SCHEDULE 14AUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
 
Proxy Statement Pursuant to Section 14(a) of
 the
Securities Exchange Act of 1934 (Amendment No. )_____)
 
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S
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¨
Check the appropriate box:
[_]  Preliminary Proxy Statement                  [_] Soliciting Material Under Rule
[_]  Confidential, For Use of the                        14a-12
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       by Rule 14a-6(e)(2))
[x]  Definitive Proxy Statement
[_]  Definitive Additional Materials
 
HOVNANIAN ENTERPRISES, INC.
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SPreliminary Proxy Statement.
¨Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)).
¨Definitive Proxy Statement.
¨Definitive Additional Materials.
¨Soliciting Material Pursuant to §240.14a-12.
 
Hovnanian Enterprises, Inc.
(Name of Registrant as Specified In Its Charter)
 
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(Name of Person(s) Filing Proxy Statement, if Other Thanother than the Registrant)
 
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HOVNANIAN ENTERPRISES, INC.
 110 West Front Street, P.O. Box 500, Red Bank, N.J. 07701 (732) 747-7800

February 1, 2010
 January 28, 2013
Dear Shareholder:

You are cordially invited to attend the Annual Meeting of Shareholders, which will be held on Tuesday, March 16, 2010,12, 2013, at the offices of Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York, New York 10017. The meeting will start promptly at 10:30 a.m., Eastern Time.
 
In accordance with the Securities and Exchange Commission rule allowing companies to furnish proxy materials to their shareholders over the Internet, the Company is primarily furnishing proxy materials to our shareholders of Class A Common Stock and registered shareholders of Class B Common Stock on the Internet, rather than mailing paper copies of the materials (including our Annual Report to Shareholders for fiscal 2009)2012) to each of those shareholders. We believe that this e-proxy process will expedite our shareholders’ receipt of proxy materials, lower costs, and reduce the environmental impact of our annual meeting.Annual Meeting. If you received only a Notice Regarding the Availability of Proxy Materials (the “Notice”) by mail or electronic mail, you will not receive a paper copy of the proxy materials unless you request one. Instead, the Notice will instruct you as to how you may access and review the proxy materials on the Internet. The Notice will also instruct you as to how you may access your proxy card to vote over the Internet, by telephone or by mail. If you received a Notice by mail or electronic mail and would like to receive a paper copy of our proxy materials, free of charge, please follow the instructions included in the Notice.
 
We anticipate that the Notice will be mailed to our shareholders on or about February 1, 2010,January 28, 2013, and will be sent by electronic mail to our shareholders who have opted for such means of delivery on or about February 1, 2010.January 28, 2013.
 
All shareholders of record of Class B Common Stock who hold in nominee name have been sent a full set of paper proxy materials, including a proxy card. As in the past, shareholders of record of Class B Common Stock held in nominee name will only be able to vote by returning the enclosed proxy card in the envelope provided for this purpose or by voting in person at the Company’s 20102013 Annual Meeting.
 
Attached to this letter is a Notice of Annual Meeting of Shareholders and Proxy Statement, which describes the business to be conducted at the meeting. We will also report on matters of current interest to our shareholders.
 
It is important that your shares be represented and voted at the meeting. Therefore, we urge you to complete, sign, date and return the enclosed proxy card or, if applicable, register your vote via the Internet or by telephone according to the instructions on the proxy card. If you attend the meeting, you may still choose to vote your shares personally even though you have previously designated a proxy.
 
We sincerely hope you will be able to attend and participate in the Company’s 20102013 Annual Meeting. We welcome the opportunity to meet with many of you and give you a firsthand report on the progress of your Company.
 
Sincerely yours,
 
Ara K. Hovnanian
Chairman of the Board


PROXY VOTING METHODS
 
If at the close of business on January 19, 2010,14, 2013, you were a shareholder of record or held shares through a broker or bank, you may vote your shares as described below or you may vote in person at the Annual Meeting. To reduce our administrative and postage costs, we would appreciate if shareholders of Class A Common Stock and registered shareholders of Class B Common Stock would please vote through the Internet or by telephone, both of which are available 24 hours a day. You may revoke your proxies at the times and in the manners described on page 1 of the Proxy Statement. If you are a shareholder of record or hold shares through a broker or bank and are voting by proxy, your vote must be received by 11:59 p.m. (Eastern Daylight Time) on March 15, 201011, 2013 to be counted unless otherwise noted below.
 
To vote by proxy:
 
Shareholders of Class A Common Stock and Registered Shareholders of Class B Common Stock:
 
BY INTERNET
 
·
Go to the website at www.proxyvote.com and follow the instructions, 24 hours a day, seven days a week.
·You will need the 12-digit Control Number included on your Notice Regarding the Availability of Proxy Materials to obtain your records and to create an electronic voting instruction form.
BY TELEPHONE
 
·From a touch-tone telephone, dial (800) 690-6903 and follow the recorded instructions, 24 hours a day, seven days a week.
·You will need the 12-digit Control Number included on your Notice Regarding the Availability of Proxy Materials in order to vote by telephone.
BY MAIL
 
·Request a proxy card from us by following the instructions on your Notice Regarding the Availability of Proxy Materials.
·When you receive the proxy card, mark your selections on the proxy card.
·Date and sign your name exactly as it appears on your proxy card.
·Mail the proxy card in the postage-paid envelope that will be provided to you.
·Mailed proxy cards must be received no later than March 11, 2013 to be counted for the Annual Meeting.
Shareholders of Record of Class B Common Stock held in Nominee NameName:
 
YOUR VOTE IS IMPORTANT. IMPORTANT — THANK YOU FOR VOTING.VOTING
 

HOVNANIAN ENTERPRISES, INC.
 
_____________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
FEBRUARY 1, 2010
_____________________
 
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Hovnanian Enterprises, Inc. will be held on Tuesday, March 16, 2010,12, 2013, at the offices of Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York, New York 10017 at 10:30 a.m. for the following matters:
 1.The election of directors of the Company for the ensuing year, to serve until the next Annual Meeting of Shareholders of the Company, and until their respective successors may be elected and qualified;
2.The ratification of the selection of Deloitte & Touche LLP, an independent registered public accounting firm, to examine the financial statements of the Company for the year ending October 31, 2010;2013;

3.The approval of amendmentsTo approve an amendment to the Company’s Amended and Restated 2008 Stock Incentive Plan; andCertificate of Incorporation (the “Certificate of Incorporation”) to increase the number of authorized shares of Class A Common Stock;
4.To approve an amendment to the Company’s Certificate of Incorporation to increase the number of authorized shares of Class B Common Stock;

5.To approve, in a non-binding advisory vote, the compensation of the Company’s named executive officers; and

6.The transaction of such other business as may properly come before the meeting and any adjournment thereof.
 
The Board of Directors recommends that you vote FOR each of the nominees listed in proposal 1, FOR proposal 2, FOR proposal 3, FOR proposal 4 and FOR proposals 2 and 3.proposal 5.
 
Only shareholders of record at the close of business on January 19, 201014, 2013 are entitled to notice of, and to vote at, the Annual Meeting. Accompanying this Notice of Annual Meeting of Shareholders is a proxy statement, proxy card(s) and the Company’s Annual Report for the fiscal year ended October 31, 2009.2012.
 
To ensure your shares are voted, if you are a shareholder of Class A Common Stock or a registered shareholder of Class B Common Stock, you may vote your shares over the Internet, by telephone, or by requesting a paper proxy card to complete, sign and return by mail. These voting procedures are described on the preceding page and on the proxy card.
 
If you are a shareholder of record of Class B Common Stock held in nominee name, you may only appoint proxies to vote your shares by signing, dating and returning the enclosed proxy card in the envelope provided.

All shareholders are urged to attend the meeting in person or by proxy. Shareholders who do not expect to attend the meeting are requested to complete, sign and date the enclosed proxy card and return it promptly, or, if applicable, to register their vote via the Internet or by telephone according to the instructions on the preceding page and the proxy card.
 
 By order of the Board of Directors,
 PETER S. REINHART
 
MICHAEL DISCAFANI
Secretary
February 1, 2010

January 28, 2013

If you are a shareholder of record and you plan to attend the Annual Meeting, please mark the appropriate box on your proxy card or, if applicable, so indicate when designating a proxy via the Internet or by telephone. If your shares are held by a bank, broker or other intermediary and you plan to attend, please send written notice to Hovnanian Enterprises, Inc., 110 West Front Street, P.O. Box 500, Red Bank, New Jersey 07701, Attention: Peter S. Reinhart,Michael Discafani, Secretary, and enclose evidence of your ownership (such as a letter from the bank, broker or other intermediary confirming your ownership or a bank or brokerage firm account statement). The names of all those planning to attend will be placed on an admission list held at the registration desk at the entrance to the meeting. If you do not plan to attend the Annual Meeting, please designate a proxy by mail or, if applicable, via the Internet or by telephone. If you choose to vote by mail, please complete, sign and date the enclosed proxy card and return it promptly so that your shares will be voted. If you have received a hard copy of the proxy materials, the enclosed envelope requires no postage if mailed in the United States.
 
 

TABLE OF CONTENTS
Page
GENERAL1
VOTING RIGHTS AND SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT2
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE3
(1)   ELECTION OF DIRECTORS4
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS7
(2)   RATIFICATION OF THE SELECTION OF AN INDEPENDENT REGISTERED PUBIC ACCOUNTING FIRM9
(3)   APPROVAL OF AN AMENDMENT TO THE COMPANY’S CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF CLASS A COMMON STOCK
9
(4)   APPROVAL OF AN AMENDMENT TO THE COMPANY’S CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF CLASS B COMMON STOCK
12
(5)   ADVISORY VOTE ON EXECUTIVE COMPENSATION14
THE COMPENSATION COMMITTEE16
COMPENSATION DISCUSSION AND ANALYSIS18
Executive Summary18
Compensation Philosophy and Objectives22
Fiscal 2012 Compensation Elements and Compensation Mix24
Details of Compensation Elements25
Actions for Fiscal 201335
Tax Deductibility and Accounting Implications36
Timing and Pricing of Stock Options36
Stock Ownership Guidelines36
EXECUTIVE COMPENSATION37
Summary Compensation Table
37
Grants of Plan-Based Awards in Fiscal 201241
Outstanding Equity Awards at Fiscal 2012 Year-End44
Option Exercises and Stock Vested in Fiscal 201247
    Nonqualified Deferred Compensation for Fiscal 201247
Potential Payments Upon Termination or Change-in-Control Table49
NON-EMPLOYEE DIRECTOR COMPENSATION51
THE AUDIT COMMITTEE56
THE AUDIT COMMITTEE REPORT57
FEES PAID TO PRINCIPAL ACCOUNTANT57
PRINCIPAL ACCOUNTANT INDEPENDENCE58
CORPORATE GOVERNANCE58
OVERSIGHT OF RISK MANAGEMENT59
LEADERSHIP STRUCTURE60
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS60
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON MARCH 12, 2013
    62
GENERAL62
SHAREHOLDER PROPOSALS FOR THE 2014 ANNUAL MEETING63

HOVNANIAN ENTERPRISES, INC.
110 WEST FRONT STREET
P.O. BOX 500
RED BANK, NEW JERSEY 07701

 
____________________PROXY STATEMENT
 
PROXY STATEMENT
____________________
 
GENERAL
 
The accompanying proxy is solicited on behalf of the Board of Directors of Hovnanian Enterprises, Inc. (the “Company”, “we”, “us”, or “our”) for use at the Annual Meeting of Shareholders referred to in the foregoing notice and at any adjournment thereof.
 
Shares represented by properly executed proxies that are received or executed in time and not revoked will be voted in accordance with the specifications thereon. If no specifications are made in an executed proxy, the persons named in the accompanying proxy card(s) will vote the shares represented by such proxies for the Board of Directors’ slate of directors;directors, for the ratification of the selection of Deloitte & Touche LLP, an independent registered public accounting firm, to examine the financial statements of the Company for the fiscal year ending October 31, 2010,2013, for the amendment to the Certificate of Incorporation to increase the number of authorized shares of Class A Common Stock, for the amendment to the Certificate of Incorporation to increase the number of authorized shares of Class B Common Stock, for the approval, in a non-binding advisory vote, of amendments to the Company’s Amendedcompensation of the Company's named executive officers and Restated 2008 Stock Incentive Plan, andon any other matters as recommended by the Board of Directors, unless contrary instructions are given.

Any person may revoke a previously designated proxy at any time before it is exercisedexercised. If you voted by Internet, telephone or mail and are a shareholder of record, you may change your vote and revoke your proxy by (i) delivering written notice of revocation to Peter S. Reinhart,Michael Discafani, Secretary, provided such statement is received no later than March 11, 2013, (ii) voting again by deliveringInternet or telephone at a later-datedlater time before the closing of voting facilities at 11:59 p.m. (Eastern Time) on March 11, 2013, (iii) submitting a properly signed proxy card with a later date that is received no later than March 11, 2013 or by(iv) revoking your proxy and voting in person at the 2013 Annual Meeting. If you hold your shares in street name, you may submit new voting instructions by contacting your bank, broker or other nominee. You may also change your vote or revoke your proxy in person at the 2013 Annual Meeting if you obtain a signed proxy from the record holder (broker or other nominee) giving you the right to vote the shares. Please note that attendance at the 2013 Annual Meeting will not by itself revoke a proxy.
 

VOTING RIGHTS AND SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The Board of Directors has set January 14, 2013 as the record date for the determination2013 Annual Meeting of shareholders entitled to vote at the meeting wasShareholders.   As of the close of business on January 19, 2010. the record date, there were         shares of Class A Common Stock outstanding and         shares of Class B Common Stock outstanding.

As of that date,November 1, 2012, the outstanding voting securities of the Company consisted of 62,876,533118,362,931 shares of Class A Common Stock, each share entitling the holder thereof to one vote, and 14,572,76914,658,353 shares of Class B Common Stock, each share entitling the holder thereof to ten votes.votes, provided that specified ownership criteria have been met. Other than as set forth in the table below, there are no persons known to the Company to be the beneficial owners of shares representing more than 5% of either the Company’s Class A Common Stock or Class B Common Stock.Stock, which represent the classes of the Company’s voting stock.
 
The following table sets forth as of January 19, 2010November 1, 2012, (1) the Class A Common Stock and Class B Common Stock of the Company beneficially owned by holders of more than 5% of either the Class A Common Stock or the Class B Common Stock of the Company and (2) the Class A Common Stock, Class B Common Stock and Depositary Shares of the Company beneficially owned by each Director, each nominee for Director, each executive officer named in the tables set forth under “Executive Compensation” below and all Directors and executive officers as a group:group.  The table does not include ownership with respect to our 7.25% Tangible Equity Units because none of the individuals or groups listed below has any beneficial ownership of such securities.

Class A Common Stock (1)Class B Common Stock (1)     Depositary Shares (1)(3)
     Amount and          Amount and     Amount and     
Directors, Nominees for Director, CertainNature ofPercentNature ofPercentNature ofPercent
Executive Officers, Directors and ExecutiveBeneficialofBeneficialofBeneficialof
Officers as a Group and Holders of More Than 5%Ownership Class (2)OwnershipClass (2)OwnershipClass (2)
Estate of Kevork S. Hovnanian (4)7,567,392   12.04%     7,138,646   48.99%       —      —   
Ara K. Hovnanian (5)5,615,0568.71%988,9156.79%——
Paul W. Buchanan (6)121,956.19%— — ——
Robert B. Coutts28,704.05%  ———  — 
Edward A. Kangas73,023 .12%————
Joseph A. Marengi 38,704 .06%— ———
Peter S. Reinhart114,957.18% ——3,000 0.1%
Peter S. Reinhart as Trustee of the   
       Sirwart Hovnanian 1994 Marital Trust (7)——5,210,09135.75%——
John J. Robbins51,260.08%—— ——
J. Larry Sorsby271,802.43%————
David G. Valiaveedan (8)4,526.01%——2,000—
Stephen D. Weinroth113,523.18%4,500.03%——
All Directors and executive officers as a
       group (11 persons)14,000,90321.60%13,342,15291.56%5,0000.1%
  Class A Common Stock (1)  Class B Common Stock (1)  
Depositary Shares
(1) (3)
 
Directors, Nominees for Director, Certain Executive Officers, Directors and Executive Officers as a Group and Holders of More Than 5% 
Amount
and
Nature of Beneficial Ownership
  
Percent
of
Class (2)
  
Amount
and
Nature of Beneficial Ownership
  
 
Percent
of
Class (2)
  
Amount
and
Nature of Beneficial Ownership
  
Percent
of
Class (2)
 
Estate of Kevork S. Hovnanian (4)  7,567,392   6.40%  7,138,646   48.70%  —   — 
Ara K. Hovnanian (5)  4,137,001   3.50%  1,856,314   12.05%  —   — 
Robert B. Coutts  131,112   0.11%  —   —   —   — 
Edward A. Kangas  231,217   0.20%  —   —   —   — 
Joseph A. Marengi  121,512   0.10%  —   —   —   — 
Brad G. O’Connor  38,895   0.03%  —   —   —   — 
Vincent Pagano Jr.  —   —   —   —   —   — 
Thomas J. Pellerito  1,243,668   1.05%  —   —   —   — 
Peter S. Reinhart as Trustee of the Sirwart Hovnanian 1994 Marital Trust (6)  —   —   5,210,091   35.54%  —   — 
John J. Robbins  160,705   0.14%  —   —   —   — 
J. Larry Sorsby  274,302   0.23%  —   —   —   — 
David G. Valiaveedan  26,105   0.02%  —   —   2,000   0.04%
Stephen D. Weinroth  279,309   0.24%  4,500   0.03%  —   — 
All Directors and executive officers as a group (10 persons)  13,771,218   11.55%  8,999,460   58.41%  2,000   0.04%

(1)(1)The figures in the table with respect to Class A Common Stock do not include the shares of Class B Common Stock beneficially owned by the specified persons. Shares of Class B Common Stock are convertible at any time on a share for share basis to Class A Common Stock. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission, andwhich generally attributes ownership to persons who have or share voting or investment power with respect to the relevant securities. Shares of Common Stock that may be acquired within 60 days upon exercise of outstanding stock options are deemed to be outstanding. Securities not outstanding, but included in the beneficial ownership of each such person, are deemed to be outstanding for the purpose of computing the percentage of outstanding securities of the class owned by such person, but are not deemed to be outstanding for the purpose of computing the percentage of the class owned by any other person. Except as indicated in these footnotes, and subject to community property laws where applicable, the persons named in the table have sole voting and investment power with respect to all securities shown as beneficially owned by them. Shares of Class A Common Stock subject to options currently exercisable or exercisable within 60 days of November 1, 2012, whether or not in-the-money, include the following: A. Hovnanian (1,600,000), P. Buchanan (70,000)(0), R. Coutts (2,333)(67,900), E. Kangas (3,667)(106,700), J. Marengi (2,333)(48,300), P. Reinhart (60,000)B. O’Connor (27,500), V. Pagano (0), T. Pellerito (240,000), J. Robbins (7,333)(110,030), J. Sorsby (190,000)(150,000), D. Valiaveedan (15,002), S. Weinroth (13,667)(168,273), and all Directors and executive officers as a group (1,949,333)(933,705). Shares of Class B Common Stock subject to options currently exercisable or exercisable within 60 days is zero. The stock options amounts exclude options cancelled by Executive Officers in December 2008 and October 2009 and byof November 1, 2012, whether or not in-the-money, include the non-employee Directors in January 2009 and October 2009.following: A. Hovnanian (750,000).
2
 


 On July 29, 2008, the Company’s Board of Directors declared a dividend of one Preferred Stock Purchase Right for each outstanding share of Class A Common Stock and Class B Common Stock. The dividend was paid to stockholders of record on August 15, 2008. Subject to the terms, provisions and conditions of the Rights Plan, if the Preferred Stock Purchase Rights become exercisable, each Preferred Stock Purchase Right would initially represent the right to purchase from the Company one ten-thousandth of a share of Series B Junior Preferred Stock for a purchase price of $35.00.$35.00 per share. However, prior to exercise, a Preferred Stock Purchase Right does not give its holder any rights as a stockholder, including without limitation, any dividend, voting or liquidation rights.

(2)Based upon the number of shares outstanding plus options currently exercisable or exercisable within 60 days of November 1, 2012, held by each suchthe applicable Director, nominee, executive officer, group or other holder.

(3)Each Depositary Share represents 1/1,000th of a share of 7.625% Series A Preferred Stock.
(4)Includes 7,127,392 shares of Class A Common Stock and 7,138,646 shares of Class B Common Stock held by the Executors of the Estate of Kevork S. Hovnanian, deceased.deceased (the “Estate of Kevork S. Hovnanian”). Ara K. Hovnanian is special purpose Executor with respect to investments in the Company, but such shares are not also included in his separate figures of beneficial ownership. Also includes 440,000 shares of Class A Common Stock held in the name of Sirwart Hovnanian, wife of the Company’s deceased Chairman Kevork S. Hovnanian. The business address of each of the Executors is 110 West Front Street, P. O.P.O. Box 500, Red Bank, New Jersey 07701.
(5)Includes 223,587, shares of Class B Common Stock held in a grantor retained annuity trust (the “AKH GRAT”) for which Ara K. Hovnanian is trustee, 372,116 shares of Class A Common Stock and 431,394 shares of Class B Common Stock held in family relatedfamily-related trusts as to which Ara K. Hovnanian has shared voting power and shared investment power and 37,374 shares of Class A Common Stock and 142,274185,274 shares of Class B Common Stock held by Mr. Hovnanian’s wife and children. Ara K. Hovnanian disclaims beneficial ownership of such shares, except to the extent of his potential pecuniary interest in the AKH GRAT and such other accounts and trusts.
(6)Includes 47,846  Of the shares of Class A Common Stock that arebeneficially held jointlyby Mr. Hovnanian, 1,995,397 shares have been pledged as collateral for a loan with Mr. Buchanan’s spouse, Gail R. Buchanan. Paul W. BuchananDeutsche Bank, and Gail R. Buchanan share voting and investment power1,337,505 shares have been pledged as collateral for a loan with respect to such shares.Morgan Stanley, both of which loans remain outstanding.
(7)(6)Includes 4,833,826 shares of Class B Common Stock held by the Kevork S. Hovnanian Family Limited Partnership, a Connecticut limited partnership (the “Limited Partnership”). Peter S. Reinhart, as trustee of the Sirwart Hovnanian 1994 Marital Trust (the “Marital Trust”), is the managing general partner of the Limited Partnership and, as such, has the sole power to vote and dispose of the shares of Class B Common Stock held by the Limited Partnership, as well as of the 376,265 shares of Class B Common Stock held directly by the Marital Trust. Mr. Reinhart disclaims beneficial ownership of the shares held by the Limited Partnership and the Marital Trust.
(8)All 2,235 shares of Class A Common Stock are held jointly with Mr. Valiaveedan’s spouse, Kathleen Dowling. David Valiaveedan and Kathleen Dowling share voting and investment power with respect to such shares.
 
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
 
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires the Company’s executive officers, directors, persons who beneficially own more than 10% of a registered class of the Company’s equity securities and certain entities associated with the foregoing (“Reporting Persons”) to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission (the “SEC”) and the New York Stock Exchange (the “NYSE”) or NASDAQ, as applicable.. These Reporting Persons are required by SEC rules to furnish the Company with copies of all Forms 3, 4 and 5, and amendments thereto, that they file with the SEC, the NYSE and NASDAQ.SEC.
 
Based solely on the Company’s review of copies of the forms and amendments of forms it has received and written representations from the Company’s officers and directors, the Company believes that, with respect to the fiscal year ended October 31, 2009,2012, all the Reporting Persons complied with all applicable filing requirements.
 


3
(1) ELECTION OF DIRECTORS
 
The Company’s Restated By-laws provide that the Board of Directors shall consist of up to eleven Directors who shall be elected annually by the shareholders. The Company’s Amended Certificate of Incorporation requires that, at any time when any shares of Class B Common Stock are outstanding, one-third of the Directors shall be independent, as defined therein.
 
Under the rules of the New York Stock Exchange (the “NYSE”), listed companies that have a controlling shareholderof which more than 50% of the voting power for the election of directors is held by an individual, group or other entity are not required to have a majority of independent directors, as defined by NYSE rules.rules, or to comply with certain other requirements. Because Mr. A. Hovnanian, andthe Estate of Kevork S. Hovnanian, the Limited Partnership established for members of his immediate family and family trusts hold more than 50% of the voting power of the Company, the Company is a controlled company within the meaning of the rules of the NYSE.  However, the Company does not avail itself of any of the exemptions afforded to controlled companies under the NYSE rules. This may change in the future at the Company’s discretion.
 
The Board of Directors has determined that a Board of Directors consisting of the seven nominees listed below is the best composition in order to satisfy both the independence requirements of the Company’s Amended Certificate of Incorporation as well as the rules of the NYSE.  The Board of Directors has also determined that Messrs. Coutts, Kangas, Marengi, Pagano, and Weinroth are independent as defined under the Company’s Certificate of Incorporation and the NYSE rules.  In reaching its determination that Mr. Pagano is independent under applicable standards, the Corporate Governance and Nominating Committee and the Board of Directors considered that he was a partner with Simpson Thacher & Bartlett LLP until his retirement on December 31, 2012.  Simpson Thacher & Bartlett LLP has provided, and continues to provide, legal services to the Company.

The following individuals are nominatedhave been recommended to the Board of Directors by the Corporate Governance and Nominating Committee and approved by the Board of Directors to serve as Directors of the Company to hold office until the next Annual Meeting of Shareholders and until their respective successors have been duly elected and qualified. Mr. Robbins, a current director, is not standing for re-election at the 2013 Annual Meeting of Shareholders.  Mr. Robbins will serve through the remainder of his term, which will end at the Company’s 2013 Annual Meeting of Shareholders.  The Board of Directors thanks Mr. Robbins for his many years of service to the Company.  Mr. Pagano has been nominated as Mr. Robbins’ successor to the Board of Directors.

In the event that any of the nominees for Director should become unavailable to serve as a Director, it is intended that the shares represented by proxies will be voted for such substitute nominees as may be nominated by the Board of Directors, unless the number of Directors constituting a full Board of Directors is reduced. The Company has no reason to believe, however, that any of the nominees is, or will be, unavailable to serve as a Director. Proxies cannot be voted for a greater number of persons than the number of nominees shown below.
 
Board of Directors
Year First Became
NameAgeCompany Affiliationa Director
Ara K. Hovnanian52President, Chief Executive Officer,1981
       Chairman of the Board & Director
Robert B. Coutts59Director2006
Edward A. Kangas65Director2002
Joseph A. Marengi56Director2006
John J. Robbins70Director2001
J. Larry Sorsby54Executive Vice President, Chief Financial1997
       Officer & Director
Stephen D. Weinroth71Director1982
Board of Directors

NameAgeCompany Affiliation 
Year
First
Became
a
Director
 
Ara K. Hovnanian55President, Chief Executive Officer, Chairman of the Board & Director  1981 
Robert B. Coutts62Director  2006 
Edward A. Kangas68Director  2002 
Joseph A. Marengi59Director  2006 
Vincent Pagano Jr.62Director Nominee  — 
J. Larry Sorsby57Executive Vice President, Chief Financial Officer & Director  1997 
Stephen D. Weinroth 74Director  1982 
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Board of Directors — Composition
 
The Board of Directors seeks to ensure that the Board of Directors is composed of members whose particular experience, qualifications, attributes and skills, when taken together, will allow the Board of Directors to satisfy its oversight responsibilities effectively. As discussed below under “Corporate Governance and Nominating Committee” beginning on page 7,8, a slate of Directors to be nominated for election at the annual shareholders’ meeting each year is approved by the Board of Directors after recommendation by the Corporate Governance and Nominating Committee. In the case of a vacancy on the Board of Directors (other than one resulting from removal by shareholders), the Corporate Governance and Nominating Committee will identify individuals believed to be qualified candidates to serve on the Board of Directors approvesand will recommend any director nominees to the full Board of Directors for election.  The Board of Directors will then approve a Directordirector nominee to fill the vacancy followingon the recommendationBoard of a candidate by the Chairman of the Board.Directors.  In identifying candidates for Director, the Corporate Governance and Nominating Committee and the Board of Directors takestake into account (1) the comments and recommendations of board members regarding the qualifications and effectiveness of the existing Board orof Directors or additional qualifications that may be required when selecting new board members that may be made in connection with the self-examinations described below under “Corporate Governance and Nominating Committee” beginning on page 7,8, (2) the requisite expertise and sufficiently diverse backgrounds of the Board of Directors’ overall membership composition, (3) the independence of outside Directors and other possible conflicts of interest of existing and potential members of the Board of Directors and (4) all other factors it considerssuch bodies consider appropriate. Although the Company has no formal policy regarding diversity, the charter of the Corporate Governance and Nominating Committee includes a statement that it and the Board of Directors believe that diversity is an important component of a board of directors, including such factors as background, skills, experience, expertise, gender, race and culture.
  As mentioned above, the Corporate Governance and Nominating Committee and the Board of Directors include diversity as one of several criteria that they consider in connection with selecting candidates for the Board of Directors. The Board of Directors seeks to ensure that it is composed of members whose particular background, expertise, qualifications, attributes and skills, when taken together, allow the Board of Directors to satisfy its oversight responsibilities effectively.


When considering whether directors and nominees have the experience, qualifications, attributes and skills, taken as a whole, to enable the Board of Directors to satisfy its oversight responsibilities effectively in light of the Company’s business and structure, the Corporate Governance and Nominating Committee and the Board of Directors focused primarily on the information discussed in each of the Directors’ individual biographies set forth below on pages 5 and 6. In particular, with regard to Mr. Coutts, the Corporate Governance and Nominating Committee and the Board of Directors considered his strong background in the manufacturing sector, believing that his experience with a large multinational corporation engaged in the manufacture of complicated products is invaluable in evaluating the multiple integrated processes in the homebuilding business and also valuable in performance management and other aspects of the Company.  With regard to Messrs.Mr. Kangas, the Corporate Governance and Robbins,Nominating Committee and the Board of Directors considered theirhis significant experience, expertise and background with regard to accounting matters, which in Mr. Robbins’ case includes specialization in homebuilding companies. The Board of Directors also consideredincluding the broad perspective brought by Mr. Kangas’shis experience in consulting to clients in many diverse industries. With regard to Mr. Marengi, the Corporate Governance and Nominating Committee and the Board of Directors considered his strong background in the technology sector, sincebecause new technologies and their cost and benefit analyses are important factors in the success of the Company. With regard to Mr. Pagano, the Corporate Governance and Nominating Committee and the Board of Directors considered his significant experience, expertise and background with regard to legal and capital markets matters, including the broad perspective brought by his experience in advising clients in the homebuilding industry and many other diverse industries.  With regard to Mr. Weinroth, the Corporate Governance and Nominating Committee and the Board of Directors considered his many years of experience in the investment banking field, which isare very valuable to the Company as it works through refinancing ofcontinues to evaluate its debt profile and in the evaluation ofcapital structure and various financing alternatives presentedand refinancing alternatives. With regard to Mr. Hovnanian, our Chief Executive Officer and Chairman of the Company. TheBoard, the Corporate Governance and Nominating Committee and the Board of Directors also considered the manyhis more than thirty years of experience with the Company represented by Messrs. A. Hovnanian andCompany. With regard to Mr. Sorsby, our Chief Executive Officer and Chief Financial Officer, respectively – over thirty years in the caseCorporate Governance and Nominating Committee and the Board of Mr. A Hovnanian, and overDirectors considered his more than twenty years inof experience with the case of Mr. Sorsby.Company.

Board of Directors — Nominees’ Biographies
 
Mr. A. Hovnanian has been Chief Executive Officer since July 1997 after being appointed President in 1988 and Executive Vice President in 1983. Mr. A. Hovnanian joined the Company in 1979 and has been a Director of the Company since 1981 and was Vice Chairman from 1998 through November 2009. In November 2009, he was elected Chairman of the Board following the death of Kevork S. Hovnanian, the chairman and founder of the Company and the father of Mr. A. Hovnanian.
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Mr. Coutts retired from the position of Executive Vice President of Lockheed Martin Corporation (NYSE), which he held from 2000 to 2008. Mr. Coutts was President and COO of the former Electronics Sector of Lockheed Martin. He was elected an officer by the Board of Directors of Lockheed Martin in December 1996. Mr. Coutts held management positions with General Electric Corporation (NYSE) from 1972-1993,1972 to 1993, and was with GE Aerospace when it became part of Lockheed Martin in 1993. Mr. Coutts is the retired Chairman of Sandia Corporation, a subsidiary of Lockheed Martin Corp., and is on the Board of Directors of The Stanley WorksBlack and Decker (NYSE), as well as the Pall Corporation (PLL)(NYSE), and is also a member of the Board of Overseers, College of Engineering, Tufts University. He is a Member of the Chapter of the National Cathedral.  He was elected as a Director of Hovnanian Enterprises, Inc. in March 2006 and is a member of the Company’s Compensation Committee.
Mr. Kangas was the Global Chairman and Chief Executive Officer of Deloitte Touche Tohmatsu from December 1989 to May 2000, when he retired. He also serves on the Boards of Directors of United Technologies Corp. (NYSE), Eclipsys, Inc. (NASDAQ), Tenet Healthcare Corporation, Inc. (NYSE), and Intuit, Inc. (NASDAQ). He was on the Board of Directors of Electronic Data Systems, Inc. (NYSE) from 2004 to 2008.2008 and AllScripts, Inc. (NASDAQ) (and, prior to its merger with AllScripts, Inc., Eclipsys Corporation (NASDAQ)) from 2004 to 2012. Mr. Kangas is the past Chairman of the Board of the National Multiple Sclerosis Society. Mr. Kangas was elected as a Director of Hovnanian Enterprises, Inc. in September 2002, is Chairman of the Company’s Audit Committee and a member of the Company’s Compensation Committee and Corporate Governance and Nominating Committee.
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Mr. Marengi, sincefrom July 2007 servesto March 2012, served as a Venture Partner for Austin Ventures. Prior to that date, Mr. Marengi served as senior vice president for Dell Inc.’s (NASDAQ)the Commercial Business Group.Group of Dell Inc. (NASDAQ). In this role, Mr. Marengi was responsible for the Dell units serving medium business, large corporate, government, education and healthcare customers in the United States. Mr. Marengi joined Dell in July 1997 from Novell Inc. (NASDAQ), where he was president and chief operating officer. He joined Novell in 1989 and moved through successive promotions to become executive vice president of worldwide sales and field operations. He is also an outside Director for Quantum Corporation (NYSE) and serves as Chairman ofsits on the Board forof Entorian Technologies, Inc. (NASDAQ)(formerly, the OTC Markets). Mr. Marengi was elected Directorto the Board of Directors of Hovnanian Enterprises, Inc. in March 2006 and is member of the Company’s Corporate Governance and Nominating Committee.
 
Mr. RobbinsPagano was a managingpartner at Simpson Thacher & Bartlett LLP until his retirement at the end of 2012. He was the head of the firm’s capital markets practice from 1999 to 2012, and, before that, administrative partner of the New York Office of Kenneth Leventhal & Company and executive committee partner, retiring from the firm in 1992. He was made a partner of Kenneth Leventhal & Company in 1973. Mr. Robbins was a Trustee of Keene Creditors Trust from 1996 until July 2009.to 1999.  He was Director and the Chairman of the Audit Committee of Raytech Corporation from May 2003 until March 2007, and has been a Director and Chairman of the Audit Committee of Texas Petrochemicals Inc. from May 2006 until December 2009. Mr. Robbins was elected as a Director of Hovnanian Enterprises, Inc. in January 2001, and is a member of the Company’s Audit Committee.firm’s executive committee during nearly all of that period.  He also serves on the Board of Directors of Cheniere Energy Partners GP, LLC, the general partner of Cheniere Energy Partners (NYSE MKT).  Mr. Pagano serves on the Engineering Advisory Council of Lehigh University.
  
Mr. Sorsby has been Chief Financial Officer of Hovnanian Enterprises, Inc. since 1996, and Executive Vice President since November 2000. Mr. Sorsby was also Senior Vice President from March 1991 to November 2000 and was elected as a Director of the Company in 1997.  He is Chairman of the Board of Visitors for Urology at The Children’s Hospital of Philadelphia (“CHOP”) and also serves on the Institutional Advancement Committee at CHOP.
 
 
Mr. Weinroth iswas from 2003 to mid-2008 a partner in Coral Reef Capital Partners, a private equity fund and was, until mid-2008, Managing Member of Hudson Capital Advisors, LLC and since then he has been an advisor to Coral Reef Capital Partners, a private equity and merchant bankingsuccessor firm and Chairmanto some of the Board of Cyalume Technologies, Inc., a manufacturer of military and safety equipment. From 1989 to 2003, he served as co-Chairman and head of the Investment Committee at First Britannia Mezzanine N.V., a European private investment firm. Hudson Capital employees.
He is Chairman of the Board Emeritus(Emeritus) of Core Laboratories, N.V. (NYSE), a global oil field service company where he had previously been Chairman from 1994 through 2001. From l989 to 2003, he served as Co-Chairman and head of the Board.Investment Committee of First Britannia Mezzanine, N.V., a European private investment firm. He was Vice Chairis presently Chairman of the Central Asian AmericanAsia Education Foundation, a successor to the Central Asian-American Enterprise Fund, to which he was appointed by the President of the United States, and isStates. Mr. Weinroth has been Chairman of its successor, the US Central Asia Education Foundation. four NYSE-listed companies and Chief Executive of three of them.
He is also Chairman ofa Trustee and the Boardimmediate past Chairman of The Joyce Theatre Foundation, Inc., and a Trustee of the Paul Taylor Dance Foundation as well as a recently retired TrusteeBoard member of the Horace Mann School.Flea Theater. Mr. Weinroth has been a Director of Hovnanian Enterprises, Inc. since 1982, is a member of the Company’s Audit Committee, and Chairman of the Company’sCompany's Compensation Committee and Corporate Governance and Nominating Committee, and is a member of its Audit Committee.

6
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the year ended October 31, 2009,2012, the Board of Directors held four regularly scheduled meetings and twoone telephonic meetings.meeting. In addition, Directors considered Company matters and had communications with the Chairman and Vice Chairman of the Board of Directors and others outside of formal meetings. During the fiscal year ended October 31, 2012, each Director attended 100% of the meetings of the Board of Directors and at least 95% of the meetings of its Committees on which such Director served. Directors are expected to attend the Annual Meeting of Shareholders, but the Company does not have a formal policy with respect to attendance. SevenAll of the eight members of the Board of Directors attended the Annual Meeting of Shareholders held on March 19, 2009.27, 2012.
 


Audit Committee
During the year ended October 31, 2009,
For fiscal 2012, the members of the Audit Committee of the Board of Directors were Messrs. Kangas, Robbins and Weinroth. The Board of Directors has determined that all of the members of the Audit Committee meet the standards for independence in our Certificate of Incorporation, which is available on our website at www.khov.com under “SEC Filings/Quarterly Filings/09-08-08 Filing Date,” and the independence requirements mandated by the NYSE listing standards.

The Audit Committee is currently chaired by Mr. Kangas and is responsible for reviewing and approving the scope of the annual audit undertaken by the Company’s independent registered public accounting firm and meeting with them to review the results of their work as well as their recommendations. The Audit Committee selects the Company’s independent registered public accounting firm and also approves and reviews their fees. The duties and responsibilities of the Audit Committee are set forth in its charter, which may be found at www.khov.com under “Investor Relations/Corporate Governance.”  During the fiscal year ended October 31, 2009,2012, the Audit Committee met on fourthree occasions and held nineeight telephonic meetings. The Audit Committee also authorizes staffing and compensation of the Internal Audit Department. The Vice President of Internal Audit for the Company reports directly to the Audit Committee on, among other things, the Company’s compliance with certain Company procedures which are designed to enhance management’s understanding of operating issues and the results of the Audit Department’s annual audits of the various aspects of the Company’s business. In fiscal 2009,2012, the Audit Department issued eleveneight traditional audit reports and performed five Sarbanes-Oxley16 reviews pursuant to Section 404 reviews. The Company’s Chief Accounting Officer reports directly toof the Audit Committee on significant accounting issues.Sarbanes-Oxley Act of 2002. For additional information related to the Audit Committee, see “The Audit Committee” below.
 
Compensation Committee
During the year ended October 31, 2009, the
            The members of the Compensation Committee of the Board of Directors during fiscal 2012 were Messrs. Weinroth, Kangas and Coutts. The Board of Directors has determined that all of the members of the Compensation Committee meet the standards for independence in our Certificate of Incorporation and the independence requirements mandated by the NYSE listing standards.  The duties and responsibilities of the Compensation Committee are set forth in its charter, which may be found on our website at www.khov.com under “Investor Relations/Corporate Governance.”
            The Compensation Committee is currently chaired by Mr. Weinroth and is responsible for reviewing salaries, bonuses and other forms of executive compensation for the Company’s senior executives, key management employees and non-employee Directors, and is active in other compensation and personnel areas as the Board of Directors from time to time may request.  In addition, all members of the Compensation Committee qualify as “non-employee directors” for purposes of Rule 16b-3 of the Exchange Act, and as “outside directors” for purposes of Section 162(m) (“Section 162(m)”) of the Internal Revenue Code of 1986, as amended. For a discussion of the criteria used and factors considered by the Compensation Committee in reviewing and determining executive compensation, see “The Compensation Committee” and “Compensation Discussion and Analysis” below. During the fiscal year ended October 31, 2009,2012, the Compensation Committee met on four occasions and held fourno telephonic meetings.
 
7
Corporate Governance and Nominating Committee
On December 12, 2005, the Board of Directors approved the establishment of
            The Company has established a Corporate Governance and Nominating Committee, although the Company is not required to have such committee because it is a controlled company under the rules of the NYSE. DuringThe members of the year ended October 31, 2009,Corporate Governance and Nominating Committee of the Board of Directors during fiscal 2012 were Messrs. Weinroth, Kangas and Marengi. The Board of Directors has determined that all of the members of the Corporate Governance and Nominating Committee meet the standards for independence in our Certificate of Incorporation and the Board of Directors were Messrs. Weinroth, Kangas and Marengi. independence requirements mandated by the NYSE listing standards.
The Corporate Governance and Nominating Committee is currently chaired by Mr. Weinroth. On September 14, 2009, the Board of Directors approved an amendment to the charter of the Corporate Governance Committee to add a nominating function. The committee is now known as the Corporate Governance and Nominating Committee. The Corporate Governance and Nominating Committee is responsible for corporate governance matters, and reviewing and recommending nominees for the Board of Directors, succession planning and other Board-related policies. The Corporate Governance and Nominating Committee also oversees the annual performance evaluation of the Board of Directors and its Committees, the Board’s periodic review of the Company’s Corporate Governance Guidelines (“Guidelines”) and compliance with the Company’s Related Person Transaction Policy. During the fiscal year ended October 31, 2009,2012, the Corporate Governance and Nominating Committee met on fourthree occasions and held no telephonic meetings.

The Guidelines require that each Director prepares annually an assessment of each Board committee on which such Director serves as well as of the full Board of Directors conduct a self-evaluation at least annually, and as circumstances otherwise dictate. In conjunction withto the self-evaluation, the Board of Directors reviews the qualifications and effectiveness of each committee and the existingfull Board of Directors and allows each board member to make comments orany recommendations regarding the qualificationsfor improvement.  The duties and effectivenessresponsibilities of the existing Board of Directors or additional qualifications thatCorporate Governance and Nominating Committee are set forth in its charter, which may be required when selecting new board members. Amongfound at www.khov.com under “Investor Relations/Corporate Governance,” and the Guidelines may be found at the same website address under “Investor Relations/Corporate Governance.”
In conducting its nomination function, among other factors, the Board of DirectorsCorporate Governance and Nominating Committee generally considers the size of the Board of Directors best suited to fulfill its responsibilities, the Board of Directors’ overall membership composition to ensure the Board of Directors has the requisite expertise and consists of persons with sufficiently diverse backgrounds, the independence of outside directors and other possible conflicts of interest of existing and potential members of the Board of Directors.
Directors as more fully described under “Election of Directors – Board of Directors – Composition” above.
The Company does not have a specific policy regarding shareholder nominations of potential directors to the Board of Directors, other than through the process described under “Shareholder Proposals for the 20112014 Annual Meeting” below.   The Corporate Governance and Nominating Committee will consider director candidates recommended by shareholders. Possible nominees to the Board of Directors may be suggested by any Director and


given to the Corporate Governance and Nominating Committee. The Corporate Governance and Nominating Committee may also seek potential nominees and engage search consultants to assist it in identifying potential nominees. The Corporate Governance and Nominating Committee adopted an amendment to its charter in November 2009 affirming its belief that diversity is an important factor to consider in evaluating potential nominees. The Corporate Governance and Nominating Committee recommends to the Board of Directors a slate of nominees for the Board of Directors for inclusion in the matters to be voted upon at the Annual Meeting. The Company’s Restated By-laws provide that Directors need not be shareholders. Vacancies on the Board of Directors, other than those resulting from removal by shareholders, may be filled by action of the Board of Directors.
As of the 120th calendar day prior to February 4, 2010,March 27, 2013, the Board of Directors had not received any recommendation for the nomination of a candidate to the Board of Directors by any shareholder or group of shareholders that at such time held more than 5% of the Company’s voting stock for at least one year.
 
VOTE REQUIRED
 
The election of the nominees to the Company’s Board of Directors for the ensuing year, to serve until the next Annual Meeting of Shareholders of the Company, and until their respective successors may be elected and qualified, requires that each director be elected by a majority of the votes cast by the shareholders of Class A Common Stock and Class B Common Stock, voting together, represented in person or by proxy at the 20102013 Annual Meeting. In determining whether each director has received the requisite number of affirmative votes, abstentions and broker non-votes will have no impact on such matter because such shares are not votes cast.
8
Mr. A. Hovnanian and others with voting power over the shares held by the Estate of Kevork S. Hovnanian, the Limited Partnership and certain members of his family trusts have informed the Company that they intend to vote in favor of the nominees named in this proposal. Because of thetheir collective voting power, of Mr. A. Hovnanian and such members of his family, this proposal is assured passage.
Our Board of Directors recommends that shareholders vote FOR the election of the nominees named in this proposal to the Company’s Board of Directors.
 
(2) RATIFICATION OF THE SELECTION OF AN INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
 
On January 5, 2009, the Audit Committee of the Board of Directors of the Company dismissed Ernst & Young LLP as the independent registered public accounting firm for the Company. Ernst & Young LLP’s reports on the financial statements of the Company for the fiscal years ended October 31, 2007 and 2008 did not contain any adverse opinion or a disclaimer of opinion, nor were such reports qualified or modified as to uncertainty, audit scope or accounting principle. During the fiscal years ended October 31, 2007 and 2008, and through January 5, 2009, (1) there were no disagreements with Ernst & Young LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to the satisfaction of Ernst & Young LLP, would have caused Ernst & Young LLP to make reference thereto in its reports on the financial statements of the Company for such years, and (2) there have been no “reportable events” as defined in Item 304(a)(1)(v) of Regulation S-K.
Also on January 5, 2009, the Audit Committee of the Company’s Board of Directors appointed Deloitte & Touche LLP as the independent registered public accounting firm for the Company as of and for the fiscal year ending October 31, 2009. This appointment followed a solicitation and review process conducted by the Company’s Audit Committee.
During the fiscal years ended October 31, 2007 and 2008, and through January 5, 2009, (1) Deloitte & Touche LLP had not been engaged as the principal accountant of the Company to audit its financial statements or as an independent accountant to audit a significant subsidiary of the Company, and (2) the Company had not consulted with Deloitte & Touche LLP regarding (a) the application of accounting principles to any completed or proposed transaction, (b) the type of audit opinion that might be rendered on the Company’s financial statements for such periods, or (c) any other accounting, auditing or financial reporting matter described in Items 304(a)(2)(i) and (ii) of Regulation S-K.
The selection of an independent registered public accounting firm to examine financial statements of the Company to be made available or transmitted to shareholders and to be filed with the SEC for the fiscal year ending October 31, 20102013 is submitted to this Annual Meeting of Shareholders for ratification. Deloitte & Touche LLP has been selected by the Audit Committee of the Company to examine such financial statements. In the event that the


shareholders fail to ratify the appointment, the Audit Committee will consider the view of the shareholders in determining its selection of the Company’s independent registered public accounting firm for the subsequent fiscal year. Even if the selection is ratified, the Audit Committee may, in its discretion, direct the appointment of a new independent registered public accounting firm at any time during the fiscal year if the Audit Committee determines that such a change would be in the best interests of the Company and our stockholders.its shareholders.

The Company has been advised that representatives of Deloitte & Touche LLP will attend the Annual Meeting of Shareholders to respond to appropriate questions and will be afforded the opportunity to make a statement if the representativerepresentatives so desires.desire.
 
VOTE REQUIRED
 
Ratification of the selection of Deloitte & Touche LLP as the Company’s independent registered public accounting firm to examine financial statements of the Company for the year ending October 31, 2010,2013 requires the majority of the votes cast by the shareholders of Class A Common Stock and Class B Common Stock, voting together, present in person or by proxy at the 20102013 Annual Meeting. In determining whether the proposal has received the requisite number of affirmative votes, abstentions will have no impact on such matter because such shares are not considered votes cast.
Mr. A. Hovnanian and others with voting power over the shares held by the Estate of Kevork S. Hovnanian, the Limited Partnership and certain members of his family trusts have informed the Company that they intend to vote in favor of this proposal. Because of thetheir collective voting power, of Mr. A. Hovnanian and such members of his family, this proposal is assured passage.
Our Board of Directors recommends that shareholders vote FOR ratification of the selection of Deloitte & Touche LLP as the Company’s independent registered public accounting firm.
 
(3) APPROVAL OF AMENDMENTSAN AMENDMENT TO THE AMENDED AND RESTATED
2008 HOVNANIAN ENTERPRISES, INC.COMPANY’S CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF CLASS A COMMON STOCK INCENTIVE PLAN
 
     ShareholdersOn December 14, 2012, subject to shareholder approval, the Board authorized an amendment to our Certificate of Incorporation to increase the number of authorized shares of Class A Common Stock (the “Class A Common Stock”) from 200,000,000 shares to 400,000,000 shares (the “Class A Amendment”). Pursuant to Proposal 4, we are being askedseparately proposing an increase to consider and approve a proposalour authorized Class B Common Stock, but we are not proposing an increase to adopt amendments to the number of authorized shares of Preferred Stock.
If approved by shareholders, the Class A Amendment would be reflected in an Amended and Restated 2008Certificate of Incorporation of Hovnanian Enterprises, Inc., and the first paragraph of paragraph Fourth of our Certificate of Incorporation would be amended to provide as follows:
9
“FOURTH: The total number of shares of all classes of stock which the Corporation shall have the authority to issue is 430,100,0001 shares, of which 400,000,000 shares shall be Class A Common Stock Incentive Plan (such plan, ashaving a par value of one cent ($0.01) per share, 30,000,0002 shares shall be Class B Common Stock having a par value of one cent ($0.01) per share and 100,000 shares shall be Preferred Stock having a par value of one cent ($0.01) per share.”
If the shareholders approve the proposed to be further amended and restated by the contemplated amendments, the “Amended Plan”). The Amended Plan, if approved,amendment, it will incorporate the following changes as compared to the existingbecome effective upon filing of an Amended and Restated 2008 Hovnanian Enterprises, Inc. Stock Incentive Plan (the “Existing Plan”):Certificate of Incorporation with the Delaware Secretary of State, which the Company anticipates doing as soon as practicable following shareholder approval.
 
  • While
    The newly authorized shares of Class A Common Stock will have all the aggregaterights and privileges of the shares of Class A Common Stock presently authorized. Therefore, approval of this proposal and any subsequent issuance of additional shares of Class A Common Stock would not affect your current rights as a shareholder, except for any dilutive effects of a potential increase in the number of outstanding shares of Class A Common Stock to, among other things, earnings per share, reserve covered by the Amended Planbook value per share and the Company’s Amended and Restated Senior Executive Short-Term Incentive Plan (the “STIP”) collectively will not reflect an increase,voting power of current holders of our Class A Common Stock.
    Reasons for the Amended Plan will allow the Company to satisfy equity awards (“Awards”) granted under the Amended Plan by utilizing the shares available for issuance under the STIP, providedProposal
    Our Board believes that any shares so utilized will reduce the number of shares of Class A Common Stock that is available for issuance is not sufficient. We are currently authorized to issue 200,000,000 shares of Class A Common Stock.  As of November 1, 2012, 118,362,931 shares of Class A Common Stock were issued and outstanding and 73,181,095 shares of Class A Common Stock were reserved (1) for conversions of our Class B Common Stock into shares of Class A Common Stock, (2) for the issuance upon exercise of outstanding stock options and stock awards, (3) for stock options and stock awards that may be granted in the future under our stock option or other incentive programs and (4) for stock that may be issued upon settlement or exchange of our outstanding equity-linked securities.  As a result, there are currently only 8,455,974 shares of Class A Common Stock available, including shares held in Treasury, for other purposes.
    The Board believes that it is advisable and in the STIP;
  • Company’s and its shareholders’ best interests to have a greater number of authorized shares of Class A Common Stock in order to maintain the Company’s flexibility to use its capital stock for business and financing purposes in the future.  The maximumadditional shares will be available for issuance from time to time at the discretion of the Board, normally without further shareholder action (except as may be required for a particular transaction by applicable law, requirements of regulatory agencies or by NYSE rules), for any proper corporate purpose including, among other things, capital-raising and deleveraging transactions, investment opportunities, to issue under stock option or other incentive programs, to attract and retain talented personnel and for other value-creating opportunities and strategic transactions.  The Board believes that the proposed increase in the Company’s authorized Class A Common Stock will provide a sufficient number of shares available to maintain the flexibility necessary to pursue the foregoing and other opportunities in the foreseeable future.
The Board believes that prudent corporate governance includes the Company having a sufficient number of authorized but unissued shares of Class A Common Stock available for various purposes, and the Board regularly evaluates the Company’s needs and opportunities to utilize shares of the Company’s Class A Common Stock.  In recent years, the Company has been focused on evaluating its debt profile, capital structure and various financing and refinancing alternatives and has successfully completed several deleveraging transactions, including with issuances of Class A Common Stock and securities which Awards may be granted undersettled or exchanged for Class A Common Stock.  These issuances represent the Amended Planprimary use of the Class A Common Stock over the past few years.
The Company has no current plans, and there are currently no agreements or arrangements to issue any single Participant duringof the additional shares of Class A Common Stock that would be authorized by the proposed Class A Amendment.  However, if shareholders approve the proposed Class A Amendment, the additional authorized shares would give the Board more flexibility in responding to a fiscal yearvariety of corporate opportunities, including those discussed above, which, if they become available, are likely to require prompt action on our part. The Board believes that the increase in the authorized number of shares of Class A Common Stock will be increased from 1,000,000enable the Company to 2,000,000;take timely advantage of market conditions and
  • For performance awards granted under the Amended Planavailability of favorable opportunities without the delay and expense associated with convening a special meeting to obtain shareholder approval at that are denominatedtime (unless otherwise required by regulatory agencies or by NYSE rules).
    • 1  The Company will have the authority to issue a total of 460,100,000 shares of all classes of stock if Proposal 4 is also approved.
    2  The Company will have the authority to issue a total of 60,000,000 shares of Class B Common Stock if Proposal 4 is approved.
    10
    Possible Effects of the Increase in Class A Common Stock
    The Company has not proposed the increase in the number of authorized shares of Class A Common Stock with the annual maximum grant per Participant duringintent of using the additional shares to prevent or discourage any fiscal year will be 2,000,000 shares (determined atactual or threatened takeover of the time of award grant, rather than at settlement).Company.  The maximum amount payableCompany currently has in respect ofeffect a performance awardshareholder approved rights plan that is not denominated in shares duringdesigned to protect shareholders against the possibility of a fiscal yearhostile takeover.  Instead, it is meant to any Participant will remain equal to the greater of (x) $15,000,000 and (y) 2.5 percent (2.5%) of the Company’s income before income taxes (consistent with the limit under the Existing Plan).
    The Amended Plan is set forth in Appendix A hereto. The principal purpose of the proposed amendments to the Existing Plan is to facilitate the ability to grant contemplated long-term performance Awards to key employees of the Company. While the terms of the contemplated performance awardspreserve shareholder value and the identityvalue of the intended recipients have not yet been finalized, the Company anticipates making special long-term performance award grants during the 2010 fiscal year to properly incentivize the key employeescertain tax assets primarily associated with net loss carryforwards and better align their interests with those of the Company’s stockholders. Absent the proposed amendments to the Existing Plan, the Company might have insufficient shares available for grantbuilt-in losses under the terms of the Existing Plan and the contemplated multi-year grants might exceed the annual award limitations under the Existing Plan.
         For a discussion of the Amended Plan, see “Material Features of the Amended Plan” below.


         The Company’s Board of Directors has approved the adoption of the Amended Plan and recommends that shareholders vote for the approval of the Amended Plan.
    Material Features of the Amended Plan
    The following is a brief summary of the material features of the Amended Plan. Because this is only a summary, it does not contain all the information about the Amended Plan that may be important to you and is qualified in its entirety to the full text of the Amended Plan as set forth in Appendix A hereto.
    Purpose
    The purpose of the Amended Plan is to aid the Company and its affiliates in recruiting and retaining key employees, directors and consultants of outstanding ability and to motivate those 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”, which consist of options, stock appreciation rights or other stock-based Awards (including performance-based Awards) granted pursuant to the Amended Plan. All employees, directors and consultants of the Company and its affiliates are eligible to participate in the Amended Plan if they are selected by the Compensation Committee of the Board of Directors (the “Committee”) to participate in the Amended Plan (any such individual, a “Participant”). For the fiscal year ended October 31, 2009, approximately 70 employees, five directors (includes non-employee directors only), and no consultants were selected by the Committee to participate in the Existing Plan (which the Amended Plan is intended to supersede and replace).
    Administration
    The Amended Plan is generally 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 be “non-employee directors” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended, “outside directors” within the meaning of 162(m)Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), and “independent directors” within the meaningamended. The proposed Class A Amendment does not change any of the applicable rules, if any, of any national securities exchange on which shares of common stock of the Company are listed or admitted to trading: provided, however, that any action permitted to be taken by the Committee may be taken by the Board of Directors in its discretion. Additionally, if the Company’s CEO is serving as a member of the Board of Directors, the Board of Directors may by specific resolution constitute the CEO as a “committee of one” with the authority to grant Awards covering up to 1,000,000 shares (giving effect to the Company’s March 26, 2004 stock split) per fiscal year to certain non executive officer Participants.
    Awards
    Awards are determined (“granted”) by the Committee and are subject to the terms and conditions stated in the Amended Plan and to such other terms and conditions, not inconsistent therewith as the Committee shall determine. Any stock options granted must have a per share exercise price that is not less than 100% of the fair market value of the Company’s common stock underlying such stock options on the date an option is granted. However, the Amended Plan includes a provision that would permit “repricing” of stock options (that is, lowering the exercise price of previously granted stock options) and similar corporate actions if (and only if) the repricing or similar corporate action is approved by at least a majority of the independent directors on our Board of Directors. The maximum term for stock options granted under the Amended Plan is ten years from the initial date of grant.
    In the event a performance-based Award is granted under the Amended Plan, it may be granted in a manner that would cause the Award to be deductible by the Company under Section 162(m) of the Code. To that end, performance-based Awards intended to be deductible under Section 162(m) of the Code must be based on the attainment by the Company of written performance goals approved by the Committee. Within 90 days after the start of a designated performance period (or, if less, the number of days which is equal to 25% of such performance period), the Committee will establish the objective performance goals for each Participant. The performance goals will be based on one or more of the following criteria: (1) earnings before or after taxes (including earnings before interest, taxes, depreciation and amortization); (2) net income; (3) operating income; (4) earnings per share of common stock of the Company; (5) book value per share; (6) return on stockholders’ equity; (7) expense management; (8) return on investment; (9) improvements in capital structure; (10) profitability of an identifiable business unit or product; (11); maintenance or improvements of profit margins;


    (12) stock price; (13) market share; (14) revenues or sales; (15) costs; (16) cash flow; (17) working capital; (18) changes in net assets (whether or not multiplied by a constant percentage intended to represent the cost of capital); and (19) return on assets.
    Prior to the payment of any Award, the Committee, or its delegate, will certify that the applicable performance goals have been met. In connection with such certification, the Committee, or its delegate, may decide to pay amounts, which are less than the Award otherwise payable for achievement of the applicable performance goals. The Committee may base the decision to reduce the Award on any criteria it deems relevant. Payment of an Award to a Participant will occur only after such certification and will be made as determined by the Committee in its sole discretion after the end of such performance period.
    Effect of Certain Events on Amended Plan and Awards
    In the event of any change in the outstanding shares of common stock by reason of any stock 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 of common stock 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 (1) the number or kind of common stock or other securities that may be issued as set forth in the Amended Plan or pursuant to outstanding Awards, (2) the option price, (3) the maximum number or amount of Awards that may be granted to a Participant during a fiscal year and/or (4) any other affected terms of such Awards. Except as otherwise provided in an Award agreement, in the event of a Change in Control (as defined in the Amended Plan), the Committee in its sole discretion and without liability to any person may take such actions, if any as it deems necessary or desirable with respect to any Award.
    Limitations
    The Amended Plan provides that the total number of shares of common stock of the Company that may be issued under the Amended Plan (inclusive of Awards previously granted under the Existing Plan and Awards granted under the Company’s Amended and Restated 1999 Stock Incentive Plan) is 11,185,995, and the maximum amount that may be paid with respect to performance-based Awards (other than Awards denominated in Shares) during a fiscal year to any Participant cannot exceed the greater of (x) $15 million or (y) 2.5% of the Company’s income before income taxes as reported in the Company’s audited consolidated financial statements prepared for the year in respect of which the performance-based Award is to be paid. The number of shares available for issuance under the Amended Plan may also be increased by utilizing shares otherwise available for issuance under theexisting terms of the Company’s STIP, provided that any shares so utilized shall reduce the number of shares available for issuance under the STIP. Additionally, the maximum number of shares of common stock of the Company for which options, stock appreciation rights restricted stock, restricted stock unit Awards and other Share-denominated performance Awards may be granted during a fiscal year to any Participant is 2,000,000.
    No award may be granted under the Amended Plan after the tenth anniversary of the Effective Date, which is February 6, 2008, but Awards theretofore granted may be extended beyond that date.plan.
     
    Amendment and Termination
    The Committee may amend, alter or discontinue the Amended Plan, but no amendment, alteration or discontinuation shall be made which, (a) without the approval of the shareholders of the Company, would (except as providedincrease in the Amended Plan in connection with adjustments in certain corporate events), increase the totalauthorized number of shares of common stock of the Company reserved for the purposes of the Amended Plan or change the maximum number of shares of common stock of the Company for which Awards may be granted to any Participant or (b) without the consent of a Participant, would impair any of the rights or obligations under any Award theretofore granted to such Participant under the Amended Plan; provided, however, that the Committee may amend the Amended Plan in such manner as it deems necessary to permit the granting of Awards meeting the requirements of the Code or other applicable laws. The Committee may not amend, alter or discontinue the provisions relating to a Change in Control (as defined in the Amended Plan) after the occurrence of a Change in Control.


    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. Notwithstanding the foregoing, and subject to the conditions stated in the Amended Plan, a Participant may transfer an option (other than an option that is also an incentive stock option granted pursuant to the Amended Plan) in whole or in part by gift or domestic relations order to a family member of the Participant.
    Certain United States Federal Income Tax Consequences
    Stock Options
    An employee to whom an incentive stock option (“ISO”) that qualifies under Section 422 of the Code is granted will not recognize income at the time of grant or exercise of such option. No federal income tax deduction will be allowable to the Company upon the grant or exercise of such ISO. However, upon the exercise of an ISO, special alternative minimum tax rules apply for the employee.
    When the employee sells shares acquired through the exercise of an ISO more than one year after the date of transfer of such shares and more than two years after the date of grant of such ISO, the employee will normally recognize a long-term capital gain or loss equal to the difference, if any, between the sale prices of such shares and the option price. If the employee does not hold such shares for this period, when the employee sells such shares, the employee will recognize ordinary compensation income and possibly capital gain or loss in such amounts as are prescribed by the Code and regulations thereunder, and the Company will generally be entitled to a federal income tax deduction in the amount of such ordinary compensation income.
    An employee to whom an option that is not an ISO (a “non-qualified option”) is granted will not recognize income at the time of grant of such option. When such employee exercises a non-qualified option, the employee will recognize ordinary compensation income equal to the excess, if any, of the fair market value as of the date of a non-qualified option exercise of the shares the employee receives, over the option exercise price. The tax basis of such shares will be equal to the exercise price paid plus the amount includable in the employee’s gross income, and the employee’s holding period for such shares will commence on the day after which the employee recognized taxable income in respect of such shares. Any subsequent sale of the shares by the employee will result in long or short-term capital gain or loss, depending on the applicable holding period. Subject to applicable provisions of the Code and regulations thereunder, the Company will generally be entitled to a federal income tax deduction in respect of the exercise of non-qualified options in an amount equal to the ordinary compensation income recognized by the employee. Any such compensation includable in the gross income of an employee in respect of a non-qualified option will be subject to appropriate federal, state, local and foreign income and employment taxes.
    Restricted Stock
    Unless an election is made by the Participant under Section 83(b) of the Code, the grant of an Award of restricted stock will have no immediate tax consequences to the Participant. Generally, upon the lapse of restrictions (as determined by the applicable restricted stock agreement between the Participant and the Company), a Participant will recognize ordinary income in an amount equal to the product of (x) the fair market value of a share of common stock of the Company on the date on which the restrictions lapse, less any amount paid with respect to the Award of restricted stock, multiplied by (y) the number of shares of restricted stock with respect to which restrictions lapse on such date. The Participant’s tax basis will be equal to the sum of the amount of ordinary income recognized upon the lapse of restrictions and any amount paid for such restricted stock. The Participant’s holding period will commence on the date on which the restrictions lapse.
    A Participant may make an election under Section 83(b) of the Code within 30 days after the date of transfer of an Award of restricted stock to recognize ordinary income on the date of award based on the fair market value of common stock of the Company on such date. An employee making such an election will have a tax basis in the shares of restricted stock equal to the sum of the amount the employee recognizes as ordinary income and any amount paid for such restricted stock, and the employee’s holding period for such restricted stock for tax purposes will commence on the date after such date.
    With respect to shares of restricted stock upon which restrictions have lapsed, when the employee sells such shares, the employee will recognize capital gain or loss consistent with the treatment of the sale of shares received upon the exercise of non-qualified options, as described above.


    Stock Units
    A Participant to whom a restricted stock unit (“RSU”) is granted generally will not recognize income at the time of grant (although the Participant may become subject to employment taxes when the right to receive shares becomes “vested” due to retirement eligibility or otherwise). Upon delivery of shares of common stock of the Company in respect of an RSU, a Participant will recognize ordinary income in an amount equal to the product of (x) the fair market value of a share of common stock of the Company on the date on which the common stock of the Company is delivered, multiplied by (y) the number of shares of common stock of the Company delivered.
    Other Stock-based Awards
    With respect to other stock-based Awards paid in cash or common stock, Participants will generally recognize income equal to the fair market value of the Award on the date on which the Award is delivered to the recipient.
    Code Section 409A
    The American Jobs Creation Act of 2004 introduced a new section of the Code (Section 409A) covering certain nonqualified deferred compensation arrangements. Section 409A generally establishes new rules that must be followed with respect to covered deferred compensation arrangements in order to avoid the imposition of an additional 20% tax (plus interest) upon the service provider who is entitled to receive the deferred compensation. Certain Awards that may be granted under the Amended Plan may constitute “deferred compensation” within the meaning of and subject to Section 409A. While the Committee intends to administer and operate the Amended Plan and establish terms (or make required amendments) with respect to Awards subject to Section 409A in a manner that will avoid the imposition of additional taxation under Section 409A upon a Participant, there can be no assurance that additional taxation under Section 409A will be avoided in all cases. In the event the Company is required to delay delivery of shares or any other payment under an Award in order to avoid the imposition of an additional tax under Section 409A, the Company will deliver such shares (or make such payment) on the first day that would not result in the Participant incurring any tax liability under Section 409A. The Committee may amend the Amended Plan and outstanding Awards to preserve the intended benefits of Awards granted under the Amended Plan and to avoid the imposition of an additional tax under Section 409A of the Code.
    General
    Ordinary income recognized by virtue of the exercise of non-qualified options, the lapse of restrictions on restricted stock or RSUs or payments made in cash or shares of common stock of the Company is subject to applicable tax withholding as required by law.
    The Company generally will be entitled to a federal tax deduction to the extent permitted by the Code at the time and in the amount that ordinary income is recognized by Participants.
    The discussion set forth above does not purport to be a complete analysis of all potential tax consequences relevant to recipients of options or other Awards or to their employers or to describe tax consequences based on particular circumstances. It is based on federal income tax law and interpretational authorities as of the date of this proxy statement, which are subject to change at any time.
    Participants in the Amended Plan
    For the fiscal year ending October 31, 2009, approximately 70 employees, five directors (includes non-employee directors only), and no consultants were selected by the Committee to participate in the Existing Plan. The following table sets forth information on Awards granted under the Existing Plan since its adoption in fiscal 2008. The market value of the underlying shares of Class A Common Stock on January 19, 2010 was $4.00 per share.and the subsequent issuance of such shares could, however, have the effect of delaying or preventing a change of control of the Company without further action by shareholders. Shares of authorized and unissued Class A Common Stock could (within the limits imposed by applicable law) be issued in one or more transactions that could make a change of control of the Company less likely. The additional authorized shares could be used to discourage persons from attempting to gain control of the Company by diluting the voting power of shares then outstanding or by increasing the voting power of persons who would support the Board in a potential takeover scenario. However, this proposal is not made in response to any effort of which we are aware to accumulate our stock or to obtain control of us, nor do we have a present intent to use the additional shares of authorized Class A Common Stock to oppose a hostile takeover attempt or to delay or prevent changes in control of management.  In addition, members of the Hovnanian family, including Ara Hovnanian, the Chairman of our Board, President and Chief Executive Officer, have the power to cast a majority of the votes that can be cast by the holders of all our currently outstanding common stock, voting together, through personal holdings, the Limited Partnership, family trusts and shares held by the Estate of Kevork S. Hovnanian.
     


    You will not realize any dilution in your percentage ownership or your voting rights as a result of increasing our authorized Class A Common Stock.  In the absence of future issuances of our Class A Common Stock Awards Previously Granted underto you, issuances of additional shares of our Class A Common Stock in the Existing Plan
    (since adoptionfuture would dilute your percentage ownership and the voting power of the Existing Plan)outstanding shares of our Class A Common Stock. In addition, the issuance of additional shares of our Class A Common Stock (or even the potential issuance) may have a depressive effect on the market price of our Class A Common Stock.  Shareholders do not have preemptive rights, which means that they do not have the right to purchase shares in any future issuance of Class A Common Stock in order to maintain their proportionate equity interests in the Company.
     
    Restricted Stock
    Unit andTotal of All
    Stock OptionDeferred ShareColumns in
    GrantsGrantsTable
    # of Shares# of Shares# of Shares
    Name & PositionCovered     Covered     Covered
    Kevork S. Hovnanian, Chairman of the Board———
    Ara K. Hovnanian, President and Chief Executive Officer   1,125,000—1,125,000
    J. Larry Sorsby, Executive Vice President and Chief Financial Officer225,000—225,000
    Paul W. Buchanan, Senior Vice President and Chief Accounting Officer40,00014,09854,098
    Peter S. Reinhart, Senior Vice President and General Counsel40,00010,07050,070
    David G. Valiaveedan, Vice President — Finance and Treasurer20,6259,67630,301
    Executive Officer Group1,450,62533,8441,484,469
    Robert B. Coutts, Director28,00017,90445,904
    Edward A. Kangas, Director44,000 29,841 73,841
    Joseph A. Marengi, Director28,00017,90445,904
    John J. Robbins, Director28,00017,90445,904
    Stephen D. Weinroth, Director44,00029,84173,841
    All Current Non-Executive Directors as a Group172,000113,394285,394
    All Non-Executive Officer Employees as a Group1,377,5631,129,2292,506,792
    All Directors and Employees3,000,1881,276,4674,276,655
    VOTE REQUIRED
     
    EQUITY COMPENSATION PLAN INFORMATION
         The following table provides information asApproval of October 31, 2009, with respectthe proposed amendment to compensation plans (including individual compensation arrangements) under which our equity securities arethe Certificate of Incorporation to increase the number of authorized for issuance.
    Equity Compensation Plan Information
    Number of
    Number ofNumber ofsecurities
    Class AClassWeightedWeightedremaining
    CommonStock Baverageaverageavailable for
    StockCommonexerciseexercisefuture issuance
    securities to besecurities to beprice ofprice ofunder equity
    issued uponissued uponoutstandingoutstandingcompensation
    exercise ofexercise ofClass AClass Bplans
    outstandingoutstandingCommonCommon(excluding
    options,options,StockStocksecurities
    warrants andwarrants andoptions,options,reflected in
    rights (inrights (inwarrants andwarrants andcolumns (a)) (in
    Plan Categorythousands)     thousands)     rights(2)     rights(3)     thousands)(1)
    (a)(a)(b)(b)(c)
    Equity compensation plans      
           approved by security holders6,352  1,584      $10.77 $3.85  5,861 
    Equity compensation plans
           not approved by security holders— — — — — 
    Total6,352 1,584 $10.77 $3.85 5,861 
    (1)Under the Company’s equity compensation plans, securities may be issued in either Class A Common Stock or Class B Common Stock.
    (2)Does not include 1,702 shares to be issued upon vesting of restricted stock, because they have no exercise price.
    (3)Does not include 459 shares to be issued upon vesting of restricted stock, because they have no exercise price.


    VOTE REQUIRED
    In order for the Amended Plan to be approved, the current NYSE rules requireshares of Class A Common Stock requires the affirmative vote of the holders, represented in person or by proxy at the 2013 Annual Meeting, of (1) a majority of the sharesvotes cast by the shareholders of Class A Common Stock and Class B Common Stock, voting together, cast on the proposal, provided thatand (2) a majority of the outstanding sharesvotes cast by the shareholders of common stock are votes on the proposal. With respect to the proposal to adopt the Amended Plan, abstentions are considered “votes cast” under NYSE rules and thus will have the same effect as a vote “against” the proposal and will be counted inClass A Common Stock.  In determining whether     a majoritythis proposal has received the requisite number of the outstanding shares of common stock are voted on the proposal. Broker non-votes will not count asaffirmative votes, cast “for” or “against” the proposal to adopt the Amended Plan andabstentions will have no effect on the outcome because they are not considered votes cast. Approval of the Class A Amendment is not conditioned on the approval of the Class B Amendment described in Proposal 4.
    If our shareholders approve the proposed Class A Amendment, it will become effective upon filing of an Amended and Restated Certificate of Incorporation with the Delaware Secretary of State, which we anticipate doing as soon as practicable following shareholder approval. However, if our shareholders approve the proposed Class A Amendment, our Board retains discretion under Delaware law not to implement the proposed amendment. If our Board were to exercise such discretion, the number of authorized shares of Class A Common Stock would remain at current levels.
    Mr. Hovnanian and others with voting power over the shares held by the Estate of Kevork S. Hovnanian, the Limited Partnership and certain family trusts have informed the Company that they intend to vote in favor of this proposal.
    11
    Our Board of Directors recommends that shareholders vote FOR the approval of the proposed amendment to our Certificate of Incorporation to increase the number of authorized shares of Class A Common Stock.
    (4) APPROVAL OF AN AMENDMENT TO THE COMPANY’S CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF CLASS B COMMON STOCK
    On December 14, 2012, subject to shareholder approval, the Board authorized an amendment to our Certificate of Incorporation to increase the number of authorized shares of Class B Common Stock (the “Class B Common Stock”) from 30,000,000 shares to 60,000,000 shares (the “Class B Amendment”). Pursuant to Proposal 3, we are separately proposing an increase to our authorized Class A Common Stock, but we are not proposing an increase to the number of authorized shares of Preferred Stock.
    If approved by shareholders, the Class B Amendment would be reflected in an Amended and Restated Certificate of Incorporation of Hovnanian Enterprises, Inc., and the first paragraph of paragraph Fourth of our Certificate of Incorporation would be amended to provide as follows:
    “FOURTH: The total number of shares of all classes of stock which the Corporation shall have the authority to issue is 260,100,0003 shares, of which 200,000,0004 shares shall be Class A Common Stock having a par value of one cent ($0.01) per share, 60,000,000 shares shall be Class B Common Stock having a par value of one cent ($0.01) per share and 100,000 shares shall be Preferred Stock having a par value of one cent ($0.01) per share.”
    If the shareholders approve the proposed amendment, it will become effective upon filing of an Amended and Restated Certificate of Incorporation with the Delaware Secretary of State, which the Company anticipates doing as soon as practicable following shareholder approval.
    The newly authorized shares of Class B Common Stock will have all the rights and privileges of the shares of Class B Common Stock presently authorized.  Therefore, approval of this proposal assumingand any subsequent issuance of additional Class B Common Stock would not affect your current rights as a shareholder, except for any dilutive effects of a potential increase in the number of outstanding shares of Class B Common Stock to, among other things, earnings per share, book value per share and the voting power of holders of our Class B Common Stock.
    Reasons for the Proposal
    The Company is a family enterprise that has been in operation since 1959, and the Company has maintained a shareholder approved dual-class capital structure since 1992. The Board established this structure as part of its philosophy to foster continuity and stability in the Company’s operations.
    The Board continues to believe that it important to the Company’s continued and future development to provide for continuity of direction and management and to maintain stability in the Company’s relationships with its lenders, suppliers, contractors and others who are important to the conduct of the Company’s business. The Board also believes that the Hovnanian family’s direction and management of the Company and the stability in the Company’s relationships with others fostered by their control have been crucial to the growth and success of the Company over its history and will continue to be so in the future.
    In light of the benefits to the Company of the continuity of share ownership and control of the Hovnanian family, the Board believes that it is advisable and in the best interests of the Company and its shareholders to maintain the relative proportion of the Class B Common Stock to the Class A Common Stock.  If Proposal 3 is approved, we would be authorized to issue 400,000,000 shares of Class A Common Stock.  Therefore, approval of the Class B Amendment would maintain the proportion of authorized Class A Common Stock and Class B Common Stock as it currently stands and enable the Company to pursue the initiatives described in Proposal 3.
    3  The Company will have the authority to issue a total of 460,100,000 shares of all classes of stock if Proposal 3 is also approved.
    4  The Company will have the authority to issue a total of 400,000,000 shares of Class A Common Stock if Proposal 3 is approved.
    12
    The Company has historically issued Class B Common Stock to the Hovnanian family in connection with equity awards and with the anticipation that the Class B Common Stock would be held for investment.  Under the terms of the Company’s Certificate of Incorporation, transfers of Class B Common Stock are restricted to certain permitted transferees (otherwise each share of Class B Common Stock would be converted into Class A Common Stock on a share-for-share basis) and, if the Class B Common Stock is held in nominee name, the beneficial owner of the Class B Common Stock is required to make representations that such holder has held continuously since the date of issuance in order to receive the benefit of the Class B Common Stock voting.  Absent such representations, each share of Class B Common Stock would carry the same number of votes as a share of Class A Common Stock.
    Possible Effects of the Increase in Class B Common Stock
    The Company has not proposed the increase in the number of authorized shares of Class B Common Stock with the intent of using the additional shares to prevent or discourage any actual or threatened takeover of the Company.  The Company currently has in effect a shareholder approved rights plan that is not designed to protect shareholders against the possibility of a hostile takeover.  Instead, it is meant to preserve shareholder value and the value of certain tax assets primarily associated with net loss carryforwards and built-in losses under Section 382 of the Internal Revenue Code of 1986, as amended. The proposed Class B Amendment does not change any of the existing terms of the rights plan.
    The increase in the authorized number of shares of Class B Common Stock and the subsequent issuance of such shares could, however, have the effect of delaying or preventing a change of control of the Company without further action by shareholders.  Shares of authorized and unissued Class B Common Stock could (within the limits imposed by applicable law) be issued in one or more transactions that could make a change of control of the Company less likely. The additional authorized shares could be used to discourage persons from attempting to gain control of the Company by diluting the voting power of shares then outstanding or by increasing the voting power of persons who would support the Board in a potential takeover scenario. However, this proposal is not made in response to any effort of which we are aware to accumulate our stock or to obtain control of us, nor do we have a present intent to use the additional shares of authorized Class B Common Stock to oppose a hostile takeover attempt or to delay or prevent changes in control of management.   In addition, members of the Hovnanian family, including Ara Hovnanian, the Chairman of our Board, President and Chief Executive Officer, have the power to cast a majority of the votes that can be cast by the holders of all our currently outstanding common stock, voting together, through personal holdings, the Limited Partnership, family trusts and shares held by the Estate of Kevork S. Hovnanian.
    You will not realize any dilution in your percentage ownership or your voting rights as a result of increasing our authorized Class B Common Stock.  Issuances of additional shares of our Class B Common Stock in the future would dilute your percentage ownership and the voting power of the outstanding shares of common stock are otherwise votedour Class A Common Stock. In addition shareholders do not have preemptive rights.
    VOTE REQUIRED
    Approval of the proposed amendment to the Certificate of Incorporation to increase the number of authorized shares of Class B Common Stock requires the affirmative vote of the holders, represented in person or by proxy at the 2013 Annual Meeting, of (1) a majority of the votes cast by the shareholders of Class A Common Stock and Class B Common Stock, voting together, and (2) a majority of the votes cast by the shareholders of Class B Common Stock.  In determining whether this proposal has received the requisite number of affirmative votes, abstentions will have no effect on the proposal.
    outcome because they are not considered votes cast.  Approval of the Class B Amendment is not conditioned on the approval of the Class A Amendment described in Proposal 3.
    If our shareholders approve the proposed Class B Amendment, it will become effective upon filing of an Amended and Restated Certificate of Incorporation with the Delaware Secretary of State, which we anticipate doing as soon as practicable following shareholder approval. However, if our shareholders approve the proposed Class B Amendment, our Board retains discretion under Delaware law not to implement the proposed amendment. If our Board were to exercise such discretion, the number of authorized shares of Class B Common Stock would remain at current levels.
    13
    Mr. A. Hovnanian and others with voting power over the shares held by the Estate of Kevork S. Hovnanian, the Limited Partnership and certain members of his family trusts have informed the Company that they intend to vote in favor of this proposal.  Because of thetheir collective voting power, of Mr. A. Hovnanian and such members of his family, this proposal is assured passage.
    Our Board of Directors recommends that shareholders vote FOR the approval of the Amended Plan.proposed amendment to our Certificate of Incorporation to increase the number of authorized shares of Class B Common Stock.
     
     (5) ADVISORY VOTE ON EXECUTIVE COMPENSATION

    In accordance with the requirements of Section 14A of the Exchange Act (which was added by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”)) and the related rules of the SEC, we are including in these proxy materials a separate resolution subject to shareholder vote to approve, in a non-binding vote, the compensation of our named executive officers as disclosed on pages 18 to 50.

     In light of the voting results with respect to the frequency of shareholder votes on executive compensation at the 2011 Annual Meeting of Shareholders in which a substantial majority of our shareholders (96.3% of the votes cast by shareholders of Class A Common Stock and Class B Common Stock, voting together) voted for “say-on-pay” proposals to occur every three years, the Board of Directors initially decided that the Company would hold, in accordance with the vote of an overwhelming majority, a triennial advisory vote on the compensation of named executive officers, which vote would next take place at the Company’s 2014 Annual Meeting of Shareholders.  However, we have voluntarily elected to hold our next “say-on-pay” vote at this 2013 Annual Meeting of Shareholders.

    In considering their vote, shareholders may wish to review with care the information on the Company’s compensation policies and decisions regarding the named executive officers presented in Compensation Discussion and Analysis on pages 18 to 36, as well as the discussion regarding the Compensation Committee on pages 16 and 17.
    As we discuss in the Compensation Discussion and Analysis section, the Board of Directors believes that the Company’s long-term success depends in large measure on the talents of the Company’s employees. The Company’s compensation system plays a significant role in the Company’s ability to attract, retain and motivate the highest quality associates in a difficult market. The principal underpinnings of the Company’s compensation system are an acute focus on performance, shareholder alignment, sensitivity to the relevant market place, and a long-term orientation.
    The Compensation Committee ties increases or decreases in overall compensation with the overall financial performance of the Company. During fiscal years when the Company’s profitability has been higher, total compensation has been higher. During more recent years when the Company’s performance has been lower due in part to the economic downturn and recession particularly in the housing industry, the Compensation Committee’s policies and actions have significantly lowered overall compensation.  These policies and actions include:

    ·Significant reductions in annual bonus opportunity, where, on average, the maximum award for all named executive officers is approximately 92% lower than the maximum award during the last ten years and approximately 39% lower than the maximum award during the last four years;
    ·Focus on improving EBITDA through a bonus component for our Chairman of the Board, President and Chief Executive Officer, our Executive Vice President and Chief Financial Officer and our Chief Operating Officer that is only earned if EBITDA improvement performance goals are met;
    ·Focus on a return to profitability and lowering net debt over a three-year performance period through a long-term incentive award for all named executive officers in fiscal 2010;
    ·Policy of generally targeting a fixed number of stock options rather than a specific option value as part of the annual compensation program (since the number of stock options generally was not increased as stock prices in the homebuilding industry declined, the value of stock option grants to our named executive officers has declined significantly); and
    ·Reduction in shareholder dilution through the Compensation Committee’s active management of both equity award levels and the number of shares available for new equity awards.
    14
    The text of the resolution in respect of this proposal is as follows:

    “Resolved, that the compensation paid to the Company’s named executive officers as disclosed pursuant to Item 402 of Regulation S-K in the Proxy Statement relating to the Company’s Annual Meeting of Shareholders to be held on March 12, 2013, including the Compensation Discussion and Analysis, compensation tables, and narrative discussion, is hereby approved.”
    The Board recommends that shareholders vote FOR approval of this resolution.
    15
    THE COMPENSATION COMMITTEE
    The Compensation Committee of the Board of Directors (the “Committee”) is the principal overseer of the Company’s various policies and procedures related to executive compensation. The Committee meets at least threefour times a year to discuss industry trends with regard to overall compensation issues and consults with outside compensation consultants as needed. The Committee is governed by its Charter which is available on the Company’s public website (www.khov.com).
     
    Areas of Responsibility
    The Committee, in conjunction with the Board of Directors and with management’s input, shapes the Company’s executive compensation philosophy and objectives. In particular, the Committee is charged with:

    ·Reviewing, at least annually, the salaries, bonuses and other forms of compensation, including stock option grants, for the Company’s senior executives (which include the Chairman of the Board, President and Chief Executive Officer (the “CEO”),  the Executive Vice President and Chief Financial Officer (the “CFO”), the Chief Operating Officer (the “COO”) and the other named executive officers (“NEOs”) for whom compensation is reported in the tables below);
     
    • Reviewing, at least annually, the salaries, bonuses and other forms of compensation, including stock option grants, for the Company’s senior executives (which include the named executive officers (“NEOs”) for whom compensation is reported in the tables below);
    • Reviewing, at least annually, compensation paid to the Company’s non-employee Directors;
    • Participating in the review of compensation of other key employees of the Company as may be directed by the Board of Directors or by management; Periodically reviewing the Company’s policies and procedures pertaining to the Company’s equity award plans and forms of equity grants to all employees and non-employee Directors, employee benefit plans (for example, the 401(k) plan and deferred compensation plans), the Chief Executive Officer’s severance agreement, executive perquisites, and forms of equity grants to all employees and non-employee directors; and
    • Fostering good corporate governance practices as they relate to executive compensation.
    ·Reviewing, at least annually, compensation paid to the Company’s non-employee Directors;
     
    ·Participating in the review of compensation of other designated key employees of the Company;
    ·Periodically reviewing the Company’s policies and procedures pertaining to the Company’s equity award plans and forms of equity grants to all employees and non-employee Directors, employee benefit plans (for example, the 401(k) plan and deferred compensation plans), severance agreements, executive perquisites, and forms of equity grants to all employees and non-employee directors;
    ·Fostering good corporate governance practices as they relate to executive compensation; and
    ·Reviewing, at least annually, as part of the Board of Directors’ oversight responsibilities, the Company's compensation program and reports from the Company’s CFO regarding his assessment of whether there are any compensation risks that are reasonably likely to result in a material adverse effect on the Company (see "Oversight of Risk Management" below).  In addition, the Committee regularly considers business and compensation risks as part of its process for establishing performance goals and determining incentive awards for each of the NEOs.
    These areas of responsibilities are discussed in more detail below under “Compensation Discussion and Analysis.”  During the fiscal year ended October 31, 2009,2012, the members of the Committee were all independent, non-employee directors.“non-employee directors” for purposes of Rule 16b-3 of the Exchange Act, and “outside directors” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended.
     
    Compensation Review Process for the Named Executive Officers
    The Committee, in conjunction with the Board of Directors and with management’s input, is responsible for making decisions related to the overall compensation of the NEOs.
    At least annually, the Committee establishes objective financial measures for determining bonus awards to the NEOs. The Committee also considers salary, employee benefits and discretionary bonus awards, if any, for the NEOs.
    In determining overall compensation for the NEOs, the Committee may consult with other members of the Board of Directors, including the Chairman of the Board, the President and Chief Executive Officer (“CEO”),CEO and the Executive Vice President and Chief Financial Officer (“CFO”)CFO. Each of the Company. Thesethese individuals often provideprovides the Committee with insight on the individual and overall performance of executives (other than with respect to himself), including the


    achievement of personal objectives, if any, rather than relying solely on the Company’s financial performance measures in determining their compensation.  The CEO and CFO are not present for the Committee’s evaluation of their individual performance. The Committee also engages an outside compensation specialist related to various compensation issues.
    Outside Compensation Consultant
    Since October 2003, the Committee has engaged Pearl Meyer & Partners (“PM&P”) as the Committee’s independent outside compensation consultant to provide services related to executivereviews and non-employee director compensation. PM&P does not provide any other services to the Company unless approved by the Committee and no such services were provided in fiscal 2009. In fiscal 2009, PM&P assisted the Committee with its review and design of the Company’s annual bonus and long-term incentive plans for the NEOs in order to reflect modifications in the Company’s objectives due to declining market conditions in the homebuilding industry. The analysis also included a review ofanalyzes the compensation of similarthe named executive positions amongofficers of the Company’s peer group of 11 publicly-traded homebuilding companies (the “Peer Group”). See “Peer Group Considerations” of the Compensation Discussion and Analysis below for a list of the companies, discussed further below.  The Committee may engage outside compensation consultants in the Company’s Peer Group.
    The Committee’s primary objective for engaging PM&P isrelation to obtain advice and feedback related to maintaining programs that providevarious compensation opportunities for executives within the median range of the Peer Group for comparable financial performance.issues.  The Committee may also instruct PM&Pa compensation consultant to provide assistance in fostering an overall compensation program that aligns with its compensation philosophy to guide, motivate, retain and reward its executives for the achievement of the Company’s financial performance, strategic initiatives and individual goals, including increased long-term shareholder value in the context of a challenging business environment.  The Company also periodically participates in a homebuilding industry groupNotwithstanding any input from compensation survey that is conducted byconsultants, the Committee has the sole discretion to make all final decisions related to NEO compensation.
    16
    Outside Compensation Consultant and No Conflicts of Interest
    For fiscal 2012, the Committee engaged Pearl Meyer & Partners (“PM&P”) as the Committee’s outside compensation consultant to provide certain services related to executive and non-employee Director compensation.  PM&P does not provide any other services to the Company unless approved by the Committee, and which provides valuable informationno such services were provided in fiscal 2012.  After considering the relevant factors, the Company has determined that no conflicts of interest have been raised in connection with the services PM&P performed for the Company in fiscal 2012. In fiscal 2012, PM&P assisted the Committee with its review of the Company’s annual bonus and long-term incentive plans for the NEOs as well as its review of the compensation program for the non-employee directors.
    The Committee’s primary objective in engaging PM&P has been to obtain advice and feedback related to maintaining programs that provide compensation opportunities for executives within the median range of the competitive homebuilder Peer Group for comparable financial performance and PM&P also provided assistance to the Committee in assessing its competitive pay levels. An abbreviated edition of the homebuilding industry survey was conducted by PM&P during fiscal 2009 at no charge to all participants, including the Company.
    fostering an overall compensation program as discussed above.
    The Committee weighs the information gatheredadvice and feedback from PM&Pits compensation consultant and the members of the Board of Directors, as well as the views of and information gathered by the members of management it has consulted in conjunction with its review of other information itthe Committee considers relevant when making decisions or making recommendations to the full Board of Directors regarding executive compensation.

    Board Communication

    The Company’s Board of Directors is updated at least quarterly of any compensation decisions or recommendations made by the Committee and the Committee requests feedback from the Board of Directors regarding specific compensation issues as it deems necessary.
     
    Compensation Committee Report
    The Committee has reviewed and discussed the Compensation Discussion and Analysis provided below with the Company’s management. Based on itsthis review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2009.2012.
     
    COMPENSATION COMMITTEE
    Stephen D. Weinroth, Chair
    Robert B. Coutts
    Edward A. Kangas

    Stephen D. Weinroth, Chair
    Robert B. Coutts
    Edward A. Kangas
    Compensation Committee Interlocks and Insider Participation
    During the fiscal year ended October 31, 2009,2012, the members of the Compensation Committee were Messrs. Weinroth, Kangas, and Coutts. Each of Messrs. Weinroth, Kangas, and Coutts are non-employee Directors, and were never officers or employees of the Company or any of its subsidiaries.subsidiaries and did not have any relationships requiring disclosure under Item 404 of Regulation S-K during fiscal 2012. None of our executive officers served on the board of directors or compensation committee of any other entity that has or had one or more executive officers who served on our Board of Directors or our Compensation Committee during fiscal 2012.
     


    17
    COMPENSATION DISCUSSION AND ANALYSIS

    1. EXECUTIVE SUMMARY

    Company Performance in Fiscal 2012

    Beginning in the second quarter of fiscal 2012, the Company began to see positive operating trends, which continued into the third and fourth quarters of fiscal 2012.  Below are some highlights for fiscal 2012:

    ·Total revenues for fiscal 2012 were $1.5 billion, up 30.9% from $1.1 billion during all of fiscal 2011;

    ·During fiscal 2012, the dollar value of net contracts, including unconsolidated joint ventures, increased 43.9% to $1.9 billion compared with $1.3 billion for fiscal 2011, and the number of net contracts increased 30.1% to 5,838 homes compared with 4,488 homes in the previous year;

    ·During fiscal 2012, deliveries, including those in our unconsolidated joint ventures, were 5,356 homes compared with 4,216 homes during fiscal 2011, representing an increase of 27.0%;

    ·Contract backlog as of October 31, 2012, including that in our unconsolidated joint ventures, was $742.2 million for 2,145 homes, which was an increase of 34.4% and 29.0%, respectively, compared to October 31, 2011;

    ·During all of fiscal 2012, homebuilding gross margin percentage, before interest expense included in cost of sales, was 17.8% compared with 15.6% in 2011;

    ·During all of fiscal 2012, total selling, general and administrative expenses were $190.3 million, or 12.8% of total revenues, compared with $211.4 million, or 18.6% of total revenues, for fiscal 2011;

    ·The Company refinanced $797 million of secured senior notes during the fourth quarter of fiscal 2012, which reduces annual cash interest payments by approximately $17 million and extends the maturity of the refinanced debt from 2016 until 2020; and

    ·The fiscal year-end closing price of a share of Class A Common Stock increased 199% compared to 2011.

    Best Practices
    ·
    Pay-for-Performance:  The Compensation Committee (“Committee”) ties increases or decreases in overall compensation with the overall financial performance of the Company. During fiscal years when the Company’s profitability has been higher, total compensation has been higher. During more recent years when the Company’s performance has been lower due in part to the economic downturn and recession, which is particularly significant in the housing industry, the overall compensation has been lower.  The Committee seeks to motivate management to achieve improved financial performance of the Company through bonus plans that reward higher performance with increased bonus opportunities. In its selection of metrics to measure bonus achievement, the Committee has selected metrics to correspond to the financial needs of the Company during the relevant period. During periods of profitability, the bonus metrics were focused on profitability and return on shareholders’ equity measures. During recent periods when there was little or no likelihood of profits, bonus metrics were focused on opportunities that would reduce the Company’s debt obligations and improve cash flow and liquidity to enable the Company to weather the difficult economic conditions and return to profitability.
    18

    The following graph demonstrates the link between the CEO’s annual realized pay and the Company’s Total Shareholder Return (“TSR”).  Annual realized pay includes salary, annual bonus, perquisites and other compensation plus the realized value of options exercised and shares vesting during the fiscal year.

    (1)The TSR Index measures the change in the Company's stock price relative to fiscal 2006.  The index for each fiscal year is determined by comparing the fiscal year-ending stock price to the ending stock price in fiscal 2006 which is set at 100.

    ·
    Emphasis on Long-Term Value Creation and Retention:  The Committee seeks to align the interests of management with the long-term interests of the shareholders by granting a significant portion of the total compensation in the form of stock options that increase in value as the Company’s financial performance improves.  The Committee also seeks to retain management through the utilization of compensation methods that require executives to be employed through various vesting periods in order to receive the full financial benefits of stock option grants that vest over multiple years, deferred shares as part of an annual bonus, and the Long-Term Incentive Program implemented in fiscal 2010.
    ·
    Maintaining Appropriate Peer Group:  In constructing the Peer Group, the Committee selected those companies that compete directly with the Company in the homebuilding industry, are of comparable size and complexity in operations to the Company and are generally in the markets in which the Company competes. The Committee reviews the composition of the Peer Group on an annual basis and makes adjustments, if needed.  The Committee reviews the executive compensation of the Peer Group companies and seeks to award total compensation opportunity for our NEOs near the median of the Peer Group, with variation in actual compensation earned both above and below the median, depending on performance.
    ·
    No Excise Tax Gross-Ups, SERPs or Defined Benefit Plans:  The Company does not maintain employment or other agreements that provide contractual rights to employees upon termination of employment (other than upon death or disability), except for the change in control severance agreements the Company entered into with Messrs. O’Connor and Valiaveedan in January 2012 discussed below and in footnote (5) to the “Potential Payments Upon Termination Or Change-In-Control Table,” and the Company does not provide excise tax gross-ups, supplemental executive retirement plans or defined benefit pension plans for any NEOs.
    19

    ·
    Maintenance and Enforcement of Stock Ownership Guidelines: The Board of Directors has established stock ownership guidelines pursuant to which the CEO, CFO and COO are requested to achieve and maintain recommended minimum levels of stock ownership as set forth below under “Stock Ownership Guidelines.”
    ·
    Perquisites:  The Committee has provided NEOs only a few perquisites in addition to typical medical, dental and life insurance benefits.  The Company limits the personal use of Company automobiles and its fractional aircraft share, reimbursement for country club dues and personal income tax preparation and accounting services to the CEO.  Our perquisites do not include any tax gross-ups.
    Compensation Decisions for Fiscal 2012

    The Committee’s compensation decisions for fiscal 2012 reflected a conservative approach to fixed pay elements (base salary), the achievement of pre-established goals (annual bonuses) and long-term equity awards well below median of the Peer Group in view of the challenging business environment and the Company’s stock performance in such environment.
    ·
    Base Salaries:   The CEO and CFO received no base salary increase for fiscal 2012.  The remaining three NEOs received a salary increase.  In December 2011, the Committee approved fiscal 2012 increases for Messrs. Pellerito, Valiaveedan and O’Connor.  The increases for Messrs. Pellerito and Valiaveedan were approved in order to move them closer to the Peer Group median and, in the case of Mr. Valiaveedan, to further align him with the median level for the broad-based compensation survey data (as described further under “Compensation Philosophy and Objectives – Peer Group Considerations”).  Mr. O’Connor received an increase as a result of his promotion to Vice President — Chief Accounting Officer and Corporate Controller.  See “Details of Compensation Elements – Base Salaries” below for additional information on base salaries.
    ·
    Annual Bonuses:  Consistent with the achievement of specified financial or personal objectives, fiscal 2012 bonuses were paid to all NEOs.  Bonuses for the CEO, CFO and COO were the same as for fiscal 2011.    Bonuses for the other NEOs increased in proportion to the amount of their annual salary increases, as their bonus calculations are a percentage of base salary.  Additional details are described below under “Details of Compensation Elements – Annual Bonuses – Regular Bonuses.”
    ·
    Discretionary Bonuses:  Discretionary bonuses were awarded to Mr. O’Connor and Mr. Valiaveedan in fiscal 2013 in respect of their performance in fiscal 2012, as described further under “Details of Compensation Elements – Annual Bonuses – Discretionary Bonuses.”

    ·
    Long-Term Awards, including stock options and participation in the Long-Term Incentive Program (described below):  Grants of equity awards made to NEOs in fiscal 2012 and the annualized target value of the Company’s Long-Term Incentive Program fell considerably below median Peer Group long-term incentive compensation levels.  The Long-Term Incentive Program was implemented in fiscal 2010 as a multi-year award with a three-year performance period (fiscal 2011-2013), with additional vesting conditions in fiscal 2014 and 2015.  In fiscal 2012, the Committee determined that stock options granted in June 2012 to the CEO, CFO and COO would have an exercise price 33 1/3% above the closing stock price on the grant date.  In determining to grant options with an exercise price at this premium level, the Committee sought to provide a stronger link with increased shareholder value, as these executives have more significant responsibility for the Company’s long-term strategy as compared to the other NEOs.  The Committee also determined to increase the number of options awarded in recognition of the premium pricing and its determination that the CEO, CFO and COO’s long-term incentive values on the grant date (including recent annual option grants and the annualized fiscal 2010 value of the LTIP at target, discussed below) were considerably below the median value of long-term incentive awards granted to the Peer Group chief executive officers, chief financial officers and chief operating officers.  Additional details are described below under “Details of Compensation Elements – Stock Grants.”

    ·
    Change in Control and Severance Agreements:  In January 2012, the Company entered into change in control severance protection agreements with Messrs. O’Connor and Valiaveedan.  The Committee considers the continued services of these key executives whose skills are not specifically tied to the homebuilding industry to be in the best interests of the Company and its shareholders.  The agreements are designed to reinforce and encourage their continued attention and dedication to their duties of employment without personal distraction or conflict of interest in circumstances which could arise from the occurrence of a change in control of the Company.  These agreements provide benefits following a change in control only if the executive is terminated involuntarily or terminates with Good Reason.  Neither of these agreements provide for excise tax gross-ups. The provisions of such agreements are described below under “Potential Payments Upon Termination Or Change-In-Control Table.”
    20
    ·
    Impact on CEO Total Direct Compensation:  The following graphs compare fiscal 2012 CEO total direct compensation (the sum of base salary, annual bonus/incentive and long-term incentive awards, excluding all other compensation elements) to the most recently published Peer Group median data available to the Committee when finalizing fiscal 2012 CEO compensation.

    I.
    (1)Reflects the most recently published Peer Group Median data available to the Committee when finalizing fiscal 2012 CEO compensation. Note that the annual incentive and long-term incentive compensation levels for two of the eleven peer group CEOs reflected in the Peer Group Median were substantially lower than their prior year levels because these CEOs were no longer serving in such positions during or just after the end of the year for which the data was gathered.  Had these two CEOs been excluded from the Peer Group CEO Median, the Peer Group CEO Median would have been higher and, consequently, the CEO’s Total Direct Compensation would have been further below the Peer Group CEO Median Total Direct Compensation.
    (1)Reflects the most recently published Peer Group Median data available to the Committee when finalizing fiscal 2012 CEO compensation. Note that the annual incentive and long-term incentive compensation levels for two of the eleven peer group CEOs reflected in the Peer Group Median were substantially lower than their prior year levels because these CEOs were no longer serving in such positions during or just after the end of the year for which the data was gathered. Had these two CEOs been excluded from the Peer Group CEO Median, the Peer Group CEO Median would have been higher and, consequently, the CEO’s Total Direct Compensation would have been further below the Peer Group CEO Median Total Direct Compensation.
    21
    2. COMPENSATION PHILOSOPHY AND OBJECTIVES
    The Compensation Committee, in conjunction with the Board of Directors and with senior management, has been instrumental in shaping the Company’s compensation philosophy and objectives because of its responsibilities and oversight of the Company’s various policies and procedures concerning executive compensation.
    The foursix primary objectives that the Committee consideredconsiders in making compensation decisions are discussed below.below, as are our other philosophies and mechanisms for determining compensation. In making compensation relatedcompensation-related decisions, the Committee also considered its role in promoting good corporate governance practices.
     
    Primary Objectives for the Compensation Program
    The Company’s primary objectives for compensating its executives are as follows:
     
     1.To fairly compensate its executives in a manner that is appropriate with respect to their performance, level of responsibilities, abilities and skills;
    2.To offer compensation that guides, motivates, retains and rewards its executives for the achievement of the Company’s financial performance, strategic initiatives and individual goals, including increased long-term shareholder value;goals;
    3.To align the executive’s interests with the interests of the shareholders;
    4.To maintain competitive pay opportunities for its executives so that it retains its talent pool and, at the same time, has the ability to attract new and highly-qualified individuals to join the organization as it grows or in the event of succession or replacement of an executive; and
    4.To ensure suitability of the reward system in a challenging business environment.
     
    5.To safeguard that the reward system is appropriately designed in the context of a challenging business environment; and
    6.To ensure that compensation plans do not incentivize a level of risk that is reasonably likely to have a material adverse effect on the Company.
    Tailored Compensation
    Consistent with these objectives, the Company’s compensation philosophy also takes into consideration the very unique roles played by each of the named executive officersNEOs for whom compensation is reported in the tables below, (“NEOs”) and the Committee seeks to individually tailor their compensation packages to align their pay mix and pay levels with their contributions to, and positions within, the Company. For example:
     
    • Chairman of the Board: The Company’s founder, Mr. Kevork Hovnanian, had served as the Chairman of the Board of Directors since the Company’s inception in 1959 until his death on September 24, 2009. Since Mr. K. Hovnanian owned a significant percentage of the voting power of the Company’s issued and outstanding shares, his compensation package emphasized cash compensation rather than equity awards.
    • CEO: The compensation package of the CEO, Mr. Ara K. Hovnanian, differs from those of the other NEOs due to his unique role and elevated set of responsibilities. Because the CEO makes executive decisions that influence the direction, stability and profitability of the Company, his overall compensation is intended to strongly align with objective financial measures of the Company.
    • CFO: The Committee recognizes that the role of the CFO, Mr. J. Larry Sorsby, similar to the CEO, is important in influencing the direction, stability, and profitability of the Company. Therefore, a significant portion of the CFO’s overall compensation is also aligned with objective financial measures of the Company. Since fiscal 2008, Mr. Sorsby’s role and contributions as CFO have intensified significantly as a result of the downturn in the homebuilding industry and the Company’s focus on debt reduction and other actions taken to proactively access the capital markets and restructure the balance sheet for future profitability.
    • Other NEOs: The Company’s Senior Vice President – Chief Accounting Officer, Mr. Paul W. Buchanan, Senior Vice President – General Counsel, Mr. Peter S. Reinhart, and Vice President – Finance and Treasurer, Mr. David G. Valiaveedan have, as result of their respective positions, less direct influence on the Company’s strategic and operational decisions as compared to the former Chairman of the Board, the CEO and the CFO. Therefore, overall compensation for these NEOs reflects both objective financial measures of the Company and the attainment of personal objectives (as determined by the CFO and the CEO, who may consult with other members of senior management).

    ·CEO, CFO and COO: The compensation package of the CEO, Mr. Ara K. Hovnanian, the CFO, Mr. J. Larry Sorsby, and the COO, Mr. Thomas J. Pellerito, differ from that of the other NEOs due to their unique roles and elevated set of responsibilities. Because the CEO, CFO and COO make executive decisions that influence the direction, stability and profitability of the Company, their overall compensation is intended to strongly align with objective financial measures of the Company.
    ·Other NEOs: The Company’s Vice President — Chief Accounting Officer and Corporate Controller, Mr. Brad G. O’Connor, and Vice President — Finance and Treasurer, Mr. David G. Valiaveedan, have, as result of their respective positions, less direct influence on the Company’s strategic and operational decisions. Therefore, overall compensation levels for these NEOs reflect both objective financial measures of the Company and the attainment of personal objectives (as determined by the Committee, which may consult with the CFO, the CEO and other members of senior management).  

    22
    Variable Incentive Compensation and Discretionary Awards
    The Company’s compensation philosophy emphasizes variable incentive compensation elements (bonus and long-term incentives) that reflect, the value of which reflects the Company’s financial and stock performance. For executives who report to the CEO or CFO, including Messrs. O’Connor and Valiaveedan, the variable compensation elements also include personal performance objectives. For all executive officers, the Committee retains the flexibility to adjust incentive awards downward or to consider discretionary bonus awards. Discretionary awards may be appropriate, for example, to reward progress toward strategic objectives or to reflect strong leadership while addressing industry-wide market conditions or to servein “special circumstances” as a retention bonus for valued executives.described on page 31 under “Discretionary Bonuses.”  
     
    Peer Group Considerations
    As context for setting the compensation levels for the CEO, and CFO and the compensation practices for all other NEOsCOO in fiscal 2009,2012, the Committee considered the compensation levels and practices of its Peer Group companies. The Company’s Peer Group includes the following 11 publicly-traded homebuilding companies: (1) Beazer Homes USA, Inc.; (2) Centex Corporation; (3) D.R. Horton, Inc.; (4)(3) KB Home; (5)(4) Lennar Corporation; (6)(5) M.D.C. Holdings, Inc.; (6) Meritage Homes Corporation; (7) NVR, Inc.; (8) Pulte Homes, Inc.; (9) Ryland Group, Inc.; (10) The Standard Pacific Corp.; and (11) Toll Brothers, Inc. The companies in the Peer Group have not changed since 2003are the same as those used in fiscal 2011 and have beenwere selected by the Committee, in consultation with PM&P and management, because of their comparable business profile. In particular, the Company’s revenue size relative to the companies in the Peer Group wasand the presence of the Peer Group companies in the Company’s markets were considered the most relevant measurefactors for selection of peer companies within the homebuilding industry. The Company and PM&PCommittee will continue to review the appropriateness of the Peer Group composition.  With respect to the compensation levels forFor the other NEOs, the Committee places equal or greater weight on its consideration of internal pay equity, an evaluation of individual performance contributions and other factors described in detail below.

    The Committee relies heavily on Peer Group comparisons for the CEO, CFO and COO.  Because only four of the 11 Peer Group companies report data for a chief operating officer position, the Committee may also review broad-based compensation survey data for the COO.  The Committee periodically reviews the compensation for the other NEOs relative to the Peer Group and broad-based compensation survey data. Becausedata, with consideration of internal pay relationships in years when market benchmarking is not conducted. The Committee does not consider the specific participants in the broad-based compensation structuresurvey data to be a material factor in its review.  The Committee believes that a review of market survey data periodically (but not necessarily every year) is sufficient for each of the NEOs is uniquely tailored to his position, the extent to which such Peer Group benchmarkingthese positions based on their roles and historical compensation levels. The Committee considered broad-based market survey data is considered is described below for each individual NEO.in connection with its fiscal 2012 compensation determinations.
     
    Consideration of Market Conditions Considerations
    In determining overall compensation for all the NEOs, the Committee also takes into account leadership abilities and risk management contributions, which are especially critical during difficult market conditions.
    During fiscal 2009,  In addition, in establishing compensation levels, the Committee takes into consideration competitive market pressures, both within and outside of the homebuilding industry.
    Since late 2006, the homebuilding industry has continued to bebeen impacted by a lack of consumer confidence, increasing home foreclosure rates, large supplies of resale and new home inventories, and more restrictive lending standards for homebuyers. The result has been weakenedhomebuyers, resulting in weak demand for new homes, slower sales, higher than normal cancellation rates, and increased price discounts and other sales incentives to attract homebuyers.
    The heightened importance Beginning in the second quarter of cash flowfiscal 2012, the Company began to see positive operating trends, which continued into the third and liquidity, as well asfourth quarters of fiscal 2012.  See “Executive Summary” for highlights of the Company’s budget cuts and downsizing, were considered byperformance in fiscal 2012.
    During fiscal 2012, the Committee sought to emphasize improving EBITDA without limiting management’s ability to strategically deploy cash, such as for repurchasing debt and making land purchases, in making executive compensation decisions for fiscal 2009.anticipation of the initial stages of recovery in the homebuilding industry.  As a result, the Chairman ofCommittee approved the Board,same bonus metrics for fiscal 2012 as in fiscal 2011, except that the cash balances component was removed.   For fiscal 2012, the CEO and CFO salaries remained the CFO did not receive any salary increases forsame as in fiscal 2009. Their fiscal 2009 annual bonus formulas continued to place a heavier focus on cash flow and liquidity, but were capped at 50%2011.  The salaries of the respective bonus amounts earned by each of them in fiscal 2008. TheCOO, Mr. Thomas Pellerito, Vice President — Chief Accounting Officer and General Counsel received salary adjustments of less than 3% from the prior fiscal yearCorporate Controller, Mr. Brad G. O’Connor, and their fiscal 2009 bonus formulas remained the same as fiscal 2008, except that their payments were capped at 50% of the maximum percentages of base salary they could otherwise achieve under the personal objectives portion of their respective bonus formulas. Following his promotion in August 2008 and a 19% salary increase, the Vice President –— Finance and Treasurer, Mr. David G. Valiaveedan, were increased by 10%, 8.5% and 5.3%, respectively, over fiscal 2011.  The salary increases for Messrs. O’Connor and Valiaveedan resulted in a corresponding increase in the dollar amount of their bonus opportunity for fiscal 2012.  The adjustments for Messrs. Pellerito and Valiaveedan were made to provide better alignment with the compensation of comparable positions in the Peer Group and, for Mr. Valiaveedan, to further recognitionalign him with the median level in the broad-based compensation survey data.  Mr. O’Connor’s base salary was increased as a result of his promotion to Vice President — Chief Accounting Officer and performanceCorporate Controller.
    23

    In setting fiscal 2012 compensation, the Committee determined that stock options granted in his new role, receivedJune 2012 to the CEO, CFO and COO would have an additional 8% salaryexercise price 33 1/3% above the closing stock price on the grant date in connection with an increase in the number of options awarded for 2009the reasons discussed above under “Executive Summary – Compensation Decisions for Fiscal 2012.”

    Say-on-Pay and his overall bonus potential increased from 40%/60%/80% to 60%/80%/100% of base salary at threshold/target/outstanding performance (as defined in his bonus formula), respectively, subject to a cap of 50%Say-on-Frequency Votes

    In light of the maximum percentagevoting results with respect to the frequency of base salary he could otherwise achieve undershareholder votes on executive compensation at the personal objectives portion2011 Annual Meeting of his new bonus formula. In addition, fiscal 2009 bonusesShareholders at which a substantial majority of our shareholders (96.3% of the votes cast by shareholders of Class A Common Stock and Class B Common Stock, voting together) voted for all NEOs were paid entirely“say-on-pay” proposals to occur every three years, the Board of Directors initially decided that the Company would hold, in cash.
    As previously discussed in the fiscal 2007 and fiscal 2008 Compensation Discussion and Analysis and below, each NEO has been offered the opportunity to earn a one-time retention bonus equal to 3% of such NEO’s fiscal year end 2007 base salary if the NEO remains employedaccordance with the Company throughvote of an overwhelming majority, a triennial advisory vote on the endcompensation of the first fiscal year innamed executive officers, which would next take place at the Company’s ROACE (as defined below) returns2014 Annual Meeting of Shareholders.  However, we have voluntarily elected to 20%. Athold our next “say-on-pay” vote at this 2013 Annual Meeting of Shareholders.   We currently expect the endnext advisory vote on the frequency of fiscal 2009,shareholder votes on executive officer compensation to occur at the Company’s ROACE did not meet this threshold. Also, as discussed in the fiscal 2007 and fiscal 2008 Compensation Discussion and Analysis and below, discretionary retention awards were awarded where appropriate.
    2017 Annual Meeting of Shareholders.


    The Committee viewed these difficultBoard of Directors thoughtfully considers the opinions expressed by shareholders through their votes, periodic meetings and other communications, and believes that shareholder engagement leads to enhanced governance practices.  During fiscal 2012, the Company conducted proactive investor outreach programs, including attending 10 investor conferences and meeting one-on-one with more than 250 investors.  Additionally, the Company periodically engages investors to discuss specific matters of importance to shareholders.  For example, in March 2012, the CFO contacted several major institutional shareholders to obtain feedback regarding the Company’s compensation actions as appropriatephilosophy and necessary to ensure alignment of pay and performance, while also taking into consideration competitive market pressures, both within and outside of the homebuilding industry, and the strength of leadership required in this challenging business environment.levels for which he received positive feedback.

    II.3. FISCAL YEAR 20092012 COMPENSATION ELEMENTS AND COMPENSATION MIX
     
    Compensation Elements at a Glance
    There are fourfive main compensation elements that support the Company’s compensation objectives, each of which is discussed in detail below.
     
    1.Base salaries;
    2.Regular and discretionary bonuses;
    3.Stock grants (for example, stock options and restricted stock unit awards); and
    4.Various employee benefits, including specified perquisites.
    1.     Base salaries;
    2.     Annual bonuses;
    3.     Stock grants (for example, stock options and restricted stock unit awards);
    4.     Long-Term Incentive Program (“LTIP”) (described below) (payable in both cash and stock); and
    5.     Other employee benefits, including limited perquisites.
    Compensation Mix
     
    Compensation Mix
    Fixed vs. Variable Compensation.A significant portion of executives’ “Total Direct Compensation” (which includes base salary, annual bonuses, stock grants and stock grants)LTIP awards) opportunity is attributed toconsists of variable compensation – that is, the ultimately realized compensation on an annualized basis is dependent on either individualCompany or Companyindividual performance. Of the elements of Total Direct Compensation, base salary is fixed compensation, while annual bonuses, and stock grants, and LTIP awards are variable compensation. Bonuses for the former Chairman of the Board, the CEO and the CFO were based upon objective formulas tied to financial performance goals that include the Company’s (a) ROACE and (b) net debt reduction. For the other NEOs, bonuses are determined based on both the Company’s ROACE and the achievement of tailored personal objectives. An important part of each NEO’s compensation package also consists of stock options, the ultimate value of which is tied to the Company’s stock performance. These variable elements are intended to align the executives’ performance and interests with Company performance and long-term shareholder value.
    The intent of the Committee is generallyfor fiscal 2012 was to maintain variable compensation opportunity as the mosta significant percentage of Total Direct Compensation opportunity for all NEOs and to maintain its approximate level from year to year. In addition, the Committee intends for Total Direct Compensation and the level of variable compensation realized to align with the median level of the Peer Group in years when the Company performs at median levels compared to the Peer Group. InFrom fiscal 2007 2008 and 2009,through fiscal 2012, the percentage of variable compensation received hasby the Company’s NEOs had declined from historical levels because total bonus amounts ultimately received by the Chairman and the CEONEOs were zero for the CEO for fiscal 2007 and significantly lower than historical amounts for all NEOs from fiscal 2008 and reduced by an additional 50% in2007 through fiscal 2009.2012.  Fiscal 2012 bonus amounts, on average, were approximately 92% lower than the highest award for these NEOs during the last ten years.  In fiscal 2009,2012, the Committee also awarded stock grants to each of the NEOs, with the exception of Mr. K. Hovnanian, as discussed below, at levels significantlyvalues that were lower than historical amounts forlevels even when considering the greater number of options awarded to the CEO, CFO and COO with an exercise price 33 1/3% above the closing stock price on the grant date.  The value of the fiscal 2007 and2012 stock grants were also well below the Peer Group median.
    median long-term incentive values for the CEO, CFO and COO and well below the Peer Group and broad-based compensation survey median for the other NEOs.
     
    24
    Long-Term vs. Short-Term Compensation.An important portion of each NEO’s Total Direct Compensation is long-term compensation, which normally includes stock option and/or restricted stock unit awards and deferred share awards granted in lieu of cash for a portion of total bonus amounts.  In fiscal 2009, due to the reduced amount of the bonuses, deferred share awards were not granted and the total bonus amounts were paid 100% in cash. Short-term compensation consists of base salary and the cash portion of annual bonus amounts. Stock option awards and restricted stock unit awards areLong-term compensation is intended to foster long-term commitment by the executive, employee-shareholder alignment and improved long-term shareholder value.  From fiscal 2009 through fiscal 2012 there were no deferred shares awarded to NEOs due to the reduced amount of the overall bonuses for each NEO as compared to more profitable years, and the bonus amounts were paid 100% in cash.  In fiscal 2010, the Committee also adopted a special LTIP for the named executive officers and other key senior executives of the Company, as discussed below.

    The average long-term compensation amounts (including stock and option grants at their grant date fair value and the LTIP award annualized at target) as a percent of Total Direct Compensation for fiscal years 2008 through 2012 for the CEO and CFO were 48% and 34%, respectively.  The average long-term compensation amount (including stock and option grants at their grant date fair value and the LTIP award annualized at target) as a percent of Total Direct Compensation for fiscal years 2010 through 2012 for the COO (who was promoted to his current position in fiscal 2010) was 36%.  The average long-term compensation amounts as a percent of Total Direct Compensation for fiscal years 2005 through 2009 forMessrs. O’Connor and Valiaveedan are lower than the CEO, CFO and CFO were 56% and 44%, respectively. The Company’s former Chairman ofCOO because, while the Board and founder, Mr. K. Hovnanian, did not typically receive any stock options or restricted stock unit awards as part of his overall compensation as he held a significant equity interest in the Company. The average long-term compensation percentages for Messrs. Buchanan, Reinhart and Valiaveedan for the same period were 19%, 18% and 11%, respectively, reflecting the Committee’s belief that whileCommittee believes it is important for these executives to be compensated in part based on the long-term performance of the Company, they have less direct influence on the long-term financial success of the Company as compared to the CEO, CFO and CFO.COO.
     


    III.4. DETAILS OF COMPENSATION ELEMENTS
     
    Base Salaries
    Base salaries are intended to reward executives for their day-to-day contributions to the Company. The Committee believes that base salaries at or abovewithin the competitive median levelrange are necessary to retain the Company’s executive talent pool, and it determined that the fiscal 20092012 base salaries of the Company’s executive officers were necessary to retain their services.
    Base salaries of all the NEOs are reviewed annually by the Committee and are subject to adjustment based on factors that may include individual performance, change in responsibilities, average salary increases or decreases in the industry, compensation for similar positions involving the Company’s Peer Group or other comparable companiesbroad-based compensation survey data if comparable data waswere unavailable from the Peer Group companies, as well as other factors such as cost of living and internal pay relationships with other executives. The Committee also consults with PM&P in determining the need for salary adjustments.
    • Chairman of the Board and CEO: For fiscal 2008 and 2009, the former Chairman of the Board and the CEO did not receive any adjustments in their existing annual base salaries. This is reflective of the Company’s budget cuts and downsizing due to industry conditions. In addition, based on discussions with PM&P, the Committee has determined that the CEO’s fiscal 2009 base salary is near the median base salary level of other chief executive officers at Peer Group companies.
    • CFO: For fiscal 2009, the CFO did not receive any adjustment in his existing annual base salary. This is reflective of the salary adjustment previously provided in fiscal 2008 and the Company’s budget cuts and downsizing due to industry conditions. While the Committee desires to position base salary for the CFO near the Peer Group median, salaries for Peer Group CFOs have increased considerably more rapidly than at the Company. Based on year-end discussions with PM&P, the committee has determined that the CFO’s fiscal 2009 base salary falls between the Peer Group 25th percentile and median.
    • Other NEOs: For fiscal 2009, Messrs. Buchanan and Reinhart each received a nominal merit increase of 2.5% of their respective base salaries. Neither executive received a salary adjustment in fiscal 2008. In making these determinations, the Committee considered the individual performance of each executive, the merit budget for employees of the Company generally, and the cost of living. Mr. Valiaveedan received a 19% base salary increase in August of fiscal 2008 upon promotion to his current position followed by an additional base salary adjustment of 8% in fiscal 2009 in further recognition of his promotion and his individual performance in his current position.
    Bonuses
     
    ·CEO: For fiscal 2007 through 2012, the CEO did not receive any adjustments in his existing annual base salary. This reflects the Company’s budget cuts and downsizing due to industry conditions. Based on discussions with PM&P and peer group market data gathered by management, the Committee determined that the CEO’s fiscal 2012 base salary was near the median base salary level of other chief executive officers at Peer Group companies.
    ·CFO: For fiscal 2011 and 2012, the CFO did not receive any adjustments in his annual base salary.  The Committee determined that the CFO’s fiscal 2012 base salary was near the median base salary level of other chief financial officers at Peer Group companies.
    ·COO: For fiscal 2012, the COO received a 10% increase in his annual base salary to move him closer to the Peer Group median. Notwithstanding that increase, the Committee determined that Mr. Pellerito’s base salary remains below the median base salary level of other chief operating officers at Peer Group companies. 
    ·Other NEOs: For fiscal 2012, Mr. O’Connor received an 8.5% salary increase as a result of his promotion to Vice President – Chief Accounting Officer and Corporate Controller and Mr. Valiaveedan received a 5.3% salary increase to move him closer to the Peer Group median and to further align him with the median level in the broad-based compensation survey data.
    25
    Annual Bonuses
    Regular Bonuses
    The Company provides each of the NEOs with an opportunity to earn annual bonuses, the cash portions of which are intended to reward executives for the attainment of short-term financial objectives and, in the case of certainsome NEOs, individual performance objectives. Fiscal 20092012 bonus awards were made pursuant to the Company’s amended and restated Hovnanian Enterprises, Inc. Senior Executive Short-Term Incentive Plan (the “Short-Term Incentive Plan”) and the 20082012 Hovnanian Enterprises, Inc. Stock Incentive Plan (the “Stock Incentive(“2012 Plan”), each of which is a shareholder approved plan, although ultimately no stockstock-based awards were paid as part of the fiscal 20092012 bonus awards under the Short-Term Incentive Plan or the Stock Incentive Plan.
    either plan.
    Bonus opportunities are intended to be competitive with industry-wide practices in order to retain and attract executive talent.  With the exception of the former Chairman of the Board, who had significant equity ownership, normally 30% ofFor fiscal 2012, as in fiscal years 2009 through 2011, the earned bonuses for the NEOs is paid in the form of deferred shares (with the remaining 70% paid in cash) with vesting restrictions in order to provide alignment with shareholders and encourage long-term retention. However, due to the reduced amount of the bonuses for fiscal 2009, 100% of the earned bonuses were paid 100% in cash. In prior years, the number of shares of the Company’s common stock paid under a deferred share award was determined by dividing the dollar amount of the deferred share portion by the lesser of (1) the closing price of the Class A Common Stock on the last day of the

    The regular annual bonus opportunities in fiscal year during which the service giving rise to the deferred share award was performed or (2) the average of the closing prices of a share of Class A Common Stock on the last day of2012 for each of the five previous fiscal quarters ending onNEOs are shown in the last day of
    following table.  The performance goals for each NEO are discussed below.

    CEOCFOCOO
    Vice President — Chief
    Accounting Officer and Corporate Controller
    Vice President —
    Finance and Treasurer
    Return on Average Common Equity ("ROACE") (1)% of Pre-tax Income based on ROACE$ Bonus based on ROACEN/A$ Bonus based on ROACE$ Bonus based on ROACE
    EBITDA Improvement$ Bonus based on EBITDA Improvement$ Bonus based on EBITDA Improvement
    $ Bonus based on
    EBITDA Improvement
    		N/AN/A
    Positive Pre-tax Profit in Both the Third and Fourth Fiscal Quarters (1)N/AN/A$ Bonus based on achievement of Positive Pre-tax Profit in Both the Third and Fourth Fiscal QuartersN/AN/A
    Tailored Personal ObjectivesN/AN/AN/A$ Bonus based on achievement of specific goals$ Bonus based on achievement of specific goals
    FormulaTotal award is greater of ROACE or EBITDA improvement factors, with maximum of $949,500Total award is greater of ROACE or EBITDA improvement factors, with maximum of $350,000Total award is sum of  EBITDA improvement and Positive Pre-tax Profit factors, with a maximum of $350,000Total award is sum of ROACE and personal objectives factors, with maximum of 30% of base salaryTotal award is sum of ROACE and personal objectives factors, with maximum of 25% of base salary

    (1)  Based on fiscal 2012 results, payments under the fiscal year during whichROACE and Positive Pre-tax Profit in Both the service giving rise to the deferred shareThird and Fourth Fiscal Quarters award was performed, and adding an incremental 20% more shares to reflect the shift from a cash bonus award to a deferred share award with four-year vesting restrictions.components were zero.

    Historically, annual bonuses for the former Chairman of the Board, the CEO and the CFO werehave been linked solely to a measure of the Company’s return on average equity (ROACE, as the current example), a common industry practice. For fiscal 2008,2011, for the CEO and CFO, the bonus formulas for these NEOs were reoriented by including aformula component related to net debt reduction component. For fiscal 2009, the net debt reduction component was changed to a net debt amount component. In light of prevailing market conditions,calculation based on earnings before interest, taxes, depreciation and amortization (“EBITDA”) improvement and cash balances.  During fiscal 2012, the Committee sought to emphasize improving EBITDA without limiting management’s ability to strategically deploy cash, such as for repurchasing debt and making land purchases, in consultation with PM&P, determinedanticipation of the initial stages of recovery in the homebuilding industry.  As a result, the Committee approved the same bonus metrics for fiscal 2012 as in fiscal 2011, except that continuing this additionalthe cash balances component was removed. The COO’s fiscal 2012 bonus measureopportunity was based in part on the same EBTIDA improvement goals and was also based on specified targetsthe Company achieving positive pre-tax profit in both the third and fourth quarters of fiscal 2012 in order to provide an additional incentive to achieve pre-tax profitability given his oversight of homebuilding operations.  The Committee believes that the goals established for fiscal 2012, which are described below, supported the financial objectives of the Company and were set at levels that were challenging, but attainable.  Furthermore, the maximum bonus levels for the reductionCEO and CFO were capped at no more than the actual 2011 bonus amounts earned.  The COO’s maximum bonus level was capped at $350,000, which included an additional $100,000 bonus opportunity compared to fiscal 2011 related to the pre-tax profit component of the Company’s net debt amount provides clarity and was well-aligned with the Company’s focus on cash flow and liquidity. his bonus formula.
    26

    Specifically, the bonus formulas for the former Chairman of the Board, the CEO and the CFO for fiscal 20092012 provided that bonuses would be equal to the greater of (a) the executive’s bonus formula based on the Company’s ROACE and (b) the new bonus formula based solely on the Company’s net debt amount, with the final bonus not to exceed 50% of the fiscal 2008 bonus.EBITDA improvement. “ROACE” is defined as “net income” (as described below) divided by “average common equity” (stockholder’s(stockholders’ equity less preferred stock at the beginning of the fiscal year and at the end of each fiscal quarter during the year divided by five). “Net debt”“EBITDA improvement” is defined as the “total debt” (balancesdifference between the EBITDA reflected in the Company’s fiscal 2012 financial statements, excluding gains or losses on extinguishment of bank debt, senior secured notes, senior notes,inventory impairment losses and senior subordinated notes) netland option write-offs, and the Company’s EBITDA reflected in its fiscal 2011 financial statements.  The Committee used this EBITDA improvement measure because it believed it was appropriate to exclude from the bonus formula items outside management’s control (e.g., impairments driven by a declining market) and it did not want to discourage management from making capital structure improvements (e.g., debt extinguishments, which could result in gains or losses on the extinguishment of any unrestricted cashdebt).  However, if fiscal 2012 EBITDA had not been adjusted, the bonuses earned by the CEO, CFO and cash equivalents asCOO under the EBITDA improvement component of the last dayannual bonus would still have been the same.  While the EBITDA component of the bonus formula for the CEO, CFO and COO in prior years compared adjusted EBITDA to EBITDA in the preceding year, for fiscal 2013, the EBITDA component of the bonus formulas for these NEOs is structured so that it will require improvement in adjusted EBITDA in fiscal 2013 over fiscal 2012 adjusted EBITDA in order for the CEO, CFO and COO to be eligible for the same or increased bonus levels under this component of the fiscal 2013 bonus formula compared to their earned fiscal 2012 bonuses.  Specifically, the Committee determined that the fiscal 2013 EBITDA component of the bonus formulas for the CEO, CFO and COO will be based on achieving targeted levels of the Company’s adjusted EBITDA for fiscal 2013, which levels have been set in reference to fiscal 2012 adjusted EBITDA.  The fiscal 2013 bonus formulas for the NEOs are described in more detail below under “Actions for Fiscal 2013.”
    For fiscal 2012, the COO’s bonus formula was based in part on EBITDA improvement.  Mr. Pellerito also had the opportunity to earn an additional $100,000 if the Company achieved positive Pre-tax Profit in both the third and fourth quarters of fiscal 2009. Net2012.  For this purpose, “Pre-tax Profit” is defined as earnings (loss) before income taxes as reflected on the Company’s consolidated financial statements, excluding gains or losses on extinguishment of debt, assumes “debt extinguishment accounting”inventory impairment losses and adds back any cash investments in new joint ventures.land option write-offs.

    For fiscal 2009,2012, the bonus formulas for Messrs. BuchananO’Connor and ReinhartValiaveedan remained the same as their fiscal 2008 formulas, except that their total bonus payments were capped at 50% of the maximum percentages of base salary they could otherwise achieve under the personal objectives portion of their respective bonus2011 formulas.  For fiscal 2009, in connection with his promotion in August 2008, Mr. Valiaveedan’s overall bonus formula increased from 40%/60%/80% to 60%/80%/100% of base salary at threshold/target/outstanding performance (as defined in his bonus formula), respectively, subject to a cap of 50% of the maximum percentage of base salary he could otherwise achieve under the personal objectives portion of his new bonus formula. Messrs. Buchanan, ReinhartO’Connor and Valiaveedan have, as result of their respective positions, less direct influence on the Company’s strategic and operational decisions compared to the former Chairman of the Board, CEO, CFO and CFOCOO, and, therefore, their bonus formulas weredo not revised to include a net debt amountan EBITDA improvement component. Specifically, these NEOs’ fiscal 20092012 bonus formulas provide,provided, as in fiscal 2008,2011, that bonuses would be based on both (a) a formula based on the Company’s ROACE and (b) the attainment of tailored personal objectives.

    Fiscal year 20092012 bonus formulas for each of the NEOs are further tailored as set forth below and are assessed annually. For all of the ROACE bonus formulas discussed below for each of the NEOs, net income“net income” used in calculating ROACE is after taxes and preferred dividends and, at the Committee’s discretion, excludes land charges.
    • Chairman of the Board: The former Chairman of the Board’s bonus formula for fiscal 2009 provided for a bonus award equal to the greater of (a) a fixed dollar amount based on the Company’s ROACE and (b) a fixed dollar amount based on the Company’s net debt amount, with his final bonus from both formulas not to exceed 50% of his fiscal 2008 bonus.
    THE GREATER OF:
     
    (a) ROACE Calculation Method*
    ROACE percentageBonus
            0.0%$0
    1.0% $150,000
    5.0%$444,700
    10.0%$444,700
    15.0%$444,700
    20.0%$444,700
    25.0%$444,700

    *The bonus is interpolated between the points shown in the table. The $444,700 cap is 50% of the fiscal 2008 bonus. The bonus is also subject to the maximum payment under the Short-Term Incentive Plan.


    AND
      
    (b) Net Debt Amount Calculation Method*
    Greater
         than               
    Net Debt (millions) $1,900 $1,900 $1,850 $1,800
    Bonus (thousands)$0$345.0$385.0$444.7

    *The bonus will not be extrapolated above $444,700 if net debt is less than $1,800,000. The bonus will be interpolated between levels shown in the table. The $444,700 cap is 50% of the fiscal 2008 bonus.
    Based on the bonus formula above, Mr. K. Hovnanian earned a cash bonus of $444,700 forSince fiscal 2009 which was entirely attributed to2007, the net debt amount calculation method of his bonus formula.
    • CEO: The CEO’s bonus formula for fiscal 2009 provided for a bonus award equal to the greater of (a) a fixed percentage of pre-tax income based on the Company’s ROACE and (b) a fixed dollar amount based on the Company’s net debt amount, with his final bonus from both formulas not to exceed 50% of his fiscal 2008 bonus. The methodology underlying the ROACE portion of the formula was historically designed to yield an annual bonus that would result in Total Direct Compensation opportunity that falls within the median range of the Peer Group for comparable financial performance.
    THE GREATER OF:
     
    (a) ROACE Calculation Method*
    ROACE percentage  % Pre-tax Income  
            0.0%0% 
    5.0%1.00%
    10.0%1.25%
    15.0%1.50%
    20.0%2.00%

    *The bonus is interpolated between the points shown in the table, and may be extrapolated beyond the maximum ROACE percentage shown at a rate of 0.10% of pre-tax income per percentage point increase in ROACE, which is the rate applied between the last two tiers of the above chart, but is subject to a maximum bonus of $699,500, which is 50% of the fiscal 2008 bonus before the 20% premium on the deferred share portion (since the 2009 bonus will be paid entirely in cash) and also subject to the maximum bonus payable under the Short-Term Incentive Plan.

    AND
     
    (b) Net Debt Amount Calculation Method*
    Greater
         than               
    Net Debt (millions) $1,900 $1,900$1,850 $1,800
    Bonus (thousands)$0$530.0 $600.0$699.5

    *The bonus will not be extrapolated above $699,500 if net debt is less than $1,800,000. The bonus will be interpolated between levels shown in the table. Since the 2009 bonus will be paid entirely in cash, the $699,500 cap is 50% of the fiscal 2008 bonus before the 20% premium on the deferred share portion.
    Based on the bonus formula above, Mr. A. Hovnanian earned a cash bonus of $699,500 which was entirely attributed to the net debt amount calculation method of his bonus formula. For the reason discussed above, this bonus was paid 100% in cash.
    • CFO: Like the former Chairman of the Board’s formula, the CFO’s bonus formula provided for a bonus amount equal to the greater of (a) a fixed dollar amount based on the Company’s ROACE and (b) a fixed dollar amount based on the Company’s net debt amount, with his final bonus not to exceed 50% of the fiscal 2008 bonus. The ROACE portion of the formula was historically designed to yield an annual bonus that would result in Total Direct Compensation opportunity that falls within the median range of the Peer Group for comparable financial performance.


    THE GREATER OF:
     
    (a) ROACE Calculation Method*
    ROACE percentageBonus
            0.0%$0
    5.0% $254,800
    10.0%$254,800
    15.0%$254,800
    20.0%$254,800
    25.0%$254,800

    *The bonus is interpolated between the points shown in the table. The $254,800 cap is 50% of the fiscal 2008 bonus before the 20% premium on the deferred share portion (since the 2009 bonus will be paid entirely in cash). The bonus is also subject to the maximum payment under the Short-Term Incentive Plan.

    AND
     
    (b) Net Debt Amount Calculation Method*
    Greater
         than               
    Net Debt (millions) $1,900 $1,900$1,850$1,800
    Bonus (thousands)$0 $190.0 $215.0 $254.8

    *The bonus will not be extrapolated above $254,800 if net debt is less than $1,800,000. The bonus will be interpolated between levels shown in the table. Since the 2009 bonus will be paid entirely in cash, the $254,800 cap is 50% of the fiscal 2008 bonus before the 20% premium on the deferred share portion.
    Based on the bonus formula above, Mr. Sorsby earned a cash bonus of $254,800 which was entirely attributed to the net debt amount calculation method of his bonus formula. For the reason discussed above, this bonus was paid 100% in cash.
    • Other NEOs: Fiscal 2009 incentive opportunities for Messrs. Buchanan, Reinhart and Valiaveedan were based on a combination of Company performance and individual performance factors that were within each of these executives’ control and that would have a positive impact on the Company. Therefore, the bonus program for these NEOs targets the achievement of both (a) ROACE financial performance objectives for the Company and (b) personal objectives, and, for fiscal 2009, is capped at 50% of the maximum percentages of base salary they could otherwise achieve under the personal objectives portion of their respective bonus formulas.
    BOTH
     
    (a) Calculation Method – for Achievement of Financial Performance Measure*
    ROACE PercentagePaul BuchananPeter ReinhartDavid Valiaveedan
    0.0%     $0     $0     $0
    5.0% 10% of base salary 10% of base salary 15% of base salary
    10.0%20% of base salary 20% of base salary 30% of base salary
    15.0%40% of base salary30% of base salary40% of base salary
    20.0%60% of base salary40% of base salary50% of base salary
    25.0%90% of base salary80% of base salary 

    *The bonuses are interpolated between the points shown in the table. The total bonuses payable under both components are capped at 50% of the maximum percentages of base salary these NEOs could otherwise achieve under the personal objectives portion of their respective bonus formulas and are subject to the maximum bonus payable under the Short-Term Incentive Plan and Stock Incentive Plan, as applicable.


    AND
    (b) Calculation Method – for Meeting Personal Objectives Measure*
    GoalsPaul BuchananPeter ReinhartDavid Valiaveedan
    ThresholdUp to 20% of base salaryUp to 20% of base salaryUp to 30% of base salary
    TargetUp to 40% of base salaryUp to 30% of base salaryUp to 40% of base salary
    OutstandingUp to 60% of base salaryUp to 40% of base salaryUp to 50% of base salary

    *“Threshold,” “target,” and “outstanding” levels are determined by the CFO and the CEO, who may consult with other members of senior management, and are used for internal evaluation purposes only. As stated above, the total bonuses payable under both components are capped at 50% of the maximum percentages of base salary these NEOs could otherwise achieve under the personal objectives portion of their respective bonus formulas and are subject to the maximum bonus payable under the Short-Term Incentive Plan and Stock Incentive Plan, as applicable.
    Mr. Buchanan’s fiscal 2009 personal objectives included management of special projects and the transition from Ernst & Young LLP to Deloitte & Touche LLP for audit of the Company’s financial statements and Ernst & Young LLP to JH Cohn for the audit of the Company’s 401(k) plan, and absorbing management responsibilities of the vacant Vice President of Accounting Processes position. Mr. Reinhart’s fiscal 2009 personal objectives included completion of the mortgage collateralization project, managing the grass roots efforts of Hovnanian Associates in federal tax law legislation and negotiating resolution of storm water issues. Mr. Valiaveedan’s fiscal 2009 personal objectives included developing and executing the capital structure strategy and management of existing joint ventures and structured lot options.
    Based on the bonus formulas above and the Committee’s determinations regarding each executive’s personal objectives, none of these NEOs earned bonuses related to the ROACE calculation method for the fiscal year, but each did earn a cash bonus for meeting his fiscal 2009 personal objectives in full (the “outstanding” category); however, since the outstanding payouts for meeting personal objectives would exceed the cap described above, the bonuses were reduced by 50% to comply with the cap.
    The NEOs have also been offered the opportunity to earn a one-time retention bonus equal to 3% of such NEO’s fiscal year end 2007 base salary if the NEO remains employed with the Company through the end of the first fiscal year in which the Company’s ROACE returns to 20%. At the end of fiscal 2009,2012, the Company’s ROACE did not yet meet this threshold.threshold, so there were no resulting retention bonuses earned for this year.

    The following description provides detail as to the determination of each NEO’s annual bonus. Due to the reduced amount of the bonuses as compared to more profitable years, all bonuses were paid in 100% in cash.  In addition, for fiscal 2012, each NEO’s bonus was subject to a cap, which the Committee has increased for fiscal 2013 bonuses and intends to consider removing or further increasing in future fiscal years as the Company’s financial results improve as they did in fiscal 2012.  See “Actions for Fiscal 2013.”

    ·CEO: The CEO’s bonus formula for fiscal 2012 provided for a bonus award equal to the greater of (a) a fixed percentage of pre-tax income based on the Company’s ROACE and (b) a fixed dollar amount based on the Company’s EBITDA improvement, with his final bonus not to exceed $949,500, the amount of his annual bonus for fiscal 2011. The methodology underlying the ROACE portion of the formula was historically designed to yield an annual bonus that would result in a Total Direct Compensation opportunity that falls within the median range of the Peer Group for comparable financial performance as well as supporting the financial objectives of the Company.  Prior to fiscal 2009, there was no imposed cap on the CEO’s bonus.  The Committee intends to consider removing or increasing the cap as the Company’s financial results improve.
     
    27
    FOR THE CEO, THE BONUS FORMULA WAS THE GREATER OF:
    (a) ROACE Calculation Method*
     ROACE percentage% Pre-tax Income
    0.0%0.00%
    5.0%1.00%
    10.0%1.25%
    15.0%1.50%
    20.0%2.00%

     *The bonus is interpolated on a linear basis between the points shown in the table, and may be extrapolated beyond the maximum ROACE percentage shown at a rate of 0.10% of pre-tax income per percentage point increase in ROACE, which is the rate applied between the last two tiers of the above chart, but was capped at $949,500 and was also subject to the maximum bonus payable under the Short-Term Incentive Plan.

    AND
    (b) EBITDA Improvement Calculation Method*
    EBITDA Improvement (millions) $0.0  $37.5  $75.0 
    Bonus (thousands) $0.0  $474.8  $949.5 
     *The bonus is interpolated on a linear basis between the points shown in the table. The bonus was capped at $949,500, and was also subject to the maximum payout under the Short-Term Incentive Plan.
    Based on the bonus formula above, because there was no payment under the ROACE component and EBITDA Improvement was $213.8 million, which significantly exceeded the maximum performance level, Mr. Hovnanian earned a cash bonus equal to the cap of $949,500, which was entirely attributed to the EBITDA Improvement Calculation Method of his bonus formula.  
    ·
    CFO: The CFO’s bonus formula for fiscal 2012 provided for a bonus amount equal to the greater of (a) a fixed dollar amount based on the Company’s ROACE and (b) a fixed dollar amount based on the Company’s EBITDA improvement, with his final bonus not to exceed $350,000, the amount of the annual bonus for fiscal 2011. The ROACE portion of the formula was historically designed to yield an annual bonus that would result in a Total Direct Compensation opportunity that falls within the median range of the Peer Group for comparable financial performance.  Prior to fiscal 2009, there was no imposed cap on the CFO’s bonus. The Committee intends to consider removing or increasing the cap as the Company’s financial results improve.  

    28
    FOR THE CFO, THE BONUS FORMULA WAS THE GREATER OF:
    (a) ROACE Calculation Method*
    ROACE percentage  Bonus (thousands)
    0.0%   $    0.0
    4.7%
    5.0%
     10.0%
     15.0%
     20.0%
     25.0%
    		  $350.0
    *The bonus is interpolated on a linear basis between the first two percentage points shown in the table, but was capped at $350,000 and was also subject to the maximum payment under the Short-Term Incentive Plan.
    AND
    (b) EBITDA Improvement Calculation Method*
    EBITDA Improvement (millions) $0.0  $37.5  $75.0 
    Bonus (thousands) $0.0  $175.0  $350.0 
     * 
    		The bonus is interpolated on a linear basis between the points shown in the table. The bonus was capped at $350,000, and was also subject to the maximum payout under the Short-Term Incentive Plan.
    Based on the bonus formula and the ROACE and EBITDA Improvement results described above, Mr. Sorsby earned a cash bonus equal to the cap of $350,000, which was entirely attributed to the EBITDA Improvement Calculation Method of his bonus formula.
    ·COO: The COO’s bonus formula for fiscal 2012 provided for a bonus amount equal to a fixed dollar amount based on the Company’s EBITDA improvement, with his EBITDA improvement bonus not to exceed $250,000, the amount of the annual bonus for fiscal 2011.  Mr. Pellerito also had the opportunity to earn an additional $100,000 bonus if the Company achieved positive Pre-tax Profit (as defined above) in both the third and fourth quarters of fiscal 2012.  The Committee intends to consider removing or increasing the COO’s total bonus cap of $350,000 as the Company’s financial results improve.

    FOR THE COO, THE BONUS FORMULA WAS BOTH:
    (a) EBITDA Improvement Calculation Method*
    EBITDA Improvement (millions) $0.0  $37.5  $75.0 
    Bonus (thousands) $0.0  $125.0  $250.0 
    *The bonus is interpolated on a linear basis between the points shown in the table.  The EBITDA improvement bonus was capped at $250,000 and was also subject to the maximum payout under the Short-Term Incentive Plan.
    AND
    (b) Pre-tax Profit in Third and Fourth Fiscal Quarters*
    Pre-tax ProfitGreater than zero in both third and fourth quarters
    Bonus (thousands) $100.0

    *The Pre-tax Profit bonus was capped at $100,000 and was also subject to the maximum payout under the Short-Term Incentive Plan.
    29
    Based on the bonus formula and the EBITDA Improvement results described above and the fact that the Company did not achieve positive Pre-tax Profit (as defined above) in both the third and fourth quarters of fiscal 2012, Mr. Pellerito earned a cash bonus equal solely to the EBITDA improvement bonus cap of $250,000.  

    ·Other NEOs: Fiscal 2012 incentive opportunities for Messrs. O’Connor and Valiaveedan were based on a combination of Company performance and individual performance factors that were within each of these executives’ control and that would have a positive impact on the Company. Therefore, the bonus program for these NEOs targeted the achievement of both (a) ROACE financial performance objectives for the Company and (b) personal objectives, and, for fiscal 2012, the total bonuses payable under both components were capped at 50% of the maximum percentages of base salary they could otherwise achieve under the personal objectives portion of their respective bonus formulas (the caps were 30% and 25% of base salary, respectively).  The Committee intends to consider removing or increasing the caps as the Company’s financial results improve.
    FOR OTHER NEOs, THE BONUS FORMULA WAS BOTH:
    (a) Calculation Method – for Achievement of Financial Performance Measure*
    ROACE Percentage Brad O’Connor  David Valiaveedan 
    0.0%  $0   $0 
    5.0% 10% of base salary  15% of base salary 
    10.0% 20% of base salary  30% of base salary 
    15.0% 40% of base salary  40% of base salary 
    20.0% 60% of base salary  50% of base salary 
     *
    The bonuses are interpolated on a linear basis between the points shown in the table. The total bonuses payable under both components were capped at 50% of the maximum percentages of base salary these NEOs could otherwise achieve under the personal objectives portion of their respective bonus formulas (the caps were 30% and 25% of base salary, respectively) and were subject to the maximum bonus payable under the Short-Term Incentive Plan.
    AND
    (b) Calculation Method – for Meeting Personal Objectives Measure*

    GoalsBrad O’ConnorDavid Valiaveedan
    ThresholdUp to 20% of base salaryUp to 30% of base salary
    TargetUp to 40% of base salaryUp to 40% of base salary
    OutstandingUp to 60% of base salaryUp to 50% of base salary
     *
     “Threshold,” “target,” and “outstanding” levels are determined by the CFO and the CEO, who may consult with other members of senior management, and are used for internal evaluation purposes only. As stated above, the total bonuses payable under both components were capped at 50% of the maximum percentages of base salary these NEOs could otherwise achieve under the personal objectives portion of their respective bonus formulas (the caps were 30% and 25% of base salary, respectively) and were subject to the maximum bonus payable under the Short-Term Incentive Plan.
     Mr. O’Connor’s fiscal 2012 personal objectives included implementing controls, either systemic or manual, for the segregation of assets among the groups of entities securing the Company’s secured bonds; providing support to operating group management related to centralizing accounting functions at the operating group level and exploring the centralization of functions at headquarters (e.g., vendor maintenance); ensuring the timely filing of all SEC-required documents; and overseeing the adoption of the more extensive second year SEC-mandated requirements for XBRL filings.  Mr. O'Connor successfully completed these objectives by ensuring timely compliance with SEC requirements for XBRL filings, as well as the efficiency and accuracy of new internal reporting tools.  He also led the team of Senior Accounting and Finance Managers to identify and implement accounting process centralization at the operating group and headquarters levels and led a project team that implemented system improvements relating to the segregation of assets for the Company’s secured bonds.
    30

    Mr. Valiaveedan’s fiscal 2012 personal objectives included developing and executing the Company’s capital structure strategy, negotiating joint venture and land banking agreements, preparing Company projections and managing existing joint ventures.  During fiscal 2012, Mr. Valiaveedan successfully negotiated and closed a land banking arrangement with GSO Capital Partners, LP and the buyout of a joint venture partner.  In addition, he played an instrumental role in the development and execution of the Company’s capital markets strategy, including several debt refinancing transactions and equity and equity-linked transactions.  These significant transactions raised capital, extended debt maturities and reduced the Company’s interest expense.
    Based on the bonus formulas above and the Committee’s determinations regarding each executive’s personal objectives, neither of these NEOs earned bonuses related to the ROACE Calculation Method for fiscal 2012, but each earned a cash bonus for meeting his respective fiscal 2012 personal objectives in full (the “outstanding” category).  Since, however, the outstanding payouts for meeting personal objectives would exceed the cap described above, the bonuses were reduced by 50% to comply with the cap, resulting in payments of $93,000 and $72,500 for Mr. O’Connor and Mr. Valiaveedan, respectively.

    Discretionary Bonuses
    The Committee has the authority to make discretionary bonus awards, which it considers under special circumstances, including exceptional contributions not reflected in the regular bonus measures, new hire sign-on bonuses and retention rewards.
    As discussed in the fiscal 2007 Compensation Discussion and Analysis, the Committee believes that the following discretionary bonus awards and other benefits discussed under “Other Employee Benefits” below were necessary to reward the executives discussed below for their individual performance during difficult market conditions and to retain their services for future fiscal years. The Committee recognized that the CFO’s leadership and supervision was critical to the formulation and implementation of the Company’s revised economic strategies and organizational modifications intended to minimize the impact of the Company’s reduction in homebuilding and mortgage sales. Furthermore, the CFO and the Vice President – Finance and Treasurer have made significant contributions to improve the Company’s long-term financial health by proactively accessing the capital markets, and restructuring the balance sheet. The Chief Accounting Officer and the General Counsel also provided strong leadership and supervision during this period by reducing the overall pecuniary and legal impact of the Company’s reduction in homebuilding and mortgage sales.
    • CFO: In December 2007, the Committee approved a discretionary cash retention bonus of $150,000 for the CFO that vested and became payable 50% in July 2008 and 50% in January 2009, subject to his continued employment with the Company.
    • Other NEOs: In December 2007, the Committee also approved discretionary cash retention  Discretionary bonuses of $100,000 for$50,000 were granted to each of Messrs. BuchananO’Connor and ReinhartValiaveedan for their performance during fiscal 2012.  These awards recognized their significant contributions involving capital raising/restructuring activities as well as their leadership and $70,000 for Mr. Valiaveedan that vested and became payable 50%assistance in July 2008 and 50%generating positive operating trends in January 2009, subject to their continued employment with the Company.
    latter half of fiscal 2012.


    Stock Grants
    The Committee may make grants of stock options, stock appreciation rights, restricted stock and restricted stock units (“RSUs”), unrestricted shares of stock, or stock-based awards settled in cash pursuant to the Stock Incentive2012 Plan. In fiscal 2009,2012, the Committee awarded stock options to each of the NEOs, subjectNEOs.  Messrs. O’Connor and Valiaveedan were eligible to an electionelect to receive restrictedRSUs in lieu of stock units (“RSUs”) instead for some of the NEOs.options, but neither made such an election.    No other stock-based awards were made to NEOs in fiscal 2009.
    2012.
    Stock options are intended to establish a strong commitment to maintain employment with the Company and focus on creating long-term shareholder value. In addition, stock options are selected over other types of stock-based awards because their design inherently rewards executives only if the stock price increases, which provides a balance with cash incentives and the more retention-oriented restricted stockRSU grants.
    Because the ultimate value received by stock option and RSU holders is directly tied to increases in the Company’s stock price, stock options and RSUs also serve to link the interests of management and shareholders and to motivate executive officers to make decisions that will increase the long-term total return to shareholders. Additionally, grants under the Stock Incentive2012 Plan include vesting and termination provisions that the Committee believes will encourage stock option and RSU holders to remain long-term employees of the Company.
    The Committee ultimately approves the size of the grants taking into account the recommendations by the CEO (other than for his own grant) and other criteria as determined by the Committee.  The awardsCommittee generally targets a specific number of options rather than a specific option value.  This philosophy directly aligns option grant values with shareholder value since option values are intended to result in Total Direct Compensation opportunitygenerally higher when the stock price is increasing and lower when the stock price is decreasing.  Consequently, despite the fact that falls within the median rangestock price has remained significantly lower than historical levels, the number of each NEO’s option grants has generally remained relatively consistent, with the exception of the Peer Groupoption grants for comparable performance.the CEO, CFO and COO in fiscal 2012 which had an exercise price 33 1/3% above the closing stock price on the grant date. The Committee’s determination and rationale for the fiscal 20092012 grants is described below.
    The Committee will continue to determine the appropriate mix of options and other award types based on the objectives of the compensation program, the Company’s business needs, the potential dilution impact and the pool of shares remaining available for grant under the Company’s shareholder-approved incentive plans.
    Stock options and RSUs generally vest in four equal annual installments, commencing on the second anniversary date of the grant. Ingrant, providing a five-year period before becoming fully vested.
    31

    During the first quarter of fiscal 2007,2012, the Committee also approved, with respect to all future stock options and all prior non-qualified stock options, the extensionconducted its annual review of the post-terminationCompany’s and NEO’s performance during fiscal 2011.  The Committee also periodically considers emerging trends in incentive plan design and “best practices” for aligning executive pay and performance.  Following its review, the Committee requested, and the CEO and CFO agreed, to apply specific performance conditions to the stock option and RSU awards previously granted during fiscal 2011 (when the full year performance results were not yet known).  The performance conditions require that, as a condition of employment (or service,vesting, the Company’s Adjusted EBITDA must exceed “fiscal 2011 actual EBITDA” for non-employee directors) exercise period for up to 12 months (or until the normal option termination date, if sooner)two consecutive fiscal years, in the eventcase of “retirement.”options, during the option term and, in the case of RSUs, prior to the tenth anniversary of the grant date.  Regardless of when the performance criteria are met, vesting will not occur sooner than 25% per year beginning on the second anniversary of the grant date.  For this purpose, “retirement” generally means termination“fiscal 2011 actual EBITDA” is the amount from our consolidated financial statements for the year ended October 31, 2011.  Adjusted EBITDA will be based on EBITDA from the consolidated financial statements for the applicable fiscal year-end, excluding inventory impairment losses and land option write-offs and gains or losses on extinguishment of employment (or, for non-employee directors, termination as a memberdebt.  These conditions reflect the Company’s heightened focus on cash flow and liquidity.  At the end of fiscal 2012, the Board of Directors) on or after age 60, or on or after age 58 with at least 15 years of credited service with the Company. The Committee determined that such an extension was appropriate based on the cyclical natureCompany’s Adjusted EBITDA exceeded fiscal 2011 actual EBITDA and that the performance criteria of the homebuilding industry.“two consecutive fiscal years” had not yet been met.
     
    Fiscal 20092012 Stock Option Awards
     



    ·CEO, CFO and COO.  The CEO, CFO and COO were granted 600,000, 120,000 and 80,000 stock options, respectively.  These grants represented a higher award level than fiscal 2011, in recognition that these options have a premium exercise price 33 1/3% above the closing stock price on the grant date.  In contrast, the 2011 option grants for these NEOs had an exercise price set at the fair market value as of the grant date. In determining to grant options with an exercise price at this premium level, the Committee sought to provide a stronger link with increased shareholder value, as these executives have more significant responsibility for the Company’s long-term strategy as compared to the other NEOs. The Committee also determined to increase the number of options awarded based on its determination that the CEO, CFO and COO’s long-term incentive values on the grant date (including recent annual option grants and the annualized fiscal 2010 value of the LTIP at target, discussed below) were considerably below the median value of long-term incentive awards granted to the Peer Group chief executive officers, chief financial officers and chief operating officers.  Additional details are described above under “– Stock Grants.”
    ·
    Other NEOs. In fiscal 2012, Mr. O’Connor was granted 20,000 stock options and Mr. Valiaveedan was granted 15,000 stock options, both with exercise prices set at the fair market value on the date of grant.  The number of options granted to Mr. O’Connor was higher than fiscal 2011 due to his promotion, and the number of options granted to Mr. Valiaveedan was the same as fiscal 2011.  These awards for fiscal 2012 were considerably below the median levels for the Peer Group and broad-based compensation surveys.
    Long-Term Incentive Program
    In fiscal 2010, the Company adopted a Long-Term Incentive Program under its stockholder-approved Amended and Restated 2008 Hovnanian Enterprises, Inc. Stock Incentive Plan (“2008 Plan”) to aid the Company in retaining key employees and to motivate them to exert their best efforts to promptly return the Company to profitability and lower debt levels by providing rewards at the end of a multi-year period.  The LTIP is intended to incentivize achievement of specified pre-tax profit goals and specified improvements in the Company’s capital structure through reductions in homebuilding debt.
    32
    Each of the NEOs is a participant in the LTIP and their awards, if any, will be determined based on actual performance for the full 36-month performance period, subject to the vesting requirements over an additional 24-month period, as described below.  This performance period commenced on November 1, 2010 (the beginning of fiscal 2011) and will end on October 31, 2013 (that is, the performance period covers fiscal 2011, 2012 and 2013). After the performance period, the awards, to the extent earned, remain subject to vesting conditions during fiscal 2014 and 2015.  The executive will not receive the full award unless the Company achieves the pre-tax profit and homebuilding debt performance goals and the executive remains employed for the entire five-year period.
    Pre-tax profit and homebuilding debt were chosen as the performance metrics for the LTIP because they are critical during this challenging economic cycle.  The Committee determined that other goals, such as revenue growth and cost reductions, would be reflected in pre-tax profit calculations, but in a balanced way with an emphasis on achieving profitability.  The Committee believed that a focus on revenue growth alone would not adequately emphasize profitability and that a focus on cost-cutting alone could emphasize short-term achievements that may sacrifice future profitability.  The Committee also determined that if the current difficult economic conditions continue during all or most of the LTIP’s performance period and achievement of pre-tax profit is not attainable, then realization of reduced homebuilding debt would put the Company in a better financial position to weather such an extended downturn and return to profitability when the economic conditions ultimately improve.

    Awards, if any, will be based on a specific target multiple of each participant’s base salary in effect on the date the participant is granted the award (the “Grant Date,” or June 11, 2010 for all NEOs).  If shares of stock are elected as a form of payout, the target number of shares is set based on the closing price of the Class A Common Stock on the Grant Date, regardless of whether the share price increases or decreases by the time the award is determined or distributed. In order to manage the potential dilution impact of the LTIP, the Committee required that at least 20% of the payout be in the form of cash.  All stock awards under the LTIP were made in the form of rights to receive shares of Class A Common Stock, except for the CEO whose award was made in the form of rights to receive shares of Class B Common Stock because the Committee took into consideration the potential benefits to the Company previously expressed by the Board of Directors of the continuity of share ownership and control of the Hovnanian family.  The following describes the target multiple of base salary and form of irrevocable payout election for each NEO:

    Target Multiple
    of 2010 Base SalaryPayout Method
    CEO3.0020% cash / 80% shares
    CFO2.0020% cash / 80% shares
    COO2.0020% cash / 80% shares
    Other NEOs1.0020% cash / 80% shares
    Although the Committee views both the stock and cash portions of the LTIP as multi-year incentive plan awards, they are reported differently for purposes of the Summary Compensation Table.  The share payout portions are reflected as “Stock Awards” in fiscal 2009 represented a 9% decline in2010 at their grant date fair value in comparison with his 2008 award.
    Cancellationunder Financial Accounting Standards Board ("FASB") Accounting Standards Codification Topic 718, Compensation – Stock Compensation ("ASC Topic 718"), which was based on the probable outcome as of Certain Out-of-the-Money Options:
    As was reportedthe Grant Date.  Conversely, the actual amounts earned on the cash payout portions, if any, will be reflected in the Summary Compensation Table as “Non-Equity Incentive Plan Compensation” in fiscal 2008 proxy statement, some named executive officers and non-employee directors cancelled some2013 (which coincides with the end of their out-of-the-money stock options in December 2008 and January 2009. Additional options were cancelled in October 2009.
         The table below summarizes these cancellationsthe performance period) or, if participants achieve a minimum performance payment during an earlier fiscal year, 2009.even though such payment remains subject to subsequent vesting restrictions, then such minimum payment would be reflected in that earlier fiscal year.  At the end of fiscal 2012, the Company did not reach breakeven or positive Pre-tax Profit (as defined below), so no minimum payment was achieved for this year.
     
    For purposes of the LTIP, “Pre-tax Profit” is defined as earnings (loss) before income tax payments as reflected on our audited financial statements, excluding the impact of any items deemed to be extraordinary items for financial reporting purposes.  “Homebuilding Debt” is defined as total (recourse) notes payable excluding accrued interest, as reflected on our consolidated audited balance sheet, less any debt issued after January 2010 that has an equity component such as debt convertible into shares of stock.
    33
    The following table illustrates the percent of the target award that can be achieved at each performance level.  Awards will be interpolated on a linear basis between performance levels but will not be extrapolated above the maximum performance levels listed below.
      
    Homebuilding Debt as of 10/31/2013
    (in billions)
      Greater than $1.70$1.65$1.60$1.55$1.50$1.40 or less
     
    $100
    or more
    100%
    of target award
    125%
    of target award
    150%
    of target award
    175%
    of target award
    200%
    of target award
    250%
    of target award
     $75
    75%
    of target award
    100%
    of target award
    125%
    of target award
    150%
    of target award
    175%
    of target award
    225%
    of target award
    FY 2013
    Pre-tax Profit
    (in millions)
    		$50
    50%
    of target award
    75%
    of target award
    100%
    of target award
    125%
    of target award
    150%
    of target award
    200%
    of target award
     $25
    25%
    of target award
    50%
    of target award
    75%
    of target award
    100%
    of target award
    125%
    of target award
    175%
    of target award
     
    Less
    than $0
    0%
    of target award
    25%
    of target award
    50%
    of target award
    75%
    of target award
    100%
    of target award
    150%
    of target award
    If the Company reached breakeven or positive Pre-tax Profit for either of fiscal 2011 or 2012, a participant was eligible for a minimum payment equal to 50% of the target award, provided that he met the vesting requirements described below.  This minimum payment would have been inclusive of and not incremental to any other award granted to the participant under the LTIP and would not have exceeded 50% of target award if the Company achieved breakeven or positive Pre-tax Profit in both fiscal 2011 and 2012.  No minimum payout was achieved in either fiscal 2011 or fiscal 2012.
    As a condition of earning each portion of the award, and as a retention inducement, following the performance period, a participant must also be employed through the vesting dates outlined below (other than in cases of death, disability or qualified retirement, or in the case of Messrs. O’Connor and Valiaveedan, specified termination following a change in control of the Company).  The vesting percentages relate to the earned award value as of October 31, 2013.

    Number of
     Cancelled Options1.50% of the award will become vested on October 31, 2013 and payable in January 2014;

    Ara K. Hovnanian1,845,834
    J. Larry Sorsby185,417
    All Other Executive Officers27,500
    Non Employee Board of Directors164,500
    Other Company Employees305,000
           Total 2,528,2512.30% of the award will become vested on October 31, 2014 and payable in January 2015; and

    3.20% of the award will become vested on October 31, 2015 and payable in January 2016.
    Other Employee Benefits
    The Company maintains additional employee benefits that the Committee believes enhance executive safety, efficiency and time that the executive is able to devote to Company affairs.
    In addition to benefits generally
    We do not believe that special perquisites should play a major role in our executive compensation program.  However, some NEOs are provided to employeesone or more of the following items:
    ·Auto allowance, including car maintenance and fuel expense;
    ·Personal use of the Company’s automobiles (including driver’s compensation) and a fractional share in an aircraft;
    ·Executive term life insurance;
    ·Annual Executive Physical Exam Program;
    ·Golf membership or country club fee reimbursement;
    ·Personal income tax preparation services; and

    ·Personal accounting services.
    34
    The Committee annually reviews the elements and level of executive perquisites for the NEOs.  In particular, in evaluating the appropriateness of these benefits for the CEO, the Committee took into consideration the degree to which the CEO is required to travel to various Company such aslocations and business functions on a daily basis.  Based on its review, the Committee requested that the CEO use Company-provided transportation to enhance the efficient use of his time.
    The Company’s matching contributions to the participant’sNEOs’ 401(k) plan NEOs are also eligible to participate in the following programs:
    Foraccounts for the reasons discussed under “Discretionary Bonuses” above,2011 calendar year, in Decemberaccordance with terms of 2007, the Committee approved a $175,000 cash contribution401(k) plan.  Beginning with the January 11, 2013 pay period, the Company will reinstate its 401(k) match at 50% of the level it matched prior to its suspension in February 2009.  This will apply to all participants in the name of Mr. Sorsby to401(k) plan, including the Children’s Hospital of Philadelphia, payable in three installments as follows: $50,000 in 2008, $50,000 in 2009 and $75,000 in 2010.NEOs.
    Specific benefits and the incremental costs of such benefits are described in detail in the footnotes to the Summary Compensation Table. The Company does not offer any defined benefit pension plans to its employees.


    IV.5.  ACTIONS FOR FISCAL 20102013
     
    Base Salary and Bonus Compensation
    CEO and CFO. The Committee maintained the base salary of the CEO at its fiscal 2009 amount, but approved an increase of $250,000 in the maximum bonus amount for the CEO to $949,500 in recognition of his increased responsibilities in assuming the position of Chairman of the Board. The Committee approved a base salary increase for the CFO in January 2010 to $600,000 andfor Mr. Pellerito, effective in December 2012, to increase his maximum bonus amount by $95,200move him closer to $350,000 in order to better approximate the Peer Group median level.median.   Messrs. O’Connor and Valiaveedan each received a 3% base salary increase, also effective in December 2012, in consideration of their individual performance and in line with the Company’s ordinary course merit-based salary and cost of living increase practices.  The Committee maintained the base salaries of the CEO and CFO at their fiscal 2012 amounts, which amounts have not changed since December 2005 for the CEO and January 2010 for the CFO.

    In prior fiscal years, the EBITDA component of the bonus amounts earned underformula for the CEO, CFO and COO compared adjusted EBITDA to EBITDA in the preceding year.  For fiscal 2013, the EBITDA component of the bonus formulas for these NEOs is structured so that it will continuerequire improvement in adjusted EBITDA in fiscal 2013 over fiscal 2012 adjusted EBITDA in order for the CEO, CFO and COO to be paid entirely in cash (that is, no deferred shareseligible for the same or increased bonus levels under this component of the fiscal 2013 bonus formula compared to their earned fiscal 2012 bonuses. Specifically, the Committee determined that the fiscal 2013 EBITDA component of the bonus formulas for the CEO, CFO and COO will be awarded).based on achieving targeted levels of the Company’s adjusted EBITDA for fiscal 2013, which levels have been set in reference to fiscal 2012 adjusted EBITDA.  The Committee also determined that the fiscal 2013 bonus formulas for the CEO, CFO and COO will include a liquidity component in addition to the EBITDA component.  In recognition of the Company’s improvements in operating trends beginning in the second quarter of fiscal 2012 and to further incent future improvements, the Committee increased the overall maximum bonus opportunity for the CEO, CFO and COO to $1,500,000, $575,000 and $575,000, respectively.  The fiscal 2013 bonus formulas for such NEOs will otherwise remain the same except that the COO’s bonus formula will not include the Pre-tax Profit in Third and Fourth Fiscal Quarters component of his fiscal 2012 bonus formula.

    Other NEOs:
    The Committee determined that the fiscal 2013 bonus formulas for Messrs. Buchanan, ReinhartO’Connor and Valiaveedan did not receive any fiscal 2010 base salary increases since they each received base salary increaseswill remain the same as in fiscal 2009. Their2012 except that, for the reasons discussed above with respect to the CEO, CFO and COO, if the Company’s fiscal 2010 bonus formulas will continue to be capped such that their payouts cannot exceed 50% of2013 Pre-tax Profit is greater than zero, the maximum percentages of base salary theyamounts these NEOs could otherwise achievereceive under the personal objectives portioncomponent of their respective bonus formulas. For example,formulas will no longer be reduced by 50%.  In addition, the maximum bonus as a percentage of base salary thatpersonal objectives for Messrs. Buchanan, ReinhartO’Connor and Valiaveedan will be eligiblewere updated to receive is 30%, 20% and 25%, respectively. In addition, as with the CEO and the CFO,reflect key goals for fiscal 2010 bonuses for these NEOs will continue to be paid entirely in cash.2013.
     
    V.
    35

    6.  TAX DEDUCTIBILITY AND ACCOUNTING IMPLICATIONS

    As a general matter, the Committee always takes into account the various tax and accounting implications of compensation. When determining amounts of equity grants to executives and employees, the Committee also examines the accounting cost associated with the grants. Similarly, in making its determination to request the cancellation of certain outstanding options as discussed above, the Committee took into consideration the acceleration of unamortized, non-cash accounting expense that would result from the cancellation.
    The Company’s annual bonus and stock option programs are intended to allow the Company to make awards to executive officers that are deductible under Section 162(m) of the Internal Revenue Code, which provision otherwise sets limits on the tax deductibility of compensation paid to a company’s most highly compensated executive officers (with the exception of the Company’s CFO). The Committee will continue to seek ways to limit the impact of Section 162(m) of the Internal Revenue Code. However, the Committee believes that the tax deduction limitation should not compromise the Company’s ability to establish and implement incentive programs that support the compensation objectives discussed above. Accordingly, achieving these objectives and maintaining required flexibility in this regard may result in compensation that is not deductible for federal income tax purposes. The bonus formulas approved by the Committee for fiscal 20092012 were, however, intended to be established in accordance with the requirements for deductibility as performance basedperformance-based compensation under Section 162(m) of the Internal Revenue Code.

    VI.7. TIMING AND PRICING OF STOCK OPTIONS
    For fiscal 2009,2012, stock options were granted on the second Friday in June for all eligible employees, and non-employee Directorsconsistent with our practice of the Company. In addition, the Companygranting equity awards shares of the Company’s Class A Common Stock to non-employee Directors as part of their annual retainerannually on the second Friday in January.June. The Company’s practice of setting “fixed” equity award grant dates is designed to avoid the possibility that the Company could grant stock awards prior to the release of material, nonpublicnon-public information whichthat is likely to result in an increase in its stock price, or to 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.  ExerciseOther than with respect to the CEO’s, CFO’s, and COO’s stock option grants in fiscal 2012, exercise prices of stock options were set at the closing price per share of the Company’s Class A Common Stock on the NYSE on the date the options were granted.  The options granted to the CEO, CFO and COO in fiscal 2012 were granted with an exercise price 33 1/3% above the closing stock price on the grant date.  See “Stock Grants – Fiscal 2012 Stock Option Awards” above.

    VII.8. STOCK OWNERSHIP GUIDELINES

    The Board of Directors of the Companyhas adopted stock ownership guidelines, recommended by the Committee, which set forth recommended minimum amounts of stock ownership, directly or beneficially, for the Company’s directorsCEO, CFO, COO and certain senior executive officers. On an annual basis,non-employee Directors because they have the most long-term strategic impact for shareholders.  The Committee reviews adherence to the Company’s stock ownership guidelines on an annual basis, which guidelines are incorporated into the Company’s Corporate Governance Guidelines.  The Company believes these guidelines further enhance the Company’s commitment to aligning the interests of our non-employee directorsDirectors and executivesenior management with those of its stockholders.shareholders.
     


    In its annual review in 2008, the Compensation Committee determined that, once the stock ownership guidelines were met, they would be deemed satisfied for subsequent annual review periods, regardless of decreases in the Company’s stock price on the New York Stock Exchange, so long as the executive or non-employee Director does not sell any portion of the share amounts which were originally included in determining that the recommended thresholds were met.
      The Committee reviewed this determination in fiscal 2012 and maintained this policy.
    Senior Executive Officers
        As of January 19, 2010 (the record date for the Annual Meeting), allAll senior executive officers and non-employee Directors had metmeet the Company’s stock ownership guidelines.
    Senior Executive Officers
    The guidelines provide that the following senior executive officers of the Company are requested to achieve and maintain minimum stock ownership amounts as follows:
    Chairman, of the BoardPresident and Chief Executive OfficerCEO – 5x6x current base salary
        Chief Financial Officer
    CFO – 2x current base salary
    COO – 2x current base salary

    See “Non-Employee Director Compensation” for information on the stock ownership guidelines for non-employee Directors.
     
    Non-Employee Directors
        The Company’s non-employee Directors receive 50% of their annual retainer in the Company’s Class A Common Stock and 50% in cash. Non-employee Directors also receive an annual grant of stock options. The guidelines provide that non-employee Directors are requested to achieve and maintain stock ownership amounts which equal 2x the total value of their annual Director retainer (or $80,000 in total) within 5 years after they become subject to the guidelines.
    36
     


    EXECUTIVE COMPENSATION
     
    (I)(1) SUMMARY COMPENSATION TABLE
    The following table summarizes the compensation for the fiscal 2009, 2008years ended October 31, 2012, October 31, 2011, and 2007October 31, 2010 of the chief executive officer, the chief financial officer, and the next three most highly compensated executive officers serving as executive officers as of October 31, 2009. Due to the death of Mr. K. Hovnanian, our Founder and former Chairman of the Board, on September 24, 2009, Mr. K. Hovnanian’s compensation for three years is included in the table.2012. These sixfive individuals comprisecompose our named executive officers or “NEOs.”
     
    Summary Compensation Table
     
                                Change in        
            Pension  
            Value and  
          Non-Equity Nonqualified  
          Incentive Plan Deferred  
        StockOptionCompensation CompensationAll Other
    Name and Principal PositionYearSalaryBonus (1)Awards (2)Awards (3)(4) EarningsCompensation (5)Total (6)
    Kevork S. Hovnanian,2009$1,058,911———    $444,700     —    $82,740     $1,586,351
       Former Chairman2008$1,128,433———$889,402     —$110,136$2,127,971
       of the Board2007$1,128,433——— —     —$134,902$1,263,335
       - deceased          
           
    Ara K. Hovnanian,2009$1,092,606——$1,380,000$699,500     —$267,015$3,439,121
       President, Chief2008$1,092,606—$503,641$1,256,250$979,302     —$336,344$4,168,143
       Executive Officer and2007$1,092,606——$3,915,000 —     —$375,334$5,382,940
       Chairman of          
       the Board          
           
    J. Larry Sorsby,2009$500,000$75,000—$276,000$254,800     —$58,822$1,164,622
       Executive Vice President2008$499,023$75,000$183,456$251,250$356,721     —$182,059$1,547,509
       and Chief2007$321,291$188,000—$522,000 —     —$67,855$1,099,146
       Financial Officer          
     
    Paul W. Buchanan,2009$286,192$50,000—$46,000$86,100     —$34,331$502,623
       Senior Vice President/2008$280,000$50,000$60,480$50,250$117,600     —$46,880$605,210
       Chief Accounting2007$271,925—$167,730—$117,600     —$34,263$591,518
       Officer          
           
    Peter S. Reinhart,2009$306,635$50,000—$46,000$61,500     —$69,461$533,596
       Senior Vice President/2008$300,000$50,000$43,200$50,250$84,000    —$48,646$576,096
       General2007$300,000—$150,450—$84,000     —$41,493$575,943
       Counsel          
           
    David G. Valiaveedan,2009$267,692$35,000$3,718$24,150 $67,500     —$6,321$404,381
       Vice President – Finance 2008 $218,615$35,000 $37,061 $25,125$61,600     —$4,966  $382,367
       and Treasurer            
    Name and Principal PositionYear Salary (1)  
    Bonus (2)
    		  Stock Awards (3)  Option Awards (4)  Non-Equity Incentive Plan Compensa-tion (5)  Change in Pension Value and Nonqualified Deferred Compensation Earnings  All Other Compensa-tion (6)  Total (7) 
    Ara K. Hovnanian, (8)2012 $1,092,606   —  $—  $1,032,000  $949,500   —  $181,582  $3,255,688 
    President, Chief2011 $1,092,606   —  $24,125  $529,875  $949,500   —  $170,049  $2,766,155 
    Executive Officer and Chairman of the Board
    		2010 $1,092,606   —  $2,622,255  $1,413,750  $949,500   —  $188,189  $6,266,300 
                                      
    J. Larry Sorsby,2012 $600,000   —  $—  $206,400  $350,000   —  $50,433  $1,206,833 
    Executive2011 $600,000   —  $4,825  $105,975  $350,000   —  $48,259  $1,109,059 
    Vice President and Chief Financial Officer
    		2010 $572,308   —  $960,001  $282,750  $350,000   —  $52,229  $2,217,288 
                                      
    Thomas J. Pellerito,2012 $538,462   —  $—  $137,600  $250,000   —  $46,406  $972,468 
    Chief Operating2011 $500,000   —  $3,217  $70,650  $250,000   —  $42,913  $866,780 
    Officer2010 $468,870  $28,750  $799,999  $188,500  $203,548   —  $38,276  $1,727,943 
                                      
    Brad G. O’Connor,2012 $308,029  $50,000  $—  $35,600  $93,000   —  $28,303  $514,932 
    Vice President — Chief Accounting Officer and Corporate Controller
    		2011 $284,523   —  $965  $21,195  $85,680   —  $27,401  $419,764 
                                      
    David G. Valiaveedan,2012 $288,821  $50,000  $—  $26,700  $72,500   —  $28,269  $466,290 
    Vice President —2011 $274,361  $—  $2,413  $17,663  $68,850   —  $27,357  $390,644 
    Finance and Treasurer2010 $270,000  $—  $221,913  $42,413  $67,500   —  $24,696  $626,522 

      (1)
    (1)The “Salary” Column. The effective date of the last base salary increase for Mr. Pellerito was January 19, 2012. This increase occurred after the beginning of fiscal 2012 resulting in a prorated base salary for fiscal 2012. Messrs. O’Connor’s and Valiaveedan’s salary increases were effective as of the beginning of fiscal 2012,  however, amounts reflected in the Summary Compensation Table reflect payment of two weeks’ salary at the fiscal 2011 rate, which was paid in fiscal 2012.
      (2)
    The “Bonus” Column. In accordance with SEC rules, the “Bonus” column discloses discretionary cash bonus awards. Discretionary cash retention awards wereMr. Pellerito was awarded in December 2007 for the CFO in the amount of $150,000, for the Chief Accounting Officer and for the General Counsel in the amount of $100,000 each and for the Vice President-Finance and Treasurer in the amount of $70,000, that vested and became payable 50% in July 2008 and 50% in January 2009 as discussed under “Discretionary Bonuses” in the Compensation Discussion and Analysis. The CFO received a discretionary cash bonus of $28,750 for fiscal 2010 for service performed prior to his becoming an executive officer.Discretionary bonuses of $50,000 were granted to each of Messrs. O’Connor and Valiaveedan, for their performance during fiscal 2012.  These awards recognized their significant contributions involving capital raising/restructuring activities as well as their leadership and assistance in generating positive operating trends in the amountlatter half of $188,000 in December 2007.fiscal 2012.  The cash portion of bonuses earned based on the NEOs meeting either financial performance-based measures or personal objectives portions of their regular bonus programs are reflected in the Summary Compensation Table as “Non-Equity Incentive Plan Compensation” and described under footnote (4)(5) below.
     


    37
    (2)
    		 (3)
    The “Stock Awards” Column. This column reflects the aggregate grant date fair valuesvalue of deferred share awards and restricted stock unitsRSUs granted in fiscal 2011 (and, for Mr. Valiaveedan, in fiscal 2010 and 2011) and the portion of the LTIP awarded in fiscal year indicated2010 that may be paid out in shares, which were, in each case, computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 718, Compensation – Stock Options (“FASB ASC Topic 718”).718. Assumptions used in the calculation of these amounts are set forth in Footnotes 3 and 15 to the Company’s audited financial statements for the fiscal year indicated in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2009.2012.  The grant date fair value of the share portion of the LTIP awards in fiscal 2010 (which for Mr. Valiaveedan equaled $216,000 of the total value reflected for that year) is based upon the probable outcome of the performance conditions as of the grant date. The maximum value of those LTIP shares at grant date fair value was: $6,555,638, $2,400,002, $2,000,000 and $540,000 for Messrs. Hovnanian, Sorsby, Pellerito and Valiaveedan, respectively.  The LTIP award levels above are subject to performance over a three-year period (fiscal 2011-2013) and, if earned, awards are subject to vesting restrictions that extend through the end of fiscal  2015, or a total of five years from grant. There is no assurance that the LTIP awards will be earned at the levels shown above and actual awards could be zero if the performance goals are not achieved.

     
    (3) (4)
    The “Option Awards” Column. Similar to the “Stock Awards” column, this column reflects the aggregate grant date fair values of stock options awarded in the fiscal year indicated, which were computed in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts are set forth in Footnotes 3 and 15 to the Company’s audited financial statements for the fiscal year indicated in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2009. Fifty percent2012. All of the 2009 stock2012 option awards for Messrs. A. Hovnanian, Sorsby and SorsbyPellerito were granted in the form of performance-based options. These performance-basedpremium-priced options follow the same vesting schedule as standard stock options provided that the Committee determines that (1)with exercise prices set 33 1/3% above the Company’s EBITDA for fiscal 2009 is at least $200,000,000 greater thanclosing stock price on the Company’s EBITDA for fiscal 2008 and (2) the Company’s EBITDA for fiscal 2010 is at least $300,000,000 greater than the Company’s EBITDA for fiscal 2008. All option awards noted for all NEOs for fiscal year 2007 were cancelled in October 2009.date of grant.
     
    (4) (5)
    “Non-Equity Incentive Plan Compensation” Column. This column represents the cash portion of the performanceperformance-based bonus awards earned by the NEOs in the fiscal year indicated.
     
    (5) (6)
    “All Other Compensation” Column.This column discloses all other compensation for the fiscal year indicated, including reportable perquisites and other personal benefits.
    For fiscal 2012, total perquisites and other personal benefits, and those that exceeded the greater of $25,000 or 10% of total perquisites and other personal benefits for each NEO, were as follows:
    Fiscal 2012 Perquisites (Supplemental Table)
      Total Perquisites and Description 
    Fiscal 2012 Perquisites that Exceeded
    the Greater of $25,000 or 10% of Total Perquisites
    Name
    Total Fiscal 2012
    Perquisites
    		Types of Perquisites (a)
    Personal Use of
    Company’s Fractional Aircraft Share
    		 
    Personal Use
    of Company’s
    Automobiles (c)
    		 
    Personal
    Income Tax Preparation (d)
    Ara K. Hovnanian $180,230 (1) (2) (4) (5) (6) (7) (8) (b)  $86,658  $30,843 
    J. Larry Sorsby $49,081 (3) (4) (5)  N/A   N/A   N/A 
    Thomas J. Pellerito $45,054 (3) (4) (5)  N/A   N/A   N/A 
    Brad G. O’Connor $26,954 (3) (4) (5)  N/A   N/A   N/A 
    David G. Valiaveedan $26,934 (3) (4) (5)  N/A   N/A   N/A 
     For fiscal 2009, total perquisites and other personal benefits, and those that exceeded the greater of $25,000 or 10% of total perquisites and other personal benefits for each NEO, were as follows:
    Fiscal 2009 Perquisites (Supplemental Table)
                Fiscal 2009 Perquisites that Exceeded the Greater of $25,000
    Total Perquisites and Description or 10% of Total Perquisites
     Total Fiscal 2009Types of Perquisites Personal Use of Company’s   Personal Use of Company’s
    NamePerquisites(a) Aircraft (b)Automobiles (c)
    Kevork S. Hovnanian$75,165  (2) (4) $N/A$64,575
    Ara K. Hovnanian $249,129 (1) (2) (4) (5) (6) (7) $57,975$149,716 
    J. Larry Sorsby $46,407  (3) (4) (5)  N/A  N/A
    Paul W. Buchanan$24,212  (2) (4) (5) N/A N/A
    Peter S. Reinhart$60,783 (3) (4) (5) N/AN/A
    David G. Valiaveedan$2,200(5) N/AN/A
    (a)(1) Personal use of the Company’s aircraft;fractional aircraft share; (2) Personal use of the Company’s automobiles; (3) Perquisites related to executive’sexecutives’ use of their own vehicle;vehicles; (4) Subsidized medical premiums for the remainder of the NEO’s employment with the Company;premiums; (5) Use of the Company’s Annual Executive Physical Exam Program; (6) Golf/country club membership fees; and (7) Personal income tax preparation.preparation; and (8) Personal accounting services.

    (b)(b)The incremental costs of Mr. Hovnanian’s personal use of the Company’s fractional aircraft are calculated as (1)share were less than the total operating costs (including trip-based management fees) directly associated with personal trips, plus (2) the allocable sharegreater of all other costs of the aircraft for the fiscal year (including depreciation$25,000 or lease payments) based upon the percentage10% of total hours flown during the fiscal year represented by personal trips. No “deadhead” flights occurred in fiscal 2009.perquisites.

    (c)(c)The incremental costs of personal use of the Company’s automobiles are calculated as the allocable share of all costs of the automobiles for the fiscal year (including depreciation)depreciation and, for the CEO, the Company's driver's salary and benefits) based upon the percentage of total miles driven during the fiscal year represented by personal trips.


     In addition to the perquisites and other personal benefits listed above, the NEOs received the following other compensation in fiscal 2009:(d)Reflects reimbursement of actual tax preparation expenses incurred by Mr. Hovnanian.
     
    38
    In addition to the perquisites and other personal benefits listed above, the NEOs received the following other compensation in fiscal 2012:

    Fiscal 20092012 All Other Compensation Other Than Perquisites (Supplemental Table)
     
                
          Company Contributions
               Company’s   to the Executive
     Term LifeContributionsDeferred
    Charitable CashInsuranceto the Executive’sCompensation Plan
    NameContribution (a)PremiumsRetirement Plan (401(k))(“EDCP”) (b)  Term Life Insurance Premiums Company Contributions to the Executive’s Retirement Plan
    (401(k)) (a)
    		  Company Contributions to the Executive Deferred Compensation Plan (“EDCP”) 
    Kevork S. Hovnanian—$225           $7,350 —
    Ara K. Hovnanian—$450$7,350            $10,086 $427 $925  — 
    J. Larry Sorsby      $50,000 $450 $7,350 $4,615  $427 $925  — 
    Paul W. Buchanan— $429$7,090 $2,601 
    Peter S. Reinhart$34,615$450$5,441$2,787
    Thomas J. Pellerito $427 $925  — 
    Brad G. O’Connor $423 $925  — 
    David G. Valiaveedan—$398$3,722 — $410 $925  — 
    (a)(a)In December 2007,This column represents a one-time Employer Non-Elective Contribution, funded by the Compensation Committee approved a $175,000 cash contributionuse of the forfeitures account, which was made to all eligible participants’ 401(k) plan accounts for the 2011 calendar year, in accordance with terms of the name of Mr. Sorsby to the Children’s Hospital of Philadelphia, payable in three installments as follows: $50,000 in 2008, $50,000 in 2009, and $75,000 in 2010. In November 2009, in lieu of a periodic service award for long term service, the Company made a charitable contribution of $34,615 on Mr. Reinhart’s behalf to the Community Foundation of New Jersey.
    (b)Messrs. K. Hovnanian and Valiaveedan did not participate in the Company’s executive deferred compensation plan (“EDCP”).
    401(k) plan.
    (6) (7)
    “Total” Compensation Column. This column reflects the sum of all the columns (the Salary, Bonus, Stock Awards, Option Awards, Non-Equity Incentive Plan Compensation, Change in Pension Value and Nonqualified Deferred Compensation Earnings, and All Other Compensation columns) of the Summary Compensation Table.
     
    Fiscal 20092012 Total Compensation (Supplemental Table). The Fiscal 20092012 Total Compensation (Supplemental Table) below includes the same amounts as the “Salary,” “Bonus,” “Non-Equity Incentive Plan Compensation,” “Change in Pension Value and Nonqualified Deferred Compensation Earnings”Earnings,” and “All Other Compensation” columns of the Summary Compensation Table for fiscal 2009,2012, but values stock awards and option awards for the fiscal year differently, as explained in footnotefootnotes (a) and (b) below.
    39
     
    The table below is intended to provide additional, supplemental compensation disclosure and not as a replacement for the Summary Compensation Table.

    Fiscal 20092012 Total Compensation (Supplemental Table)

                   Intrinsic   Change in        
       ExpensePension  
       Value ofValue and  
      Cash AwardsOutstandingNonqualified Total of All
     Fiscal 2009of Fiscal 2009Options inDeferredAll OtherColumns of
    Fiscal 2009RetentionPerformanceFiscal 2009Compensation Compensation Supplemental
    NameSalaryCash BonusBonus(a)Earningsin Fiscal 2009Table 
    Fiscal 2012
    Salary
    		  
    Cash Awards
    of Fiscal 2012
    Bonus
    		  
    Stock Awards
    (a)
    		  
    Intrinsic
    Expense
    Value of
    Outstanding
    Options in
    Fiscal 2012
    (b)
    		  
    Change in
    Pension
    Value and
    Nonqualified
    Deferred
    Compensation
    Earnings
    		  
    All Other
    Compensation in Fiscal
    2012
    		  
    Total of All Columns of Supplemental
    Table
    		 
    Kevork S. Hovnanian$1,058,991  $0  $444,700$0$0   $82,740$1,586,431
    Ara K. Hovnanian$1,092,606$0 $699,500$0 $0 $267,015 $2,059,121 $1,092,606  $949,500   —  —  —  $181,582  $2,223,688 
    J. Larry Sorsby $500,000$75,000$254,800  $0$0$58,822 $888,622 $600,000  $350,000   —  —  —  $50,433  $1,000,433 
    Paul W. Buchanan$286,192 $50,000$86,100$0$0 $34,331$456,623
    Peter S. Reinhart$306,635$50,000$61,500$0$0$69,461$487,596
    Thomas J. Pellerito $538,462  $250,000  $1,851  —  —  $46,406  $836,719 
    Brad G. O’Connor  $308,029  $143,000  $5,083  —  —  $28,303  $484,415 
    David G. Valiaveedan$267,692$35,000$67,500$0$0$6,321$376,513 $288,821  $122,500  $5,180  —  —  $28,269  $444,770 
    (a)"Stock Awards" in this column, for Mr. Pellerito, represent the portion of the RSU award granted to him on June 13, 2008, which vested and was issued in fiscal 2012 at the stock price on the date of issue.  For Mr. O’Connor, the amount represents the portion of the RSU award granted to him on May 19, 2006 and the deferred shares awards granted for service performed in fiscal years 2007 and 2008, which vested and were issued in fiscal 2012 at the stock price on the date of issue.  For Mr. Valiaveedan, the amount represents the portion of RSU awards granted to him on June 13, 2008, June 12, 2009 and June 11, 2010 and the deferred shares awards granted for service performed in fiscal years 2007 and 2008, which vested and were issued in fiscal 2012 at the stock price on the date of issue.
     
    (b)The “Intrinsic Expense Value of Outstanding Options in Fiscal 2009”2012” column is based on the intrinsic expense value or degree to which the stock option was “in-the-money” of stock option awards granted in fiscal 20092012 at the grant date, instead of the grant date fair values of option awards granted in fiscal 2009,2012, as discussed under footnotes (2)footnote (4) above.  The fiscal 2012 option grants for Messrs. Hovnanian, Sorsby and (3) above.Pellerito were premium-priced options with an exercise price 33 1/3% above the closing stock price on the grant date and were therefore underwater on the grant date.
      
    (8)Beginning in fiscal 2010, the Committee approved a $250,000 increase in the maximum annual bonus amount for the CEO, reported under “Non-Equity Incentive Plan Compensation,” in recognition of his increased responsibilities in assuming the position of Chairman of the Board.


    (II)
    40
    (2)  GRANTS OF PLAN-BASED AWARDS IN FISCAL 2009
    2012
    The following table summarizes both:
    (1)        The potential equity and non-equity incentive plan awards that could have been or could be earned by each of the NEOs at the defined levels of “Threshold,” “Target,”“Target” and “Maximum” based on the performance-based awards granted to the NEOs in fiscal 2009;2012; and
    (2)         All other plan-based awards, such as stock options and RSUs, granted in fiscal 2009.
    2012.
    Each of the following columns is described in the footnotes below the table.

                            
    Grants of Plan-Based Awards in Fiscal 20092012
     
                    All Other   Grant 
    Estimated Possible Payouts Under Non-Equity
    Incentive Plan Awards
    		 
    Estimated Future
    Payouts Under Equity Incentive Plan Awards (#)
    		 All Other Stock Awards: Number of Shares of Stock or Units  All Other Option Awards: Number of Securities Underlying Options (#)  Exercise or Base Price of Option Awards ($/Sh) Grant Date Fair Value of Stock and Option Awards
             All OtherOption Exercise 
             StockAwards: or Base 
             Awards:Number of Price ofGrant Date
             NumberSecurities OptionFair Value
           Estimated Future Payouts Underof SharesUnderlying Awardsof Stock
     Estimated Future Payouts Under Equity Incentive Plan Awardsof Stock orOptions ($/Sh)and Option
     Non-Equity Incentive Plan Awards Number of Shares of Stock (3) Units (4) (#)(5) (6)Awards (7)
    Grant                                   
    DateThreshold Target Maximum ThresholdTarget Maximum   
    Kevork S. N/A—(1) $444,700 (1) $444,700 (1) N/AN/AN/A—   — — — 
    NameDate Threshold Target  Maximum Threshold  Target  Maximum (#)  (4)  (5) (6)
    Ara K. (1)  $0 —  $949,500 N/A N/A N/A N/A      
    Hovnanian                 02/10/2012(2)       0 337,500 337,500      $1.93  $0
    06/08/2012(3)               600,000  $2.88  $1,032,000
    Ara K.6/12/09—(1)  (1) $699,500(1) N/A375,000N/A—     375,000 $2.55 $690,000 
    Hovnanian                  
                         
    J. Larry6/12/09— (1) $254,800(1) $254,800(1) N/A75,000N/A—   75,000 $2.55 $138,000  (1)  $0  $350,000  $350,000 N/A N/A N/A N/A      
    Sorsby                02/10/2012(2)       0 67,500 67,500      $1.93  $0
    06/08/2012(3)               120,000  $2.88  $206,400
    Paul W. 6/12/09$57,400(2) $86,100(2) $86,100(2) N/AN/AN/A—   25,000 $2.55 $46,000 
    Buchanan                
                         
    Peter S.6/12/09 $61,500(2) $61,500(2) $61,500(2) N/AN/AN/A—   25,000 $2.55 $46,000 
    Reinhart               
    Thomas J. (1)  $0  $225,000  $350,000 N/A N/A N/A N/A      
    Pellerito06/08/2012(3)               80,000  $2.88  $137,600
                         
    Brad G. (1)  $62,000  $93,000  $93,000 N/A N/A N/A N/A      
    O’Connor06/08/2012(3)               20,000  $2.16  $35,600
                         
    David G.6/12/09  $67,500(2) $67,500(2) $67,500(2) N/AN/A N/A   1,458    13,125 $ 2.55  $27,868 (1)  $72,500  $72,500  $72,500 N/A N/A N/A N/A       
    Valiaveedan            06/08/2012(3)               15,000  $2.16  $26,700

    (1)(1)
    Estimated Future PaymentsRegular Bonuses for former Chairman, CEO and CFO. As stated above under “Regular Bonuses” in the Compensation Discussion and Analysis, the fiscal 20092012 bonus formulas for Messrs. K. Hovnanian, A. Hovnanian and Sorsby arewere based on the greater of the ROACE calculation method and the Net Debt AmountEBITDA Improvement calculation method, provided that their respective final bonuses docould not exceed 50% of their respective fiscal 2008 bonuses.$949,500 and $350,000, respectively.  These NEOs would not earn any bonus under the Net Debt Amount calculation method if the “net debt amount” (as defined above under “Regular Bonuses” in the Compensation Discussion and Analysis) was $1,900,000,000 or greater and would not earn any bonus under the ROACE calculation method if the ROACE percentage (as defined above under “Regular Bonuses” in the Compensation Discussion and Analysis) was zero or lower (as was the case in fiscal 2009). Therefore, no values have2012) and would not earn any bonus under the EBITDA Improvement calculation method if the EBITDA improvement calculation (as discussed above under “Regular Bonuses” in the Compensation Discussion and Analysis) was $0 or lower.  Because bonus amounts above those levels, however, would be interpolated, $0 has been disclosed at the “threshold” level for purposes of the above table presentation for these NEOs.
    For purposes of the above table presentation, bonuses earned at the “target” levels for the former Chairman, the CEO and the CFO would be equal to the greater of (a) the ROACE calculation method which hasassuming a “target” percentage of 15% in accordance with the respective bonus formula tables and (b) the amount that could be earned under the Net Debt AmountEBITDA Improvement calculation at the “target” level or the “mid-point” range of the respective bonus formula tables as described above under “Regular Bonuses” in the Compensation Discussion and Analysis, provided that their respective final bonuses docould not exceed 50% of their respective fiscal 2008 bonuses.$949,500 and $350,000 for the CEO and CFO, respectively. Based on the greater of both components of their respective “target” levels of the bonus formulas, the ROACE portion of the bonus formulas would be greater than the Net Debt Formula calculationsEBITDA Improvement portion for Messrs. K. Hovnanian andMr. Sorsby. As a result, the total cash bonusesbonus payable to Messrs. K. Hovnanian andMr. Sorsby at this level would be $444,700 and $254,800, respectively.capped at $350,000.  Mr. A. Hovnanian’s ROACE calculation method would provide for a payment of 1.5% of pre-tax income and, because pre-tax income was not determinable at the time the fiscal 20092012 bonus formula was established, no target amount is reflected for Mr. A. Hovnanian in the above presentation table.
    41
                The maximum cash bonuses that could be earned by Messrs. K. Hovnanian, A. Hovnanian and Sorsby for fiscal 20092012 under either the ROACE calculation method or the Net Debt AmountEBITDA Improvement calculation method in total were $444,700, $699,500,$949,500 and $254,800,$350,000, respectively.
    Regular Bonus for COO. As stated above under “Regular Bonuses” in the Compensation Discussion and Analysis, the fiscal 2012 bonus formula for Mr. Pellerito was based on the EBITDA Improvement calculation method, provided that his bonus could not exceed $250,000.  Mr. Pellerito would not earn any bonus under the EBITDA Improvement calculation method if the EBITDA improvement calculation (as discussed above under “Regular Bonuses” in the Compensation Discussion and Analysis) was $0 or lower.  Because bonus amounts above that level, however, would be interpolated and because Mr. Pellerito would not earn any bonus under the Pre-tax Profit in Third and Fourth Fiscal Quarters component if the Company did not achieve pre-tax profitability in both the third and the fourth quarters of fiscal 2012, $0 has been disclosed at the “threshold” level for purposes of the above table for this NEO.



    (2)
    Estimated Future Payments            For purposes of the above table presentation, the bonus earned at the “target” level for the COO would be the amount that could be earned under the EBITDA Improvement calculation at the “target” level or the “mid-point” range of the bonus formula as described above under “Regular Bonuses” in the Compensation Discussion and Analysis plus an additional $100,000 if the Company achieved positive pre-tax profit in both the third and fourth fiscal quarters. The total cash bonus payable to Mr. Pellerito at this level would be $225,000.
    The maximum cash bonus that could be earned by Mr. Pellerito for fiscal 2012 was $350,000, which consisted of the maximum bonus of $250,000 based on the EBITDA Improvement calculation method plus an additional $100,000 if the Company achieved positive pre-tax profit in both the third and fourth quarters of fiscal 2012.
    Regular Bonuses for the Vice President — Chief Accounting Officer General Counsel and Corporate Controller and the Vice President –— Finance and Treasurer. As stated above under “Regular Bonuses” of the Compensation Discussion and Analysis, the fiscal 20092012 bonus formulas for Messrs. Buchanan, ReinhartO’Connor and Valiaveedan arewere based on both the ROACE calculation method and the “Meeting Personal Objectives” method, subject to a cap of 50% of the maximum percentages of base salary they could otherwise achieve under the personal objectives portion of their respective bonus formulas.
    formulas (the caps were 30% and 25% of base salary, respectively).
    For purposes of the above table presentation, the “threshold” level is defined as when the ROACE percentage is at or below zero and the “threshold” achievement of the personal objectives established for Messrs. Buchanan, ReinhartO’Connor and Valiaveedan at the beginning of the fiscal year as described above in the Compensation Discussion and Analysis under “Regular Bonuses” is achieved. Based on the “threshold” level, these NEO’sNEOs would not have earned a bonus payout for fiscal 20092012 based on the ROACE percentage, and,but, based upon the “threshold” achievement of their personal objectives, Messrs. Buchanan, ReinhartO’Connor and Valiaveedan would have earned bonus payouts of 20%, 20% and 25%30% of their base salaries, respectively, after reducing Mr. Valiaveedan’s bonus to comply with the cap.salary, respectively.  As a result, for fiscal 2009,2012, Messrs. Buchanan, ReinhartO’Connor and Valiaveedan at “threshold” would have earned total cash bonuses of $57,400, $61,500$62,000 and $67,500,$72,500, respectively.
      Since the payout based on Mr. Valiaveedan’s “target” level would exceed 50% of the maximum percentage of base salary he could otherwise achieve under the personal objectives portion of his bonus formula, the bonus for Mr. Valiaveedan at this level would be capped at $72,500 which is 25% of his base salary.
    For purposes of this table presentation, the “target” level is defined as whenassumes the Company’s ROACE percentage is at 15% and if the “target” or a “substantial” percentage of the personal objectives established for Messrs. Buchanan, ReinhartO’Connor and Valiaveedan at the beginning of the fiscal year is achieved. Since the payouts based on their respective “target” levels would exceed 50% of the maximum percentages of base salary they could otherwise achieve under the personal objectives portion of their respective bonus formulas, the bonuses for Messrs. Buchanan, ReinhartO’Connor and Valiaveedan at this level would be capped at $86,100, $61,500$93,000 and $67,500, respectively.
    $72,500, respectively (the caps were 30% and 25% of base salary, respectively).
    For purposes of this table presentation, the “maximum” level is defined as the maximum award earned under the ROACE calculation method and the maximum award if all or an “outstanding” percentage of the personal objectives established for Messrs. Buchanan, ReinhartO’Connor and Valiaveedan at the beginning of the fiscal year are achieved. The maximum bonus payable under the ROACE calculation is capped at a 25%20% ROACE level for Messrs. BuchananO’Connor and Reinhart and a 20% ROACE level for Mr. Valiaveedan. Since the payouts based on their respective “maximum” levelsthe maximum level would exceed 50% of the maximum percentages of base salary they could otherwise achieve under the personal objectives portion of their respective bonus formulas, the bonuses for Messrs. Buchanan, ReinhartO’Connor and Valiaveedan at this level would be capped at $86,100, $61,500$93,000 and $67,500, respectively.$72,500, respectively (30% and 25% of base salary, respectively).
    42
    (2)Awards reported reflect the options modified on February 10, 2012.  On February 10, 2012, the June 10, 2011 option awards of 337,500 and 67,500 for the CEO and CFO, respectively, and the June 10, 2011 RSU awards of 12,500 and 2,500 for the CEO and CFO, respectively, were amended to require that, as a condition of vesting, the Company’s Adjusted EBITDA must exceed “fiscal 2011 actual EBITDA” for two consecutive fiscal years, in the case of options, during the option term and, in the case of RSUs, prior to the tenth anniversary of the grant date.  Regardless of when the performance criteria are met, vesting will not occur sooner than 25% per year beginning on the second anniversary of the grant date.  For this purpose, “fiscal 2011 actual EBITDA” is the amount from our consolidated financial statements for the year ended October 31, 2011.  Adjusted EBITDA will be based on EBITDA from the consolidated financial statements for the applicable fiscal year-end, excluding inventory impairment losses and land option write-offs and gains or losses on extinguishment of debt.  At the end of fiscal 2012, the Committee determined that the Company’s Adjusted EBITDA exceeded fiscal 2011 actual EBITDA. No incremental fair value was recognized under FASB AFC Topic 718 in connection with the modification of these options or  RSU awards.

    (3)Fifty percent
    Stock Option Awards. These rows represent the number of stock options awarded each NEO in fiscal 2012.  For the fiscal 2009CEO, CFO and COO, the options have a premium exercise price set 33 1/3% above the closing stock price on the grant date. Mr. Hovnanian’s stock option award was granted in the form of options to purchase shares of Class B Common Stock and the stock option awards for the CEO and CFOother NEOs were granted in the form of performance-based options. These performance-based options follow the same vesting schedule as standard stock options provided that the Committee determines that (1) the Company’s EBITDA (as defined above) for fiscal 2009 is at least $200,000,000 greater than the Company’s EBITDA for fiscal 2008 and (2) the Company’s EBITDA for fiscal 2010 is at least $300,000,000 greater than the Company’s EBITDA for fiscal 2008.to purchase shares of Class A Common Stock.
     
    (4)“All Other Stock Awards: Number of Shares of Stock or Units” Column.This column discloses the number of restricted stock units (not tied to any financial or personal objectives performance measure) awarded to an NEO in fiscal 2009. Mr. Valiaveedan’s grant reflects his election to receive a portion of his stock option grant in the form of restricted stock units.
    (5)
    “All Other Option Awards: Number of Securities Underlying Options” Column. This column discloses the number of stock options (not tied to any financial or personal objectives performance measure) awarded to an NEO in fiscal 2009.2012.  

     
    (6)(5)
    “Exercise or Base Price of Option Awards” Column.Column. TheWith the exception of the June 8, 2012 grants for the CEO, CFO and COO, the option exercise price is the closing price per share of the Company’s Class A Common Stock on the NYSE on the day of the option grantgrant.  For the CEO, CFO and COO, options granted on June 12, 2009 (which was $2.55).8, 2012 have a premium exercise price set 33 1/3% above the closing stock price on the grant date.

     
    (7)(6)
    “Grant Date Fair Value of Stock and Option Awards” Column.Column. The grant date fair value of the restricted stock unit or stock option awardsgrants was computed in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts are set forth in Footnotes 3 and 15 to the Company’s audited financial statements for the fiscal year indicated in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2009.2012. This value for options was calculated based on the Black-Scholes option pricing model in which the option fair value as of the grant date (June 12, 2009)June 8, 2012 was determined to be $1.84. The value$1.72 for restricted stock units was based on the closing stock price onCEO, CFO and COO and $1.78 for the date of the grant, or $2.55.other NEOs.  
    43
     


    (III)(3) OUTSTANDING EQUITY AWARDS AT FISCAL 20092012 YEAR-END
    The following table shows all unexercised stock options, unvested deferred shares, and unvested restricted stock units held at the end of fiscal 20092012 by the NEOs.
     
    Outstanding Equity Awards at Fiscal 20092012 Year-End
     
    OPTION AWARDSSTOCK AWARDS
    Equity
    Incentive    Equity
    PlanEquityIncentive
    Awards:IncentivePlan Awards:
    Number ofPlan Awards:Market or
    Number ofNumber ofSecurities      Number ofPayout Value
    SecuritiesSecuritiesUnderlyingMarket ValueUnearnedof Unearned
    UnderlyingUnderlying Unexercisedof Shares ofShares orShares or
    UnexercisedUnexercised Unearned OptionStock thatother Rightsother Rights
    GrantOptions #Options #OptionsExerciseOptionhave notthat have notthat have not
    Name   Date (1)   Exercisable   Unexercisable   #(2)   Price ($)   Expiration Date   vested ($)   vested #   vested ($)
    Kevork Hovnanian————————— 
     
    Ara Hovnanian03/13/00250,000——$2.883/12/2010  —  ——
    03/13/01250,000——$6.35 3/12/2011—— —
    11/06/01500,000—— $5.5811/5/2011———
    11/13/02600,000—$15.9011/12/2012———
     06/13/08 — 375,000—$6.466/12/2018———
    6/12/09—375,000 375,000$2.556/11/2019———
     
    J. Larry Sorsby03/21/0040,000——$2.973/20/2010———
    03/01/0150,000——$5.352/28/2011———
    11/06/0150,000——$5.5811/5/2011———
    11/08/0250,000—$16.3511/7/2012———
    06/13/08—75,000—$6.466/12/2018———
    6/12/09—75,00075,000$2.556/11/2019———
     
    Paul Buchanan08/28/0015,000——$3.288/27/2010———
    03/18/0215,000——$12.133/17/2012———
    06/13/0815,000——$6.466/12/2018———
    6/12/0925,000——$2.556/11/2019———
     
    Peter Reinhart08/28/005,000——$3.288/27/2010———
    03/18/0215,000——$12.133/17/2012———
    06/13/0815,000——$6.466/12/2018———
    6/12/0925,000——$2.556/11/2019———
     
    David Valiaveedan(3)10/31/05—————38   $149   
    10/31/07—————1,895$7,409
    10/31/08——————7,385$28,875
    6/13/08—7,500—$6.466/12/2018   $3,257   ——
    6/12/09—13,125—$2.556/11/2019$5,701——
       OPTION AWARDS  STOCK AWARDS 
    Name
    Grant
    Date (1)
    		 
    Number of
    Securities
    Underlying
    Unexercised
    Options #
    Exercisable
    		  
    Number of
    Securities
    Underlying
    Unexercised
    Options #
    Unexercisable
    		  
    Equity
    Incentive
    Plan
    Awards:
    Number of
    Securities
    Underlying
    Unexercised
    Unearned
    Options #
    		  Option Exercise Price ($)  
    Option
    Expiration Date
    		  
    Number of Shares or Units of
    Stock that
    have not
    vested (#)
    		  
    Market Value
    of Shares or Units of
    Stock that
    have not
    vested ($)
    		  
    Equity
    Incentive
    Plan Awards:
    Number of
    Unearned
    Shares or
    other Rights
    that have not
    vested (#)
    		  
    Equity
    Incentive
    Plan Awards:
    Market or
    Payout Value
    of Unearned
    Shares or
    other Rights
    that have not
    vested ($)
    		 
    Ara Hovnanian (4)06/13/08  281,250   93,750   —  $6.46  06/12/18   —  $—   —   $—  
     06/12/09  375,000(2) 375,000(2) —  $2.55  06/11/19   —  $—   —   $—  
     06/11/10  93,750   281,250   —  $4.73  06/10/20   —  $—   1,385,970(3) $5,959,671(3)
     06/10/11  —   —   337,500(5)$1.93  06/09/21   —  $—   12,500(5) $53,750  
     06/08/12  —   600,000   —  $2.88  06/07/22   —  $—   —   $—  
                                           
    J. Larry Sorsby (4)06/13/08  56,250   18,750   —  $6.46  06/12/18   —  $—   —   $—  
     06/12/09  75,000(2) 75,000(2) —  $2.55  06/11/19   —  $—   —   $—  
     06/11/10  18,750   56,250   —  $4.73  06/10/20   —  $—   507,400(3) $2,181,820(3)
     06/10/11  —   —   67,500(5)$1.93  06/09/21   —  $—   2,500(5) $10,750  
     06/08/12  —   120,000   —  $2.88  06/07/22   —  $—   —   $—  
                                           
    Thomas J. Pellerito01/23/03  20,000   —   —  $15.95  01/22/13   —  $—   —   $—  
     06/13/08  10,000   —   —  $6.46  06/12/18   —  $—   —   $—  
     06/12/09  35,000   —   —  $2.55  06/11/19   —  $—   —   $—  
     06/11/10  50,000   —   —  $4.73  06/10/20   —  $—   422,833(3) $1,818,182(3)
     06/10/11  45,000   —   —  $1.93  06/09/21   —  $—   —   $—  
     06/08/12  80,000   —   —  $2.88  06/07/22   —  $—   —   $—  
                                           
    Brad G. O’Connor06/13/08  11,250   3,750   —  $6.46  06/12/18   —  $—   —   $—  
     10/31/08  —   —   —  $—   —   —  $—   2,621   $11,270  
     06/12/09  12,500   12,500   —  $2.55  06/11/19   —  $—   —   $—  
     06/11/10  3,750   11,250   —  $4.73  06/10/20   —  $—   118,393(3) $509,090(3)
     06/10/11  —   13,500   —  $1.93  06/09/21   500  $2,150   —   $—  
     06/08/12  —   20,000   —  $2.16  06/07/22   —  $—   —   $—  
                                           
    David G. Valiaveedan06/13/08  5,625   1,875   —  $6.46  06/12/18   206  $886   —   $—  
     10/31/08  —   —   —  $—   —   —  $—   1,844   $7,929  
     06/12/09  6,564   6,561   —  $2.55  06/11/19   728  $3,130   —   $—  
     06/11/10  2,813   8,437   —  $4.73  06/10/20   937  $4,029   114,165(3) $490,910(3)
     06/10/11  —   11,250   —  $1.93  06/09/21   1,250  $5,375   —   $—  
     06/08/12  —   15,000   —  $2.16  06/07/22   —  $—   —   $—  

    (1)(1)The options listed above that were granted prior to 2007 vest 25% per year beginning onrepresented in the third anniversary of the date of grant. The options listed above that were granted after 2007table (except as discussed in footnotes (2) and (5) below) vest 25% per year beginning on the second anniversary of the date of grant provided, however, thatexcept for Mr. Pellerito whose January 23, 2003 option grant vested 25% per year beginning on the first anniversary of the date of grant. In each case, upon termination due to death, disability or qualified retirement, (as defined under “Stock Grants”), the options, to the extent not previously vested and exercised, shall immediatelywould become fully vested and exercisable. All restricted stock unitThe RSU awards represented in the table vest 25% per year beginning on the second anniversary of the date of grant provided, however, thatgrant. In each case, upon termination due to death, disability or qualified retirement, (as defined under “Stock Grants”), but only if such retirement occurs on or after the first anniversary of the date of the grant, the restricted stock units,RSUs, to the extent not previously vested and distributed, willwould become fully vested and distributable. Currently, Messrs. Buchanan and Reinhart areMr. Pellerito is the only NEOs with option or restricted stock unit grantsNEO who qualifyis retirement eligible and qualifies for accelerated vesting on the basis of retirement.
    (2) Therefore, all of Mr. Pellerito’s outstanding options have been treated as immediately vested, and his RSUs are treated as vested on the first anniversary of the grant date for purposes of this table.  In connection with the amendments to their options and RSUs awarded in fiscal 2011 described under footnote (5) below, Messrs. Hovnanian and Sorsby agreed to eliminate accelerated vesting of such RSUs on the basis of qualified retirement.  In addition, following fiscal 2011 year-end, the Company entered into change in control severance agreements with Messrs. O’Connor and Valiaveedan pursuant to which their unvested options would become fully vested and exercisable if they are terminated under specified conditions following a change in control of the vesting conditions,Company.  All stock option and RSU grants were made in the form of Class A Common Stock except for the CEO whose grants were made in the form of Class B Common Stock.
    44
    		(2)Included in these numbers are 375,000 and 75,000 performance-based options for Mr. Hovnanian and Mr. Sorsby, respectively (50% of the options reflected in each column).  These performance-based options follow the same time vesting schedule as standard stock options, provided that the Committee determined that (1) the Company’s EBITDA for fiscal 2009 was at least $200,000,000 greater than the Company’s EBITDA for fiscal 2008 and (2) the Company’s EBITDA for fiscal 2010 was at least $300,000,000 greater than the Company’s EBITDA for fiscal 2008. For this purpose, “EBITDA” was defined as the Company’s consolidated earnings before interest expense, income taxes, depreciation and amortization (but including inventory impairment loss and land option write-offs and gain on extinguishment of debt), determined in a manner consistent with the Company’s ordinary course practices for quarterly press release financial reporting purposes. At the end of fiscal 2009, the Committee determined that the first performance hurdle was achieved since the Company’s EBITDA for fiscal 2009 was at least $200,000,000 greater than in fiscal 2008.  At the end of fiscal 2010, the Committee determined that the second performance hurdle was achieved since the Company’s EBITDA for fiscal 2010 was at least $300,000,000 greater than in fiscal 2008.

    (3)Represents the number and value of shares underlying the LTIP awards granted on June 11, 2010.  Because performance through the end of fiscal 2012 was between the target and maximum levels, the number and value of shares underlying the awards are based on maximum performance.  There is no assurance that the LTIP awards will not vestbe earned at the levels shown above, and actual awards could be zero if certain financialthe performance goals are not met as described under “Fiscal 2009 Stock Option Awards” above.achieved.
     

    (4)In October 2011, in the interest of reducing the Company’s overall shareholder dilution, Messrs. Hovnanian and Sorsby voluntarily cancelled all of the outstanding options from their 2001 and 2002 grants to further reduce (as they did in fiscal 2008) a portion of the equity reserve “overhang” under the Company’s equity compensation plans.  As a result, the total number of shares of common stock available for future issuance was reduced by 1,200,000 shares (1,100,000 and 100,000, for the options cancelled by Mr. Hovnanian and Mr. Sorsby, respectively).

    (3)(5)The amounts listedIn February 2012, these awards were amended to require that, as a condition of vesting, the Company’s Adjusted EBITDA must exceed “fiscal 2011 actual EBITDA” for Mr. Valiaveedan under the “Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares or other Rights that have not vested” columntwo consecutive fiscal years, in the table above represent unvested deferred share awards grantedcase of options, during the option term and, in the case of RSUs, prior to fiscal year 2009. Deferred share awards vestthe tenth anniversary of the grant date.  Regardless of when the performance criteria are met, vesting will not occur sooner than 25% per year beginning on the second November 1st followinganniversary of the fiscal year for which the award was granted provided, however, if the grantee either attains age 58 or completes 20 years of service with the Company, the grantee would become immediately vested in 100% of his then unvested Deferred Share Award upon the later of (1) the January 15th following the fiscal year for which the award was granted or (2) the date the Grantee attains age 58 or completes 20 years of service with the Company. Currently, Mr. Valiaveedangrant date.  For this purpose, “fiscal 2011 actual EBITDA” is the only NEO who has not achieved the age or service necessaryamount from our consolidated financial statements for the accelerated vestingyear ended October 31, 2011.  Adjusted EBITDA will be based on EBITDA from the consolidated financial statements for the applicable fiscal year-end, excluding inventory impairment losses and land option write-offs and gains or losses on extinguishment of his deferred share awards.debt.  At the end of fiscal 2012, the Committee determined that the Company’s Adjusted EBITDA exceeded fiscal 2011 actual EBITDA and that the performance criteria of “two consecutive fiscal years” had not yet been met.
     
    (IV)
    45
    The following table shows the total value of all unexercised stock options (exercisable and unexercisable) that each of the NEOs held at the end of fiscal 2012:

    Value of Outstanding Option Awards at Fiscal 2012 Year-End (Supplemental Table)
    Name Grant Date Number of Securities Underlying Unexercised Options Exercisable (#) 
    Value of Unexercised In The Money Options Exercisable
    ($) (a)
    		 Number of Securities Underlying Unexercised Options Unexercisable (#) Value of Unexercised In The Money Options Unexercisable ($) (a)
    Ara Hovnanian 06/13/08  281,250  $0  93,750  $0 
      06/12/09  375,000  $656,250  375,000  $656,250 
      06/11/10  93,750  $0  281,250  $0 
      06/10/11  —  $0  337,500  $799,875 
      06/08/12  —  $0  600,000  $852,000 
                      
    J. Larry Sorsby 06/13/08  56,250  $0  18,750  $0 
      06/12/09  75,000  $131,250  75,000  $131,250 
      06/11/10  18,750  $0  56,250  $0 
      06/10/11  —  $0  67,500  $159,975 
      06/08/12  —  $0  120,000  $170,400 
                      
     Thomas J. Pellerito 01/23/03  20,000  $0  —  $0 
      06/13/08  10,000  $0  —  $0 
      06/12/09  35,000  $61,250  —  $0 
      06/11/10  50,000  $0  —  $0 
      06/10/11  45,000  $106,650  —  $0 
      06/08/12  80,000   $113,600  —   $0 
                      
    Brad G. O’Connor 06/13/08  11,250  $0  3,750  $0 
      06/12/09  12,500  $21,875  12,500  $21,875 
      06/11/10  3,750  $0  11,250  $0 
      06/10/11  —  $0  13,500  $31,995 
      06/08/12  —  $0  20,000  $42,800 
                      
    David G. Valiaveedan 06/13/08  5,625  $0  1,875  $0 
      06/12/09  6,564  $11,487  6,561  $11,482 
      06/11/10  2,813  $0  8,437  $0 
      06/10/11  —  $0  11,250  $26,663 
      06/08/12  —  $0  15,000  $32,100 

    (a)Based on the difference between the closing market price of the Company’s Class A Common Stock on the NYSE at October 31, 2012 and the exercise price of the options.
    46
    (4) OPTION EXERCISES AND STOCK VESTED IN FISCAL 2009
    2012
    The following table discloses information with respect to stock options exercised by the NEOs in fiscal 20092012 and stock awards held by them that vested in fiscal 2009:2012:
     
    Option Exercises and Stock Vested in Fiscal 20092012
     
    Option AwardsStock Awards
    Number ofNumber of
    Shares AcquiredValue RealizedShares AcquiredValue Realized
    on Exerciseon Exerciseon Vestingon Vesting
    Name(#)     ($) (1)     (#)     ($)
    Kevork S. Hovnanian—— ——
    Ara K. Hovnanian (2)150,000 $645,000117,399 $204,274 
    J. Larry Sorsby (3)——42,764$74,409
    Paul W. Buchanan— —15,348$27,756
    Peter S. Reinhart (4)——11,320$20,747
    David G.Valiaveedan——673$2,921
      Option Awards  Stock Awards
      
    Number of
    Shares Acquired
    on Exercise
    		  
    Value Realized
    on Exercise
    		  
    Number of
    Shares Acquired
    on Vesting
    		  
    Value Realized
    on Vesting
    Name  (#)  ($)   (#)  ($)
    Ara K. Hovnanian    —   —   —  —     
    J. Larry Sorsby   —   —   —  —     
    Thomas J. Pellerito  —   —   1,667  $3,517 (1) 
    Brad G, O’Connor    —   —   3,779  $5,083 (2)
    David G. Valiaveedan   —   —   3,365  $5,180 (2)
    (1)(1)Represents 1,667 RSUs granted to Mr. Pellerito in fiscal 2011 that were considered vested in fiscal 2012 due to Mr. Pellerito’s “retirement eligibility,” but that were not delivered in fiscal 2012.  These RSUs had a market value of $3,517 as of June 11, 2012, based on the closing price for shares of Class A Common Stock on the first business day after the June 10, 2012 deemed vesting date.
    (2)Based on the difference between theclosing market price of the Company’sCompany's Class A Common Stock on the NYSE at the time of exercise of the option and the exercise price of the option.
    (2)Option awards were exercised on the date the grant was to expire. Upon vesting, 117,399 stock awards shares of the Company’s Class B Common Stock were deferred into the Company’s nonqualified deferred compensation plan for executives (“EDCP”) in accordance with Mr. Hovnanian’s prior election.
    (3)Upon vesting, 42,764 stock awards shares of the Company’s Class A Common Stock were deferred into the Company’s nonqualified deferred compensation plan for executives (“EDCP”) in accordance with Mr. Sorsby’s prior election.
    (4)Upon vesting 10,070 stock awards shares of the Company’s class A Common Stock were deferred into the Company’s nonqualified deferred compensation plan for executives (“EDCP”) in accordance with Mr. Reinhart’s prior election.vesting.



    (V)(5) NONQUALIFIED DEFERRED COMPENSATION FOR FISCAL 2009
    2012
    The following table provides a summary of the NEOs’ participation in the Company’s nonqualified executive deferred compensation plan (“EDCP”) during fiscal 2009. Executives may defer both salary and performance-based bonus award payments2012.  No deferrals under the EDCP. Mr. K. HovnanianEDCP were permitted in fiscal 2012.  Messrs. O’Connor and Mr. Valiaveedan didare not eligible to participate in the EDCP.  For Mr. Buchanan and Mr. Reinhart,Pellerito, the table also provides information regarding RSUs that were considered to have vested in a prior fiscal year due to theirhis “retirement eligibility” because of age and/or years of service, but upon which the underlying shares of Class A Common Stock have not yet been delivered.
     
    Nonqualified Deferred Compensation for Fiscal 20092012
     
    ExecutiveRegistrantAggregateAggregate Balance
    Contributions inContributions inAggregate Earnings inWithdrawals/at Last Fiscal
    Name Last Fiscal Year (1)     Last Fiscal Year (2)     Last Fiscal Year (3)     Distributions (4)     Year (5) 
    Executive
    Contributions in
    Last Fiscal Year
    		  
    Registrant
    Contributions in
    Last Fiscal Year (1)
    		  
    Aggregate
    Earnings
    in
    Last Fiscal
    Year (2)
    		  
    Aggregate
    Withdrawals/
    Distributions (3)
    		  
    Aggregate Balance at
    Last Fiscal
    Year (4)
    		 
    Kevork S. Hovnanian—————
    Ara K. HovnanianAra K. Hovnanian$214,360       $10,086       ($31,186)$85,240 $3,388,883 $—  $—  $990,293  $181,968  $1,469,486 
    J. Larry SorsbyJ. Larry Sorsby$79,025 $4,615 ($35,269)$38,418$752,292 $—  $—  $550,270  $—  $827,329 
    Paul W. Buchanan$2,601$2,601 ($15,524)$26,032$160,803 
    Thomas J. Pellerito $—  $—  $—  $—  $— 
    —— ($3,563) $3,225$14,663 $—  $3,517  $6,678  $1,851  $10,741 
    Peter S. Reinhart$20,308$2,787 ($10,291)$59,611$—
    —— ($3,563)$3,225$14,663
    Brad G. O’Connor $—  $—  $—  $—  $— 
    David G. ValiaveedanDavid G. Valiaveedan—————  $—  $—  $—  $—  $— 

    (1)(1)“Executive ContributionsRepresents 1,667 RSUs granted to Mr. Pellerito in Last Fiscal Year” Column. This column represents (A) any deferrals of cash compensation by the NEO (including deferrals in excess of an NEO’s maximum 401(k) contribution amount (“401(k) excess” amount), and (B) any deferred stock award which may have becomefiscal 2011 that were considered vested in fiscal 2009 and was elected by the NEO to be deferred further under the EDCP. For fiscal 2009, Mr. A. Hovnanian, Mr. Sorsby and Mr. Reinhart deferred 117,399 shares, 42,764 shares, and 10,070 shares, respectively,2012 with thea market valuesvalue of $204,274, $74,409, and $17,522, respectively,$3,517 as of June 11, 2012, based on the closing price for shares of Class A Common Stock on the first business day after the June 10, 2012 deemed vesting date. The other NEOs’ contributions here principally represent 401(k) excess amounts which were deferred under the EDCP and which were included in the “Salary” column of the Summary Compensation Table. In addition, contributions under the EDCP also included deferrals of cash bonus amounts included in the “Bonus” or “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table.

     (2)
    (2)
    		“Registrant Contributions in Last Fiscal Year” Column. This column represents the Company’s matching contributions to the accounts of the NEOs in fiscal 2009 in respect of the executive’s contributions. These values are also reflected in the “All Other Compensation” column of the Summary Compensation Table. See footnote (5) to the Summary Compensation Table.
    (3)“Aggregate Earnings in Last Fiscal Year” Column. Column.This column represents the unrealized earnings/(losses) of the EDCP’s total “account balance” as described in the narrative below.account balance. For Mr. Buchanan and Mr. Reinhart,Pellerito, the second row under their nameshis name represents earnings/(losses) on the undelivered portion of the shares of Class A Common Stock underlying theirhis RSUs that had been considered vested in a prior fiscal year, which earnings/(losses) have been “realized” only to the extent of the shares delivered during fiscal 2009.2012.  Also includes earnings/(losses) on the 1,667 RSUs that were considered vested in fiscal 2012.  No such earnings are considered above-market or preferential and, accordingly, are not included in the Summary Compensation Table.
    47
     (3)
    (4)
    		“Aggregate Withdrawals/Distribution” Column. Column.This column represents the payouts or distributions to the NEOs of vested amounts of deferred compensation pursuant to their elections. For Mr. Buchanan and Mr. Reinhart,Pellerito, the second row under their nameshis name represents the value “realized” upon the delivery of the firstthird 25% of the shares of Class A Common Stock underlying theirhis RSUs that had been considered vested in a prior fiscal year, based upon the closing market price of the Company’s Class A Common Stock on the NYSE aton the timedate of delivery.
     (4)
    (5)
    “Aggregate Balance at Last Fiscal Year” Column.This For Messrs. Hovnanian and Sorsby, this column represents the net balance of their EDCP Deferred Share Deferral accounts based on the NEOs’ EDCP accountsvalue of 341,741 and 192,402 deferred shares, respectively, as of October 31, 2009 based on an aggregation of all sub-accounts (discussed below). The majority of such balances reflects executive and Company contributions that were included in Summary Compensation tables in previous years.2012. For Mr. Buchanan and Mr. Reinhart,Pellerito, the second row under their nameshis name represents the market value of the remaining undelivered portion of the shares of Class A Common Stock underlying theirhis RSUs granted in fiscal 2011 that had beenwere considered vested in a prior fiscal year,2012 (1,667 RSUs) and the remaining undelivered shares underlying his RSUs granted in fiscal 2008 that were considered vested in fiscal 2009 (831 RSUs), based upon the closing market price of the Company’s Class A Common Stock ofon the NYSE as of October 30, 2009, the last trading day prior to fiscal year-end.31, 2012. The grant date fair value of these shares ($80,438) is includedthe 1,667 RSUs that were considered vested in fiscal 2012 was $3,217, which amount was reported in the Summary Compensation Table in a previous year.fiscal 2011.  The grant date fair value of the remaining undelivered shares that were considered vested in fiscal 2009 was $5,368. Because these shares were awarded to Mr. Pellerito in fiscal 2008 prior to his becoming an NEO, this grant was not reflected in the Summary Compensation Table in fiscal 2008.


    Narrative to the Non-QualifiedNonqualified Deferred Compensation Table for Fiscal 20092012 Table
     
    Total Account Balances
    The EDCP’s total account balance is equal to the sum of (1) the “Deferral Account” balance, (2) the “Company Contribution Account” balance and (3) the “Deferred Share Deferral Account” balance. The “Deferral Account” balance amount includes that portion of a participant’s annual base salary, cash bonus and any “401(k) excess” contribution amount, as elected by the participant, that is deferred in accordance with the EDCP’s provisions. The “Company Contribution Amount” balance consists of the annual company matching contribution amounts under the plan. The “Deferred Share Deferral Account” balance includes the value of vested stock awarded under any Company stock incentive plan for which shares may have been deferred under the EDCP.Upon a termination of employment before retirement, EDCP account balances generally are paid in a lump sum during the 60-day period immediately following the last day of the calendar quarter of termination. Upon a termination of employment due to retirement, EDCP account balances for Messrs. Hovnanian and Sorsby will be paid in a lump sum no earlier than six months after the date of retirement or in installments over 2 to 15 years.  In the event of Mr. Pellerito’s termination of employment for any reason, including death, disability or qualified retirement, all undelivered shares of Class A Common Stock underlying his RSUs that have been considered vested will be delivered.  See footnote (4) to the “Nonqualified Deferred Compensation for Fiscal 2012” table above.
     
    EDCP’s Election Options
        In connection with the cash payments deferred under the EDCP, a participant may elect one or more of the “Measurement Funds” available under the EDCP, for the purpose of crediting or debiting additional amounts to his or her Account Balance:
     
    Fund ClassMeasurement Fund
    Money Market FundVanguard VIF Money Market
    IncomePIMCo (VIT) Total Return Bond
    IncomeVanguard VIF Hi-Yield Bond
    BalancedVanguard VIF Balanced
    Large GrowthVanguard VIF Capital Growth
    Large ValueT. Rowe Price Equity Income Portfolio
    Mid CapT. Rowe Price Mid-Cap Growth
    Small/Mid ValueFirst Eagle Overseas
    Small ValueRoyce Micro-Cap
    Small GrowthVanguard VIF Small Company
    Aggressive-GrowthINVESCO (VIF) Dynamics
    Foreign Large BlendT. Rowe Price International
    48



    (VI)(6) POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL TABLE
    The following table summarizes payments and benefits that would be payable to each of the NEOs in the event of their termination of employment or upon the occurrence of a change in controlchange-in-control (“triggering event”). For purposes of this table, the effective date of termination is assumed to be October 30, 2009,31, 2012, the last business day of fiscal 2009.2012. The table does not include any payments that are described in the “Nonqualified Deferred Compensation for Fiscal 2012” table above.

    Potential Payments Upon Termination Or Change-In-Control Table
    Named Executive OfficerVoluntary TerminationInvoluntary TerminationChange in Control
    WithoutWith
    With GoodNormalWithoutWithDeath orQualifiedQualified
    Form of Compensation    Reason    Retirement    Cause    Cause    Disability    Termination    Termination
    Kevork S. Hovnanian
    Accelerated vesting of cash
           performance-based awards (1)$444,700$444,700$444,700—$444,700——
    Accelerated vesting of equity awards (2)———————
    Contractual Disability/Death Payment (3)———————
    Total$444,700$444,700$444,700—$444,700——
     
    Ara K. Hovnanian 
    Accelerated vesting of cash 
           performance-based awards (1)——$699,500 —$699,500——
    Accelerated vesting of equity awards (2)———— $510,000— —
    Contractual Disability/Death Payment (3)————$10,000,000——
    Total——$699,500—$11,209,500——
     
    J. Larry Sorsby
    Accelerated vesting of cash 
           performance-based awards (1)——$254,800—$254,800——
    Accelerated vesting of equity awards (2)— ———$102,000——
    Contractual Disability/Death Payment (3) ———————
    Total——$254,800—$356,800——
     
    Paul W. Buchanan
    Accelerated vesting of cash
           performance-based awards (1)$86,100$86,100$86,100—$86,100——
    Accelerated vesting of equity awards (2)$48,663$48,663$48,663
    Contractual Disability/Death Payment (3)———————
    Total$134,763$134,763$86,100—$134,763——
     
    Peter S. Reinhart
    Accelerated vesting of cash
           performance-based awards (1)$61,500$61,500$61,500—$61,500——
    Accelerated vesting of equity awards (2)$48,663$48,663——$48,663——
    Contractual Disability/Death Payment (3)———————
    Total$110,163$110,163$61,500—$110,163——
     
    David G. Valiaveedan
    Accelerated vesting of cash
           performance-based awards (1)——$67,500—$67,500——
    Accelerated vesting of equity awards (2)————$63,241——
    Contractual Disability/Death Payment (3)———————
    Total——$67,500—$130,741——
    Potential Payments Upon Termination Or Change-In-Control Table

    Named Executive Officer Voluntary Termination  Involuntary Termination  Change in Control (5) 
    Form of Compensation 
    With or Without Good
    Reason
    		  
    Normal
    Retirement
    		  
    Without
    Cause
    		  With Cause  Death or Disability  
    Without
    Termination
    		  With Involuntary Termination Other Than for Cause or Termination with Good Reason 
    Ara K. Hovnanian                     
    Accelerated vesting of annual bonus awards (1)  —   —  $949,500   —  $949,500   —   — 
    Accelerated vesting of equity awards (2)  —   —   —   —  $2,361,875   —   — 
    Accelerated vesting of LTIP awards (3)  —   —   —   —  $2,634,177   —   — 
    Contractual disability/death payment (4)  —   —   —   —  $10,000,000       — 
    Cash severance payment  —   —   —   —   —   —   — 
    Accrued and unpaid vacation (6)  —   —   —   —   —   —   — 
    Total  —   —  $949,500   —  $15,945,552   —   — 
                                 
    J. Larry Sorsby                            
    Accelerated vesting of annual bonus awards (1)  —   —  $350,000   —  $350,000   —   — 
    Accelerated vesting of equity awards (2)  —   —   —   —  $472,375   —   — 
    Accelerated vesting of LTIP awards (3)  —   —   —   —  $964.370   —   — 
    Contractual disability/death payment  —   —   —   —   —   —   — 
    Cash severance payment  —   —   —   —   —   —   — 
    Accrued and unpaid vacation (6) $93,569  $
    93,569
    		  $
    93,569
    		  $
    93,569
    		  $
    93,569
    		   —  $
    93,569
    		 
    Total $
    93,569
    		  $
    93,569
    		  $443,569  $
    93,569
    		  $1,880,314   —  $
    93,569
    		 
                                 
    Thomas J. Pellerito                            
    Accelerated vesting of annual bonus awards (1) $250,000  $250,000  $250,000   —  $250,000   —   — 
    Accelerated vesting of equity awards (2)  —   
    —
    		   
    —
    		   
    —
    		   
    —
    		   —   — 
    Accelerated vesting of LTIP awards (3)  —   —   —   —  $803,640   —   — 
    Contractual disability/death payment  —   —   —   —   —   —   — 
    Cash severance payment  —   —   —   —   —   —   — 
    Accrued and unpaid vacation (6) $32,682  $
    32,682
    		  $
    32,682
    		  $
    32,682
    		  $
    32,682
    		   —  $
    32,682
    		 
    Total $282,682  $
    282,682
    		  $
    282,682
    		  $32,682  $1,086,322   —  $
    32,682
    		 
                                 
    Brad G. O’Connor                            
    Accelerated vesting of annual bonus awards (1)  —   —  $93,000   —  $93,000   —   — 
    Accelerated vesting of equity awards (2)  —   —   —   —  $110,090   —  $110,090 
    Accelerated vesting of LTIP awards (3)  —   —   —   —  $225,023   —   — 
    Contractual disability/death payment  —   —   —   —   —   —   — 
    Cash severance payment  —   —   —   —   —   —  $397,560 
    Accrued and unpaid vacation (6) $16,526  $
    16,526
    		  $
    16,526
    		  $
    16,526
    		  $
    16,526
    		   —  $
    16,526
    		 
    Total $
    16,526
    		  $
    16,526
    		  $109,526  $
    16,526
    		  $444,639   —  $524,176 
                                 
    David G. Valiaveedan                            
    Accelerated vesting of annual bonus awards (1)  —   —  $72,500   —  $72,500   —   — 
    Accelerated vesting of equity awards (2)  —   —   —   —  $91,595   —  $91,595 
    Accelerated vesting of LTIP awards (3)  —   —   —   —  $216,985   —   — 
    Contractual disability/death payment  —   —   —   —   —   —   — 
    Cash severance payment  —   —   —   —   —   —  $359,617 
    Accrued and unpaid vacation (6) $19,920  $
    19,920
    		  $
    19,920
    		  $
    19,920
    		  $
    19,920
    		   —  $
    19,920
    		 
    Total $
    19,920
    		  $
    19,920
    		  $92,420  $
    19,920
    		  $401,001   —  $471,132 

    For purposes of this table presentation, consideration of the forms of compensation or additional payments or benefits to an NEO in the event of a triggering event include:includes:
    49
     
    (1)
    Accelerated vesting of cash performance-basedannual bonus awards. According to the Company’s bonus program’s policies and procedures, the cash portion of an NEO’s total 2009fiscal 2012 performance-based bonus award is considered earned only if hean NEO is on the payroll and employed by the Company on the scheduled date that it is scheduled to be paid. However, if an NEO’s termination were due to retirement on or after age 58, a reduction in force, position elimination, death or disability, the NEO would be eligible for a prorated payment through his termination date, less any amounts previously paid. The values in the table represent 100% of the NEOs’ fiscal 20092012 bonuses that were payable no later than January 15, 2010.2013. Because Mr. Pellerito has reached age 58, any termination of his employment, other than for cause, would be considered a qualified retirement.

    (2) 
    Accelerated vesting of equity awards. Under circumstances other than death, disability or qualified retirement, any unvested stock options and RSUs are cancelled in accordance with the Company’s stock option and RSU agreements.  Due to Mr. Pellerito's "retirement eligibility" under these agreements, all of Mr. Pellerito's outstanding options and RSUs are considered vested. The amounts in this table are calculated at the closing market price of the Company’s stock on October 31, 2012 ($4.30).

    (3) 
    Accelerated vesting of LTIP awards. Except in the case of death or disability, LTIP participants who terminate prior to the end of the performance period (October 31, 2013) forfeit all of their LTIP awards.  Therefore, no amounts are shown under “Voluntary Termination.” Similarly, no amounts are shown under “Involuntary Termination” except in the case of death or disability.  In the case of death prior to the end of the performance period, the participant is eligible to receive a prorated award payable in January 2014.  In the case of disability, the participant is eligible to receive a prorated award in accordance with the following schedule: (1) 50% of the award will become vested on October 31, 2013 and payable in January 2014, (2) 30% of the award will become vested on October 31, 2014 and payable in January 2015 and (3) 20% of the award will become vested on October 31, 2015 and payable in January 2016.  The values in the “Death or Disability” column represent two-thirds of the NEOs’ LTIP award based on performance through October 31, 2012 and, for the stock portion, based on the closing market price of the Company’s stock on October 31, 2012 ($4.30).

    (4) 
    Contractual Disability and Death Payment. The Company has an agreement with Mr. Hovnanian which provides that in the event of his disability or death during his employment with the Company he (or his designated beneficiary, estate or legal representative) will be entitled to receive a lump sum payment of $10 million.

    (5) 
    Change in Control. Following the end of fiscal 2011, the Company entered into change in control agreements with Messrs. O’Connor and Valiaveedan.  Such agreements provide that if, within two years of the occurrence of a change in control, the NEO is involuntarily terminated other than for cause or the NEO terminates for good reason (a material reduction in duties, title or responsibilities or any reduction in base salary), the NEO, upon execution of the Company’s standard release, would receive a lump sum cash payment equal to one year’s annual base salary plus the average of the last three year’s bonuses and become 100% vested in all outstanding stock options, RSUs and deferred shares granted prior to the change in control, to the extent not previously vested.  In addition, if the change in control occurs following the end of the LTIP performance period (October 31, 2013), the unpaid cash and stock portions of the LTIP award will continue to be paid to the NEO on the scheduled payout dates.  The amounts in the table reflect the additional payments that Messrs. O’Connor and Valiaveedan would have received had a change in control occurred and Messrs. O’Connor’s and Valiaveedan’s employment were terminated involuntarily other than for cause or for good reason on the last business day of the fiscal year.  Neither of these agreements provide for excise tax gross-ups.

    (6) 
    Accrued and Unpaid Vacation. Represents accrued but unpaid vacation payable upon termination for any reason.  Mr. Hovnanian does not accrue vacation.
     


    (2)Accelerated vesting of equity awards.
    (3)Contractual Disability and Death Payment.
    For purposes of this table, the following programs were also considered.
     
    (VII)
    ·
    Base salary continuation plan payments. The Company does not maintain such plans.
    ·
    Contractual disability/death payments. Only Mr. Hovnanian has this arrangement, which is described under footnote (4) above.
    ·
    Other perquisites and benefits. Except as noted above, there are no existing severance arrangements or policies which would extend perquisites or other benefits to the NEOs upon a triggering event that would not otherwise be also available to any employee of the Company.
    50
    NON-EMPLOYEE DIRECTOR COMPENSATION FOR FISCAL 2009
    The Committee annually reviews the compensation program for directors who are not employees of the Company and makes recommendations to the Board of Directors for their approval. The compensation program for non-employee DirectorsCommittee has not changed since fiscal 2006 when the Committee reviewed a studyperiodically engaged PM&P to conduct independent, comprehensive reviews of non-employee Director compensation, involvingincluding a review of Director compensation for the Company’s Peer Group prepared bywhich PM&P. In December 2008,&P last conducted in 2010.  After consideration of the compensation philosophy, the historical and marketplace compensation values and practices for Director compensation, as well as the anticipated Director time commitments and value added activities for fiscal 2012, the Committee recommended, and the Board of Directors approved, the following non-employee Director benefitscontinuation for fiscal 2009, which reflected no changes2012 of the annual retainers and meeting fees at the same levels as fiscal 2011.  These retainer and meeting fee levels have remain unchanged since fiscal 2006 except as discussed below:2005.
     
    For fiscal 2009, after consideration ofconsidered the grant date fair value of stock optionequity grants in comparison with historical grant values, and information on general industry and Peer Group director compensation levels as well asand practices, including a comprehensive review of non-employee Director compensation for the Peer Group prepared by the Company’s compensation department, and the added value and guidance the non-employee directorsDirectors provided in the strategic decisions concerning the Company’s capital structure and refinancing of the Company’s debt,debt.   Based on these factors, the Committee recommended and the Board of Directors approved additional stock option grantsfor fiscal 2012, the adoption of 10,000 annual stock optionsa fixed value approach for Director equity awards, which is described below.  The fixed value approach is a majority practice among general industry companies and 4,000 stock options for each committee on which a director serves.is intended to avoid significant fluctuations in non-employee Director compensation from year-to-year.  The total value of non-employee Director stock and stock option awards for fiscal 2009 approximates2012 was near the median of the Peer Group.
    In May 2012, the Committee also authorized the amendment of the Executive Deferred Compensation Plan (“EDCP”) to allow for general industry companies with similar revenue size.Director deferrals of retainers, meeting fees and restricted share units, including a choice to defer such compensation until termination from the Board of Directors.  Deferrals of stock retainers had been previously authorized under the EDCP.

    Below is a summary of non-employee Director compensation for fiscal 2012:
    ·Annual retainer of $40,000 with an additional retainer of $20,000 for each committee on which a Director serves (each paid 100% in cash);
    ·Annual fixed value restricted share unit award valued at $50,000 for each Director plus an additional $15,000 for each committee on which a Director serves, based on the closing stock price on the date of grant, provided that, for fiscal 2012, Directors were given the opportunity to elect prior to the grant date to receive stock options in lieu of restricted share units at a ratio 1.4 stock options per restricted share unit.
    ·Meeting fees of $3,000 per board meeting held in person, $2,000 per telephonic board meeting, $5,000 per committee meeting held in person and $2,500 per telephonic committee meeting.
    For fiscal 2013, the Committee determined that the amounts of the annual and committee retainer payments to non-employee Directors would remain the same but that, at each non-employee Director’s election, such payments may be made either 50% in cash and 50% in stock or 100% in cash.  The Committee will continue to reviewalso determined that meeting fees would remain the director compensation program annually to determine whether such additional stock option grants or other changes may be neededsame for fiscal 2010.2013.  In addition, the Committee determined that, for fiscal 2013, each Director would receive an annual fixed value restricted share unit award valued at $50,000 plus an additional $15,000 for each committee on which the Director serves, based on the closing stock price on the date of grant, provided that, Directors will be given the opportunity to elect prior to the grant date to receive an equivalent value of stock options in lieu of restricted share units.

    For additional information related to non-employee Director compensation, please also refer to the “Director Compensation for Fiscal 2009”2012” table below.
    51

    In conjunction with promoting high ethical standards for the distribution of equity-based incentives, the Committee also established the second Friday in January of each year as the date for payment of the non-employee director Board retainerDirector annual and committee retainers and the date for establishment of the stock price for purposes of calculation of the stock portion of the non-employee Director annual and committee retainers. The Committee also established the second Friday in June as the date of the annual stock option and RSU grants for all non-employee Directors of the Company, which is the same as the grant date for all employees. The Company’s practice of setting “fixed” equity award grant dates is designed to avoid 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.  Exercise prices of stock options granted to non-employee Directors were set at the closing price per share of the Company’s Class A Common Stock on the NYSE on the date the options were granted.

    The Board retainer.of Directors of the Company has adopted stock ownership guidelines, recommended by the Committee, which set forth recommended minimum amounts of stock ownership, directly or beneficially, for the Company’s non-employee Directors.  The guidelines provide that non-employee Directors are requested to achieve and maintain stock ownership amounts which equal 2x the total value of their annual retainer exclusive of any committee retainers (which represents $80,000 in total) within 5 years after they become subject to the guidelines. 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 New York Stock Exchange, so long as the non-employee Director does not sell any portion of the share amounts which were originally included in determining that the recommended thresholds were met.
     
    39On an annual basis, the Committee reviews adherence to the Company’s stock ownership guidelines, which are incorporated into the Company’s Corporate Governance Guidelines. The Company believes these guidelines further enhance the Company’s commitment to aligning the interests of non-employee Directors with those of its stockholders.  As of November 1, 2012, all incumbent, non-employee Directors were in compliance with these stock ownership guidelines.


    The following table summarizes the compensation of the Company’s Non-Employeenon-employee Directors related to their services in fiscal 2009.2012.
     
    Director Compensation for Fiscal 20092012

    Name 
    Fees Earned
    or Paid in Cash (1)
    		  Stock Awards (2)  Option Awards (3)  Non-Equity Incentive Plan Compensation  Change in Pension Value and Nonqualified Deferred Compensation Earnings  
    All Other
    Compensation
    		  Total 
    Robert B. Coutts $94,000  $65,001  $—   —   —   —  $159,001 
    Edward A. Kangas $201,500  $94,999  $—   —   —   —  $296,499 
    Joseph A. Marengi $89,000  $65,001  $—   —   —   —  $154,001 
    John J. Robbins $134,000  $—  $74,991   —   —   —  $208,991 
    Stephen D. Weinroth $206,500  $—  $109,600   —   —   —  $316,100 
     
    Change in
    Pension Value
    Feesand Nonqualified
    EarnedNon-EquityDeferred
    or Paid inStockOptionIncentive PlanCompensationAll Other
    NameCash (1)      Awards (2)      Awards (3)      Compensation      Earnings      Compensation      Total
    Robert B. Coutts$73,501$29,999$38,640———$142,140
    Edward A. Kangas$151,001 $49,999$60,720———$261,720
    Joseph A. Marengi$61,001 $29,999$38,640———$129,640
    John J. Robbins$91,001$29,999$38,640———$159,640
    Stephen D. Weinroth$146,001$49,999$60,720———$256,720

    (1)“Fees Earned or Paid in Cash” Column. The amounts in this column represent the combined value of fiscal 2009
     (1)
    “Fees Earned or Paid in Cash” Column. The amounts in this column represent the combined value of fiscal 2012 annual retainer and meeting fees paid in cash (including approximately 50% of the total annual retainer fee) as shown below. The remaining approximately 50% of the total annual retainer fee is paid in shares of the Company’s Class A Common Stock. For a full description of the annual retainer and meeting fees, share awards and stock option awards to non-employee directors, see the discussion preceding this table.
     
    52
    Total Fees Earned and Paid in Cash (Supplemental Table)

    Name FY12 Meeting Fees (a)  FY12 Annual Retainer Fees Cash Payment (represents 100% of the total Annual Retainer Fees)  Cash Total 
    Robert B. Coutts $34,000  $60,000  $94,000 
    Edward A. Kangas  $101,500  $100,000  $201,500 
    Joseph A. Marengi   $29,000  $60,000  $89,000 
    John J. Robbins             $74,000  $60,000  $134,000 
    Stephen D. Weinroth $106,500  $100,000  $206,500 
     
    FY09 Annual Retainer Fees
    FY09Cash Payment
    Meeting(represents 50% of the totalCash
    NameFees     Annual Retainer Fees) (a)     Total
    Robert B. Coutts$43,500$30,001$73,501
    Edward A. Kangas$101,000$50,001$151,001
    Joseph A. Marengi$31,000$30,001$61,001
    John J. Robbins$61,000$30,001$91,001
    Stephen D. Weinroth$96,000$50,001$146,001
    (a) Subject to rounding. 
    (a)FY12 Meeting Fees include fees due to the Audit Committee members for Audit Committee Earnings Press Release and Form 10-Q telephonic meetings that occurred between the third quarter of fiscal 2010 through the first quarter of fiscal 2012.  Such payments had not been paid to the Audit Committee members in prior years.  The amounts related to prior years are $30,000, $35,000 and $32,500 for Messrs. Kangas, Robbins and Weinroth, respectively.

    (2)“Stock Awards” Column. The amounts in this column represent the remaining 50% of the total annual retainer fee paid in shares of the Company’s Class A Common Stock for fiscal 2009 computed in accordance with FASB ASC Topic 718 as shown in the table below. The assumptions used in the calculation of these amounts are included in footnotes
    (2)
    “Stock Awards” Column. The amounts in this column represent the aggregate grant date fair value of RSUs awarded in fiscal 2012 and are computed in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts are set forth in Footnotes 3 and 15 to the Company’s audited financial statements for fiscal 2009 included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2012.

    Grant Date Fair Value for the fiscal year ended October 31, 2009.Total RSUs Granted to Non-Employee Directors in Fiscal 2012 (Supplemental Table)

    Name 
    Grant
    Date
    		  
    Number of RSUs
    Granted (a)
    		  
    Total Grant Date
    Fair Value of RSUs
    		 
    Robert B. Coutts 06/08/2012    30,093   $65,001 
    Edward A. Kangas 06/08/2012    43,981   $94,999 
    Joseph A. Marengi 06/08/2012    30,093   $65,001 
    John J. Robbins —    —   $— 
    Stephen D. Weinroth —    —   $— 
     
    Total Annual Retainer (Supplemental Table)
    (a)For fiscal 2012, non-employee Directors were granted RSUs valued at $50,000 on the grant date for serving on the Company’s Board of Directors and additional RSUs valued at $15,000 on the grant date for each Board committee on which the non-employee Director served provided that Directors were given the opportunity to elect prior to the grant date to receive options to purchase shares of Class A Common Stock in lieu of RSUs at a ratio 1.4 stock options per RSU.

     (3)
    “Option Awards” Column. The amounts in this column reflect options to purchase shares of Class A Common Stock awarded in fiscal 2012 and are based on the aggregate grant date fair value of the option awards computed in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts are set forth in Footnotes 3 and 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, 2012.
     
    FY09 Annual Retainer
    Fees Cash Payment
    FY09 Annual Retainer Fees(represents 50% of theTotal
    Stock Payment (representsNumbertotal Annual RetainerAnnual
    50% of the total Annualof SharesFees; also shown inRetainer for
    NameRetainer Fees) (a) (b)     Represented     footnote (1) above) (b)     Fiscal 2009
    Robert B. Coutts$29,99912,820$30,001$60,000
    Edward A. Kangas$49,99921,367$50,001$100,000
    Joseph A. Marengi$29,99912,820$30,001$60,000
    John J. Robbins$29,99912,820$30,001$60,000
    Stephen D. Weinroth$49,99921,367$50,001$100,000
    (a) Non-employee Director stock awards have no vesting restrictions and are valued as of the market value on the day of grant.
    (b) Subject to rounding.

    (3)“Option Awards” Column. The amounts in this column reflect stock options awarded in fiscal 2009 and are based on the grant date fair value of the option awards computed in accordance with FASB ASC Topic 718. Assumptions used in this calculation of these amounts are set forth in footnotes 3 and 15 to the Company’s audited financial statements for fiscal 2009 included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2009.
    53
     


    The following table discloses the grant date fair value (based on Black-Scholes option pricing model) for the total stock options granted to non-employee Directors in fiscal 2012:

    Grant Date Fair Value for the Total Stock Options Granted to Non-Employee Directors in fiscal 2009:Fiscal 2012
    (Supplemental Table)

    Name 
     
     
    Grant
    Date
    		  
    Number of Options
    Granted (a)
    		  Total Grant Date Fair Value of Options 
    Robert B. Coutts —    —   $— 
    Edward A. Kangas —    —   $— 
    Joseph A. Marengi —    —   $— 
    John J. Robbins 06/08/2012    42,130   $74,991 
    Stephen D. Weinroth 06/08/2012    61,573   $109,600 
     
    Number of OptionsOption Fair
    Granted (as of June 12,Value per ShareTotal Grant
    Non-Employee Director2009 grant date) (a)    at Grant Date    Date Fair Value
    Robert B. Coutts21,000$1.84$38,640
    Edward A. Kangas33,000$1.84$60,720
    Joseph A. Marengi21,000$1.84$38,640
    John J. Robbins21,000$1.84$38,640
    Stephen D. Weinroth33,000$1.84$60,720
    (a) For fiscal 2009, non-employee Directors were granted 15,000 stock options for serving on the Company’s Board of Directors and an additional 6,000 stock options for each Board committee on which the non-employee director served.
    (a)For fiscal 2012, non-employee Directors were given the opportunity to elect prior to the grant date to receive options to purchase shares of Class A Common Stock in lieu of RSUs at a ratio of 1.4 stock options per RSU.

     
    54
    The following table shows the total numbers of all unexercised stock options (exercisable and unexercisable)unvested RSUs that each of the non-employee directors held at the end of fiscal 2009:2012:

    Outstanding OptionNon-Employee Director Equity Awards at Fiscal 20092012 Year-End (Supplemental Table)
     
       OPTION AWARDS STOCK AWARDS
    Name 
    Grant Date
    (a)
    		 Number of Securities Underlying Unexercised Options Exercisable (#) 
    Value of Unexercised
    In The Money Options Exercisable
    ($) (b)
    		 Number of Securities Underlying Unexercised Options Unexercisable (#) 
    Value of Unexercised
    In The Money Options Unexercisable ($) (b)
    		 
    Option
    Exercise
    Price ($)
    Option
    Expiration Date
    		 Number of Shares or Units of Stock that have not vested (#) Market Value of Shares or Units of Stock that have not vested ($)
    Robert B. Coutts 06/13/08 7,000  $0  —  $0  $6.46 06/12/18 —  $— 
    Number ofNumber ofEquity Incentive 06/12/09 21,000  $36,750  —  $0  $2.55 06/11/19 —  $— 
    SecuritiesSecuritiesPlan Awards: 06/11/10 21,000  $0  —  $0  $4.73 06/10/20 —  $— 
    UnderlyingUnderlyingNumber of Securities 06/10/11 18,900  $44,793  —  $0  $1.93 06/09/21 —  $— 
    UnexercisedUnexercisedUnderlyingOption 06/08/12 —  $0  —  $0  $2.16 06/07/22 30,093  $129,400 
    Grant dateOptions #Options #Unexercised UnearnedExerciseOption                         
    Name(a)    Exercisable    Unexercisable    Options #    Price ($)    Expiration Date
    Robert B. Coutts6/13/082,3334,667—$6.466/12/18
    6/12/09—21,000—$2.556/11/19
    Edward A. Kangas6/13/083,667 7,333—$6.466/12/18 06/13/08 11,000  $0  —  $0  $6.46 06/12/18 —  $— 
    6/12/09—33,000 —$2.556/11/19 06/12/09 33,000  $57,750  —  $0  $2.55 06/11/19 —  $— 
     06/11/10 33,000  $0  —  $0  $4.73 06/10/20 —  $— 
     06/10/11 29,700  $70,389  —  $0  $1.93 06/09/21 —  $— 
     06/08/12 —  $0  —  $0  $2.16 06/07/22 43,981  $189,118 
                             
    Joseph A. Marengi6/13/08 2,3334,667—$6.466/12/18 06/13/08 7,000  $0  —  $0  $6.46 06/12/18 —  $— 
     06/12/09 21,000  $36,750  
    —
    		  $0  $2.55 06/11/19 —  $— 
     06/11/10 14,000  $0  7,000  $0  $4.73 06/10/20 —  $— 
     06/10/11 6,300  $14,931  12,600  $29,862  $1.93 06/09/21 466  $2,004 
    6/12/09—21,000—$2.556/11/19 06/08/12 —  $0  —  $0  $2.16 06/07/22 30,093  $129,400 
                             
    John J. Robbins11/06/015,000——$5.5811/05/11 06/13/08 7,000  $0  —  $0  $6.46 06/12/18 —  $— 
    6/13/082,3334,667—$6.466/12/18 06/12/09 21,000  $36,750  —  $0  $2.55 06/11/19 —  $— 
    6/12/09—21,000—$2.556/11/19 06/11/10 21,000  $0  —  $0  $4.73 06/10/20 —  $— 
     06/10/11 18,900  $44,793  —  $0  $1.93 06/09/21 —  $— 
     06/08/12 42,130  $90,158  —  $0  $2.16 06/07/22 —  $— 
                             
    Stephen D. Weinroth11/06/0110,000——$5.5811/05/11 06/13/08 11,000  $0  —  $0  $6.46 06/12/18 —  $— 
    6/13/083,6677,333—$6.466/12/18 06/12/09 33,000  $57,750  —  $0  $2.55 06/11/19 —  $— 
    6/12/09—33,000—$2.556/11/19 06/11/10 33,000  $0  —  $0  $4.73 06/10/20 —  $— 
     06/10/11 29,700  $70,389  —  $0  $1.93 06/09/21 —  $— 
     06/08/12 61,573  $131,766  —  $0  $2.16 06/07/22 —  $— 
    (a)
    		Stock options vest one-third per year beginning on the first anniversary of the date of grant. If prior to the stock option termination date the non-managementnon-employee Director ceases to be a member of the Board of Directors due to death, disability or Retirement, the stock option, to the extent not previously vested and exercised, immediately becomes fully vested and exercisable and remains exercisable until the earlier of (1) the stock option termination date and (2)exercisable.  RSUs vest one-third per year beginning on the first anniversary of the non-management Director’sdate of grant; provided, however, that, if the non-employee Director ceases to be a member of the Board of Directors due to death, disability or Retirement.Retirement, but only if such Retirement occurs on or after the first anniversary of the date of the grant, the RSUs, to the extent not previously vested and distributed, would become fully vested and distributable.  “Retirement” is defined as termination as 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 stock option and RSU grants were made in the form of Class A Common Stock. Currently, Messrs. Coutts, Kangas, Robbins and Weinroth qualify for accelerated vesting on the basis of their eligibility for retirement and, therefore, all options granted to these Directors are treated as immediately vested, and all RSUs are treated as vested on the first anniversary of the grant date for the purposes of this table.  



    (b)Based on the difference between the closing market price of the Company’s Class A Common Stock on the NYSE at October 31, 2012 and the exercise price of the options.
    55
    THE AUDIT COMMITTEE
     
    Membership, Independence, & Qualifications
    For fiscal 2012, Messrs. Kangas, as Chairman, Robbins and Weinroth arewere the members of the Audit Committee.  In the judgment of theThe 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 an “audit committee financial expert” in accordance with SEC regulations. With regard to Mr. Kangas, the Board of Directors considered his significant experience, expertise and background with regard to accounting matters, including the broad perspective brought by his experience in consulting to clients in many diverse industries. With regard to Mr. Robbins, the Board of Directors considered his significant experience, expertise and background with regard to accounting matters, which includes specialization in homebuilding companies. With regard to Mr. Weinroth, the Board of Directors considered his many years of experience as a Managing Member or partner in several merchant and investment banking companies, which are very valuable to the Company as it continues to evaluate its debt profile and capital structure and various financing and refinancing alternatives.
     
    Responsibilities of the Audit Committee & 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 was adopted in March 2000 and last amended on February 6, 2008. The Audit Committee Charter is available on the Company’s public website, www.khov.com, under “Investor Relations/Corporate Governance.”
     
    Policies & 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 other audit, review, or attest services. The Company’s independent registered public accounting firm will reportreports directly to the Audit Committee, and the Audit Committee is responsible for the resolution of disagreements between such firm and management regarding financial reporting.
    In fiscal year 2003, the Audit Committee established whistle blowing procedures as required by Section 301 of the Sarbanes-Oxley Act of 2002 and Section 303A.07(c)(iii) of the NYSE Corporate Governance Rules. These procedures are discussed in the Company’s Code of Ethics (Section IV.G.) which is available on the Company’s public website 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 October 15, 2009.
    November 13, 2012.
    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 services. The Audit Committee may revise the list of general pre-approved services from time to time, based on subsequent determinations. For fiscal year 2010,2012, there are four categories of services that have 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.
     
    56

    THE AUDIT COMMITTEE REPORT
    Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls.controls over financial reporting. In fulfilling its oversight responsibilities, the Audit Committee has reviewed and discussed the audited financial statements included infor the Annual Report on Form 10-Kfiscal year ended October 31, 2012 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 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 respective 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 Rule 3526 of the Public Accounting Oversight Board, “Communication with Audit Committees Concerning Independence,” and received by the Company, and
    • ·the overall scope and plans for such accounting firm’s respective 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 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 Statements on Auditing Standards No. 61, as amended (AICPA, Professional Standards Vol. I. AU Section 380), as adopted by the Public Company Accounting Oversight Board, which we refer to as the PCAOB, in Rule 3200T, other standards of the PCAOB, rules of the Securities and Exchange Commission, and other applicable regulations.
      The Audit Committee, under the Audit Committee under generally accepted auditing standards and under Statements on Auditing Standards No. 61, as amended (AICPA, Professional Standards Vol. I. AU Section 380), as adopted by the Public Company Accounting Oversight Board, which we refer to as the PCAOB, in Rule 3200T, other standards of the PCAOB, rules of the Securities and Exchange Commission, and other applicable regulations.
         The Audit Committee, as part of its Charter, reviews quarterly with management the Company’s annual audited financial statements and quarterly financial statements prior to their being filed with the SEC. In addition, theThe 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, 2009, which was filed with the SEC on December 22, 2009.2012.
     
    AUDIT COMMITTEE
    Edward A. Kangas, Chair
    John J. Robbins
    Stephen D. Weinroth



    Edward A. Kangas, Chair
    John J. Robbins
    Stephen D. Weinroth
    FEES PAID TO PRINCIPAL ACCOUNTANT

    Audit Fees
    The aggregate fees billed by Deloitte & Touche LLCLLP in each of fiscal years 20092012 and 20082011 for professional services rendered for the audit of our consolidated financial statements, 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 years 20092012 and 2008,2011, the audit of the effectiveness of the Company’s internal control over financial reporting as of October 31, 20092012 and 2008,2011, or 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 $2,761,000$2,995,940 and zero,$2,721,000, respectively. There were no fees billed by Ernst & Young LLP in fiscal 2012 for these audit services.  The aggregate fees billed by Ernst & Young LLP in each of fiscal years 2009 and 20082011 for these audit services were $370,000 and $3,689,000, respectively.$208,000.
     
    Audit-Related Fees
    The aggregate fees billed by Deloitte & Touche LLCLLP in each ofboth fiscal years 20092012 and 20082011 for assurance and related services that were reasonably related to performance of the audit or review of the Company’s consolidated financial statements and that are not reported under “Audit Fees” above were $3,000 and zero, respectively.$2,000. These services consisted of employee benefit plan audits, and accounting consultation. The aggregatefees were for electronic access to the Deloitte & Touche LLP Technical Library. There were no fees billed by Ernst & Young LLP in eacheither of fiscal years 20092012 and 20082011 for these audit relatedaudit-related services were $271,000 and $72,000, respectively..
     
    57
    Tax Fees
    The aggregate fees billed by Deloitte & Touche LLCLLP in each of fiscal years 20092012 and 20082011 for professional services rendered for tax compliance, tax advice and tax planning were $536,000$21,000 and $320,000,$22,000, respectively. The aggregate fees billed by Ernst & Young LLP in each of fiscal years 20092012 and 20082011 for these tax services were $185,000$33,000 and $590,000,$38,000, respectively.
     
    All Other Fees
    There were no fees billed for products and services provided by Deloitte & Touche LLC in fiscal year 2009 andLLP or by Ernst & Young LLP in eacheither of fiscal year 20092012 and fiscal year 2008,2011 other than the services described above.
     
    Pre-Approval Policies and Procedures
    All of the services covered under the captions “Audit Fees,” “Audit-Related Fees”,Fees,” “Tax Fees” and “All Other Fees” were pre-approved by the Audit Committee. For a discussion of the Audit Committee’s pre-approval policies and procedures, see “The Audit Committee” above.
     
    PRINCIPAL ACCOUNTANT INDEPENDENCE
    The Audit Committee has determined that the provision of all non-audit services performed by Deloitte & Touche LLCLLP and Ernst & Young LLP were compatible with maintaining the independence of each firm.
     
    CORPORATE GOVERNANCE
    The Corporate Governance and Nominating Committee is primarily responsible for reviewing the Company’s existing Corporate 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 adopted 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 has also adopted Corporate Governance Guidelines.
    The Company makes available to the public various corporate governance related information on its public website (www.khov.com) under “Investor Relations/Governance” and to any shareholder who requests such information in writing. Information on the website includes the Company’s Code of Ethics, Corporate Governance Guidelines (including the Related Person Transaction Policy) and Committee Charters includingof the Audit Committee, Charter, the Compensation Committee, Charter, and the Corporate Governance and Nominating Committee Charter.Committee.
     


    Shareholders, associates of the Company and other interested parties may communicate directly with the Board of Directors by corresponding to the address below. Correspondence will be discussed at the next scheduled meeting of the Board of Directors, or as indicated by the urgency of the matter.
     
    Attn: Board of Directors of Hovnanian Enterprises, Inc.
    c/o Mr. Edward A. Kangas, Director & Chairman of the Audit Committee
    Privileged & Confidential
    Hovnanian Enterprises, Inc.
    110 West Front Street
    P.O. Box 500
    Red Bank, N.J. 07701
     
    The Company’s non-employee Directors meet without management after each regularly scheduled meeting of the Board of Directors. The presiding Director is selected to preside at each meetingthese executive sessions by the directors in attendance.
    58

    Shareholders, associates of the Company and other interested parties may communicate directly with non-employee Directors as a group by corresponding to the address below. MembersFollowing this Annual Meeting and, assuming the election of all the director nominees, members of the non-employee Director group will include: Messrs. Coutts, Kangas, Marengi, RobbinsPagano and Weinroth. All such non-employee Directors are “independent” in accordance with NYSE rules.rules and as defined under the Company's Certificate of Incorporation. Mr. Kangas will report to all non-employee Directors any correspondence which is received by him as indicated by the urgency of the matter, or at the next scheduled meeting of non-employee Directors.
     
    Attn: Non-Employee Directors of Hovnanian Enterprises, Inc.
    c/o Mr. Edward A. Kangas, Director & Chairman of the Audit Committee
    Privileged & Confidential
    Hovnanian Enterprises, Inc.
    110 West Front Street
    P.O. Box 500
    Red Bank, N.J. 07701
     
    In addition, associates of the Company may anonymously report concerns or complaints via the K. Hovnanian Corporate Governance Hotline or by following the procedure discussed in the Company’s Code of Ethics.
     
    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 Executive Vice President and Chief Financial Officer, Mr. Sorsby (who is himself a member of the Board of Directors), is directly responsible for the Company’s Enterprise Risk Management function and reports both to the President, and 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, including the Senior Vice-President and GeneralVice President — Corporate Counsel, Vice-President ofVice President — Risk Management, Senior Vice-President ofVice President — Human Resources, Vice-President ofVice President — Chief Information Services, Vice-President ofOfficer, Vice President — Audit Services, including persons performing the functions of such officers, and others.
    On behalf of the Board of Directors, the Audit Committee plays a key role in the oversight of the Company’s Enterprise Risk Management function. In that regard, the CFO meets with the Audit Committee at least four times a year to discuss the 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. Finally, the CFO reports directly to the Board of Directors on at least an annual basis to apprise them directly of the Company’s Enterprise Risk Management efforts.
     
    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 do not provide guaranteed bonuses, nor have we awarded excessively large equity grants with unlimited upside but no downside risk;
    ·In recent years when ROACE bonuses were not attainable, bonuses based on net debt or EBITDA improvements have been capped based on specific dollar amounts;
    ·We maintain a balanced portfolio between long-term and short-term; fixed and variable; and cash and equity in our compensation program;
    ·A variety of performance measures are used in our short-term and long-term incentive plans;

    ·We do not provide lucrative severance packages or any supplemental pension plans;
    ·A large portion of our compensation program is tied to long-term and sustained company performance, and our LTIP grant requires a two-year holding period for full vesting even after awards are earned after a three-year performance period;
    ·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;
    ·Our CEO, CFO and COO are subject to our stock ownership and holding guidelines, discussed on page 36; and

    ·Our compensation programs do not provide high or inappropriate pay opportunities compared to our Peer Group and broad-based compensation survey data.
    59
    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. K.Kevork Hovnanian, and the day-to-day management direction of the Company under Mr. A.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 more than 30 years 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 will enablehas enabled him to carry on the tradition of a strong leader that has always marked this family-controlled company and to successfully navigate the Company through the current challenging economic environment, as well as any future challenges.  
    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.”
    Although the Board of Directors has not formally designated a lead independent Director, Mr. Kangas, the chairman of the Audit Committee, 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 pages 44 and 45.page 58.
     
    CERTAIN RELATIONSHIPS AND 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 Corporate Governance Guidelines and its 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 nominees, executive officer or greater than 5% shareholder or an immediate family member of any such person are prohibited, unless approved or ratified by the 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 (as defined in the Related Person Transaction Policy) to the Company’s GeneralCorporate 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 GeneralCorporate 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;
    • the benefit and perceived benefit (or lack thereof) to the Company;
    • opportunity costs of alternate transactions;
    • the materiality and character of the related person’s direct or indirect interest, and the actual or apparent conflict of interest of the related person; 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 Rule 10A-3 of the Exchange Act, if such non-employee director serves on the Audit Committee; (2) independence under the Company’s Amended Certificate of Incorporation; (3) status as an outside director under Section 162(m) of the Internal Revenue Code if such non-employee director serves on the Compensation Committee; or (4) status as a “non-employee director” under Rule 16b-3 of the Exchange Act if such non-employee director serves on the Compensation Committee.

    ·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 related person’s direct or indirect interest, and the actual or apparent conflict of interest of the related person; 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 Rule 10A-3 of the Exchange Act, if such non-employee director serves on the Audit Committee; (2) independence under the Company’s Certificate of Incorporation; (3) status as an “outside director” under Section 162(m) of the Internal Revenue Code if such non-employee director serves on the Compensation Committee; or (4) status as a “non-employee director” under Rule 16b-3 of the Exchange Act if such non-employee director serves on the Compensation Committee.
    60
    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.
     
    ·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 Corporate Governance Guidelines on our website at www.khov.com under “Investors Relations/Corporate Governance.”
     


    Relationships
    Mr. K. Hovnanian, the Chairman of the Board of Directors until his death on September 24, 2009, was the father of Mr. A. Hovnanian, the President and Chief Executive Officer and now the Chairman of the Board of Directors. Prior to November 4, 2009, Mr. A. Hovnanian was the President and Chief Executive Officer and Vice Chairman of the Board of Directors.Related Person Transactions
     
    Related Person Transactions
    The related transactions discussed below were entered into prior to the adoption of our Related Person Transaction Policy and were approved by the Board of Directors.
    During the year ended October 31, 2003, we entered into an agreement (as subsequently amended) to purchase land in California for approximately $31.1$31.4 million from an entity that is owned by Hirair Hovnanian, a family relative of our Chief Executive Officer and our former Chairman of the Board.Board and Chief Executive Officer. As of October 31, 2009,2012, we have an option deposit of $3.2$3.0 million related to this land acquisition agreement. In connection with this agreement, we also have consolidated $9.7 million in accordance with ASC 810-10, we no longer have any balance consolidated under “Consolidated inventory not owned” in the Consolidated Balance Sheets. Neither the Company nor the Chief Executive Officer nor the former Chairman of the Board and Chief Executive Officer has a financial interest in the relative’s company from whom the land was purchased. 

    The following transactions were reviewed, approved and ratified by the Board of Directors or by the Corporate Governance and Nominating Committee in accordance with our Related Person Transaction Policy:
    During the fiscal years ended October 31, 2012, 2011 and 2010, an engineering firm owned by Tavit Najarian, a relative of our Chairman of the Board and Chief Executive Officer, provided services to the Company totaling $0.9 million, $1.0 million and $1.3 million, respectively. Neither the Company nor the Chairman of the Board and Chief Executive Officer has a financial interest in the relative’s company from whom the services were provided.

    During the fiscal years ended October 31, 2011 and 2010, a real estate development firm owned by Mazin Kalian, a relative of our Chairman of the Board and Chief Executive Officer, provided consulting services to the Company totaling less than $0.1 million and $0.2 million, respectively, including significant travel related expenses.  The consulting services consisted primarily of negotiations, community design and cost analysis on a potential joint venture.   During the fiscal year ended October 31, 2012, there were no consulting services provided.  Neither the Company nor the Chairman of the Board and Chief Executive Officer has or had a financial interest in the relative’s company from whom the land was purchased.services were provided.

    During the year ended October 31, 2001, we entered into an agreement to purchase land from an entity that is owned by a family relative
    In November 2012, one of our Chief Executive Officerjoint ventures in which we have a 50% interest sold an option to acquire a parcel of land for approximately $5.5 million. The total cost to the buyer was approximately $11.1 million and on which the commission was paid. The son of Mr. Pellerito, one of our former Chairman ofexecutive officers, was employed by the Board, totalling $26.9 million. As of October 31, 2008, all of this property has been purchased,brokerage firm that handled the transaction and during fiscal 2008,received $145,710 as a commission in connection with the Company delivered the remaining four lots that were in inventory. Neither the Company nor the Chief Executive Officer nor the former Chairman of the Board has or hadtransaction.  Mr. Pellerito did not have a financial interest in the relative’s company from whombrokerage firm involved in the land was purchased.
    During the years ended October 31, 2009, 2008, 2007 and 2006, an engineering firm owned by a relative of our Chief Executive Officer and our former Chairmantransaction nor did he receive any portion of the Board provided servicescommission paid to the Company totalling $1.7 million, $2.6 million, $3.6 million, and $5.0 million, respectively. Neither the Company nor our Chief Executive Officer nor our former Chairman of the Board has or had a financial interest in the relative’s company from which the services were provided.
    In December 2005, we entered into an agreement to purchase land in New Jersey from an entity that is owned by family relatives of our Chief Executive Officer and former Chairman of the Board at a base price of $25 million. The land will be acquired in four phases over a period of 3 years from the date of acquisition of the first phase. On June 11, 2008, the parties amended the purchase agreement and closed title to 43 of the 86 homes in phase one. The purchase of the balance of phase one was deferred, but such purchase must occur simultaneously with the scheduled closing of any of the three remaining phases. The purchase prices for all phases are subject to an increase in the purchase price for the phase of not less than 7% per annum from February 1, 2008; a deposit in the amount of $500,000 has been made by the Company. On November 12, 2009, the parties closed title to 83 homes located in phase two. The purchase prices for all phases are subject to an increase in the purchase price for the phase of not less than 7% per annum compound interest increase from February 1, 2008; a deposit in the amount of $500,000 has been made by the Company. Neither the Company nor the Chief Executive Officer nor the former Chairman of the Board has or had a financial interest in the relatives’ company from whom the land will be purchased.his son.
     


    61
    IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON MARCH 16, 2010.12, 2013
     
    Our 20102013 proxy statement, the Company’s Annual Report to Shareholders for the year ended October 31, 20092012 (which is not deemed to be part of the official proxy soliciting materials), proxy cards (for Class A Common Stock shareholders and registered Class B Common Stock shareholders) and any amendments to the foregoing materials that are required to be furnished to shareholders are available online at www.proxyvote.com.
    www.proxyvote.com.
    For information on how to obtain directions to the Company’s 20102013 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, and in favor of the ratification of the selected independent registered public accounting firm, in favor of amending the Certificate of Incorporation to increase the number of authorized shares of Class A Common Stock, in favor of amending the Certificate of Incorporation to increase the number of authorized shares of Class B Common Stock, and in favor of the compensation of the Company’s named executive officers, and as recommended by the Board of Directors. All proxies will be voted as specified.
    Each share of Class A Common Stock entitles the holder thereof to one vote, and each share of Class B Common Stock entitles the holder thereof to ten votes.votes (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 the holders of a majority in voting power of all common stock represented in person or by proxy at the 2010 Annual Meeting, voting together.votes cast. All votes will be certified by the Inspectors of Election, who are employees of the Company. Abstentions and broker non-votes will have no effect on the vote for proposal one and proposal five because such shares are not considered votes cast. Abstentions will have no effect on the vote for proposalproposals two, three and four because such shares are not considered votes cast. Brokers may vote shares with respect to proposalproposals two, three and four in the absence of client instructions and thus there will be no broker non-votes with respect to proposal two.
    Under NYSE rules, brokers may not vote shares on the proposal to approve the Company’s Amended and Restated 2008 Stock Incentive Plan without specific instructions on that proposal from their customers. In addition, in order for the plan to be approved, NYSE rules require the affirmative vote of a majority of the shares of Class A Common Stock and Class B Common Stock, voting together, cast on the proposal, provided that a majority of the outstanding shares of common stock are voted on the proposal. Abstentions are considered votes cast under NYSE rules with respect to proposalproposals two, three and thus will have the same effect as a vote “against” the proposal.
    four.
    Notwithstanding the foregoing, the Company’s amended 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 amended Certificate of Incorporation) or any Permitted Transferee (as defined in the amended 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 amended 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 3 nor more than 20 business days prior to March 16, 2010.12, 2013. Proxy cards should be mailed to Vote Processing, c/o Broadridge Financial Solutions, Inc., 51 Mercedes Way, Edgewood, N.Y. 11717.
     


    62
    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 has no information 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 20112014 ANNUAL MEETING
     
         Shareholder proposals for inclusionUnder the SEC’s rules and regulations, any stockholder desiring to submit a proposal to be included in theour 2014 proxy materials relatedstatement must submit such proposal to us at our principal executive offices to the 2011 Annual Meetingattention of Shareholders must be received by the Companyour Secretary no later than October 4, 2010. Shareholder proposals submitted after December 16, 2010 willthe close of business on September 28, 2013.
    Our restated bylaws require timely notice of business to be considered untimelybrought before a shareholders’ meeting, including nominations of persons for purposeselection 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 SEC Rule 14a-4.the 2013 Annual Meeting (November 12, 2013) but not later than 90 days prior to such anniversary date (December 12, 2013), provided, however, that in the event that the date of the 2014 annual meeting 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 bylaws have other requirements that must be followed in connection with submitting director nominations and any other business for consideration at a shareholders’ meeting.
     
    By Order of the Board of Directors
    HOVNANIAN ENTERPRISES, INC.

    Red Bank, New Jersey
    February 1, 2010


    APPENDIX A
    AMENDED AND RESTATED
    2008 HOVNANIAN ENTERPRISES, INC.
    STOCK INCENTIVE PLAN
    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. Upon approval by the Company’s stockholders, the Plan is intended to supersede and replace the 1999 Hovnanian Enterprises, Inc. Stock Incentive Plan, as amended and restated prior to the Effective Date (the “1999 Plan”), and equity-based Awards that were previously granted under the 1999 Plan that remain outstanding shall be governed pursuant to the terms set forth herein.
    2. DEFINITIONS
    The following capitalized terms used in the Plan have the respective meanings set forth in this Section:
    (a) Act: The Securities Exchange Act of 1934, as amended, or any successor thereto.
    (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.
    (c) Award: An Option, Stock Appreciation Right or Other Stock-Based Award granted pursuant to the Plan (including, without limitation, Awards granted under the 1999 Plan).
    (d) Beneficial Owner: A “beneficial owner”, as such term is defined in Rule 13d-3 under the Act (or any successor rule thereto).
    (e) Board: The Board of Directors of the Company.
    (f) Change in Control:
    The occurrence of any of the following events:
    (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;
    (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 Sections 2(f) (i), (iii) or (iv) of the Plan 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;
    (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 would result 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
    (iv) the Company undergoes a complete liquidation of the Company or an agreement for 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.
    (g) Code: The Internal Revenue Code of 1986, as amended, or any successor thereto.
    (h) 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.
    (i) Company: Hovnanian Enterprises, Inc., a Delaware corporation, and any successors thereto.
    (j) 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.
    (k) Effective Date: February 6, 2008.
    (l) 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.
    (m) Family Member:
    (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;
    (ii) any spouse of such a person;
    (iii) any descendant of such a person;
    (iv) any spouse of any descendant of such a person; or
    (v) any trust for the benefit of any of the aforementioned persons.
    (n) ISO: An Option that is also an incentive stock option granted pursuant to Section 6(d) of the Plan.
    (o) LSAR: A limited stock appreciation right granted pursuant to Section 7(d) of the Plan.
    (p) 1999 Plan: The 1999 Hovnanian Enterprises, Inc. Stock Incentive Plan, as amended and restated prior to the Effective Date 1999.
    (q) Other Stock-Based Awards: Awards granted pursuant to Section 8 of the Plan.
    (r) Option: A stock option granted pursuant to Section 6 of the Plan.
    (s) Option Price: The purchase price per Share of an Option, as determined pursuant to Section 6(a) of the Plan.


    (t) 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.
    (u) Performance-Based Awards: Certain Other Stock-Based Awards granted pursuant to Section 8(b) of the Plan.
    (v) 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).
    (w) Plan: The 2008 Hovnanian Enterprises, Inc. Stock Incentive Plan.
    (x) Shares: Shares of common stock of the Company.
    (y) Stock Appreciation Right: A stock appreciation right granted pursuant to Section 7 of the Plan.
    (z) Subsidiary: A subsidiary corporation, as defined in Section 424(f) of the Code (or any successor section thereto).
    3. SHARES SUBJECT TO THE PLAN
    Subject to Sections 4, 6(f) and 9 of the Plan (and giving effect to the Company’s stock split on March 26, 2004), the total number of Shares which may be issued under the Plan pursuant to grants of ISOs or other Awards (inclusive of Shares previously issued under the 1999 Plan) is 16,972,128 and the maximum number of Shares for which Options, Stock Appreciation Rights, restricted Shares or restricted Share units may be granted during a fiscal year (inclusive of any such Awards previously granted under the 1999 Plan) to any Participant shall be 2,000,000. The Shares may consist, in whole or in part, of unissued Shares or treasury Shares. The issuance of Shares or the 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. Notwithstanding the forgoing, in the event that any Awards under the Plan terminate or lapse (or have terminated or lapsed) for any reason from and after November 1, 2007 (including, without limitation, due to a voluntary or involuntary forfeiture of such Awards), the number of Shares subject to such terminated or lapsed Awards shall not be available for future Award grants under the Plan and the total number of Shares available for issuance under the Plan shall instead be reduced by such number of Shares. The number of Shares available for issuance under the Plan may also be increased by utilizing Shares otherwise available for issuance under the terms of the Company’s Amended and Restated Senior Executive Short-Term Incentive Plan (the “STIP”), provided that any Shares so utilized shall reduce the number of Shares available for issuance under the STIP.
    4. ADMINISTRATION
    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), “outside directors” within the meaning of Section 162(m) of the Code (or any successor section 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 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 1,000,000 Shares (giving effect to the Company’s stock split on March 26, 2004, and otherwise subject to the provisions of Section 9 of the Plan) in each fiscal year to Participants who are (i) not subject to the rules promulgated under Section 16 of the Act (or any successor section thereto) or (ii) covered employees (or anticipated to become covered employees) as such term is defined in Section 162(m) of the Code; provided, however, that such chief executive officer shall notify the Committee of any such grants made pursuant to this Section 4.
    5. LIMITATIONS
    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.
    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:
    (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).
    (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. The Committee may, in its discretion, accelerate the date after which Options may be exercised in whole or in part. 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 accelerate the date after which Options may be exercised in whole or in part.
    (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.
    (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.
    (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 for 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; provided, however, that such actions shall be permitted to the extent approved by at least a majority of the Board’s “independent directors” (as defined for purposes of The New York Stock Exchange listed company rules). Any such approved action shall be treated as a grant of a new Award to the extent required under Sections 162(m), 422 or 424 of the Code (for individuals who are “covered employees” under Section 162(m) of the Code at the time of such action, or for stock options that are intended to retain their status as ISOs).
    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) Limited Stock Appreciation Rights. The Committee may grant LSARs that are exercisable upon the occurrence of specified contingent events. Such LSARs may provide for a different method of determining appreciation, may specify that payment will be made only in cash and may provide that any related Awards are not exercisable while such LSARS are exercisable. Unless the context otherwise requires, whenever the term “Stock Appreciation Right” is used in the Plan, such term shall include LSARs.
    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) 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 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 in a manner which is intended to be deductible by the Company under Section 162(m) of the Code (or any successor section thereto) (“Performance-Based Awards”). A Participant’s Performance-Based Award shall be determined based on the attainment of written performance goals approved by the Committee for a performance period established by the Committee (i) while the outcome for that performance period is substantially uncertain and (ii) no more than 90 days after the commencement of the performance period to which the performance goal relates or, if less, the number of days which is equal to 25 percent of the relevant performance period. 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) expense management; (viii) return on investment; (ix) improvements in capital structure; (x) profitability of an identifiable business unit or product; (xi) maintenance or improvement of profit margins; (xii) stock price; (xiii) market share; (xiv) revenues or sales; (xv) costs; (xvi) cash flow; (xvii) working capital; (xviii) changes in net assets (whether or not multiplied by a constant percentage intended to represent the cost of capital); and (xix) return on assets. The foregoing criteria may relate to the Company, one or more of its Affiliates or one or more of its divisions or units, or any combination of the foregoing, and may be applied on an absolute basis and/or be relative to one or more peer group companies or indices, or any combination thereof, all as the Committee shall determine. In addition, to the degree consistent with Section 162(m) of the Code (or any successor section thereto), the performance goals may be calculated without regard to extraordinary items. In any event, the performance goals


    shall be based on an objective formula or standard. The maximum amount of Shares that may be granted as subject to a Performance-Based Award denominated in Shares shall be 2,000,000 Shares per fiscal year for any Participant. The maximum amount payable in respect of a Performance-Based Award that is not denominated in Shares during a fiscal year to any Participant shall be equal to the greater of (x) $15,000,000 and (y) 2.5 percent (2.5%) of the Company’s income before income taxes, as reported in the Company’s audited consolidated financial statements for the year in respect of which the Performance-Based Award is to be payable or distributed, as applicable. The Committee shall determine whether, with respect to a performance period, the applicable performance goals have been met with respect to a given Participant and, if they have, shall so certify and ascertain the amount of the applicable Performance-Based Award. No Performance-Based Awards will be paid for such performance period until such certification is made by the Committee. 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 and consistent with the provisions of Section 162(m) of the Code, elect to defer payment of a Performance-Based Award.
    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 of Shares 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 Option Price, (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) Change in Control. Except as otherwise provided in an Award agreement, in the event of a Change in Control, the Committee in its sole discretion and without liability to any person may take such actions, if any, as it deems necessary or desirable with respect to any Award (including, without limitation, (i) the acceleration of an Award, (ii) the payment of a cash amount in exchange for the cancellation of an Award which, in the case of Options and Stock Appreciation Rights, may 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 and/or (iii) the requiring of the issuance of substitute Awards that will substantially preserve the value, rights and benefits of any affected Awards previously granted hereunder) as of the date of the consummation of the Change in Control.
    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.
    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.


    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. Notwithstanding the foregoing, a Participant may transfer an Option (other than an ISO) 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 portion thereof shall be exercisable only by the Permitted Transferee, provided that no such Option or portion thereof is transferred for value, and provided further that, following any such transfer, neither such Option 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.
    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 (b) without the consent of a Participant, would 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) 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.
    14. INTERNATIONAL PARTICIPANTS
    With respect to Participants who reside or work outside the United States of America and who are not (and who are not expected to be) ‘covered employees’ within the meaning of Section 162(m) of the Code, 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.
    15. CHOICE OF LAW
    The Plan shall be governed by and construed in accordance with the laws of the State of Delaware.
    16. EFFECTIVENESS OF THE PLAN
    The Plan shall be effective as of the Effective Date, subject to the approval of the Company’s shareholders.


    17. SECTION 409A
    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.



    HOVNANIAN ENTERPRISES, INC.
    110 WEST FRONT STREET
    P.O. BOX 500
    RED BANK, NJ 07701
    VOTE BY INTERNET - www.proxyvote.com
    Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
    ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
    If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
    VOTE BY PHONE - 1-800-690-6903
    Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions.
    VOTE BY MAIL
    Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
    If you vote over the Internet or by telephone, please do not mail your card.



    TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
    M18836-P87247                    KEEP THIS PORTION FOR YOUR RECORDS
    DETACH AND RETURN THIS PORTION ONLY
    THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
    HOVNANIAN ENTERPRISES, INC.

    Proposals to be voted on at our Annual Meeting are listed below along with the Board of Director's recommendations.

    The Board of Directors recommends that you vote FOR each of the nominees listed in proposal 1 and FOR proposals 2 and 3.
    		 For 
    All
     Withhold 
    All
    		For All
     Except     		To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below.
    o
    o
    		o
    Vote on Directors
    1.     Election of directors.
    Nominees:
    01) Ara K. Hovnanian
    02) Robert B. Coutts
    03) Edward A. Kangas
    04) Joseph A. Marengi
    05) John J. Robbins
    06) J. Larry Sorsby
    07) Stephen D. Weinroth
    Vote on Proposal For  Against  Abstain 
    2.Ratification of the selection of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal 2010.ooo
    3.Approval of amendments to our Amended and Restated 2008 Stock Incentive Plan.ooo
    4.Consideration of such other business as may properly come before the Annual Meeting and any adjournments thereof.
    For address changes and/or comments, please check this box and write them on the back where indicated.o
    YesNo
    Please indicate if you plan to attend this meeting.oo
    Please mark, sign, date and return the proxy card promptly. This Proxy must be signed exactly as name appears hereon. Executors, administrators, trustees, etc., should give full title as such. If the signer is a corporation, please sign the full corporate name by a duly authorized officer.

    Signature [PLEASE SIGN WITHIN BOX]DateSignature (Joint Owners)Date


    DIRECTIONS TO THE 2010 ANNUAL MEETING OF SHAREHOLDERS OF HOVNANIAN ENTERPRISES, INC.
    Please call our Investor Relations department at 1-800-815-9680 for directions to the Company's
    2010 Annual Meeting.
    Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
    The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.
    M18837-P87247
    PROXY
    HOVNANIAN ENTERPRISES, INC.
    Class A Common Stock
    This Proxy is Solicited on Behalf of the Board of Directors
    The undersigned hereby constitutes and appoints Peter S. Reinhart and Paul W. Buchanan, and each of them, his true and lawful agents and proxies with full power of substitution in each, to represent the undersigned at the Annual Meeting of Shareholders of HOVNANIAN ENTERPRISES, INC. to be held at the offices of Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York, N.Y. 10017, at 10:30 a.m. on March 16, 2010, and at any adjournments thereof, upon the matters set forth in the Notice of Annual Meeting and Proxy Statement dated February 1, 2010 and upon all other matters properly coming before said meeting.
    This proxy, when properly executed, will be voted (1) FOR the election of the nominees to the Board of Directors; (2) FOR the ratification of the selection of Deloitte & Touche LLP as the Company's independent registered public accounting firm for the year ending October 31, 2010; (3) FOR the approval of amendments to the Company's Amended and Restated 2008 Stock Incentive Plan; and (4) on any other matters in accordance with the discretion of the named proxies and agents, if no instructions to the contrary are indicated in items (1), (2) and (3).
    Address Changes/Comments:  
    (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)


       SEE REVERSE   
       SEE REVERSE   
    SIDE
    		CONTINUED AND TO BE SIGNED ON REVERSE SIDESIDE


    HOVNANIAN ENTERPRISES, INC.
    110 WEST FRONT STREET
    P.O. BOX 500
    RED BANK, NJ 07701
    VOTE BY INTERNET - www.proxyvote.com
    Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
    ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
    If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
    VOTE BY PHONE - 1-800-690-6903
    Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions.
    VOTE BY MAIL
    Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
    If you vote over the Internet or by telephone, please do not mail your card.



    TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
    M18838-P87247                    KEEP THIS PORTION FOR YOUR RECORDS
    DETACH AND RETURN THIS PORTION ONLY
    THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
    HOVNANIAN ENTERPRISES, INC.

    Proposals to be voted on at our Annual Meeting are listed below along with the Board of Director's recommendations.

    The Board of Directors recommends that you vote FOR each of the nominees listed in proposal 1 and FOR proposals 2 and 3.
    		 For 
    All
     Withhold 
    All
    		For All
     Except     		To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below.
    o
    o
    		o
    Vote on Directors
    1.     Election of directors.
    Nominees:
    01) Ara K. Hovnanian
    02) Robert B. Coutts
    03) Edward A. Kangas
    04) Joseph A. Marengi
    05) John J. Robbins
    06) J. Larry Sorsby
    07) Stephen D. Weinroth
    Vote on Proposal For  Against  Abstain 
    2.Ratification of the selection of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal 2010.ooo
    3.Approval of amendments to our Amended and Restated 2008 Stock Incentive Plan.ooo
    4.Consideration of such other business as may properly come before the Annual Meeting and any adjournments thereof.
    For address changes and/or comments, please check this box and write them on the back where indicated.o
    YesNo
    Please indicate if you plan to attend this meeting.oo
    Please mark, sign, date and return the proxy card promptly. This Proxy must be signed exactly as name appears hereon. Executors, administrators, trustees, etc., should give full title as such. If the signer is a corporation, please sign the full corporate name by a duly authorized officer.

    Signature [PLEASE SIGN WITHIN BOX]DateSignature (Joint Owners)Date


    DIRECTIONS TO THE 2010 ANNUAL MEETING OF SHAREHOLDERS OF HOVNANIAN ENTERPRISES, INC.
    Please call our Investor Relations department at 1-800-815-9680 for directions to the Company's
    2010 Annual Meeting.
    Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
    The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.
    M18839-P87247
    PROXY
    HOVNANIAN ENTERPRISES, INC.
    Class B Common Stock
    This Proxy is Solicited on Behalf of the Board of Directors
    The undersigned hereby constitutes and appoints Peter S. Reinhart and Paul W. Buchanan, and each of them, his true and lawful agents and proxies with full power of substitution in each, to represent the undersigned at the Annual Meeting of Shareholders of HOVNANIAN ENTERPRISES, INC. to be held at the offices of Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York, N.Y. 10017, at 10:30 a.m. on March 16, 2010, and at any adjournments thereof, upon the matters set forth in the Notice of Annual Meeting and Proxy Statement dated February 1, 2010 and upon all other matters properly coming before said meeting.
    This proxy, when properly executed, will be voted (1) FOR the election of the nominees to the Board of Directors; (2) FOR the ratification of the selection of Deloitte & Touche LLP as the Company's independent registered public accounting firm for the year ending October 31, 2010; (3) FOR the approval of amendments to the Company's Amended and Restated 2008 Stock Incentive Plan; and (4) on any other matters in accordance with the discretion of the named proxies and agents, if no instructions to the contrary are indicated in items (1), (2) and (3).
    Address Changes/Comments:  
    (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)


       SEE REVERSE   
       SEE REVERSE   
    SIDE
    		CONTINUED AND TO BE SIGNED ON REVERSE SIDESIDE


    HOVNANIAN ENTERPRISES, INC.
    110 WEST FRONT STREET
    P.O. BOX 500
    RED BANK, NJ 07701
    VOTE BY MAIL
    Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.



    TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
    M18840-P87247                    KEEP THIS PORTION FOR YOUR RECORDS
    DETACH AND RETURN THIS PORTION ONLY
    THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
    HOVNANIAN ENTERPRISES, INC.

    Proposals to be voted on at our Annual Meeting are listed below along with the Board of Director's recommendations.

    The Board of Directors recommends that you vote FOR each of the nominees listed in proposal 1 and FOR proposals 2 and 3.
     For 
    All
     Withhold 
    All
    		For All
     Except     		To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below.
    o
    o
    		o
    Vote on Directors
    1.     Election of directors.
    Nominees:
    01) Ara K. Hovnanian
    02) Robert B. Coutts
    03) Edward A. Kangas
    04) Joseph A. Marengi
    05) John J. Robbins
    06) J. Larry Sorsby
    07) Stephen D. Weinroth
    Vote on Proposal For  Against  Abstain 
    2.Ratification of the selection of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal 2010.ooo
    3.Approval of amendments to our Amended and Restated 2008 Stock Incentive Plan.ooo
    4.Consideration of such other business as may properly come before the Annual Meeting and any adjournments thereof.
    For address changes and/or comments, please check this box and write them on the back where indicated.o
    YesNo
    Please indicate if you plan to attend this meeting.oo
    Please mark, sign, date and return the proxy card promptly. This Proxy must be signed exactly as name appears hereon. Executors, administrators, trustees, etc., should give full title as such. If the signer is a corporation, please sign the full corporate name by a duly authorized officer.

    Signature [PLEASE SIGN WITHIN BOX]DateSignature (Joint Owners)Date


    DIRECTIONS TO THE 2010 ANNUAL MEETING OF SHAREHOLDERS OF HOVNANIAN ENTERPRISES, INC.
    Please call our Investor Relations department at 1-800-815-9680 for directions to the Company's
    2010 Annual Meeting.
    Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
    The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.
    M18841-P87247
    PROXY
    HOVNANIAN ENTERPRISES, INC.
    Nominee Holder of Class B Common Stock
    This Proxy is Solicited on Behalf of the Board of DirectorsJanuary 28, 2013
     
    The undersigned hereby constitutes and appoints Peter S. Reinhart and Paul W. Buchanan, and each of them, his true and lawful agents and proxies with full power of substitution in each, to represent the undersigned at the Annual Meeting of Shareholders of HOVNANIAN ENTERPRISES, INC. to be held in the offices of Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York, N.Y. 10017, at 10:30 a.m. on March 16, 2010, and at any adjournments thereof, upon the matters set forth in the notice of meeting and Proxy Statement dated February 1, 2010 and upon all other matters properly coming before said meeting.
    63
     
    This proxy, when properly executed, will be voted (1) FOR the election of the nominees to the Board of Directors; (2) FOR the ratification of the selection of Deloitte & Touche LLP as the Company's independent registered public accounting firm for the year ending October 31, 2010; (3) FOR the approval of amendments to the Company's Amended and Restated 2008 Stock Incentive Plan; and (4) on any other matters in accordance with the discretion of the named proxies and agents, if no instructions to the contrary are indicated in items (1), (2) and (3).
     
    According to the certification of the beneficial owner of the shares represented by this proxy, such beneficial owner (A) has been the beneficial owner of _______ of such shares continuously since the date of their issuance or is a Permitted Transferee (as defined in paragraph 4(A)(i) of paragraph FOURTH of the Company's amended Certificate of Incorporation) of any such beneficial owner and (B) has not been the beneficial owner of _______ of such shares continuously since the date of their issuance nor a Permitted Transferee of any such beneficial owner.
     
    If no certification is made by the beneficial owner of the shares represented by this proxy, it will be deemed that all shares of Class B Common Stock represented by this proxy have not been held continuously, since the date of issuance, for the benefit or account of the same beneficial owner of the shares represented by this proxy or any Permitted Transferee.
     
    Address Changes/Comments:  
    (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)


       SEE REVERSE   
       SEE REVERSE   
    SIDE
    		CONTINUED AND TO BE SIGNED ON REVERSE SIDESIDE