NON-EMPLOYEE DIRECTOR COMPENSATION
The Committee annually reviews the compensation program for
Directors who are not employees of the Company and periodically engages a consultant to conduct independent, comprehensive reviews of non-employee director compensation, including a review of director compensation for the Peer Group. After
consideration of the compensation philosophy, the historical and marketplace compensation values and practices for director compensation, the anticipated director time commitments and value-added activities for fiscal 2023 and the views of the
Committee’s outside compensation consultant, the Committee recommended, and the Board of Directors approved, the continuation for fiscal 2023 of the annual retainers, equity awards, meeting fees and charitable contributions at the same values as
fiscal 2022.
Below is a summary of non-employee Director compensation for fiscal 2023:
Annual board cash retainer of $50,000 with an additional cash retainer of $27,500 for each
committee on which a Director serves and an additional annual cash retainer of $50,000 for the Lead Director. Committee retainers are subject to proration for partial years of service.
Annual RSU award valued at $75,000 for board service plus an additional $15,000 for each
committee on which a Director serves as of the grant date, in each case, based on the closing stock price on the grant date, after the application of the illiquidity discount for the mandatory two-year post-vesting delayed delivery period.
Fees related to meetings of $3,000 with respect to board meetings held in person, $2,000 with
respect to telephonic board meetings, $5,000 with respect to committee meetings held in person and $2,500 with respect to telephonic committee meetings.
$15,000 annual charitable donation made by the Company in the name of each Director to the
charities of the Director’s choosing.
For additional information related to non-employee Director compensation, please
also refer to the “Director Compensation for Fiscal 2023” table below.
In conjunction with promoting high ethical standards for the distribution of
equity-based incentives, the Committee has established the second Friday in June as the date of the annual RSU grants for all non-employee Directors of the Company (other than newly elected Directors), which is the same as the PSU, RSU, MSU and
option grant date for all employees (other than newly hired or promoted employees). The Company’s practice of setting “fixed” equity award grant dates is designed to reduce the possibility that the Company could grant stock awards prior to the
release of material, non-public information that is likely to result in an increase in its stock price or delay the grant of stock awards until after the release of material, non-public information that is likely to result in a decrease in the
Company’s stock price.
The Board of Directors of the Company has adopted stock ownership guidelines,
which set forth recommended minimum amounts of stock ownership, directly or beneficially, for the Company’s non-employee Directors. To further align the interests of our Board with our shareholders, in October 2020 the Board increased the
ownership guideline for non-employee Directors from three times to five times the total value of their annual Board retainer. Specifically, the guidelines provide that non-employee Directors are requested to achieve and maintain stock ownership
amounts that equal five times the total value of their annual retainer exclusive of any committee retainers (which represents $250,000 in total) within five years after they become subject to the guidelines upon their election to the Board. If a
non-employee Director fails to achieve the required minimum ownership during the applicable five-year transition period, that person shall thereafter be required to retain 100% of shares of the Company’s common stock earned, net of taxes, until
the targeted ownership level is attained. Under the policy, once the stock ownership guidelines are met, they are deemed satisfied for subsequent annual review periods, regardless of decreases in the Company’s stock price on the NYSE. The
Corporate Governance and Nominating Committee reviews adherence to the Company’s stock ownership guidelines on an annual basis. The Company believes these ownership guidelines further enhance the Company’s commitment to aligning the interests of
non-employee Directors with those of its stockholders. All non-employee Directors are currently in compliance with these stock ownership guidelines.
The following table summarizes the compensation of the Company’s non-employee
Directors related to their service in fiscal 2023.
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Change in
Pension
Value and Nonqualified
Deferred
Compensation
Earnings
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Fees Earned or Paid in Cash
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|
Stock Awards |
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|
Option Awards |
|
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Non-Equity
Incentive Plan Compensation |
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All Other Compensation |
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| Name |
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Total |
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($) (1) |
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($) (2) |
|
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($) |
|
|
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($) |
|
|
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($) |
|
|
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($) (3) |
|
|
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($) |
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| Robert B. Coutts |
|
|
176,500
|
|
|
|
105,020
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15,000 |
|
|
|
296,520 |
|
| Miriam Hernandez-Kakol |
|
|
174,000
|
|
|
|
105,020 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15,000 |
|
|
|
294,020 |
|
| Edward A. Kangas |
|
|
274,000
|
|
|
|
120,033 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15,000 |
|
|
|
409,033 |
|
| Joseph A. Marengi |
|
|
224,000
|
|
|
|
120,033 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15,000 |
|
|
|
359,033 |
|
| Vincent Pagano |
|
|
176,500
|
|
|
|
105,020 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15,000 |
|
|
|
296,520 |
|
| Robin Stone Sellers |
|
|
176,500
|
|
|
|
105,020 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15,000 |
|
|
|
296,520 |
|
(1)
“Fees Earned or Paid in Cash” Column. The amounts in
this column represent the combined value of the fiscal 2023 annual cash retainers and cash fees relating to meetings. For a full description of the annual retainers, meeting fees and share awards to non-employee Directors, see the discussion
preceding this table.
(2)
“Stock Awards” Column. The amounts in these
columns represent the grant date fair value of RSUs granted in fiscal 2023 computed in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts are set forth in footnote (15) to the Company’s audited financial
statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2023. There is a mandatory two-year post-vesting delayed delivery for the RSUs granted in fiscal 2023. RSUs vest on the first anniversary of
the date of grant, but if the non-employee Director ceases to be a member of the Board of Directors due to death, disability or qualified retirement, the RSUs, to the extent not previously vested and distributed, would become fully vested and
deliverable within 60 days after the delivery date. The delivery date is the date that is the earlier of (1) the second anniversary of the vesting date or (2) the second anniversary of the date of the participant’s qualified termination.
“Retirement” is defined as termination of a member of the Board of Directors on or after age 60 or on or after age 58 with at least 15 years of service to the Company immediately preceding such termination. All RSU grants were made in the
form of rights to receive Class A Common Stock. Currently, each non-employee Director qualifies for accelerated vesting on the basis of his or her eligibility for retirement.
(3)
“All Other Compensation” Column. Represents annual
charitable gift program donations made by the Company in the name of each Director.
THE AUDIT COMMITTEE
Membership, Independence and Qualifications
During the fiscal year ended October 31, 2023, Mr.
Kangas, as Chairman, Mr. Coutts, Ms. Hernandez-Kakol, Mr. Marengi, Mr. Pagano and Ms. Sellers were the members of the Audit Committee. The Company’s Board of Directors has determined that each member of the Audit Committee is independent as
required by both the rules of the NYSE and regulations of the SEC and has met the financial literacy requirements of the NYSE. The Company’s Board of Directors has also determined that Mr. Kangas is an “audit committee financial expert” in
accordance with SEC regulations. In determining that Mr. Kangas is an “audit committee financial expert,” the Board of Directors considered his significant experience, expertise and background with regard to accounting matters, including the
broad perspective brought by his experience advising clients in many diverse industries.
Responsibilities of the Audit Committee and Charter
The Audit Committee oversees the Company’s
financial reporting process on behalf of the Board of Directors and is governed by its Charter, which is available at www.khov.com under “Investor Relations”, “Corporate Governance.”
Policies and Procedures Established by Audit Committee
In accordance with SEC regulations, the Audit
Committee has established procedures for the appointment, compensation, retention and oversight of the independent registered public accounting firm engaged to prepare or issue an audit report or to provide other audit, review or attest services.
The Company’s independent registered public accounting firm reports directly to the Audit Committee, and the Audit Committee is responsible for the resolution of any disagreements between such firm and management regarding financial reporting.
The Audit Committee has established whistle blower
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 concerns regarding
questionable accounting or auditing matters, as required by Section 301 of the Sarbanes-Oxley Act of 2002 and Rule 10A-3 of the Exchange Act. These procedures are discussed in the Company’s Code of Ethics, which is available at www.khov.com under
“Investor Relations”, “Corporate Governance.”
Audit and Non-Audit Services Pre-Approval Policy
The Audit Committee has also established
procedures for the pre-approval of audit and permitted non-audit services provided by an independent registered public accounting firm. The Company’s “Audit and Non-Audit Services Pre-Approval Policy” (“Pre-Approval Policy”) was most recently
reviewed and approved by the Audit Committee at its meeting held on September 28, 2023.
As set forth in the Pre-Approval Policy, audit
services require specific approval by the Audit Committee, except for certain services that have received general pre-approval by the Audit Committee.
In accordance with the Pre-Approval Policy, the
Audit Committee annually reviews and pre-approves the services that may be provided by the independent registered public accounting firm without obtaining specific pre-approval from the Audit Committee. Prior to establishing the list of
pre-approved services, the Audit Committee determines if the Company’s independent registered public accounting firm is an effective provider of such services. The Audit Committee may revise the list of general pre-approved services from time to
time, based on subsequent determinations. For fiscal year 2023, there were four categories of services that received general pre-approval by the Audit Committee: Audit, Audit-Related, Tax and All Other Services, and the pre-approved dollar amount
for such services may not exceed $100,000 per engagement.
The Audit Committee may delegate to one or more of
its members the authority to approve in advance all significant audit or permitted non-audit services to be provided by the independent registered public accounting firm, so long as decisions are presented to the full Audit Committee at its next
scheduled meeting.
All of the services covered under the captions
“Audit Fees,” “Audit-Related Fees,” “Tax Fees” and “All Other Fees” below were pre-approved by the Audit Committee.
THE AUDIT COMMITTEE REPORT
Management has the primary responsibility for the financial statements and the
reporting process, including the systems of internal controls over financial reporting. In fulfilling its oversight responsibilities, the Audit Committee has reviewed and discussed the audited financial statements for the fiscal year ended
October 31, 2023 with management. This review included a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements.
The Audit Committee has reviewed and discussed with the independent registered
public accounting firm, which is responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles:
The overall scope and plans for such accounting firm’s audits of the Company;
Such accounting firm’s judgments as to the quality, not just the acceptability, of the
Company’s accounting principles;
Such accounting firm’s independence from management and the Company, including matters in the
written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Accounting Oversight Board (the “PCAOB”), concerning independence and received by the Company; and
Such other matters as are required to be discussed with the Audit Committee under generally accepted auditing
standards and under the applicable requirements of the PCAOB, rules of the SEC and other applicable regulations.
The Audit Committee, under the Audit Committee Charter, reviews with management the
Company’s annual audited financial statements and quarterly financial statements prior to their filing with the SEC. The Audit Committee, in reliance on the reviews and discussions referred to above, recommended to the Board of Directors that the
audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2023.
AUDIT COMMITTEE
Edward A. Kangas, Chair
Robert B. Coutts
Miriam Hernandez-Kakol
Joseph A. Marengi
Vincent Pagano Jr.
Robin Stone Sellers
FEES PAID TO PRINCIPAL ACCOUNTANT
Audit Fees
The aggregate fees billed by Deloitte & Touche LLP in each of fiscal 2023 and 2022 for professional services rendered
for the audit of our consolidated financial statements included in our Form 10-K for the years ended October 31, 2023 and 2022, for the reviews of the unaudited condensed consolidated financial statements included in our Quarterly Reports on Form
10-Q for the quarterly periods during fiscal 2023 and 2022, the audit of the effectiveness of the Company’s internal controls over financial reporting as of October 31, 2023 and 2022, and for services normally provided by our independent registered
public accounting firm in connection with statutory or regulatory filings or engagements, including comfort and consent letters in connection with SEC filings and financing transactions, were $1,860,000 and $1,910,000, respectively.
Audit-Related Fees
There were no audit-related fees billed by
Deloitte & Touche LLP in fiscal 2023 or 2022.
Tax Fees
The aggregate fees billed by Deloitte & Touche LLP in fiscal 2023 for professional services rendered for tax
compliance, tax advice or tax planning were $3,000. There were no fees billed for professional services rendered for tax compliance, tax advice or tax planning provided by Deloitte & Touche LLP in fiscal 2022.
All Other Fees
There were no fees billed for products and
services provided by Deloitte & Touche LLP in either fiscal 2023 or 2022 other than the services described above.
PRINCIPAL ACCOUNTANT INDEPENDENCE
The Audit Committee has determined that the provision of all non-audit services
performed by Deloitte & Touche LLP were compatible with maintaining the independence of such firm.
CORPORATE GOVERNANCE
The Corporate Governance and Nominating Committee is primarily responsible for
reviewing the Company’s Governance Guidelines and further developing such guidelines and other policies and procedures that enhance the Company’s corporate governance.
In accordance with promoting strong corporate governance, the Company has a Code of Ethics
that applies to its principal executive officer, principal financial officer, controller and all other associates of the Company, including its Directors and other officers.
The Company makes available to the public various corporate governance-related
information on its public website (www.khov.com) under “Investor Relations”, “Corporate Governance” and to any shareholder who requests such information in writing. Information on the website includes the Company’s Code of Ethics, Governance
Guidelines (including the Related Person Transaction Policy) and Charters of the Audit Committee, the Compensation Committee and the Corporate Governance and Nominating Committee.
Shareholders, associates of the Company and other interested parties may
communicate directly with the Board of Directors or the non-employee directors specifically by corresponding to the address below and stating to which group the correspondence is addressed. Correspondence will be discussed at the next scheduled
meeting of the Board of Directors or non-Employee directors, as applicable, or as indicated by the urgency of the matter. The office of the Corporate Secretary reviews correspondence received and will filter advertisements, solicitations, spam
and other such items not related to a director’s duties and responsibilities. All other relevant correspondence addressed to a director will be forwarded to that director, or if none is specified, to the Chair of the Board.
Attn: Board of Directors or Non-Employee Directors of Hovnanian Enterprises, Inc.
c/o Mr. Edward A. Kangas, Lead Independent Director & Chairman of the Audit Committee
Privileged & Confidential
Hovnanian Enterprises, Inc.
90 Matawan Road
Fifth Floor
Matawan, N.J. 07747
The Company’s independent Directors meet without management after each regularly
scheduled meeting of the Board of Directors. The Lead Independent Director presides at these executive sessions by the Directors in attendance. Following the 2024 Annual Meeting, assuming the election of all the director nominees, the independent
members of the Board are: Mr. Coutts, Ms. Hernandez-Kakol, Mr. Kangas, Mr. Marengi, Mr. Pagano and Ms. Sellers. All such Directors, are “independent” in accordance with NYSE rules and as defined under the Company’s Restated Certificate of
Incorporation.
In addition, associates of the Company may anonymously report concerns or
complaints 24/7 via the K. Hovnanian Corporate Governance Hotline that is monitored by an independent third-party company or by following the procedure discussed in the Company’s Code of Ethics.
BOARD OVERSIGHT OF RISK MANAGEMENT
The Company is exposed to a number of risks and
undertakes at least annually an Enterprise Risk Management review to identify and evaluate these risks and to develop plans to manage them effectively. The Company’s Chief Financial Officer and Treasurer, Mr. O’Connor, is directly responsible for
the Company’s Enterprise Risk Management function and reports both to the President, Chief Executive Officer and Chairman and to the Audit Committee in this capacity. In fulfilling his risk management responsibilities, the CFO works closely with
members of senior management and others. Also, from time to time, the Board of Directors discusses trends in the real estate industry with outside experts as part of its oversight responsibility.
On behalf of the Board of Directors, the Audit
Committee, which includes our Lead Independent Director, Mr. Kangas, plays a key role in the oversight of the Company’s Enterprise Risk Management function. In particular, Mr. Kangas leverages his extensive experience on other public company
boards and from previously leading Deloitte as its Global Chairman and CEO as part of the Audit Committee’s assessment of risks facing the Company. In that regard, the CFO meets with the Audit Committee at least four times a year to discuss the
short-term and long-term risks facing the Company, highlighting any new risks that may have arisen since they last met. The Audit Committee also reports to the Board of Directors on a regular basis to apprise them of their discussions with the
CFO regarding the Company’s Enterprise Risk Management efforts. With respect to cybersecurity risk oversight, our Board of Directors has established a Cybersecurity Subcommittee of the Corporate Governance and Nominating Committee that receives
updates at least three times a year from our information technology team to assess the primary cybersecurity risks facing the Company. The Company engages outside experts to review and advise on cybersecurity preparedness and those expert reports
are shared with the subcommittee which advice is then relayed to the Board of Directors. The subcommittee also receives updates on the measures the Company is taking to mitigate such risks. These measures include required annual training and
monthly phishing testing for all associates as well as ongoing educational communications throughout the year. Additional specialized training is conducted multiple times per year for our cybersecurity and infrastructure teams, including
attendance at cybersecurity conferences and training seminars, breach simulation exercises and personal accreditation training. In addition to such updates, our Board of Directors and Audit Committee receive updates from management as to changes
to the Company’s cybersecurity risk profile or significant newly identified risks.
In fiscal 2023, we systematically reviewed all of our
incentive compensation programs for potential risk areas as well as the key enterprise risks facing the Company and concluded that our compensation programs are not reasonably likely to have a material adverse effect on the Company.
By design, the Company’s compensation program for
executive officers does not incentivize excessive risk-taking. Our base salary component of compensation does not encourage risk-taking because it is a fixed amount. The remaining elements of executive officer compensation have the following
risk-limiting characteristics:
We generally do not provide guaranteed bonuses, nor have we awarded
excessively large equity grants with unlimited upside but no downside risk;
The elements of our compensation program are balanced between long-term
and short-term, fixed and variable, and cash and equity awards;
We use a variety of performance measures in our short-term and long-term
incentive plans;
We generally do not provide lucrative severance packages or any defined
benefit pension plans;
A large portion of our compensation program is tied to long-term and
sustained Company performance, our LTIP awards are earned after a multi-year performance period and certain of our LTIP and all of our PSU awards are subject to time-based vesting conditions that extend beyond the performance periods and are
further subject to a mandatory two-year post-vesting delayed delivery;
Our incentive plans are not tied to formulas that could focus executives
on specific short-term outcomes to the detriment of long-term results;
The Compensation Committee reserves the right to apply negative
discretion to bonus amounts calculated under the bonus formulas; and
Our CEO, CFO and COO (if any) are subject to our stock ownership and
holding guidelines, discussed on pages 139 and 140.
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ENVIRONMENTAL,
SOCIAL &
GOVERNANCE (ESG)
PRACTICES
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OUR COMMITMENT
Hovnanian has a long history of corporate
responsibility, which is deeply rooted in our heritage. We are a company that is built on dedication and purpose. At our communities and offices, this means attracting the best talent and creating the best experience for our homebuyers.
Throughout the 13 states where we operate, we strive to be good neighbors and are committed to practices that have a positive impact. We believe that value creation and a commitment to ESG practices are complementary goals.
Having succeeded as a company for more than 60 years,
we understand that a clear vision of what you stand for is crucial for lasting success. In 1959, our founder, Kevork S. Hovnanian established our Company on a strong value system, long before the term “corporate responsibility” was part of the
conversation within board rooms.
Our commitment to ESG and corporate responsibility
more broadly is evidenced by our Board’s oversight of ESG matters. In particular, our Board has tasked our Corporate Governance and Nominating Committee with responsibility for our ESG oversight. In this capacity, the Corporate Governance and
Nominating Committee reviews and considers the Company’s policies and practices relating to environmental stewardship, corporate social responsibility and other public policy issues significant to the Company.
In February 2024 the Company will publish its
third ESG Report. The purpose of our annual ESG Report is to communicate to all our stakeholders our efforts regarding corporate sustainability. Our ESG Report includes but is not limited to, information pertaining to our commitment to adhering
to sound environmental principles and practices, our efforts to promote an inclusive and diverse work environment, ensuring proper safety protocols and policies and continuing our strong corporate governance practices.
Below are highlights from the Company’s
2023 ESG Report:
With a focus to design and construct our communities in an
environmentally sound and responsible manner, we:
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Received the 2023 Zero Energy Ready Champion Award as the homebuilder in the United States with the most DOE Zero
Energy Ready homes built in the past year.
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Received a 2023 Housing Innovation Award for The Cove at Asbury Park
which is a townhome community located in Asbury Park, NJ.
The Home Energy Rating System (HERS) Index
Received two United States Department of Energy (DOE) Housing
Innovation Awards for the second consecutive year. Since 2003, the DOE Housing Innovation Awards have honored the very best in innovation on the path to zero energy ready homes by recognizing energy conscious and forward-thinking builders
delivering American homebuyers more efficient homes.
Diversity and inclusion initiatives implemented or enhanced in fiscal
2023
The Company has both a Diversity & Inclusion Task Force as well
as a Diversity & Inclusion Executive Committee. Our CEO leads the Diversity & Inclusion Executive Committee.
Our ‘Diversity Made Simple’ training was established in 2020. In
fiscal 2023, this training is now mandatory for all associates on an annual basis.
For associates in managerial positions, which is 21.9% of all
associates, they have an additional, more extensive mandatory training concerning, ‘Unconscious Bias’.
Hovnanian is a founding member of Building Talent Foundation (BTF)
whose mission is to advance the education, training, and career progression of young people and people from underrepresented groups in residential construction. In fiscal 2022, we extended our partnership and financial commitment for another
three years and we actively utilize BTFs Residential Construction Careers Platform JobsToBuild.
We have a diverse associate base comprised of 25.6% non-white
associates. Additionally, 44.3% of our associates are women, and women represent 38.9% of all associates in manager and above positions.
We maintain a repository of nearly 500 training modules/courses to
facilitate these learning sessions in both in-person and virtual settings, including mandatory diversity, preventing workplace harassment, cybersecurity and safety training courses.
To promote an inclusive work environment, our leadership team began
hosting quarterly Town Hall events over the past two years. These live events have become a staple within the organization and provide all associates with an opportunity to hear about the Company’s progress and strategic initiatives, and to ask
questions directly of our CEO, CFO and Group Presidents. We encourage associates to provide candid feedback and ask questions directly or anonymously, if preferred. Our leadership team is committed to answering every question received, either
during the Town Hall or posted after the event on our Company intranet. With associates working across 13 states and a variety of functions, our Town Halls play a crucial role in ensuring a shared sense of purpose and belonging at the Company.
In fiscal 2023, the Company has introduced two additional channels for engaging associates companywide, Lunch & Learns and Coffee Chats with the goal of enhancing two-way communication within the Company.
The Company facilitates the involvement of Hovnanian associates with
a variety of charitable causes, community outreach programs and other philanthropic activities in local markets.
The ESG Report is available on the
Company’s website at www.khov.com under “Investor Relations”. The information contained on or accessible through the Hovnanian website, including the Company’s ESG Report, is not considered part of this proxy statement.
LEADERSHIP STRUCTURE
From 1997 to 2009, the Company had
separate individuals serving as Chairman of the Board and as Chief Executive Officer. This structure reflected the continuing strong leadership, energy and passion brought to the Board of Directors by our founder, Mr. Kevork Hovnanian, and the
day-to-day management direction of the Company under Mr. Ara Hovnanian as President and CEO. Following the death of Mr. K. Hovnanian in September 2009, the Board of Directors appointed Mr. A. Hovnanian to the additional position of Chairman,
believing that his many decades of service to the Company, vast industry experience and close relationship with our founder uniquely qualified him for this role. The Board of Directors believes that combining these positions under Mr. A.
Hovnanian’s leadership has enabled him to carry on the tradition of a strong leader that has always marked this family-run company and to successfully navigate the Company. In the view of the Board of Directors, this leadership structure also
enables the Board of Directors to better fulfill its risk oversight responsibilities, as described above under “Oversight of Risk Management.”
On June 17, 2021, the Board of Directors designated
Mr. Kangas as Lead Independent Director. In his position as Lead Independent Director, Mr. Kangas serves as liaison between the Chairman and the Independent Directors; consults on meeting agenda items for the Board; has the ability to coordinate
meetings of the Independent Directors; if requested by major shareholders, would make himself available for consultation and direct communication; presides at all meetings of the Board at which the Chair is not present, including executive
sessions of the Independent Directors; and serves on the Strategy Committee. Mr. Kangas is also able to provide input on the design of the Board and is involved in the Board’s oversight of risks facing the Company as chair of the Audit Committee.
See “Board Oversight of Risk Management” above. As Lead Independent Director, Mr. Kangas serves as the Director to whom correspondence may be directed on behalf of both the Board of Directors and the non-employee Directors, as described above
under “Corporate Governance” beginning on page 180.
CERTAIN RELATIONSHIPS & RELATED TRANSACTIONS
The Board of Directors has adopted a written Related
Person Transaction Policy (the “Related Person Transaction Policy”) to assist it in reviewing, approving and ratifying related person transactions and to assist the Company in the preparation of related disclosures required by the SEC. This
Related Person Transaction Policy supplements the Company’s other policies that may apply to transactions with related persons, such as the Company’s Guidelines and Code of Ethics.
The Related Person Transaction Policy provides that
all Related Person Transactions (as defined in the Related Person Transaction Policy) covered by the Related Person Transaction Policy and involving a director, director nominee, executive officer or greater than 5% shareholder or an immediate
family member of any such person are prohibited, unless approved or ratified by the independent and disinterested members of the Board of Directors or the Corporate Governance and Nominating Committee. The Company’s employees, directors, director
nominees, executive officers and their immediate family members are required to provide prompt and detailed notice of any purported Related Person Transaction to the Company’s Corporate Counsel or Chief Financial Officer, who in turn must
promptly forward such notice and information to the Chairperson of the Board of Directors or the Corporate Governance and Nominating Committee and will advise the Corporate Governance and Nominating Committee or disinterested directors as to
whether the Related Person Transaction will be required to be disclosed in applicable regulatory filings. The Company’s Corporate Counsel will document all non-reportable and reportable Related Person Transactions.
In reviewing Related Person Transactions
for approval or ratification, the Corporate Governance and Nominating Committee or disinterested directors will consider the relevant facts and circumstances, including, without limitation:
the commercial reasonableness of the terms of the transaction;
the benefit and perceived benefit, or lack thereof, to the Company;
opportunity costs of alternate transactions;
the materiality and character of the Company’s and related person’s
direct or indirect interest and the actual or apparent conflict of interest of the Company and related person;
whether the proposed transaction would likely impair the judgment of
the related person to act in the best interest of the Company;
whether the proposed transaction includes any potential reputational
risk issues that may arise as a result of, or in connection with, the proposed transaction; and
with respect to a non-employee director or nominee, whether the
transaction would compromise the director’s
(1) independence under the NYSE rules and the Company’s Restated
Certificate of Incorporation; (2) status as a “non-employee director” under Rule 16b-3 of the Exchange Act if such non-employee director serves or will serve on the Compensation Committee; or (3) status as an independent director under Rule
10A-3 or Rule 10C-1 of the Exchange Act if such non-employee director serves or will serve on the Audit Committee or Compensation Committee, respectively.
The Corporate Governance and Nominating Committee or
the disinterested directors will not approve or ratify a Related Person Transaction unless, after considering all relevant information, it has determined that the transaction is in, or is not inconsistent with, the Company’s best interests and
the best interests of its shareholders.
Generally, the Related Person
Transaction Policy applies to any current or proposed transaction in which:
the Company was or is to be a participant;
the amount involved exceeds $120,000; and
any related person had or will have a direct or indirect material
interest.
A copy of our Related Person
Transaction Policy is available as part of our Governance Guidelines on our website at www.khov.com under “Investor Relations,” “Corporate Governance/Guidelines.”
Related Person Transactions
The following transactions were reviewed, approved
and ratified by the disinterested members of the Board of Directors and/or by the Corporate Governance and Nominating Committee in accordance with our Related Person Transaction Policy:
During the year ended October 31, 2023, an
engineering firm owned by Tavit Najarian, a relative of Ara K. Hovnanian, our Chairman of the Board and our Chief Executive Officer, provided services to the Company totaling $1.3 million. Neither the Company nor Mr. Hovnanian has a financial
interest in the relative’s company from whom the services were provided.
Mr. Alexander Hovnanian, the son of Ara K.
Hovnanian, our Chairman of the Board of Directors and our Chief Executive Officer, is employed by the Company. In fiscal 2023, Mr. Hovnanian served as Executive Vice President, National Homebuilding Operations. For fiscal 2023, he received cash
compensation of approximately $1,008,000 and equity awards with an aggregate grant date fair value of approximately $825,000.
Carson Sorsby, the son of J. Larry Sorsby, one of
our Board directors and our former Chief Financial Officer, is employed by the Company. Carson Sorsby holds the position of Account Manager in the Company’s mortgage subsidiary. For fiscal 2023, he earned commissions totaling approximately
$136,400. His compensation is commensurate with that of similarly situated employees in his position.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING
TO BE HELD ON MARCH 21, 2024
Our 2023 Proxy Statement, the Company’s Annual Report
to Shareholders for the year ended October 31, 2023 (which is not deemed to be part of the official proxy soliciting materials), proxy cards and any amendments to the foregoing materials that are required to be furnished to shareholders are
available online at www.proxyvote.com.
For information on how to obtain directions to the
Company’s 2024 Annual Meeting, please call our Investor Relations department at 1-800-815-9680.
GENERAL
Solicitation
The solicitation of proxies is being made by our
Board of Directors on our behalf primarily through the internet and by mail, but directors, officers, employees and contractors retained by us may also engage in the solicitation of proxies by telephone. The cost of soliciting proxies will be
borne by us. In addition, we may reimburse brokers, custodians, nominees and other record holders for their reasonable out-of-pocket expenses in forwarding proxy material to beneficial owners.
Voting
Unless otherwise directed, the persons named in the
proxy card(s) intend to vote all shares represented by proxies received by them in favor of the election of the nominees to the Board of Directors of the Company named herein, in favor of the ratification of the selected independent registered
public accounting firm, in favor of the approval of the Third Amended and Restated 2020 Hovnanian Enterprises, Inc. Stock Incentive Plan, in favor of the compensation of the Company’s named executive officers and in favor of the amendment to the
Company’s Stockholder Rights Plan, in each case, as recommended by the Board of Directors. All proxies will be voted as specified. The proxy will be voted on any other matters as may properly come before the meeting in accordance with the
discretion of the named proxies and agents.
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 (except as provided below). Votes of Class A Common Stock and Class B Common Stock will be counted together without regard to class for
proposals that require the affirmative vote of a majority of the votes cast by holders of the outstanding Class A Common Stock and Class B Common Stock, voting together, represented in person or by proxy at the 2024 Annual Meeting.
All votes will be certified by the Inspectors of
Election. Abstentions and broker non-votes will have no effect on the vote for proposals one, three, four and five because such shares are not considered votes cast. Abstentions will have no effect on the vote for proposal two because such shares
are not considered votes cast. Brokers may vote shares with respect to proposal two in the absence of client instructions, and thus there will be no broker non-votes with respect to proposal two.
Notwithstanding the foregoing, the Company’s
Restated 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 continuously, since the date of issuance, for the benefit or account of the same named beneficial owner of such shares (as defined in the Restated Certificate of Incorporation) or any Permitted
Transferee (as defined in the Restated Certificate of Incorporation). 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 properly complete their voting instruction
card, which is specially designed for beneficial owners of Class B Common Stock. The Company has also supplied nominee holders of Class B Common Stock with instructions and specially designed proxy cards to accommodate the voting of the Class B
Common Stock. In accordance with the Company’s Restated 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 voting instruction card and the nominee
proxy card relating to such shares is properly completed, mailed and received not less than three nor more than 20 business days prior to March 21, 2024. Proxy cards should be mailed to Vote Processing, c/o Broadridge Financial Solutions, Inc.,
51 Mercedes Way, Edgewood, NY 11717.
Additional Matters
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 is not aware that others will attempt to do so. If other matters requiring the vote of shareholders properly come before the meeting and
any adjournments or postponements thereof, it is the intention of the persons named in the proxy cards to vote the shares represented by the proxies held by them in accordance with their judgment on such matters.
SHAREHOLDER PROPOSALS for the 2025 ANNUAL MEETING
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Matawan, New Jersey
February, 2024
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Under the SEC’s rules and regulations, any stockholder desiring to submit a proposal to be included in our 2025 proxy statement must submit such proposal to
us at our principal executive offices to the attention of our Secretary no later than October 5, 2024.
Our Restated By-laws require timely notice of business to be brought before a shareholders’ meeting, including nominations of persons for election as
directors. To be timely, a stockholder’s notice must be delivered to our Secretary at our principal executive offices not earlier than 120 days prior to the first anniversary of the 2024 Annual Meeting (November 21, 2024), but not later
than 90 days prior to such anniversary date (December 21, 2024), provided, however, that in the event that the date of the 2025 Annual Meeting of Shareholders is advanced by more than 20 days, or delayed by more than 70 days, from such
anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or
the tenth day following the day on which public announcement of the date of such meeting is first made. Our Restated By-laws have other requirements that must be followed in connection with submitting director nominations and any other
business for consideration at a shareholders’ meeting.
In addition to satisfying the foregoing requirements under our Restated By-laws, to comply with the universal proxy rules, stockholders who intend to
solicit proxies in support of director nominees other than the Company’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than January 20, 2025.
By order of the Board of Directors,
HOVNANIAN ENTERPRISES, INC.
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| APPENDIX A |
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—Third Amended |
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and Restated 2020 |
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Hovnanian Enterprises, Inc. |
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Stock Incentive Plan |
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| SECTION |
1 |
PURPOSE OF THE PLAN |
The purpose of the Plan is to
aid the Company and its Affiliates in recruiting and retaining key employees, directors and consultants of outstanding ability and to motivate such employees, directors and consultants to exert their best efforts on behalf of the Company and its
Affiliates by providing incentives through the granting of Awards. The Company expects that it will benefit from the added interest which such key employees, directors or consultants will have in the welfare of the Company as a result of their
proprietary interest in the Company’s success.
The following capitalized terms used in the Plan have the
respective meanings set forth in this Section:
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(a) |
Act: The Securities Exchange Act of 1934, as amended, or any successor thereto. |
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(b) |
Affiliate: With respect to the Company, any entity directly or indirectly controlling, controlled by, or under common control with,
the Company or any other entity designated by the Board in which the Company or an Affiliate has an interest. |
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(c) |
Award: An Option, Stock Appreciation Right or Other Stock-Based Award granted pursuant to the Plan. |
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(d) |
Beneficial Owner: A “beneficial owner”, as such term is defined in Rule 13d-3 under the Act (or any successor rule thereto). |
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(e) |
Board: The Board of Directors of the Company. |
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(f) |
Cause: The occurrence of any of the following with respect to a Participant: (a) the willful and continued failure of the
Participant to perform substantially all of his or her duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness) for a period of 10 days following a written demand for substantial
performance that is delivered to such Participant by the Company, which specifically identifies the manner in which the Company believes the Participant has not substantially performed his or her duties; (b) dishonesty in the performance of
the Participant’s duties with the Company; (c) the Participant’s conviction of, or plea of guilty or nolo contendere to, a crime under the laws of the United States or any state thereof constituting a felony or a misdemeanor involving moral
turpitude; (d) the Participant’s willful malfeasance or willful misconduct in connection with the Participant’s duties with the Company or any act or omission which is injurious to the financial condition or business reputation of the
Company or its affiliates; or (e) the Participant’s breach of any restrictive covenant provisions set forth in the Participant’s Award agreement. |
The occurrence of any of the following events:
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(i) |
any Person (other than a Person holding securities representing 10% or more of the combined voting power of the Company’s outstanding
securities as of the Effective Date, or any Family Member of such a Person, the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any company owned, directly or indirectly, by the
shareholders of the Company in substantially the same proportions as their ownership of stock of the Company), becomes the Beneficial Owner, directly or indirectly, of securities of the Company, representing 50% or more of the combined
voting power of the Company’s then-outstanding securities; |
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(ii) |
during any period of twenty-four consecutive months (not including any period prior to the Effective Date), individuals who at the
beginning of such period constitute the Board, and any new director (other than (A) a director nominated by a Person who has entered into an agreement with the Company to effect a transaction described in clauses (i), (iii) or (iv) of this
definition or (B) a director nominated by any Person (including the Company) who publicly announces an intention to take or to consider taking actions (including, but not limited to, an actual or threatened proxy contest) which if
consummated would constitute a Change in Control) whose election by the Board or nomination for election by the Company’s shareholders was approved in advance by a vote of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof; |
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(iii) |
the consummation of any transaction or series of transactions under which the Company is merged or consolidated with any other company,
other than a merger or consolidation which results in the shareholders of the Company immediately prior thereto continuing to own (either by remaining outstanding or by being converted into voting securities of the surviving entity) more
than 65% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or |
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(iv) |
the consummation of a complete liquidation of the Company or the sale or disposition by the Company of all or substantially all of the
Company’s assets, other than a liquidation of the Company into a wholly-owned subsidiary. |
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(h) |
Code: The Internal Revenue Code of 1986, as amended, or any successor thereto. |
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(i) |
Committee: The Compensation Committee of the Board (or a subcommittee thereof as provided under Section 4), or such other committee
of the Board to which the Board has delegated power to act under or pursuant to the provisions of the Plan, or the full Board. |
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(j) |
Company: Hovnanian Enterprises, Inc., a Delaware corporation, and any successors thereto. |
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(k) |
Disability: Inability of a Participant to perform in all material respects his duties and responsibilities to the Company, or any
Subsidiary of the Company, by reason of a physical or mental disability or infirmity which inability is reasonably expected to be permanent and has continued (i) for a period of six consecutive months or (ii) such shorter period as the
Committee may reasonably determine in good faith. The Disability determination shall be in the sole discretion of the Committee and a Participant (or his representative) shall furnish the Committee with medical evidence documenting the
Participant’s disability or infirmity which is satisfactory to the Committee. |
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(l) |
Effective Date: January 24, 2020, the date the Plan was initially adopted by the Board, prior to the amendment and restatement
thereof. |
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(m) |
Fair Market Value: On a given date, the closing price of the Shares as reported on such date on the Composite Tape of the principal
national securities exchange on which such Shares are listed or admitted to trading, or, if no Composite Tape exists for such national securities exchange on such date, then on the principal national securities exchange on which such Shares
are listed or admitted to trading, or, if the Shares are not listed or admitted on a national securities exchange, the arithmetic mean of the per Share closing bid price and per Share closing asked price on such date as quoted on the
National Association of Securities Dealers Automated Quotation System (or such market in which such prices are regularly quoted), or, if there is no market on which the Shares are regularly quoted, the Fair Market Value shall be the value
established by the Committee in good faith. If no sale of Shares shall have been reported on such Composite Tape or such national securities exchange on such date or quoted on the National Association of Securities Dealer Automated
Quotation System on such date, then the immediately preceding date on which sales of the Shares have been so reported or quoted shall be used. |
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(i) |
any Person holding securities representing 10% or more of the combined voting power of the Company’s outstanding securities as of the
Effective Date; |
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(ii) |
any spouse of such a person; |
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(iii) |
any descendant of such a person; |
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(iv) |
any spouse of any descendant of such a person; or |
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(v) |
any trust for the benefit of any of the aforementioned persons. |
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(o) |
Good Reason: The occurrence of any of the following with respect to a Participant, without the Participant’s express written consent:
(a) any material diminution in the Participant’s duties, titles or responsibilities with the Company from those in effect immediately prior to a Change in Control
or (b) any reduction in the Participant’s annual base salary or any material reduction in the Participant’s annual bonus opportunity, annual equity awards or long-term incentive program awards from the Participant’s annual base salary or
annual bonus opportunity, annual equity awards or long-term incentive program awards in effect immediately prior to a Change in Control. Notwithstanding the foregoing, no event shall constitute Good Reason unless the Participant provides
the Company with written notice of such event within 60 days after the occurrence thereof and the Company fails to cure or resolve the behavior otherwise constituting Good Reason within 30 days of its receipt of such notice.
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(p) |
ISO: An Option that is also an incentive stock option granted pursuant to Section 6(d) of the Plan. |
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(q) |
Minimum Vesting Condition: The requirement, with respect to any Award, that vesting of (or lapsing of restrictions on) such Award
does not occur any more rapidly than on the first anniversary of the grant date for such Award (or the date of commencement of employment or service, in the case of a grant made in connection with a Participant’s commencement of employment
or service), other than (i) in connection with a Change in Control or (ii) as a result of a Participant’s death,
retirement, Disability or involuntary termination of employment without cause; provided, that such Minimum Vesting Condition will not be required on Awards covering, in the aggregate, a number of Shares not to exceed 5% of the Absolute
Share Limit, as defined in Section 3. |
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(r) |
Other Stock-Based Awards: Awards granted pursuant to Section 8 of the Plan. |
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(s) |
Option: A stock option granted pursuant to Section 6 of the Plan. |
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(t) |
Option Price: The purchase price per Share of an Option, as determined pursuant to Section 6(a) of the Plan. |
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(u) |
Participant: An employee, director or consultant of the Company or any of its Affiliates who is selected by the Committee to
participate in the Plan. |
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(v) |
Performance-Based Awards: Certain Other Stock-Based Awards granted pursuant to Section 8(b) of the Plan. |
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(w) |
Person: A “person”, as such term is used for purposes of Section 13(d) or 14(d) of the Act (or any successor section thereto). |
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(x) |
Plan: The Amended and Restated 2020 Hovnanian Enterprises, Inc. Stock Incentive Plan. |
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(y) |
Prior Plan: The 2012 Hovnanian Enterprises, Inc. Amended and Restated Stock Incentive Plan. |
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(z) |
Prior Plan Award: An equity award granted under the Prior Plan which remained outstanding as of March 24, 2020 (the date this Plan
was initially approved by the Company’s shareholders prior to the amendment and restatement thereof). |
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(aa) |
Shares: Shares of common stock of the Company. |
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(bb) |
Stock Appreciation Right: A stock appreciation right granted pursuant to Section 7 of the Plan. |
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(cc) |
Subsidiary: A subsidiary corporation, as defined in Section 424(f) of the Code (or any successor section thereto). |
| SECTION |
3 |
SHARES SUBJECT TO THE PLAN |
Subject to Sections 4, 6(f)
and 9 of the Plan, the total number of Shares which may be issued under the Plan pursuant to grants of ISOs or other Awards is 1,715,000 (the “Absolute Share Limit”). The Shares may consist, in whole or in part, of unissued Shares or
treasury Shares. The issuance of Shares or payment of cash upon the exercise of an Award or in consideration of the cancellation or termination of an Award shall reduce the total number of Shares available under the Plan, as applicable. If Shares
are not issued or are withheld from payment of an Award to satisfy tax obligations with respect to the Award, such Shares will not be added back to the aggregate number of Shares with respect to which Awards may be granted under the Plan, but
rather will count against the aggregate number of Shares with respect to which Awards may be granted under the Plan. When an Option or Stock Appreciation Right is granted under the Plan, the number of Shares subject to the Option or Stock
Appreciation Right will be counted against the aggregate number of Shares with respect to which Awards may be granted under the Plan as one Share for every Share subject to such Option or Stock Appreciation Right. No Shares will be added back to
the Share reserve under the Plan with respect to exercised Stock Appreciation Rights granted under the Plan (regardless of whether the Stock Appreciation Rights are cash settled or stock settled). Additionally, no Shares will be added back to the
Share reserve under the Plan in the event that (i) a portion of the Shares covered by an Option are tendered to the Company or “net settled” to cover payment of the Option exercise price or (ii) the Company utilizes the proceeds received upon
Option exercise to repurchase Shares on the open market or otherwise. For the avoidance of doubt, any cash-based or other incentive awards granted outside of the Plan shall not count against the Absolute Share Limit, regardless of whether any
such incentive awards may be denominated in or otherwise linked to the Company’s Shares. In the event that any Awards under the Plan or any Prior Plan Awards terminate or lapse for any reason without payment of consideration, the number of Shares
subject to such terminated or lapsed Awards or Prior Plan Awards shall be available for future Award grants under the Plan. The maximum number of Shares subject to Awards granted during a calendar year to any non-employee director serving on the
Board, taken together with any cash fees paid to such non-employee director during such calendar year, shall not exceed $600,000 in total value (calculating the value of any such Awards based on the grant date fair value of such Awards for
financial reporting purposes).
The Plan shall be administered
by the Committee, which may delegate its duties and powers in whole or in part to any subcommittee thereof consisting solely of at least two individuals who are each intended to qualify as “non-employee directors” within the meaning of Rule 16b-3
under the Act (or any successor rule thereto) and “independent directors” within the meaning of the applicable rules, if any, of any national securities exchange on which Shares are listed or admitted to trading; provided, however, that any
action permitted to be taken by the Committee may be taken by the Board, in its discretion. The Committee shall have the full power and authority to establish the terms and conditions of any Award consistent with the provisions of the Plan and
subject to the Minimum Vesting Condition. Following the grant of any Award, the Committee shall be authorized to waive any such terms and conditions associated with the Award at any time (including, without limitation, accelerating or waiving any
vesting conditions) in connection with a Participant’s death or Disability. 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 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 administrations of the Plan, as described herein, shall lie within its sole and absolute discretion and shall be final, conclusive and binding on all parties concerned (including, but not
limited to Participants and their beneficiaries or successors). Determinations made by the Committee under the Plan need not be uniform and may be made selectively among Participants, whether or not such Participants are similarly situated.
Awards may, in the discretion of the Committee, be made under the Plan in assumption of, or in substitution for, outstanding awards previously granted by the Company or its Affiliates or a company acquired by the Company or with which the Company
combines. The number of Shares underlying such substitute awards shall be counted against the aggregate number of Shares available for Awards under the Plan. The Committee shall require payment of any minimum amount it may determine to be
necessary to withhold for federal, state, local or other, taxes as a result of the exercise or vesting of an Award. Unless the Committee specifies otherwise, the Participant may elect to pay a portion or all of such minimum withholding taxes by
(a) delivery in Shares or (b) having Shares withheld by the Company from any Shares that would have otherwise been received by the Participant. The number of Shares so delivered or withheld shall have an aggregate Fair Market Value sufficient to
satisfy the applicable minimum withholding taxes. If the chief executive officer of the Company is a member of the Board, the Board by specific resolution may constitute such chief executive officer as a committee of one which shall have the
authority to grant Awards of up to an aggregate of 40,000 Shares in each fiscal year to Participants who are not subject to the rules promulgated under Section 16 of the Act (or any successor section thereto); provided, however, that such chief
executive officer shall notify the Committee of any such grants made pursuant to this Section 4.
No Award may be granted under
the Plan after the tenth anniversary of the Effective Date, but Awards theretofore granted may extend beyond that date.
| SECTION |
6 |
TERMS AND CONDITIONS OF OPTIONS |
Options granted under the Plan
shall be, as determined by the Committee, non-qualified or incentive stock options for federal income tax purposes, as evidenced by the related Award agreements, and shall be subject to the foregoing and the following terms and conditions and to
such other terms and conditions, not inconsistent therewith, as the Committee shall determine:
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(a) |
Option Price. The Option Price per Share shall be determined by the Committee, but shall not be less than 100% of the Fair Market
Value of a Share on the date an Option is granted (other than in the case of Options granted in substitution of previously granted awards, as described in Section 4). |
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(b) |
Exercisability. Options granted under the Plan shall be exercisable at such time and upon such terms and conditions as may be
determined by the Committee, but in no event shall an Option be exercisable more than ten years after the date it is granted. |
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(c) |
Exercise of Options. Except as otherwise provided in the Plan or in an Award agreement, an Option may be exercised for all, or from time to time any part, of
the Shares for which it is then exercisable. For purposes of Section 6 of the Plan, the exercise date of an Option shall be the later of the date a notice of exercise is received by the Company and, if applicable, the date payment is
received by the Company pursuant to clauses (i), (ii), (iii) or (iv) in the following sentence. The purchase price for the
Shares as to which an Option is exercised shall be paid to the Company in full not later than at the time that the Shares being purchased are delivered to or at the direction of the Participant, in each case at the election of the
Participant to the extent permitted by law and as designated by the Committee, (i) in cash, (ii) in Shares having a Fair Market Value equal to the aggregate Option Price for the Shares being purchased and satisfying such other
requirements as may be imposed by the Committee; provided, that such Shares have been held by the Participant for no less than six months (or such other period as established from time to time by the Committee in order to avoid adverse
accounting treatment applying generally accepted accounting principles), (iii) partly in cash and partly in such Shares, (iv) through the delivery of irrevocable instruments to a broker to deliver promptly to the Company an amount equal
to the aggregate Option Price for the Shares being purchased or (v) through net settlement in Shares. No Participant shall have any rights to dividends or other rights of a shareholder with respect to Shares subject to an Option until
the Participant has given written notice of exercise of the Option, paid in full for such Shares and, if applicable, has satisfied any other conditions imposed by the Committee pursuant to the Plan.
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(d) |
ISOs. The Committee may grant Options under the Plan that are intended to be ISOs. Such ISOs shall comply with the requirements of
Section 422 of the Code (or any successor section thereto). No ISO may be granted to any Participant who at the time of such grant, owns more than 10% of the total combined voting power of all classes of stock of the Company or of any
Subsidiary, unless (i) the Option Price for such ISO is at least 110% of the Fair Market Value of a Share on the date the ISO is granted and (ii) the date on which such ISO terminates is a date not later than the day preceding the fifth
anniversary of the date on which the ISO is granted. Any Participant who disposes of Shares acquired upon the exercise of an ISO either (i) within two years after the date of grant of such ISO or (ii) within one year after the transfer of
such Shares to the Participant, shall notify the Company of such disposition and of the amount realized upon such disposition. All Options granted under the Plan are intended to be nonqualified stock options, unless the applicable Award
agreement expressly states that the Option is intended to be an ISO. If an Option is intended to be an ISO, and if for any reason such Option (or portion thereof) shall not qualify as an ISO, then, to the extent of such nonqualification,
such Option (or portion thereof) shall be regarded as a nonqualified stock option granted under the Plan; provided that such Option (or portion thereof) otherwise complies with the Plan’s requirements relating to nonqualified stock options.
In no event shall any member of the Committee, the Company or any of its Affiliates (or their respective employees, officers or directors) have any liability to any Participant (or any other Person) due to the failure of an Option to
qualify for any reason as an ISO. |
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(e) |
Attestation. Wherever in this Plan or any agreement evidencing an Award a Participant is permitted to pay the exercise price of an
Option or taxes relating to the exercise of an Option by delivering Shares, the Participant may, subject to procedures satisfactory to the Committee, satisfy such delivery requirement by presenting proof of beneficial ownership of such
Shares, in which case the Company shall treat the Option as exercised without further payment and/or shall withhold such number of Shares from the Shares acquired by the exercise of the Option, as appropriate. |
|
(f) |
Repricing of Options. Notwithstanding any other provisions under the Plan, no action shall be taken under the Plan to (i) lower the
exercise prices of any Company stock options after they are granted, (ii) exchange stock options for stock options with lower exercise prices or cancel an Option when the Option Price exceeds the Fair Market Value in exchange for cash or
other Awards (other than pursuant to Section 9 hereof) or (iii) take any other action that is treated as a “repricing” of stock options under generally accepted accounting principles. Any such approved action shall be treated as a grant of
a new Award to the extent required under Sections 422 or 424 of the Code (for stock options that are intended to retain their status as ISOs). |
| SECTION |
7 |
TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS |
|
(a) |
Grants. The Committee also may grant (i) a Stock Appreciation Right independent of an Option or (ii) a Stock Appreciation Right in connection with an Option,
or a portion thereof. A Stock Appreciation Right granted pursuant to clause (ii) of the preceding sentence
(A) may be granted at the time the related Option is granted or at any time prior to the exercise or cancellation of the related Option, (B) shall cover the same
number of Shares covered by an Option (or such lesser number of Shares as the Committee may determine) and (C) shall be subject to the same terms and conditions as such Option except for such additional limitations as are contemplated by
this Section 7 (or such additional limitations as may be included in an Award agreement).
|
|
(b) |
Terms. The exercise price per Share of a Stock Appreciation Right shall be an amount determined by the Committee but in no event shall such amount be less
than the greater of (i) the Fair Market Value of a Share on the date the Stock Appreciation Right is granted or, in the case of a Stock Appreciation Right granted in conjunction with an Option, or a portion thereof, the Option Price of
the related Option and (ii) an amount permitted by applicable laws, rules, restated By-laws or policies of regulatory authorities or stock exchanges. Each Stock Appreciation Right granted independent of an Option shall entitle a
Participant upon exercise to an amount equal to (i) the excess of
(A) the Fair Market Value on the exercise date of one Share over (B) the exercise price per Share, times (ii) the number of Shares covered by the Stock Appreciation
Right. Each Stock Appreciation Right granted in conjunction with an Option, or a portion thereof, shall entitle a Participant to surrender to the Company the unexercised Option, or any portion thereof, and to receive from the Company in
exchange therefor an amount equal to (i) the excess of (A) the Fair Market Value on the exercise date of one Share over (B) the Option Price per Share, times (ii) the number of Shares covered by the Option, or portion thereof, which is
surrendered. The date a notice of exercise is received by the Company shall be the exercise date. Payment shall be made in Shares or in cash, or partly in Shares and partly in cash (any such Shares valued at such Fair Market Value), all
as shall be determined by the Committee. Stock Appreciation Rights may be exercised from time to time upon actual receipt by the Company of written notice of exercise stating the number of Shares with respect to which the Stock
Appreciation Right is being exercised. No fractional Shares will be issued in payment for Stock Appreciation Rights, but instead cash will be paid for a fraction or, if the Committee should so determine, the number of Shares will be
rounded downward to the next whole Share.
|
|
(c) |
Limitations. The Committee may impose, in its discretion, such conditions upon the exercisability or transferability of Stock Appreciation Rights as it may deem
fit. |
|
(d) |
Repricing of Stock Appreciation Rights. Notwithstanding any other provisions under the Plan, no action shall be taken under the Plan
to (i) lower the exercise prices of any Company stock appreciation right after they are granted, (ii) exchange stock appreciation rights for stock appreciation rights with lower exercise prices or cancel a stock appreciation right when the
exercise price exceeds the Fair Market Value in exchange for cash or other Awards (other than pursuant to Section 9 hereof) or (iii) take any other action that is treated as a “repricing” of stock appreciation rights under generally
accepted accounting principles. |
| SECTION |
8 |
OTHER STOCK-BASED AWARDS |
|
(a) |
Generally. The Committee, in its sole discretion, may grant or sell Awards of Shares, Awards of restricted Shares and Awards that
are valued in whole or in part by reference to, or are otherwise based on the Fair Market Value of, Shares (“Other Stock-Based Awards”). Such Other Stock-Based Awards shall be in such form, and dependent on such conditions, as the
Committee shall determine, including, without limitation, the right to receive one or more Shares (or the equivalent cash value of such Shares or a combination thereof) upon the completion of a specified period of service, the occurrence of
an event and/or the attainment of performance objectives. Other Stock-Based Awards may be granted alone or in addition to any other Awards granted under the Plan. Subject to the provisions of the Plan, the Committee shall determine to whom
and when Other Stock-Based Awards will be made, the number of Shares to be awarded under (or otherwise related to) such Other Stock-Based Awards; whether such Other Stock-Based Awards shall be settled in cash, Shares or a combination of
cash and Shares; and all other terms and conditions of such Awards (including, without limitation, the vesting provisions thereof subject to Section 4 and provisions ensuring that all Shares so awarded and issued shall be fully paid and
non-assessable). |
|
(b) |
Performance-Based Awards. Notwithstanding anything to the contrary herein, certain Other Stock-Based Awards granted under this
Section 8 may be granted subject to performance-vesting conditions (“Performance-Based Awards”). The performance goals, which must be objective, 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 shareholders’ equity; (vii) total shareholder return;
(viii) expense management; (ix) return on investment before or after the cost of capital; (x) improvements in capital structure; (xi) profitability of an identifiable business unit or product; (xii) maintenance or improvement of profit
margins; (xiii) stock price; (xiv) market share; (xv) revenues or sales; (xvi) costs; (xvii) cash flow; (xviii) working capital; (xix) changes in net assets (whether or not multiplied by a constant percentage intended to represent the cost
of capital); and (xx) 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 indices, or any combination thereof, all as the Committee shall determine. In addition, 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 Committee shall determine whether, with respect to a performance period, the applicable performance goals have been met with respect to a given Participant. The
amount of the Performance-Based Award actually paid to a given Participant may be less than the amount determined by the applicable performance goal formula, at the discretion of the Committee. The amount of the Performance-Based Award
determined by the Committee for a performance period shall be paid to the Participant at such time as determined by the Committee in its sole discretion after the end of such performance period; provided, however, that a Participant may, if
and to the extent permitted by the Committee, elect to defer payment of a Performance-Based Award. |
|
(c) |
To the extent that any dividends or dividend equivalent payments may be paid with respect to any Other Stock-Based Award, no such dividend
or dividend equivalent payments will be made unless and until the corresponding portion of the underlying Other Stock-Based Award becomes earned and vested in accordance with its terms. |
| SECTION |
9 |
ADJUSTMENTS UPON CERTAIN EVENTS |
Notwithstanding any other provisions in the Plan to
the contrary, the following provisions shall apply to all Awards granted under the Plan:
|
(a) |
Generally. In the event of any change in the outstanding Shares after the Effective Date by reason of any Share dividend or split,
reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of Shares or other corporate exchange or change in capital structure, any distribution to shareholders other than regular cash dividends or any
similar event, the Committee in its sole discretion and without liability to any person shall make such substitution or adjustment, if any, as it deems to be equitable, as to (i) the number or kind of Shares or other securities issued or
reserved for issuance as set forth in Section 3 of the Plan or pursuant to outstanding Awards, (ii) the exercise price relating to outstanding Options or Stock Appreciation Rights, (iii) the maximum number or amount of Awards that may be
granted to any Participant during a fiscal year and/or (iv) any other affected terms of such Awards. |
|
(b) |
General Treatment of Awards Following Change in Control. Without limiting the generality of Sections 9(a) and 9(c) and except as
otherwise provided in an Award agreement, the following provisions shall apply to any outstanding Awards following a Change in Control: |
|
(i) |
In the event of a Participant’s involuntary termination of employment with the Company or a subsidiary thereof without “Cause” or for “Good
Reason” within two years following a Change in Control, any service-based vesting conditions applicable to Awards held by such Participant shall be deemed fully satisfied and any outstanding Options held by such Participant shall become
immediately exercisable. |
|
(ii) |
Upon the occurrence of a Change in Control that results in the Company’s Shares ceasing to be publicly traded on a national securities
exchange, any service-based vesting conditions applicable to outstanding Awards shall be deemed fully satisfied and any outstanding Options shall become immediately exercisable. |
|
(iii) |
With respect to any outstanding Performance-Based Awards with uncompleted performance periods as of the Change in Control date, (A) any
performance-based vesting conditions that are linked to the Company’s Share price shall be deemed to have been achieved at the Share price set forth in the definitive agreement governing the transaction constituting the Change in Control
(or, in the absence of such agreement, the closing price per Share for the last trading day prior to the consummation of the Change in Control) and (B) any performance-based vesting conditions that are linked to performance criteria other
than the Company’s Share price shall be deemed to have been achieved at “target” or “100% multiplier” level, as applicable. |
|
(c) |
Treatment of Awards Following Change in Control if Awards are Not Assumed. In the event that the Company or other surviving entity
following a Change in Control will not be assuming outstanding Awards following the Change in Control, the vesting of outstanding Awards will be automatically accelerated and such Awards will then be canceled in exchange for a payment in
cash or other property equal to the value thereof as determined by the Committee which, in the case of Options and Stock Appreciation Rights, shall equal the excess, if any, of value of the consideration to be paid in the Change in Control
transaction to holders of the same number of Shares subject to such Options or Stock Appreciation Rights (or, if no consideration is paid in any such transaction, the Fair Market Value of the Shares subject to such Options or Stock
Appreciation Rights) over the aggregate exercise price of such Options or Stock Appreciation Rights. |
| SECTION |
10 |
NO RIGHT TO EMPLOYMENT |
The granting of an Award under
the Plan shall impose no obligation on the Company or any Subsidiary to continue the employment of a Participant and shall not lessen or affect the Company’s or Subsidiary’s right to terminate the employment of such Participant.
| SECTION |
11 |
SUCCESSORS AND ASSIGNS |
The Plan shall be binding on
all successors and assigns of the Company and a Participant; including without limitation, the estate of such Participant and the executor, administrator or trustee of such estate, or any receiver or trustee in bankruptcy or representative of the
Participant’s creditors.
| SECTION |
12 |
NONTRANSFERABILITY OF AWARDS |
Unless otherwise determined by
the Committee, an Award shall not be transferable or assignable by the Participant otherwise than by will or by the laws of descent and distribution, and any Award transfers authorized by the Committee shall not be transferred for value.
Notwithstanding the foregoing, a Participant may transfer an Option (other than an ISO) or a stock appreciation right in whole or in part by gift or domestic relations order to a family member of the Participant (a “Permitted Transferee”)
and, following any such transfer such Option or stock appreciation right or portion thereof shall be exercisable only by the Permitted Transferee, provided that no such Option or stock appreciation right or portion thereof is transferred for
value, and provided further that, following any such transfer, neither such Option or stock appreciation right or any portion thereof nor any right hereunder shall be transferable other than to the Participant or otherwise than by will or the
laws of descent and distribution or be subject to attachment, execution or other similar process. For purposes of this Section 12, “family member” includes any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse,
sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive relationships, any person sharing the Participant’s household (other than a tenant or employee), trust in which
these persons have more than 50% of the beneficial interest, a foundation in which these persons (or the Participant) control the management of assets and any other entity in which these persons (or the Participant) own more than 50% of the
voting interests. An Award exercisable after the death of a Participant may be exercised by the legatees, personal representatives or distributees of the Participant.
| SECTION |
13 |
AMENDMENTS OR TERMINATION |
The Committee may amend, alter
or discontinue the Plan, but no amendment, alteration or discontinuation shall be made which, (a) without the approval of the shareholders of the Company, would (except as is provided in the Plan for adjustments in certain events), increase the
total number of Shares reserved for the purposes of the Plan or change the maximum number of Shares for which Awards may be granted to any Participant or amend the repricing prohibitions under Sections 6(f) and 7(d) or (b) without the consent of
a Participant, would materially impair any of the rights or obligations under any Award theretofore granted to such Participant under the Plan; provided, however, that the Committee may amend the Plan in such manner as it deems necessary to
permit the granting of Awards meeting the requirements of the Code or other applicable laws. Notwithstanding anything to the contrary herein, the Committee may not amend, alter or discontinue the provisions relating to Section 9(b) or Section
9(c) of the Plan after the occurrence of a Change in Control.
Without limiting the
generality of the foregoing, to the extent applicable, notwithstanding anything herein to the contrary, this Plan and Awards issued hereunder shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations
and other interpretative guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Effective Date. Notwithstanding any provision of the Plan to the contrary, in the event that the
Committee determines that any amounts payable hereunder will be taxable to a Participant under Section 409A of the Code and related Department of Treasury guidance prior to payment to such Participant of such amount, the Company may (a) adopt
such amendments to the Plan and Awards and appropriate policies and procedures, including amendments and policies with retroactive effect, that the Committee determines necessary or appropriate to preserve the intended tax treatment of the
benefits provided by the Plan and Awards hereunder and/or (b) take such other actions as the Committee determines necessary or appropriate to avoid the imposition of an additional tax under Section 409A of the Code.
| SECTION |
14 |
INTERNATIONAL PARTICIPANTS
|
With respect to Participants
who reside or work outside the United States of America, the Committee may, in its sole discretion, amend the terms of the Plan or Awards with respect to such Participants in order to conform such terms with the requirements of local law or to
obtain more favorable tax or other treatment for a Participant, the Company or an Affiliate.
The Plan shall be governed by and construed in accordance with the
laws of the State of Delaware.
| SECTION |
16 |
EFFECTIVENESS OF THE PLAN |
The Plan was initially effective as of the Effective Date, subject
to the approval of the Company’s shareholders.
Notwithstanding other
provisions of the Plan or any Award agreements thereunder, no Award shall be granted, deferred, accelerated, extended, paid out or modified under this Plan in a manner that would result in the imposition of an additional tax under Section 409A of
the Code upon a Participant. In the event that it is reasonably determined by the Committee that, as a result of Section 409A of the Code, payments or deliveries of shares in respect of any Award under the Plan may not be made at the time
contemplated by the terms of the Plan or the relevant Award agreement, as the case may be, without causing the Participant holding such Award to be subject to taxation under Section 409A of the Code, the Company will make such payment or delivery
of shares on the first day that would not result in the Participant incurring any tax liability under Section 409A of the Code. In the case of a Participant who is a “specified employee” (within the meaning of Section 409A(a)(2)(B)(i) of the
Code), payments and/or deliveries of shares in respect of any Award subject to Section 409A of the Code that are linked to the date of the Participant’s separation from service shall not be made prior to the date which is six (6) months after the
date of such Participant’s separation from service from the Company and its affiliates, determined in accordance with Section 409A of the Code and the regulations promulgated thereunder. The Company shall use
commercially reasonable efforts to implement the
provisions of this Section 17 in good faith; provided that neither the Company, the Committee nor any of the Company’s employees, directors or representatives shall have any liability to Participants with respect to this Section 17.
| SECTION |
18 |
FORFEITURE/CLAWBACK |
Any Awards granted under the Plan may be subject to reduction,
cancellation, forfeiture or recoupment to the extent required by applicable law or listed company rules or to the extent otherwise provided in an Award agreement at the time of grant.
| |
|
| APPENDIX B-1 |
|
| |
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| |
|
| |
|
| |
|
| |
— Rights Agreement |
| |
dated as of August 14, 2008
between HOVNANIAN
ENTERPRISES, INC. |
| |
and National City Bank
Rights Agent |
| |
|
T A B L E of C O N T E N T S
| S E C T I O N 1 |
1 |
Certain Definitions |
| S E C T I O N 2 |
6 |
Appointment of Rights Agent |
| S E C T I O N 3 |
7 |
Issuance of Rights Certificates |
| S E C T I O N 4 |
9 |
Form of Rights Certificates |
| S E C T I O N 5 |
9 |
Countersignature and Registration |
| S E C T I O N 6 |
10 |
Transfer, Split-Up, Combination and Exchange of
Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates |
| S E C T I O N 7 |
10 |
Exercise of Rights; Purchase Price; Expiration
Date of Rights |
| S E C T I O N 8 |
12 |
Cancellation and Destruction of Rights
Certificates |
| S E C T I O N 9 |
12 |
Company Covenants Concerning Securities and
Rights |
| S E C T I O N 1 0 |
14 |
Record Date |
| S E C T I O N 1 1 |
14 |
Adjustment of Purchase Price, Number and Kind
of Securities or Number of Rights |
| S E C T I O N 1 2 |
21 |
Certificate of Adjusted Purchase Price or
Number of Shares |
| S E C T I O N 1 3 |
22 |
Fractional Rights and Fractional Shares |
| S E C T I O N 1 4 |
23 |
Rights of Action |
| S E C T I O N 1 5 |
24 |
Agreement of Rights Holders |
| S E C T I O N 1 6 |
24 |
Rights Certificate Holder Not Deemed a
Stockholder |
| S E C T I O N 1 7 |
25 |
Concerning the Rights Agent |
| S E C T I O N 1 8 |
25 |
Merger, Consolidation or Change of Name of
Rights Agent |
| S E C T I O N 1 9 |
26 |
Duties of Rights Agent |
| S E C T I O N 2 0 |
28 |
Change of Rights Agent |
| S E C T I O N 2 1 |
29 |
Issuance of New Rights Certificates |
| S E C T I O N 2 2 |
29 |
Redemption |
T A B L E of C O N T E N T S
| S E C T I O N 2 3 |
30 |
Exchange |
| S E C T I O N 2 4 |
31 |
Notice of Certain Events |
| S E C T I O N 2 5 |
32 |
Notices |
| S E C T I O N 2 6 |
33 |
Supplements and Amendments |
| S E C T I O N 2 7 |
33 |
Successors |
| S E C T I O N 2 8 |
33 |
Determinations and Actions by the Board |
| S E C T I O N 2 9 |
34 |
Benefits of this Agreement |
| S E C T I O N 3 0 |
34 |
Severability |
| S E C T I O N 3 1 |
34 |
Governing Law |
| S E C T I O N 3 2 |
34 |
Counterparts |
| S E C T I O N 3 3 |
35 |
Descriptive Headings; Interpretation |
E X H I B I T S
| E X H I B I T A |
|
Form of Certificate of Designation of Series B Junior Preferred Stock |
| E X H I B I T B |
|
Form of Rights Certificate |
| E X H I B I T C |
|
Summary of Rights |
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of
August 14, 2008 (the “Agreement”), between Hovnanian Enterprises, Inc., a Delaware corporation (the “Company”), and National City Bank (the “Rights Agent”).
WITNESSETH
WHEREAS, on July 29, 2008 (the
“Rights Dividend Declaration Date”), the Board authorized and declared a dividend distribution of one right (a “Right”) for each share of Class A common stock, par value $0.01 per share, of the Company (the “Class A Common Stock”)
and one Right for each share of Class B common stock, par value $0.01 per share, of the Company (the “Class B Common Stock”) outstanding at the Close of Business (as hereinafter defined) on August 15, 2008 (the “Record Date”), each
Right initially representing the right to purchase one ten-thousandth of a share of Preferred Stock (as hereinafter defined) of the Company, upon the terms and subject to the conditions hereinafter set forth, and further authorized and directed
the issuance of one Right (subject to adjustment as provided herein) with respect to each share of Class A Common Stock and each share of Class B Common Stock issued or delivered by the Company (whether originally issued or delivered from the
Company’s treasury) after the Record Date but prior to the earlier of the Distribution Date (as hereinafter defined) and the Expiration Date (as hereinafter defined) or as provided in Section 21.
NOW, THEREFORE, in consideration of the mutual agreements herein
set forth, the parties hereby agree as follows:
| SECTION 1 |
CERTAIN DEFINITIONS |
For purposes of this Agreement, the following terms shall have the
meanings indicated:
|
(a) |
“Acquiring Person” shall mean any Person (other than the Company, any Related Person or any Exempt Person) that has become, in
itself or, together with all Affiliates and Associates of such Person, the Beneficial Owner of 4.9% or more of the shares of Class A Common Stock then-outstanding, provided, however, that any Person who would otherwise
qualify as an Acquiring Person as of the Close of Business on the Record Date will not be deemed to be an Acquiring Person for any purpose of this Agreement on and after such date unless and until such time as such stockholder acquires the
beneficial ownership of one additional share of Class A Common Stock, and provided, further, that a Person will not be deemed to have become an Acquiring Person solely as a result of (i) a reduction in the number of shares
of Class A Common Stock outstanding, (ii) the exercise of any options, warrants, rights or similar interests (including restricted stock) granted by the Company to its directors, officers and employees, (iii) any unilateral grant of any
security by the Company, or (iv) an Exempt Transaction, unless and until such time as such stockholder acquires the beneficial ownership of one additional share of Class A Common Stock. The Board shall not make any determination with
respect to a potential Acquiring Person until five (5) Business Days after the date on which all Board members first received notice of the change of beneficial ownership at issue. Notwithstanding the foregoing, the Board may, in its sole
discretion, determine that any Person shall not be deemed to be an “Acquiring Person” for any purposes of this Agreement. |
|
(b) |
“Act” shall mean the Securities Act of 1933, as amended. |
|
(c) |
“Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act as in effect on the date of this Agreement, and to the extent not included within the foregoing clause of this Section 1(c), shall also include, with respect to any Person, any other Person (whether or not
a Related Person or an Exempt Person) whose shares of Class A Common Stock or Class B Common Stock would be deemed constructively owned by such first Person, owned by a single “entity” as defined in Section 1.382-3(a)(1) of the Treasury
Regulations, or otherwise aggregated with shares owned by such first Person pursuant to the provisions of the Code, or any successor provision or replacement provision, and the Treasury Regulations thereunder, provided, however,
that a Person shall not be deemed to be the Affiliate or Associate of another Person solely because either or both Persons are or were directors of the Company. |
|
(d) |
“Agreement” shall have the meaning set forth in the preamble of this Agreement. |
|
(e) |
“Authorized Officer” shall mean the Chief Executive Officer, President, any Vice President, the Treasurer or the Secretary of the
Company. |
|
(f) |
A Person shall be deemed the “Beneficial Owner” of, and to “beneficially own” any securities: |
|
(i) |
which such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, warrants, options, or other rights
(in each case, other than upon exercise or exchange of the Rights); provided, however, that a Person shall not be deemed the “Beneficial Owner” of, or to “beneficially own” securities (including rights, options
or warrants) which are convertible or exchangeable into Class A Common Stock until such time as the convertible or exchangeable securities are exercised and converted or exchanged into Class A Common Stock except to the extent the
acquisition or transfer of such rights, options or warrants would be treated as exercised on the date of its acquisition or transfer under Section 1.382-4(d) of the Treasury Regulations; and, provided further, however, that
a Person shall not be deemed the Beneficial Owner of, or to beneficially own securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person’s Affiliates or Associates until such tendered securities are
accepted for purchase or exchange; |
|
(ii) |
which such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has or shares the right to vote or dispose of,
or has “beneficial ownership” of (as defined under Rule 13d-3 of the General Rules and Regulations under the Exchange Act), including pursuant to any agreement, arrangement or understanding (whether or not in writing), but only if the
effect of such agreement, arrangement or understanding is to treat such Persons as an “entity” under Section 1.382-3(a)(1) of the Treasury Regulations, or |
|
(iii) |
which any other person is the Beneficial Owner, if such Person or any of such Person’s Affiliates or Associates has any agreement,
arrangement or understanding (whether or not in writing) with such other Person (or any of such other Person’s Affiliates or Associates) with respect to acquiring, holding, voting or disposing of any securities of the Company, but only if
the effect of such agreement, arrangement or understanding is to treat such Persons as an “entity” under Section 1.382-3(a)(1) of the Treasury Regulations; provided, however, that a Person shall not be deemed the “Beneficial
Owner” of, or to “beneficially own” any security (A) if such Person has the right to vote such security pursuant to an agreement, arrangement or understanding (whether or not in writing) which (1) arises solely from a revocable proxy given
to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations of the Exchange Act and (2) is not also then reportable on Schedule 13D under the Exchange
Act (or any comparable or successor report), or (B) if such beneficial ownership arises solely as a result of such Person’s status as a “clearing agency,” as defined in Section 3(a)(23) of the Exchange Act; provided further, however,
that nothing in this Section 1(e) shall cause a Person engaged in business as an underwriter of securities or member of a selling to group to be the Beneficial Owner of, or to “beneficially own,” any securities acquired through such
Person’s participation in good faith in an underwriting syndicate until the expiration of 40 calendar days after the date of such acquisition, or such later date as the directors of the Company may determine in any specific case.
Notwithstanding anything herein to the contrary, to the extent not within the foregoing provisions of this Section 1(e), a Person shall be deemed the “Beneficial Owner” of and shall be deemed to “beneficially own” or have “beneficial
ownership” of, securities which such Person would be deemed to constructively own or which otherwise would be aggregated with shares owned by such pursuant to Section 382 of the Code, or any successor provision or replacement provision and
the Treasury Regulations thereunder. |
|
(g) |
“Board” shall mean the Board of Directors of the Company. |
|
(h) |
“Business Day” shall mean any day other than a Saturday, Sunday or a day on which banking institutions in the States of New York or
New Jersey (or such other state in which the principal office of the Rights Agent may be located) are authorized or obligated by law or executive order to close. |
|
(i) |
“Class A Common Stock” shall have the meaning set forth in the preamble of this Agreement. |
|
(j) |
“Class B Common Stock” shall have the meaning set forth in the preamble of this Agreement. |
|
(k) |
“Close of Business” on any given date shall mean 5:00 P.M., New York City time, on such date; provided, however, that if
such date is not a Business Day, it shall mean 5:00 P.M., New York City time, on the next succeeding Business Day. |
|
(l) |
“Code” shall mean the Internal Revenue Code of 1986, as amended. |
|
(m) |
“Common Stock” shall mean the Class A Common Stock together with the Class B Common Stock. |
|
(n) |
“Company” shall have the meaning set forth in the preamble of this Agreement. |
|
(o) |
“Company’s Certificate of Incorporation” shall mean the Certificate of Incorporation of the Company, as amended. |
|
(p) |
“Current Per Share Market Price” shall have the meaning set forth in Section 11(d)(i) or Section 11(d)(ii) hereof, as applicable. |
|
(q) |
“Current Value” shall have the meaning set forth in Section 11(a)(iii) hereof. |
|
(r) |
“Distribution Date” shall mean the earliest of (i) the Close of Business on the tenth Business Day after the Stock Acquisition Date
or (ii) the Close of Business on the tenth Business Day (or, unless the Distribution Date shall have previously occurred, such later date as may be specified by the Board of Directors of the Company) after the commencement of a tender or
exchange offer by any Person (other than the Company, any Related Person or any Exempt Person), if upon the consummation thereof such Person would be the Beneficial Owner of 4.9% or more of the then-outstanding Class A Common Stock. |
|
(s) |
“Equivalent Preferred Stock” shall have the meaning set forth in Section 11(b) hereof. |
|
(t) |
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended. |
|
(u) |
“Exchange Ratio” shall have the meaning set forth in Section 23(a) hereof |
|
(v) |
“Exempt Person” shall mean (i) a Person whose Beneficial Ownership (together with all Affiliates and Associates of such Person) of
4.9% or more of the then-outstanding Class A Common Stock would not, as determined by the Board in its sole discretion, jeopardize or endanger the availability to the Company of its NOLs and (ii) any Person that beneficially owns, as of the
Record Date, 4.9% or more of the outstanding shares of Class A Common Stock, provided, however, that, with respect to clause (ii) of this paragraph, any such Person shall only be deemed to be an Exempt Person for so long as
it beneficially owns no more than the amount of Class A Common Stock it owned on the Record Date; and provided, further, that, with respect to clauses (i) and (ii) of this paragraph, any Person shall cease to be an Exempt
Person as of the date that such Person ceases to beneficially own 4.9% or more of the shares of the then outstanding Class A Common Stock. Additionally, a Person shall cease to be an Exempt Person if the Board, in its sole discretion, makes
a contrary determination with respect to the effect of such Person’s Beneficial Ownership (together with all Affiliates and Associates of such Person) with respect to the availability to the Company of its NOLs. |
|
(w) |
“Exempt Transaction” shall mean any transaction that the Board determines, in its sole discretion, is exempt, which determination
shall be irrevocable. |
|
(x) |
“Expiration Date” shall mean the earliest of (i) the Final Expiration Date, (ii) the time at which the Rights are redeemed as provided in Section 22 hereof,
(iii) the time at which the Rights are exchanged as provided in Section 23 hereof, (iv) the repeal of Section 382 of the Code or any successor statute if the Board determines that this Agreement is no longer necessary for the preservation
of Tax Benefits,
(v) the beginning of a taxable year of the Company to which the Board determines that no Tax Benefits may be carried forward and
(vi) August 14, 2009 if Stockholder Approval has not been obtained.
|
|
(y) |
“Final Expiration Date” shall be August 14, 2018. |
|
(z) |
“Nasdaq” means The Nasdaq Stock Market. |
|
(aa) |
“NOLs” shall mean the Company’s net operating loss carryforwards. |
|
(bb) |
“Person” shall mean any individual, firm, corporation, partnership, limited liability company, limited liability partnership, trust
or other legal entity, group of persons making a “coordinated acquisition” of shares or otherwise treated as an entity within the meaning of Section 1.382-3(a)(1) of the Treasury Regulations or otherwise, and includes any successor (by
merger or otherwise) of such individual or entity. |
|
(cc) |
“Preferred Stock” shall mean shares of Series B Junior Preferred Stock, par value $0.01 per share, of the Company having the rights
and preferences set forth in the form of Certificate of Designation of Series B Junior Preferred Stock attached hereto as Exhibit A. |
|
(dd) |
“Purchase Price” shall mean initially $35.00 per one ten-thousandth of a Preferred Stock, subject to adjustment from time to time as
provided in this Agreement. |
|
(ee) |
“Record Date” shall have the meaning set forth in the recitals to this Agreement. |
|
(ff) |
“Redemption Price” shall mean $0.01 per Right, subject to adjustment of the Company to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof. |
|
(gg) |
“Related Person” shall mean (i) any Subsidiary of the Company or (ii) any employee benefit or stock ownership plan of the Company or
of any Subsidiary of the Company or any entity holding shares of Class A Common Stock or Class B Common Stock, as the case may be, for or pursuant to the terms of any such plan. |
|
(hh) |
“Rights” shall have the meaning set forth in the recitals to this Agreement. |
|
(ii) |
“Rights Agent” shall have the meaning set forth in the preamble of this Agreement. |
|
(jj) |
“Rights Certificates” shall mean certificates evidencing the Rights, in substantially the form attached hereto as Exhibit B. |
|
(kk) |
“Rights Dividend Declaration Date” shall have the meaning set forth in the recitals to this Agreement. |
|
(ll) |
“Section 11(a)(ii) Trigger Date” shall have the meaning set forth in Section 11(a)(iii) hereof. |
|
(mm) |
“Securities Act” shall mean Securities Act of 1933, as amended. |
|
(nn) |
“Spread” shall have the meaning set forth in Section 11(a)(iii) hereof. |
|
(oo) |
“Stock Acquisition Date” shall mean the first date of public announcement (which for purposes of this definition shall include,
without limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has become such or such earlier date as a majority of the Board shall become aware of the
existence of an Acquiring Person. |
|
(pp) |
“Stockholder Approval” shall mean the approval of this Agreement by the affirmative vote of the holders of a majority of the voting
power of the outstanding shares of Common Stock of the Company entitled to vote, and voting together without regard to class, and that are present, or represented by proxy, and are voted on the proposal to approve this Agreement, at the
meeting of stockholders of the Company duly held in accordance with the Company’s certificate of incorporation (as amended) and applicable law. |
|
(qq) |
“Subsidiary” shall mean, with reference to any Person, any corporation or other legal entity of which a majority of the voting power
of the voting equity securities or equity interests is owned, directly or indirectly, by such Person, or otherwise controlled by such Person. |
|
(rr) |
“Substitution Period” shall have the meaning set forth in Section 11(a)(iii) hereof. |
|
(ss) |
“Summary of Rights ” shall mean a copy of a summary of the terms of the Rights, in substantially the form attached hereto as Exhibit
C. |
|
(tt) |
“Tax Benefits” shall mean the net operating loss carry-overs, capital loss carry-overs, general business credit carry-overs,
alternative minimum tax credit carry-overs and foreign tax credit carry-overs, as well as any “net unrealized built-in loss” within the meaning of Section 382, of the Company or any direct or indirect subsidiary thereof. |
|
(uu) |
“Trading Day” shall mean a day on which the principal national securities exchange on which the shares of Class A Common Stock are
listed or admitted to trading is open for the transaction of business or, with respect to the shares of Class B Common Stock which are not listed or admitted to trading on any national securities exchange, a Trading Day for the Class A
Common Stock. |
|
(vv) |
“Treasury Regulations” shall mean final, temporary and proposed income tax regulations promulgated under the Code, including any
amendments thereto. |
| SECTION 2 |
APPOINTMENT OF RIGHTS AGENT |
The Company hereby appoints
the Rights Agent to act as agent for the Company in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment and hereby certifies that it complies with the requirements of the New York Stock Exchange
governing transfer agents and registrars. The Company may from time to time appoint such co-rights agents as it may deem necessary or desirable. The Rights Agent shall have no duty to supervise, and shall in no event be liable for, the acts or
omission of any such co-rights agent. Prior to the appointment of a co-rights agent, the specific duties and obligations of each such co-rights agents shall be set forth in writing and delivered to the Rights Agent and the proposed co-rights
agent. Any actions which may be taken by the Rights Agent pursuant to the terms of this Agreement may be taken by any such co-rights agent. To the extent that any co-rights agent takes any action pursuant to this Agreement, such co-rights agent
shall be entitled to all of the rights and protections of, and subject to all of the applicable duties and obligations imposed upon, the Rights Agent pursuant to the terms of this Agreement. The Rights Agent will have no duty to supervise, and in
no event will be liable for, the acts or omissions of any co-rights agent.
| SECTION 3 |
ISSUANCE OF RIGHTS CERTIFICATES |
|
(a) |
Until the Distribution Date, (i) the Rights shall be evidenced (subject to Section 3(b)) by the certificates representing the shares of
Class A Common Stock or Class B Common Stock, registered in the names of the record holders thereof (which certificates representing such shares of Class A Common Stock and/or Class B Common Stock shall also be deemed to be Rights
Certificates), (ii) the Rights shall be transferable only in connection with the transfer of the underlying shares of Class A Common Stock and/or Class B Common Stock, and (iii) the surrender for transfer of any certificates representing
such shares of Class A Common Stock and/or Class B Common Stock in respect of which Rights have been issued shall also constitute the transfer of the Rights associated with the shares of Class A Common Stock and/or Class B Common Stock
represented by such certificates. |
|
(b) |
On or as promptly as practicable after the Record Date, the Company shall send by first class, postage prepaid mail, to each record holder
of shares of Class A Common Stock and Class B Common Stock as of the Close of Business on the Record Date, at the address of such holder shown on the records of the Company as of such date, a copy of a Summary of Rights to Purchase
Preferred Stock in substantially the form attached as Exhibit C. With respect to certificates for Class A Common Stock and Class B Common Stock outstanding as of the Record Date, until the Distribution Date, the Rights will be evidenced by
such certificates registered in the names of the holders thereof together with the Summary of Rights. |
|
(c) |
Rights shall be issued by the Company in respect of all shares of Class A Common Stock and Class B Common Stock (other than any shares of
Class A Common Stock and Class B Common Stock that may be issued upon the exercise or exchange of any Right) issued or delivered by the Company (whether originally issued or delivered from the Company’s treasury) after the Record Date but
prior to the earlier of the Distribution Date and the Expiration Date, except as specially provided in Section 21 hereof, after the Distribution Date. Certificates representing such shares of Class A Common Stock and Class B Common Stock
shall have stamped on, impressed on, printed on, written on, or otherwise affixed to them a legend in substantially the following form or such similar legend as the Company may deem appropriate and is not inconsistent with the provisions of
this Agreement and as do not affect the rights, duties or responsibilities of the Rights Agent, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of
any stock exchange or transaction reporting system on which the shares of Class A Common Stock or Class B Common Stock may from time to time be listed or quoted: |
This certificate also evidences and entitles
the holder hereof to certain Rights as set forth in the Rights Agreement between Hovnanian Enterprises, Inc. and National City Bank, dated as of August 14, 2008 and as amended from time to time (the “Rights Agreement”), the terms of which are
hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of Hovnanian Enterprises, Inc. The Rights are not exercisable prior to the occurrence of certain events specified in the Rights Agreement.
Under certain circumstances, as set forth in the Rights Agreement, such Rights may be redeemed, may be exchanged, may expire, may be amended, or may be evidenced by separate certificates and no longer be evidenced by this certificate. Hovnanian
Enterprises, Inc. shall mail to the holder of this certificate a copy of the Rights Agreement, as in effect on the date of mailing, without charge promptly after receipt of a written request therefor. Under certain circumstances as set forth
in the Rights Agreement, Rights that are or were beneficially owned by an Acquiring Person or any Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights Agreement) may become null and void.
|
(d) |
Any Rights Certificate issued pursuant to this Section 3 or Section 21 hereof that represents Rights beneficially owned by an Acquiring
Person or any of its Associates or Affiliates and any Rights Certificate issued at any time upon the transfer of any Rights to an Acquiring Person or any of its Associates or Affiliates or to any nominee of such Acquiring Person, Associate
or Affiliate and any Rights Certificate issued pursuant to Section 6 or 11 hereof upon transfer, exchange, replacement or adjustment of any other Rights Certificate referred to in this sentence, shall be subject to and contain a legend in
substantially the following form or such similar legend as the Company may deem appropriate and is not inconsistent with the provisions of this Agreement or as may be required to comply with any applicable law or with any rule or regulation
made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed: |
The Rights represented by this Rights
Certificate are or were beneficially owned by a Person who was an Acquiring Person or an Affiliate or an Associate of an Acquiring Person (as such terms are defined in the Rights Agreement). This Rights Certificate and the Rights represented
hereby may become null and void in the circumstances specified in Section 11(a)(ii) of the Rights Agreement.
|
(e) |
As promptly as practicable after the Distribution Date, the Company shall prepare and execute, the Rights Agent shall countersign and the
Company shall send or cause to be sent (and the Rights Agent will, if requested, and if provided with all necessary information, send), by first class, insured, postage prepaid mail, to each record holder of shares of Class A Common Stock
and Class B Common Stock, as of the Close of Business on the Distribution Date (other than an Acquiring Person or any Associate or Affiliate of an Acquiring Person), at the address of such holder shown on the records of the Company, a
Rights Certificate representing one Right for each share of Class A Common Stock and/or Class B Common Stock so held, subject to adjustment as provided herein. As of and after the Distribution Date, the Rights shall be represented solely by
such Rights Certificates. The Company shall promptly notify the Rights Agent in writing upon the occurrence of the Distribution Date and, if such notification is given orally, the Company shall confirm same in writing on or prior to the
next Business Day. Until such notice is received by the Rights Agent, the Rights Agent may presume conclusively that the Distribution Date has not occurred. |
|
(f) |
In the event that the Company purchases or otherwise acquires any shares after the Record Date but prior to the Distribution Date, any
Rights associated with such shares of Class A Common Stock and/or Class B Common Stock shall be deemed canceled and retired so that the Company shall not be entitled to exercise any Rights associated with the shares of Class A Common Stock
and/or Class B Common Stock so purchased or acquired. |
| SECTION 4 |
FORM OF RIGHTS CERTIFICATES |
The Rights Certificates (and
the form of election to purchase and the form of assignment to be printed on the reverse thereof) shall each be substantially in the form attached hereto as Exhibit B with such changes and marks of identification or designation, and such
legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange or transaction reporting system on which the Rights may from time to time be listed or quoted, or to conform to usage. Subject to the provisions of Section 21 hereof, the
Rights Certificates, whenever distributed shall entitle the holders thereof to purchase such number of one ten-thousandths of a share of Preferred Stock as is set forth therein at the Purchase Price; provided, however, that the
Purchase Price, the number and kind of securities issuable upon exercise of each Right and the number of Rights outstanding shall be subject to adjustments as provided in this Agreement.
| SECTION 5 |
COUNTERSIGNATURE AND REGISTRATION |
|
(a) |
The Rights Certificates shall be executed on behalf of the Company by any Authorized Officer, either manually or by facsimile signature,
and shall have affixed thereto the Company’s seal or a facsimile thereof which shall be attested by any Authorized Officer, either manually or by facsimile signature. The Rights Certificates shall be countersigned by the Rights Agent,
either manually or by facsimile signature and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who shall have signed any of the Rights Certificates shall cease to be such officer of the Company
before countersignature by the Rights Agent and issuance and delivery by the Company, such Rights Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as
though the person who signed such Rights Certificates had not ceased to be such officer of the Company; and any Rights Certificates may be signed on behalf of the Company by any person who, at the actual date of the execution of such Rights
Certificate, shall be a proper officer of the Company to sign such Rights Certificate, although at the date of the execution of this Agreement any such person was not such an officer. |
|
(b) |
Following the Distribution Date, upon receipt by the Rights Agent of written notice of the occurrence of the Distribution Date pursuant to
Section 3(e) hereof, a stockholder list and all other relevant information referred to in Section 3(e) or as reasonably requested by the Rights Agent, the Rights Agent shall keep, books for registration and transfer of the Rights
Certificates issued hereunder or cause to be kept, at its office or offices designated for such purposes and at such other offices as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or
with any rule or regulation of any stock exchange or any transaction reporting system on which the rights may from time to time be listed or quoted. Such books shall show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced on its face by each of the Rights Certificates and the date of each of the Rights Certificates. |
| SECTION 6 |
TRANSFER, SPLIT-UP, COMBINATION AND EXCHANGE OF RIGHTS CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES |
|
(a) |
Subject to the provisions of Section 7(d) and Section 13 hereof, at any time after the Close of Business on the Distribution Date, and
prior to the Expiration Date, any Rights Certificate(s) (other than Rights Certificates representing Rights that may have been exchanged pursuant to Section 23 hereof) representing exercisable Rights may be transferred, split up, combined
or exchanged for another Rights Certificate(s), entitling the registered holder to purchase a like number of one ten-thousandths of a share of Preferred Stock (or other securities, as the case may be) as the Rights Certificate(s)
surrendered then entitled such holder (or former holder in the case of a transfer) to purchase. Any registered holder desiring to transfer, split up, combine or exchange any such Rights Certificate(s) must make such request in writing
delivered to the Rights Agent, and must surrender the Rights Certificate(s) to be transferred, split up, combined or exchanged, with the forms of assignment and certificate contained therein duly executed, at the office or offices of the
Rights Agent designated for such purpose. The Rights Certificates are transferable only on the registry books of the Rights Agent. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the
transfer of any such surrendered Rights Certificate until the registered holder shall have (i) completed and signed the certificate contained in the form of assignment on the reverse side of such Rights Certificate, (ii) provided such
additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner and the Affiliates and Associates of such Beneficial Owner (or former Beneficial Owner) as the Company or the Rights Agent shall reasonably request and
(iii) paid a sum sufficient to cover any tax or charge that may be imposed in connection with any transfer, split up, combination or exchange or Rights Certificates as required by Section 9(d) hereof. Thereupon the Rights Agent shall
countersign and deliver to the Person entitled thereto a Rights Certificate or Rights Certificates, as the case may be, as so requested registered in such name or names as may be designated by the surrendering registered holder. The Rights
Agent shall promptly forward any such sum collected by it to the Company or to such Person or Persons as the Company shall specify by written notice. The Rights Agent shall have no duty or obligation unless and until it is satisfied that
all such taxes and/ or charges have been paid. |
|
(b) |
Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation
of a Rights Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate, if mutilated, the Company shall execute and deliver a new Rights Certificate of like tenor to the Rights Agent and the Rights Agent will countersign and deliver such
new Rights Certificate to the registered holder in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated. |
| SECTION 7 |
EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS |
|
(a) |
Except as otherwise provided herein, the Rights shall become exercisable on the Distribution Date and prior to the Expiration Date, and
thereafter the registered holder of any Right Certificate may, subject to Section 11(a)(ii) and Section 23 hereof, exercise the Rights evidenced thereby in whole or in part upon surrender of the Rights Certificate, with the form of election
to purchase on the reverse side thereof duly executed, to the Rights Agent at the office or agency of the Rights Agent designated for such purpose, together with payment of the Purchase Price (including any applicable tax or charge required
to be paid by the holder of such Rights Certificate in accordance with the provisions of Section 9(d)) hereof for each one ten-thousandth of a share of Preferred Stock (or other securities, cash or assets, as the case may be) as to which
the Rights are exercised. |
| (b) |
Upon receipt of a Rights Certificate representing exercisable Rights with the form of election to purchase and the
certificate properly completed and duly executed, accompanied by payment of the Purchase Price for the shares to be purchased and an amount equal to any applicable tax or charge required to be paid under Section 9(d) hereof by certified
check, cashier’s check, bank draft or money order payable to the order of the Company, the Rights Agent shall, thereupon promptly (i) (A) requisition from any transfer agent of the shares of Preferred Stock (or make available, if
the Rights Agent is the transfer agent for such shares) certificates representing the total number of one ten-thousandths of a share of Preferred Stock to be purchased (and the Company hereby irrevocably authorizes and directs its
transfer agent to comply with all such requests) or (B) if the Company shall have elected to deposit any shares of Preferred Stock issuable upon exercise of the Rights hereunder with a depositary agent, requisition from the depositary
agent depositary receipts representing such number of one ten-thousandths of a share of Preferred Stock as are to be purchased (and the Company hereby irrevocably authorizes and directs such depositary agent to comply with all such
requests), (ii) after receipt of such certificates (or depositary receipts, as the case may be) cause the same to be delivered to or upon the order of the registered holder of such Rights Certificate, registered in such name or names as
may be designated by such holder, (iii) when appropriate, requisition from the Company or any transfer agent therefor of certificates representing the number of equivalent shares to be issued in lieu of the issuance of shares of Class A
Common Stock or Class B Common Stock, as the case may be, in accordance with the provisions of Section 11(a)(iii), (iv) when appropriate, after receipt of such certificates, cause the same to be delivered to or upon the order of the
registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, (v) when appropriate, requisition from the Company of the amount of cash to be paid in lieu of the issuance of fractional
shares in accordance with the provisions of Section 13 hereof, and (vi) when appropriate, after receipt, deliver such cash to the registered holder of such Rights Certificate. |
|
(c) |
In case the registered holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, the Rights Agent shall
prepare, execute and deliver a new Rights Certificate evidencing Rights equivalent to the Rights remaining unexercised to the registered holder of such Rights Certificate or to his duly authorized assigns, subject to the provisions of
Section 13 hereof. |
|
(d) |
Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to any purported transfer, split up, combination or exchange of any Rights Certificate pursuant to Section 6 or exercise or assignment of a Rights Certificate as set forth in this Section 7 unless the registered holder
of such Rights Certificate shall have (i) duly and properly completed and signed the certificate following the form of assignment or the form of election to purchase, as applicable, set forth on the reverse side of the Rights Certificate
surrendered for such transfer, split up, combination, exchange, exercise or assignment and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) thereof and of the Rights evidenced
thereby and Affiliates and Associates thereof as the Company or the Rights Agent may reasonably request. |
| SECTION 8 |
CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES |
All Rights Certificates
surrendered for the purpose of exercise, transfer, split-up, combination or exchange shall, if surrendered to the Company or any of its agents, be delivered to the Rights Agent for cancellation or in cancelled form, or, if surrendered to the
Rights Agent, shall be cancelled by it, and no Rights Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation and
retirement, and the Rights Agent shall so cancel and retire, any other Rights Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all cancelled Rights Certificates to the
Company, or shall, at the written request of the Company, destroy such cancelled Rights Certificates, and in such case shall deliver a certificate of destruction thereof to the Company.
| SECTION 9 |
COMPANY COVENANTS CONCERNING SECURITIES AND RIGHTS |
|
(a) |
The Company covenants and agrees that it shall cause to be reserved, authorized for issuance and kept available out of its authorized and
unissued shares of Preferred Stock, and/or other securities, or any shares of any such security of the Company held in its treasury, a number of shares of Preferred Stock (or any other security of the Company as may be applicable at the
time of exercise) that shall be sufficient to permit the exercise in full of all outstanding Rights in accordance with Section 7. |
|
(b) |
The Company covenants and agrees so long as the shares of Preferred Stock (and, following the occurrence of any Person becoming an
Acquiring Person, shares of Class A Common Stock and/or other securities) issuable upon the exercise of the Rights may be listed on any national securities exchange, or quoted on Nasdaq, it shall endeavor to cause, from and after such time
as the Rights become exercisable, all securities reserved for issuance upon the exercise of Rights to be listed on such exchange, or quoted on the Nasdaq, upon official notice of issuance upon such exercise. |
|
(c) |
The Company covenants and agrees it will take all such actions as may be necessary to ensure that all shares of Preferred Stock (and,
following the occurrence of any Person becoming an acquiring Person shares of Class A Common Stock, Class B Common Stock and/or other securities) delivered upon exercise of Rights, at the time of delivery of the certificates for such
securities, shall be (subject to payment of the Purchase Price) duly authorized, validly issued, fully paid and nonassessable securities. |
|
(d) |
The Company covenants and agrees it will pay when due and payable any and all federal or state taxes and charges that may be payable in
respect of the issuance or delivery of the Rights Certificates and of any certificates representing securities issued upon the exercise of Rights; provided, however, that the Company shall not be required to pay any tax or charge
which may be payable in respect of any transfer or delivery of Rights Certificates to a person other than, or the issuance or delivery of certificates or depositary receipts representing securities issued upon the exercise of Rights in a
name other than that of, the registered holder of the Rights Certificate evidencing Rights surrendered for exercise, or to issue or deliver any certificates or depositary receipts representing securities issued upon the exercise of any
Rights until any such tax or charge has been paid (any such tax or charge being payable by the holder of such Rights Certificate at the time of surrender) or until it has been established to the Company’s reasonable satisfaction that no
such tax or charge is due. |
|
(e) |
If the Company determines that registration under the Securities Act is required, then the Company shall use commercially reasonable
efforts (i) to file, as soon as practicable after the Distribution Date, on an appropriate form, a registration statement under the Securities Act with respect to the securities issuable upon exercise of the Rights, (ii) to cause such
registration statement to become effective as soon as practicable after such filing and (iii) to cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the
earlier of (A) the date as of which the Rights are no longer exercisable for such securities and (B) the Expiration Date. The Company shall also take such action as may be appropriate under, or to ensure compliance with, the securities or
“blue sky” laws of the various states in connection with the exercisability of the Rights. The Company may temporarily suspend, for a period of time not exceed 90 days, the exercisability of the Rights in order to prepare and file such
registration statement and to permit it to become effective or to qualify the rights, the exercise thereof or the issuance of shares of Preferred Stock, Class A Common Stock, Class B Common Stock, or other securities upon the exercise
thereof under state securities or “blue sky” laws. Upon any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at
such time as the suspension is no longer in effect. The Company shall notify the Rights Agent in writing whenever it makes a public announcement pursuant to this Section 9(e) and give the Rights Agent a copy of such announcement. In
addition, if the Company determines that a registration statement or other document should be filed under the Securities Act or any state securities laws following the Distribution Date, the Company may temporarily suspend the
exercisability of the Rights, for a period of time not to exceed 90 days, in each relevant jurisdiction until such time as a registration statement has been declared effective or any such other document filed and, if required, approved,
and, upon any such suspension, the Company shall issue a public announcement stating that the exercisability of the rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in
effect. Notwithstanding anything in this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction if the requisite registration or qualification in such jurisdiction has not been effected or the exercise of the
Rights is not permitted under applicable law. |
|
(f) |
Notwithstanding anything in this Agreement to the contrary, after the later of the Stock Acquisition Date and the Distribution Date, the
Company shall not take (or permit any Subsidiary to take) any action if at the time such action is taken it is reasonably foreseeable that such action shall eliminate or otherwise diminish the benefits intended to be afforded by the Rights. |
|
(g) |
In the event that the Company is obligated to issue other securities of the Company and/or pay cash pursuant to Sections 7, 11, 13 or 23 it
shall make all arrangements necessary so that such other securities and/or cash are available for distribution by the Rights Agent, if and when necessary to comply with this Agreement. |
Each Person in whose name any
certificate for a number of one ten-thousandths of a share of Preferred Stock (or Class A Common Stock, Class B Common Stock and/or other securities, as the case may be) is issued upon the exercise of Rights shall for all purposes be deemed to
have become the holder of record of such shares of Preferred Stock (or Class A Common Stock, Class B Common Stock and/or other securities, as the case may be) represented thereby on, and such certificate shall be dated, the date upon which the
Rights Certificate representing such Rights was duly surrendered and payment of the Purchase Price (and all applicable taxes and charges) was made; provided, however, that if the date of such surrender and payment is a date upon which the
transfer books of the Company for shares of Preferred Stock (or Class A Common Stock, Class B Common Stock and/or other securities, as the case may be) are closed, such Person shall be deemed to have become the record holder of such securities
on, and such certificate shall be dated, the next succeeding Business Day on which the transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Rights Certificate shall not be entitled to any
rights of a holder of any security of the Company with respect to shares for which the Rights are or may be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive
rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein.
| SECTION 11 |
ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SECURITIES OR NUMBER OF RIGHTS |
The Purchase Price, the number
of shares of Preferred Stock or other securities or property purchasable upon exercise of each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11.
| (a) |
(i) |
In the event the Company shall at any time after the Record Date (A) declare a dividend on the shares of Preferred Stock payable in shares
of Preferred Stock, (B) subdivide the outstanding shares of Preferred Stock, (C) combine the outstanding shares of Preferred Stock into a smaller number of shares of Preferred Stock or (D) issue any shares of its capital stock in a
reclassification of the shares of Preferred Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this
Section 11(a), the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, as the case may be, and the number and kind of shares of capital
stock issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive the aggregate number and kind of shares of capital stock which, if such Right had been
exercised immediately prior to such date and at a time when the transfer books of the Company for the shares of Preferred Stock were open, the holder would have owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of one Right. |
|
(ii) |
Subject to Section 23 of this Agreement and except as otherwise provided in this Section 11(a)(ii) and Section 11(a)(iii), in the event
that any Person becomes an Acquiring Person, each holder of a Right shall thereafter have the right to receive, upon exercise thereof at a price equal to the then-current Purchase Price, in accordance with the terms of this Agreement and in
lieu of shares of Preferred Stock, such number of shares of Class A Common Stock or Class B Common Stock, as the case may be, (or at the option of the Company, such number of one ten-thousandths of a share of Preferred Stock) as shall equal
the result obtained by (x) multiplying the then-current Purchase Price by the number of one ten-thousandths of a share of Preferred Stock for which a Right is then exercisable and dividing that product by (y) 50% of the Current Per Share
Market Price of the Company’s Class A Common Stock (determined pursuant to Section 11(d) hereof) on the date of the occurrence of such event; provided, however, that the Purchase Price (as so adjusted) and the number of shares of
Class A Common Stock or Class B Common Stock, as the case may be, so receivable upon exercise of a Right shall thereafter be subject to further adjustment as appropriate in accordance with Section 11(f) hereof. |
Notwithstanding anything in this Agreement to the
contrary, however, from and after the time (the “invalidation time”) when any Person first becomes an Acquiring Person, any Rights that are beneficially owned by (A) any Acquiring Person (or any Affiliate or Associate of any Acquiring
Person), (B) a transferee of any Acquiring Person (or any such Affiliate or Associate) who becomes a transferee after the invalidation time or (C) a transferee of any Acquiring Person (or any such Affiliate or Associate) who became a transferee
prior to or concurrently with the invalidation time pursuant to either (1) a transfer from the Acquiring Person to holders of its equity securities or to any Person with whom it has any continuing agreement, arrangement or understanding, written
or otherwise, regarding the transferred Rights or (2) a transfer that the Board has determined is part of a plan, arrangement or understanding, written or otherwise, which has the purpose or effect of avoiding the provisions of this paragraph,
and subsequent transferees of such Persons, shall be void without any further action and any holder of such Rights shall thereafter have no rights whatsoever with respect to such Rights under any provision of this Agreement. The Company will use
commercially reasonable efforts to ensure that the provisions of this Section 11(a)(ii) are complied with, but shall have no liability to any holder of Rights Certificates or other Person as a result of its failure to make any determinations with
respect to an Acquiring Person or its Affiliates, Associates or transferees hereunder. From and after the invalidation time, no Right Certificates shall be issued pursuant to Section 3 or Section 6 hereof that represents Rights that are or have
become void pursuant to the provisions of this paragraph, and any Right Certificates delivered to the Rights Agent that represents Rights that are or have become void pursuant to the provisions of this paragraph shall be cancelled.
|
(iii) |
The Company may at its option substitute for a share of Class A Common Stock or Class B Common Stock, as the case may be, issuable upon the
exercise of Rights in accordance with the foregoing subparagraph (ii) such number or fractions of shares of Preferred Stock having an aggregate current market value equal to the Current Per Share Market Price of a share of Class A Common
Stock or Class B Common Stock, as the case may be. In the event that there shall be an insufficient number of Class A Common Stock or Class B Common Stock authorized but unissued (and unreserved) to permit the exercise in full of the Rights
in accordance with the foregoing subparagraph (ii), the Board shall, with respect to such deficiency, to the extent permitted by applicable law and any material agreements then in effect to which the Company is a party (A) determine the
excess of (x) the value of the shares of Common Stock issuable upon the exercise of a Right in accordance with the foregoing subparagraph (ii) (the “Current Value”) over (y) the then-current Purchase Price multiplied by the number of
one ten-thousandths of shares of Preferred Stock for which a Right was exercisable immediately prior to the time that the Acquiring Person became such (such excess, the “Spread”), and (B) with respect to each Right (other than Rights
which have become void pursuant to Section 11(a)(ii)), make adequate provision to substitute for the shares of Class A Common Stock and/or Class B Common Stock issuable in accordance with subparagraph (ii) upon exercise of the Right and
payment of the applicable Purchase Price, (1) cash, (2) a reduction in such Purchase Price, (3) shares of Preferred Stock or other equity securities of the Company (including, without limitation, shares or fractions of shares of preferred
stock which, by virtue of having dividend, voting and liquidation rights substantially comparable to those of the shares of Class A Common Stock and/or Class B Common Stock, are deemed in good faith by the Board to have substantially the
same value as the shares of Class A Common Stock or Class B Common Stock, as the case may be, (such shares of preferred stock and shares or fractions of shares of preferred stock are hereinafter referred to as “Common Stock equivalents”)
(4) debt securities of the Company, (5) other assets or (6) any combination of the foregoing, having a value which, when added to the value of the shares of Class A Common Stock and Class B Common Stock actually issued upon exercise of such
Right, shall have an aggregate value equal to the Current Value (less the amount of any reduction in such Purchase Price), where such aggregate value has been determined by the Board (upon the advice of a nationally recognized investment
banking firm selected by the Board in good faith); provided, however, if the Company shall not make adequate provision to deliver value pursuant to clause (B) above within thirty (30) days following the date that the Acquiring Person became
such (the “Section 11(a)(ii) Trigger Date”), then the Company shall be obligated to deliver, to the extent permitted by applicable law and any material agreements then in effect to which the Company is a party, upon the surrender for
exercise of a Right and without requiring payment of the Purchase Price, shares of Class A Common Stock and/or Class B Common Stock (to the extent available), and then, if necessary, such number or fractions of shares of Preferred Stock (to
the extent available) and then, if necessary, cash, which shares and/or cash have an aggregate value equal to the Spread. If within the thirty (30) day period referred to above the Board shall determine in good faith that it is likely that
sufficient additional shares of Class A Common Stock and/or Class B Common Stock could be authorized for issuance upon exercise in full of the Rights, then, if the Board so elects, such thirty (30) day period may be extended to the extent
necessary, but not more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in order that the Company may seek stockholder approval for the authorization of such additional shares (such thirty (30) day period, as it may be
extended, is hereinafter called the “Substitution Period”). To the extent that the Company determines that some action need be taken pursuant to the second and/or third sentence of this Section 11(a)(iii), the Company (x) shall
provide, subject to Section 11(a)(ii) hereof and the last sentence of this Section 11(a)(iii) hereof, that such action shall apply uniformly to all outstanding Rights and (y) may suspend the exercisability of the Rights until the expiration
of the Substitution Period in order to seek any authorization of additional shares and/or to decide the appropriate form of distribution to be made pursuant to such second sentence and to determine the value thereof. In the event of any
such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect. |
|
(b) |
If the Company fixes a record date for the issuance of rights, options or warrants to all holders of shares of Preferred Stock entitling
them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase shares of Preferred Stock (or securities having equivalent rights, privileges and preferences as the shares of Preferred Stock (for
purposes of this Section 11(b), “Equivalent Preferred Stock”)) or securities convertible into shares of Preferred Stock or Equivalent Preferred Stock at a price per share of Preferred Stock or Equivalent Preferred Stock (or having a
conversion price per share, if a security convertible into shares of Preferred Stock or Equivalent Preferred Stock) less than the Current Per Share Market Price of the shares of Preferred Stock (determined pursuant to Section 11(d)) on such
record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which is the number of shares of
Preferred Stock outstanding on such record date plus the number of shares of Preferred Stock which the aggregate offering price of the total number of shares of Preferred Stock and/or Equivalent Preferred Stock so to be offered (and/or the
aggregate initial conversion price of the convertible securities so to be offered) would purchase at such Current Per Share Market Price and the denominator of which is the number of shares of Preferred Stock outstanding on such record date
plus the number of additional shares of Preferred Stock and/or Equivalent Preferred Shares to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible); provided,
however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock issuable upon exercise of one Right. In case such subscription price may
be paid in a consideration part or all of which is in a form other than cash, the value of such consideration shall be as determined in good faith by the Board, whose determination shall be described in a written statement filed with the
Rights Agent. Shares of Preferred Stock owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is
fixed, and in the event that such rights, options or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. |
|
(c) |
If the Company fixes a record date for the making of a distribution to all holders of shares of Preferred Stock (including any such
distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) of evidences of indebtedness, cash (other than a regular periodic cash dividend), assets, stock (other than a
dividend payable in shares of Preferred Stock) or subscription rights, options or warrants (excluding those referred to in Section 11(b)), the Purchase Price to be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which is the Current Per Share Market Price of the shares of Preferred Stock (as determined pursuant to Section 11(d)) on such record date or, if
earlier, the date on which shares of Preferred Stock begin to trade on an ex-dividend or when issued basis for such distribution, less the fair market value (as determined in good faith by the Board, whose determination shall be described
in a written statement filed with the Rights Agent) of the portion of the evidences of indebtedness, cash, assets or stock so to be distributed or of such subscription rights, options or warrants applicable to one share of Preferred Stock,
and the denominator of which is such Current Per Share Market Price of the shares of Preferred Stock; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right but less than the aggregate
par value of the shares of capital stock issuable upon exercise of one Right. Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Purchase Price shall
again be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. |
| (d) |
(i)
|
For the purpose of any computation hereunder, the “Current Per Share Market Price” of any security (a “Security” for purposes of
this Section 11(d)(i) only) on any date shall be deemed to be the average of the daily closing prices per share of a share of the Class A Common Stock for the 30 consecutive Trading Days immediately prior to, but not including, such date; provided,
however, that in the event that the Current Per Share Market Price of the Security is determined during a period following the announcement by the issuer of such Security of (A) a dividend or distribution on such Security payable in
shares of such Security or securities convertible into such shares (other than the Rights) or (B) any subdivision, combination or reclassification of such Security, and prior to the expiration of 30 Trading Days after, but not including,
the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the Current Per Share Market Price shall be appropriately adjusted to take into
account ex-dividend trading or to reflect the current per share market price per share equivalent of such Security. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or,
if the Security is not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on
which the Security is listed or admitted to trading or, if the Security is not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices
in the over-the-counter market, as reported by Nasdaq or such other system then in use, or, if on any such date Security is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Security selected by the Board. If the Security is not publicly held or not so listed or traded, or is not the subject of available bid and asked quotes, the Current Per Share Market Price of such
Security shall mean the fair value per share as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent. |
|
(ii) |
For the purpose of any computation hereunder, the “Current Per Share Market Price” of shares of the Preferred Stock shall be
determined in accordance with the method set forth above in Section 11(d)(i) other than the last sentence thereof. If the Current Per Share Market Price of Preferred Stock cannot be determined in the manner provided above, it shall be
conclusively deemed to be an amount equal to the current per share market price of the shares of Class A Common Stock multiplied by ten thousand (as such number may be appropriately adjusted to reflect events such as stock splits, stock
dividends, recapitalizations or similar transactions relating to the shares of Class A Common Stock occurring after the date of this Agreement). If neither the Class A Common Stock, Class B Common Stock nor the Preferred Stock are publicly
held or so listed or traded, or the subject of available bid and asked quotes, “Current Per Share Market Price” of the Preferred Stock shall mean the fair value per share as determined in good faith by the Board, whose determination shall
be described in a statement filed with the Rights Agent. For all purposes of this Agreement, the current per share market price of one ten-thousandth of a Preferred Share will be equal to the current per share market price of one Preferred
Share divided by ten thousand. |
|
(e) |
Except as set forth below, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or
decrease of at least 1% in such price; provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 11 shall be made to the nearest cent or to the nearest one one-millionth of a share of Preferred Stock or one ten-thousandth of a share of a Class A Common Stock or Class B Common Stock or other security,
as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years from the date of the transaction which requires such
adjustment and (ii) the Expiration Date. |
|
(f) |
If as a result of an adjustment made pursuant to Section 11(a), the holder of any Right thereafter exercised becomes entitled to receive
any securities of the Company other than shares of Preferred Stock, thereafter the number and/or kind of such other securities so receivable upon exercise of any Right (and/or the Purchase Price in respect thereof) shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares of Preferred Stock (and the Purchase Price in respect thereof) contained in this Section 11, and the
provisions of Sections 7, 9, 10 and 13 with respect to the shares of Preferred Stock (and the Purchase Price in respect thereof) shall apply on like terms to any such other securities (and the Purchase Price in respect thereof). |
|
(g) |
All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one ten-thousandths of a share of Preferred Stock issuable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein. |
|
(h) |
Unless the Company has exercised its election as provided in Section 11(i), upon each adjustment of the Purchase Price pursuant to Section
11(b) or Section 11(c), each Right outstanding immediately prior to the making of such adjustment shall evidence the right to purchase, at the adjusted Purchase Price, that number of one ten-thousandths of a share of Preferred Stock
(calculated to the nearest one one-millionth of a share of Preferred Stock) obtained by (i) multiplying (x) the number of one ten-thousandths of a share of Preferred Stock issuable upon exercise of a Right immediately prior to such
adjustment of the Purchase Price by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of
the Purchase Price. |
|
(i) |
The Company may elect, on or after the date of any adjustment of the Purchase Price, to adjust the number of Rights in substitution for any
adjustment in the number of one ten-thousandths of a share of Preferred Stock issuable upon the exercise of a Right. Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of one
ten-thousandths of a share of Preferred Stock for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated
to the nearest one hundred-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company
shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. The Company shall also, as promptly as
practicable, notify the Rights Agent in writing of same pursuant to Section 9(e) hereof and give the Rights Agent a copy of such announcement. Such record date may be the date on which the Purchase Price is adjusted or any day thereafter,
but if the Rights Certificates have been issued, such record date shall be at least 10 calendar days later than the date of the public announcement. If Rights Certificates have been issued, upon each adjustment of the number of Rights
pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Rights Certificates on such record date Rights Certificates evidencing, subject to the provision of Section 13,
the additional Rights to which such holders are entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Rights Certificates
held by such holders prior to the date of adjustment, and upon surrender thereof if required by the Company, new Rights Certificates evidencing all the Rights to which such holders are entitled after such adjustment. Rights Certificates so
to be distributed shall be issued, executed, and countersigned in the manner provided for herein (and may bear, at the option of the Company, the adjusted Purchase Price) and shall be registered in the names of the holders of record of
Rights Certificates on the record date specified in the public announcement. |
|
(j) |
Without respect to any adjustment or change in the Purchase Price and/or the number and/or kind of securities issuable upon the exercise of
the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Purchase Price and the number and kind of securities which were expressed in the initial Rights Certificate issued hereunder. |
|
(k) |
Before taking any action that would cause an adjustment reducing the Purchase Price below one ten-thousandth of the then par value, if any,
of the shares of Preferred Stock or below the then par value, if any, of any other securities of the Company issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid and nonassessable shares of Preferred Stock or such other securities, as the case may be, at such adjusted Purchase Price. |
|
(l) |
In any case in which this Section 11 otherwise requires that an adjustment in the Purchase Price be made effective as of a record date for
a specified event, the Company may elect to defer until the occurrence of such event the issuance to the holder of any Right exercised after such record date the number of one ten-thousandths of a share of Preferred Stock or other
securities of the Company, if any, issuable upon such exercise over and above the number of one ten-thousandths of a share of Preferred Stock or other securities of the Company, if any, issuable upon such exercise on the basis of the
Purchase Price in effect prior to such adjustment; provided, however, that the Company delivers to such holder a due bill or other appropriate instrument evidencing such holder’s right to receive such additional shares of
Preferred Stock or other securities upon the occurrence of the event requiring such adjustment. |
|
(m) |
Notwithstanding anything in this Agreement to the contrary, the Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to the extent that in its good faith judgment the Board determines to be necessary or advisable in order that any (i) consolidation or subdivision of the shares of
Preferred Stock, (ii) issuance wholly for cash of shares of Preferred Stock at less than the Current Per Share Market Price therefor, (iii) issuance wholly for cash of shares of Preferred Stock or securities which by their terms are
convertible into or exchangeable for shares of Preferred Stock, (iv) stock dividends or (v) issuance of rights, options or warrants referred to in this Section 11, hereafter made by the Company to holders of its shares of Preferred Stock is
not taxable to such stockholders. |
|
(n) |
Notwithstanding anything in this Agreement to the contrary, in the event that the Company at any time after the Record Date and prior to
the Distribution Date (i) pays a dividend on the outstanding shares of Class A Common Stock or Class B Common Stock payable in shares of Class A Common Stock and/or Class B Common Stock, as applicable, (ii) subdivides the outstanding shares
of Class A Common Stock or Class B Common Stock, (iii) combines the outstanding shares of Class A Common Stock or Class B Common Stock into a smaller number of shares or (iv) issues any shares of its capital stock in a reclassification of
the outstanding shares of Class A Common Stock or Class B Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), the number of Rights
associated with each share of Class A Common Stock and/or each share of Class B Common Stock then outstanding, or issued or delivered thereafter but prior to the Distribution Date, shall be proportionately adjusted so that the number of
Rights thereafter associated with each share of Class A Common Stock and/or each share of Class B Common Stock following any such event equals the result obtained by multiplying the number of Rights associated with each share of Class A
Common Stock or Class B Common Stock, as applicable, immediately prior to such event by a fraction the numerator of which is the total number of shares of Class A Common Stock or Class B Common Stock, as applicable, outstanding immediately
prior to the occurrence of the event and the denominator of which is the total number of shares of Class A Common Stock or Class B Common Stock, as the case may be, outstanding immediately following the occurrence of such event. The
adjustments provided for in this Section 11(n) shall be made successively whenever such a dividend is paid or such a subdivision, combination or reclassification is effected. |
| SECTION 12 |
CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES |
Whenever an adjustment is made
or any event affecting the Rights or their exercisability (including without limitation an event which causes Rights to become null and void) occurs as provided in Section 11, the Company shall promptly (a) prepare a certificate setting forth
such adjustment and a brief statement of the facts and calculations accounting for such adjustment or describing such event, (b) file with the Rights Agent, and with each transfer agent for the shares of Preferred Stock and the shares of Class A
Common Stock and Class B Common Stock, a copy of such certificate, and (c) mail a brief summary thereof to each holder of a Rights Certificate. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment
therein contained and shall not be deemed to have knowledge of any such adjustment unless and until it shall have received such certificate, provided, however, that the Rights Agent will not be entitled to such protection in cases
of bad faith or willful misconduct.
| SECTION 13 |
FRACTIONAL RIGHTS AND FRACTIONAL SHARES |
|
(a) |
The Company shall not be required to issue fractions of Rights or to distribute Rights Certificates which evidence fractional Rights. In
lieu of such fractional Rights, the Company shall pay to the registered holders of the Rights Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current
market value of one Right. For purposes of this Section 13(a), the current market value of one Right is the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been
otherwise issuable. The closing price for any Trading Day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported
in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Rights are not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading or, if the Rights are not listed or
admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the Nasdaq or such other system then in use
or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights, such market maker to be selected by the
Board. If the Rights are not publicly held or are not so listed or traded, or are not the subject of available bid and asked quotes, the current market value of one Right shall mean the fair value thereof as determined in good faith by the
Board, whose determination shall be described in a statement filed with the Rights Agent. |
|
(b) |
The Company shall not be required to issue fractions of shares of Preferred Stock (other than fractions which are integral multiples of one
ten-thousandth of a share of Preferred Stock) upon exercise of the Rights or to distribute certificates which evidence fractional shares of Preferred Stock (other than fractions which are integral multiples of one ten-thousandth of a share
of Preferred Stock). Fractions of Preferred Stock in integral multiples of one ten-thousandth of such Preferred Stock may, in the sole discretion of the Company, be evidenced by depositary receipts pursuant to an appropriate agreement
between the Company and a depositary selected by it, provided that such agreement provides that the holders of such depositary receipts have all the rights, privileges and preferences to which they are entitled as beneficial owners of the
Preferred Stock represented by such depositary receipts. In lieu of fractional shares of Preferred Stock that are not integral multiples of one ten-thousandth of a share of Preferred Stock, the Company may pay to the registered holders of
Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one ten-thousandth of a share of Preferred Stock. For purposes of this Section 13(b),
the current market value of one ten-thousandth of a share of Preferred Stock shall be one ten-thousandth of the closing price of a share of Preferred Stock (as determined pursuant to Section 11(d)(ii) hereof) for the Trading Day immediately
prior to the date of such exercise; provided, however, that if the closing price of the shares of the Preferred Stock cannot be so determined, the closing price of the shares of the Preferred Stock for such Trading Day shall
be conclusively deemed to be an amount equal to the closing price of the shares of Class A Common Stock shares for such Trading Day multiplied by ten thousand (as such number may be appropriately adjusted to reflect events such as stock
splits, stock dividends, recapitalizations or similar transactions relating to the Class A Common Stock shares occurring after the date of this Agreement). |
|
(c) |
Following the occurrence of any Person becoming an Acquiring Person, the Company shall not be required to issue fractions of shares of
Class A Common Stock or Class B Common Stock, as the case may be, upon exercise or exchange of the Rights or to distribute certificates which evidence fractional shares of Class A Common Stock or Class B Common Stock, as the case may be. In
lieu of issuing any such fractional securities, the Company may pay to any Person to whom or which such fractional securities would otherwise be issuable an amount in cash equal to the same fraction of the current market value of one such
security. For purposes of this Section 13(c), the current market value of one share of Class A Common Stock, or other security issuable upon the exercise or exchange of Rights shall be the closing price thereof (as determined pursuant to
Section 11(d)(i) hereof) on the Trading Day immediately prior to the date of such exercise or exchange. |
|
(d) |
The holder of a Right by the acceptance of the Rights expressly waives his right to receive any fractional Rights or any fractional shares
upon exercise of a Right, except as permitted by this Section 13. |
| SECTION 14 |
RIGHTS OF ACTION |
|
(a) |
All rights of action in respect of this Agreement, excepting the rights of action given to the Rights Agent hereunder, are vested in the
respective registered holders of the Rights Certificates (and, prior to the Distribution Date, the registered holders of shares of Class A Common Stock and Class B Common Stock); and any registered holder of any Rights Certificate (or,
prior to the Distribution Date, of the shares of Class A Common Stock and Class B Common Stock), without the consent of the Rights Agent or of the holder of any other Rights Certificate (or, prior to the Distribution Date, of the shares of
Class A Common Stock or Class B Common Stock), may, in his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his right
to exercise the Rights evidenced by such Rights Certificate in the manner provided in such Rights Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and shall be entitled to specific performance of the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement. |
|
(b) |
Notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, judgment, decree or ruling (whether interlocutory or final)
issued by a court of competent jurisdiction or by a governmental regulatory, self-regulatory or administrative agency or commission, or any statute, rule, regulation, or executive order promulgated or enacted by any governmental authority,
prohibiting or otherwise restraining performance of such obligation; provided, however that the Company shall use commercially reasonable efforts to have any such injunction, order, judgment, decree or ruling lifted or otherwise
overturned as soon as possible. |
| SECTION 15 |
AGREEMENT OF RIGHTS HOLDERS |
Every holder of a Right consents and agrees with
the Company and the Rights Agent and with every other holder of a Right that:
|
(a) |
prior to the Distribution Date, the Rights shall be transferable only in connection with the transfer of shares of Class A Common Stock or
Class B Common Stock; |
|
(b) |
after the Distribution Date, the Rights Certificates are transferable only on the registry books of the Rights Agent if surrendered at the
principal office or offices of the Rights Agent designated for such purposes, duly endorsed and accompanied by a properly executed instrument of transfer with the appropriate forms and certificates fully executed; |
|
(c) |
the Company and the Rights Agent may deem and treat the person in whose name a Rights Certificate (or, prior to the Distribution Date, the
associated Class A Common Stock or Class B Common Stock share certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Rights Certificates or
the associated Class A Common Stock or Class B Common Stock share certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any
notice to the contrary; and |
|
(d) |
such holder expressly waives any right to receive any fractional Rights and any fractional securities upon exercise or exchange of a Right,
except as otherwise provided in Section 13. |
| SECTION 16 |
RIGHTS CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER |
No holder, of any Rights
Certificate, by means of such possession, shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the number of one ten-thousandths of a share of Preferred Stock or any other securities of the Company which may at
any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the holder of any Rights Certificate, by means of such possession, any of the
rights of a stockholder of the Company including any right to vote on any matter submitted to stockholders at any meeting thereof, including the election of directors, or to give or withhold consent to any corporate action, or to receive notice
of meetings or other actions affecting stockholders (except as provided in Section 24 hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Rights Certificate have been exercised in
accordance with the provisions of this Agreement.
| SECTION 17 |
CONCERNING THE RIGHTS AGENT |
|
(a) |
The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder, and, from time to time, on
demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the preparation, administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, damage, judgment, fine, penalty, claim, demand, cost or expense incurred without gross negligence, bad faith or willful misconduct on the
part of the Rights Agent (which gross negligence, bad faith or willful misconduct must be determined by a final, non-appealable order, judgment, decree or ruling of a court of competent jurisdiction), for anything done or omitted by the
Rights Agent in connection with the acceptance and administration of this Agreement and the performance of its duties and responsibilities and the exercise of its rights hereunder, including the costs and expenses of defending against any
claim of liability arising therefrom, directly or indirectly. The costs and expenses of enforcing this right of indemnification will also be paid by the Company. The provisions of this Section 17 shall survive the exercise, exchange,
redemption or expiration of the Rights, the resignation, replacement or removal of the Rights Agent and the termination of this Agreement. |
|
(b) |
The Rights Agent may conclusively rely on, and will be protected and shall incur no liability for or in respect of any action taken,
suffered or omitted by it in connection with, its acceptance or administration of this Agreement and the exercise and performance of its duties and responsibilities and the exercise of its rights hereunder, in reliance upon any Rights
Certificate or certificate evidencing shares of Preferred Stock, Class A Common Stock, Class B Common Stock or other securities of the Company, or any instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter,
notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons, or otherwise upon the
advice of counsel as set forth in Section 19. |
|
(c) |
Notwithstanding anything in this Agreement to the contrary, in no event will the Rights Agent be liable for special, indirect or
consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Rights Agent has been advised of the likelihood of such loss or damage and regardless of the form of action. |
| SECTION 18 |
MERGER, CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT |
|
(a) |
Any Person into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any Person
resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent is a party, will be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on
the part of any of the parties hereto; provided that such Person would be eligible for appointment as a successor Rights Agent under the provisions of Section 20 hereof. If at the time such successor Rights Agent shall succeed to the agency
created by this Agreement any of the Rights Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of a predecessor Rights Agent and deliver such Rights Certificates so
countersigned; and if at that time any of the Rights Certificates shall not have been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor or in the name of the successor
Rights Agent; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement. |
|
(b) |
If at any time the name of the Rights Agent changes and at such time any of the Rights Certificates have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Rights Certificates so countersigned; and if at that time any of the Rights Certificates have been countersigned, the Rights Agent may countersign
such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement. |
| SECTION 19 |
DUTIES OF RIGHTS AGENT |
The Rights Agent undertakes to
perform the duties and obligations expressly imposed by this Agreement (and no implied duties) upon the following terms and conditions, by all of which the Company and the holders of Rights Certificates, by their acceptance thereof, shall be
bound:
|
(a) |
The Rights Agent may consult with competent legal counsel (who may be legal counsel for the Company), and the advice or opinion of such
counsel shall be full and complete authorization and protection to the Rights Agent and the Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitted by it in accordance with the content of such advice
or opinion. |
|
(b) |
Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of any Acquiring Person and the determination of the Current Per Share Market Price) be proved or established by the Company prior to taking, suffering or omitting to take any action
hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any Authorized Officer and delivered to the
Rights Agent; and such certificate, pursuant to its terms, shall be full and complete authorization and protection to the Rights Agent for any action taken or suffered by it under the provisions of this Agreement in reliance upon such
certificate. |
|
(c) |
The Rights Agent shall be liable hereunder only for its own gross negligence, bad faith or willful misconduct (which gross negligence, bad
faith or willful misconduct must be determined by a final, non-appealable order, judgment, decree or ruling of a court of competent jurisdiction). |
|
(d) |
The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the
Rights Certificates (except its countersignature thereof) be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only. |
|
(e) |
The Rights Agent will have no liability in respect of the validity of this Agreement or the execution and delivery hereof (except the due
execution and delivery hereof by the Rights Agent) or in respect of the validity or execution of any Rights Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant
contained in this Agreement or in any Rights Certificate; nor shall it be responsible for any adjustment required under the provisions of Sections 11, 12, 22 or 23 hereof or responsible for the manner, method or amount of any such
adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced by Rights Certificates after actual notice of any such adjustment); nor shall it by any
act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Class A Common Stock, Class B Common Stock or Preferred Stock to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Class A Common Stock, Class B Common Stock or Preferred Stock shall, when so issued, be validly authorized and issued, fully paid and nonassessable. |
|
(f) |
The Company agrees that it shall perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered
all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement. |
|
(g) |
The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties and the exercise of
the rights hereunder from any person reasonably believed by the Rights Agent to be one of the Authorized Officers, and to apply to such Authorized Officers for advice or instructions in connection with its duties, and it shall not be liable
for any action taken or suffered by it in good faith in accordance with instructions of any such Authorized Officer or for any delay in acting while waiting for those instructions. Any application by the Rights Agent for written
instructions from the Company may, at the option of the Rights Agent, set forth in writing any action proposed to be taken or omitted by the Rights Agent under this Agreement and the date on and/or after which such action shall be taken or
such omission shall be effective. The Rights Agent shall not be liable for any action taken by, or omission of, the Rights Agent in accordance with a proposal included in any such application on or after the date specified in such
application (which date shall not be less than five Business Days after the date any Authorized Officer of the Company actually receives such application, unless any such Authorized Officer shall have consented in writing to an earlier
date) unless, prior to taking any such action (or the effective date in the case of an omission), the Rights Agent shall have received written instructions in response to such application specifying the action to be taken or omitted. |
|
(h) |
The Rights Agent and any stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other Person. |
|
(i) |
The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself
(through its directors, officers or employees) or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, omission, default, neglect or misconduct of any such attorneys or agents or
for any loss to the Company or any other Person resulting from any such act, default, neglect or misconduct, provided reasonable care was exercised in the selection and continued employment thereof. |
|
(j) |
If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, the certificate contained in the form
of assignment or the form of election to purchase set forth on the reverse thereof, as the case may be, has not been completed to certify the holder is not an Acquiring Person (or an Affiliate or Associate thereof) or a transferee thereof,
the Rights Agent shall not take any further action with respect to such requested exercise or transfer without first consulting with the Company. |
|
(k) |
No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably
assured to it. |
|
(l) |
The Rights Agent will not be required to take notice or be deemed to have notice of any fact, event or determination (including, without
limitation, any dates or events defined in this Agreement or the designation of any Person as an Acquiring Person, Affiliate or Associate) under this Agreement unless and until the Rights Agent is specifically notified in writing by the
Company of such fact, event or determination. |
|
(m) |
The provisions of this Section 19 shall survive the exercise, exchange, redemption or expiration of the Rights, the resignation,
replacement or removal of the Rights Agent and the termination of this Agreement. |
| SECTION 20 |
CHANGE OF RIGHTS AGENT |
The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this Agreement upon thirty (30) days’ written notice mailed to the Company, and to each transfer agent of the shares of Class A Common Stock, Class B Common Stock and
Preferred Stock known to the Rights Agent, respectively, by registered or certified mail, and, if such resignation occurs after the Distribution Date, to the registered holders of the Rights Certificates by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent upon thirty (30) days’ written notice, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the shares of Class A Common Stock, the Class B
Common Stock and the Preferred Stock, by registered or certified mail, and, if such removal occurs after the Distribution Date, to the holders of the Rights Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall, in its sole discretion, appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of thirty (30) days after giving notice of such removal
or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Rights Certificate (who shall, with such notice, submit his Rights Certificate for inspection by the
Company), then any registered holder of any Rights Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be
(a) a legal business entity organized and doing business under the laws of the United States or of the State of New York or of any other state of the United States, in good standing, which is authorized under such laws to exercise corporate
trust, stock transfer or shareholder services powers and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50,000,000 or (b) an affiliate of a legal business entity described in clause (a) of
this sentence. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights
Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of
any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the shares of Class A Common Stock, the Class B Common Stock and the Preferred Stock, and, if such appointment
occurs after the Distribution Date, mail a notice thereof in writing to the registered holders of the Rights Certificates. Failure to give any notice provided for in this Section 20, however, or any defect therein, shall not affect the legality
or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.
| SECTION 21 |
ISSUANCE OF NEW RIGHTS CERTFICATES |
Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by the Board to reflect any adjustment or change in the Purchase Price
and the number or kind or class of shares or other securities or property purchasable under the Rights Certificates made in accordance with the provisions of this Agreement. In addition, in connection with the issuance or sale by the Company of
shares of Class A Common Stock or Class B Common Stock following the Distribution Date and prior to the Expiration Date, the Company (a) shall, with respect to shares of Class A Common Stock or Class B Common Stock so issued or sold pursuant to
the exercise, exchange or conversion of securities (other than Rights) issued prior to the Distribution Date which are exercisable or exchangeable for, or convertible into, shares of Class A Common Stock or Class B Common Stock and (b) may, in
any other case, if deemed necessary or appropriate by the Board, issue Rights Certificates representing the appropriate number of Rights as would have been issued in respect of such shares of Class A Common Stock or Class B Common Stock if they
had been issued or sold prior to the Distribution Date, as appropriately adjusted as provided herein as if they had been so issued or sold; provided, however, that (i) no such Rights Certificate shall be issued if, and to the
extent that, in its good faith judgment the Board determines that the issuance of such Rights Certificate could have a material adverse tax consequence to the Company or to the Person to whom or which such Rights Certificate otherwise would be
issued, and (ii) no such Rights Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof.
|
(a) |
The Board may, at any time prior to such time as any Person first becomes an Acquiring Person, redeem all but not less than all the
then-outstanding Rights at the Redemption Price. The redemption of the Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish. The Company may, at its option, pay
the Redemption Price in cash, securities or any other form of consideration deemed appropriate by the Board. |
|
(b) |
Immediately upon the effectiveness of the redemption of the Rights, and without any further action and without any notice, the right to
exercise the Rights shall terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price for each Right so held without interest thereon. Promptly after the effectiveness of the redemption of the
Rights, the Company shall give notice of such redemption to the Rights Agent and the holders of the then outstanding Rights by mailing such notice to all such holders at each holder’s last address as it appears upon the registry books of
the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the shares of Class A Common Stock and Class B Common Stock; provided however, that the failure to give, or any defect in, any such
notice will not affect the validity of the Redemption of the Rights. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption shall state
the method by which the payment of the Redemption Price shall be made. |
|
(a) |
The Board may, at its option, at any time after any Person first becomes an Acquiring Person, exchange all or part of the then-outstanding
and exercisable Rights (which shall not include Rights that have not become effective or that have become void pursuant to the provisions of Section 11(a)(ii) hereof) for shares of Class A Common Stock or Class B Common Stock, as the case
may be, at an exchange ratio of one share of Class A Common Stock or Class B Common Stock, as the case may be, (or ten-thousandth of a share of Preferred Stock) per Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such amount per Right being hereinafter referred to as the “Exchange Ratio”. The exchange of the Rights by the Board may be made effective at such time, on such basis and with such
conditions as the Board in its sole discretion may establish. |
|
(b) |
Immediately upon the effectiveness of the action of the Board ordering the exchange of any Rights pursuant to subsection (a) of this
Section 23 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of shares of Class A Common Stock
or Class B Common Stock, as the case may be, equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give public notice of any such exchange; provided, however, that the failure to
give, or any defect in, such notice shall not affect the validity of such exchange. The Company shall promptly mail a notice of any such exchange to all of the holders of the Rights so exchanged at their last addresses as they appear upon
the registry books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange
of the shares of Class A Common Stock or Class B Common Stock, for Rights shall be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on
the number of Rights (other than Rights which have become void pursuant to the provisions of Section 11(a)(ii) hereof) held by each holder of Rights. |
|
(c) |
The Company may at its option substitute and, in the event that there shall not be sufficient shares of Class A Common Stock or Class B
Common Stock issued but not outstanding or authorized but unissued (and unreserved) to permit an exchange of Rights as contemplated in accordance with this Section 23, the Company shall substitute to the extent of such insufficiency, for
each share of Class A Common Stock and/or Class B Common Stock that would otherwise be issuable upon exchange of a Right, a number of shares of Preferred Stock or fraction thereof (or equivalent preferred shares as such term is defined in
Section 11(b)) such that the Current Per Share Market Price of one share of Preferred Stock (or equivalent preferred share) multiplied by such number or fraction is equal to the Current Per Share Market Price as of the date of such
exchange. |
| SECTION 24 |
NOTICE OF CERTAIN EVENTS |
|
(a) |
If the Company proposes to (i) pay any dividend payable in stock of any class to the holders of shares of Preferred Stock or to make any
other distribution to the holders of shares of Preferred Stock (other than a regular periodic cash dividend), (ii) offer to the holders of shares of Preferred Stock rights, options, warrants or any similar instrument to subscribe for or to
purchase any additional shares of Preferred Stock or shares of stock of any class or any other securities, rights or options, (iii) effect any reclassification of its Preferred Stock (other than a reclassification involving only the
subdivision of outstanding shares of Preferred Stock), (iv) effect any consolidation or merger into or with any other Person, (v) to effect the liquidation, dissolution or winding up of the Company or (vi) declare or pay any dividend on the
shares of Class A Common Stock or Class B Common Stock payable in shares of Class A Common Stock or Class B Common Stock, respectively, or to effect a subdivision, combination or reclassification of the Class A Common Stock or Class B
Common Stock as the case may be, then, in each such case, the Company shall give to the Rights Agent and, to the extent possible, to each holder of a Rights Certificate, in accordance with Section 25 hereof, a notice of such proposed
action, which shall specify the record date for the purposes of such stock dividend, distribution or offering of rights, warrants, options or any similar instrument or the date on which such reclassification, consolidation, merger, sale,
transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of the shares of Preferred Stock, if any such date is to be fixed, and such notice shall be so given in the case of any
action covered by clause (i) or (ii) above at least ten (10) days prior to the record date for determining holders of the shares of Class A Common Stock, Class B Common Stock, and/or Preferred Stock for purposes of such action, and in the
case of any such other action covered by clause (1) or (ii) above at least ten (10) days prior to the date of such proposed action or the date of participation therein by the holders of the shares of Preferred Stock, whichever is the
earlier. |
|
(b) |
If a Stock Acquisition Date occurs, then the Company shall as soon as practicable thereafter give to the Rights Agent and each holder of a
Rights Certificate, to the extent feasible and in accordance with Section 25 hereof, a notice of the occurrence of such event, which shall specify the event and the consequences of the event to holders of Rights. |
|
(a) |
Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Rights Certificate to or on
the Company shall be sufficiently given or made (a) immediately, if made by personal delivery to the party to be notified, (b) on the fifth (5th) day if sent by first-class mail, postage prepaid, (c) the next Business Day if by nationally
recognized overnight courier or (d) upon confirmation, if transmission by facsimile combined with a phone call to the Company notifying it of such transmission, all addressed (until another address is filed in writing by the Company with
the Rights) as follows: |
Hovnanian Enterprises, Inc.
10 HWY 35
P.O. Box 500
Red Bank, NJ 63131
Attention: Peter Reinhart
Facsimile: 732.383.2716
Phone: 732.747.6835
|
(b) |
Subject to the provisions of Section 20, any notice or demand authorized by this Agreement to be given or made by the Company or by the
holder of any Rights Certificate to or on the Rights Agent shall be sufficiently given or made (a) immediately, if made by personal delivery to the party to be notified, (b) on the fifth (5th) day if sent by first-class mail, postage
prepaid, (c) the next Business Day if by nationally recognized overnight courier or (d) upon confirmation, if transmission by facsimile combined with a phone call to the Rights Agent notifying it of such transmission, all addressed (until
another address is filed in writing by the Rights Agent with the Company) as follows: |
National City Bank
Shareholder Services Administration
Suite 635 – LOC 01-3116
629 Euclid Avenue
Cleveland, Ohio 44114
Attention: Shareholder Services Administration
With a copy to:
Jones Day
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: Lyle G. Ganske
Facsimile: 216.579.0212
|
(c) |
Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Rights
Certificate (or, if prior to the Distribution Date, to the holder of certificates representing shares of Class A Common Stock or Class B Common Stock) shall be sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry books of the Company. |
|
SECTION 26 |
SUPPLEMENTS AND AMENDMENTS |
Prior to the Distribution
Date, the Company may in its sole and absolute discretion, and the Rights Agent shall, if the Company so directs, supplement or amend any provision of this Agreement in any respect without the approval of any holders Rights, any such supplement
or amendment to be evidenced by writing signed by the Company and the Rights Agent. From and after the time at which the Rights cease to be redeemable pursuant to Section 22, the Company may and the Rights Agent shall, if the Company so directs,
supplement or amend this Agreement without the approval of any holders of Rights in order (i) to cure any ambiguity, (ii) to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions
herein, (iii) to shorten or lengthen any time period hereunder or (iv) to amend or supplement the provisions hereunder in any manner which the Company may deem necessary or desirable; provided, however, that no such supplement or
amendment shall adversely affect the interests of the holders of Rights (other than an Acquiring Person or any Affiliate or Associate of an Acquiring Person), and no such amendment may cause the Rights again to become redeemable or cause this
Rights Agreement again to become amendable other than in accordance with this sentence. Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the
terms of this Section 26, the Rights Agent shall execute such supplement or amendment. Notwithstanding anything herein to the contrary, the Rights Agent shall not be obligated to enter into any supplement or amendment that affects the Rights
Agent’s own right, duties, obligations or immunities under this Agreement.
All the covenants and provisions
of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.
|
SECTION 28 |
DETERMINATIONS AND ACTIONS BY THE BOARD |
|
(a) |
For all purposes of this Agreement, any calculation of the number of shares of Class A Common Stock or Class B Common Stock or any other
class of capital stock outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding shares of Class A Common Stock or Class B Common Stock of which any Person is the Beneficial
Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act or the provisions of Section 382 of the Code or any successor or replacement provision. |
|
(b) |
The Board shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically
granted to the Board or to the Company, or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Agreement, and (ii) make all
determinations and calculations deemed necessary or advisable for the administration of this Agreement (including without limitation a determination to redeem or not redeem the Rights or amend this Agreement). |
|
(c) |
All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect
to the foregoing) which are done or made by the Board in good faith, shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights and all other parties, and (y) not subject the Board, or any of the
directors on the Board to any liability to any person, including without limitation the Rights Agent and the holders of the Rights. Unless otherwise notified, the Rights Agent shall always be entitled to assume that the Board acted in good
faith and the Rights Agent shall be fully protected and shall incur no liability in reliance thereon. |
|
SECTION 29 |
BENEFITS OF THIS AGREEMENT |
Nothing in this Agreement
shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, registered holders of shares of Class A Common Stock or Class B Common
Stock) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of shares of Class A Common Stock or Class B Common Stock).
If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force
and effect and shall in no way be affected, impaired or invalidated; provided, however, that nothing contained in this Section 30 will affect the ability of the Company under the provisions of Section 26 to supplement or amend
this Agreement to replace such invalid, void or unenforceable term, provision, covenant or restriction with a legal, valid and enforceable term, provision, covenant or restriction.
This Agreement, each Right and
each Rights Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State.
This Agreement may be executed
in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
|
SECTION 33 |
DESCRIPTIVE HEADINGS; INTERPRETATION |
Descriptive headings of the
several sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. For the avoidance of doubt and for clarification purposes only, if under any
circumstance contemplated herein Rights become exercisable for the purchase of shares of Class A Common Stock or Class B Common Stock, such Rights may only be exercised as follows: (A) Rights issued in respect of Class A Common Stock will be
exercisable only for the purchase of shares of Class A Common Stock (or any common stock equivalents issued in respect thereof) and (B) Rights issued in respect of Class B Common Stock will be exercisable only for the purchase of shares of Class
B Common Stock (or any common stock equivalents issued in respect thereof).
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed, all as of the day and year first above written.
HOVNANIAN ENTERPRISES
/s/ Peter Reinhart
Name: Peter Reinhart
Title: General Counsel
NATIONAL CITY BANK
/s/ Sharon Boughter
Name: Sharon Boughter
Title: Vice President
Signature page to Rights Agreement
EXHIBIT A
CERTIFICATE OF DESIGNATION
OF
SERIES B JUNIOR PREFERRED STOCK
OF
HOVNANIAN ENTERPRISES, INC.
(Pursuant to Section 151 of the General Corporation Law of the State
of Delaware)
Hovnanian Enterprises, Inc. (hereinafter called the “Company”),
a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “DGCL”), does hereby certify:
|
(1) |
The name of the Company is Hovnanian Enterprises, Inc. |
|
(2) |
The certificate of incorporation, as amended (the “Certificate of Incorporation”) of the Company authorizes the issuance of 100,000
shares of Preferred Stock, $0.01 par value (the “Preferred Stock”), and expressly vests in the Board of Directors of the Company (the “Board”) the authority provided therein to provide for the issuance of said shares in
series and by filing a certificate pursuant to the applicable law of the State of Delaware, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights
of the shares of each such series and the qualifications, limitations, or restrictions thereof. |
|
(3) |
The Board, pursuant to the authority expressly vested in it as aforesaid, on July 29, 2008 adopted the following resolutions creating a “Series
B Junior” series of Preferred Stock: |
RESOLVED, that a series of the class of authorized Preferred Stock of
the Company be and hereby is created, and that the designation and amount thereof and the voting powers, preferences and relative, participating, optional and other special rights
of the shares of such series, and the qualifications, limitations or restrictions thereof are as follows:
SERIES B JUNIOR PREFERRED STOCK
|
SECTION 1 |
DESIGNATION AND AMOUNT. |
The shares of such series will
be designated as Series B Junior Preferred Stock (the “Series B Preferred”) and the number of shares constituting the Series B Preferred is 10,000. Such number of shares may be increased or decreased by resolution of the Board; provided,
however, that no decrease will reduce the number of shares of Series B Preferred to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or
warrants or upon the conversion of any outstanding securities issued by the Company and convertible into Series B Preferred.
|
SECTION 2 |
DIVIDENDS AND DISTRIBUTIONS. |
|
(a) |
Subject to the rights of the holders of any shares of any series of Preferred Stock ranking prior to the Series B Preferred with respect to
dividends, the holders of shares of Series B Preferred, in preference to the holders of Class A Common Stock, par value $0.01 per share and Class B Common Stock, par value $0.01 (collectively, the “Common Stock”), of the Company,
and of any other junior stock, will be entitled to receive, when, as and if declared by the Board out of funds legally available for the purpose, dividends payable in cash (except as otherwise provided below) on such dates as are from time
to time established for the payment of dividends on the Common Stock (each such date being referred to herein as a “Dividend Payment Date”), commencing on the first Dividend Payment Date after the first issuance of a share or
fraction of a share of Series B Preferred (the “First Dividend Payment Date”), in an amount per share (rounded to the nearest cent) equal to, subject to the provision for adjustment hereinafter set forth, the greater of (i) $1 and
(ii) ten thousand (10,000) times the aggregate per share amount of all cash dividends, and ten thousand (10,000) times the aggregate per share amount (payable in kind) of all non-cash dividends, other than a dividend payable in shares of
Class A Common Stock or Class B Common Stock, as the case may be, or a subdivision of the outstanding shares of Class A Common Stock or Class B Common Stock, as the case may be, (by reclassification or otherwise), declared on the Class A
Common Stock and/or Class B Common Stock since the immediately preceding Dividend Payment Date or, with respect to the First Dividend Payment Date, since the first issuance of any share or fraction of a share of Series B Preferred. In the
event that the Company at any time (i) declares a dividend on the outstanding shares of Common Stock payable in shares of Common Stock, (ii) subdivides the outstanding shares of Common Stock, (iii) combines the outstanding shares of Common
Stock into a smaller number of shares or (iv) issues any shares of its capital stock in a reclassification of the outstanding shares of Common Stock (including any such reclassification in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation), then, in each such case and regardless of whether any shares of Series B Preferred are then issued or outstanding, the amount to which holders of shares of Series B Preferred would
otherwise be entitled immediately prior to such event will be correspondingly adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. |
|
(b) |
The Company will declare a dividend on the Series B Preferred as provided in paragraph (a) of this Section 2 immediately after it declares
a dividend on the Class A Common Stock and/or Class B Common Stock (other than a dividend payable in shares of Common Stock). Each such dividend on the Series B Preferred will be payable immediately prior to the time at which the related
dividend on the Class A Common Stock and/or Class B Common Stock is payable. |
|
(c) |
Dividends will accrue, and be cumulative, on outstanding shares of Series B Preferred from the Dividend Payment Date next preceding the
date of issue of such shares, unless (i) the date of issue of such shares is prior to the record date for the First Dividend Payment Date, in which case dividends on such shares will accrue from the date of the first issuance of a share of
Series B Preferred or (ii) the date of issue is a Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series B Preferred entitled to receive a dividend and before such Dividend Payment
Date, in either of which events such dividends will accrue, and be cumulative, from such Dividend Payment Date. Accrued but unpaid dividends will cumulate from the applicable Dividend Payment Date but will not bear interest. Dividends paid
on the shares of Series B Preferred in an amount less than the total amount of such dividends at the time accrued and payable on such shares will be allocated pro rata on a share-by-share basis among all such shares at the time outstanding.
The Board may fix a record date for the determination of holders of shares of Series B Preferred entitled to receive payment of a dividend or distribution declared thereon, which record date will be not more than 60 calendar days prior to
the date fixed for the payment thereof. |
The holders of shares of Series B Preferred shall have the following voting rights:
|
(a) |
Subject to the provision for adjustment hereinafter set forth and except as otherwise provided in the Certificate of Incorporation or
required by law, each share of Series B Preferred shall entitle the holder thereof to 10,000 votes, on all matters upon which the holders of the Common Stock of the Company are entitled to vote. In the event the Company shall at any time
after the Record Date declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise
than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series B Preferred were entitled
immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number
of shares of Common Stock that were outstanding immediately prior to such event. |
|
(b) |
Except as otherwise provided herein, in the Certificate of Incorporation or in any other Certificate of Designations creating a series of
Preferred Stock or any similar stock, and except as otherwise required by law, the holders of shares of Series B Preferred and the holders of shares of Common Stock and any other capital stock of the Company having general voting rights
shall vote together as one class on all matters submitted to a vote of stockholders of the Company. |
|
(c) |
Except as set forth herein, or as otherwise provided by law, holders of Series B Preferred shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. |
|
(a) |
Whenever dividends or other dividends or distributions payable on the Series B Preferred are in arrears, thereafter and until all accrued
and unpaid dividends and distributions, whether or not declared, on shares of Series B Preferred outstanding have been paid in full, the Company will not: |
|
(i) |
Declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) (“Junior Stock”) to the shares of Series B Preferred; |
|
(ii) |
Declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) (“Parity Stock”) with the shares of Series B Preferred, except dividends paid ratably on the shares of Series B Preferred and all such Parity Stock on which dividends are payable or in arrears
in proportion to the total amounts to which the holders of all such shares are then entitled; |
|
(iii) |
Redeem, purchase or otherwise acquire for consideration shares of any Junior Stock; provided, however, that the Company may at any time
redeem, purchase or otherwise acquire shares of any such Junior Stock in exchange for shares of any other Junior Stock of the Company; or |
|
(iv) |
Redeem, purchase or otherwise acquire for consideration any shares of Series B Preferred, or any shares of Parity Stock, except in
accordance with a purchase offer made in writing or by publication (as determined by the Board) to all holders of such shares upon such terms as the Board, after consideration of the respective annual dividend rates and other relative
rights and preferences of the respective series and classes, may determine in good faith will result in fair and equitable treatment among the respective series or classes. |
|
(b) |
The Company will not permit any majority-owned subsidiary of the Company to purchase or otherwise acquire for consideration any shares of
stock of the Company unless the Company could, under paragraph (a) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. |
|
SECTION 5 |
REACQUIRED SHARES. |
Any shares of Series B
Preferred purchased or otherwise acquired by the Company in any manner whatsoever will be retired and canceled promptly after the acquisition thereof. All such shares will upon their cancellation become authorized but unissued shares of Preferred
Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Certificate of Incorporation of the Company, or in any other Certificate of Designations creating
a series of Preferred Stock or any similar stock or as otherwise required by law.
|
SECTION 6 |
LIQUIDATION, DISSOLUTION OR WINDING UP. |
Upon any liquidation, dissolution or winding up
of the Company, no distribution will be made (a) to the holders of shares of Junior Stock unless, prior thereto, the holders of shares of Series B Preferred have received an amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment; provided, however, that the holders of shares of Series B Preferred will be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth,
equal to a minimum per share liquidation payment of $10,000 but will be entitled to an aggregate per share liquidation payment of 10,000 times the payment made per share of Common Stock or (b) to the holders of shares of Parity Stock, except
distributions made ratably on the shares of Series B Preferred and all such Parity Stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the
Company at any time (i) declares a dividend on the outstanding shares of Common Stock payable in shares of Common Stock, (ii) subdivides the outstanding shares of Common Stock, (iii) combines the outstanding shares of Common Stock into a smaller
number of shares or (iv) issues any shares of its capital stock in a reclassification of the outstanding shares of Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation), then, in each such case and regardless of whether any shares of Series B Preferred are then issued or outstanding, the aggregate amount to which each holder of shares of Series B Preferred would otherwise be
entitled immediately prior to such event will be correspondingly adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately prior to such event.
|
SECTION 7 |
CONSOLIDATION, MERGER, ETC. |
In the event that the Company
enters into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then, in each such case, each share of Series
B Preferred will at the same time be similarly exchanged for or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to ten thousand (10,000) times the aggregate amount of stock, securities, cash
and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Company at any time (a) declares a dividend on the outstanding shares of Common Stock
payable in shares of Common Stock, (b) subdivides the outstanding shares of Common Stock, (c) combines the outstanding shares of Common Stock in a smaller number of shares or (d) issues any shares of its capital stock in a reclassification of the
outstanding shares of Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), then, in each such case and regardless of whether any shares of
Series B Preferred are then issued or outstanding, the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series B Preferred will be correspondingly adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
The shares of Series B Preferred are not redeemable.
The Series B Preferred rank,
with respect to the payment of dividends and the distribution of assets, junior to all other series of the Company’s Preferred Stock, unless the terms of such series shall so provide.
|
SECTION 10 |
FRACTIONAL SHARES. |
Series B Preferred may be issued in fractions of a
share that shall entitle the holder, in proportion to such holder’s fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series B Preferred.
FURTHER RESOLVED, that the
statements contained in the foregoing resolutions creating and designating the said Series B Junior Preferred Stock and fixing the number, powers, preferences and relative, optional, participating, and other special rights and the qualifications,
limitations, restrictions, and other distinguishing characteristics thereof shall, upon the effective date of said series, be deemed to be included in and be a part of the Certificate of Incorporation of the Company pursuant to the provisions of
Sections 104 and 151 of the DGCL.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
IN WITNESS WHEREOF, this Certificate of Designation
is executed on behalf of the Company by the undersigned on August 14, 2008.
HOVNANIAN ENTERPRISES
/s/ Peter Reinhart
Name: Peter Reinhart
Title: General Counsel
EXHIBIT B
FORM OF RIGHTS CERTIFICATE
Certificate No. R- _________ ______________Rights in respect of Class
__ Common Stock
NOT EXERCISABLE AFTER AUGUST 14, 2018 OR EARLIER IF
REDEEMED, EXCHANGED OR AMENDED. THE RIGHTS ARE SUBJECT TO REDEMPTION, EXCHANGE AND AMENDMENT AT THE OPTION OF THE COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES SPECIFIED IN THE RIGHTS AGREEMENT, RIGHTS THAT
ARE OR WERE BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR AN ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) OR A TRANSFEREE THEREOF SHALL BECOME NULL AND VOID AND NO LONGER TRANSFERABLE.
RIGHTS CERTIFICATE
HOVNANIAN ENTERPRISES, INC.
This certifies that_____________, or registered
assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions, and conditions of the Rights Agreement, (the “Rights Agreement”), by and between
Hovnanian Enterprises, Inc., a Delaware corporation (the “Company”), and National City Bank (the “Rights Agent”), dated as of August 14, 2008, to purchase from the Company at any time after the Distribution Date (as
such term is defined in the Rights Agreement) and prior to 5:00 p.m. (New York time) on the Expiration Date (as such term is defined in the Rights Agreement) at the office or offices of the Rights Agent designated for such purpose, one
ten-thousandth of a fully paid nonassessable share of Series B Junior Preferred Stock, par value $0.01 per share (the “Preferred Shares”), of the Company, at a purchase price of $35.00 per one ten-thousandth of a Preferred Share
(the “Purchase Price”), upon presentation and surrender of this Rights Certificate with the Form of Election to Purchase and related Certificate duly executed. If this Rights Certificate is exercised in part, the holder will be
entitled to receive upon surrender hereof another Rights Certificate or Rights Certificates for the number of whole Rights not exercised. The number of Rights evidenced by this Rights Certificate (and the number of one ten-thousandths of a
Preferred Share which may be purchased upon exercise thereof) set forth above, and the Purchase Price set forth above, are the number and Purchase Price as of the date of the Rights Agreement, based on the Preferred Shares as constituted at such
date. Terms used herein with initial capital letters and not defined herein are used herein with the meanings ascribed thereto in the Rights Agreement.
As provided in the Rights
Agreement, the Purchase Price and/or the number and/or kind of shares of Preferred Stock (or other securities, as the case may be) which may be purchased upon the exercise of the Rights evidenced by this Rights Certificate are subject to
adjustment upon the occurrence of certain events.
This Rights Certificate is
subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a
full description of the rights, limitations of rights, obligations, duties and immunities of the Rights Agent, the Company and the holders of the Rights Certificates, which limitations of rights include the temporary suspension of the
exercisability of the Rights under the circumstances specified in the Rights Agreement. Copies of the Rights Agreement are on file at the principal executive offices of the Company and can be obtained from the Company without charge upon written
request therefor.
Pursuant to the Rights
Agreement, from and after the occurrence of any Person becoming an Acquiring Person, any Rights that are Beneficially Owned by (i) any Acquiring Person (or any Affiliate or Associate of any Acquiring Person), (ii) a transferee of any Acquiring
Person (or any such Affiliate or Associate) who becomes a transferee after the occurrence of any Person becoming an Acquiring Person or (iii) a transferee of any Acquiring Person (or any such Affiliate or Associate) who became a transferee prior
to or concurrently with any Person becoming an Acquiring Person pursuant to either (a) a transfer from an Acquiring Person to holders of its equity securities or to any Person with whom it has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (b) a transfer which the Board of Directors of the Company has determined is part of a plan, arrangement or understanding which has the purpose or effect of avoiding certain provisions of the
Rights Agreement, and subsequent transferees of any of such Persons, will be void without any further action and any holder of such Rights will thereafter have no rights whatsoever with respect to such Rights under any provision of the Rights
Agreement. From and after the occurrence of any Person becoming an Acquiring Person, no Rights Certificate will be issued that represents Rights that are or have become void pursuant to the provisions of the Rights Agreement, and any Rights
Certificate delivered to the Rights Agent that represents Rights that are or have become void pursuant to the provisions of the Rights Agreement will be canceled.
This Rights Certificate, with
or without other Rights Certificates, may be exchanged for another Rights Certificate or Rights Certificates entitling the holder to purchase a like number of one ten-thousandths of a Preferred Share (or other securities, as the case may be) as
the Rights Certificate or Rights Certificates surrendered entitled such holder (or former holder in the case of a transfer) to purchase, upon presentation and surrender hereof at the office or offices of the Rights Agent designated for such
purpose, with the Form of Assignment (if appropriate) and the related Certificate duly executed.
Subject to the provisions of the
Rights Agreement, the Rights evidenced by this Certificate may be redeemed by the Company at its option at a redemption price of $0.01 per Right or may be exchanged in whole or in part. The Rights Agreement may be supplemented and amended by the
Company, as provided therein.
The Company is not required to
issue fractions of Preferred Shares (other than fractions which are integral multiples of one ten-thousandth of a Preferred Share, which may, at the option of the Company, be evidenced by depositary receipts) or other securities issuable, as the
case may be, upon the exercise of any Right or Rights evidenced hereby. In lieu of issuing such fractional Preferred Shares or other Securities, the Company may make a cash payment, as provided in the Rights Agreement.
No holder of this Rights
Certificate, as such, will be entitled to vote or receive dividends or be deemed for any purpose the holder of the Preferred Shares or of any other securities of the Company which may at any time be issuable upon the exercise of the Right or
Rights represented hereby, nor will anything contained herein or in the Rights Agreement be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in the Rights Agreement), or
to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Rights Certificate have been exercised in accordance with the provisions of the Rights Agreement.
This Rights Certificate will not be valid or obligatory for any
purpose until it has been countersigned by the Rights Agent.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
WITNESS the facsimile signature of the proper
officers of the Company and its corporate seal. Dated as of August 14, 2008.
HOVNANIAN ENTERPRISES
/s/ Peter Reinhart
Name: Peter Reinhart
Title: General Counsel
Countersigned
NATIONAL CITY BANK
/s/ Sharon Boughter
Name: Sharon Boughter
Title: Vice President
Signature page to Rights Certificate
Form of Reverse Side of Rights Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the Rights Certificate)
FOR VALUE RECEIVED, ____________________________ hereby sells,
assigns and transfers unto
(Please print name and address of transferee)
this Rights Certificate, together with all right,
title and interest therein, and does hereby irrevocably constitute and appoint Attorney, to transfer the within Rights Certificate on the books of the within-named Company, with full power of substitution.
Signature(s) Guaranteed:
SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
The undersigned hereby certifies that the Rights evidenced by this
Rights Certificate are not beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement).
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
|
(1) |
the Rights evidenced by this Rights Certificate ☐ are ☐ are not being sold, assigned, transferred, split up, combined or exchanged by or on behalf of a Person who is
or was an Acquiring Person or an Affiliate or Associate of any such Person (as such terms are defined in the Rights Agreement); and |
|
(2) |
after due inquiry and to the best knowledge of the undersigned, it ☐ did ☐ did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was
or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person. |
Form of Reverse Side of Rights Certificate – continued
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise the Rights Certificate)
To Hovnanian Enterprises, Inc.:
The undersigned hereby irrevocably elects to
exercise ___________________________ Rights represented by this Rights Certificate to purchase the one ten-thousandths of a Preferred Share or other securities issuable upon the exercise of such Rights and requests that certificates for such
securities be issued in the name of and delivered to:
Please insert social security or other identifying
number:__________________________________________________________
(Please print name and address)
If such number of Rights is not all the Rights
evidenced by this Rights Certificate, a new Rights Certificate for the balance remaining of such Rights will be registered in the name of and delivered to:
Please insert social security or other identifying
number:________________________________________________________________
(Please print name and address)
Signature(s) Guaranteed:
SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
The undersigned hereby certifies that the Rights
evidenced by this Rights Certificate are not beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement).
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
|
(1) |
the Rights evidenced by this Rights Certificate ☐ are ☐ are not being exercised by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or
Associate of any such Person (as such terms are defined pursuant to the Rights Agreement); and |
|
(2) |
after due inquiry and to the best knowledge of the undersigned, it ☐ did ☐ did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was,
or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person. |
NOTICE
The signature in the Form of Assignment or Form of
Election to Purchase, as the case may be, must conform to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the
Form of Assignment or the Form of Election to Purchase, as the case may be, is not completed, such Assignment or Election to Purchase will not be honored.
EXHIBIT C
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE
RIGHTS AGREEMENT, RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN ACQUIRING PERSON (AS DEFINED IN THE RIGHTS PLAN) AND CERTAIN TRANSFEREES THEREOF WILL BECOME NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.
SUMMARY OF RIGHTS
On July 29, 2008, the Board of
Directors (the “Board”) of Hovnanian Enterprises, Inc., a Delaware corporation (the “Company”), adopted a rights plan and declared a dividend of one preferred share purchase right for each outstanding share of Class
A common stock and Class B common stock. The dividend is payable to our stockholders of record as of August 15, 2008. The terms of the rights and the rights plan are set forth in a Rights Agreement, by and between us and National City Bank, as
Rights Agent, dated as of August 14, 2008 (the “Rights Plan”).
This summary of rights provides
only a general description of the Rights Plan, and thus, should be read together with the entire Rights Plan, which is incorporated into this summary by reference. All capitalized terms used herein but not defined herein shall have the meanings
ascribed to such terms in the Rights Plan. Upon written request, the Company will provide a copy of the Rights Plan free of charge to any of its stockholders.
Our Board adopted the Rights
Plan in an effort to protect stockholder value by attempting to protect against a possible limitation on our ability to use our net operating loss carryforwards (the “NOLs”) to reduce potential future federal income tax
obligations. We have experienced and continue to experience substantial operating losses, and under the Internal Revenue Code and rules promulgated by the Internal Revenue Service, we may “carry forward” these losses in certain circumstances to
offset any current and future earnings and thus reduce our federal income tax liability, subject to certain requirements and restrictions. To the extent that the NOLs do not otherwise become limited, we believe that we will be able to carry
forward a significant amount of NOLs, and therefore these NOLs could be a substantial asset to us. However, if we experience an “Ownership Change,” as defined in Section 382 of the Internal Revenue Code, our ability to use the NOLs will be
substantially limited, and the timing of the usage of the NOLs could be substantially delayed, which could therefore significantly impair the value of that asset.
The Rights Plan is intended to
act as a deterrent to any person or group acquiring 4.9% or more of our outstanding Class A common stock (an “Acquiring Person”) without the approval of our Board. Stockholders who own 4.9% or more of our outstanding Class A common
stock as of the close of business on August 15, 2008 will not trigger the Rights Plan so long as they do not (i) acquire any additional shares of Class A common stock or (ii) fall under 4.9% ownership of Class A common stock and then re-acquire
4.9% or more of the Class A common stock. The Rights Plan does not exempt any future acquisitions of Class A common stock by such persons. Any rights held by an Acquiring Person are void and may not be exercised. Our Board may, in its sole
discretion, exempt any person or group from being deemed an Acquiring Person for purposes of the Rights Plan.
The Rights. Our
Board authorized the issuance of one right per each outstanding share of our Class A common stock and Class B common stock payable to our stockholders of record as of August 15, 2008. Subject to the terms, provisions and conditions of the Rights
Plan, if the rights become exercisable, each right would initially represent the right to purchase from us one ten-thousandth of a share of our Series B Junior Preferred Stock for a purchase price of $35.00 (the “Purchase Price”). If issued, each
fractional share of preferred stock would give the stockholder approximately the same dividend, voting and liquidation rights as does one share of our Class A common stock. However, prior to exercise, a right does not give its holder any rights
as a stockholder of the Company, including without limitation any dividend, voting or liquidation rights.
Exercisability. The
rights will not be exercisable until the earlier of (i) 10 business days after a public announcement by us that a person or group has become an Acquiring Person and (ii) 10 business days after the commencement of a tender or exchange offer by a
person or group for 4.9% of the Class A common stock.
We refer to the date that the
rights become exercisable as the “Distribution Date.” Until the Distribution Date, our Class A common stock and Class B common stock certificates will evidence the rights and will contain a notation to that effect. Any transfer of
shares of Class A common stock and/or Class B common stock prior to the Distribution Date will constitute a transfer of the associated rights. After the Distribution Date, the rights may be transferred other than in connection with the transfer
of the underlying shares of Class A common stock or Class B common stock unless and until our Board has determined not to affect an exchange pursuant to the Rights Plan (as described below).
After the Distribution Date,
each holder of a Right, other than Rights beneficially owned by the Acquiring Person (which will thereupon become void), will thereafter have the right to receive upon exercise of a Right and payment of the Purchase Price, that number of shares
of Class A common stock or Class B common stock, as the case may be, having a market value of two times the Purchase Price.
Exchange. After
the Distribution Date, the Board may exchange the Rights (other than Rights owned by such person or group which will have become void), in whole or in part, at an exchange ratio of one share of Common Stock, or a fractional share of Series B
Preferred Stock (or of a share of a similar class or series of the Company’s preferred stock having similar rights, preferences and privileges) of equivalent value, per Right (subject to adjustment).
Expiration. The
rights and the Rights Plan will expire on the earliest of (i) August 14, 2018, (ii) the time at which the Rights are redeemed pursuant to the Rights Agreement, (iii) the time at which the Rights are exchanged pursuant to the Rights Agreement,
(iv) the repeal of Section 382 of the Code or any successor statute if the Board determines that the Rights Agreement is no longer necessary for the preservation of Tax Benefits, (v) the beginning of a taxable year of the Company to which the
Board determines that no Tax Benefits may be carried forward and (vi) August 14, 2009 if Stockholder Approval has not been obtained.
Redemption. At
any time prior to the time an Acquiring Person becomes such, the Board may redeem the Rights in whole, but not in part, at a price of $0.01 per Right (the “Redemption Price”). The redemption of the Rights may be made
effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish. Immediately upon any redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of
Rights will be to receive the Redemption Price.
Anti-Dilution Provisions.
Our Board may adjust the purchase price of the preferred shares, the number of preferred shares issuable and the number of outstanding rights to prevent dilution that may occur as a result of certain events, including among others, a stock
dividend, a stock split or a reclassification of the preferred shares or our Class A common stock or Class B common stock. No adjustments to the purchase price of less than 1% will be made.
Amendments. Before
the Distribution Date, our Board may amend or supplement the Rights Plan without the consent of the holders of the Rights. After the Distribution Date, our Board may amend or supplement the Rights Plan only to cure an ambiguity, to alter time
period provisions, to correct inconsistent provisions, or to make any additional changes to the Rights Plan, but only to the extent that those changes do not impair or adversely affect any rights holder and do not result in the rights again
becoming redeemable, and no such amendment may cause the Rights again to become redeemable or cause this Rights Agreement again to become amendable other than in accordance with this sentence.
AMENDMENT NO. 1
TO
RIGHTS AGREEMENT
This Amendment No. 1 (this “Amendment”)
to that certain rights agreement, by and between Hovnanian Enterprises, Inc., a Delaware corporation (the “Company”), and Computershare Trust Company, N.A., as successor to National City Bank (the “Rights Agent”), dated as of August
14, 2008, is made and entered into as of January 11, 2018, and shall become effective on January 11, 2018.
BACKGROUND
WHEREAS, the Company and the
Rights Agent entered into that certain rights agreement, dated as of August 14, 2008 (the “Existing Rights Agreement”);
WHEREAS, Section 26 of the
Existing Rights Agreement provides that prior to the Distribution Date, the Company may supplement or amend any provision of the Existing Rights Agreement without the approval of any holders of Rights;
WHEREAS, no Distribution Date has occurred on or prior to the date
hereof;
WHEREAS, the Board of Directors
of the Company (the “Board”) deems it advisable and in the best interests of the Company and its stockholders to amend the terms of the Existing Rights Agreement as set forth herein; and
WHEREAS, on January 8, 2018, the Board authorized and approved this
Amendment.
AGREEMENT
NOW, THEREFORE, the Company
hereby amends the Existing Rights Agreement as follows and directs the Rights Agent to execute this Amendment:
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Effect of Amendment. Except as expressly provided herein, the Existing Rights Agreement shall be and remain in full force and
effect. |
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Capitalized Terms. All capitalized, undefined terms used in this Amendment shall have the meanings assigned thereto in the Existing
Rights Agreement. |
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National City Bank. All references in the Existing Rights Agreement to “National City Bank” shall be removed and replaced with
“Computershare Trust Company, N.A.”. |
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Section 1 of the Existing Rights Agreement is hereby amended as follows: |
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The reference to “August 14, 2009” in clause (x)(vi) shall be removed and replaced with “August 14, 2019”. |
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The reference to “August 14, 2018” in clause (y) shall be removed and replaced with “August 14, 2021”. |
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The reference to “$35.00” in clause (dd) shall be removed and replaced with “$16.60”. |
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The references to “this Agreement” in clause (pp) shall be removed and replaced with “Amendment No. 1 to Rights Agreement, dated as
of January 11, 2018, between the Company and the Rights Agent”. |
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Exhibit B to the Existing Rights Agreement is hereby amended and restated in its entirety as set forth on Exhibit 1 hereto. |
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Exhibit C to the Existing Rights Agreement is hereby amended and restated in its entirety as set forth on Exhibit 2 hereto. |
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Governing Law. This Amendment shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes
shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State. |
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Execution in Counterparts. This Amendment may be executed in any number of counterparts and each of such counterparts shall for all
purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. A signature to this Amendment executed and/or transmitted electronically shall have the same authority, effect and
enforceability as an original signature. |
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first written above.
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HOVNANIAN ENTERPRISES, INC. |
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By: |
/s/ Michael Discafani |
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Signature |
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Name: Michael Discafani |
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Title: Vice President, Corporate Counsel and Secretary |
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COMPUTERSHARE TRUST COMPANY, N.A. |
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By: |
/s/ Michael J. Lang |
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Signature |
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Name: Michael J. Lang |
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Title: Senior Vice President, Investor Services |
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Exhibit 1
FORM OF RIGHTS CERTIFICATE
Certificate No. R-__________ __________ Rights in respect of Class ___
Common Stock
NOT EXERCISABLE AFTER AUGUST 14, 2021 OR EARLIER IF
REDEEMED, EXCHANGED OR AMENDED. THE RIGHTS ARE SUBJECT TO REDEMPTION, EXCHANGE AND AMENDMENT AT THE OPTION OF THE COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES SPECIFIED IN THE RIGHTS AGREEMENT, RIGHTS THAT
ARE OR WERE BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR AN ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) OR A TRANSFEREE THEREOF SHALL BECOME NULL AND VOID AND NO LONGER TRANSFERABLE.
RIGHTS CERTIFICATE
HOVNANIAN ENTERPRISES , INC .
This certifies that _________________ , or
registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions, and conditions of the Rights Agreement, (as amended from time to time, the “Rights
Agreement”), by and between Hovnanian Enterprises, Inc., a Delaware corporation (the “Company”), and Computershare Trust Company, N.A. (as successor to National City Bank) (the “Rights Agent”), dated as of August
14, 2008, to purchase from the Company at any time after the Distribution Date (as such term is defined in the Rights Agreement) and prior to 5:00 p.m. (New York time) on the Expiration Date (as such term is defined in the Rights Agreement) at
the office or offices of the Rights Agent designated for such purpose, one ten-thousandth of a fully paid, nonassessable share of Series B Junior Preferred Stock, par value $0.01 per share (the “Preferred Shares”), of the Company,
at a purchase price of $16.60 per one ten-thousandth of a Preferred Share (the “Purchase Price”), upon presentation and surrender of this Rights Certificate with the Form of Election to Purchase and related Certificate duly
executed. If this Rights Certificate is exercised in part, the holder will be entitled to receive upon surrender hereof another Rights Certificate or Rights Certificates for the number of whole Rights not exercised. The number of Rights evidenced
by this Rights Certificate (and the number of one ten-thousandths of a Preferred Share which may be purchased upon exercise thereof) set forth above, and the Purchase Price set forth above, are the number and Purchase Price as of the date of the
Rights Agreement, based on the Preferred Shares as constituted at such date. Terms used herein with initial capital letters and not defined herein are used herein with the meanings ascribed thereto in the Rights Agreement.
As provided in the Rights
Agreement, the Purchase Price and/or the number and/or kind of shares of Preferred Stock (or other securities, as the case may be) which may be purchased upon the exercise of the Rights evidenced by this Rights Certificate are subject to
adjustment upon the occurrence of certain events.
This Rights Certificate is
subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a
full description of the rights, limitations of rights, obligations, duties and immunities of the Rights Agent, the Company and the holders of the Rights Certificates, which limitations of rights include the temporary suspension of the
exercisability of the Rights under the circumstances specified in the Rights Agreement. Copies of the Rights Agreement are on file at the principal executive offices of the Company and can be obtained from the Company without charge upon written
request therefor.
Pursuant to the Rights
Agreement, from and after the occurrence of any Person becoming an Acquiring Person, any Rights that are Beneficially Owned by (i) any Acquiring Person (or any Affiliate or Associate of any Acquiring Person), (ii) a transferee of any Acquiring
Person (or any such Affiliate or Associate) who becomes a transferee after the occurrence of any Person becoming an Acquiring Person or (iii) a transferee of any Acquiring Person (or any such Affiliate or Associate) who became a transferee prior
to or concurrently with any Person becoming an Acquiring Person pursuant to either (a) a transfer from an Acquiring Person to holders of its equity securities or to any Person with whom it has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (b) a transfer which the Board of Directors of the Company has determined is part of a plan, arrangement or understanding which has the purpose or effect of avoiding certain provisions of the
Rights Agreement, and subsequent transferees of any of such Persons, will be void without any further action and any holder of such Rights will thereafter have no rights whatsoever with respect to such Rights under any provision of the Rights
Agreement. From and after the occurrence of any Person becoming an Acquiring Person, no Rights Certificate will be issued that represents Rights that are or have become void pursuant to the provisions of the Rights Agreement, and any Rights
Certificate delivered to the Rights Agent that represents Rights that are or have become void pursuant to the provisions of the Rights Agreement will be canceled.
This Rights Certificate, with or
without other Rights Certificates, may be exchanged for another Rights Certificate or Rights Certificates entitling the holder to purchase a like number of one ten-thousandths of a Preferred Share (or other securities, as the case may be) as the
Rights Certificate or Rights Certificates surrendered entitled such holder (or former holder in the case of a transfer) to purchase, upon presentation and surrender hereof at the office or offices of the Rights Agent designated for such purpose,
with the Form of Assignment (if appropriate) and the related Certificate duly executed.
Subject to the provisions of the
Rights Agreement, the Rights evidenced by this Certificate may be redeemed by the Company at its option at a redemption price of $0.01 per Right or may be exchanged in whole or in part. The Rights Agreement may be supplemented and amended by the
Company, as provided therein.
The Company is not required to
issue fractions of Preferred Shares (other than fractions which are integral multiples of one ten-thousandth of a Preferred Share, which may, at the option of the Company, be evidenced by depositary receipts) or other securities issuable, as the
case may be, upon the exercise of any Right or Rights evidenced hereby. In lieu of issuing such fractional Preferred Shares or other securities, the Company may make a cash payment, as provided in the Rights Agreement.
No holder of this Rights
Certificate, as such, will be entitled to vote or receive dividends or be deemed for any purpose the holder of the Preferred Shares or of any other securities of the Company which may at any time be issuable upon the exercise of the Right or
Rights represented hereby, nor will anything contained herein or in the Rights Agreement be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in the Rights Agreement), or
to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Rights Certificate have been exercised in accordance with the provisions of the Rights Agreement.
This Rights Certificate will not be valid or obligatory for any
purpose until it has been countersigned by the Rights Agent.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal. Dated as of August 14, 2008.
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HOVNANIAN ENTERPRISES, INC. |
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/s/ |
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Signature |
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Name: |
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Title: |
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Countersigned: |
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COMPUTERSHARE TRUST COMPANY, N.A. |
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/s/ |
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Signature |
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Name: |
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Title: |
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Form of Reverse Side of Rights Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the Rights Certificate)
FOR VALUE RECEIVED,___________________hereby sells, assigns and transfers
unto
(Please print name and address of transferee)
this Rights Certificate, together with all right,
title and interest therein, and does hereby irrevocably constitute and appoint Attorney, to transfer the within Rights Certificate on the books of the within-named Company, with full power of substitution.
Signature(s) Guaranteed:
SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
The undersigned hereby certifies that the Rights
evidenced by this Rights Certificate are not beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement).
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
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the Rights evidenced by this Rights Certificate ☐ are ☐ are not being sold, assigned, transferred, split up, combined or exchanged by or on behalf of a Person who is
or was an Acquiring Person or an Affiliate or Associate of any such Person (as such terms are defined in the Rights Agreement); and |
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after due inquiry and to the best knowledge of the undersigned, it ☐ did ☐ did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was
or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person. |
Form of Reverse Side of Rights Certificate — continued
FORM OF ELECTION TO PURCHASE
(To be executed if the holder desires to exercise the Rights
Certificate)
To Hovnanian Enterprises, Inc.:
The undersigned hereby irrevocably elects to
exercise ________________________ Rights represented by this Rights Certificate to purchase the one ten-thousandths of a Preferred Share or other securities issuable upon the exercise of such Rights and requests that certificates for such
securities be issued in the name of and delivered to:
Please insert social security or other identifying number:
(Please print name and address)
If such number of Rights is not all the Rights
evidenced by this Rights Certificate, a new Rights Certificate for the balance remaining of such Rights will be registered in the name of and delivered to:
Please insert social security or other identifying
number:____________________________________________________
(Please print name and address)
,
Signature(s) Guaranteed:
SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
The undersigned hereby certifies that the Rights
evidenced by this Rights Certificate are not beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as such terms are defined in the Rights Agreement).
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
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the Rights evidenced by this Rights Certificate ☐ are ☐ are not being exercised by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or
Associate of any such Person (as such terms are defined pursuant to the Rights Agreement); and |
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after due inquiry and to the best knowledge of the undersigned, it ☐ did ☐ did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was,
or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person. |
NOTICE
The signature(s) in the Form of Assignment or Form
of Election to Purchase, as the case may be, must conform to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the
Form of Assignment or the Form of Election to Purchase, as the case may be, is not completed, such Assignment or Election to Purchase will not be honored.
Exhibit 2
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE
AMENDED RIGHTS PLAN, RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE AMENDED RIGHTS PLAN) AND CERTAIN TRANSFEREES THEREOF WILL BECOME NULL AND VOID AND WILL NO LONGER BE
TRANSFERABLE.
SUMMARY OF RIGHTS
On January 11, 2018, the Board
of Directors (the “Board”) of Hovnanian Enterprises, Inc., a Delaware corporation (the “Company”), entered into Amendment No. 1 (the “Amendment”) to the Rights Agreement, by and between the Company and
Computershare Trust Company, N.A. (as successor to National City Bank), dated as of August 14, 2008 (the “Rights Plan”, and as amended by the Amendment, the “Amended Rights Plan”).
This summary of rights provides
only a general description of the Amended Rights Plan, and thus, should be read together with the entire Amended Rights Plan, which is incorporated into this summary by reference. All capitalized terms used herein but not defined herein shall
have the meanings ascribed to such terms in the Amended Rights Plan. Upon written request, the Company will provide a copy of the Amended Rights Plan (which includes the Rights Plan and the Amendment) free of charge to any of its stockholders.
Our Board entered into the
Amended Rights Plan in an effort to protect stockholder value by attempting to protect against a possible limitation on our ability to use our net operating loss carryforwards (the “NOLs”) to reduce future potential federal income
tax obligations. We have experienced substantial operating losses, and under the Internal Revenue Code and rules promulgated by the Internal Revenue Service, we may “carry forward” these losses in certain circumstances to offset any current and
future earnings and thus reduce our federal income tax liability, subject to certain requirements and restrictions. To the extent that the NOLs do not otherwise become limited, we believe that we will be able to carry forward a significant amount
of NOLs, and therefore these NOLs could be a substantial asset to us. However, if we experience an “Ownership Change,” as defined in Section 382 of the Internal Revenue Code, our ability to use the NOLs will be substantially limited, and the
timing of the usage of the NOLs could be substantially delayed, which could therefore significantly impair the value of that asset.
The Amended Rights Plan is
intended to act as a deterrent to any person or group acquiring 4.9% or more of our outstanding Class A common stock (an “Acquiring Person”) without the approval of our Board. Stockholders who owned 4.9% or more of our outstanding
Class A common stock as of the close of business on August 15, 2008 would not have triggered the Amended Rights Plan so long as they did not and do not (i) acquire any additional shares of Class A common stock or (ii) fall under 4.9% ownership of
Class A common stock and then re-acquire 4.9% or more of the Class A common stock. The Amended Rights Plan does not exempt any subsequent acquisitions of Class A common stock by such persons. Any Rights held by an Acquiring Person are void and
may not be exercised. Our Board may, in its sole discretion, exempt any person or group from being deemed an Acquiring Person for purposes of the Amended Rights Plan.
The Rights. Our
Board authorized the issuance of one Right per each outstanding share of our Class A common stock and Class B common stock payable to our stockholders of record as of August 15, 2008 and the issuance of one Right per each share of Class A common
stock and Class B common stock issued or delivered by the Company after such date but before the earlier of the Distribution Date (as defined below) and the Expiration Date (as defined below). Subject to the terms, provisions and conditions of
the Amended Rights Plan, if the Rights become exercisable, each Right would initially represent the right to purchase from us one ten-thousandth of a share of our Series B Junior Preferred Stock for a purchase price of $16.60 (the “Purchase
Price”). If issued, each fractional share of preferred stock would give the stockholder approximately the same dividend, voting and liquidation rights as does one share of our Class A common stock. However, prior to exercise, a Right
does not give its holder any rights as a stockholder of the Company, including without limitation any dividend, voting or liquidation rights.
Exercisability. The
Rights will not be exercisable until the earlier of (i) 10 business days after a public announcement by us that a person or group has become an Acquiring Person and (ii) 10 business days after the commencement of a tender or an exchange offer by
a person or group for 4.9% of the Class A common stock.
We refer to the date that the
Rights become exercisable as the “Distribution Date.” Until the Distribution Date, our Class A common stock and Class B common stock certificates will evidence the Rights and will contain a notation to that effect. Any transfer of
shares of Class A common stock and/or Class B common stock prior to the Distribution Date will constitute a transfer of the associated Rights. After the Distribution Date, the Rights may be transferred other than in connection with the transfer
of the underlying shares of Class A common stock or Class B common stock unless and until our Board has determined to affect an exchange pursuant to the Amended Rights Plan (as described below).
After the Distribution Date,
each holder of a Right, other than Rights beneficially owned by the Acquiring Person (which will thereupon become void), will thereafter have the right to receive upon exercise of a Right and payment of the Purchase Price, that number of shares
of Class A common stock or Class B common stock, as the case may be, having a market value of two times the Purchase Price.
Exchange. After
the Distribution Date, the Board may exchange the Rights (other than Rights owned by such person or group which will have become void), in whole or in part, at an exchange ratio of one share of Common Stock, or a fractional share of Series B
Preferred Stock (or of a share of a similar class or series of the Company’s preferred stock having similar rights, preferences and privileges) of equivalent value, per Right (subject to adjustment).
Expiration. The
Rights and the Amended Rights Plan will expire on the earliest of (i) August 14, 2021, (ii) the time at which the Rights are redeemed pursuant to the Rights Agreement, (iii) the time at which the Rights are exchanged pursuant to the Amended
Rights Plan, (iv) the repeal of Section 382 of the Internal Revenue Code or any successor statute if the Board determines that the Amended Rights Plan is no longer necessary for the preservation of Tax Benefits, (v) the beginning of a taxable
year of the Company to which the Board determines that no Tax Benefits may be carried forward and (vi) August 14, 2019, if Stockholder Approval has not been obtained.
Redemption. At
any time prior to the time an Acquiring Person becomes such, the Board may redeem the Rights in whole, but not in part, at a price of $0.01 per Right (the “Redemption Price”). The redemption of the Rights may be made effective at such time, on
such basis and with such conditions as the Board in its sole discretion may establish. Immediately upon any redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive
the Redemption Price.
Anti-Dilution Provisions.
Our Board may adjust the purchase price of the preferred shares, the number of preferred shares issuable and the number of outstanding rights to prevent dilution that may occur as a result of certain events, including among others, a stock
dividend, a stock split or a reclassification of the preferred shares or our Class A common stock or Class B common stock. No adjustments to the purchase price of less than 1% will be made.
Amendments. Before
the Distribution Date, our Board may amend or supplement the Amended Rights Plan without the consent of the holders of the Rights. After the time that the Rights have become no longer redeemable, our Board may amend or supplement the Amended
Rights Plan only to cure an ambiguity, to alter time period provisions, to correct inconsistent provisions, or to make any additional changes to the Amended Rights Plan, but only to the extent that those changes do not impair or adversely affect
any Rights holder, and no such amendment may cause the Rights again to become redeemable or cause the Amended Rights Plan again to become amendable other than in accordance the Amended Rights Plan.
AMENDMENT NO. 2
TO
RIGHTS AGREEMENT
January 18, 2021
This Amendment No. 2 (this “Amendment”)
to that certain Rights Agreement, by and between Hovnanian Enterprises, Inc., a Delaware corporation (the “Company”), and Computershare Trust Company, N.A., as successor to National City Bank (the “Rights Agent”), dated as of August
14, 2008, as amended by that certain Amendment No. 1 to Rights Agreement, dated as of January 11, 2018, is made and entered into as of January 18, 2021, and shall become effective on January 18, 2021.
BACKGROUND
WHEREAS, the Company and the
Rights Agent entered into that certain Rights Agreement, dated as of August 14, 2008, which was subsequently amended by that certain Amendment No. 1 to Rights Agreement, dated as of January 11, 2018, by and between the Company and the Rights
Agent (as amended, the “Existing Rights Agreement”);
WHEREAS, Section 26 of the
Existing Rights Agreement provides that prior to the Distribution Date, the Company may supplement or amend any provision of the Existing Rights Agreement without the approval of any holders of Rights;
WHEREAS, no Distribution Date has occurred on or prior to the date
hereof;
WHEREAS, the Board deems it
advisable and in the best interests of the Company and its stockholders to amend the terms of the Existing Rights Agreement as set forth herein; and
WHEREAS, on January 18, 2021, the Board authorized and approved this
Amendment.
AGREEMENT
NOW, THEREFORE, the Company
hereby amends the Existing Rights Agreement as follows and directs the Rights Agent to execute this Amendment:
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Effect of Amendment. Except as expressly provided herein, the Existing Rights Agreement shall be and remain in full force and
effect. |
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Capitalized Terms. All capitalized, undefined terms used in this Amendment shall have the meanings assigned to them in the Existing
Rights Agreement. |
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Section 1 of the Existing Rights Agreement is hereby amended as follows: |
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The reference to “August 14, 2019” in clause (x)(vi) shall be removed and replaced with “August 14, 2022”. |
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The reference to “August 14, 2021” in clause (y) shall be removed and replaced with “August 14, 2024”. |
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c. |
The reference to “$16.60” in clause (dd) shall be removed and replaced with “$171.85”. |
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d. |
The references to “this Agreement” in clause (pp) shall be removed and replaced with “Amendment No. 2 to Rights Agreement, dated as
of January 18, 2021, by and between the Company and the Rights Agent”. |
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4. |
The first two sentences of Section 5(a) of the Existing Rights Agreement are hereby amended as follows: |
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a. |
“The Rights Certificates shall be executed on behalf of the Company by any Authorized Officer, either manually or by electronic (to the
extent available and in accordance with the Rights Agent’s standard practices and procedures) or facsimile signature. The Rights Certificates shall be countersigned by an authorized signatory of the Rights Agent, either manually or by
electronic (to the extent available and in accordance with the Rights Agent’s standard practices and procedures) or facsimile signature, and shall not be valid for any purpose unless so countersigned.” |
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5. |
Section 11(n) of the Existing Rights Agreement is hereby amended to add the following sentence to the end of such Section: |
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a. |
“Notwithstanding any prior adjustments to the number of Rights associated with each share of Class A Common Stock and/or Class B Common
Stock, as applicable, as of January 18, 2021, each then-outstanding share of Class A Common Stock and Class B Common Stock entitles the holder thereof to one Right per share of Class A Common Stock and/or Class B Common Stock, as
applicable, and each share of Class A Common Stock and/or Class B Common Stock, as applicable, issued or delivered after January 18, 2021, but prior to the Distribution Date or the Expiration Date, as applicable, shall entitle the holder
thereof to one Right per share of Class A Common Stock and/or Class B Common Stock, as applicable, in all cases, subject to any adjustments in accordance with this Agreement.” |
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6. |
Exhibit B to the Existing Rights Agreement is hereby amended and restated in its entirety as set forth on Exhibit 1 attached
hereto. |
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7. |
Exhibit C to the Existing Rights Agreement is hereby amended and restated in its entirety as set forth on Exhibit 2 attached
hereto. |
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8. |
Governing Law. This Amendment shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes
shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State. |
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9. |
Execution in Counterparts. This Amendment may be executed in any number of counterparts and each of such counterparts shall for all
purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. A signature to this Amendment executed and/or transmitted electronically shall have the same authority, effect and
enforceability as an original signature. |
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first written above.
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HOVNANIAN ENTERPRISES, INC. |
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By: |
/s/ Brad G. O’Connor |
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Name: |
Brad G. O’Connor |
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Title: |
Senior Vice President, Treasurer and |
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Chief Accounting Officer |
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COMPUTERSHARE TRUST COMPANY, N.A. |
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By: |
/s/ Marleen Grandeson-Mills |
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Name: |
Marleen Grandeson-Mills |
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Title: |
AVP, Relationship Manager |
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[Signature Page to Amendment No. 2 to Rights Agreement]
Exhibit 1
FORM OF RIGHTS CERTIFICATE
Certificate No. R-_______ ________ Rights in respect of Class ____
Common Stock
NOT EXERCISABLE AFTER THE EXPIRATION DATE OR EARLIER
IF REDEEMED, EXCHANGED OR AMENDED. THE RIGHTS ARE SUBJECT TO REDEMPTION, EXCHANGE AND AMENDMENT AT THE OPTION OF THE COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES SPECIFIED IN THE RIGHTS AGREEMENT, RIGHTS
THAT ARE OR WERE BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR AN ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) OR A TRANSFEREE THEREOF SHALL BECOME NULL AND VOID AND NON-TRANSFERABLE.
RIGHTS CERTIFICATE
HOVNANIAN ENTERPRISES, INC.
This certifies that
______________ , or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions,
and conditions of the Rights Agreement, by and between Hovnanian Enterprises, Inc., a Delaware corporation (the “Company”), and Computershare Trust Company, N.A. (as successor to National City Bank) (the “Rights Agent”),
dated as of August 14, 2008 (as amended from time to time, the “Rights Agreement”), to purchase from the Company at any time after the Distribution Date (as such term is defined in the Rights Agreement) and prior to 5:00 p.m. (New
York time) on the Expiration Date (as such term is defined in the Rights Agreement) at the office or offices of the Rights Agent designated for such purpose, one ten-thousandth of a fully paid, nonassessable share of Series B Junior Preferred
Stock, par value $0.01 per share (the “Preferred Shares”), of the Company, at a purchase price of $171.85 per one ten-thousandth of a Preferred Share (the “Purchase Price”), upon presentation and surrender of this
Rights Certificate with the Form of Election to Purchase and related Certificate duly executed. If this Rights Certificate is exercised in part, the holder will be entitled to receive upon surrender hereof another Rights Certificate or Rights
Certificates for the number of whole Rights not exercised. The number of Rights evidenced by this Rights Certificate (and the number of one ten-thousandths of a Preferred Share which may be purchased upon exercise thereof) set forth above, and
the Purchase Price set forth above, are the number and Purchase Price as of January 18, 2021, the date of the most recent amendment to the Rights Agreement, based on the Preferred Shares as constituted at such date. Terms used herein with initial
capital letters and not defined herein are used herein with the meanings ascribed to them in the Rights Agreement.
As provided in the Rights
Agreement, the Purchase Price and/or the number and/or kind of shares of Preferred Stock (or other securities, as the case may be) which may be purchased upon the exercise of the Rights evidenced by this Rights Certificate are subject to
adjustment upon the occurrence of certain events.
This Rights Certificate is
subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a
full description of the rights, limitations of rights, obligations, duties and immunities of the Rights Agent, the Company and the holders of the Rights Certificates, which limitations of rights include the temporary suspension of the
exercisability of the Rights under the circumstances specified in the Rights Agreement. Copies of the Rights Agreement are on file at the principal executive offices of the Company and can be obtained from the Company without charge upon written
request therefor.
Pursuant to the Rights
Agreement, from and after the occurrence of any Person becoming an Acquiring Person, any Rights that are beneficially owned by (i) any Acquiring Person (or any Affiliate or Associate of any Acquiring Person), (ii) a transferee of any Acquiring
Person (or any Affiliate or Associate of an Acquiring Person) who becomes a transferee after the occurrence of any Person becoming an Acquiring Person or (iii) a transferee of any Acquiring Person (or any Affiliate or Associate of an Acquiring
Person) who became a transferee prior to or concurrently with any Person becoming an Acquiring Person pursuant to either (a) a transfer from an Acquiring Person to holders of its equity securities or to any Person with whom it has any continuing
agreement, arrangement or understanding regarding the transferred Rights or (b) a transfer which the Board of Directors of the Company has determined is part of a plan, arrangement or understanding which has the purpose or effect of avoiding
certain provisions of the Rights Agreement, and subsequent transferees of any of such Persons, will be void without any further action and any holder of such Rights will thereafter have no rights whatsoever with respect to such Rights under any
provision of the Rights Agreement. From and after the occurrence of any Person becoming an Acquiring Person, no Rights Certificate will be issued that represents Rights that are or have become void pursuant to the provisions of the Rights
Agreement, and any Rights Certificate delivered to the Rights Agent that represents Rights that are or have become void pursuant to the provisions of the Rights Agreement will be cancelled.
This Rights Certificate, with or
without other Rights Certificates, may be exchanged for another Rights Certificate or Rights Certificates entitling the holder to purchase a like number of one ten-thousandths of a Preferred Share (or other securities, as the case may be) as the
Rights Certificate or Rights Certificates surrendered entitled such holder (or former holder in the case of a transfer) to purchase, upon presentation and surrender hereof at the office or offices of the Rights Agent designated for such purpose,
with the Form of Assignment (if appropriate) and the related Certificate duly executed.
Subject to the provisions of the
Rights Agreement, the Rights evidenced by this Certificate may be redeemed by the Company at its option at a redemption price of $0.01 per Right or may be exchanged in whole or in part. The Rights Agreement may be supplemented and amended by the
Company, as provided therein.
The Company is not required to
issue fractions of Preferred Shares (other than fractions which are integral multiples of one ten-thousandth of a Preferred Share, which may, at the option of the Company, be evidenced by depositary receipts) or other securities issuable, as the
case may be, upon the exercise of any Right or Rights evidenced hereby. In lieu of issuing such fractional Preferred Shares or other securities, the Company may make a cash payment, as provided in the Rights Agreement.
No holder of this Rights
Certificate, as such, will be entitled to vote or receive dividends or be deemed for any purpose the holder of the Preferred Shares or of any other securities of the Company which may at any time be issuable upon the exercise of the Right or
Rights represented hereby, nor will anything contained herein or in the Rights Agreement be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in the Rights Agreement), or
to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Rights Certificate have been exercised in accordance with the provisions of the Rights Agreement.
This Rights Certificate will not be valid or obligatory for any
purpose until it has been countersigned by the Rights Agent.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
WITNESS the manual, electronic or facsimile signature of the proper
officer of the Company. Dated as of _________, 20____.
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HOVNANIAN ENTERPRISES, INC. |
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Name: |
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Title: |
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Countersigned: |
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COMPUTERSHARE TRUST COMPANY, N.A. |
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Name: |
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Title: |
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Form of Reverse Side of Rights Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the Rights Certificate)
FOR VALUE RECEIVED,_________________________hereby sells, assigns and
transfers unto
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(Please print name and address of transferee) |
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this Rights Certificate, together with all right,
title and interest therein, and does hereby irrevocably constitute and appoint Attorney, to transfer the within Rights Certificate on the books of the within-named Company, with full power of substitution.
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____________________________ , ____________________ |
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Dated |
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Signature |
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Signature(s) Guaranteed:
SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
__________________________
The undersigned hereby certifies that the Rights
evidenced by this Rights Certificate are not beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement).
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
| (1) |
the Rights evidenced by this Rights Certificate ☐ are ☐ are not being sold, assigned, transferred, split up, combined or exchanged by or on
behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Person (as such terms are defined in the Rights Agreement); and |
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| (2) |
after due inquiry and to the best knowledge of the undersigned, it ☐ did ☐ did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person. |
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____________________________ , ____________________ |
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Dated |
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Signature |
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Form of Reverse Side of Rights Certificate — continued
FORM OF ELECTION TO PURCHASE
(To be executed if the holder desires to exercise the Rights
Certificate)
To Hovnanian Enterprises, Inc.:
The undersigned hereby irrevocably elects to exercise
______________________Rights represented by this Rights Certificate to purchase the one ten-thousandths of a Preferred Share or other securities issuable upon the exercise of such
Rights and requests that certificates for such securities be issued in the name of and delivered to:
Please insert social security or other identifying number:
________________________________________________________________________
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(Please print name and address) |
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If such number of Rights is not all the Rights
evidenced by this Rights Certificate, a new Rights Certificate for the balance remaining of such Rights will be registered in the name of and delivered to:
Please insert social security or other identifying number:
________________________________________________________________________
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(Please print name and address) |
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____________________________ , ____________________ |
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Dated |
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Signature(s) Guaranteed:
SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
The undersigned hereby certifies that the Rights
evidenced by this Rights Certificate are not beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as such terms are defined in the Rights Agreement).
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
| (1) |
the Rights evidenced by this Rights Certificate are ☐ are ☐ not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Person (as such terms are defined pursuant to the Rights Agreement); and |
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| (2) |
after due inquiry and to the best knowledge of the undersigned, it ☐ did ☐ did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was, or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person. |
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____________________________ , ____________________ |
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Dated |
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Signature |
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NOTICE
The signature(s) in the Form of Assignment or Form of
Election to Purchase, as the case may be, must conform to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the
Form of Assignment or the Form of Election to Purchase, as the case may be, is not completed, such Assignment or Election to Purchase will not be honored.
Exhibit 2
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE
AMENDED RIGHTS PLAN, RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN ACQUIRING PERSON (OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON) (AS SUCH TERMS ARE DEFINED IN THE AMENDED RIGHTS PLAN) AND CERTAIN TRANSFEREES THEREOF
WILL BECOME NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.
SUMMARY OF RIGHTS
On January 18, 2021, the Board
of Directors (the “Board”) of Hovnanian Enterprises, Inc., a Delaware corporation (the “Company”), approved the Company entering into, and the Company entered into, Amendment No. 2 (the “Amendment”) to
the Rights Agreement, by and between the Company and Computershare Trust Company, N.A. (as successor to National City Bank), dated as of August 14, 2008, as amended by Amendment No. 1, dated January 11, 2018 (as amended through the date hereof,
the “Amended Rights Plan”).
This summary of rights provides
only a general description of the Amended Rights Plan, and thus, should be read together with the entire Amended Rights Plan, which is incorporated into this summary by reference. All capitalized terms used herein but not defined herein shall
have the meanings ascribed to such terms in the Amended Rights Plan. Upon written request, the Company will provide a copy of the Amended Rights Plan free of charge to any of its stockholders.
Our Board approved the Amended
Rights Plan in an effort to protect stockholder value by attempting to protect against a possible limitation on our ability to use our net operating loss carryforwards (the “NOLs”) to reduce future potential federal income tax
obligations. We have experienced substantial operating losses, and under the Internal Revenue Code and rules promulgated by the Internal Revenue Service, we may “carry forward” these losses in certain circumstances to offset any current and
future earnings and thus reduce our federal income tax liability, subject to certain requirements and restrictions. To the extent that the NOLs do not otherwise become limited, we believe that we will be able to carry forward a significant amount
of NOLs, and therefore these NOLs could be a substantial asset to us. However, if we experience an “Ownership Change,” as defined in Section 382 of the Internal Revenue Code, our ability to use the NOLs will be substantially limited, and the
timing of the usage of the NOLs could be substantially delayed, which could therefore significantly impair the value of that asset.
The Amended Rights Plan is
intended to act as a deterrent to any person or group acquiring 4.9% or more of our outstanding Class A common stock (an “Acquiring Person”) without the approval of our Board, thereby reducing the likelihood of an Ownership Change.
Stockholders who owned 4.9% or more of our outstanding Class A common stock as of the close of business on August 15, 2008 would not have triggered the Amended Rights Plan so long as they did not and do not (i) acquire any additional shares of
Class A common stock or (ii) fall under 4.9% ownership of Class A common stock and then re-acquire 4.9% or more of the Class A common stock. The Amended Rights Plan does not exempt any subsequent acquisitions of Class A common stock by such
persons. Any Rights held by an Acquiring Person and certain Associates, Affiliates and transferees thereof are void and may not be exercised. Our Board may, in its sole discretion, exempt any person or group from being deemed an Acquiring Person
for purposes of the Amended Rights Plan.
The Rights. Our
Board authorized the issuance of one Right per each outstanding share of our Class A common stock and Class B common stock payable to our stockholders of record as of August 15, 2008 and the issuance of one Right per each share of Class A common
stock and Class B common stock issued or delivered by the Company after such date but before the earlier of the Distribution Date (as defined below) and the Expiration Date (as defined below). Notwithstanding any prior adjustments to the number
of Rights associated with each share of Class A common stock and/or Class B common stock, as applicable, as of January 18, 2021, each outstanding share of Class A common stock and Class B common stock entitles the holder thereof to one Right, and
each share of Class A common stock and/or Class B common stock, as applicable, issued or delivered after January 18, 2021, but prior to the earlier of the Distribution Date and the Expiration Date, will entitle the holder thereof to one Right, in
each case, subject to adjustments in accordance with the Amended Rights Plan. Subject to the terms, provisions and conditions of the Amended Rights Plan, if the Rights become exercisable, each Right would initially represent the right to purchase
from us one ten-thousandth of a share of our Series B Junior Preferred Stock for a purchase price of $171.85 (the “Purchase Price”). If issued, each fractional share of preferred stock would give the stockholder approximately the
same dividend, voting and liquidation rights as does one share of our Class A common stock. However, prior to exercise, a Right does not give its holder any rights as a stockholder of the Company, including without limitation any dividend, voting
or liquidation rights.
Exercisability. The
Rights will not be exercisable until the earlier of (i) 10 business days after a public announcement by us or an Acquiring Person that a person or group has become an Acquiring Person or the earlier date that a majority of our Board becomes aware
of the existence of an Acquiring Person and (ii) 10 business days after the commencement of a tender or an exchange offer by a person or group for 4.9% or more of the then-outstanding Class A common stock.
We refer to the date that the
Rights become exercisable as the “Distribution Date.” Until the Distribution Date, our Class A common stock and Class B common stock certificates will evidence the Rights and will contain a notation to that effect. Any transfer of
shares of Class A common stock and/or Class B common stock prior to the Distribution Date will constitute a transfer of the associated Rights. After the Distribution Date, the Rights may be transferred other than in connection with the transfer
of the underlying shares of Class A common stock or Class B common stock unless and until our Board has determined to affect an exchange pursuant to the Amended Rights Plan (as described below).
Subject to the terms, provisions
and conditions of the Amended Rights Plan, after the Distribution Date, each holder of a Right, other than Rights beneficially owned by the Acquiring Person or certain Associates, Affiliates or transferees thereof (which will thereupon become
void), will thereafter have the right to receive upon exercise of such Right and payment of the then-current Purchase Price, that number of shares of Class A common stock or Class B common stock, as the case may be, having a then-current market
value of two times the Purchase Price.
Exchange. After
the Distribution Date, the Board may exchange the Rights (other than Rights owned by an Acquiring Person or certain Affiliates, Associates or transferees thereof, which will have become void), in whole or in part, at an exchange ratio of one
share of Common Stock, or a fractional share of Series B Junior Preferred Stock (or of a share of a similar class or series of the Company’s preferred stock having similar rights, preferences and privileges) of equivalent value, per Right
(subject to adjustment).
Expiration. The
Rights and the Amended Rights Plan will expire on the earliest of (i) August 14, 2024, (ii) the time at which the Rights are redeemed pursuant to the Rights Agreement, (iii) the time at which the Rights are exchanged pursuant to the Amended
Rights Plan, (iv) the repeal of Section 382 of the Internal Revenue Code or any successor statute if the Board determines that the Amended Rights Plan is no longer necessary for the preservation of Tax Benefits, (v) the beginning of a taxable
year of the Company to which the Board determines that no Tax Benefits may be carried forward and (vi) August 14, 2022, if Stockholder Approval has not been obtained.
Redemption. At
any time prior to the time an Acquiring Person becomes such, the Board may redeem the Rights in whole, but not in part, at a price of $0.01 per Right, subject to adjustment in accordance with the Amended Rights Plan (the “Redemption Price”).
The redemption of the Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish. Immediately upon any redemption of the Rights, the right to exercise the Rights will
terminate and the only right of the holders of Rights will be to receive the Redemption Price.
Anti-Dilution Provisions.
Our Board may adjust the Purchase Price, the number of shares of Series B Junior Preferred Stock issuable and the number of outstanding Rights to prevent dilution that may occur as a result of certain events, including among others, a stock
dividend, a stock split or a reclassification of shares of Series B Junior Preferred Stock or our Class A common stock or Class B common stock. No adjustments to the purchase price of less than 1% will be required to be made.
Amendments. Before
the Distribution Date, our Board may amend or supplement the Amended Rights Plan without the consent of the holders of the Rights. After the time that the Rights have become no longer redeemable, our Board may amend or supplement the Amended
Rights Plan only to cure an ambiguity, to alter time period provisions, to correct inconsistent or defective provisions, or to make any additional changes to the Amended Rights Plan that we deem necessary or desirable, but only to the extent that
those changes do not adversely affect the interests of any Rights holder (other than any Acquiring Person), and no such amendment may cause the Rights again to become redeemable or cause the Amended Rights Plan again to become amendable other
than in accordance with the Amended Rights Plan.
| APPENDIX B-2 |
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—Stockholder Rights |
|
Plan Amendment |
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AMENDMENT NO. 3
TO
RIGHTS AGREEMENT
January 11, 2024
This Amendment No. 3 (this “Amendment”)
to that certain Rights Agreement, by and between Hovnanian Enterprises, Inc., a Delaware corporation (the “Company”), and Computershare Trust Company, N.A., as successor to National City Bank (the “Rights Agent”), dated as of August
14, 2008, as amended by that certain Amendment No. 1 to Rights Agreement, dated as of January 11, 2018, and that certain Amendment No. 2 to Rights Agreement, dated as of January 18, 2021, is made and entered into as of January 11, 2024, and shall
become effective on January 11, 2024.
BACKGROUND
WHEREAS, the Company and the
Rights Agent entered into that certain Rights Agreement, dated as of August 14, 2008, which was subsequently amended by that certain Amendment No. 1 to Rights Agreement, dated as of January 11, 2018, and that certain Amendment No. 2 to Rights
Agreement, dated as of January 18, 2021, by and between the Company and the Rights Agent (as amended, the “Existing Rights Agreement”);
WHEREAS, Section 26 of the
Existing Rights Agreement provides that prior to the Distribution Date, the Company may supplement or amend any provision of the Existing Rights Agreement without the approval of any holders of Rights;
WHEREAS, no Distribution Date has occurred on or prior to the date
hereof;
WHEREAS, the Board deems it
advisable and in the best interests of the Company and its stockholders to amend the terms of the Existing Rights Agreement as set forth herein; and
WHEREAS, on January 11, 2024, the Board authorized and approved this
Amendment.
AGREEMENT
NOW, THEREFORE, the Company
hereby amends the Existing Rights Agreement as follows and directs the Rights Agent to execute this Amendment:
|
(1) |
Effect of Amendment. Except as expressly provided herein, the Existing Rights Agreement shall be and remain in full force and
effect. |
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(2) |
Capitalized Terms. All capitalized, undefined terms used in this Amendment shall have the meanings assigned to them in the Existing
Rights Agreement. |
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(3) |
Section 1 of the Existing Rights Agreement is hereby amended as follows: |
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(a) |
The reference to “August 14, 2022” in clause (x)(vi) shall be removed and replaced with “August 14, 2025”. |
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(b) |
The reference to “August 14, 2024” in clause (y) shall be removed and replaced with “August 14, 2027”. |
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(c) |
The reference to “$171.85” in clause (dd) shall be removed and replaced with “$802.00”. |
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(d) |
The references to “this Agreement” in clause (pp) shall be removed and replaced with “Amendment No. 3 to Rights Agreement, dated as
of January 11, 2024, by and between the Company and the Rights Agent”. |
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(4) |
Exhibit B to the Existing Rights Agreement is hereby amended and restated in its entirety as set forth on Exhibit 1 attached
hereto. |
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(5) |
Exhibit C to the Existing Rights Agreement is hereby amended and restated in its entirety as set forth on Exhibit 2 attached
hereto. |
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(6) |
Governing Law. This Amendment shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes
shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State. |
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(7) |
Execution in Counterparts. This Amendment may be executed (by hand or electronically) in any number of counterparts and each of such
counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. A signature to this Amendment executed and/or transmitted electronically shall have the
same authority, effect and enforceability as an original signature. |
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first written above.
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HOVNANIAN ENTERPRISES, INC. |
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By: |
/s/ Brad G. O’Connor |
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Name: Brad G. O’Connor |
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Title: Chief Financial Officer and Treasurer |
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COMPUTERSHARE TRUST COMPANY, N.A. |
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By: |
/s/ Shirley Nessralla |
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Name: Shirley Nessralla |
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Title: Vice President and Manager |
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[Signature Page to Amendment No. 3 to Rights Agreement]
Exhibit 1
FORM OF RIGHTS CERTIFICATE
Certificate No. R-_________ _________Rights in respect of Class____Common
Stock
NOT EXERCISABLE AFTER THE EXPIRATION DATE OR EARLIER
IF REDEEMED, EXCHANGED OR AMENDED. THE RIGHTS ARE SUBJECT TO REDEMPTION, EXCHANGE AND AMENDMENT AT THE OPTION OF THE COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES SPECIFIED IN THE RIGHTS AGREEMENT, RIGHTS
THAT ARE OR WERE BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR AN ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) OR A TRANSFEREE THEREOF SHALL BECOME NULL AND VOID AND NON-TRANSFERABLE.
RIGHTS CERTIFICATE
HOVNANIAN ENTERPRISES, INC.
This certifies that___________ ,
or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions, and conditions of
the Rights Agreement, by and between Hovnanian Enterprises, Inc., a Delaware corporation (the “Company”), and Computershare Trust Company, N.A. (as successor to National City Bank) (the “Rights Agent”), dated as of
August 14, 2008 (as amended from time to time, the “Rights Agreement”), to purchase from the Company at any time after the Distribution Date (as such term is defined in the Rights Agreement) and prior to 5:00 p.m. (New York time) on
the Expiration Date (as such term is defined in the Rights Agreement) at the office or offices of the Rights Agent designated for such purpose, one ten-thousandth of a fully paid, nonassessable share of Series B Junior Preferred Stock, par value
$0.01 per share (the “Preferred Shares”), of the Company, at a purchase price of $802.00 per one ten-thousandth of a Preferred Share (the “Purchase Price”), upon presentation and surrender of this Rights Certificate
with the Form of Election to Purchase and related Certificate duly executed. If this Rights Certificate is exercised in part, the holder will be entitled to receive upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised. The number of Rights evidenced by this Rights Certificate (and the number of one ten-thousandths of a Preferred Share which may be purchased upon exercise thereof) set forth above, and the Purchase Price set
forth above, are the number and Purchase Price as of January 11, 2024, the date of the most recent amendment to the Rights Agreement, based on the Preferred Shares as constituted at such date. Terms used herein with initial capital letters and
not defined herein are used herein with the meanings ascribed to them in the Rights Agreement.
As provided in the Rights
Agreement, the Purchase Price and/or the number and/or kind of shares of Preferred Stock (or other securities, as the case may be) which may be purchased upon the exercise of the Rights evidenced by this Rights Certificate are subject to
adjustment upon the occurrence of certain events.
This Rights Certificate is
subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a
full description of the rights, limitations of rights, obligations, duties and immunities of the Rights Agent, the Company and the holders of the Rights Certificates, which limitations of rights include the temporary suspension of the
exercisability of the Rights under the circumstances specified in the Rights Agreement. Copies of the Rights Agreement are on file at the principal executive offices of the Company and can be obtained from the Company without charge upon written
request therefor.
Pursuant to the Rights
Agreement, from and after the occurrence of any Person becoming an Acquiring Person, any Rights that are beneficially owned by (i) any Acquiring Person (or any Affiliate or Associate of any Acquiring Person), (ii) a transferee of any Acquiring
Person (or any Affiliate or Associate of an Acquiring Person) who becomes a transferee after the occurrence of any Person becoming an Acquiring Person or (iii) a transferee of any Acquiring Person (or any Affiliate or Associate of an Acquiring
Person) who became a transferee prior to or concurrently with any Person becoming an Acquiring Person pursuant to either (a) a transfer from an Acquiring Person to holders of its equity securities or to any Person with whom it has any continuing
agreement, arrangement or understanding regarding the transferred Rights or (b) a transfer which the Board of Directors of the Company has determined is part of a plan, arrangement or understanding which has the purpose or effect of avoiding
certain provisions of the Rights Agreement, and subsequent transferees of any of such Persons, will be void without any further action and any holder of such Rights will thereafter have no rights whatsoever with respect to such Rights under any
provision of the Rights Agreement. From and after the occurrence of any Person becoming an Acquiring Person, no Rights Certificate will be issued that represents Rights that are or have become void pursuant to the provisions of the Rights
Agreement, and any Rights Certificate delivered to the Rights Agent that represents Rights that are or have become void pursuant to the provisions of the Rights Agreement will be cancelled.
This Rights Certificate, with or
without other Rights Certificates, may be exchanged for another Rights Certificate or Rights Certificates entitling the holder to purchase a like number of one ten-thousandths of a Preferred Share (or other securities, as the case may be) as the
Rights Certificate or Rights Certificates surrendered entitled such holder (or former holder in the case of a transfer) to purchase, upon presentation and surrender hereof at the office or offices of the Rights Agent designated for such purpose,
with the Form of Assignment (if appropriate) and the related Rights Certificate duly executed.
Subject to the provisions of the
Rights Agreement, the Rights evidenced by this Rights Certificate may be redeemed by the Company at its option at a redemption price of $0.01 per Right or may be exchanged in whole or in part. The Rights Agreement may be supplemented and amended
by the Company, as provided therein.
The Company is not required to
issue fractions of Preferred Shares (other than fractions which are integral multiples of one ten-thousandth of a Preferred Share, which may, at the option of the Company, be evidenced by depositary receipts) or other securities issuable, as the
case may be, upon the exercise of any Right or Rights evidenced hereby. In lieu of issuing such fractional Preferred Shares or other securities, the Company may make a cash payment, as provided in the Rights Agreement.
No holder of this Rights
Certificate, as such, will be entitled to vote or receive dividends or be deemed for any purpose the holder of the Preferred Shares or of any other securities of the Company which may at any time be issuable upon the exercise of the Right or
Rights represented hereby, nor will anything contained herein or in the Rights Agreement be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in the Rights Agreement), or
to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Rights Certificate have been exercised in accordance with the provisions of the Rights Agreement.
This Rights Certificate will not be valid or obligatory for any
purpose until it has been countersigned by the Rights Agent.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
WITNESS the manual, electronic or facsimile signature of the proper
officer of the Company. Dated as of__________, 20___.
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HOVNANIAN ENTERPRISES, INC. |
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Title: |
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Countersigned: |
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COMPUTERSHARE TRUST COMPANY, N.A. |
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By: |
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Name: |
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Form of Reverse Side of Rights Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the Rights Certificate)
FOR VALUE RECEIVED,_________________________hereby sells, assigns and
transfers unto
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(Please print name and address of transferee) |
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this Rights Certificate, together with all right,
title and interest therein, and does hereby irrevocably constitute and appoint Attorney, to transfer the within Rights Certificate on the books of the within-named Company, with full power of substitution.
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____________________________ , ____________________ |
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Dated |
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Signature |
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Signature(s) Guaranteed:
SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
__________________________
The undersigned hereby certifies that the Rights
evidenced by this Rights Certificate are not beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement).
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
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the Rights evidenced by this Rights Certificate ☐ are ☐ are not being sold, assigned, transferred, split up, combined or exchanged by or on
behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Person (as such terms are defined in the Rights Agreement); and |
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after due inquiry and to the best knowledge of the undersigned, it ☐ did ☐ did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person. |
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____________________________ , ____________________ |
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Form of Reverse Side of Rights Certificate — continued
FORM OF ELECTION TO PURCHASE
(To be executed if the holder desires to exercise the Rights
Certificate)
To Hovnanian Enterprises, Inc.:
The undersigned hereby irrevocably elects to exercise______________Rights
represented by this Rights Certificate to purchase the one ten-thousandths of a Preferred Share or other securities issuable upon the exercise of such Rights and requests that
certificates for such securities be issued in the name of and delivered to:
Please insert social security or other identifying number:
________________________________________________________________________
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(Please print name and address) |
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If such number of Rights is not all the Rights
evidenced by this Rights Certificate, a new Rights Certificate for the balance remaining of such Rights will be registered in the name of and delivered to:
Please insert social security or other identifying number:
________________________________________________________________________
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____________________________ , ____________________ |
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Dated |
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Signature(s) Guaranteed:
SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
The undersigned hereby certifies that the Rights
evidenced by this Rights Certificate are not beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as such terms are defined in the Rights Agreement).
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
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the Rights evidenced by this Rights Certificate☐are☐are not being exercised by or on behalf of a Person who is or was an Acquiring Person
or an Affiliate or Associate of any such Person (as such terms are defined pursuant to the Rights Agreement); and |
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after due inquiry and to the best knowledge of the undersigned, it ☐ did ☐ did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was, or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person. |
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____________________________ , ____________________ |
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NOTICE
The signature(s) in the Form of Assignment or Form of
Election to Purchase, as the case may be, must conform to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the
Form of Assignment or the Form of Election to Purchase, as the case may be, is not completed, such Assignment or Election to Purchase will not be honored.
Exhibit 2
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE
AMENDED RIGHTS PLAN, RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN ACQUIRING PERSON (OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON) (AS SUCH TERMS ARE DEFINED IN THE AMENDED RIGHTS PLAN) AND CERTAIN TRANSFEREES THEREOF
WILL BECOME NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.
SUMMARY OF RIGHTS
On January 11, 2024, the Board
of Directors (the “Board”) of Hovnanian Enterprises, Inc., a Delaware corporation (the “Company”), approved the Company entering into, and the Company entered into, Amendment No. 3 (the “Amendment”) to
the Rights Agreement, by and between the Company and Computershare Trust Company, N.A. (as successor to National City Bank), dated as of August 14, 2008, as amended by Amendment No. 1, dated January 11, 2018, and Amendment No. 2, dated January
18, 2021 (as amended through the date hereof, the “Amended Rights Plan”).
This summary of rights provides
only a general description of the Amended Rights Plan, and thus, should be read together with the entire Amended Rights Plan, which is incorporated into this summary by reference. All capitalized terms used herein but not defined herein shall
have the meanings ascribed to such terms in the Amended Rights Plan. Upon written request, the Company will provide a copy of the Amended Rights Plan free of charge to any of its stockholders.
Our Board approved the Amended
Rights Plan in an effort to protect stockholder value by attempting to protect against a possible limitation on our ability to use our net operating loss carryforwards (the “NOLs”) to reduce future potential federal income tax
obligations. We have experienced substantial operating losses, and under the Internal Revenue Code and rules promulgated by the Internal Revenue Service, we may “carry forward” these losses in certain circumstances to offset any current and
future earnings and thus reduce our federal income tax liability, subject to certain requirements and restrictions. To the extent that the NOLs do not otherwise become limited, we believe that we will be able to carry forward a significant amount
of NOLs, and therefore these NOLs could be a substantial asset to us. However, if we experience an “Ownership Change,” as defined in Section 382 of the Internal Revenue Code, our ability to use the NOLs will be substantially limited, and the
timing of the usage of the NOLs could be substantially delayed, which could therefore significantly impair the value of that asset.
The Amended Rights Plan is
intended to act as a deterrent to any person or group acquiring 4.9% or more of our outstanding Class A common stock (an “Acquiring Person”) without the approval of our Board, thereby reducing the likelihood of an Ownership Change.
Stockholders who owned 4.9% or more of our outstanding Class A common stock as of the close of business on August 15, 2008 would not have triggered the Amended Rights Plan so long as they did not and do not (i) acquire any additional shares of
Class A common stock or (ii) fall under 4.9% ownership of Class A common stock and then re-acquire 4.9% or more of the Class A common stock. The Amended Rights Plan does not exempt any subsequent acquisitions of Class A common stock by such
persons. Any Rights held by an Acquiring Person and certain Associates, Affiliates and transferees thereof are void and may not be exercised. Our Board may, in its sole discretion, exempt any person or group from being deemed an Acquiring Person
for purposes of the Amended Rights Plan.
The Rights. Our
Board authorized the issuance of one Right per each outstanding share of our Class A common stock and Class B common stock payable to our stockholders of record as of August 15, 2008 and the issuance of one Right per each share of Class A common
stock and Class B common stock issued or delivered by the Company after such date but before the earlier of the Distribution Date (as defined below) and the Expiration Date (as defined below). Notwithstanding any prior adjustments to the number
of Rights associated with each share of Class A common stock and/or Class B common stock, as applicable, as of January 18, 2021, each outstanding share of Class A common stock and Class B common stock entitles the holder thereof to one Right, and
each share of Class A common stock and/or Class B common stock, as applicable, issued or delivered after January 18, 2021, but prior to the earlier of the Distribution Date and the Expiration Date, will entitle the holder thereof to one Right, in
each case, subject to adjustments in accordance with the Amended Rights Plan. Subject to the terms, provisions and conditions of the Amended Rights Plan, if the Rights become exercisable, each Right would initially represent the right to purchase
from us one ten-thousandth of a share of our Series B Junior Preferred Stock for a purchase price of $802.00 (the “Purchase Price”). If issued, each fractional share of preferred stock would give the stockholder approximately the
same dividend, voting and liquidation rights as does one share of our Class A common stock. However, prior to exercise, a Right does not give its holder any rights as a stockholder of the Company, including without limitation any dividend, voting
or liquidation rights.
Exercisability. The
Rights will not be exercisable until the earlier of (i) 10 business days after a public announcement by us or an Acquiring Person that a person or group has become an Acquiring Person or the earlier date that a majority of our Board becomes aware
of the existence of an Acquiring Person and (ii) 10 business days after the commencement of a tender or an exchange offer by a person or group for 4.9% or more of the then-outstanding Class A common stock.
We refer to the date that the
Rights become exercisable as the “Distribution Date.” Until the Distribution Date, our Class A common stock and Class B common stock certificates will evidence the Rights and will contain a notation to that effect. Any transfer of
shares of Class A common stock and/or Class B common stock prior to the Distribution Date will constitute a transfer of the associated Rights. After the Distribution Date, the Rights may be transferred other than in connection with the transfer
of the underlying shares of Class A common stock or Class B common stock unless and until our Board has determined to affect an exchange pursuant to the Amended Rights Plan (as described below).
Subject to the terms, provisions
and conditions of the Amended Rights Plan, after the Distribution Date, each holder of a Right, other than Rights beneficially owned by the Acquiring Person or certain Associates, Affiliates or transferees thereof (which will thereupon become
void), will thereafter have the right to receive upon exercise of such Right and payment of the then-current Purchase Price, that number of shares of Class A common stock or Class B common stock, as the case may be, having a then-current market
value of two times the Purchase Price.
Exchange. After
the Distribution Date, the Board may exchange the Rights (other than Rights owned by an Acquiring Person or certain Affiliates, Associates or transferees thereof, which will have become void), in whole or in part, at an exchange ratio of one
share of Common Stock, or a fractional share of Series B Junior Preferred Stock (or of a share of a similar class or series of the Company’s preferred stock having similar rights, preferences and privileges) of equivalent value, per Right
(subject to adjustment).
Expiration. The
Rights and the Amended Rights Plan will expire on the “Expiration Date,” which is the earliest of (i) August 14, 2027, (ii) the time at which the Rights are redeemed pursuant to the Rights Agreement, (iii) the time at which the
Rights are exchanged pursuant to the Amended Rights Plan, (iv) the repeal of Section 382 of the Internal Revenue Code or any successor statute if the Board determines that the Amended Rights Plan is no longer necessary for the preservation of Tax
Benefits, (v) the beginning of a taxable year of the Company to which the Board determines that no Tax Benefits may be carried forward and (vi) August 14, 2025, if Stockholder Approval has not been obtained.
Redemption. At
any time prior to the time an Acquiring Person becomes such, the Board may redeem the Rights in whole, but not in part, at a price of $0.01 per Right, subject to adjustment in accordance with the Amended Rights Plan (the “Redemption Price”).
The redemption of the Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish. Immediately upon any redemption of the Rights, the right to exercise the Rights will
terminate and the only right of the holders of Rights will be to receive the Redemption Price.
Anti-Dilution Provisions.
Our Board may adjust the Purchase Price, the number of shares of Series B Junior Preferred Stock issuable and the number of outstanding Rights to prevent dilution that may occur as a result of certain events, including among others, a stock
dividend, a stock split or a reclassification of shares of Series B Junior Preferred Stock or our Class A common stock or Class B common stock. No adjustments to the purchase price of less than 1% will be required to be made.
Amendments. Before
the Distribution Date, our Board may amend or supplement the Amended Rights Plan without the consent of the holders of the Rights. After the time that the Rights have become no longer redeemable, our Board may amend or supplement the Amended
Rights Plan only to cure an ambiguity, to alter time period provisions, to correct inconsistent or defective provisions, or to make any additional changes to the Amended Rights Plan that we deem necessary or desirable, but only to the extent that
those changes do not adversely affect the interests of any Rights holder (other than any Acquiring Person), and no such amendment may cause the Rights again to become redeemable or cause the Amended Rights Plan again to become amendable other
than in accordance with the Amended Rights Plan.
