wishing to cast ten votes for each share of
such stock must (i) obtain from their nominee a proxy card designed for
beneficial owners of Class B Common Stock, (ii) complete the certification on
such card and (iii) execute the card and return it to their nominee. The
Company has also supplied nominee holders of Class B Common Stock with
specially designed proxy cards to accommodate the voting of the Class B Common
Stock. In accordance with the Company's Certificate of Incorporation, shares of
Class B Common Stock held in nominee name will be entitled to ten votes per
share only if the beneficial owner proxy card or the nominee proxy card
relating to such shares is properly completed and received by Midlantic Bank
N.A., the Company's transfer agent, not less than 3 nor more than 20 business
days prior to May 2, 1995. Completed proxy cards should be sent to Post Office
Box 600, Edison, New Jersey 08818, Attention: Corporate Trust Department.
All items to be acted upon at this Annual Meeting of Shareholders will be
determined by a majority of the votes cast. Mr. K. Hovnanian and certain
members of his family have informed the Company that they intend to vote in
favor of all proposals submitted on behalf of the Company. Because of the
voting power of Mr. K. Hovnanian and such members of his family, all of the
foregoing proposals are assured passage.
Management does not intend to present any business at the meeting other than
that set forth in the accompanying Notice of Annual Meeting of Shareholders,
and it has no information that others will do so. If other matters requiring
the vote of the shareholders properly come before the meeting and any
adjournments thereof, it is the intention of the persons named in the
accompanying form of proxy to vote the proxies held by them in accordance with
their judgment on such matters.
SHAREHOLDER PROPOSALS FOR THE
1996 ANNUAL MEETING
Shareholder proposals for inclusion in the proxy materials related to the
1996 Annual Meeting of Shareholders must be received by the Company no later
than October 31, 1995.
By Order of the Board of Directors
Hovnanian Enterprises, Inc.
Red Bank, New Jersey
March 15, 1995
12
<PAGE>
HOVNANIAN ENTERPRISES, INC.
P
R CLASS A COMMON STOCK
O
X
Y THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Kevork S. Hovnanian, Ara
K. Hovnanian and Desmond P. McDonald, and each of them, his true and
lawful agents and proxies with full power of substitution in each, to
represent the undersigned at the Annual Meeting of Shareholders of
HOVNANIAN ENTERPRISES, INC. to be held in the Boardroom of the American
Stock Exchange, 13th Floor, 86 Trinity Place, New York, New York, at 10:30
A.M. on May 2, 1995, and at any adjournments thereof, upon the matters set
forth in the notice of meeting and Proxy Statement dated March 15, 1995
and upon all other matters properly coming before said meeting.
SEE REVERSE SIDE
<PAGE>
[X] PLEASE MARK YOUR 0000
VOTES AS IN THIS --
EXAMPLE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED (1) FOR THE ELECTION OF THE
NOMINEES OF THE BOARD OF DIRECTORS; (2) FOR THE RATIFICATION OF THE SELECTION
OF KENNETH LEVENTHAL & COMPANY AS INDEPENDENT ACCOUNTANTS; AND (3) ON ANY OTHER
MATTERS IN ACCORDANCE WITH THE DISCRETION OF THE NAMED ATTORNEYS AND AGENTS, IF
NO INSTRUCTIONS TO THE CONTRARY ARE INDICATED IN ITEMS (1), (2) AND (3).
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [_] [_] 2. Ratification of [_] [_] [_]
Directors, Nominees: the selection of
K. Hovnanian, A. Hovnanian, Kenneth Leventhal & Company as
P. Buchanan, A. Greenbaum, independent accountants for the
T. Mason, D. McDonald, year ended October 31, 1995.
P. Reinhart, J. Schimpf,
S. Weinroth
3. In their discretion, upon other
matters as may properly come
before the meeting.
For, except vote withheld from the following nominee(s):
--------------------------------------------------------
Please mark, sign, date and return the proxy card promptly using the enclosed
envelope. This Proxy must be signed exactly as name appears hereon. Executors,
administrators, trustees, etc., should give full title as such. If the signer
is a corporation, please sign full corporate name by duly authorized officer.
--------------------------------------------------------------------------------
1995
--------------------------------------------------------------------------------
SIGNATURE(S) DATE
Class A Common Stock
<PAGE>
HOVNANIAN ENTERPRISES, INC.
P
R CLASS B COMMON STOCK
O
X
Y THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Kevork S. Hovnanian, Ara
K. Hovnanian and Desmond P. McDonald, and each of them, his true and
lawful agents and proxies with full power of substitution in each, to
represent the undersigned at the Annual Meeting of Shareholders of
HOVNANIAN ENTERPRISES, INC. to be held in the Boardroom of the American
Stock Exchange, 13th Floor, 86 Trinity Place, New York, New York, at 10:30
A.M. on May 2, 1995, and at any adjournments thereof, upon the matters set
forth in the notice of meeting and Proxy Statement dated March 15, 1995
and upon all other matters properly coming before said meeting.
SEE REVERSE SIDE
<PAGE>
[X] PLEASE MARK YOUR 0000
VOTES AS IN THIS --
EXAMPLE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED (1) FOR THE ELECTION OF THE
NOMINEES OF THE BOARD OF DIRECTORS; (2) FOR THE RATIFICATION OF THE SELECTION
OF KENNETH LEVENTHAL & COMPANY AS INDEPENDENT ACCOUNTANTS; AND (3) ON ANY OTHER
MATTERS IN ACCORDANCE WITH THE DISCRETION OF THE NAMED ATTORNEYS AND AGENTS, IF
NO INSTRUCTIONS TO THE CONTRARY ARE INDICATED IN ITEMS (1), (2) AND (3).
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [_] [_] 2. Ratification of [_] [_] [_]
Directors, Nominees: the selection of
K. Hovnanian, A. Hovnanian, Kenneth Leventhal & Company as
P. Buchanan, A. Greenbaum, independent accountants for the
T. Mason, D. McDonald, year ended October 31, 1995.
P. Reinhart, J. Schimpf,
S. Weinroth
3. In their discretion, upon other
matters as may properly come
before the meeting.
For, except vote withheld from the following nominee(s):
--------------------------------------------------------
Please mark, sign, date and return the proxy card promptly using the enclosed
envelope. This Proxy must be signed exactly as name appears hereon. Executors,
administrators, trustees, etc., should give full title as such. If the signer
is a corporation, please sign full corporate name by duly authorized officer.
--------------------------------------------------------------------------------
1995
--------------------------------------------------------------------------------
SIGNATURE(S) DATE
Class B Common Stock
<PAGE>
HOVNANIAN ENTERPRISES, INC.
P
R BENEFICIAL OWNER OF CLASS B COMMON STOCK
O
X
Y THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Kevork S. Hovnanian, Ara
K. Hovnanian and Desmond P. McDonald, and each of them, his true and
lawful agents and proxies with full power of substitution in each, to
represent the undersigned at the Annual Meeting of Shareholders of
HOVNANIAN ENTERPRISES, INC. to be held in the Boardroom of the American
Stock Exchange, 13th Floor, 86 Trinity Place, New York, New York, at 10:30
A.M. on May 2, 1995, and at any adjournments thereof, upon the matters set
forth in the notice of meeting and Proxy Statement dated March 15, 1995
and upon all other matters properly coming before said meeting.
By signing on the reverse hereof, the undersigned certifies that (A) with
respect to of the shares represented by this proxy, the undersigned
has been the beneficial owner of such shares since the date of their
issuance or is a Permitted Transferee (as defined in paragraph 4(A) of
Article FOURTH of the Company's Certificate of Incorporation) of any such
beneficial owner and (B) with respect to the remaining shares
represented by this proxy, the undersigned has not been the beneficial
owner of such shares since the date of their issuance nor is the
undersigned a Permitted Transferee of any such beneficial owner.
If no certification is made, it will be deemed that all shares of Class B
Common Stock represented by this proxy have not been held, since the date
of issuance, for the benefit or account of the same beneficial owner of
such shares or any Permitted Transferee.
SEE REVERSE SIDE
<PAGE>
[X] PLEASE MARK YOUR 0000
VOTES AS IN THIS --
EXAMPLE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED (1) FOR THE ELECTION OF THE
NOMINEES OF THE BOARD OF DIRECTORS; (2) FOR THE RATIFICATION OF THE SELECTION
OF KENNETH LEVENTHAL & COMPANY AS INDEPENDENT ACCOUNTANTS; AND (3) ON ANY OTHER
MATTERS IN ACCORDANCE WITH THE DISCRETION OF THE NAMED ATTORNEYS AND AGENTS, IF
NO INSTRUCTIONS TO THE CONTRARY ARE INDICATED IN ITEMS (1), (2) AND (3).
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [_] [_] 2. Ratification of [_] [_] [_]
Directors, Nominees: the selection of
K. Hovnanian, A. Hovnanian, Kenneth Leventhal & Company as
P. Buchanan, A. Greenbaum, independent accountants for the
T. Mason, D. McDonald, year ended October 31, 1995.
P. Reinhart, J. Schimpf,
S. Weinroth
3. In their discretion, upon other
matters as may properly come
before the meeting.
For, except vote withheld from the following nominee(s):
--------------------------------------------------------
Please mark, sign, date and return the proxy card promptly using the enclosed
envelope. This Proxy must be signed exactly as name appears hereon. Executors,
administrators, trustees, etc., should give full title as such. If the signer
is a corporation, please sign full corporate name by duly authorized officer.
--------------------------------------------------------------------------------
1995
--------------------------------------------------------------------------------
SIGNATURE(S) DATE
Class B Common Stock
<PAGE>
HOVNANIAN ENTERPRISES, INC.
P
R NOMINEE HOLDER OF CLASS B COMMON STOCK
O
X
Y THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Kevork S. Hovnanian, Ara
K. Hovnanian and Desmond P. McDonald, and each of them, his true and
lawful agents and proxies with full power of substitution in each, to
represent the undersigned at the Annual Meeting of Shareholders of
HOVNANIAN ENTERPRISES, INC. to be held in the Boardroom of the American
Stock Exchange, 13th Floor, 86 Trinity Place, New York, New York, at 10:30
A.M. on May 2, 1995, and at any adjournments thereof, upon the matters set
forth in the notice of meeting and Proxy Statement dated March 15, 1995
and upon all other matters properly coming before said meeting.
SEE REVERSE SIDE
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED (1) FOR THE ELECTION OF THE
NOMINEES OF THE BOARD OF DIRECTORS; (2) FOR THE RATIFICATION OF THE SELECTION
OF KENNETH LEVENTHAL & COMPANY AS INDEPENDENT ACCOUNTANTS FOR THE YEAR ENDED
OCTOBER 31 1995; AND (3) ON ANY OTHER MATTERS IN ACCORDANCE WITH THE
DISCRETION OF THE NAMED ATTORNEYS AND AGENTS, IF NO INSTRUCTIONS TO THE
CONTRARY ARE INDICATED IN ITEMS (1), (2) AND (3).
<TABLE>
<CAPTION>
CLASS B COMMON STOCK SHARES CLASS B COMMON STOCK SHARES NOT
OWNED BY SAME BENEFICIAL OWNER OWNED BY SAME BENEFICIAL OWNER
OR PERMITTED TRANSFEREE SINCE OR PERMITTED TRANSFEREE SINCE
ISSUANCE ISSUANCE
------------------------------ -------------------------------
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
--------- --------- --------- --------- --------- ---------
(POST NUMBER OF SHARES NOT (POST NUMBER OF SHARES NOT
NUMBER OF VOTES) NUMBER OF VOTES)
<S> <C> <C> <C> <C> <C> <C>
1. Directors:
K. Hovnanian ____ shs. ____ shs. ____ shs. ____ shs. ____ shs. ____ shs.
A. Hovnanian ____ shs. ____ shs. ____ shs. ____ shs. ____ shs. ____ shs.
P. Buchanan ____ shs. ____ shs. ____ shs. ____ shs. ____ shs. ____ shs.
A. Greenbaum ____ shs. ____ shs. ____ shs. ____ shs. ____ shs. ____ shs.
T. Mason ____ shs. ____ shs. ____ shs. ____ shs. ____ shs. ____ shs.
D. McDonald ____ shs. ____ shs. ____ shs. ____ shs. ____ shs. ____ shs.
P. Reinhart ____ shs. ____ shs. ____ shs. ____ shs. ____ shs. ____ shs.
J. Schimpf ____ shs. ____ shs. ____ shs. ____ shs. ____ shs. ____ shs.
S. Weinroth ____ shs. ____ shs. ____ shs. ____ shs. ____ shs. ____ shs.
2. Ratification of
independent accountants ____ shs. ____ shs. ____ shs. ____ shs. ____ shs. ____ shs.
</TABLE>
3. In their discretion, upon other matters as may properly come before the
meeting.
Please mark, sign, date and return the proxy card promptly using the enclosed
envelope. This proxy must be signed exactly as name appears hereon. Executors,
administrators, trustees, etc., should give full title as such. If the signer
is a corporation, please sign full corporate name by duly authorized officer.
------------------------------------------------
1995
------------------------------------------------
Class B Common Stock SIGNATURE(S) DATE
