HOVNANIAN ENTERPRISES,
INC.
SENIOR EXECUTIVE SHORT-TERM
INCENTIVE PLAN
(AS AMENDED AND
RESTATED)
The purpose of the Senior Executive
Short-Term Incentive Plan (the “Plan”) is to advance
the interests of Hovnanian Enterprises, Inc. (the
“Company”), and its shareholders by providing
incentives in the form of periodic bonus awards
(“Awards”) to certain senior executive employees of the
Company and its affiliates, thereby motivating such executives to
attain corporate performance goals articulated under the
Plan.
(a) The
Plan shall be administered by two or more individuals who are each
“non-employee directors” within the meaning of Rule
16b-3 under the Securities Exchange Act of 1934, as amended, or any
successor thereto, “outside directors” as defined under
Section 162(m) of the Internal Revenue Code of 1986, as amended
(the “Code”), and “independent directors”
within the meaning of the applicable rules, if any, of any national
securities exchange on which shares of common stock of the Company
are listed or admitted to trading, unless otherwise determined by
the Company's Board of Directors to act as the committee (the
“Committee”).
(b) The
Committee shall have the exclusive authority to select the senior
executives to be granted Awards under the Plan, to determine the
size and terms of the Award (subject to the limitations imposed on
Awards in Section 4 below), to modify the terms of any of the Award
that has been granted (except for any modification that would
increase the amount of the Award payable to an executive), to
determine the time when Awards will be made and the performance
period to which they relate, to establish performance objectives in
respect of such performance periods, and to certify that such
performance objectives were attained; provided, however, that any
such action shall be consistent with the applicable provisions of
Section 162(m) of the Code. The Committee is authorized to
interpret the plan, to establish, amend and rescind any rules and
regulations relating to the Plan, and to make any other
determinations that it deems necessary or desirable for the
administration of the Plan. The Committee may correct any defect or
supply any omission or reconcile any inconsistency in the Plan in
the manner and to the extent the Committee deems necessary or
desirable. Any decision of the Committee in the interpretation and
administration of the Plan, as described herein, shall be final,
conclusive and binding on all parties concerned.
Awards may be granted to senior
executives of the Company and its affiliates who are “covered
employees”, as defined in Section 162(m) of the Code, or who
the Committee anticipates may become covered employees. An
Executive to whom an Award is granted shall be a
“Participant”.
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4.
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AWARDS UNDER THE PLAN.
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(a) A
Participant's Award shall be determined based on the attainment of
written performance goals approved by the Committee in respect of a
specified period of service (a “performance period”),
which is established by the Committee (i) while the outcome for
that performance period is substantially uncertain and (ii) not
more than 90 days after the commencement of that performance period
or, if less, the number of days which is equal to 25 percent of
that performance period. The performance goals shall be based upon
one or more of the following criteria: (i) earnings before or after
taxes (including earnings before interest, taxes, depreciation and
amortization); (ii) net income; (iii) operating income; (iv)
earnings per share; (v) book value per share; (vi) return on
stockholders' equity; (vii) expense management; (viii) return on
investment before or after the cost of capital; (ix) improvements
in capital structure; (x) profitability of an identifiable business
unit or product; (xi) maintenance or improvement of profit margins;
(xii) stock price; (xiii) market share; (xiv) revenues or sales;
(xv) costs; (xvi) cash flow; (xvii) working capital; (xviii)
changes in net assets (whether or not multiplied by a constant
percentage intended to represent the cost of capital); and (xix)
return on assets. The foregoing criteria may relate to the Company,
one or more of its affiliates or one or more of its divisions or
units, or any combination of the foregoing, and may be applied on
an absolute basis and/or be relative to one or more peer group
companies or other indices, or any combination thereof, all as the
Committee shall determine. In addition, to the degree consistent
with Section 162(m) of the Code, the performance goals may be
calculated without regard to extraordinary items. In any event, the
performance goals shall be based on an objective formula or
standard. The maximum amount of an Award to any Participant with
respect to a fiscal year of the Company shall be to the greater of
(x) $15,000,000 and (y) 2.5 percent (2.5%) of the Company's income
before income taxes, as reported in the Company's audited
consolidated financial statements for the year in respect of which
the Award is to be payable or distributed, as
applicable.
(b) The
Committee shall determine whether, with respect to a performance
period, the specified performance goals have been met with respect
to any
