EXHIBIT 10(a)     

 

 

2012 HOVNANIAN ENTERPRISES, INC.
STOCK INCENTIVE PLAN

 

INCENTIVE STOCK OPTION AGREEMENT

(Performance Option Grant)

 

 

Participant:

 

Date of Grant:

             

Number of Class A Shares:

 

Grant Price:

               

           

Vesting Schedule: *

   

Date

 

Number of Shares

                                                   

Option Termination Date:

     

 

 

1.     Grant of the Option. For valuable consideration, receipt of which is
hereby acknowledged, Hovnanian Enterprises, Inc., a Delaware Corporation (The
"Company"), hereby grants the right and option (the "Option") to purchase, on
the terms and conditions hereinafter set forth, all or any part of an aggregate
number of Class A Shares set forth above. This grant is made subject to the
terms and conditions of the 2012 Company Stock Incentive Plan (the "Plan"),
which Plan is incorporated herein by reference and subject to amendments to the
Plan. The purchase price of the Shares subject to the Option (the "Grant Price")
shall be the price per Share set forth above. This Option is intended to qualify
as an Incentive Stock Option within the meaning of Section 422 of the Internal
Revenue Code of 1986 (the "Code") to the extent possible under Section 422 of
the Code. Any portion of the Option which is ineligible to be treated as an
Incentive Stock Option (due to Section 422(d) of the Code or otherwise) shall be
treated as a nonqualified option.

 

2.     Vesting. In the event that the performance goals set forth in the
following sentence are achieved, this Option will vest in accordance with the
schedule set forth above, subject to Section 3 of this Agreement. No portion of
the Option will vest unless the Committee determines that the Company achieved
$100 million in Pre-tax Profit in at least one of Fiscal 2014, Fiscal 2015 or
Fiscal 2016 (the earliest of such fiscal years in which the Pre-tax Profit goal
is achieved constituting the “Performance Achievement”). As used herein,
“Pre-tax Profit” is defined as earnings (losses) before income tax expense as
reflected on our audited financial statements, excluding the impact of any items
deemed by the Committee to be extraordinary items for financial reporting
purposes (e.g., losses from land impairments and losses from debt
repurchases/debt retirement such as call premiums, above par purchase prices and
related issuance costs).

 

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*  Subject to achievement of performance goals, as set forth under Section 2.

 

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3.       Exercise of Option.

 

(a)     Period of Exercise.

 

(i)     In General. The Option must be exercised before the Option Termination
Date set forth above (the "Option Termination Date"). The Participant may
exercise less than the full installment available to him or her under this
Option, but the Participant must exercise this Option in full shares of the
Common Stock of the Company. The Participant is limited to ten exercises during
the term of this Option.

 

(ii)     Termination of Employment Other Than Due to Death, Disability or
Retirement. If, prior to the Option Termination Date, the Participant ceases to
be employed by the Company or a subsidiary thereof (otherwise than by reason of
death, Disability or Retirement), the nonvested portion of the Option shall be
canceled and the vested portion of the Option, to the extent not previously
exercised, shall remain exercisable until the earlier of (a) the Option
Termination Date and (b) the sixtieth (60th) day after the date of cessation of
employment, and thereafter all Options, to the extent not previously exercised,
shall terminate together with all other rights hereunder. This Option shall be
wholly void and of no effect after the Option Termination Date. For purposes of
this Agreement, "Disability" shall mean disability within the meaning of Section
22(e)(3) of the Code, and "Retirement" shall mean termination of employment on
or after age 60, or on or after age 58 with at least 15 years of "Service" to
the Company and its Subsidiaries immediately preceding such termination of
employment. For this purpose, "Service" means the period of employment
immediately preceding Retirement, plus any prior periods of employment with the
Company and its Subsidiaries of one or more years' duration, unless they were
succeeded by a period of non-employment with the Company and its Subsidiaries of
more than three years' duration.

 

(iii)     Termination of Employment Due to Death. If, prior to the Option
Termination Date, the Participant ceases to be employed by the Company or a
subsidiary thereof due to the Participant's death, the Option, to the extent not
previously vested and exercised, shall become fully vested and exercisable, if
at all, upon the later of (x) the date the Participant ceases to be employed by
the Company or a subsidiary thereof due to the Participant's death and (y) the
date of the Performance Achievement, and the Option shall remain exercisable
(assuming it becomes initially exercisable) until the Option Termination Date,
and thereafter all Options, to the extent not previously exercised, shall
terminate together with all other rights hereunder. During such time, the Option
will be exercisable by the person or persons to whom the Participant's rights
under the Option shall pass by will or by the applicable laws of descent and
distribution. For the avoidance of doubt, upon a Performance Failure (as defined
below), the Option shall immediately terminate, regardless of whether such
Performance Failure occurs prior to or following the Participant’s termination
of employment due to death.

 

(iv)     Termination of Employment Due to Disability. If prior to the Option
Termination Date, the Participant ceases to be employed by the Company or a
subsidiary thereof by reason of Disability, the Option, to the extent not
previously vested and exercised, shall become fully vested and exercisable, if
at all, upon the later of (x) the date the Participant ceases to be employed by
the Company or a subsidiary thereof by reason of Disability and (y) the date of
the Performance Achievement, and the Option shall remain exercisable (assuming
it becomes initially exercisable) until the Option Termination Date by the
Participant or his or her designated personal representative on the
Participant's behalf, and thereafter all Options, to the extent not previously
exercised, shall terminate together with all other rights hereunder. For the
avoidance of doubt, upon a Performance Failure (as defined below), the Option
shall immediately terminate, regardless of whether such Performance Failure
occurs prior to or following the Participant’s termination of employment due to
Disability.

 

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(v)     Termination of Employment Due to Retirement. If prior to the Option
Termination Date the Participant ceases to be employed by the Company or a
subsidiary thereof due to Participant's Retirement, the Option, to the extent
not previously vested and exercised, shall become fully vested and exercisable,
if at all, upon the later of (x) the Retirement date and (y) the date of the
Performance Achievement, and the Option shall remain exercisable (assuming it
becomes initially exercisable) until the earlier of (i) the Option Termination
Date and (ii) the first anniversary of the later to occur of the Participant's
Retirement and the date of the Performance Achievement, and thereafter all
Options, to the extent not previously exercised, shall terminate together with
all other rights hereunder. Notwithstanding the preceding sentence (and without
limiting the Participant’s rights in connection with a Retirement), in the event
of the Participant’s Qualified Retirement, the Option, to the extent not
previously vested and exercised, shall become fully vested and exercisable, if
at all, upon the later of (x) the Qualified Retirement date and (y) the date of
the Performance Achievement, and the Option shall remain exercisable (assuming
it becomes initially exercisable) until the Option Termination Date and shall
then terminate together with all other rights under this Agreement. As used
herein, the term “Qualified Retirement” means the Participant’s termination of
employment with the Company and its Subsidiaries at or after reaching age 65
with at least 10 years of Service. For the avoidance of doubt, upon a
Performance Failure (as defined below), the Option shall immediately terminate,
regardless of whether such Performance Failure occurs prior to or following a
Retirement or Qualified Retirement.

 

(vi)     Failure to Achieve Performance Goals. In the event that the Committee
determines that the Company has failed to achieve its Pre-tax Profit performance
goals as forth under Section 2 on or prior to the end of Fiscal 2016 (a
“Performance Failure”), then the entire Option shall immediately terminate
together with all other rights hereunder.

 

(b)     Method of Exercise. Subject to the provisions of the Plan, this Option
may be exercised by written notice to the Company stating the number of shares
with respect to which it is being exercised and accompanied by payment of the
Option Price (a) by certified or bank cashier's check payable to the order of
the Company in New York Clearing House Funds, (b) by surrender or delivery to
the Company of shares of its Common Stock that have been held by the Participant
for at least six months (or such other period of time as may be determined by
the Board of Directors), or (c) in any other form acceptable to the Company
together with payment or arrangement for payment of any federal income or other
tax required to be withheld by the Company. As soon as practical after receipt
of such notice and payment, the Company, shall, without transfer or issue tax or
other incidental expense to the Participant, deliver to the Participant at the
offices of the Company at 110 West Front Street, Red Bank, New Jersey, or such
other place as may be mutually acceptable, or, at the election of the Company,
by first-class insured mail addressed to the Participant at his or her address
shown in the employment records of the Company or at the location at which he or
she is employed by the Company or a subsidiary, a certificate or certificates
for previously unissued shares or reacquired shares of its Common Stock as the
Company may elect.

 

(c)     Delivery.

 

(i)     The Company may postpone the time of delivery of certificates for shares
of its Common Stock for such additional time as the Company shall deem necessary
or desirable to enable it to comply with the listing requirements of any
securities exchange upon which the Common Stock of the Company may be listed, or
the requirements of the Securities Act of 1933 or the Securities Exchange Act of
1934 or any Rules or Regulations of the Securities and Exchange Commission
promulgates thereunder or the requirements of applicable state laws relating to
authorization, issuance or sale of securities.

 

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(ii)     If the Participant fails to accept delivery of the shares of Common
Stock of the Company upon tender of delivery thereof, his or her right to
exercise this Option with respect to such undelivered shares may be terminated
by the Company.

 

4.     Notification of Disposition. Participant agrees to notify the Company in
writing, within thirty days, of any disposition (whether by sale, exchange,
gift, or otherwise) of shares of Common Stock acquired by the Participant
pursuant to the exercise of this Option within one year of the transfer of such
shares to the Participant.

 

5.     Adjustments Upon Certain Events. Subject to the terms of the Plan, in the
event of any change in the outstanding Shares by reason of any Share dividend or
split, reorganization, recapitalization, merger, consolidation, amalgamation,
spin-off or combination transaction or exchange of Shares or other similar
events (collectively, an "Adjustment Event"), the Committee shall, in its sole
discretion, make an appropriate and equitable adjustment in the number of Shares
subject to this Agreement to reflect such Adjustment Event. Any such adjustment
made by the Committee shall be final and binding upon the Participant, the
Company and all other interested persons.

 

6.     No Right to Continued Employment. Neither the Plan nor this Agreement
shall be construed as giving the Participant the right to be retained in the
employ of, or in any consulting relationship to, the Company or any Affiliate.
Further, the Company or an Affiliate may at any time dismiss the Participant,
free from any liability or any claim under the Plan or this Agreement, except as
otherwise expressly provided herein.

 

7.     No Acquired Rights. In participating in the Plan, the Participant
acknowledges and accepts that the Board has the power to amend or terminate the
Plan, to the extent permitted thereunder, at any time and that the opportunity
given to the Participant to participate in the Plan is entirely at the
discretion of the Committee and does not obligate the Company or any of its
Affiliates to offer such participation in the future (whether on the same or
different terms). The Participant further acknowledges and accepts that such
Participant's participation in the Plan is not to be considered part of any
normal or expected compensation and that the termination of the Participant's
employment under any circumstances whatsoever will give the Participant no claim
or right of action against the Company or its Affiliates in respect of any loss
of rights under this Agreement or the Plan that may arise as a result of such
termination of employment.

 

8.     No Rights of a Shareholder. The Participant shall not have any rights or
privileges as a shareholder of the Company until the Shares in question have
been registered in the Company's register of shareholders.

 

9.     Legend on Certificates. Any Shares issued or transferred to the
Participant pursuant to Section 3 of this Agreement shall be subject to such
stop transfer orders and other restrictions as the Committee may deem advisable
under the Plan or the rules, regulations, and other requirements of the
Securities and Exchange Commission, any stock exchange upon which such Shares
are listed, and any applicable Federal or state laws or relevant securities laws
of the jurisdiction of the domicile of the Participant, and the Committee may
cause a legend or legends to be put on any certificates representing such Shares
to make appropriate reference to such restrictions.

 

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10.     Transferability. The Option may not be assigned, alienated, pledged,
attached, sold or otherwise transferred or encumbered by the Participant
otherwise than by will or by the laws of descent and distribution. Any purported
assignment, alienation, pledge, attachment, sale, transfer or encumbrance not
permitted by this Section 10 shall be void and unenforceable against the Company
or any Affiliate.

 

11.     Withholding. The Participant may be required to pay to the Company or
any Affiliate and the Company or any Affiliate shall have the right and is
hereby authorized to withhold from any transfer due under this Agreement or
under the Plan or from any compensation or other amount owing to the
Participant, applicable withholding taxes with respect to any transfer under
this Agreement or under the Plan and to take such action as may be necessary in
the opinion of the Company to satisfy all obligations for the payment of such
taxes. Notwithstanding the foregoing, if the Participant's employment with the
Company terminates prior to the transfer of all of the Shares under this
Agreement, the payment of any applicable withholding taxes with respect to any
further transfer of Shares under this Agreement or the Plan shall be made solely
through the sale of Shares equal to the statutory minimum withholding liability.

 

12.     Non-Solicitation Covenants.

 

(a)     The Participant acknowledges and agrees that, during the Participant's
employment with the Company and its Affiliates and upon the Participant's
termination of Employment with the Company and its Affiliates for any reason,
for a period commencing on the termination of such Employment and ending on the
second anniversary of such termination, the Participant shall not, whether on
Participant's own behalf or on behalf of or in conjunction with any person,
company, business entity or other organization whatsoever, directly or
indirectly:

 

(i)       solicit any employee of the Company or its Affiliates with whom the
Participant had any contact during the last two years of the Participant's
employment, or who worked in the same business segment or division as the
Participant during that period to terminate employment with the Company or its
Affiliates;

 

(ii)      solicit the employment or services of, or hire, any such employee
whose employment with the Company or its Affiliates terminated coincident with,
or within twelve (12) months prior to or after the termination of Participant's
employment with the Company and its Affiliates;

 

(iii)     directly or indirectly, solicit to cease to work with the Company or
its Affiliates any consultant then under contract with the Company or its
Affiliates.

 

(b)     It is expressly understood and agreed that although the Participant and
the Company consider the restrictions contained in this Section 12 to be
reasonable, if a final judicial determination is made by a court of competent
jurisdiction that the time or any other restriction contained in this Agreement
is an unenforceable restriction against the Participant, the provisions of this
Agreement shall not be rendered void but shall be deemed amended to apply as to
such maximum time and territory and to such maximum extent as such court may
judicially determine or indicate to be enforceable. Alternatively, if any court
of competent jurisdiction finds that any restriction contained in this Agreement
is unenforceable, and such restriction cannot be amended so as to make it
enforceable, such finding shall not affect the enforceability of any of the
other restrictions contained herein.

 

13.     Specific Performance. The Participant acknowledges and agrees that the
Company's remedies at law for a breach or threatened breach of any of the
provisions of Section 12 would be inadequate and the Company would suffer
irreparable damages as a result of such breach or threatened breach. In
recognition of this fact, the Participant agrees that, in the event of such a
breach or threatened breach, in addition to any remedies at law, the Company,
without posting any bond, shall be entitled to cease making any payments or
providing any benefit otherwise required by this Agreement and obtain equitable
relief in the form of specific performance, temporary restraining order,
temporary or permanent injunction or any other equitable remedy which may then
be available.

 

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14.     Choice of Law. THE INTERPRETATION, PERFORMANCE AND ENFORCEMENT OF THIS
AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW.

 

15.     Option Subject to Plan. By entering into this Agreement, the Participant
agrees and acknowledges that the Participant has received and read a copy of the
Plan. The Option is subject to the Plan. In the event of a conflict between any
term or provision contained herein and a term or provision of the Plan, the
applicable terms and provisions of the Plan will govern and prevail.

 

16.     Signature in Counterparts. This Agreement may be signed in counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement.

 

 

HOVNANIAN ENTERPRISES, INC.

         

By:

     

Stephen D. Weinroth, Chair
Compensation Committee

       

PARTICIPANT

             

By:

       

 

 

 

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