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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A
(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.          )

Filed by the Registrantxý



Filed by a Party other than the Registranto


 

Check the appropriate box:

 

xý

Preliminary Proxy Statement


o

Confidential, for Use of the Commission Only
(as (as permitted by Rule 14a-6(e)(2))


o

Definitive Proxy Statement


o

Definitive Additional Materials


o

Soliciting Material Pursuant to §240.14a-12

Hovnanian Enterprises, Inc.
(Name of Registrant as Specified In Its Charter)

Payment of Filing Fee (Check the appropriate box):


xHOVNANIAN ENTERPRISES, INC.
No fee required.
(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
   
Payment of Filing Fee (Check the appropriate box):

ý

No fee required.

o

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)
 1.Title of each class of securities to which transaction applies:
  
(2) 
2.Aggregate number of securities to which transaction applies:
  
(3) 
3.Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
  
(4) 
4.Proposed maximum aggregate value of transaction:
  
(5) 
5.Total fee paid:

         

o

Fee paid previously with preliminary materials:
materials.

o

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 
 

(1)		1.

Amount previously paid:Previously Paid:
  
(2) 
2.Form, Schedule or Registration Statement No.:
  (3)Filing Party:
         
  
(4)		Date Filed:

GRAPHIC






  
3.Filing Party:
4.Date Filed:



HOVNANIAN ENTERPRISES, INC.
10 Highway 35,110 West Front Street, P.O. Box 500, Red Bank, N.J. 07701 (732) 747-7800

February __, 2004
                        , 2008

Dear Shareholder:Stockholder:

You are cordially invited to attend the Annuala Special Meeting of ShareholdersStockholders which will be held on                        Friday, March 5, 2004,, 2008, at the offices of Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York, New York.York 10017. The meeting will start promptly at 10:30 a.m.
This is an important Special Meeting that affects your investment in the Company.

        At the meeting you will be asked to consider and vote upon an amendment to the Company's Certificate of Incorporation, to approve your Board of Directors' decision to adopt and implement a stockholder rights plan and to adjourn the Special Meeting to a later date or dates, if necessary. Your Board of Directors believes that, together, the charter amendment and the stockholder rights plan will help foster the Company's long term-growth and preserve its ability to use certain of its tax assets.

        Attached to this letter are a Notice of Special Meeting of Stockholders and Proxy Statement, which describes the business to be conducted at the meeting.

It is important that your shares be represented and voted at the meeting. Therefore, we urge you to submit your proxy, even if you intend to come to the meeting. Please promptly complete, sign, date and return the enclosed proxy card in the postage-paid envelope provided for this purpose or, registerif applicable, submit your voteproxy via the Internet or by telephone according to the instructions on the proxy card. Of course, ifIf you decide to attend the meeting, you may still choose to vote your shares personallyin person even thoughif you have previously designatedreturned a proxy.

Important items        We welcome the opportunity to be acted upon at the meeting include the electionmeet with many of directors, ratification of the selection of independent accountants, approval of an amendment to the Company’s amended Certificate of Incorporation, which would increase the number of authorized shares of the Company’s common stock, approval of the Company’s amendedyou and restated Senior Executive Short-Term Incentive Plan and approval of the Company’s amended and restated 1999 Stock Incentive Plan.

Wewe sincerely hope you will be able to attend and participate in the Company’s 2004 AnnualSpecial Meeting. We welcome the opportunity to meet with many of you and give you a firsthand report on the progress of your Company.

PROXY VOTING METHODS

        If at the close of business on                        , 2008, you were a stockholder of record or held shares through a broker or bank, you may have your shares voted as described in the enclosed proxy card or you may vote in person at the Special Meeting. For more general information on how you may vote your shares please see the discussion under "Questions and Answers About the Special Meeting, the NOL Protective Amendment, the Rights Plan and Adjournment—General—How do I cast my vote?" You may revoke your proxies at the times and in the manners described in the Proxy Statement.

        If you require directions to the Company's Special Meeting, please call the Company's Investor Relations department at 1-800-815-9680.


YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.



HOVNANIAN ENTERPRISES, INC.

NOTICE OF ANNUALSPECIAL MEETING OF SHAREHOLDERS
FEBRUARY __, 2004STOCKHOLDERS

                        , 2008

NOTICE IS HEREBY GIVEN that the Annuala Special Meeting of ShareholdersStockholders of Hovnanian Enterprises, Inc. will be held on                        Friday, March 5, 2004,, 2008, at the offices of Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York, New York 10017 at 10:30 a.ma.m. for the following purposes:

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.

Your Board of Directors believes these proposals are in the best interests of the Company and our stockholders and unanimously recommends that you vote FOR proposals 1, 2 and 3.

Only shareholdersstockholders of record at the close of business on                        January 16, 2004, 2008 are entitled to notice of, and to vote at, the meeting.Special Meeting. Accompanying this Notice of AnnualSpecial Meeting of ShareholdersStockholders is a proxy statement and proxy card(s).

        Stockholders of Class A Common Stock or registered stockholders of Class B Common Stock may submit proxies over the Internet, by telephone or by signing, dating and returning by mail the enclosed proxy card, or they may vote in person by attending the Special Meeting. These voting procedures are described on the proxy card.

        If you are a form of proxy and the Company’s Annual Report for the year ended October 31, 2003.

Shareholdersstockholder of record of Class B Common Stock held in nominee name, you may only appoint proxies to vote theiryour shares by signing, dating and returning the enclosed proxy card in one of three ways:
the envelope provided.

1.  Via the Internet pursuant to the instructions on the proxy card;

2.  Calling the toll-free number on the enclosed proxy card; or

3.  Signing, dating and returning the enclosed proxy card in the envelope provided.

All shareholders        We urge you to submit your proxy promptly, to ensure that your shares are urgedrepresented at the meeting. Even if you plan to attend the meeting in person, or by proxy. Shareholders who do not expect to attend the meeting are requested toplease promptly complete, sign, date and datereturn the enclosed proxy card and return it promptly in the self-addressedpostage-paid envelope provided, or, to register their voteif applicable, submit a proxy via the Internet or by telephone according to the instructions on the proxy card.




By order of your Board of Directors,
PETER S. REINHART
Secretary

                        , 2008

Even if you plan to attend the Special Meeting, please submit a proxy by mail or, if applicable, via the Internet or by telephone. If you choose to submit a proxy by mail, please promptly complete, sign, date and return the enclosed proxy card in the postage-paid envelope provided, so that your shares will be represented at the meeting.

If you need assistance in submitting your proxy, please call the firm assisting us in the solicitation of proxies:

INNISFREE M&A INCORPORATED

Toll-free at 888-750-5834


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


PROXY STATEMENT

GENERAL

        The accompanying proxy is solicited on behalf of the Board of Directors
PETER of Hovnanian Enterprises, Inc. (the "Company", "we", "us", or "our") for use at the Special Meeting of stockholders referred to in the foregoing notice and at any adjournment or postponement 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, the persons named in the accompanying proxy card(s) will vote the shares represented by such proxies FOR approval of the NOL Protective Amendment, FOR approval of the Rights Plan and FOR approval of adjournment of the Special Meeting to a later date, if necessary, to permit further solicitation of proxies in the event there are insufficient votes at the time of the Special Meeting to approve the NOL Protective Amendment and/or the Rights Plan. Any person may revoke a previously designated proxy at any time before it is exercised by delivering written notice of revocation to Peter S. REINHARTReinhart, Secretary, by delivering a later-dated proxy, or by voting in person at the Special Meeting. Please note that attendance at the Special Meeting will not by itself revoke a proxy.


QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING, THE NOL PROTECTIVE AMENDMENT, THE RIGHTS PLAN AND ADJOURNMENT


GENERAL

SecretaryWhy am I receiving this proxy statement?

        A: You have received this proxy statement and the enclosed proxy card(s) from us because you held shares of the Company's common stock on                        , 2008.

What are the proposals I will be voting on at the Special Meeting?

        A: As a stockholder, you will consider and vote upon proposals that are intended to assist in protecting the long-term value to us of net operating losses and built-in losses within the meaning of Section 382 of the Internal Revenue Code ("NOLs"). The proposals are:

What is the Vote Requirement?

        A: Approval of Proposal One requires the affirmative vote of the holders of (1) a majority in voting power of all outstanding common stock, voting together, (2) a majority in voting power of all outstanding Class A Common Stock voting separately and (3) a majority in voting power of all outstanding Class B Common Stock voting separately.

        Approval of each of Proposal Two and Proposal Three requires the affirmative vote of a majority of the votes cast by the holders of Class A Common Stock and Class B Common Stock, voting together, represented in person or by proxy at the Special Meeting.

        At the Special Meeting, the holders of record, present in person or by proxy, of a majority of the votes of the Company's issued and outstanding capital stock shall constitute a quorum for the transaction of business. Additionally, a majority of the votes of each of the Company's issued and outstanding Class A Common Stock and Class B Common Stock are required to constitute a quorum for the transaction of business regarding the NOL Protective Amendment.

Who is entitled to vote?

        A: Only holders of record of shares of common stock on the close of business on                        , 2008 will be entitled to vote at the Special Meeting. On                        , 2008, we began mailing this proxy statement to all persons entitled to vote at the Special Meeting.

How do I cast my vote?

        A: If your shares of Class A Common Stock or Class B Common Stock are registered in your name, you may submit your proxy by telephone, by Internet, or by completing, signing, dating and



returning the enclosed proxy card in the postage-paid envelope provided. Simply follow the easy instructions on the proxy card. You may also vote in person at the Special Meeting. Execution of the enclosed proxy card or submission via telephone or Internet will not affect your right to attend the Special Meeting or to vote in person at the Special Meeting.

        If your shares of Class A Common Stock are held in "street name" through a broker, bank or other nominee, please follow the instructions provided by your nominee on the enclosed voting instruction form, in order to submit your proxy by telephone or by Internet, or please sign, date and return the voting instruction form in the postage-paid envelope provided. If you desire to vote in person at the Special Meeting, you must provide a legal proxy from your bank, broker or other nominee.

        If your shares of Class B Common Stock are held in "street name" through a broker, bank or other nominee, you may only appoint proxies by signing, dating and returning the enclosed proxy card, including the required certification, in the envelope provided. 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, including the required certification, and received not less than 3 nor more than 20 business days prior to the meeting date.

What is the effect of not voting?

        A: If stockholders fail to vote their shares of stock, it will have the same effect as a vote against Proposal One but will have no effect on the approval of Proposal Two or Proposal Three.

Can stockholders change their votes after they have delivered their proxies?

        A: Yes. Stockholders can change their vote at any time before their proxies are voted at the Special Meeting. Stockholders can do this in one of three ways. First, they can submit another, later-dated new proxy before the Special Meeting. If their shares are held in an account at a brokerage firm or bank, they should contact their brokerage firm or bank to change their vote. Second, they can revoke their proxies by submitting a notice of revocation to the Company's corporate Secretary before the Special Meeting. Third, if they are a holder of record, they can attend the Special Meeting and vote in person. Holders in "street-name" must obtain a legal proxy from their bank, broker or other nominee in order to vote in person at the meeting. Attendance at the meeting by itself will not revoke a proxy.

When and where is the Special Meeting being held?

        A: The Special Meeting is being held on                        , 2008 at the offices of Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York, New York 10017 at 10:30 a.m. If you require directions to the Special Meeting, please call our Investor Relations department at 1-800-815-9680.

        If you are a shareholderstockholder of record and you plan to attend the AnnualSpecial 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 intermediarynominee and you plan to attend, please send written notice to Hovnanian Enterprises, Inc., 10 Highway 35,110 West Front Street, P.O. Box 500, Red Bank, New Jersey 07701, Attention: Peter S. Reinhart, Secretary, and enclose evidence of your ownership (such as a letter from the bank, broker or intermediaryother nominee 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


What is Section 382?

        A: Section 382 ("Section 382") is a provision of the Internal Revenue Code of 1986 (the "Code") which would impose limitations on the future use of the Company's NOLs if we undergo an "ownership change" as defined in Section 382.

How important are the NOLs?

        A: The Company's approximately $700 million (pre-tax) federal NOLs as of July 31, 2008, are a significant asset that could save up to almost $244 million in taxes over the next 20 years. Because the NOLs do not planstart expiring until 2028, we will have to attendcontinually manage our Section 382 risk for a significant period of time. Because the Annual Meeting, please designateamount and timing of our future taxable income, if any, cannot be accurately predicted, we cannot estimate the exact amount of NOLs that we can ultimately use to reduce our income tax liability. Although we are unable to quantify an exact value, we believe the NOLs are a proxy by mail or via the Internet or by telephone. If you choose to vote by mail, please sign the proxy card and return it in the envelope so that your shares will be voted. The envelope requires no postage if mailed in the United States.


HOVNANIAN ENTERPRISES, INC.
10 HIGHWAY 35
P.O. BOX 500
RED BANK, NEW JERSEY 07701

PROXY STATEMENT

GENERAL

The accompanying proxy is solicited on behalf of thevery valuable asset. Our Board of Directors believes that the provisions 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. It is expected that this Proxy StatementNOL Protective Amendment and the accompanying proxyRights Plan will be mailed on or about February __, 2004an important tool in avoiding adverse impacts from Section 382 limitations.

Is all Common Stock subject to each shareholder entitled to vote. A form of proxythe NOL Protective Amendment and the Company’s Annual Report for the year ended October 31, 2003 accompany this Proxy Statement.

Shares represented by properly executed proxies, if such proxies are received in time and not revoked, will be voted in accordance with the specifications thereon. If no specifications are made, the persons named in the accompanying proxy will vote such proxy for the Board of Directors’ slate of directors, for the ratification of selected independent accountants, for approval of an amendment to the Company’s amended Certificate of Incorporation, which would increase the number of authorized shares of the Company’s common stock, for the approval of the Company’s amended and restated Senior Executive Short-Term Incentive Plan, for the approval of the Company’s amended and restated 1999 Stock Incentive Plan, and 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 exercised by delivering written notice of revocation to the Secretary of the Company or by voting in person at the meeting. Please note that attendance at the meeting will not by itself revoke a proxy.


VOTING RIGHTS AND SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENTRights Plan?

        A: The record date for the determination of shareholders entitled to vote at the meeting is the close of business on January 16, 2004. On January 16, 2004, the outstanding voting securities of the Company consisted of 23,126,252 shares of Class A Common Stock each share entitlingis subject to both the holder thereof to one vote,NOL Protective Amendment and 7,332,779 shares of Class B Common Stock, each share entitling the holder thereof to ten votes.

Other than as set forth in the table below, there are no persons known to the Company to be the beneficial owner of shares representing more than 5% of the Company’s Class A Common Stock or Class B Common Stock.

The following table sets forth as of January 16, 2004 theRights Plan. Although both Class A Common Stock and Class B Common Stock ofare included in the Company beneficially owned by each director, nominee for director, by certain executive officers, by all directors and executive officers of the Company as a group and by holders of more than 5% of either theSection 382 "ownership change" calculation, Class AB Common Stock will not be subject to the NOL Protective Amendment or the Rights Plan. Because the Class B Common Stock is not traded on an exchange and transfers among holders of Class B Common Stock are relatively infrequent, transfers to other Class B stockholders would likely only have a nominal effect on the Section 382 ownership shift calculations.

Is the Company's outstanding Preferred Stock subject to the NOL Protective Amendment and the Rights Plan?

        A: No. Although certain types of preferred stock would count in the Section 382 "ownership change" calculation, the Company's outstanding Preferred Stock does not count. Therefore, it is not subject to the NOL Protective Amendment or the Rights Plan.

Why is your Board of Directors recommending approval of both the NOL Protective Amendment and the Rights Plan?

        A: Your Board of Directors is recommending approval of both the NOL Protective Amendment and the Rights Plan because, although your Board of Directors has determined that these measures are the best way to preserve the NOLs, neither measure is a complete solution. The NOL Protective Amendment is only enforceable against shares voted in favor of the Company:amendment and therefore it is possible that shares could be transferred in a way that would trigger an "ownership change" despite the NOL Protective Amendment. In contrast, while the Rights Plan deters acquisitions of Class A Common Stock by all holders thereof, if an acquisition does trigger an "ownership change" the Rights Plan does not include a mechanism to block the transfer. The NOL Protective Amendment provides a mechanism to block the impact of a transfer on the ownership shift while allowing purchasers to receive their money back from the blocked purchase.



 		      Class A Common Stock
   
Class B Common Stock
   
   
Amount and
Nature of
Beneficial
Ownership(1)
   
Percent
of Class (2)
   
Amount and
Nature of
Beneficial
Ownership(1)
   
Percent
of Class (2)
Directors, Nominees for Directors, Certain
Executive Officers, Directors and Executive
Officers as a Group and Holders of More Than 5%
                                                                        
Kevork S. Hovnanian(3)(5)                5,016,325          21.7%          5,843,837          79.8%  
Ara K. Hovnanian(4)                1,233,800          5.2%          1,026,016          14.0%  
Geaton A. DeCesaris, Jr.(6)                587,924          2.5%          —           —   
Arthur M. Greenbaum                6,868          —           1,500          —   
Kevin C. Hake                3,588          —           —           —   
Edward A. Kangas                11,867          .1%          —           —   
Desmond P. McDonald                10,867          .1%          —           —   
Peter S. Reinhart                39,032          .2%          85           —   
John J. Robbins                8,367          —           —           —   
J. Larry Sorsby                88,211          .4%          —           —   
Stephen D. Weinroth                29,617          .1%          2,250          —   
Capital Growth Management (7)                1,728,900          7.5%          —           —   
All directors and executive officers as a group
(12 persons)		                7,101,466          29.7%          6,873,688          93.4%  
 

Notes:

(1)The figures in the table in respect of Class A Common Stock do not include the shares of Class B Common Stock beneficially owned by the specified persons, which shares of Class B Common Stock are convertible at any time on a share for share basis to Class A Common Stock. The figures in the table represent beneficial ownership (including ownership of 759,500 Class A Common Stock Options currently exercisable or exercisable within 60 days) and sole voting power and sole investment power except as noted in notes (3), (4), (5) and (6) below.

(2)Based upon the number of shares outstanding plus options for such director, nominee or holder.

(3)Includes 113,250 shares of Class A Common Stock and 320,012 shares of Class B Common Stock as to which Kevork S. Hovnanian has shared voting power and shared investment power. Kevork S. Hovnanian’s address is 10 Hwy 35, P.O. Box 500, Red Bank, New Jersey 07701.

(4)Includes 35,217 shares of Class A Common Stock and 95,667 shares of Class B Common Stock as to which Ara K. Hovnanian has shared voting power and shared investment power. Ara K. Hovnanian’s address is 10 Hwy 35, P.O. Box 500, Red Bank, New Jersey 07701.

(5)Includes 2,829,413 shares of Class B Common Stock held by the Kevork S. Hovnanian Family Limited Partnership, a Connecticut limited partnership (the “Limited Partnership”), beneficial ownership of which is disclaimed by Kevork S. Hovnanian. Kevork S. Hovnanian’s wife, Sirwart Hovnanian, as trustee of the Sirwart Hovnanian 1994 Marital Trust, is the Managing General Partner of the Limited Partnership and as such has the sole power to vote and dispose of the shares of Class B Common Stock held by the Limited Partnership. Also includes 264,562 shares of Class B Common Stock

2Who can help answer further questions about the Special Meeting?

        A: If you have more questions about the Special Meeting, you should contact:

    Innisfree M&A Incorporated
    Stockholders Call Toll-Free: (888) 750-5834
    Banks and Brokers Call Collect: (212) 750-5833.


THE NOL PROTECTIVE AMENDMENT


held in trust for Mr. Hovnanian’s daughter over which Sirwart Hovnanian, as trustee, shares with her daughter the power to dispose of and vote. In addition, includes 18,250 shares of Class A Common Stock and 55,450 shares of Class B Common Stock held in trust for Mr. Hovnanian’s grandchildren, over which Sirwart Hovnanian, as trustee, has sole power to dispose of and vote and includes 95,000 shares of Class A Common Stock held in the name of Sirwart Hovnanian over which she has sole power to dispose of and vote. Mr. Hovnanian disclaims beneficial ownership of the shares described in the preceding three sentences.

(6)Includes 275,680 shares of Class A Common Stock as to which Geaton A. DeCesaris, Jr. has shared voting power and shared investment power.

(7)Based solely upon information contained in a statement on Schedule 13G filed with the Securities and Exchange Commission as of February 7, 2003. Address: One International Place. Boston, MA 02110

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a)What is the purpose of the Securities Exchange Act of 1934, as amended, requires the Company’s executive officers, directors, persons who own more than ten percent of a registered classNOL Protective Amendment?

        A: The purpose of the Company’s equity securities and certain entities associated withNOL Protective Amendment is to help preserve the foregoing (“Reporting Persons”)long-term value to file reportsthe Company of ownership and changesits accumulated NOLs by limiting direct or indirect transfers of Class A Common Stock that would affect the percentage of stock that is treated as being owned by "5-percent stockholders" within the meaning of Section 382. Changes in ownership of our 5-percent stockholders and the creation of new 5-percent stockholders can result in limitations on Forms 3, 4our ability to use NOLs to reduce future income tax liability.

What transfers will the NOL Protective Amendment prohibit?

        A: Subject to certain limited exceptions, the transfer restrictions would restrict any person from buying Class A Common Stock (or any interest in Class A Common Stock) if the transfer would result in a stockholder (or several stockholders, in the aggregate, who hold their stock as a "group" under Section 382) owning 5 percent or more of our common stock.

Do all investors who file a 13G or a 13D count in the Section 382 "ownership change" calculation?

        A: No, some investors who file a 13G or 13D are not "5-percent stockholders" under the Section 382 definition and 5therefore would not affect our ownership shift for purposes of Section 382. However, for purposes of determining the existence and identity of, and the amount of common stock owned by, any stockholder, we will be entitled to rely on the existence or absence of filings with the Securities and Exchange Commission (the “SEC”("SEC") of Schedules 13D and the New York Stock Exchange (the “NYSE”). These Reporting Persons are required by SEC regulation13G (or similar filings) as of any date, subject to furnish the Company with copies of all Forms 3, 4 and 5, and amendments thereto, that they file with the SEC and the NYSE.

Based solely on the Company’s reviewour actual knowledge of the copiesownership of such formsour common stock.

How will the NOL Protective Amendment affect me if I vote for it and amendments thereto it has received, we believe that with respect toI already own more than 5% of the fiscal year ended October 31, 2003, all the Reporting Persons complied with all applicable filing requirements, except as follows: in January 2003, Geaton A. DeCesaris, Jr. received an option grant for 50,000Company's common stock or if I acquire shares of Class A Common Stock upon conversion of Class B Common Stock?

        A: If you already own more than 5% of our common stock or if you receive shares of Class A Common Stock upon conversion of Class B Common Stock, you would be able to transfer your shares of Class A Common Stock if both of the following conditions are met: (i) such transfer does not increase the percentage stock ownership of another holder of 5% or more of our common stock or create a new holder of 5% or more of our common stock (other than certain transfers that create a new public group) and (ii) the stock that is the subject of the transfer was acquired prior to the effective date of the NOL Protective Amendment or was acquired upon conversion of Class B Common Stock. Shares acquired in any such transaction will be subject to the transfer restrictions. In addition, Class B stockholders will be permitted to transfer their Class B Common Stock among Class B stockholders.


Will the NOL Protective Amendment apply to me if I vote for it and I own less than 5% of the Company's common stock?

        A: Yes, but there will be no restrictions on the sale of Class A Common Stock by a stockholder who owns less than 5% of our common stock to a purchaser who, after the sale, also would own less than 5% of our common stock.

What happens if I vote "No" on this proposal? Am I still subject to the transfer restriction?

        A: Delaware law provides that transfer restrictions with respect to shares of Class A Common Stock issued prior to the effectiveness of the NOL Protective Amendment will be effective against (i) stockholders with respect to shares that were voted in favor of this proposal and (ii) purported transferees of shares that were voted in favor of this proposal if (A) the transfer restriction is conspicuously noted on the certificate(s) representing such shares or (B) the transferee had actual knowledge of the transfer restrictions (even absent such conspicuous notation). The Company intends that newly issued shares of Class A Common Stock issued after the effectiveness of the NOL Protective Amendment will be issued with the transfer restriction conspicuously noted on the certificate(s) representing such shares and therefore under Delaware law such newly issued shares will be subject to the transfer restrictions. For the purpose of determining whether a stockholder is subject to the NOL Protective Amendment, we intend to take the position that all shares issued prior to effectiveness of the NOL Protective Amendment that are proposed to be transferred were voted in favor of the NOL Protective Amendment unless the contrary is established to our satisfaction. A court could find, however, that the NOL Protective Amendment is unenforceable, either in general or as applied to a particular stockholder or particular fact situation.

Will your Board of Directors be able to make exceptions for transfers that would otherwise be restricted?

        A: Yes, your Board of Directors will have the discretion to approve transfers that would otherwise be restricted by the NOL Protective Amendment.

What are some of the factors I should consider in deciding how to vote?

        A: Some of the factors you should consider before making your voting decision are discussed in the section "Certain Considerations" at the end of this proxy statement.

How long would the NOL Protective Amendment be in place?

        A: The NOL Protective Amendment would expire on the earlier of (i) your Board of Directors' determination that the NOL Protective Amendment is no longer necessary for the preservation of the NOLs because of the repeal of Section 382 or any successor statute, (ii) the beginning of a taxable year of the Company to which your Board of Directors determines that no NOLs may be carried forward or (iii) such date as your Board of Directors determines that the NOL Protective Amendment is no longer necessary for the preservation of the NOLs.


THE RIGHTS PLAN

What is the purpose of the Rights Plan?

        A: The purpose of the Rights Plan is to help preserve the long-term value to the Company of its accumulated NOLs. The proposed Rights Plan is designed to deter the acquisition of our stock in excess of amounts that, because of Section 382, could inhibit the Company's ability to use the NOLs to reduce our future income tax liability.


Was there an attempt by someone outside the Company to acquire control of the Company?

        A: No. Additionally, Kevork S. Hovnanian, the Chairman of your Board of Directors, and Ara K. Hovnanian, our President and Chief Executive Officer, have voting control, through personal holdings and family-owned entities, of Class A and Class B Common Stock that enables them to cast approximately 71.6% of the votes that may be cast by the holders of our outstanding Class A and Class B Common Stock.

What acquisitions will the Rights Plan deter?

        A: Subject to certain limited exceptions, the Rights Plan would restrict any person from buying Class A Common Stock (or any interest in Class A Common Stock) if the acquistion would result in a stockholder (or several stockholders, in the aggregate, who hold their stock as a "group" under the federal securities laws) owning 4.9% or more of the Class A Common Stock.

How will the Rights Plan affect me if I already own 4.9% or more of the Class A Common Stock?

        A: Holders of 4.9% or more of the Class A Common Stock as of August 15, 2008, the effective date of the Rights Plan, are restricted from buying any additional shares of Class A Common Stock.

Will the Rights Plan apply to me if I own less than 4.9% of the Class A Common Stock?

        A: No, not unless you enter into a transaction or other agreement by which you would own 4.9% or more of the Class A Common Stock.

Will your Board of Directors be able to make exceptions for acquisitions that was reportedwould otherwise be restricted?

        A: Yes, your Board of Directors may, in its sole discretion, exempt any person or group from triggering the dilutive effect of the Rights Plan.

What are some of the factors I should consider in deciding how to vote?

        A: Some of the factors you should consider before making your voting decision are discussed in the section "Certain Considerations" at the end of this proxy statement.

How long would the Rights Plan be in place?

        A: The Rights Plan would expire on the earlier of (i) August 14, 2018, (ii) the rights being redeemed pursuant to the SEC, butRights Plan, (iii) the rights being exchanged pursuant to the Rights Plan, (iv) your Board of Directors' determination that the Rights Plan is no longer necessary for the preservation of the NOLs because of the repeal of Section 382 or any successor statute, (v) the beginning of a taxable year of the Company to which your Board of Directors determines that no NOLs may be carried forward and (vi) August 14, 2009, if the Rights Plan has not in a timely manner.

been approved by stockholders.


ADJOURNMENT

3
What is the purpose of Adjournment?


(1) ELECTION OF DIRECTORS

The Company’s restated By-laws provide that        A: In the event there are not sufficient votes at the time of the Special Meeting to adopt the NOL Protective Amendment and/or the Rights Plan, the Board of Directors shall consistmay submit a proposal to adjourn the Special Meeting to a later date, or dates, if necessary, to permit further solicitation of upproxies.



MATTERS TO BE CONSIDERED AT SPECIAL MEETING

PROPOSAL ONE: NOL PROTECTIVE AMENDMENT

AMENDMENT TO CERTIFICATE OF INCORPORATION TO PRESERVE
VALUE OF NET OPERATING LOSSES

Introduction

        At the Special Meeting, you will consider and vote on an amendment to eleven directors who shall be elected annually by the shareholders. The Company’s amendedour Certificate of Incorporation requiresto impose certain restrictions on the transfer of Class A Common Stock. The NOL Protective Amendment is designed to prevent certain future transfers of Class A Common Stock which could otherwise adversely affect our ability to use the NOLs for income tax purposes and certain income tax credits.

        As of July 31, 2008 we estimate that the Company's NOLs could save it as much as $244 million in taxes over the next 20 years. We estimate that we had approximately $700 million of (pre-tax) NOLs as of July 31, 2008. Furthermore, our NOLs do not expire until 2028. To the extent we have future taxable income, and until the NOLs expire, they can be used to offset any future ordinary tax on our income. Because the amount and timing of our future taxable income, if any, cannot be accurately predicted, we cannot estimate the exact amount of NOLs that can ultimately be used to reduce the Company's income tax liability. Although we are unable to quantify an exact value, we believe NOLs are a very valuable asset and your Board of Directors believes it is in the Company's best interests to attempt to prevent the imposition of limitations on their use by adopting the proposed NOL Protective Amendment.

        The benefit of the NOLs to the Company would be significantly reduced or eliminated if we experience an "ownership change" as defined in Section 382. An "ownership change" can occur through one or more acquisitions of our stock, whether occurring contemporaneously or pursuant to a single plan, by which stockholders or groups of stockholders, each of whom owns or is deemed to own directly or indirectly at least 5% of the our stock, increase their ownership of our stock by more than 50 percentage points over their lowest percentage interest within a rolling three-year period. If that were to happen, we would only be allowed to use a limited amount of NOLs and credits to offset our taxable income subsequent to the "ownership change." The annual limit is obtained by multiplying (i) the aggregate value of our outstanding equity immediately prior to the "ownership change" (reduced by certain capital contributions made during the immediately preceding two years and certain other items) by (ii) the federal long-term tax-exempt interest rate in effect for the month of the "ownership change." In calculating this annual limit, numerous special rules and limitations apply, including provisions dealing with "built-in gains and losses." If we were to experience an "ownership change" at our current stock price levels, we believe we would be subject to an annual NOL limitation which would result in a material amount of NOLs expiring unused, resulting in a significant impairment to the Company's NOL assets.

        If the Company were to have taxable income in excess of the NOL limitations following a Section 382 "ownership change," it would not be able to offset tax on the excess income with the NOLs. Although any loss carryforwards not used as a result of any Section 382 limitation would remain available to offset income in future years (again, subject to the Section 382 limitation) until the NOLs expire, any "ownership change" could significantly defer the utilization of the loss carryforwards, accelerate payment of federal income tax and could cause some of the NOLs to expire unused. Because the aggregate value of our outstanding stock and the federal long-term tax-exempt interest rate fluctuate, it is impossible to predict with any accuracy the annual limitation upon the amount of our taxable income that could be offset by such loss carryforwards and credits were an "ownership change" to occur in the future, but such limitation could be material.

        As of                        , 2008, we do not believe that we have experienced an ownership change, but calculating whether an "ownership change" has occurred is subject to inherent uncertainty. This



uncertainty results from the complexity and ambiguity of the Section 382 provisions, as well as limitations on the knowledge that any publicly traded company can have about the ownership of and transactions in its securities. We and our advisors have analyzed the information available, along with various scenarios of possible future changes of ownership. In light of this analysis, our current stock price and daily trading volume, we believe that if no action is taken it is possible that we would undergo a Section 382 "ownership change."

        Although your Board of Directors adopted the Rights Plan on July 29, 2008 to assist in protecting the NOLs, we currently do not have the ability to completely restrict transactions that could result in an "ownership change" and there is nothing we can do under the Rights Plan to block the impact of any resulting ownership shift. Your Board of Directors believes the best interests of stockholders will be served by adopting provisions that are designed to restrict direct and indirect transfers of our stock if such transfers will affect the percentage of stock that is treated as owned by a 5-percent stockholder. In addition, the NOL Protective Amendment will include a mechanism to block the impact of a transfer on the ownership shift while allowing purchasers to receive their money back from prohibited purchases. In order to implement these transfer restrictions, the NOL Protective Amendment must be approved.

        Although both Class A Common Stock and Class B Common Stock are included in the Section 382 "ownership change" calculation, Class B Common Stock will not be subject to the transfer restrictions. Because the Class B Common Stock is not traded on an exchange and transfers among holders of Class B Common Stock are relatively infrequent, transfers of such shares would likely only have a nominal effect on the Section 382 ownership shift calculations.

        The NOL Protective Amendment is contained in a proposed new Paragraph NINTH to our Certificate of Incorporation which is attached as Annex A to this proxy statement and is incorporated by reference herein.We urge you to read the NOL Protective Amendment in its entirety, as the discussion in this proxy statement is only a summary. The NOL Protective Amendment will only become effective if approved by the requisite vote of stockholders.

Section 382 Ownership Shift Calculations.

        Generally, an "ownership change" can occur through one or more acquisitions by which one or more stockholders, each of whom owns or is deemed to own directly or indirectly 5% or more in value of a corporation's stock, increase their aggregate percentage ownership by more than 50 percentage points over the lowest percentage of stock owned by such stockholders at any time whenduring the preceding rolling three-year period. The amount of the increase in the percentage of stock ownership (measured as a percentage of the value of the Company's outstanding shares rather than voting power) of each 5-percent stockholder is computed separately, and each such increase is then added together with any other such increases to determine whether an "ownership change" has occurred.

        For example, if a single investor acquired 50.1% of our stock in a three-year period, an "ownership change" would occur. Similarly, if ten persons, none of whom owned our stock, each acquired slightly over 5% of our stock within a three-year period (so that such persons owned, in the aggregate, more than 50%), an "ownership change" would occur.

        In determining whether an "ownership change" has occurred, the rules of Section 382 are very complex, and are beyond the scope of this summary discussion. Some of the factors that must be considered in making a Section 382 "ownership change" calculation include the following:

    •
    All holders who each own less than five percent of a company's common stock are generally (but not always) treated as a single "5-percent stockholder." Transactions in the public markets among stockholders who are not "5-percent stockholders" are generally (but not always) excluded from the calculation.

      •
      There are several rules regarding the aggregation and segregation of stockholders who otherwise do not qualify as "5-percent stockholders." Ownership of stock is generally attributed to its ultimate beneficial owner without regard to ownership by nominees, trusts, corporations, partnerships or other entities.

      •
      Acquisitions by a person which cause that person to become a "5-percent stockholder" generally result in a five percentage (or more) point change in ownership, regardless of the size of the final purchase(s) that caused the threshold to be exceeded.

      •
      Certain constructive ownership rules, which generally attribute ownership of stock owned by estates, trusts, corporations, partnerships or other entities to the ultimate indirect individual owner thereof, or to related individuals, are applied in determining the level of stock ownership of a particular stockholder. Special rules can result in the treatment of options (including warrants) or other similar interests as having been exercised if such treatment would result in an ownership change.

      •
      The redemption or buyback of shares by an issuer will increase the ownership of any "5-percent stockholders" (including groups of stockholders who are not themselves "5-percent stockholders") and can contribute to an "ownership change." In addition, it is possible that a redemption or buyback of shares could cause a holder of less than 5% to become a "5-percent stockholder," resulting in a five percentage (or more) point change in ownership.

    Description of NOL Protective Amendment

            The following is a summary of the proposed NOL Protective Amendment. This summary is qualified in its entirety by reference to the full text of the proposed transfer restrictions, which is contained in proposed paragraph NINTH of our Certificate of Incorporation and set forth in the accompanying Annex A.Stockholders are urged to read in their entirety the transfer restrictions set forth in the accompanying Annex A.

             Prohibited Transfers.    Subject to certain exceptions pertaining to existing 5-percent stockholders and Class B stockholders acquiring shares of Class A Common Stock upon conversion (described below), the transfer restrictions generally will restrict any direct or indirect transfer (such as transfers of stock of the Company that result from the transfer of interests in other entities that own stock of the Company) if the effect would be to:

      •
      increase the direct or indirect ownership of our stock by any person (or public group) from less than 5% to 5% or more of our common stock;

      •
      increase the percentage of our common stock owned directly or indirectly by a person (or public group) owning or deemed to own 5% or more of our common stock; or

      •
      create a new public group.

            Transfers included under the transfer restrictions include sales to persons (or public groups) whose resulting percentage ownership (direct or indirect) of common stock would exceed the 5% thresholds discussed above, or to persons whose direct or indirect ownership of common stock would by attribution cause another person (or public group) to exceed such threshold. Complicated rules of constructive ownership, aggregation, segregation, combination and other common stock ownership rules prescribed by the Code (and related regulations) will apply in determining whether a person or group of persons constitute a 5-percent stockholder under Section 382 and whether less than 5-percent stockholders will be treated as one or more "public groups," each of which is a 5-percent stockholder under Section 382. A transfer from one member of the public group to another member of the public group does not increase the percentage of our common stock owned directly or indirectly by the public group and, therefore, such transfers are not restricted. For purposes of determining the existence and identity of, and the amount of common stock owned by, any stockholder, we will be entitled to rely on the existence or absence of filings with the SEC of Schedules 13D and 13G (or any similar filings) as of


    any date, subject to our actual knowledge of the ownership of our common stock. The transfer restrictions will include the right to require a proposed transferee, as a condition to registration of a transfer of common stock, to provide all information reasonably requested regarding such person's direct and indirect ownership of our common stock. The transfer restrictions may result in the delay or refusal of certain requested transfers of our common stock. As a result of these rules, the transfer restrictions could result in prohibiting ownership (thus requiring dispositions) of our common stock as a result of a change in the relationship between two or more persons or entities, or of a transfer of an interest in an entity other than us, such as an interest in an entity that, directly or indirectly, owns our common stock. The transfer restrictions will also apply to proscribe the creation or transfer of certain "options" (which are broadly defined by Section 382) in respect of our common stock to the extent that, in certain circumstances, creation, transfer or exercise of the option would result in a proscribed level of ownership.

             Treatment of Pre-Existing 5-percent Stockholders and Class B Stockholders.    The transfer restrictions will contain an exception permitting otherwise prohibited transfers of Class B Common Stock among Class B stockholders. The transfer restrictions will also contain exceptions permitting certain otherwise prohibited transfers by pre-existing 5-percent stockholders and Class B stockholders who have converted their Class B Common Stock for Class A Common Stock pursuant to our Certificate of Incorporation ("Converted A Shares"). Pre-existing 5-percent stockholders are:

      •
      any person or entity who has filed a Schedule 13D or 13G with respect to Class A or Class B Common Stock on or before the date of adoption of the NOL Protective Amendment; and

      •
      certain persons and entities with specified ownership interests in the foregoing persons or entities.

            Pre-existing 5-percent stockholders and stockholders holding Converted A Shares will receive the following different treatment under the transfer restrictions. In contrast to the treatment of persons who become "5-percent stockholders" (as defined in Section 382) after adoption of the NOL Protective Amendment, who will be prohibited from disposing of any shares of Class A Common Stock without the express consent of your Board of Directors, a direct or indirect transfer of shares of Class A Common Stock by (but not to) a pre-existing 5-percent stockholder or stockholders holding Converted A Shares will be permitted so long as such a transfer would not:

      •
      increase the ownership of common stock by any person (other than a public group) to 5% or more of our common stock; or

      •
      increase the percentage of common stock owned by a person (other than a public group) owning 5% or more of our common stock.

            These permitted transfers include transfers to a public group even though the public group becomes a new public group as a result of such transfer and is treated as a 5-percent stockholder under Section 382. In addition, the transferred shares of Class A Common Stock must be (i) owned by the pre-existing 5-percent stockholder prior to the date of adoption of the NOL Protective Amendment or (ii) Converted A Shares. These provisions will permit pre-existing 5-percent stockholders and Class B stockholders to dispose of shares of the Company owned by them, subject to the conditions above.

             Consequences of Prohibited Transfers.    Upon adoption of the transfer restrictions, any direct or indirect transfer attempted in violation of the restrictions would be void as of the date of the purported transfer as to the purported transferee (or, in the case of an indirect transfer, the ownership of the direct owner of Class A Common Stock would terminate simultaneously with the transfer), and the purported transferee (or in the case of any indirect transfer, the direct owner) would not be recognized as the owner of the shares owned in violation of the restrictions for any purpose, including for purposes of voting and receiving dividends or other distributions in respect of such Class A Common Stock, or in the case of options, receiving Class A Common Stock in respect of their exercise. In this proxy



    statement, Class A Common Stock purportedly acquired in violation of the transfer restrictions is referred to as "excess stock."

            In addition to the purported transfer being void as of the date of the purported transfer, upon demand, the purported transferee must transfer the excess stock to our agent along with any dividends or other distributions paid with respect to such excess stock. Our agent is required to sell such excess stock in an arms' length transaction (or series of transactions) that would not constitute a violation under the transfer restrictions. The net proceeds of the sale, together with any other distributions with respect to such excess stock received by our agent, after deduction of all costs incurred by the agent, will be distributed first to the purported transferee in an amount, if any, up to the cost (or in the case of gift, inheritance or similar transfer, the fair market value of the excess stock on the date of the violative transfer) incurred by the purported transferee to acquire such excess stock, and the balance of the proceeds, if any, will be distributed to a charitable beneficiary. If the excess stock is sold by the purported transferee, such person will be treated as having sold the excess stock on behalf of the agent, and will be required to remit all proceeds to our agent (except to the extent we grant written permission to the purported transferee to retain an amount not to exceed the amount such person otherwise would have been entitled to retain had our agent sold such shares).

            To the extent permitted by law, any stockholder who knowingly violates the transfer restrictions will be liable for any and all damages suffered by us as a result of such violation, including damages resulting from a reduction in or elimination of the ability to utilize the NOLs and any professional fees incurred in connection with addressing such violation.

            With respect to any transfer of Class A Common Stock which does not involve a transfer of "securities" of the Company within the meaning of the General Corporation Law of the State of Delaware but which would cause any 5-percent stockholder to violate the transfer restrictions, the following procedure will apply in lieu of those described above. In such case, no such 5-percent stockholder shall be required to dispose of any interest that is not a security of the Company, but such 5-percent stockholder and/or any person whose ownership of securities of the Company is attributed to such 5-percent stockholder will be deemed to have disposed of (and will be required to dispose of) sufficient securities, simultaneously with the transfer, to cause such 5-percent stockholder not to be in violation of the transfer restrictions, and such securities will be treated as excess stock to be disposed of through the agent under the provisions summarized above, with the maximum amount payable to such 5-percent stockholder or such other person that was the direct holder of such excess stock from the proceeds of sale by the agent being the fair market value of such excess stock at the time of the prohibited transfer.

             Modification and Waiver of Transfer Restrictions.    Your Board of Directors will have the discretion to approve a transfer of Class A Common Stock that would otherwise violate the transfer restrictions if it determines that such transfer is in the Company's best interests. If your Board of Directors decides to permit a transfer that would otherwise violate the transfer restrictions, that transfer or later transfers may result in an "ownership change" that could limit our use of the NOLs. In deciding whether to grant a waiver, your Board of Directors may seek the advice of counsel and tax experts with respect to the preservation of our federal tax attributes pursuant to Section 382. In addition, your Board of Directors may request relevant information from the acquirer and/or selling party in order to determine compliance with the NOL Protective Amendment or the status of our federal income tax benefits, including an opinion of counsel (the cost of which will be borne by the transferor and/or the transferee) that the transfer will not result in a limitation on the use of the NOLs under Section 382. In considering a waiver, we expect your Board of Directors to consider, such factors, among others, as:

      •
      the impact of the proposed transfer on our Section 382 shift in ownership percentage;

      •
      the then existing level of our Section 382 shift in ownership percentage;

      •
      the timing of the expected "roll-off" of our existing ownership shift;

        •
        the economic impact of any Section 382 limitation that might result, taking into account factors such as our market capitalization and cash position;

        •
        the impact on possible future issuances or purchases of our common stock by us; and

        •
        any changes or expected changes in applicable tax law.

              If your Board of Directors decides to grant a waiver, it may impose conditions on the acquirer or selling party.

              In addition, in the event of a change in law, your Board of Directors will be authorized to modify the applicable allowable percentage ownership interest (now 5%) or modify any of the definitions, terms and conditions of the transfer restrictions or to eliminate the transfer restrictions, provided that your Board of Directors determines, by adopting a written resolution, that such action is reasonably necessary or advisable to preserve the NOLs or that the continuation of these restrictions is no longer reasonably necessary for such purpose, as applicable. Stockholders of the Company will be notified of any such determination through a filing with the SEC or such other method of notice as the Secretary of the Company shall deem appropriate.

              Your Board of Directors may establish, modify, amend or rescind by-laws, regulations and procedures for purposes of determining whether any transfer of Class A Common Stock would jeopardize the Company's ability to preserve and use the NOLs.

      Implementation and Expiration of the NOL Protective Amendment

              If the NOL Protective Amendment is approved by our stockholders at the Special Meeting, we intend to immediately thereafter enforce the restrictions to preserve future use of the NOL assets. The NOL Protective Amendment would expire on the earlier of (i) your Board of Directors' determination that the NOL Protective Amendment is no longer necessary for the preservation of the NOLs because of the repeal of Section 382 or any successor statute, (ii) the beginning of a taxable year of the Company to which your Board of Directors determines that no NOLs may be carried forward or (iii) such date as your Board of Directors determines that the NOL Protective Amendment is no longer necessary for the preservation of the NOLs. Your Board of Directors is also permitted to accelerate or extend the expiration date of the transfer restrictions in the event of a change in the law.

      Effectiveness and Enforceability

              Although the NOL Protective Amendment is intended to reduce the likelihood of an "ownership change," we cannot eliminate the possibility that an "ownership change" will occur even if we adopt it:

        •
        Your Board of Directors can permit a transfer to an acquirer that results or contributes to an "ownership change" if it determines that such transfer is in the Company's best interests and will consider the factors discussed earlier.

        •
        A court could find that some or all of the NOL Protective Amendment is not enforceable, either in general or as to a particular fact situation. Under the laws of the State of Delaware, our jurisdiction of incorporation, a corporation may provide in its Certificate of Incorporation for restrictions on the transfer of securities for the purpose of maintaining any tax advantage (including operating losses). Delaware law provides that transfer restrictions with respect to shares of our Class A Common Stock issued prior to the effectiveness of the restrictions will be effective against (i) stockholders with respect to shares that were voted in favor of this proposal and (ii) purported transferees of shares that were voted for this proposal if (A) the transfer restriction is conspicuously noted on the certificate(s) representing such shares or (B) the transferee had actual knowledge of the transfer restrictions (even absent such conspicuous notation). The Company intends that shares of Class A Common Stock issued after the effectiveness of the NOL Protective Amendment will be issued with the transfer restriction conspicuously noted on the certificate(s) representing such shares and therefore under Delaware

          law such newly issued shares will be subject to the transfer restriction. For the purpose of determining whether a stockholder is subject to the NOL Protective Amendment, we intend to take the position that all shares issued prior to the effectiveness of the NOL Protective Amendment that are proposed to be transferred were voted in favor of the NOL Protective Amendment unless the contrary is established to our satisfaction. We also intend in certain circumstances to assert the position that stockholders have waived the right to challenge or are estopped from challenging the enforceability of the NOL Protective Amendment, unless a stockholder establishes, to our satisfaction, that such stockholder did not vote in favor of the NOL Protective Amendment. Nonetheless, a court could find that the provision is unenforceable, either in general or as applied to a particular stockholder or fact situation.

        •
        Despite the adoption of the NOL Protective Amendment, there would still remain a risk that certain changes in relationships among stockholders or other events will cause an "ownership change" of us and our subsidiaries under Section 382. We cannot assure you that the NOL Protective Amendment is enforceable under all circumstances, particularly against stockholders who do not vote in favor of this proposal or who do not have notice of the acquisition restrictions at the time they subsequently acquire their shares. Accordingly, we cannot assure you that an "ownership change" will not occur. However, your Board of Directors has adopted a Section 382 stockholder rights plan (see "Proposal Two: Approval of Stockholder Rights Plan") which is intended to act as a deterrent to any person becoming a 5-percent stockholder and endangering our ability to use the NOLs. The NOL Protective Amendment and the Rights Plan will not apply to, among other exceptions, any shares of Class B Common Stock are outstanding, one-thirdStock.

              As a result of these and other factors, the NOL Protective Amendment serves to reduce, but does not eliminate, the risk that we will undergo an "ownership change." We cannot assure you that upon audit, the IRS would agree that all of the directors shall be independent, as defined therein. The Board of Directors has determined that a Board of Directors consisting of the nine 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 NYSE rules. Under the rules of the NYSE, listed companies, like us, who have a controlling shareholderNOLs are not required to have a majority of independent directors. Because Mr. K. Hovnanian and members of his immediate family 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.

      The following persons are proposed as directors of the Company to hold office until the next Annual Meeting of Shareholders and until their respective successors have been duly elected and qualified. In the event that any of the nominees for directors should become unavailable, it is intended that the shares represented by the proxies will be voted for such substitute nominees as may be nominated by the Board of Directors, unless the number of directors constituting a full Board of Directors is reduced. The Company has no reason to believe, however, that any of the nominees is, or will be, unavailable to serve as a director. Proxies cannot be votedallowable. See "Certain Considerations" for a greater number of persons than the number of nominees named below.

      Board of Directors

      Name
      		   
      		Age
      		   
      		Company Affiliation
      		   
      		Year First Became
      a Director
      Kevork S. Hovnanian            80     Chairman of the Board, & Director of the Company.     1967
      Ara K. Hovnanian            46    President, Chief Executive Officer, & Director of the Company.    1981
      Geaton A. DeCesaris, Jr.            48    President of the Hovnanian’s Land Investment Group & Director of the Company.    2001
      Arthur M. Greenbaum            78    Director of the Company.    1992
      Edward A. Kangas            59    Director of the Company.    2002
      Desmond P. McDonald            76    Director of the Company.    1982
      John J. Robbins            64    Director of the Company.    2001
      J. Larry Sorsby            48    Executive Vice President, Chief Financial Officer,
      & Director of the Company.      		    1998
      Stephen D. Weinroth            65    Director of the Company.    1982
       

      4


      Board of Directors – Directors’ Biographies


      		Mr. K. Hovnanian is founder of the Company and has served as Chairman of the Board since its original incorporation in 1967. He served as Chief Executive Officer from 1967 through July 1997. In 1996, the New Jersey Institute of Technology awarded Mr. Hovnanian a President’s Medal for “Distinguished Achievement to an Outstanding Entrepreneur”. In 1992, Mr. Hovnanian was granted one of five nationwide Harvard Dively Awards for Leadership in Corporate Public Initiatives.


      		Mr. A. Hovnanian has been Chief Executive Officer since 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. In 1985, Governor Kean appointed Mr. Hovnanian to The Council on Affordable Housing and he was reappointed to the Council in 1990 by Governor Florio. In 1994, Governor Whitman appointed him as member of the Governor’s Economic Master Plan Commission. Mr. Hovnanian serves as Member of the Advisory Council of PNC Bank, The Monmouth Real Estate Investment Corporation and is on the Boards of a variety of charitable organizations. Mr. A. Hovnanian is the son of Mr. K. Hovnanian.

      		Mr. DeCesaris, Jr. was elected as a Director of the Company in January 2001. Mr. DeCesaris, Jr. also serves as President of the Company’s Land Investment Group, established in the third quarter of 2003. Prior to this position, Mr. Decesaris, Jr. was President of Homebuilding Operations and Chief Operating Officer since January 2001. Prior to joining the Company in 2001, Mr. DeCesaris, Jr. served as President, Chief Executive Officer and director of Washington Homes, Inc. (“WHI”) from August 1988 to January 2001 and as Chairman of the Board of Directors of WHI from April 1999 to January 2001.

      		Mr. Greenbaum has been a Director of the Company since 1992. Mr. Greenbaum is a Senior Partner of Greenbaum, Rowe, Smith, Ravin, Davis & Himmel, a law firm which he has been a part of since 1950. Mr. Greenbaum qualifies as an independent director, as defined in the Company’s amended Certificate of Incorporation.

      		Mr. Kangas has been a Director of the Company since 2002. Mr. Kangas was Chairman and Chief Executive Officer of Deloitte Touche Tohmatsu from December 1989 to May 2000, when he retired. He also serves on the Board of Tenet Healthcare Corporation, Inc. (NYSE) and is Chairman of the Board and member of the Finance, Compensation, and Audit Committees of the National Multiple Sclerosis Society. Mr. Kangas qualifies as an independent director, as defined in the Company’s amended Certificate of Incorporation.

      5



      		Mr. McDonald has been a Director of the Company since 1982. Mr. McDonald was a Director of Midlantic Bank, N.A. from 1976 until December 1995, Executive Committee Chairman from August 1992 to December 1995 and President from 1976 to June 1992. He was also a Director of Midlantic Corporation until December 1995 and Vice Chairman from June 1990 to July 1992. Mr. McDonald qualifies as an independent director, as defined in the Company’s amended Certificate of Incorporation.

      		Mr. Robbins has been a Director of the Company since January 2001. Mr. Robbins was a partner with Kenneth Leventhal & Company from 1973 to 1992 when he retired; at the time of his retirement, he was serving as managing partner of the New York office and on the executive committee. Mr. Robbins has been a Trustee of Keene Creditors Trust since 1996. He has been Director and Chairman of the Audit Committee of Raytech Corporation since May 1, 2003. Mr. Robbins qualifies as an independent director, as defined in the Company’s amended Certificate of Incorporation.

      		Mr. Sorsby has been a Director of the Company since 1998, Chief Financial Officer of the Company since 1996, and Executive Vice President since November 2000. From March 1991 to November 2000, he was Senior Vice President, and from March 1991 to July 2000, he was Treasurer.

      		Mr. Weinroth has been a Director of the Company since 1982. Mr. Weinroth is a managing director and board member of Kline, Hawkes & Co., a manager of private equity funds and a principal of Weinroth & Co. LLC, a merchant banking firm. From 1996 to 2003 he was a senior partner in Anderson, Weinroth & Co., L.P., a merchant banking firm. He is also Chairman of the Board Emeritus of Core Laboratories, N.V., a New York Stock Exchange-listed worldwide oil field services company. He has held such position since 2001 and prior thereto was Chairman of the Board from 1994-2001. Mr. Weinroth qualifies as an independent director, as defined in the Company’s amended Certificate of Incorporation.

      MEETINGS OF BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS

      The members of the Audit Committee of the Board of Directors are Messrs. Kangas, McDonald, Robbins and Weinroth. The Audit Committee is chaired by Mr. McDonald and is responsible for reviewing and approving the scope of the annual audit undertaken by the Company’s independent accountants and meeting with them to review the results of their work as well as their recommendations. The Audit Committee appoints the Company’s independent accountants and also approves and reviews the fees of independent accountants.

      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 approximately 46 audits annually of the various aspects of the Company’s business. The Audit Committee authorizes staffing and compensation of the internal audit department. The Company’s Chief Accounting Officer reports directly to the Audit Committee on significant accounting issues. During the year ended October 31, 2003, the Audit Committee met on four occasions and had eight telephonic meetings. For discussions related to Audit Committee meetings, see “Report of the Audit Committee” below.

      6


      During the year ended October 31, 2003, the members of the Compensation Committee were Messrs. Weinroth and Kangas. The Compensation Committee is chaired by Mr. Weinroth and is active in reviewing salaries, bonuses and other forms of compensation for officers and key employees of the Company, in establishing salaries and in other compensation and personnel areas as the Board of Directors from time to time may request. For afurther discussion of the criteria used and factors considered by the Compensation Committee in reviewing and establishing executive compensation, see “Reportmatters you should consider before voting.

      Vote Needed for Approval

              Approval of the Compensation Committee” below. During the year ended October 31, 2003, the Compensation Committee met on two occasions.

      The Company does not have a Nominating Committee. Under the rulesproposed amendment to our Certificate of the NYSE, listed companies, like us, who have a controlling shareholder are not required to have a nominating committee. Because the Company does not have a nominating committee, 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 2005 Annual Meeting” below. Possible nominees to the Board of Directors may be suggested by any director and given to the Chairman of the Board. The Company’s restated By-laws provide that directors need not be shareholders. The Chairman of the Board of Directors, who is also the controlling shareholder, each year recommends a slate of directors to be nominated for election at the annual shareholders’ meeting. The Board of Directors approves the slate of nominees. Vacancies on the Board of Directors, other than those resulting from removal by shareholders, may be filled by action of the Board of Directors after recommendation by the Chairman of the Board.

      As of the 120th calendar day prior to February 3, 2004, 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.

      The Company’s Corporate Governance Guidelines (“Guidelines”) require that the Board of Directors conduct a self-evaluation at least annually, and as circumstances otherwise dictate. In conjunction with the self-evaluation, the Board of Directors reviews the qualifications and effectiveness of the existing Board of Directors and allows for each board member to make comments or recommendations regarding the qualifications and effectiveness of the existing Board of Directors or additional qualifications that may be required when selecting new board members. Among other factors, the Board of Directors generally considers the size of the Board of Directors best suited to fulfill its responsibilities, the Board of Director’s 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. The Company does not pay fees to any third party to identify or evaluate or assist in the identification or evaluation of potential director nominees.

      During the year ended October 31, 2003, the Board of Directors held four regularly scheduled meetings and two telephonic meetings. In addition, the directors considered Company matters and had frequent communications with the Chairman of the Board of Directors and others apart from the formal meetings. Directors are expected to attend the Annual Meeting of Shareholders, but the Company does not have a formal policy with respect to attendance. Eight members of the Board of Directors attended the Annual Meeting of Shareholders held on March 7, 2003.

      DIRECTOR COMPENSATION

      In fiscal 2004, each director who is not an officer of the Company will be paid an annual retainer of $40,000, 50% in cash and 50% in shares of Class A Common Stock. Pursuant to their annual retainer, each non-management director received 236 shares of Class A Common Stock on December 15, 2003. In addition, the non-management directors receive a fee of $3,000 for each board meeting held in person and $2,000 for a telephonic board meeting. Members of the Audit Committee and Compensation Committee receive $5,000 for each meeting held in person and $2,500 for a telephonic meeting. During the year ended October 31, 2003, Mr. McDonald received $73,500, Mr. Greenbaum received $36,000, Mr. Robbins received $71,000, Mr. Weinroth received $73,500, and Mr. Kangas received $46,000. From time to time, non-management directors are also granted stock options, and in January of 2004, each non-management director received an award of 7,500 options to purchase Class A Common Stock. In addition, all directors are reimbursed for expenses related to their attendance at meetings of the Board of Directors and committee meetings.

      7


      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,Incorporation requires the affirmative vote of the holders of (1) a majority in voting power of all outstanding common stock, voting together.
      together, (2) a majority in voting power of all outstanding Class A Common Stock, voting separately and (3) a majority in voting power of all outstanding Class B Common Stock, voting separately. With respect to the NOL Protective Amendment, the holders of record, present in person or by proxy, of (i) a majority of the votes of the Company's issued and outstanding capital stock, (ii) a majority of the votes of the Company's issued and outstanding Class A Common Stock and (iii) a majority of the votes of the Company's issued and outstanding Class B Common Stock shall constitute a quorum for the transaction of business.

      Mr. K. Hovnanian and certain members of his family have informed the Companyus that they intend to vote in favor of the nominees namedproposal.

              In determining whether the proposal has received the requisite number of affirmative votes, broker non-votes and abstentions will be counted and will have the same effect as a vote against the proposal.

              The NOL Protective Amendment, if approved, would become effective upon the filing of a Certificate of Amendment with the Secretary of State of the State of Delaware, which we expect to accomplish as soon as practicable after approval is obtained.

      Recommendation of your Board of Directors

      YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE NOL PROTECTIVE AMENDMENT.



      PROPOSAL TWO: APPROVAL OF RIGHTS PLAN

              The Rights Plan approval proposal is an opportunity for stockholders to approve your Board of Directors' decision to adopt the Rights Plan. Under the Rights Plan, such approval is required by August 14, 2009, which is one year from the effectiveness of the Rights Plan, or the Rights Plan will automatically expire on that date.

              The Rights Plan, as it may be amended and restated, is not designed to protect stockholders against the possibility of a hostile takeover. Instead, it is meant to protect stockholder value by attempting to preserve our ability to use the NOLs. Please see the discussion under "Proposal One: NOL Protective Amendment" for a discussion of the Section 382 limitation on use of NOLs. Because the transfer restrictions of the NOL Protective Amendment may not be enforceable in all circumstances (as described in "Proposal One: NOL Protective Amendment—Effectiveness and Enforceability") your Board of Directors believes it is in the best interest of us and our stockholders to approve the adoption of the Rights Plan. Your Board of Directors has unanimously approved the Rights Plan and is unanimously recommending that stockholders approve the plan at the Special Meeting.

              Although both Class A Common Stock and Class B Common Stock are included in the Section 382 "ownership change" calculation, Class B Common Stock will not be subject to the Rights Plan. Because the Class B Common Stock is not traded on an exchange and transfers among holders of Class B Common Stock are relatively infrequent, transfers of such shares would likely only have a nominal effect on the Section 382 ownership shift calculations.

              The following description of the Rights Plan is qualified in its entirety by reference to the text of the Rights Plan, which is attached to this proxy statement as Annex B.You are urged to read carefully the Rights Plan in its entirety as the discussion below is only a summary.

      Description of Rights Plan

              The Rights Plan is intended to act as a deterrent to any person or group acquiring 4.9% or more of our outstanding Class A Common Stock (an "Acquiring Person") without the approval of your Board of Directors. Stockholders who own 4.9% or more of the Company's outstanding Class A Common Stock as of the close of business on August 15, 2008 will not trigger the Rights Plan so long as they do not (i) acquire any additional shares of Class A Common Stock or (ii) fall under 4.9% ownership of Class A Common Stock and then re-acquire 4.9% or more of the Class A Common Stock. The Rights Plan does not exempt any future acquisitions of Class A Common Stock by such persons. Any rights held by an Acquiring Person are void and may not be exercised. Your Board of Directors may, in its sole discretion, exempt any person or group from being deemed an Acquiring Person for purposes of the Rights Plan.

               The Rights.    Our Board of Directors authorized the issuance of one right per each outstanding share of Class A Common Stock and Class B Common Stock payable to our stockholders of record as of August 15, 2008. Subject to the terms, provisions and conditions of the Rights Plan, if the rights become exercisable, each right would initially represent the right to purchase from us one ten-thousandth of a share of our Series B Junior Preferred Stock for a purchase price of $35.00 (the "Purchase Price"). If issued, each fractional share of preferred stock would give the stockholder approximately the same dividend, voting and liquidation rights as does one share of Class A Common Stock. However, prior to exercise, a right does not give its holder any rights as a stockholder, including without limitation any dividend, voting or liquidation rights.

               Exercisability.    The rights will not be exercisable until the earlier of (i) 10 business days after a public announcement by us that a person or group has become an Acquiring Person and (ii) 10 business days after the commencement of a tender or exchange offer by a person or group for 4.9% of the Class A Common Stock.


              We refer to the date that the rights become exercisable as the "Distribution Date." Until the Distribution Date, Class A Common Stock and Class B Common Stock certificates will evidence the rights and may contain a notation to that effect. Any transfer of shares of Class A Common Stock and/or Class B Common Stock prior to the Distribution Date will constitute a transfer of the associated rights. After the Distribution Date, the rights may be transferred other than in connection with the transfer of the underlying shares of Class A Common Stock or Class B Common Stock.

              After the Distribution Date, each holder of a right, other than rights beneficially owned by any Acquiring Person (which will thereupon become void), will thereafter have the right to receive upon exercise of a right and payment of the Purchase Price, that number of shares of Class A Common Stock or Class B Common Stock, as the case may be, having a market value of two times the Purchase Price.

               Exchange.    After the Distribution Date, your Board of Directors may exchange the rights (other than rights owned by an Acquiring Person which will have become void), in whole or in part, at an exchange ratio of one share of Class A Common Stock or Class B Common Stock, as the case may be, or a fractional share of Series B Preferred Stock (or of a share of a similar class or series of our preferred stock having similar rights, preferences and privileges) of equivalent value, per right (subject to adjustment).

               Expiration.    The rights and the Rights Plan will expire on the earliest of (i) August 14, 2018, (ii) the time at which the rights are redeemed pursuant to the Rights Agreement (as described below), (iii) the time at which the rights are exchanged pursuant to the Rights Agreement, (iv) your Board of Directors' determination that the NOL Protective Amendment is no longer necessary for the preservation of the NOLs because of the repeal of Section 382 or any successor statute, (v) the beginning of a taxable year of the Company to which your Board of Directors determines that no tax benefits may be carried forward and (vi) August 14, 2009 if stockholder approval of the Rights Plan has not been obtained.

               Redemption.    At any time prior to the time an Acquiring Person becomes such, your Board of Directors may redeem the rights in whole, but not in part, at a price of $0.01 per right (the "Redemption Price"). The redemption of the rights may be made effective at such time, on such basis and with such conditions as your Board of Directors in its sole discretion may establish. Immediately upon any redemption of the rights, the right to exercise the rights will terminate and the only right of the holders of rights will be to receive the Redemption Price.

               Anti-Dilution Provisions.    The purchase price of the preferred shares, the number of preferred shares issuable and the number of outstanding rights are subject to adjustment to prevent dilution that may occur as a result of certain events, including among others, a stock dividend, a stock split or a reclassification of the preferred shares or Class A Common Stock or Class B Common Stock. No adjustments to the purchase price of less than 1% will be made.

               Amendments.    Before the Distribution Date, your Board of Directors may amend or supplement the Rights Plan without the consent of the holders of the rights. After the Distribution Date, your Board of Directors may amend or supplement the Rights Plan only to cure an ambiguity, to alter time period provisions, to correct inconsistent provisions, or to make any additional changes to the Rights Plan, but only to the extent that those changes do not impair or adversely affect any rights holder.

      Vote Needed for Approval

              Approval of the Rights Plan requires the affirmative vote of the majority in voting power of all outstanding common stock entitled to vote, voting together, and that are present, or represented by proxy, and are voted on the proposal to approve the Rights Plan. With respect to the vote on the Rights Plan, the holders of record, present in person or by proxy, of a majority of the votes of the



      Company's issued and outstanding capital stock shall constitute a quorum for the transaction of business.

              Mr. K. Hovnanian and certain members of his family have informed us that they intend to vote in favor of the proposal. Because of the voting power of Mr. K. Hovnanian and such members of his family, this proposal is assured passage.

              In determining whether the proposal has received the requisite number of affirmative votes, abstentions and broker non-votes will have no impact on such matter because shares for which the holder abstains from voting or are the subject of broker non-votes are not shares voted.

      OurRecommendation of your Board of Directors recommends that shareholders vote FOR

      YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE APPROVAL OF THE RIGHTS PLAN.



      PROPOSAL THREE: ADJOURNMENT

              In the electionevent there are not sufficient votes at the time of the nominees named in thisSpecial Meeting to adopt Proposal One and/or Proposal Two, the Board of Directors may submit a proposal to adjourn the Company’s BoardSpecial Meeting to a later date, or dates, if necessary, to permit further solicitation of Directors.

      (2) RATIFICATION OF THE SELECTION OF
      INDEPENDENT ACCOUNTANTS

      proxies. The selectionadoption of independent accountants to examine financial statements of the Company made available or transmitted to shareholders and filed with the Securities and Exchange Commission for the year ended October 31, 2004 is submitted to this Annual Meeting of Shareholders for ratification. Ernst & Young LLP has been selected by the Audit Committee of the Company to examine such financial statements.

      The Company has been advised that a representative of Ernst & Young LLP will attend this Annual Meeting of Shareholders to respond to appropriate questions and will be afforded the opportunity to make a statement if the representative so desires.

      VOTE REQUIRED

      Ratification of the selection of Ernst & Young LLP as our independent accountants to examine financial statements of the Company for the year ended October 31, 2004,Proposal Three requires the affirmative vote of a majority of the votes cast by holders of a majorityClass A Common Stock and Class B Common Stock, voting together, represented in voting power of all outstanding common stock, voting together.
      person or by proxy at the Special Meeting, if Proposal Three is presented.

      Mr. K. Hovnanian and certain members of his family have informed the Companyus that they intend to vote in favor of this proposal.the proposal, if necessary. Because of the voting power of Mr. K. Hovnanian and such members of his family, this proposal is assured passage.

              In determining whether the proposal has received the requisite number of affirmative votes, abstentions and broker non-votes will have no impact on such matter because shares for which the holder abstains from voting or are the subject of broker non-votes are not shares voted.

      OurRecommendation of your Board of Directors recommends that shareholders vote FOR ratification of the selection of Ernst & Young LLP as our independent accountants.

      YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" ADJOURNMENT, IF NECESSARY.



      (3) APPROVAL OF AN AMENDMENT TO THE COMPANY’S AMENDEDCERTAIN CONSIDERATIONS
      CERTIFICATE OF INCORPORATION TO INCREASE THE
      NUMBER OF AUTHORIZED SHARES OF COMMON STOCK.

      On December 15, 2003, subject to shareholder approval, the        Your Board of Directors authorizedbelieves that attempting to safeguard the tax benefits as described above is in our best interests. Nonetheless, we cannot eliminate the possibility that an amendment"ownership change" will occur even if the NOL Protective Amendment and the Rights Plan are approved. You should consider the factors discussed below in making your voting decision.

      The IRS could challenge the amount of the Company's NOLs or claim we experienced an "ownership change," which could reduce the amount of NOLs that we can use.

              The amount of the Company's NOLs has not been audited or otherwise validated by the IRS. The IRS could challenge the amount of the NOLs, which could result in an increase in our liability in the future for income taxes. In addition, calculating whether an "ownership change" has occurred is subject to uncertainty, both because of the complexity and ambiguity of Section 382 and because of limitations on a publicly traded company's knowledge as to the ownership of, and transactions in, its securities. Therefore, we cannot assure you that a governmental authority will not claim that we experienced an "ownership change" and attempt to reduce or eliminate the benefit of the Company's NOLs even if the NOL Protective Amendment and the Rights Plan are in place.

      Continued Risk of "Ownership Change."

              Although the NOL Protective Amendment and the Rights Plan are intended to reduce the likelihood of an "ownership change" that could adversely affect us, we cannot assure you that such restrictions would prevent all transfers that could result in such an ownership change. In particular, absent a court determination, there can be no assurance that the acquisition restrictions of the NOL Protective Amendment will be enforceable against all our amended Certificatestockholders, and they may be subject to challenge on equitable grounds. In particular, the acquisition restrictions may not be enforceable against stockholders who vote against or abstain from voting on the NOL Protective Amendment or who do not have notice of Incorporationthe restrictions at the time when they subsequently acquire their shares.

      Potential Effects on Liquidity.

              The NOL Protective Amendment and Rights Plan will restrict a stockholder's ability to increase the number of authorized shares of all classes of stock from 100,100,000 shares to 230,100,000 shares, consisting of 200,000,000acquire, directly or indirectly, additional shares of Class A Common Stock (the “Classin excess of the specified limitations. Furthermore, a stockholder's ability to dispose of Class A Common Stock”)Stock may be limited by reducing the class of potential acquirers for such Class A Common Stock and a stockholder's ownership of Class A Common Stock may become subject to the NOL Protective Amendment and Rights Plan upon actions taken by persons related to, or affiliated with, them. Stockholders are advised to carefully monitor their ownership of our stock and consult their own legal advisors and/or us to determine whether their ownership of our stock approaches the proscribed level.

      Potential Impact on Value.

              If the NOL Protective Amendment is approved, your Board of Directors intends to impose a legend reflecting the NOL Protective Amendment on certificates representing newly issued or transferred shares held by stockholders that voted for approval of the NOL Protective Amendment. Because certain buyers, including persons who wish to acquire more than 5% of Class A Common Stock and certain institutional holders who may not be comfortable holding Class A Common Stock with restrictive legends, may not be able to purchase Class A Common Stock, the NOL Protective Amendment could depress the value of Class A Common Stock in an amount that might more than offset any value conserved as a result of the preservation of the NOLs. The Rights Plan could have a similar effect if investors object to holding Class A Common Stock subject to the Rights Plan.


      Anti-Takeover Impact.

              The basis for the NOL Protective Amendment and the Rights Plan is to preserve the long-term value to the Company of the accumulated NOLs. The NOL Protective Amendment, if adopted, could be deemed to have an "anti-takeover" effect because, among other things, it will restrict the ability of a person, entity or group to accumulate more than five percent of Class A Common Stock and the ability of persons, entities or groups now owning more than five percent of Class A Common Stock from acquiring additional shares of Class A Common Stock without the approval of your Board of Directors. Similarly, the Rights Plan is not intended to prevent a takeover of the Company, but because an acquiring person may be diluted upon a trigger of the Rights Plan, it does have a potential anti-takeover effect. However, Kevork S. Hovnanian, the Chairman of your Board of Directors, and Ara K. Hovnanian, our President and Chief Executive Officer, have voting control, through personal holdings and family-owned entities, of Class A and Class B Common Stock that enables them to cast approximately 71.6% of the votes that may be cast by the holders of our outstanding Class A and Class B Common Stock combined.



      VOTING RIGHTS AND SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

              The record date for the determination of stockholders entitled to vote at the Special Meeting was the close of business on                                 , 30,000,0002008. As of that date, the outstanding voting securities of the Company consisted of                    shares of Class A Common Stock, each share entitling the holder thereof to one vote, and                    shares of Class B Common Stock, (the “Class B Common Stock” and, together witheach share entitling the holder thereof to ten votes. Other than as set forth in the table below, there are no persons known to us to be the beneficial owners of shares representing more than 5% of either Class A Common Stock the “Common Stock”) and 100,000 sharesor Class B Common Stock.

              The following table sets forth as of Preferred Stock. We are not proposing an increase to the number of authorized shares of Preferred Stock. If approved by the shareholders, the first paragraph of paragraph Fourth of our amended 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 230,100,000, of which 200,000,000 shares shall beSeptember 8, 2008 (1) Class A Common Stock having a par value of one cent ($0.01) per share, 30,000,000 shares shall beand Class B Common Stock havingbeneficially owned by holders of more than 5% of either Class A Common Stock or Class B Common Stock and (2) Class A Common Stock, Class B Common Stock and Depositary Shares beneficially owned by each Director, each "named executive officer" identified in our proxy statement for the annual meeting held on March 31, 2008 and all Directors and executive officers as a par valuegroup:

       
      		 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)      		 

      Kevork S. Hovnanian(4)

      		  7,567,392  12.19% 12,348,737  84.34% —  — 

      Ara K. Hovnanian(5)

      		  5,586,237  8.76% 1,412,874  9.38% —  — 

      Paul W. Buchanan(6)

      		  77,500  0.12% —  —  —  — 

      Robert B. Coutts

      		  11,736  0.02% —  —  —  — 

      Edward A. Kangas

      		  75,020  0.12% —  —  —  — 

      Joseph A. Marengi

      		  21,736  0.03% —  —  —  — 

      Peter S. Reinhart

      		  53,964  0.09% —  —  3,000  0.1%

      John J. Robbins

      		  61,125  0.10% —  —  —  — 

      J. Larry Sorsby

      		  333,157  0.53% —  —  —  — 

      Stephen D. Weinroth

      		  115,520  0.19% 4,500  .03% —  — 

      Ameriprise Financial, Inc.(7)

      		  1,056,754  1.70% —  —  N/A  N/A 

      Barclays Global Investors, NA.(8)

      		  3,059,667  4.93% —  —  N/A  N/A 

      Capital Group International, Inc.(9)

      		  3,903,900  6.29% —  —  N/A  N/A 

      EARNEST Partners, LLC(10)

      		  5,352,802  8.62% —  —  N/A  N/A 

      Franklin Mutual Advisors(11)

      		  2,556,220  4.11% —  —  N/A  N/A 

      State Street Bank and Trust Company(12)

      		  2,978,834  4.80% —  —  N/A  N/A 

      Tontine Management, L.L.C. and affiliates(13)

      		  3,041,777  4.90% —  —  N/A  N/A 

      T. Rowe Price Associates, Inc.(14)

      		  4,753,880  7.65% —  —  N/A  N/A 

      All Directors and executive officers as a group (11 persons)

      		  13,904,274  21.68% 13,766,111  91.38% 5,000  0.1%
      (1)
      The figures in the table with respect to Class A Common Stock do not include the shares of one cent ($0.01) perClass 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 100,000 shares shall be PreferredExchange Commission and generally attributes ownership to persons who have or share voting or investment power with respect to the relevant securities. Shares of Common Stock havingsubject to options either currently exercisable or exercisable within 60 days are deemed outstanding for computing the percentage of the person holding such options but are not deemed outstanding for computing the percentage of 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 include the following: K. Hovnanian (0), A. Hovnanian, (1,600,000), P. Buchanan (32,500), R. Coutts (5,666)

        E. Kangas (39,499), J. Marengi (5,666), P. Reinhart (22,500), J. Robbins (37,499), J. Sorsby (251,355), S. Weinroth (49,499), and all Directors and executive officers as a par valuegroup (2,044,184). Shares of one cent ($0.01) per share.”

      REASONS FOR THE PROPOSALClass B Common Stock subject to options currently exercisable or exercisable within 60 days include the following: A. Hovnanian (423,959).

      Our Board of Directors believes that
      (2)
      Based upon the number of shares outstanding plus options currently exercisable or exercisable within 60 days held by each such Director, nominee, executive officer or holder.

      (3)
      Each Depositary Share represents 1/1,000th of a share of 7.625% Series A Preferred Stock.

      (4)
      Includes 4,833,826 shares of Class B Common Stock that are available for issuanceheld by the Kevork S. Hovnanian Family Limited Partnership, a Connecticut limited partnership (the "Limited Partnership"), beneficial ownership of which is not sufficient. We are currently authorizeddisclaimed by Kevork S. Hovnanian. Kevork S. Hovnanian's wife, Sirwart Hovnanian, 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 issue 87,000,000vote and dispose of the shares of Class B Common Stock held by the Limited Partnership. Also includes 190,000 shares of Class A Common Stock and 13,000,000376,265 shares of Class B Common Stock.

      8


      AsStock shares held in the name of Sirwart Hovnanian or the Record Date, 30,459,031 sharesMarital Trust and over which Ms. Hovnanian has sole power to dispose of Common Stock were issued and outstanding and 16,379,722 sharesvote shares. Mr. Hovnanian disclaims beneficial ownership of Common Stock were reserved for (1) conversions of our Class B Common Stock intosuch shares.

      (5)
      Includes 157,271 shares of Class A Common Stock in connection with salesand 250,000 shares of our Class B Common Stock (2) issuance upon exercise of outstanding stock options and stock awards and (3) options and stock awards that may be grantedheld in the future under our stock option or other incentive programs. As a result, there are currently only 53,161,247grantor retained annuity trust (the "AKH GRAT") for which Ara K. Hovnanian is trustee, 372,116 shares of Common Stock available for issuance.

      The Board of Directors believes that it is advisable and in our best interest and in the best interest of our shareholders to have a greater number of authorized shares of Common Stock. The additional shares will be available for issuance from time to time at the discretion of the Board of Directors, 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, stock splits, stock dividends, future acquisitions of property or securities of other corporations, to issue under stock option or other incentive programs, convertible debt financings and equity financings. No shareholder has any preemptive rights regarding future issuances of any shares of Common Stock.

      As previously announced, if our shareholders approve the amendment to our amended Certificate of Incorporation that is the subject of this proposal, we intend to effect a 2-for-1 stock split whereby we will distribute to the holders of our outstanding Class A Common Stock one share of Class A Common Stock and to the holders431,394 shares of our outstanding Class B Common Stock one share of Class B Common Stock. The Board of Directors believes that this stock split is advisableheld in family related trusts as to which Ara K. Hovnanian has shared voting power and in our best interestshared investment power and in the best interest of our shareholders. However, unless the number of37,374 shares of Common Stock we are authorized to issue is increased, we will not be able to carry out this stock split.

      The issuance of additional shares of Common Stock could dilute the earnings and book value allocable to each share of Common Stock. Also, if we were to sell or otherwise issue authorized but unissued Common Stock at a time when a takeover is pending or threatened, the issuance of additional Common Stock could discourage the takeover by making it more expensive for the person who wants to take us over to obtain control of us. However, Mr. K. Hovnanian, the Chairman of our Board of Directors, and certain members of his family, 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. The proposed amendment to the amended Certificate of Incorporation is not being recommended in response to any specific effort of which we are aware to obtain control of the Company, nor is the Board of Directors currently proposing to shareholders any anti-takeover measures.

      VOTE REQUIRED

      Approval of the proposed amendment to our amended Certificate of Incorporation requires the affirmative vote of the holders of (1) a majority in voting power of all outstanding Common Stock, voting together, (2) a majority in voting power of all outstanding Class A Common Stock and (3) a majority in voting power122,274 shares of all outstanding Class B Common Stock.

      Stock held by Mr. K. HovnanianHovnanian's wife and certain members of his family have informed the Company that they intend to vote in favor of this proposal.

      Our Board of Directors recommends that shareholders vote FOR the approval of the proposed amendment to our amended Certificate of Incorporation.

      9


      (4) APPROVAL OF THE COMPANY’S AMENDED AND RESTATED
      SENIOR EXECUTIVE SHORT-TERM INCENTIVE PLAN

      Shareholders are being asked to consider and approve proposals to amend the amended and restated Senior Executive Short-Term Incentive Plan (the “Bonus Plan”) to:

      (1)  increase the maximum amount of a Bonus Award (as defined below) that may be granted to any Participant (as defined below) in the Bonus Plan with respect to any fiscal year of the Company from $10 million to a formula, pursuant to which the maximum amount of such an Bonus Award cannot exceed the greater of (x) $15 million and (y) 2-1/2% 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 Bonus Award is to be paid;

      (2)  increase the number of shares available for issuance under the Bonus Plan from 2,500,000 shares of our common stock to 5,000,000 shares of our common stock;

      (3)  provide that the Bonus Plan will expire on March 5, 2009 (such that the Bonus Plan will only have a term of five years from the date of this Annual Meeting of Shareholders), such that no new Bonus Awards may be granted after such expiration date (although Bonus Awards granted prior to such expiration date will remain in effect and be subject to the terms of the Bonus Plan);

      (4)  clarify that the Bonus Plan may not be amended to increase the number of shares of our common stock available for issuance under the Bonus Plan or to increase the maximum amount of a Bonus Award that may be granted to any Participant in the Bonus Plan with respect to any fiscal year of the Company without shareholder approval of any such increases;

      (5)  clarify that the shares of our common stock that are available for issuance under the Bonus Plan and subject to issuance under any Bonus Awards may be adjusted in number or kind to reflect the effects of any stock split, stock dividend, corporate transaction or change in the capital structure of our Company, as well as to clarify the effects a change in control of our Company could have on any outstanding Bonus Awards;

      (6)  change the jurisdiction under which the Bonus Plan and any Bonus Awards granted under the Bonus Plan will be governed from the State of New York to the State of Delaware; and

      (7)  make certain other non-material conforming changes to the Bonus Plan in order to provide for the foregoing.

      The Bonus Plan, as amended, is set forth in Appendix A hereto.

      The Bonus Plan provides for annual bonus awards calculated using a pre-established formula, which is based on the Company’s overall performance. The Company has experienced increased profitability and growth for the year ended October 31, 2003 in comparison to previous years. Therefore, the Company believes that the current limit on the maximum amount of any one Bonus Award (both in dollar value and number of shares) is not sufficient to meet the purpose of the Bonus Plan, which is to promote the interests of the Company and its shareholders by providing incentives in the form of periodic bonus awards (“Bonus Awards”) to certain senior executive employees of the Company and its affiliates, thereby motivating such executives to attain corporate performance goals set forth in the Bonus Plan, while preserving for the benefit of the Company and its subsidiaries the associated U.S. federal income tax deduction. In connection with preserving this benefit, the Company has proposed to limit the term of the Bonus Plan to a period of five years from the date of this Annual Meeting of Shareholders, to ensure that any extension of the term of the Bonus Plan will be approved by shareholders at a later date, therefore ensuring that the Company meets certain requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), which section governs the tax deductibility of performance-based compensation, as the Bonus Awards granted under the Bonus Plan are intended to be.

      The Company’s Compensation Committee (the “Committee”) has approved the amendments to the Bonus Plan.

      For a discussion of the Bonus Plan, see “Material Features of the Bonus Plan” below and “Annual Bonus Program” below.

      10


      MATERIAL FEATURES OF THE BONUS PLAN

      The following is a brief summary of the material features of the Bonus Plan. Because this is only a summary, it does not contain all the information about the Bonus Plan that may be important to you and is qualified in its entirety to the full text of the amended and restated Bonus Plan as set forth in Appendix A hereto.

      PURPOSE

      The purpose of the Bonus Plan is to promote the interests of the Company and its shareholders by providing incentives in the form of Bonus Awards to certain senior executive employees of the Company and its affiliates, thereby motivating such executives to attain corporate performance goals set forth in the Bonus Plan while preserving for the benefit of the Company and its subsidiaries the associated U.S. federal income tax deduction under Section 162(m) of the Code.

      ADMINISTRATION

      The Bonus Plan is administered by a committee of two or more individuals who are each “non-employee directors” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended, or any successor thereto, “outside directors” as defined under Section 162(m) of the Code and “independent directors” within the meaning of the applicable rules, if any, of any national securities exchange on which shares of common stock of the Company are listed or admitted to trading, unless otherwise determined by the Company’s Board of Directors to act as such a committee. The Compensation Committee, or its delegate, may select senior executives of the Company and its affiliates who are “covered employees”, as defined in Section 162(m) of the Code, or who the Company anticipates may be “covered employees” of the Company and its subsidiaries (the “Participants”), to be granted Bonus Awards under the Bonus Plan. For the fiscal year ended October 31, 2003, approximately four “covered employees” were selected by the Committee to participate in the Bonus Plan.

      BONUS AWARDS

      A Participant’s Bonus Award shall be determined based on the achievement 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: (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) stock price; (vii) return on stockholders’ equity; (viii) expense management; (ix) return on investment before or after the cost of capital; (x) improvements in capital structure; (xi) profitability of an identifiable business unit or product; (xii) maintenance or improvements of profit margins; (xiii) market share; (xiv) revenues or sales; (xv) cost; (xvi) cash flow; (xvii) working capital; (xviii) changes in net assets (whether or not multiplied by a constant percentage intended to represent cost of capital); and (xix) return on assets.

      Prior to the payment of any Bonus 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 Bonus Award otherwise payable for achievement of the applicable performance goals. The Committee may base the decision to reduce the Bonus Award on any criteria it deems relevant. Payment of a Bonus 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. The Bonus Plan provides that the Committee shall determine, in its discretion, whether a Bonus Award shall be payable in cash, common stock of the Company, or a combination thereof (which may include, without limitation, permitting a Participant to elect, in the calendar year prior to the year in which a Bonus Award may otherwise become payable to a Participant under the Bonus Plan, to defer receipt of all or any portion of such Bonus Award into a right to receive shares of common stock of the Company at a future date (such right, a “Deferred Share Unit”);provided, however, that the number of shares of common stock of the Company that may be issued under the Bonus Plan, as amended, will be 5,000,000.

      11


      EFFECT OF CERTAIN EVENTS ON BONUS PLAN AND BONUS AWARDS

      As amended, 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 may make such substitution or adjustment, if any, as it deems to be equitable, as to (i) the number or kind of common stock or other securities that may be issued as set forth in the Bonus Plan or pursuant to outstanding Bonus Awards and/or (ii) any other affected terms of such Bonus Awards. Except as otherwise provided in a Bonus Award agreement, in the event of a Change in Control (as defined in the 1999 Stock Incentive Plan (as amended and restated)), 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 Bonus Award.

      LIMITATIONS

      As amended, the Bonus Plan will provide that the maximum Bonus Award to any Participant with respect to any fiscal year shall be the greater of (x) $15 million and (y) 2-1/2% 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 Bonus Award is to be payable or distributed, as applicable.

      AMENDMENT AND TERMINATION

      The Committee may at any time amend, suspend or terminate the Bonus Plan in whole or in part. As amended, and notwithstanding the foregoing, no amendment, suspension or termination of the Bonus Plan shall be made which (i) without the Participant’s consent, impairs any of the rights or obligations under any Bonus Award theretofore granted to a Participant under the Bonus Plan, (ii) without the approval of the shareholders of the Company (except upon the occurrence of an event described above in “Effect of Certain Events on Bonus Plan and Bonus Awards”) increases the total number of shares of common stock available for issuance under the Bonus Plan or changes the maximum amount of any Bonus Award which may be payable or distributed to any Participant;provided, however, that the Committee may amend the Bonus Plan in such manner as it deems necessary to permit the granting of Bonus Awards meeting the requirements of the Code or other applicable laws.

      NONTRANSFERABILITY OF BONUS AWARDS

      A Participant’s rights and interest under the Bonus Plan generally may not be assigned, transferred, or encumbered, except in the event of a Participant’s death or as may be approved by the Committee. No Bonus Award under the Bonus Plan will be construed as giving any employee a right to continued employment with the Company or its subsidiaries.

      12


      PARTICIPANTS OF THE BONUS PLAN

      For the year ended October 31, 2003, the Committee granted the following Bonus Awards to the following Participants under the Bonus Plan: (a) Bonus Awards for a total of 4 participants (4 participants in the Executive Officers Group, no participants in the Non-Executive Director Group, and no participants in the Non-Executive Officer Employee Group). Additional information is provided in the chart below.

      Senior Executive Short-Term Incentive Plan Bonus Awards
      for the Fiscal Year ended October 31, 2003

      Name And Position
      		   
      		Cash Bonus Awards
      Dollar Value(1)
      		   
      		Restricted Stock Awards;
      Dollar Value ($) (Aggregate)(2)
      Ara K. Hovnanian, CEO                6,989,600          2,566,080  
      Kevork S. Hovnanian, Chairman of the Board                6,128,000          —   
      Geaton A. DeCesaris, Jr., President of the Hovnanian Land Investment Group                2,144,800          1,103,040  
      J. Larry Sorsby, CFO                1,052,245          541,154  
      Peter S. Reinhart, General Counsel                —           —   
      Kevin C. Hake, V.P., Finance and Treasurer                —           —   
      Executive Officer Group                16,314,645          4,210,274  
      Non-Executive Director Group                N/A           N/A   
      Non-Executive Officer Employees Group                —           —   
       
      (1)Includes Bonus Awards not paid until after the end of fiscal year ended October 31, 2003.

      (2)Represents the rights to receive common stock after vesting 25% per year ever four years. Any Participant who achieves either 20 years of service or reaches the age of 58 becomes immediately 100% vested in such stock.

      VOTE REQUIRED

      Approval of the amended and restated Senior Executive Short-Term Incentive Plan requires the affirmative vote of the holders of a majority in voting power of all outstanding common stock, voting together.

      Mr. K. Hovnanian and certain members of his family have informed the Company that they intend to vote in favor of this proposal. Because of the voting power of Mr. K. Hovnanian and such members of his family, this proposal is assured passage.

      Our Board of Directors recommends that shareholders vote FOR approval of the amended and restated Senior Executive Short-Term Incentive Plan.

      13


      5. APPROVAL OF THE COMPANY’S AMENDED AND
      RESTATED 1999 STOCK INCENTIVE PLAN

      Shareholders are being asked to consider and approve proposals to amend the amended and restated 1999 Stock Incentive Plan (the “Stock Plan”) to:

      (1)  increase the number of shares available for issuance under the Stock Plan from 4,500,000 shares of common stock to 10,000,000 shares of common stock;

      (2)  increase the maximum amount of a performance-based Award that may be granted to any Participant (as defined below) in the Stock Plan with respect to any fiscal year of the Company from $2 million to a formula, pursuant to which the maximum amount of such a performance-based Award cannot exceed the greater of (x) $15 million and (y) 2-1/2% 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;

      (3)  increase the number of shares of common stock for which stock options, stock appreciation rights, restricted stock and restricted stock unit Awards can be granted during a calendar year to any Participant from 300,000 to 500,000;

      (4)  increase the number of shares of common stock for which Awards (as defined below) may be granted in each calendar year to Participants who are (i) not subject to the rules promulgated under Section 16 of the Securities Exchange Act of 1934, as amended (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 Internal Revenue Code of 1986, as amended (the “Code”), from 300,000 to 500,000;

      (5)  provide that the compensation committee of the Company’s Board of Directors (the “Compensation Committee”) will have the power and authority to amend, alter or discontinue the Stock Plan, in lieu of the Company’s Board of Directors;

      (6)  update the performance criteria on which performance-based Awards may be granted to Participants to conform to the performance criteria on which performance-based Bonus Awards may be granted under the Senior Executive Short-Term Incentive Plan, as amended and restated;

      (7)  make certain editorial changes, such as (a) clarifying that the persons who are selected to participate in the Stock Plan must be employees, directors or consultants of the Company or its affiliates, (b) clarifying that unless the Committee specifies otherwise, a Participant may only elect to have the Company withhold any shares of common stock upon the exercise or vesting of any Award in respect of the minimum amount of taxes that the Company may be required to withhold in connection with such exercise or vesting, and (c) clarifying that the number, kind and exercise price (if applicable) of shares available for issuance under the Stock Plan and under Awards are subject to adjustment to reflect the effects of any stock split, stock dividend, corporate transaction or change in the capital structure of our Company; and

      (8)  make certain other non-material conforming changes to the Stock Plan in order to provide for the foregoing.

         The Stock Plan, as amended, is set forth in Appendix B hereto.

      The number of shares currently available for distribution under the Stock Plan is not enough to meet the needs of the Company in order to provide incentives to current and future participants in the Stock Plan. The Board of Directors determined that the continuance of the Stock Plan is in the best interest of the Company in order to compensate officers, directors, and other managers of the Company and its subsidiaries and to align the interests of the Company’s executives and shareholders in the enhancement of shareholder value and therefore it believes the number of shares available for issuance under the Stock Plan should be increased. In addition, the Company has experienced increased profitability and growth for the year ended October 31, 2003 in comparison to previous years. Therefore, the Company believes that the current limit on the maximum amount of any one Award (both in dollar value and number of shares) is not sufficient to meet the purpose of the Stock Plan, which is to motivate those employees, directors or 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).

      14


      For a further discussion of the Stock Plan, see “Material Features of the Stock Plan” below and “Annual Bonus Program” below.

      The Company’s Board of Directors has approved the amendments to the Stock Plan and recommends that shareholders vote for the approval of the amendments to the Stock Plan.

      MATERIAL FEATURES OF THE STOCK PLAN

      The following is a brief summary of the material features of the Stock Plan. Because this is only a summary, it does not contain all the information about the Stock Plan that may be important to you and is qualified in its entirety to the full text of the amended and restated Stock Plan as set forth in Appendix B hereto.

      PURPOSE

      The purpose of the Stock Plan is to aid the Company and its affiliates in recruiting and retaining key employees, directors or consultants of outstanding ability and to motivate those employees, directors or 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 Stock Plan. All employees, directors and consultants of the Company and its affiliates are eligible to participate in the Stock Plan, if they are selected by the Compensation Committee of the Board of Directors (the “Committee”) to participate in the Stock Plan (any such individual, a “Participant”). For the fiscal year ended October 31, 2003, approximately 198 employees, nine directors and zero consultants were selected by the Committee to participate in the Stock Plan.

      ADMINISTRATION

      The Stock Plan is 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 “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) of the Code and “independent directors” within the meaning of the applicable rules, if any, of any national securities exchange on which shares of common stock of the Company are listed or admitted to trading;provided, however, that any action permitted to be taken by the Committee may be taken by the Board of Directors in its discretion.

      AWARDS

      Awards are determined (“granted”) by the Committee and are subject to the terms and conditions stated in the Stock 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 on the date an option is granted.

      In the event a performance-based Award is granted under the Stock Plan, as amended, it must 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 must be based on the attainment by the Company of written performance goals approved by the Committee for a specified performance period established by the Committee, based on objective performance criteria including one or more of the following: (i) consolidated earnings before or after taxes (including earnings before interest, taxes, depreciation and amortization); (ii) net income; (iii) operating income; (iv) earnings per share of common stock of the Company; (v) book value per share; (vi) stock price; (vii) return on stockholders’ equity; (viii) expense management; (ix) return on investment; (x) improvements in capital structure; (xi) profitability of an identifiable business unit or product; (xii) maintenance or improvements of profit margins; (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.

      EFFECT OF CERTAIN EVENTS ON STOCK 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

      15


      than regular cash dividends or any similar event, the Committee in its sole discretion and without liability to any person may make such substitution or adjustment, if any, as it deems to be equitable, as to (i) the number or kind of common stock or other securities that may be issued as set forth in the Stock Plan or pursuant to outstanding Awards, (ii) the option price and/or (iii) 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 Stock Plan, as amended and restated), 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

      As amended, the Stock Plan will provide that the total number of shares of common stock of the Company that may be issued under the Stock Plan is 10,000,000 and the maximum amount of performance-based Awards that may be granted during a calendar year to any Participant cannot exceed the greater of (x) $15 million and (y) 2-1/2% 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. Additionally, the maximum number of shares of common stock of the Company for which options, stock appreciation rights, restricted stock and restricted stock unit Awards may be granted during a calendar year to any Participant is 500,000.

      No award may be granted under the Stock Plan after the tenth anniversary of the Effective Date, which is March 5, 1999, but awards theretofore granted may be extended beyond that date.

      AMENDMENT AND TERMINATION

      As amended, the Committee may amend, alter or discontinue the Stock Plan, but no amendment, alteration or discontinuation shall be made which, (a) without the approval of the shareholders of the Company, would (except as provided in the Stock Plan in connection with adjustments in certain corporate events), increase the total number of shares of common stock of the Company reserved for the purposes of the Stock 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 Stock Plan;provided, however, that the Committee may amend the Stock 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 Stock 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 Stock Plan, a Participant may transfer an option (other than an option that is also an incentive stock option granted pursuant to the Stock Plan) in whole or in part by gift or domestic relations order to a family member of the Participant.

      16


      PARTICIPANTS OF THE PLAN

      During the year ended October 31, 2003, the Committee granted the following awards to the following individuals under the Plan: (a) option Awards for a total of 18 Participants (3 Participants in the Executive Officers Group, 5 Participants in the Non-Executive Director Group, and 10 Participants in the Non-Executive Officer Employee Group) and (b) other stock-based Awards (rights to receive stock) for 198 Participants (3 participants in the Executive Officers Group, 5 participants in the Non-Executive Director Group, and 190 Participants in the Non-Executive Officer Employee Group). During the year ending October 31, 2003, the Committee did not grant any Awards that were stock-appreciation rights. Additional information is provided in the tables below.

      1999 Stock Incentive Plan
      (Option Awards granted in the year ended October 31, 2003)

      Name and Position
      		   
      		Dollar Value
      per share ($)
      		   
      		Number of
      Options
      Ara K. Hovnanian, CEO                31.80          300,000  
      Kevork S. Hovnanian, Chairman of the Board                —           —   
      Geaton A. DeCesaris, Jr., President of
      Hovnanian Land Investment Group      		                31.90          50,000  
      J. Larry Sorsby, CFO                32.70          25,000  
      Peter S. Reinhart, General Counsel                —           —   
      Kevin C. Hake, V.P., Finance & Treasurer                —           —   
      Executive Officer Group                31.87          375,000 ��
      Non-Executive Director Group(1)                73.86          37,500  
      Non-Executive Officer Employees Group                32.65          105,500  
       
      (1)Stock Option Awards to Outside Directors were granted in January 2004.

      1999 Stock Incentive Plan
      (Other stock based Awards; Rights to receive stock for the year ended October 31, 2003)

      Name and Position
      		   
      		Restricted Stock Awards;
      Dollar Value ($)
      (aggregate)(1)
      		   
      		Number of Shares
      of Common Stock
      Subject to Awards
      Ara K. Hovnanian, CEO                —           —   
      Kevork S. Hovnanian, Chairman of the Board                —           —   
      Geaton A. DeCesaris, Jr., President of
      the Hovnanian Land Investment Group      		                —           —   
      J. Larry Sorsby, CFO                —           —   
      Peter S. Reinhart, General Counsel                70,051          1,476  
      Kevin C. Hake, V.P., Finance & Treasurer                88,088          1,856  
      Executive Officer Group                247,412          5,213  
      Non-Executive Director Group (2)                100,013          3,155  
      Non-Executive Officer Employees Group                7,492,877          157,501  
       
      (1)Represents the rights to receive common stock after vesting 25% per year every four years. Any Participant who achieves either 20 years of service or reaches the age of 58 becomes immediately 100% vested in such stock.

      (2)Outside Directors received 50% of their annual compensation in stock grants as of 12/31/02.

      VOTE REQUIRED

      Approval of the amended and restated 1999 Stock Incentive Plan requires the affirmative vote of the holders of a majority in voting power of all outstanding common stock, voting together.

      Mr. K. Hovnanian and certain members of his family have informed the Company that they intend to vote in favor of this proposal. Because of the voting power of Mr. K. Hovnanian and such members of his family, this proposal is assured passage.

      Our Board of Directors recommends that shareholders vote FOR approval of the amended and restated 1999 Stock Incentive Plan.

      17


      EXECUTIVE COMPENSATION

      Summary Compensation Table

      The following table summarizes the compensation paid or accrued by the Company for the chief executive officer and the other four most highly compensated executive officers during the fiscal years ended October 31, 2003, 2002 and 2001. Disclosure is also provided for Geaton A. DeCesaris, Jr. who was not an executive officer of the Company as of October 31, 2003, but for whom disclosure would have been required had he been an executive officer at that time.


             		      
             		    Annual Compensation
      		    Long-Term Compensation
      		    

             		      
             		    
             		    
             		    
             		Awards
      		    Payouts
      		    
      Name and Principal Position
      		   
      		Year or
      Period
      		   
      		Salary
      		   
      		Bonus(1)
      		   
      		Other
      Annual
      Compen-
      sation(2)
      		Restricted
      Stock
      Awards(3)
      		   
      		Number of
      Securities
      Underlying
      Options/
      SARs(4)
      		   
      		LTIP
      Payouts
      		   
      		All Other
      Compen-
      sation(5)
      		   
      Kevork S. Hovnanian                2003         $1,101,782        $6,128,000      —
      		—
      		    —
      		    N/A    $  16,414    
      Chairman of the Board,                2002         $970,041        $4,354,000      —
      		—
      		    —
      		    N/A    $  15,664    
      and Director                2001         $917,807        $2,364,000      —
      		—
      		    —
      		    N/A    $  13,072    
       
      Ara K. Hovnanian                2003        $1,063,145        $6,989,600        $89,571  $2,566,080    300,000    N/A    $484,139    
      President, Chief Executive                2002         $909,408        $3,747,800      —
      		$1,927,440    250,000    N/A    $181,047    
      Officer and Director                2001         $860,772        $1,655,220      —
      		$   851,256    125,000    N/A    $110,209    
       
      Geaton A. DeCesaris, Jr                2003        $547,813        $2,144,800      —
      		$1,103,040    50,000    N/A    $334,618    
      President of the Hovnanian                2002         $519,802        $2,093,636      —
      		$1,076,727    50,000    N/A    $267,251    
      Land Investment Group and Director                2001         $384,939        $1,244,617      —
      		$   774,438    —
      		    N/A    $    8,366    
       
      J. Larry Sorsby                2003        $321,283        $1,052,245      —
      		$   541,154    25,000    N/A    $102,759    
      Executive Vice President                2002         $271,266        $731,003      —
      		$   375,944    25,000    N/A    $  45,017    
      and Chief Financial Officer                2001         $262,184        $399,002      —
      		$   205,201    25,000    N/A    $  33,092    
      and Director                                                                                                                                    
       
      Peter S. Reinhart                2003        $260,612        $136,211      —
      		$     70,051    —
      		    N/A    $  36,157    
      Senior Vice President/                2002         $219,077        $118,318      —
      		$     60,849    7,500    N/A    $  28,018    
      General Counsel                2001         $204,052        $91,626      —
      		$     47,122    —
      		    N/A    $  22,200    
       
      Kevin C. Hake                2003        $207,733        $171,283      —
      		$     88,088    —
      		    N/A    $  14,639    
      Vice President/                2002         $181,730        $130,550      —
      		$     67,140    —
      		    N/A    $    8,101    
      Finance & Treasurer                2001         $175,000        $87,728      —
      		$     45,118    —
      		    N/A    $    2,835    
       

      Notes:

      (1)Includes awards not paid until after year end.

      (2)Includes perquisites and other personal benefits unless the aggregate amount is less than either $50,000 or 10% of the total of annual salary and bonus reported for the named executive officer. Perquisites for A. Hovnanian in 2003 includes $78,571 relating to personal use of the Company’s corporate aircraft.

      (3)Represents the right to receive Class A Common Stock after vesting 25% a year for four years. Any executive with 20 years of service or who reaches the age of 58 becomes immediately 100% vested. Awards of restricted stock during the year ended October 31, 2003 amounted to 54,051 shares for A. Hovnanian, 23,234 shares for G. DeCecaris, 11,399 shares for
      J. Sorsby, 1,476 shares for P. Reinhart, and 1,856 shares for K. Hake. The aggregate number of shares of restricted stock held as of October 31, 2003, and the value thereof as of such date, were as follows: A. Hovnanian: 257,842 shares ($20,957,398); G. DeCecaris: 97,826 shares ($7,951,297); J. Sorsby: 62,201 shares ($5,055,697); P. Reinhart: 1,476 shares ($119,969); K. Hake: 7,336 shares ($596,230).

      (4)The Company has not granted any stock appreciation rights.

      18


      (5)Includes accruals under the Company’s savings and investment retirement plan (the “Retirement Plan”), deferred compensation plan (the “Deferred Plan”) and term life insurance premiums for each of the named executive officers for the year ended October 31, 2003 as follows:

      		   
      		Retirement
      Plan
      		   
      		Deferred
      Plan
      		   
      		Term
      Insurance
      		   
      		Total
      Kevork S. Hovnanian              $16,000          —         $414         $16,414  
      Ara K. Hovnanian              $16,000        $467,234        $905         $484,139  
      Geaton A. DeCesaris, Jr.              $16,000        $317,263        $905         $334,168  
      J. Larry Sorsby              $16,000        $85,930        $829         $102,759  
      Peter S. Reinhart              $16,000        $19,314        $843         $36,157  
      Kevin C. Hake              $10,000        $4,034        $605         $14,639  
       

      Option Grants in Last Fiscal Year(1)

      The following table provides information on option grants in fiscal 2003 to the named executive officers.


             		    Individual Grants
      		    Potential Realized
      Value at Assumed
      Annual Rates of
      Stock Price
      Appreciation for
      Option Term (2)

             		    
             Number of
      Securities
      Underlying
      Options
      Granted
      		 % of Total
      Options
      Granted to
      Employees
      in Fiscal 2003
      		 Exercise
      or Base
      Price
      Per Share
      		 Expiration
      Date
      		    
      Name
      		   
      		   
      		   
      		   
      		   
      		5%
      		   
      		10%
      Kevork S. Hovnanian        N/A           N/A           N/A           N/A           N/A           N/A   
      Ara K. Hovnanian        300,000          62.4%        $31.80          11/12/12        $5,999,655        $15,204,303  
      Geaton A. DeCesaris, Jr.        50,000          10.4%        $31.90          1/22/13        $1,003,087        $2,542,019  
      J. Larry Sorsby        25,000          5.2%        $32.70          11/7/12        $514,121        $1,302,884  
      Peter S. Reinhart    —
      		    —
      		    —
      		    —
      		    —
      		    —
      Kevin C. Hake    —
      		    —
      		    —
      		    —
      		    —
      		    —
       

      Notes:

      (1)The Company has not granted any stock appreciation rights.

      (2)The potential realizable value is reported net of the option exercise price, but before income taxes associated with exercise. These amounts represent assumed annual compounded rates of appreciation of 5% and 10% only from the date of grant to the end of the option. Actual gains, if any, on stock option exercises are dependent on the future performance of the Company’s Class A Common Stock, overall stock market conditions, and the optionee’s continued employment through the vesting period. The amounts reflected in this table may not necessarily be achieved.

      Aggregated Option Exercises During the Year Ended
      October 31, 2003 and Option Values at October 31, 2003(1)

      The following table provides information on option exercises during the year ended October 31, 2003 by the named executive officers and the value of such officers’ unexercised options at October 31, 2003.


             		      
             Shares Acquired
      On Exercise
      		    
             Value
      Realized
      		    Number of Securities
      Underlying Unexercised
      Options at
      October 31, 2003(2)
      		    Value of Unexercised
      In-the-Money Options at
      October 31, 2003(2)
      		    
      Name
      		   
      		   
      		   
      		Exercisable
      		   
      		Unexercisable
      		   
      		Exercisable
      		   
      		Unexercisable
      Kevork S. Hovnanian                —           —           None           None           N/A           N/A   
      Ara K. Hovnanian                295,000        $6,321,850          537,500          762,500        $40,286,828        $47,695,609  
      Geaton A. DeCesaris, Jr.            —
      		    —
      		        107,000          62,500        $8,118,213        $4,801,250  
      J. Larry Sorsby                8,915        $178,389          76,250          98,750        $5,642,038        $7,610,963  
      Peter S. Reinhart                7,500        $137,400          3,750          17,500        $274,878        $1,169,513  
      Kevin C. Hake            —
      		    —
      		    —
      		        12,500      —
      		      $908,519  
       

      Notes:

      (1)The Company has not granted any stock appreciation rights.

      (2)The closing price of the Class A Common Stock on October 31, 2003, which was the last trading day of October 2003, on the New York Stock Exchange was $81.28.

      19


      Ten-Year Option Repricings(1)

      For the year ended October 31, 2003, there were no adjustments or amendments to the exercise prices of stock options previously awarded.

      Note:

      (1)The Company has not granted any stock appreciation rights.

      Employment Contracts and Arrangements

      The Company has an agreement withchildren. Ara K. Hovnanian Chief Executive Officer, that provides thatdisclaims beneficial ownership of such shares, except to the extent of his potential pecuniary interest in the event of his disability or death he (or his legal representative or estate) will receive continued payment of his annual base salaryAKH GRAT and the annual bonus amount earned by him in respect of the three full preceding calendar years, payable in equal monthly installments through the third anniversary of his disability or death.

      Equity Compensation Plans

      The following table provides information as of October 31, 2003 with respect to compensation plans (including compensation arrangements) under which the Company’s equity securities are authorized for issuancesuch other accounts and does not reflect the amendments proposed and described in this Proxy Statement to the Company’s amended and restated 1999 Stock Incentive Plan and amended and restated Senior Executive Short-Term Incentive Plan.

      Equity Compensation Plan Informationtrusts.


             		      Number of securities
      to be issued upon
      exercise of outstanding
      options, warrants and
      rights (in thousands)(1)
      (a)
      		    Weighted average
      exercise price of
      outstanding options,
      warrants and rights
      (b)
      		    Number of Securities
      remaining available for
      future issuance under
      equity compensation plans
      (excluding securities
      reflected in column (a)
      in thousands)(2)
      (c)
      Plan Category
      		   
      		   
      		   
      Equity compensation plans approved by security holders                3,396          5.89          3,221  
      Equity compensation plans not approved by security holders                —           —           —   
      Total                3,396          5.89          3,221  
       

      Note:(6)

      (1)All securities underlying these options, warrants and rights are
      Includes 45,000 shares of Class A Common Stock.

      (2)  Under the Company’s equity compensation plans, securities may be issued in either Class A Common Stock or Class B
      Common Stock.

      20


      REPORT OF THE COMPENSATION COMMITTEE

      The Compensation Committee is charged with the responsibility of determining the cash and other incentive compensation, if any, to be paid to the Company’s executive officers and key management employees. The amount and nature of the compensation received by the Company’s executives during the year ended October 31, 2003 was determined in accordance with the compensation program and policies described below.

      The executive compensation program is designed to attract, retain and reward highly qualified executives while maintaining a strong and direct link between executive pay, the Company’s financial performance and total shareholder return. The executive compensation program contains three major components: base salaries, annual bonuses and stock options. In establishing the three major components for each executive, the Compensation Committee reviews, as part of its criteria, the compensation received by other executives in the homebuilding industry. The Compensation Committee engaged an outside compensation consultant to provide information with regard to compensation levels of chief executive officers of comparable companies in the homebuilding industry.

      Base Salary

      The Compensation Committee believes that, due to the Company’s success in its principal markets, other companies seeking proven executives may view members of the Company’s highly experienced executive team as potential targets. The base salaries paid to the Company’s executive officers and key management employees during the year ended October 31, 2003 generally were believed to be necessary to retain their services.

      Base salaries, including that of Mr. K. Hovnanian, the Company’s Chairman of the Board, and Mr. Ara Hovnanian, Chief Executive Officer, are reviewed annually and are adjusted based on the performance of the executive, any increased responsibilities assumed by the executive, average salary increases or decreases in the industry and the going rate for similar positions at comparable companies. Base salaries for the Company’s executive officers for the year ended October 31, 2003 were set by Mr. A. Hovnanian. Each executive officer’s base salary, including the base salary of each of Mr. K. Hovnanian and Mr. A. Hovnanian, was reviewed by the Compensation Committee in accordance with the criteria described above.

      Annual Bonus Program

      The Company maintains an annual bonus program under which executive officers and other key management employees have the opportunity to earn bonuses. The annual bonus program consists of the amended and restated Senior Executive Short-Term Incentive Plan and the amended and restated 1999 Stock Incentive Plan and is intended to motivate and reward executives for the achievement of individual performance objectives and for the attainment by the Company of strategic and financial performance goals, including levels of return on equity. In addition, under the amended and restated 1999 Stock Incentive Plan, the ultimate value received by option holders is directly tied to increases in the Company’s stock price, therefore, stock options serve to closely link the interests of management and shareholders and motivate executives to make decisions that will serve to increase the long-term total return to shareholders. Additionally, grants under the amended and restated 1999 Stock Incentive Plan include vesting and termination provisions which the Compensation Committee believes will encourage option holders to remain employees of the Company.

      Under the amended and restated Senior Executive Short-Term Incentive Plan, senior executives, including Mr. K. Hovnanian, Chairman of the Board, and Mr. A. Hovnanian, President and Chief Executive Officer, receive a fixed amount bonus based on the Company’s Return on Equity (“ROE”). All other executive officers participate in the amended and restated 1999 Stock Incentive Plan, which is based on ROE or on a Division’s Return on Investment (“ROI”) and they receive either a fixed amount or a percentage of their base salary. As the Company’s ROE or a Division’s ROI reaches higher targeted levels, the fixed amount or bonus percentage of salary increases. The annual bonus payment is made 70% in cash and 30% in the right to receive the Company’s common stock. The 30% right to receive common stock is increased 20% and vests 25% a year starting with the first anniversary after the cash bonus payment accrues. Any executive with 20 years of service or who reaches the age of 58 vests immediately.

      The Company’s annual bonus program is intended to allow the Company to make awards to executive officers and other key management employees that are deductible under Section 162(m) of the Code. The Compensation Committee will continueheld jointly with Mr. Buchanan's spouse, Gail R. Buchanan. Paul W. Buchanan and Gail R. Buchanan share voting and investment power with respect to seek ways to limit the impact of Section 162(m) of the Code.

      such shares.

      21
      (7)


      However, the Compensation 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
      Based solely upon information contained in this regard may result in compensation that is not deductible for federal income tax purposes.

      Both the amended and restated Senior Executive Short-Term Incentive Plan and the amended and restated 1999 Stock Incentive Plan are administered by the Compensation Committee. No member of the Compensation Committee, while a member, is eligible to participate in either the amended and restated 1999 Stock Incentive Plan or the amended and restated Senior Executive Short-Term Incentive Plan.

      COMPENSATION COMMITTEE

      Stephen D. Weinroth, Chair
      Edward A. Kangas

      REPORT OF THE AUDIT COMMITTEE

      Membership, Independence, & Qualifications

      Messrs. McDonald, as Chairman, Kangas, Robbins and Weinroth are the members of the Audit Committee. In the judgment of the Company��s Board of Directors, each member of the Audit Committee is independent as required by both the rules of the NYSE and SEC regulations, and a “financial expert” in accordance with SEC regulations. The most recent review by the Board of Directors of the Audit Committee qualifications occurredstatement on December 15, 2003 at a regularly scheduled Board Meeting.

      Responsibilities of the 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, as set forth in Appendix C hereto, which was adopted in March 2000 and amended in December 2002, October 2003 and January 2004. The Audit Committee Charter is available on the Company’s public website, www.khov.com, under “Investor Relations/Corporate Governance”.

      Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. In fulfilling its oversight responsibilities, the Audit Committee reviewed the audited financial statements in the Annual Report with management, including 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 reviewed with the independent auditors, who are responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles:

      •  the overall scope and plans for their respective audits,

      •  their judgments as to the quality, not just the acceptability, of the Company’s accounting principles,

      •  their independence from management and the Company, including matters in the written disclosures and the letter from the independent accountants required by Independence Standards Board Standard No.1 and received by the Company, and

      •  such matters as are required to be discussed with the committee under generally accepted auditing standards and under Statements on Auditing Standards No. 61.

      The Audit Committee, as part of its Charter, reviews quarterly with management the Company’s financial statements prior to their beingSchedule 13G filed with the SEC. In addition, the Audit Committee,Securities and Exchange Commission on February 13, 2008. As of December 31, 2007, Ameriprise Financial, Inc. had sole voting power with respect to zero shares, shared voting power with respect to zero shares, sole dispositive power with respect to zero shares and shared dispositive power with respect to 1,057,754 shares of Class A Common Stock. Address: 145 Ameriprise Financial Center, Minneapolis, Minnesota 55474.

      (8)
      Based solely upon information contained in reliancea statement on the reviews and discussions referred to above, has 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 year ended October 31, 2003.

      Policies & Procedures Established By Audit Committee

      In fiscal 2003, the Audit Committee established whistleblowing procedures as required by Section 301 of the Sarbanes-Oxley Act and NYSE Rule 303(A)(7)(c)(iii). These procedures are discussed in the Company’sCode of Ethics (Section IV.G.) which is available on the Company’s public website atwww.khov.com under “Investor Relations/Corporate Governance”.

      22


      In accordance with SEC regulation, the Audit Committee has established procedures for the appointment, compensation, retention and oversight of any accounting firm engaged to prepare or issue an audit report or other audit, review, or attest services. In addition, the Audit Committee has established procedures for the pre-approval of audit and non-audit services provided by auditors. This accounting firm will rep regarding financial reporting.

      Audit Committee

      Desmond P. McDonald, Chair
      John J. Robbins
      Stephen D. Weinroth
      Edward A. Kangas

      FEES PAID TO PRINCIPAL ACCOUNTANT

      Audit Fees

      The Company was billed a total of $797,592 by Ernst & Young LLP for services rendered in connectionSchedule 13G filed with the auditSecurities and Exchange Commission on February 5, 2008. As of Hovnanian Enterprises, Inc.December 31, 2007, Barclays Global Investors, NA and its consolidated subsidiaries financial statements for the fiscal year ended October 31, 2003affiliated entities reported sole voting and $39,054 for the reviewsdispositive power as follows: (i) Barclays Global Investors, NA had sole voting power with respect to 785,196 shares and sole investment power with respect to 943,539 shares of the interim financial statements. The Company was billed a total of $480,000 by Ernst & Young LLP for services rendered in connection with the audit of Hovnanian Enterprises, Inc. and its consolidated subsidiaries financial statements for the fiscal year ended October 31, 2002 and $31,500 for the reviews of the interim financial statements.

      Financial Information Systems Design and Implementation Fees

      There were no fees billed by Ernst & Young LLP for services rendered in connection with financial information systems design and implementation during either the fiscal year ended October 31, 2003 or the fiscal year ended October 31, 2002.

      All Other Fees

      The total of all other fees billed for services rendered by Ernst & Young LLP, other than those services discussed above, for the fiscal years ended October 31, 2003 and October 31, 2002 were $541,130 and $504,768, respectively.

      PRINCIPAL ACCOUNTANT INDEPENDENCE

      The Audit Committee has determined that the provision of all non-audit services performed by the principal accountant were compatible with maintaining their independence.

      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”. Information on the Company’s public website includes the Company’s Code of Ethics, Corporate Governance Guidelines and Committee Charters, including the Audit Committee Charter and the Compensation Committee Charter.

      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.

      23


      Attn: Board of Directors of Hovnanian Enterprises, Inc.
      c/o Mr. Desmond McDonald, Director
      Privileged & Confidential
      Hovnanian Enterprises, Inc.
      10 Highway 35
      P.O. Box 500
      Red Bank, N.J. 07701


      The Company’s non-management directors meet without management after each regularly scheduled meeting of the Board of Directors. The presiding director of such meetings is selected at each meeting. Shareholders, associates of the Company and other interested parties may communicate directly with non-management directors as a group by corresponding to the address below. Members of the non-management group include: Messrs. Greenbaum, Kangas, McDonald, Robbins, and Weinroth. All non-management directors, with the exception of Mr. Greenbaum, are “independent” in accordance with NYSE rules. Mr. McDonald will report to all non-management directors any correspondence which is received by him as indicated by the urgency of the matter, or at the next scheduled meeting of non-management directors.


      Attn: Non-Management Directors of Hovnanian Enterprises, Inc.
      c/o Mr. Desmond McDonald, Director
      Privileged & Confidential
      Hovnanian Enterprises, Inc.
      10 Highway 35
      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 following procedures as discussed in the Company’s Code of Ethics.

      COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

      Mr. Weinroth is Chairman of the Compensation Committee. During the fiscal year ended October 31, 2003, the members of the Compensation Committee were Messrs. Weinroth and Kangas. Each of Messrs. Weinroth and Kangas are non-employee directors and were never officers or employees of the Company or any of its subsidiaries.

      See “Certain Relationships and Related Transactions” below for more information concerning Mr. Greenbaum’s business relationship with the Company.

      24


      PERFORMANCE GRAPH

      The following graphs compare on a cumulative basis the yearly percentage change over the five and three year periods ending October 31, 2003 in (i) the total shareholder return on the Class A Common Stock (Address: 45 Fremont Street, San Francisco, California 94105), (ii) Barclays Global Fund Advisors had sole voting power and investment power with respect to 2,099,529 shares of Class A Common Stock (Address: 45 Fremont Street, San Francisco, California 94105), (iii) Barclays Global Investors, Ltd had no voting power or investment power with respect to shares of Class A Common Stock (Address: Murray House, 1 Royal Mint Court, London EC3N 4HH), (iv) Barclays Global Investors Japan Trust and Banking Company Limited had no voting power or investment power with respect to shares of Class A Common Stock (Address: Ebisu Prime Square Tower 8th Floor, 1-1-39 Hiroo Shibuya-Ku, Tokyo 150-8402 Japan), (v) Barclays Global Investors Japan Limited had sole voting power and investment power with respect to 16,599 shares of Class A Common Stock (Address: Ebisu Prime Square Tower 8th Floor, 1-1-39 Hiroo Shibuya-Ku, Tokyo 150-8402 Japan), (vi) Barclays Global Investors Canada Limited had no voting power or investment power with respect to shares of Class A Common Stock (Address: Brookfield Place, 161 Bay Street, Suite 2500, PO Box 614, Toronto, Canada Ontario M5J 2S1), (vii) Barclays Global Investors Australia Limited had no voting power or investment power with respect to shares of Class A Common Stock (Address: Level 43, Grosvenor Place, 225 George Street, PO Box N43, Sydney, Australia NSW 1220), and (viii) Barclays Global Investors (Deutschland) AG had no voting power or investment power with respect to shares of Class A Common Stock (Address: Apianstrasse 6, D-85774, Unterfohring, Germany). The shares reported are held by the companies in trust accounts for the economic benefit of the beneficiaries of those accounts.

      (9)
      Based solely upon information contained in a statement on Schedule 13G filed with the Securities and Exchange Commission on February 1, 2008. As of December 31, 2007, Capital Group International, Inc., as the parent holding company of a group of investment management companies that hold investment power and, in some cases, voting power over the securities, had sole voting power with respect to 3,291,600 shares and sole investment power with respect to 3,903,900 shares of Class A Common Stock. Capital International Limited, as the investment manager of various institutional accounts, had sole voting power with respect to 2,963,700 shares and sole investment power with respect to 3,374,000 shares of Class A Common Stock. Address: 11100 Santa Monica Blvd., Los Angeles, California 90025.

      (10)
      Based solely upon information contained in a statement on Schedule 13G/A filed with the Securities and Exchange Commission on January 31, 2008. As of December 31, 2007, EARNEST Partners, L.L.C. had sole voting power with respect to 1,824,199 shares, shared voting power with respect to 1,440,581 shares and sole investment power with respect to 5,352,802 shares of Class A Common Stock. Address: 1180 Peachtree Street NE, Suite 2300, Atlanta, Georgia 30309.

      (11)
      Based solely upon information contained in a statement on Schedule 13G/A filed with the Securities and Exchange Commission on January 30, 2008. As of December 31, 2007, Franklin Mutual Advisors, LLC had sole voting power and sole investment power with respect to 2,556,220 shares of Class A Common Stock. Address: 101 John F. Kennedy Parkway, Short Hills, New Jersey 07078.

      (12)
      Based solely upon information contained in a statement on Schedule 13G/A filed with the Securities and Exchange Commission on February 12, 2008. As of December 31, 2007, State Street Bank and Trust Company, acting in various fiduciary capacities, had sole voting and investment power with (ii)respect to 2,978,834 shares of Class A Common Stock. Address: State Street Financial Center, One Lincoln Street, Boston, Massachusetts 02111.

      (13)
      Based solely upon information contained in a statement on Schedule 13G/A jointly filed with the total returnSecurities and Exchange Commission on January 25, 2008 by Tontine Partners L.P., Tontine Management, L.L.C., Tontine Overseas Associates, L.L.C, Tontine Capital Partners, L.P., Tontine Capital Management, L.L.C. and Jeffrey L. Gendell. As of December 31, 2007, Tontine Partners L.P. and Tontine Management, L.L.C. each had shared voting and investment power with respect to 463,016 shares of Class A Common Stock, Tontine Overseas Associates, L.L.C. had shared voting and investment power with respect to 2,318,579 shares of Class A Common Stock, Tontine Capital Partners, L.P. had shared voting and investment power with respect to 260,182 shares of Class A Common Stock, Tontine Capital Management, L.L.C. had shared voting and investment power with respect to 612,482 shares of Class A Common Stock and Mr. Gendell had shared voting and investment power with respect to 3,041,777 shares of Common Stock. Address: 55 Railroad Avenue, Greenwich, Connecticut 06830.

      (14)
      Based solely upon information contained in a statement on Schedule 13G filed with the Standard & Poor’s 500 IndexSecurities and Exchange Commission on February 13, 2008. As of December 31, 2007, T. Rowe Price Associates, Inc. had sole voting power with (iii)respect to 1,222,450 shares, shared voting power with respect to zero shares, sole dispositive power with respect to 4,753,880 shares and shared dispositive power with respect to zero shares of Class A Common Stock. Address: 100 E. Pratt Street, Baltimore, Maryland 21202.

      IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SPECIAL MEETING TO BE HELD ON                            , 2008.

      This proxy statement and proxy cards (for Class A Common Stock stockholders and registered Class B Common Stock stockholders) and any amendments to the total returnforegoing materials that are required to be furnished to stockholders are available online at http://www.eproxyaccess.com/hov.

              For information on how to obtain directions to the S & P Homebuilding Index. Such yearly percentage change has been measured by dividing (i) the sum of (a) the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and (b) the price per shareCompany's Special Meeting, please call our Investor Relations department at the end of the measurement period less the price per share at the beginning of the measurement period, by (ii) the price per share at the beginning of the measurement period. The price of each unit has been set at $100 on October 31, 1998 and 2000 for the preparation of the five and three years graphs, respectively.

      Note: The stock price performance shown on the following graph is not necessarily indicative of future price performance.
      1–800–815–9680.


      Comparison of the Five-Year Cumulative Total Return of Hovnanian Enterprises, Inc.,GENERAL
      the S&P 500 Index and the S&P Homebuilding Index.


      25


      ComparisonInterests of the Three-Year Cumulative Total Return of Hovnanian Enterprises, Inc.,
      the S&P 500 Index and the S&P Homebuilding Index.


      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      Mr. K. Hovnanian, the chairman of Company’s Board of Directors, is the father of Mr. A. Hovnanian, the Chief Executive Officer and a member of the Board of Directors.

      Prior to the enactment of Sarbanes-Oxley Act of 2002 (the “Act”), our Board of Directors adopted a general policy providing that it would not make loans to our officers or directors or their relatives at an interest rate less than the interest rate at the date of the loan on six month U.S. Treasury Bills, that the aggregate of such loans would not exceed $3 million at any one time, and that such loans would be made only with the approval of the members of our Board of Directors who had no interest in the transaction. At October 31, 2003 and 2002 related party receivables from officers and directors amounted to zero dollars. Interest income from these loans for the years ended October 31, 2003, 2002, and 2001 amounted to zero dollars, $18,000, and $84,000, respectively. At October 31, 2003, there was one loan amounting to $140,000 to an

              Certain of our executive officer, who is not a member of the Board of Directors. This loan was extended for relocation purposes, and is forgivable after five years. The related party receivables and loan were extended prior to the enactment of the Act, and have not been materially modified.

      The Company provides property management services to various limited partnerships including one partnership in which our Chief Executive Officer is a general partner, and in which members of his family and certain officers and directors are limited partners. During each of the years ended October 31, 2003, 2002, and 2001 we received $0.1 million in fees for such management services. At October 31, 2003 and 2002, no amounts were due us by these partnerships.

      During the year ended October 31, 2003, we entered into an agreementown Class A Common Stock, Class B Common Stock and/or options to purchase land in California for approximately $33.4 millionsuch stock. To the extent they own Class A Common Stock their interests are the same as all other holders of Class A Common Stock. To the extent they own Class B Common Stock, their interests may differ from an entity thatClass A Common stockholders because their shares of Class B Common Stock will not be subject to the NOL Protective Amendment or the Rights Plan.

      Solicitation

              The solicitation of proxies is ownedbeing made primarily by a family relative of our Chairman of the Boardmail, but directors, officers, employees, and our Chief Executive Officer. As of October 31, 2003, we have an option deposit of $3.9 million related to this land acquisition agreement. In connection with this agreement, wecontractors retained by us may also have consolidated $29.5 million in accordance with Financial Accounting Standards Board Interpretation No. 46, “Consolidation of Variable Interest Entities”, under “Consolidated Inventory Not Owned” in our Consolidated Balance Sheet for the fiscal year ended October 31, 2003. Neither the Company, the Chairman of the Board nor the Chief Executive Officer has a financial interestengage in the relative’s company from whom the land was optioned.

      During the year ended October 31, 2001, we entered into an agreement to purchase land from an entity that is ownedsolicitation of proxies by a family relativetelephone. The cost of our Chairman of the Board and our Chief Executive Officer, totaling $26.9 million. As of October 31, 2003 and 2002, land aggregating $18.4 million and $10.3 million, respectively, had

      26


      been purchased. Neither the Company, the Chairman of the Board nor the Chief Executive Officer has a financial interest in the relative’s company from whom the land was purchased.

      Mr. Greenbaum is a partner in Greenbaum, Rowe, Smith, Ravin, Davis & Himmel, a law firm retained by the Company during the fiscal year ended October 31, 2003, that provided services to the Company during the fiscal year ended October 31, 2003.

      GENERAL

      The expense of this solicitation is tosoliciting proxies will be borne by us. We have retained the Company. The Company may also reimburse persons holding shares in their names orservices of Innisfree M&A Incorporated to assist in the namessolicitation of theirproxies, at a cost to us of approximately $                . In addition, we may reimburse brokers, custodians, nominees and other record holders for their reasonable out-of-pocket expenses in sending proxies andforwarding proxy material to their principals.
      beneficial owners. This Proxy Statement and the accompanying forms of proxy are being sent to stockholders on or about                                 , 2008.

      Voting

      Unless otherwise directed, the persons named in the accompanying form of proxy card(s) intend to vote all shares represented by proxies received by them in favor of the election of nominees to the Board of Directors of the Company named herein, in favor of the ratification of selected independent accountants, in favor of an amendment to the Company’s amended Certificate of Incorporation, in favor of the Company’s amended and restated 1999 Stock Incentive Plan and in favor of the Company’s amended and restated Senior Executive Short-Term Incentive Plan.all three proposals. All proxies will be voted as specified.

      Each share of Class A Common Stock entitles the holder thereof to one vote and each share of Class B Common Stock entitles the holder thereof to ten votes. Votes of Class A Common Stock and Class B Common Stock will be counted together without regard to class for proposals that require the affirmative vote of the holders of a majority in voting power of all outstanding common stock represented in person or by proxy at the Special Meeting, voting together. All votes will be certified by the Inspectors of Election, who are employees of the Company.

      Election. Abstentions and broker non-votes will have the effect of votes against a proposalProposal One and broker non-votes will have no effect on the vote. Under NYSE rules, brokers may not vote shares on the proposal to approve the Company’s amended and restated 1999 Stock Incentive Planfor Proposal Two or the proposal to approve the Company’s amended and restated Senior Executive Short-Term Incentive Plan without specific instructions on these proposals from their customers.
      Proposal Three.

      Notwithstanding the foregoing, the Company’s amendedour Certificate of Incorporation provides that each share of Class B Common Stock held, to the extent of the Company’sour knowledge, in nominee name by a stockbroker, bank or otherwise will be entitled to only one vote per share unless the Company iswe are satisfied that such shares have been held continuous,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.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 obtain fromproperly complete their nominee a proxyvoting instruction card, which is specially designed for beneficial owners of Class B Common Stock. The Company hasWe have 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’sour 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 proxyvoting



      instruction card orand the nominee proxy card relating to such shares is either (i) properly completed, mailed, and received by ADP, the Company’s proxy service facilitator, or (ii) registered via the Internet pursuant to the instructions on the beneficial owner proxy card or the nominee proxy card, or (iii) registered by calling the toll-free number on the beneficial owner proxy card or the nominee proxy card, and, in each case, not less than 3 nor more than 20 business days prior to                        March 5, 2004. Proxy cards returned by mail should be sent to Hovnanian Enterprises, Inc., c/o ADP, 51 Mercedes Way, Edgewood, N.Y., 11717.

      2008.

      Additional Matters

      Management does not intend to present any business at the meeting other than that set forth in the accompanying Notice of AnnualSpecial Meeting of Shareholders,Stockholders, and it has no information that others will attempt to do so. If other matters requiring the vote of the shareholdersstockholders properly come before the meeting and any adjournments or postponements thereof, it is the intention of the persons named in the accompanying form of proxy cards to vote the shares represented by the proxies held by them in accordance with their judgment on such matters.

      By Order of your Board of Directors
      HOVNANIAN ENTERPRISES, INC.

      Red Bank, New Jersey
                   , 2008



      27ANNEX A


      SHAREHOLDER PROPOSALS FOR THE 2005 ANNUAL MEETING
      AMENDMENT TO

      CERTIFICATE OF INCORPORATION

      Shareholder proposals        NINTH: RESTRICTIONS ON TRANSFERS

              9.1DEFINITIONS.    As used in this Paragraph NINTH, the following capitalized terms have the following meanings when used herein with initial capital letters (and any references to any portions of Treasury Regulation § 1.382-2T shall include any successor provisions):

              "5-percent Transaction" means any Transfer described in clause (a) or (b) of Section 9.2.

              "5-percent Stockholder" means a Person or group of Persons that is a "5-percent shareholder" of the Corporation pursuant to Treasury Regulation § 1.382-2T(g).

              "Agent" has the meaning set forth in Section 9.5.

              "Board of Directors" or "Board" means the board of directors of the Corporation.

              "Class B Common Stock" means any interest in Class B Common Stock of the Corporation as defined in Paragraph FOURTH of the Certificate of Incorporation that would be treated as "stock" of the Corporation pursuant to Treasury Regulation § 1.382-2T(f)(18).

              "Code" means the United States Internal Revenue Code of 1986, as amended from time to time, and the rulings issued thereunder.

      "Corporation Security" or "Corporation Securities" means (i) shares of Class A Common Stock and Class B Common Stock, (ii) shares of Preferred Stock (other than preferred stock described in Section 1504(a)(4) of the Code), (iii) warrants, rights, or options (including options within the meaning of Treasury Regulation § 1.382-2T(h)(4)(v)) to purchase Securities of the Corporation, and (iv) any Stock.

              "Effective Date" means the date of filing of this Certificate of Amendment of Certificate of Incorporation of the Corporation with the Secretary of State of the State of Delaware.

              "Excess Securities" has the meaning given such term in Section 9.4;provided,however, that Excess Securities shall not include Class B Common Stock.

              "Expiration Date" means the earlier of (i) the repeal of Section 382 of the Code or any successor statute if the Board of Directors determines that this Paragraph NINTH is no longer necessary for inclusionthe preservation of Tax Benefits, (ii) the beginning of a taxable year of the Corporation to which the Board of Directors determines that no Tax Benefits may be carried forward or (iii) such date as the Board of Directors shall fix in accordance with Section 9.12 of this Paragraph NINTH.

              "Percentage Stock Ownership" means the percentage Stock Ownership interest of any Person or group (as the context may require) for purposes of Section 382 of the Code as determined in accordance with the Treasury Regulation § 1.382-2T(g), (h), (j) and (k) or any successor provision.

              "Person" means any individual, firm, corporation or other legal entity, and includes any successor (by merger or otherwise) of such entity;provided,however, that a Person shall not mean a Public Group.

              "Pre-existing 5-percent Stockholder" means (i) any Person that has filed a Schedule 13D or 13G with respect to the Corporation on or before the Effective Date and (ii) any "5-percent owner" or "higher tier entity" of any Person described in clause (i) within the meaning of Treasury Regulation § 1.382-2T(f)(10) and 1.382-2T(f)(14).


              "Prohibited Distributions" means any and all dividends or other distributions paid by the Corporation with respect to any Excess Securities received by a Purported Transferee.

              "Prohibited Transfer" means any Transfer or purported Transfer of Corporation Securities to the extent that such Transfer is prohibited and/or void under this Paragraph NINTH.

              "Public Group" has the meaning set forth in Treasury Regulation § 1.382-2T(f)(13).

              "Purported Transferee" has the meaning set forth in Section 9.4.

              "Securities" and "Security" each has the meaning set forth in Section 9.7.

              "Stock" means any interest that would be treated as "stock" of the Corporation pursuant to Treasury Regulation § 1.382-2T(f)(18).

              "Stock Ownership" means any direct or indirect ownership of Stock, including any ownership by virtue of application of constructive ownership rules, with such direct, indirect, and constructive ownership determined under the provisions of Section 382 of the Code and the regulations thereunder.

              "Tax Benefits" means the net operating loss carryforwards, capital loss carryforwards, general business credit carryforwards, alternative minimum tax credit carryforwards and foreign tax credit carryforwards, as well as any loss or deduction attributable to a "net unrealized built-in loss" of the Corporation or any direct or indirect subsidiary thereof, within the meaning of Section 382 of the Code.

              "Transfer" means, any direct or indirect sale, transfer, assignment, conveyance, pledge or other disposition or other action taken by a person, other than the Corporation, that alters the Percentage Stock Ownership of any Person or group. A Transfer also shall include the creation or grant of an option (including an option within the meaning of Treasury Regulation § 1.382-2T(h)(4)(v)). For the avoidance of doubt, a Transfer shall not include the creation or grant of an option by the Corporation, nor shall a Transfer include the issuance of Stock by the Corporation.

              "Transferee" means any Person to whom Corporation Securities are Transferred.

              "Treasury Regulations" means the regulations, including temporary regulations or any successor regulations promulgated under the Code, as amended from time to time.

              9.2TRANSFER AND OWNERSHIP RESTRICTIONS.    In order to preserve the Tax Benefits, from and after the Effective Date of this Paragraph NINTH any attempted Transfer of Corporation Securities (excluding Class B Common Stock) prior to the Expiration Date and any attempted Transfer of Corporation Securities (excluding Class B Common Stock) pursuant to an agreement entered into prior to the Expiration Date, shall be prohibited and voidab initio (a) if the transferor is a 5-percent Stockholder or (b) to the extent that, as a result of such Transfer (or any series of Transfers of which such Transfer is a part), either (1) any Person or group of Persons would become a 5-percent Stockholder or (2) the Percentage Stock Ownership in the proxy materials relatedCorporation of any 5-percent Stockholder would be increased.

              9.3EXCEPTIONS.    

              (a)   Notwithstanding anything to the 2005 Annual Meetingcontrary herein, if a Transfer by (but not to) a Pre-existing 5-percent Stockholder otherwise would be prohibited by Section 9.2, such Transfer shall not be prohibited under Section 9.2 if both of Shareholders must be receivedthe following conditions are met: (i) such Transfer does not increase the Percentage Stock Ownership of any 5-percent Stockholder or create a new 5-percent Stockholder, in each case other than a Public Group (including a new Public Group created under Treasury Regulation § 1.382-2T(j)(3)(i)), and (ii) the Stock that is the subject of the Transfer was either (x) acquired by such Pre-existing 5-percent Stockholder prior to the Company no later than October __, 2004.Effective Date or (y) acquired



      upon conversion of Class B Common Stock in accordance with Paragraph FOURTH of this Certificate of Incorporation.

      By Order        (b)   The restrictions set forth in Section 9.2 shall not apply to an attempted Transfer that is a 5-percent Transaction if the transferor or the Transferee obtains the written approval of the Board of Directors
      HOVNANIAN ENTERPRISES, INC.

      Red Bank, New Jersey
      February __, 2004 or a duly authorized committee thereof. As a condition to granting its approval pursuant to this Section 9.3, the Board of Directors, may, in its discretion, require (at the expense of the transferor and/or transferee) an opinion of counsel selected by the Board of Directors that the Transfer shall not result in the application of any Section 382 of the Code limitation on the use of the Tax Benefits; provided that the Board may grant such approval notwithstanding the effect of such approval on the Tax Benefits if it determines that the approval is in the best interests of the Corporation. The Board of Directors may impose any conditions that it deems reasonable and appropriate in connection with such approval, including, without limitation, restrictions on the ability of any Transferee to Transfer Stock acquired through a Transfer. Approvals of the Board of Directors hereunder may be given prospectively or retroactively. The Board of Directors, to the fullest extent permitted by law, may exercise the authority granted by this Paragraph NINTH through duly authorized officers or agents of the Corporation. Nothing in this Section 9.3 shall be construed to limit or restrict the Board of Directors in the exercise of its fiduciary duties under applicable law.

      28
              9.4

      APPENDIX AEXCESS SECURITIES.    

      HOVNANIAN ENTERPRISES, INC.        (a)   No employee or agent of the Corporation shall record any Prohibited Transfer, and the purported transferee of such a Prohibited Transfer (the"Purported Transferee") shall not be recognized as a stockholder of the Corporation for any purpose whatsoever in respect of the Corporation Securities which are the subject of the Prohibited Transfer (the"Excess Securities"). Until the Excess Securities are acquired by another person in a Transfer that is not a Prohibited Transfer, the Purported Transferee shall not be entitled with respect to such Excess Securities to any rights of stockholders of the Corporation, including, without limitation, the right to vote such Excess Securities and to receive dividends or distributions, whether liquidating or otherwise, in respect thereof, if any, and the Excess Securities shall be deemed to remain with the transferor unless and until the Excess Securities are transferred to the Agent pursuant to Section 9.5 or until an approval is obtained under Section 9.3(b). After the Excess Securities have been acquired in a Transfer that is not a Prohibited Transfer, the Corporation Securities shall cease to be Excess Securities. For this purpose, any Transfer of Excess Securities not in accordance with the provisions of this Section 9.4 or Section 9.5 shall also be a Prohibited Transfer.

              (b)   The Corporation may require as a condition to the registration of the Transfer of any Corporation Securities (other than Class B Common Stock) or the payment of any distribution on any Corporation Securities (other than Class B Common Stock) that the proposed Transferee or payee furnish to the Corporation all information reasonably requested by the Corporation with respect to all the direct or indirect ownership interests in such Corporation Securities. The Corporation may make such arrangements or issue such instructions to its stock transfer agent as may be determined by the Board of Directors to be necessary or advisable to implement this Paragraph NINTH, including, without limitation, authorizing such transfer agent to require an affidavit from a Purported Transferee regarding such Person's actual and constructive ownership of stock and other evidence that a Transfer will not be prohibited by this Paragraph NINTH as a condition to registering any transfer.

              9.5TRANSFER TO AGENT.    If the Board of Directors determines that a Transfer of Corporation Securities constitutes a Prohibited Transfer then, upon written demand by the Corporation sent within thirty days of the date on which the Board of Directors determines that the attempted Transfer would result in Excess Securities, the Purported Transferee shall transfer or cause to be transferred any certificate or other evidence of ownership of the Excess Securities within the Purported Transferee's possession or control, together with any Prohibited Distributions, to an agent designated by


      SENIOR EXECUTIVE SHORT-TERM INCENTIVE PLAN

      (AS AMENDED AND RESTATED)

      the Board of Directors (the"Agent"). The Agent shall thereupon sell to a buyer or buyers, which may include the Corporation, the Excess Securities transferred to it in one or more arm's-length transactions (on the public securities market on which such Excess Securities are traded, if possible, or otherwise privately);provided, however, that any such sale must not constitute a Prohibited Transfer andprovided, further, that the Agent shall effect such sale or sales in an orderly fashion and shall not be required to effect any such sale within any specific time frame if, in the Agent's discretion, such sale or sales would disrupt the market for the Corporation Securities or otherwise would adversely affect the value of the Corporation Securities. If the Purported Transferee has resold the Excess Securities before receiving the Corporation's demand to surrender Excess Securities to the Agent, the Purported Transferee shall be deemed to have sold the Excess Securities for the Agent, and shall be required to transfer to the Agent any Prohibited Distributions and proceeds of such sale, except to the extent that the Corporation grants written permission to the Purported Transferee to retain a portion of such sales proceeds not exceeding the amount that the Purported Transferee would have received from the Agent pursuant to Section 9.6 if the Agent rather than the Purported Transferee had resold the Excess Securities.

      1. PURPOSE.        9.6

      APPLICATION OF PROCEEDS AND PROHIBITED DISTRIBUTIONS.    The purposeAgent shall apply any proceeds of a sale by it of Excess Securities and, if the Purported Transferee has previously resold the Excess Securities, any amounts received by it from a Purported Transferee, together, in either case, with any Prohibited Distributions, as follows: (a) first, such amounts shall be paid to the Agent to the extent necessary to cover its costs and expenses incurred in connection with its duties hereunder; (b) second, any remaining amounts shall be paid to the Purported Transferee, up to the amount paid by the Purported Transferee for the Excess Securities (or the fair market value at the time of the Senior Executive Short-Term Incentive Plan (the “Plan”) is to advance the interests of K. Hovnanian (the “Company”), and its shareholders by providing incentivesTransfer, in the form of periodic bonus awards (“Awards”) to certain senior executive employeesevent the purported Transfer of the Company and its affiliates, thereby motivating such executives to attain corporate performance goals articulated under the Plan.

      2. ADMINISTRATION.

      (a)  The PlanExcess Securities was, in whole or in part, a gift, inheritance or similar Transfer) which amount shall be administered by twodetermined at the discretion of the Board of Directors; and (c) third, any remaining amounts shall be paid to one or more individuals who are each “non-employee directors”organizations qualifying under section 501(c)(3) of the Code (or any comparable successor provision) selected by the Board of Directors. The Purported Transferee of Excess Securities shall have no claim, cause of action or any other recourse whatsoever against any transferor of Excess Securities. The Purported Transferee's sole right with respect to such shares shall be limited to the amount payable to the Purported Transferee pursuant to this Section 9.6. In no event shall the proceeds of any sale of Excess Securities pursuant to this Section 9.6 inure to the benefit of the Corporation or the Agent, except to the extent used to cover costs and expenses incurred by Agent in performing its duties hereunder.

              9.7MODIFICATION OF REMEDIES FOR CERTAIN INDIRECT TRANSFERS.    In the event of any Transfer (excluding Class B Common Stock) which does not involve a transfer of securities of the Corporation within the meaning of Delaware law ("Securities," and individually, a "Security") but which would cause a 5-percent Stockholder to violate a restriction on Transfers provided for in this Paragraph NINTH, the application of Section 9.5 and Section 9.6 shall be modified as described in this Section 9.7. In such case, no such 5-percent Stockholder shall be required to dispose of any interest that is not a Security, but such 5-percent Stockholder and/or any Person whose ownership of Securities is attributed to such 5-percent Stockholder shall be deemed to have disposed of and shall be required to dispose of sufficient Securities (which Securities shall be disposed of in the inverse order in which they were acquired) to cause such 5-percent Stockholder, following such disposition, not to be in violation of this Paragraph NINTH. Such disposition shall be deemed to occur simultaneously with the Transfer giving rise to the application of this provision, and such number of Securities that are deemed to be disposed of shall be considered Excess Securities and shall be disposed of through the Agent as provided in Sections 9.5 and 9.6, except that the maximum aggregate amount payable either to such 5-percent Stockholder, or to such other Person that was the direct holder of such Excess Securities, in connection with such sale shall be the fair market value of such Excess Securities at the time of the purported Transfer. All expenses incurred by the Agent in disposing of such Excess Stock shall be paid out of any amounts due such 5-percent Stockholder or such other Person. The purpose of this Section 9.7 is to extend the restrictions in Sections 9.2 and 9.5 to situations in which there is a



      5-percent Transaction without a direct Transfer of Securities, and this Section 9.7, along with the other provisions of this Paragraph NINTH, shall be interpreted to produce the same results, with differences as the context requires, as a direct Transfer of Corporation Securities.

              9.8LEGAL PROCEEDINGS; PROMPT ENFORCEMENT.    If the Purported Transferee fails to surrender the Excess Securities or the proceeds of a sale thereof to the Agent within thirty days from the date on which the Corporation makes a written demand pursuant to Section 9.5 (whether or not made within the time specified in Section 9.5), then the Corporation shall promptly take all cost effective actions which it believes are appropriate to enforce the provisions hereof, including the institution of legal proceedings to compel the surrender. Nothing in this Section 9.8 shall (a) be deemed inconsistent with any Transfer of the Excess Securities provided in this Paragraph NINTH being voidab initio, (b) preclude the Corporation in its discretion from immediately bringing legal proceedings without a prior demand or (c) cause any failure of the Corporation to act within the time periods set forth in Section 9.5 to constitute a waiver or loss of any right of the Corporation under this Paragraph NINTH. The Board of Directors may authorize such additional actions as it deems advisable to give effect to the provisions of this Paragraph NINTH.

              9.9LIABILITY.    To the fullest extent permitted by law, any stockholder subject to the provisions of this Paragraph NINTH who knowingly violates the provisions of this Paragraph NINTH and any Persons controlling, controlled by or under common control with such stockholder shall be jointly and severally liable to the Corporation for, and shall indemnify and hold the Corporation harmless against, any and all damages suffered as a result of such violation, including but not limited to damages resulting from a reduction in, or elimination of, the Corporation's ability to utilize its Tax Benefits, and attorneys' and auditors' fees incurred in connection with such violation.

              9.10OBLIGATION TO PROVIDE INFORMATION.    As a condition to the registration of the Transfer of any Stock, any Person who is a beneficial, legal or record holder of Stock, and any proposed Transferee and any Person controlling, controlled by or under common control with the proposed Transferee, shall provide such information as the Corporation may request from time to time in order to determine compliance with this Paragraph NINTH or the status of the Tax Benefits of the Corporation.

              9.11LEGENDS.    The Board of Directors may require that any certificates issued by the Corporation evidencing ownership of shares of Stock (other than Class B Common Stock) that are subject to the restrictions on transfer and ownership contained in this Paragraph NINTH bear the following legend:

        "THE CERTIFICATE OF INCORPORATION, AS AMENDED (THE "CERTIFICATE OF INCORPORATION"), OF THE CORPORATION CONTAINS RESTRICTIONS PROHIBITING THE TRANSFER (AS DEFINED IN THE CERTIFICATE OF INCORPORATION) OF CLASS A COMMON STOCK OF THE CORPORATION (INCLUDING THE CREATION OR GRANT OF CERTAIN OPTIONS, RIGHTS AND WARRANTS) WITHOUT THE PRIOR AUTHORIZATION OF THE BOARD OF DIRECTORS OF THE CORPORATION (THE "BOARD OF DIRECTORS") IF SUCH TRANSFER AFFECTS THE PERCENTAGE OF STOCK OF THE CORPORATION (WITHIN THE MEANING OF SECTION 382 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND THE TREASURY REGULATIONS PROMULGATED THEREUNDER), THAT IS TREATED AS OWNED BY A FIVE PERCENT SHAREHOLDER UNDER THE CODE AND SUCH REGULATIONS. IF THE TRANSFER RESTRICTIONS ARE VIOLATED, THEN THE TRANSFER WILL BE VOIDAB INITIO AND THE PURPORTED TRANSFEREE OF THE STOCK WILL BE REQUIRED TO TRANSFER EXCESS SECURITIES (AS DEFINED IN THE CERTIFICATE OF INCORPORATION) TO THE CORPORATION'S AGENT. IN THE EVENT OF A TRANSFER WHICH DOES NOT INVOLVE SECURITIES OF THE


        CORPORATION WITHIN THE MEANING OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE ("SECURITIES") BUT WHICH WOULD VIOLATE THE TRANSFER RESTRICTIONS, THE PURPORTED TRANSFEREE (OR THE RECORD OWNER) OF THE SECURITIES WILL BE REQUIRED TO TRANSFER SUFFICIENT SECURITIES PURSUANT TO THE TERMS PROVIDED FOR IN THE CORPORATION'S CERTIFICATE OF INCORPORATION TO CAUSE THE FIVE PERCENT STOCKHOLDER TO NO LONGER BE IN VIOLATION OF THE TRANSFER RESTRICTIONS. THE CORPORATION WILL FURNISH WITHOUT CHARGE TO THE HOLDER OF RECORD OF THIS CERTIFICATE A COPY OF THE CERTIFICATE OF INCORPORATION, CONTAINING THE ABOVE-REFERENCED TRANSFER RESTRICTIONS, UPON WRITTEN REQUEST TO THE CORPORATION AT ITS PRINCIPAL PLACE OF BUSINESS."

      The Board of Directors may also require that any certificates issued by the Corporation evidencing ownership of shares of Stock that are subject to conditions imposed by the Board of Directors under Section 9.3 of this Paragraph NINTH also bear a conspicuous legend referencing the applicable restrictions.

              9.12AUTHORITY OF BOARD OF DIRECTORS.    

              (a)   The Board of Directors shall have the power to determine all matters necessary for assessing compliance with this Paragraph NINTH, including, without limitation, (i) the identification of 5-percent Stockholders, (ii) whether a Transfer is a 5-percent Transaction or a Prohibited Transfer, (iii) the Percentage Stock Ownership in the Corporation of any 5-percent Stockholder, (iv) whether an instrument constitutes a Corporation Security, (v) the amount (or fair market value) due to a Purported Transferee pursuant to Section 9.6, and (vi) any other matters which the Board of Directors determines to be relevant; and the good faith determination of the Board of Directors on such matters shall be conclusive and binding for all the purposes of this Paragraph NINTH. In addition, the Board of Directors may, to the extent permitted by law, from time to time establish, modify, amend or rescind by-laws, regulations and procedures of the Corporation not inconsistent with the provisions of this Paragraph NINTH for purposes of determining whether any Transfer of Corporation Securities would jeopardize the Corporation's ability to preserve and use the Tax Benefits and for the orderly application, administration and implementation of this Paragraph NINTH.

              (b)   Nothing contained in this Paragraph NINTH shall limit the authority of the Board of Directors to take such other action to the extent permitted by law as it deems necessary or advisable to protect the Corporation and its stockholders in preserving the Tax Benefits. Without limiting the generality of the foregoing, in the event of a change in law making one or more of the following actions necessary or desirable, the Board of Directors may, by adopting a written resolution, (i) accelerate or extend the Expiration Date, (ii) modify the ownership interest percentage in the Corporation or the Persons or groups covered by this Paragraph NINTH, (iii) modify the definitions of any terms set forth in this Paragraph NINTH or (iv) modify the terms of this Paragraph NINTH as appropriate, in each case, in order to prevent an ownership change for purposes of Section 382 of the Code as a result of any changes in applicable Treasury Regulations or otherwise;provided, however, that the Board of Directors shall not cause there to be such acceleration, extension or modification unless it determines, by adopting a written resolution, that such action is reasonably necessary or advisable to preserve the Tax Benefits or that the continuation of these restrictions is no longer reasonably necessary for the preservation of the Tax Benefits. Stockholders of the Corporation shall be notified of such determination through a filing with the Securities and Exchange Commission or such other method of notice as the Secretary of the Corporation shall deem appropriate.

              (c)   In the case of an ambiguity in the application of any of the provisions of this Paragraph NINTH, including any definition used herein, the Board of Directors shall have the power to determine



      the application of such provisions with respect to any situation based on its reasonable belief, understanding or knowledge of the circumstances. In the event this Paragraph NINTH requires an action by the Board of Directors but fails to provide specific guidance with respect to such action, the Board of Directors shall have the power to determine the action to be taken so long as such action is not contrary to the provisions of this Paragraph NINTH. All such actions, calculations, interpretations and determinations which are done or made by the Board of Directors in good faith shall be conclusive and binding on the Corporation, the Agent, and all other parties for all other purposes of this Paragraph NINTH. The Board of Directors may delegate all or any portion of its duties and powers under this Paragraph NINTH to a committee of the Board of Directors as it deems necessary or advisable and, to the fullest extent permitted by law, may exercise the authority granted by this Paragraph NINTH through duly authorized officers or agents of the Corporation. Nothing in this Paragraph NINTH shall be construed to limit or restrict the Board of Directors in the exercise of its fiduciary duties under applicable law.

              9.13RELIANCE.    To the fullest extent permitted by law, the Corporation and the members of the Board of Directors shall be fully protected in relying in good faith upon the information, opinions, reports or statements of the chief executive officer, the chief financial officer, the chief accounting officer or the corporate controller of the Corporation or of the Corporation's legal counsel, independent auditors, transfer agent, investment bankers or other employees and agents in making the determinations and findings contemplated by this Paragraph NINTH, and the members of the Board of Directors shall not be responsible for any good faith errors made in connection therewith. For purposes of determining the existence and identity of, and the amount of any Corporation Securities owned by any stockholder, the Corporation is entitled to rely on the existence and absence of filings of Schedule 13D or 13G under the Securities and Exchange Act of 1934, as amended (or similar filings), as of any date, subject to its actual knowledge of the ownership of Corporation Securities.

              9.14BENEFITS OF THIS PARAGRAPH NINTH.    Nothing in this Paragraph NINTH shall be construed to give to any Person other than the Corporation or the Agent any legal or equitable right, remedy or claim under this Paragraph NINTH. This Paragraph NINTH shall be for the sole and exclusive benefit of the Corporation and the Agent.

              9.15SEVERABILITY.    The purpose of this Paragraph NINTH is to facilitate the Corporation's ability to maintain or preserve its Tax Benefits. If any provision of this Paragraph NINTH or the application of any such provision to any Person or under any circumstance shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision of this Paragraph NINTH.

              9.16WAIVER.    With regard to any power, remedy or right provided herein or otherwise available to the Corporation or the Agent under this Paragraph NINTH, (1) no waiver will be effective unless expressly contained in a writing signed by the waiving party; and (2) no alteration, modification or impairment will be implied by reason of any previous waiver, extension of time, delay or omission in exercise, or other indulgence.



      ANNEX B

      RIGHTS AGREEMENT

      dated as of

      August 14, 2008

      between

      HOVNANIAN ENTERPRISES, INC.

      and

      National City Bank

      Rights Agent



      TABLE OF CONTENTS



      		Page

      Section 1

      Certain Definitions

      		B-4

      Section 2

      Appointment of Rights Agent


      B-8

      Section 3

      Issuance of Rights Certificates


      B-8

      Section 4

      Form of Rights Certificates


      B-10

      Section 5

      Countersignature and Registration


      B-10

      Section 6

      Transfer, Split-Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates


      B-11

      Section 7

      Exercise of Rights; Purchase Price; Expiration Date of Rights


      B-12

      Section 8

      Cancellation and Destruction of Rights Certificates


      B-13

      Section 9

      Company Covenants Concerning Securities and Rights


      B-13

      Section 10

      Record Date


      B-14

      Section 11

      Adjustment of Purchase Price, Number and Kind of Securities or Number of Rights


      B-15

      Section 12

      Certificate of Adjusted Purchase Price or Number of Shares


      B-21

      Section 13

      Fractional Rights and Fractional Shares


      B-21

      Section 14

      Rights of Action


      B-22

      Section 15

      Agreement of Rights Holders


      B-23

      Section 16

      Rights Certificate Holder Not Deemed a Stockholder


      B-23

      Section 17

      Concerning the Rights Agent


      B-23

      Section 18

      Merger, Consolidation or Change of Name of Rights Agent


      B-24

      Section 19

      Duties of Rights Agent


      B-24

      Section 20

      Change of Rights Agent


      B-26

      Section 21

      Issuance of New Rights Certificates


      B-27

      Section 22

      Redemption


      B-27

      Section 23

      Exchange


      B-28

      Section 24

      Notice of Certain Events


      B-28

      Section 25

      Notices


      B-29

      Section 26

      Supplements and Amendments


      B-30

      Section 27

      Successors


      B-30

      Section 28

      Determinations and Actions by the Board


      B-30

      Section 29

      Benefits of this Agreement


      B-31

      Section 30

      Severability


      B-31

      Section 31

      Governing Law


      B-31



      		Page

      Section 32

      Counterparts

      		B-31

      Section 33

      Descriptive Headings; Interpretation


      B-31

      EXHIBITS

      Exhibit A:

      Form of Certificate of Designation of Series B Junior Preferred Stock

      Exhibit B:

      Form of Rights Certificate

      Exhibit C:

      Summary of Rights



      RIGHTS AGREEMENT

              RIGHTS AGREEMENT, dated as of August 14, 2008 (the "Agreement"), between Hovnanian Enterprises, Inc., a Delaware corporation (the "Company"), and National City Bank (the "Rights Agent").


      W I T N E S S E T H

              WHEREAS, on July 29, 2008 (the "Rights Dividend Declaration Date"), the Board authorized and declared a dividend distribution of one right (a "Right") for each share of Class A common stock, par value $0.01 per share, of the Company (the "Class A Common Stock") and one Right for each share of Class B common stock, par value $0.01 per share, of the Company (the "Class B Common Stock") outstanding at the Close of Business (as hereinafter defined) on August 15, 2008 (the "Record Date"), each Right initially representing the right to purchase one ten-thousandth of a share of Preferred Stock (as hereinafter defined) of the Company, upon the terms and subject to the conditions hereinafter set forth, and further authorized and directed the issuance of one Right (subject to adjustment as provided herein) with respect to each share of Class A Common Stock and each share of Class B Common Stock issued or delivered by the Company (whether originally issued or delivered from the Company's treasury) after the Record Date but prior to the earlier of the Distribution Date (as hereinafter defined) and the Expiration Date (as hereinafter defined) or as provided in Section 21.

              NOW, THEREFORE, in consideration of the mutual agreements herein set forth, the parties hereby agree as follows:

      Certain Definitions

              For purposes of this Agreement, the following terms shall have the meanings indicated:

              "Acquiring Person" shall mean any Person (other than the Company, any Related Person or any Exempt Person) that has become, in itself or, together with all Affiliates and Associates of such Person, the Beneficial Owner of 4.9% or more of the shares of Class A Common Stock then-outstanding,provided,however, that any Person who would otherwise qualify as an Acquiring Person as of the Close of Business on the Record Date will not be deemed to be an Acquiring Person for any purpose of this Agreement on and after such date unless and until such time as such stockholder acquires the beneficial ownership of one additional share of Class A Common Stock, andprovided,further, that a Person will not be deemed to have become an Acquiring Person solely as a result of (i) a reduction in the number of shares of Class A Common Stock outstanding, (ii) the exercise of any options, warrants, rights or similar interests (including restricted stock) granted by the Company to its directors, officers and employees, (iii) any unilateral grant of any security by the Company, or (iv) an Exempt Transaction, unless and until such time as such stockholder acquires the beneficial ownership of one additional share of Class A Common Stock. The Board shall not make any determination with respect to a potential Acquiring Person until five (5) Business Days after the date on which all Board members first received notice of the change of beneficial ownership at issue. Notwithstanding the foregoing, the Board may, in its sole discretion, determine that any Person shall not be deemed to be an "Acquiring Person" for any purposes of this Agreement.

              "Act" shall mean the Securities Act of 1933, as amended.

              "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 16b-312b-2 of the General Rules and Regulations under the Exchange Act as in effect on the date of this Agreement, and to the extent not included within the foregoing clause of this Section 1(c), shall also include, with respect to any Person, any other Person (whether or not a Related Person or an Exempt Person) whose shares of Class A Common Stock or Class B Common Stock would be deemed constructively owned by such first Person, owned by a single "entity" as defined in Section 1.382-3(a)(1) of the Treasury Regulations, or otherwise aggregated with shares owned by such first Person pursuant



      to the provisions of the Code, or any successor provision or replacement provision, and the Treasury Regulations thereunder,provided,however, that a Person shall not be deemed to be the Affiliate or Associate of another Person solely because either or both Persons are or were directors of the Company.

              "Agreement" shall have the meaning set forth in the preamble of this Agreement.

              "Authorized Officer" shall mean the Chief Executive Officer, President, any Vice President, the Treasurer or the Secretary of the Company.

              A Person shall be deemed the "Beneficial Owner" of, and to "beneficially own" any securities:

                which such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, warrants, options, or other rights (in each case, other than upon exercise or exchange of the Rights);provided,however, that a Person shall not be deemed the "Beneficial Owner" of, or to "beneficially own" securities (including rights, options or warrants) which are convertible or exchangeable into Class A Common Stock until such time as the convertible or exchangeable securities are exercised and converted or exchanged into Class A Common Stock except to the extent the acquisition or transfer of such rights, options or warrants would be treated as exercised on the date of its acquisition or transfer under Section 1.382-4(d) of the Treasury Regulations; and,provided further,however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange;

                which such Person or any of such Person's Affiliates or Associates, directly or indirectly, has or shares the right to vote or dispose of, or has "beneficial ownership" of (as defined under Rule 13d-3 of the General Rules and Regulations under the Exchange Act), including pursuant to any agreement, arrangement or understanding (whether or not in writing), but only if the effect of such agreement, arrangement or understanding is to treat such Persons as an "entity" under Section 1.382-3(a)(1) of the Treasury Regulations, or

                which any other person is the Beneficial Owner, if such Person or any of such Person's Affiliates or Associates has any agreement, arrangement or understanding (whether or not in writing) with such other Person (or any of such other Person's Affiliates or Associates) with respect to acquiring, holding, voting or disposing of any securities of the Company, but only if the effect of such agreement, arrangement or understanding is to treat such Persons as an "entity" under Section 1.382-3(a)(1) of the Treasury Regulations;provided,however, that a Person shall not be deemed the "Beneficial Owner" of, or to "beneficially own" any security (A) if such Person has the right to vote such security pursuant to an agreement, arrangement or understanding (whether or not in writing) which (1) arises solely from a revocable proxy given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations of the Exchange Act and (2) is not also then reportable on Schedule 13D under the Exchange Act (or any comparable or successor report), or (B) if such beneficial ownership arises solely as a result of such Person's status as a "clearing agency," as defined in Section 3(a)(23) of the Exchange Act;provided further, however, that nothing in this Section 1(e) shall cause a Person engaged in business as an underwriter of securities or member of a selling to group to be the Beneficial Owner of, or to "beneficially own," any securities acquired through such Person's participation in good faith in an underwriting syndicate until the expiration of 40 calendar days after the date of such acquisition, or such later date as the directors of the Company may determine in any specific case. Notwithstanding anything herein to the contrary, to the extent not within the foregoing provisions of this Section 1(e), a Person shall be deemed the "Beneficial Owner" of and shall be deemed to "beneficially own" or have "beneficial ownership" of, securities



        which such Person would be deemed to constructively own or which otherwise would be aggregated with shares owned by such pursuant to Section 382 of the Code, or any successor provision or replacement provision and the Treasury Regulations thereunder.

              "Board" shall mean the Board of Directors of the Company.

              "Business Day" shall mean any day other than a Saturday, Sunday or a day on which banking institutions in the States of New York or New Jersey (or such other state in which the principal office of the Rights Agent may be located) are authorized or obligated by law or executive order to close.

              "Class A Common Stock" shall have the meaning set forth in the preamble of this Agreement.

              "Class B Common Stock" shall have the meaning set forth in the preamble of this Agreement.

              "Close of Business" on any given date shall mean 5:00 P.M., New York City time, on such date;provided,however, that if such date is not a Business Day, it shall mean 5:00 P.M., New York City time, on the next succeeding Business Day.

              "Code" shall mean the Internal Revenue Code of 1986, as amended.

              "Common Stock" shall mean the Class A Common Stock together with the Class B Common Stock.

              "Company" shall have the meaning set forth in the preamble of this Agreement.

              "Company's Certificate of Incorporation" shall mean the Certificate of Incorporation of the Company, as amended.

              "Current Per Share Market Price" shall have the meaning set forth in Section 11(d)(i) or Section 11(d)(ii) hereof, as applicable.

              "Current Value" shall have the meaning set forth in Section 11(a)(iii) hereof.

              "Distribution Date" shall mean the earliest of (i) the Close of Business on the tenth Business Day after the Stock Acquisition Date or (ii) the Close of Business on the tenth Business Day (or, unless the Distribution Date shall have previously occurred, such later date as may be specified by the Board of Directors of the Company) after the commencement of a tender or exchange offer by any Person (other than the Company, any Related Person or any Exempt Person), if upon the consummation thereof such Person would be the Beneficial Owner of 4.9% or more of the then-outstanding Class A Common Stock.

              "Equivalent Preferred Stock" shall have the meaning set forth in Section 11(b) hereof.

              "Exchange Act" shall mean the Securities Exchange Act of 1934, as amendedamended.

              "Exchange Ratio" shall have the meaning set forth in Section 23(a) hereof

              "Exempt Person" shall mean (i) a Person whose Beneficial Ownership (together with all Affiliates and Associates of such Person) of 4.9% or more of the then-outstanding Class A Common Stock would not, as determined by the Board in its sole discretion, jeopardize or endanger the availability to the Company of its NOLs and (ii) any Person that beneficially owns, as of the Record Date, 4.9% or more of the outstanding shares of Class A Common Stock,provided,however, that, with respect to clause (ii) of this paragraph, any such Person shall only be deemed to be an Exempt Person for so long as it beneficially owns no more than the amount of Class A Common Stock it owned on the Record Date; andprovided,further, that, with respect to clauses (i) and (ii) of this paragraph, any Person shall cease to be an Exempt Person as of the date that such Person ceases to beneficially own 4.9% or more of the shares of the then outstanding Class A Common Stock. Additionally, a Person shall cease to be an Exempt Person if the Board, in its sole discretion, makes a contrary determination with respect to the effect of such Person's Beneficial Ownership (together with all Affiliates and Associates of such Person) with respect to the availability to the Company of its NOLs.


              "Exempt Transaction" shall mean any transaction that the Board determines, in its sole discretion, is exempt, which determination shall be irrevocable.

              "Expiration Date" shall mean the earliest of (i) the Final Expiration Date, (ii) the time at which the Rights are redeemed as provided in Section 22 hereof, (iii) the time at which the Rights are exchanged as provided in Section 23 hereof, (iv) the repeal of Section 382 of the Code or any successor thereto, “outside directors” as defined under Section 162(m)statute if the Board determines that this Agreement is no longer necessary for the preservation of Tax Benefits, (v) the beginning of a taxable year of the Internal Revenue CodeCompany to which the Board determines that no Tax Benefits may be carried forward and (vi) August 14, 2009 if Stockholder Approval has not been obtained.

              "Final Expiration Date" shall be August 14, 2018.

              "Nasdaq" means The Nasdaq Stock Market.

              "NOLs" shall mean the Company's net operating loss carryforwards.

              "Person" shall mean any individual, firm, corporation, partnership, limited liability company, limited liability partnership, trust or other legal entity, group of 1986,persons making a "coordinated acquisition" of shares or otherwise treated as amended (the “Code”), and “independent directors”an entity within the meaning of Section 1.382-3(a)(1) of the applicable rules, ifTreasury Regulations or otherwise, and includes any successor (by merger or otherwise) of such individual or entity.

              "Preferred Stock" shall mean shares of Series B Junior Preferred Stock, par value $0.01 per share, of the Company having the rights and preferences set forth in the form of Certificate of Designation of Series B Junior Preferred Stock attached hereto asExhibit A.

              "Purchase Price" shall mean initially $35.00 per one ten-thousandth of a Preferred Stock, subject to adjustment from time to time as provided in this Agreement.

              "Record Date" shall have the meaning set forth in the recitals to this Agreement.

              "Redemption Price" shall mean $0.01 per Right, subject to adjustment of the Company to reflect any stock split, stock dividend or similar transaction occurring after the date hereof.

              "Related Person" shall mean (i) any Subsidiary of the Company or (ii) any employee benefit or stock ownership plan of the Company or of any Subsidiary of the Company or any entity holding shares of Class A Common Stock or Class B Common Stock, as the case may be, for or pursuant to the terms of any such plan.

              "Rights" shall have the meaning set forth in the recitals to this Agreement.

              "Rights Agent" shall have the meaning set forth in the preamble of this Agreement.

              "Rights Certificates" shall mean certificates evidencing the Rights, in substantially the form attached hereto asExhibit B.

              "Rights Dividend Declaration Date" shall have the meaning set forth in the recitals to this Agreement.

              "Section 11(a)(ii) Trigger Date" shall have the meaning set forth in Section 11(a)(iii) hereof.

              "Securities Act" shall mean Securities Act of 1933, as amended.

              "Spread" shall have the meaning set forth in Section 11(a)(iii) hereof.

              "Stock Acquisition Date" shall mean the first date of public announcement (which for purposes of this definition shall include, without limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has become such or such earlier date as a majority of the Board shall become aware of the existence of an Acquiring Person.


              "Stockholder Approval" shall mean the approval of this Agreement by the affirmative vote of the holders of a majority of the voting power of the outstanding shares of Common Stock of the Company entitled to vote, and voting together without regard to class, and that are present, or represented by proxy, and are voted on the proposal to approve this Agreement, at the meeting of stockholders of the Company duly held in accordance with the Company's certificate of incorporation (as amended) and applicable law.

              "Subsidiary" shall mean, with reference to any Person, any corporation or other legal entity of which a majority of the voting power of the voting equity securities or equity interests is owned, directly or indirectly, by such Person, or otherwise controlled by such Person.

              "Substitution Period" shall have the meaning set forth in Section 11(a)(iii) hereof.

              "Summary of Rights " shall mean a copy of a summary of the terms of the Rights, in substantially the form attached hereto asExhibit C.

              "Tax Benefits" shall mean the net operating loss carry-overs, capital loss carry-overs, general business credit carry-overs, alternative minimum tax credit carry-overs and foreign tax credit carry-overs, as well as any "net unrealized built-in loss" within the meaning of Section 382, of the Company or any direct or indirect subsidiary thereof.

              "Trading Day" shall mean a day on which the principal national securities exchange on which the shares of common stock of the CompanyClass A Common Stock are listed or admitted to trading unless otherwise determined byis open for the Company’s Boardtransaction of Directorsbusiness or, with respect to the shares of Class B Common Stock which are not listed or admitted to trading on any national securities exchange, a Trading Day for the Class A Common Stock.

              "Treasury Regulations" shall mean final, temporary and proposed income tax regulations promulgated under the Code, including any amendments thereto.

      Appointment of Rights Agent

              The Company hereby appoints the Rights Agent to act as agent for the committee (the “Committee”).

      (b)Company in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment and hereby certifies that it complies with the requirements of the New York Stock Exchange governing transfer agents and registrars. The CommitteeCompany may from time to time appoint such co-rights agents as it may deem necessary or desirable. The Rights Agent shall have no duty to supervise, and shall in no event be liable for, the exclusive authority to select the senior executives to be granted Awards under the Plan, to determine the size and termsacts or omission of the Award (subjectany such co-rights agent. Prior to the limitations imposed on Awardsappointment of a co-rights agent, the specific duties and obligations of each such co-rights agents shall be set forth in Section 4 below),writing and delivered to modifythe Rights Agent and the proposed co-rights agent. Any actions which may be taken by the Rights Agent pursuant to the terms of this Agreement may be taken by any such co-rights agent. To the extent that any co-rights agent takes any action pursuant to this Agreement, such co-rights agent shall be entitled to all of the rights and protections of, and subject to all of the applicable duties and obligations imposed upon, the Rights Agent pursuant to the terms of this Agreement. The Rights Agent will have no duty to supervise, and in no event will be liable for, the acts or omissions of any co-rights agent.

      Issuance of Rights Certificates

              Until the Distribution Date, (i) the Rights shall be evidenced (subject to Section 3(b)) by the certificates representing the shares of Class A Common Stock or Class B Common Stock, registered in the names of the record holders thereof (which certificates representing such shares of Class A Common Stock and/or Class B Common Stock shall also be deemed to be Rights Certificates), (ii) the Rights shall be transferable only in connection with the transfer of the underlying shares of Class A Common Stock and/or Class B Common Stock, and (iii) the surrender for transfer of any certificates representing such shares of Class A Common Stock and/or Class B Common Stock in respect of which



      Rights have been issued shall also constitute the transfer of the Rights associated with the shares of Class A Common Stock and/or Class B Common Stock represented by such certificates.

              On or as promptly as practicable after the Record Date, the Company shall send by first class, postage prepaid mail, to each record holder of shares of Class A Common Stock and Class B Common Stock as of the Close of Business on the Record Date, at the address of such holder shown on the records of the Company as of such date, a copy of a Summary of Rights to Purchase Preferred Stock in substantially the form attached as Exhibit C. With respect to certificates for Class A Common Stock and Class B Common Stock outstanding as of the Record Date, until the Distribution Date, the Rights will be evidenced by such certificates registered in the names of the holders thereof together with the Summary of Rights.

              Rights shall be issued by the Company in respect of all shares of Class A Common Stock and Class B Common Stock (other than any shares of Class A Common Stock and Class B Common Stock that may be issued upon the exercise or exchange of any Right) issued or delivered by the Company (whether originally issued or delivered from the Company's treasury) after the Record Date but prior to the earlier of the Distribution Date and the Expiration Date, except as specially provided in Section 21 hereof, after the Distribution Date. Certificates representing such shares of Class A Common Stock and Class B Common Stock shall have stamped on, impressed on, printed on, written on, or otherwise affixed to them a legend in substantially the following form or such similar legend as the Company may deem appropriate and is not inconsistent with the provisions of this Agreement and as do not affect the rights, duties or responsibilities of the Rights Agent, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange or transaction reporting system on which the shares of Class A Common Stock or Class B Common Stock may from time to time be listed or quoted:

        This certificate also evidences and entitles the holder hereof to certain Rights as set forth in the Rights Agreement between Hovnanian Enterprises, Inc. and National City Bank, dated as of August 14, 2008 and as amended from time to time (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of Hovnanian Enterprises, Inc. The Rights are not exercisable prior to the occurrence of certain events specified in the Rights Agreement. Under certain circumstances, as set forth in the Rights Agreement, such Rights may be redeemed, may be exchanged, may expire, may be amended, or may be evidenced by separate certificates and no longer be evidenced by this certificate. Hovnanian Enterprises, Inc. shall mail to the holder of this certificate a copy of the Rights Agreement, as in effect on the date of mailing, without charge promptly after receipt of a written request therefor.Under certain circumstances as set forth in the Rights Agreement, Rights that are or were beneficially owned by an Acquiring Person or any Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights Agreement) may become null and void.

              Any Rights Certificate issued pursuant to this Section 3 or Section 21 hereof that represents Rights beneficially owned by an Acquiring Person or any of its Associates or Affiliates and any Rights Certificate issued at any time upon the transfer of any Rights to an Acquiring Person or any of its Associates or Affiliates or to any nominee of such Acquiring Person, Associate or Affiliate and any Rights Certificate issued pursuant to Section 6 or 11 hereof upon transfer, exchange, replacement or adjustment of any other Rights Certificate referred to in this sentence, shall be subject to and contain a legend in substantially the following form or such similar legend as the Company may deem appropriate and is not inconsistent with the provisions of this Agreement or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed:

        The Rights represented by this Rights Certificate are or were beneficially owned by a Person who was an Acquiring Person or an Affiliate or an Associate of an Acquiring Person (as such terms are


        defined in the Rights Agreement). This Rights Certificate and the Rights represented hereby may become null and void in the circumstances specified in Section 11(a)(ii) of the Rights Agreement.

              As promptly as practicable after the Distribution Date, the Company shall prepare and execute, the Rights Agent shall countersign and the Company shall send or cause to be sent (and the Rights Agent will, if requested, and if provided with all necessary information, send), by first class, insured, postage prepaid mail, to each record holder of shares of Class A Common Stock and Class B Common Stock, as of the Close of Business on the Distribution Date (other than an Acquiring Person or any Associate or Affiliate of an Acquiring Person), at the address of such holder shown on the records of the Company, a Rights Certificate representing one Right for each share of Class A Common Stock and/or Class B Common Stock so held, subject to adjustment as provided herein. As of and after the Distribution Date, the Rights shall be represented solely by such Rights Certificates. The Company shall promptly notify the Rights Agent in writing upon the occurrence of the Distribution Date and, if such notification is given orally, the Company shall confirm same in writing on or prior to the next Business Day. Until such notice is received by the Rights Agent, the Rights Agent may presume conclusively that the Distribution Date has not occurred.

              In the event that the Company purchases or otherwise acquires any shares after the Record Date but prior to the Distribution Date, any Rights associated with such shares of Class A Common Stock and/or Class B Common Stock shall be deemed canceled and retired so that the Company shall not be entitled to exercise any Rights associated with the shares of Class A Common Stock and/or Class B Common Stock so purchased or acquired.

      Form of Rights Certificates

              The Rights Certificates (and the form of election to purchase and the form of assignment to be printed on the reverse thereof) shall each be substantially in the form attached hereto asExhibit B with such changes and marks of identification or designation, and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange or transaction reporting system on which the Rights may from time to time be listed or quoted, or to conform to usage. Subject to the provisions of Section 21 hereof, the Rights Certificates, whenever distributed shall entitle the holders thereof to purchase such number of one ten-thousandths of a share of Preferred Stock as is set forth therein at the Purchase Price;provided,however, that the Purchase Price, the number and kind of securities issuable upon exercise of each Right and the number of Rights outstanding shall be subject to adjustments as provided in this Agreement.

      Countersignature and Registration

              The Rights Certificates shall be executed on behalf of the Company by any Authorized Officer, either manually or by facsimile signature, and shall have affixed thereto the Company's seal or a facsimile thereof which shall be attested by any Authorized Officer, either manually or by facsimile signature. The Rights Certificates shall be countersigned by the Rights Agent, either manually or by facsimile signature and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who shall have signed any of the Award that has been granted (except for any modification that would increase the amountRights Certificates shall cease to be such officer of the Award payableCompany before countersignature by the Rights Agent and issuance and delivery by the Company, such Rights Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the person who signed such Rights Certificates had not ceased to be such officer of the Company; and any Rights Certificates may be signed on behalf of the Company by any person who, at the actual date of the execution of such Rights Certificate, shall be a proper officer of the Company to sign such Rights Certificate, although at the date of the execution of this Agreement any such person was not such an executive),officer.


              Following the Distribution Date, upon receipt by the Rights Agent of written notice of the occurrence of the Distribution Date pursuant to determineSection 3(e) hereof, a stockholder list and all other relevant information referred to in Section 3(e) or as reasonably requested by the Rights Agent, the Rights Agent shall keep, books for registration and transfer of the Rights Certificates issued hereunder or cause to be kept, at its office or offices designated for such purposes and at such other offices as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange or any transaction reporting system on which the rights may from time when Awards willto time be madelisted or quoted. Such books shall show the names and addresses of the respective holders of the Rights Certificates, the number of Rights evidenced on its face by each of the Rights Certificates and the performance perioddate of each of the Rights Certificates.

      Transfer, Split-Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates

              Subject to which they relate, to establish performance objectives in respect of such performance periods, and to certify that such performance objectives were attained;provided, however, that any such action shall be consistent with the applicable provisions of Section 162(m)7(d) and Section 13 hereof, at any time after the Close of Business on the Distribution Date, and prior to the Expiration Date, any Rights Certificate(s) (other than Rights Certificates representing Rights that may have been exchanged pursuant to Section 23 hereof) representing exercisable Rights may be transferred, split up, combined or exchanged for another Rights Certificate(s), entitling the registered holder to purchase a like number of one ten-thousandths of a share of Preferred Stock (or other securities, as the case may be) as the Rights Certificate(s) surrendered then entitled such holder (or former holder in the case of a transfer) to purchase. Any registered holder desiring to transfer, split up, combine or exchange any such Rights Certificate(s) must make such request in writing delivered to the Rights Agent, and must surrender the Rights Certificate(s) to be transferred, split up, combined or exchanged, with the forms of assignment and certificate contained therein duly executed, at the office or offices of the Code.Rights Agent designated for such purpose. The Committee is authorized to interpretRights Certificates are transferable only on 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 administrationregistry books of the Plan. The Committee may correct any defect or supply any omission or reconcile any inconsistency inRights Agent. Neither the Plan in the manner and to the extent the Committee deems necessary or desirable. Any decision of the Committee in the interpretation and administration of the Plan, as described herein, shall be final, conclusive and binding on all parties concerned.

      3. PARTICIPATION.

      Awards may be granted to senior executives of the Company and its affiliates who are “covered employees”, as defined in Section 162(m) of the Code, or who the Committee anticipates may become covered employees. An Executive to whom an Award is granted shall be a “Participant”.

      4. AWARDS UNDER THE PLAN.

      (a)  A Participant’s Award shall be determined based on the attainment of written performance goals approved by the Committee in respect of a specified period of service (a “performance period”), which is established by the Committee (i) while the outcome for that performance period is substantially uncertain and (ii) not more than 90 days after the commencement of that performance period or, if less, the number of days which is equal to 25 percent of that performance period. The performance goals shall be based upon one or more of the following criteria: (i) earnings before or after taxes (including earnings before interest, taxes, depreciation and amortization); (ii) net income; (iii) operating income; (iv) earnings per share; (v) book value per share; (vi) return on stockholders’ equity; (vii) expense management; (viii) return on investment before or after the cost of capital; (ix) improvements in capital structure; (x) profitability of an identifiable business unit or product; (xi) maintenance or improvement of profit margins; (xii) stock price; (xiii) market share; (xiv) revenues or

      A-1


      sales; (xv) costs; (xvi) cash flow; (xvii) working capital; (xviii) changes in net assets (whether or not multiplied by a constant percentage intended to represent the cost of capital); and (xix) return on assets. The foregoing criteria may relate to the Company, one or more of its affiliates or one or more of its divisions or units, or any combination of the foregoing, and may be applied on an absolute basis and/or be relative to one or more peer group companies or other indices, or any combination thereof, all as the Committee shall determine. In addition, to the degree consistent with Section 162(m) of the Code, the performance goals may be calculated without regard to extraordinary items. In any event, the performance goals shall be based on an objective formula or standard. The maximum amount of an Award to any Participant with respect to a fiscal year ofRights Agent nor the Company shall be obligated to take any action whatsoever with respect to the greatertransfer of (x) $15,000,000any such surrendered Rights Certificate until the registered holder shall have (i) completed and (y) 2.5 percent (2.5%)signed the certificate contained in the form of assignment on the reverse side of such Rights Certificate, (ii) provided such additional evidence of the Company’s income before incomeidentity of the Beneficial Owner (or former Beneficial Owner and the Affiliates and Associates of such Beneficial Owner (or former Beneficial Owner) as the Company or the Rights Agent shall reasonably request and (iii) paid a sum sufficient to cover any tax or charge that may be imposed in connection with any transfer, split up, combination or exchange or Rights Certificates as required by Section 9(d) hereof. Thereupon the Rights Agent shall countersign and deliver to the Person entitled thereto a Rights Certificate or Rights Certificates, as the case may be, as so requested registered in such name or names as may be designated by the surrendering registered holder. The Rights Agent shall promptly forward any such sum collected by it to the Company or to such Person or Persons as the Company shall specify by written notice. The Rights Agent shall have no duty or obligation unless and until it is satisfied that all such taxes and/or charges have been paid.

              Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Rights Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Rights Certificate, if mutilated, the Company shall execute and deliver a new Rights Certificate of like tenor to the Rights Agent and the Rights Agent will countersign and deliver such new Rights Certificate to the registered holder in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.


      Exercise of Rights; Purchase Price; Expiration Date of Rights

              Except as reportedotherwise provided herein, the Rights shall become exercisable on the Distribution Date and prior to the Expiration Date, and thereafter the registered holder of any Right Certificate may, subject to Section 11(a)(ii) and Section 23 hereof, exercise the Rights evidenced thereby in whole or in part upon surrender of the Company’s audited consolidated financial statementsRights Certificate, with the form of election to purchase on the reverse side thereof duly executed, to the Rights Agent at the office or agency of the Rights Agent designated for such purpose, together with payment of the Purchase Price (including any applicable tax or charge required to be paid by the holder of such Rights Certificate in accordance with the provisions of Section 9(d)) hereof for each one ten-thousandth of a share of Preferred Stock (or other securities, cash or assets, as the case may be) as to which the Rights are exercised.

              Upon receipt of a Rights Certificate representing exercisable Rights with the form of election to purchase and the certificate properly completed and duly executed, accompanied by payment of the Purchase Price for the year in respect of which the Award isshares to be purchased and an amount equal to any applicable tax or charge required to be paid under Section 9(d) hereof by certified check, cashier's check, bank draft or money order payable to the order of the Company, the Rights Agent shall, thereupon promptly (i) (A) requisition from any transfer agent of the shares of Preferred Stock (or make available, if the Rights Agent is the transfer agent for such shares) certificates representing the total number of one ten-thousandths of a share of Preferred Stock to be purchased (and the Company hereby irrevocably authorizes and directs its transfer agent to comply with all such requests) or distributed,(B) if the Company shall have elected to deposit any shares of Preferred Stock issuable upon exercise of the Rights hereunder with a depositary agent, requisition from the depositary agent depositary receipts representing such number of one ten-thousandths of a share of Preferred Stock as applicable.are to be purchased (and the Company hereby irrevocably authorizes and directs such depositary agent to comply with all such requests), (ii) after receipt of such certificates (or depositary receipts, as the case may be) cause the same to be delivered to or upon the order of the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, (iii) when appropriate, requisition from the Company or any transfer agent therefor of certificates representing the number of equivalent shares to be issued in lieu of the issuance of shares of Class A Common Stock or Class B Common Stock, as the case may be, in accordance with the provisions of Section 11(a)(iii), (iv) when appropriate, after receipt of such certificates, cause the same to be delivered to or upon the order of the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, (v) when appropriate, requisition from the Company of the amount of cash to be paid in lieu of the issuance of fractional shares in accordance with the provisions of Section 13 hereof, and (vi) when appropriate, after receipt, deliver such cash to the registered holder of such Rights Certificate.

      (b)  The Committee        In case the registered holder of any Rights Certificate shall determine whetherexercise less than all the specified performance goals have been metRights evidenced thereby, the Rights Agent shall prepare, execute and deliver a new Rights Certificate evidencing Rights equivalent to the Rights remaining unexercised to the registered holder of such Rights Certificate or to his duly authorized assigns, subject to the provisions of Section 13 hereof.

              Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to any Participant and, if such goals have been met, shall so certify and shall ascertain the amount of the applicable Award. No Awards will be paid for any performance period until such applicable certification is made by the Committee. The amount of the Award actually paid to any Participant may, at the discretion of the Committee, be less than the amount determined by the applicable performance goal formula. The amount of the Award determined by the Committee in respect of a performance period shall be paid to the Participant at such time after the end of such performance period as shall be determined by the Committee in its sole discretion;provided, however, that a Participant may, if and to the extent permitted by the Committee, elect to defer receipt of an Award.

      (c)  The provisions of this Section 4 shall be administered and interpreted in accordance with Section 162(m) of the Code and all supporting regulations to ensure the deductibility by the Company or any of its affiliates of the payment of Awards.

      (d)  The Committee shall determine, in its discretion, whether an Award shall be payable in cash, common stock of the Company, or a combination thereof, which may include, without limitation, permitting a Participant to elect, in the calendar year prior to the year in which an Award may otherwise become payable to a Participant under the Plan, to defer receipt of all or any portion of such Award into a right to receive shares of common stock of the Company at a future date;provided, however, that the total number of shares of common stock of the Company (“Shares”) that may be issued under the Plan is 5,000,000. In the event of any change in the outstanding Shares by reason of any Share dividend orpurported transfer, split reorganization, recapitalization, merger, consolidation, spin-off,up, combination or exchange of Sharesany Rights Certificate pursuant to Section 6 or other corporate exchangeexercise or change in capital structure, any distribution to shareholdersassignment of Shares other than regular cash dividends or any similar event, the Committee in its sole discretion and without liability to any person may 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 that may be issueda Rights Certificate as set forth in this Section 4(d) or pursuant to outstanding Awards and/or (ii) any other affected terms7 unless the registered holder of such Awards. ExceptRights Certificate shall have (i) duly and properly completed and signed the certificate following the form of assignment or the form of election to purchase, as otherwise provided in an Award agreement, inapplicable, set forth on the event of a Change in Control (as defined in the 1999 Hovnanian Enterprises, Inc. Stock Incentive Plan (as amended and restated), 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.

      5. AMENDMENT AND TERMINATION OF THE PLAN.

      (a)  The Committee may at any time, or from time to time, suspend or terminate the Plan in whole or in part or amend it in such respects as the Committee may deem appropriate.

      (b)  Notwithstanding the foregoing, no amendment, suspension or terminationreverse side of the Plan shall be made which (i) without the Participant’s consent, impairs anyRights Certificate surrendered for such transfer, split up, combination, exchange, exercise or assignment and (ii) provided such additional evidence of the rights or obligations under any Award theretofore granted to a Participant under the Plan, (ii) without the approvalidentity of the shareholdersBeneficial Owner (or former Beneficial Owner) thereof and of the Company (exceptRights evidenced thereby and Affiliates and Associates thereof as provided in Section 4(d) of the Plan) increases the total number of Shares available for issuance under the Plan or changes the maximum amount of any Award which may be payable or distributed to any Participant;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.

      A-2


      6. MISCELLANEOUS PROVISIONS.

      (a)  Determination made by the Committee under the Plan need not be uniform and may be made selectively among eligible individuals under the Plan, whether or not such eligible individuals are similarly situated. Neither the Plan nor any action taken hereunder shall be construed as giving any right to be retained as an employee of the Company or any affiliate thereof.the Rights Agent may reasonably request.


      Cancellation and Destruction of Rights Certificates

      (b)  A Participant’s rights        All Rights Certificates surrendered for the purpose of exercise, transfer, split-up, combination or interest under the Plan may not be assigned or transferred, hypothecated or encumbered in whole or in part either directly or by operation of law or otherwise (except in the event of a Participant’s death) including, but not by way of limitation, execution, levy, garnishment, attachment, pledge, bankruptcy or in any other manner; provided, however, that, subject to applicable law, any amounts payable to any Participant hereunder are subject to reduction to satisfy any liabilities owedexchange shall, if surrendered to the Company or any of its affiliatesagents, be delivered to the Rights Agent for cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Rights Certificate purchased or acquired by the Participant. Any attempted assignmentCompany otherwise than upon the exercise thereof. The Rights Agent shall deliver all cancelled Rights Certificates to the Company, or transfer, hypothecation shall, at the written request of the Company, destroy such cancelled Rights Certificates, and in such case shall deliver a certificate of destruction thereof to the Company.

      Company Covenants Concerning Securities and Rights

              The Company covenants and agrees that it shall cause to be reserved, authorized for issuance and kept available out of its authorized and unissued shares of Preferred Stock, and/or encumbranceother securities, or any shares of any such security of the Company held in its treasury, a number of shares of Preferred Stock (or any other security of the Company as may be applicable at the time of exercise) that shall be voidsufficient to permit the exercise in full of all outstanding Rights in accordance with Section 7.

              The Company covenants and agrees so long as the shares of Preferred Stock (and, following the occurrence of any Person becoming an Acquiring Person, shares of Class A Common Stock and/or other securities) issuable upon the exercise of the Rights may be listed on any national securities exchange, or quoted on Nasdaq, it shall endeavor to cause, from and after such time as the Rights become exercisable, all securities reserved for issuance upon the exercise of Rights to be listed on such exchange, or quoted on the Nasdaq, upon official notice of issuance upon such exercise.

              The Company covenants and agrees it will take all such actions as may be necessary to ensure that all shares of Preferred Stock (and, following the occurrence of any Person becoming an acquiring Person shares of Class A Common Stock, Class B Common Stock and/or other securities) delivered upon exercise of Rights, at the time of delivery of the certificates for such securities, shall be (subject to payment of the Purchase Price) duly authorized, validly issued, fully paid and nonassessable securities.

              The Company covenants and agrees it will pay when due and payable any and all federal or state taxes and charges that may be payable in respect of the issuance or delivery of the Rights Certificates and of any certificates representing securities issued upon the exercise of Rights;provided,however, that the Company shall not be required to pay any tax or charge which may be payable in respect of any transfer or delivery of Rights Certificates to a person other than, or the issuance or delivery of certificates or depositary receipts representing securities issued upon the exercise of Rights in a name other than that of, the registered holder of the Rights Certificate evidencing Rights surrendered for exercise, or to issue or deliver any certificates or depositary receipts representing securities issued upon the exercise of any Rights until any such tax or charge has been paid (any such tax or charge being payable by the holder of such Rights Certificate at the time of surrender) or until it has been established to the Company's reasonable satisfaction that no effect.such tax or charge is due.

      (c)        If the Company determines that registration under the Securities Act is required, then the Company shall use commercially reasonable efforts (i) to file, as soon as practicable after the Distribution Date, on an appropriate form, a registration statement under the Securities Act with respect to the securities issuable upon exercise of the Rights, (ii) to cause such registration statement to become effective as soon as practicable after such filing and (iii) to cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the earlier of (A) the date as of which the Rights are no longer exercisable for such securities and



      (B) the Expiration Date. The Company shall also take such action as may be appropriate under, or to ensure compliance with, the securities or "blue sky" laws of the various states in connection with the exercisability of the Rights. The Company may temporarily suspend, for a period of time not exceed 90 days, the exercisability of the Rights in order to prepare and file such registration statement and to permit it to become effective or to qualify the rights, the exercise thereof or the issuance of shares of Preferred Stock, Class A Common Stock, Class B Common Stock, or other securities upon the exercise thereof under state securities or "blue sky" laws. Upon any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect. The Company shall notify the Rights Agent in writing whenever it makes a public announcement pursuant to this Section 9(e) and give the Rights Agent a copy of such announcement. In addition, if the Company determines that a registration statement or other document should be filed under the Securities Act or any state securities laws following the Distribution Date, the Company may temporarily suspend the exercisability of the Rights, for a period of time not to exceed 90 days, in each relevant jurisdiction until such time as a registration statement has been declared effective or any such other document filed and, if required, approved, and, upon any such suspension, the Company shall issue a public announcement stating that the exercisability of the rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect. Notwithstanding anything in this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction if the requisite registration or qualification in such jurisdiction has not been effected or the exercise of the Rights is not permitted under applicable law.

              Notwithstanding anything in this Agreement to the contrary, after the later of the Stock Acquisition Date and the Distribution Date, the Company shall not take (or permit any Subsidiary to take) any action if at the time such action is taken it is reasonably foreseeable that such action shall eliminate or otherwise diminish the benefits intended to be afforded by the Rights.

              In the event that the Company is obligated to issue other securities of the Company and/or pay cash pursuant to Sections 7, 11, 13 or 23 it shall make all arrangements necessary so that such other securities and/or cash are available for distribution by the Rights Agent, if and when necessary to comply with this Agreement.

      Record Date

              Each Person in whose name any certificate for a number of one ten-thousandths of a share of Preferred Stock (or Class A Common Stock, Class B Common Stock and/or other securities, as the case may be) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of such shares of Preferred Stock (or Class A Common Stock, Class B Common Stock and/or other securities, as the case may be) represented thereby on, and such certificate shall be dated, the date upon which the Rights Certificate representing such Rights was duly surrendered and payment of the Purchase Price (and all applicable taxes and charges) was made;provided,however, that if the date of such surrender and payment is a date upon which the transfer books of the Company for shares of Preferred Stock (or Class A Common Stock, Class B Common Stock and/or other securities, as the case may be) are closed, such Person shall be deemed to have become the record holder of such securities on, and such certificate shall be dated, the next succeeding Business Day on which the transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Rights Certificate shall not be entitled to any rights of a holder of any security of the Company with respect to shares for which the Rights are or may be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein.


      Adjustment of Purchase Price, Number and Kind of Securities or Number of Rights

              The Purchase Price, the number of shares of Preferred Stock or other securities or property purchasable upon exercise of each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11.

              In the event the Company shall at any time after the Record Date (A) declare a dividend on the shares of Preferred Stock payable in shares of Preferred Stock, (B) subdivide the outstanding shares of Preferred Stock, (C) combine the outstanding shares of Preferred Stock into a smaller number of shares of Preferred Stock or (D) issue any shares of its affiliatescapital stock in a reclassification of the shares of Preferred Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a), the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, as the case may be, and the number and kind of shares of capital stock issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive the aggregate number and kind of shares of capital stock which, if such Right had been exercised immediately prior to such date and at a time when the transfer books of the Company for the shares of Preferred Stock were open, the holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right.

              Subject to Section 23 of this Agreement and except as otherwise provided in this Section 11(a)(ii) and Section 11(a)(iii), in the event that any Person becomes an Acquiring Person, each holder of a Right shall thereafter have the right to deductreceive, upon exercise thereof at a price equal to the then-current Purchase Price, in accordance with the terms of this Agreement and in lieu of shares of Preferred Stock, such number of shares of Class A Common Stock or Class B Common Stock, as the case may be, (or at the option of the Company, such number of one ten-thousandths of a share of Preferred Stock) as shall equal the result obtained by (x) multiplying the then-current Purchase Price by the number of one ten-thousandths of a share of Preferred Stock for which a Right is then exercisable and dividing that product by (y) 50% of the Current Per Share Market Price of the Company's Class A Common Stock (determined pursuant to Section 11(d) hereof) on the date of the occurrence of such event;provided,however, that the Purchase Price (as so adjusted) and the number of shares of Class A Common Stock or Class B Common Stock, as the case may be, so receivable upon exercise of a Right shall thereafter be subject to further adjustment as appropriate in accordance with Section 11(f) hereof.

              Notwithstanding anything in this Agreement to the contrary, however, from and after the time (the "invalidation time") when any payment made underPerson first becomes an Acquiring Person, any Rights that are beneficially owned by (A) any Acquiring Person (or any Affiliate or Associate of any Acquiring Person), (B) a transferee of any Acquiring Person (or any such Affiliate or Associate) who becomes a transferee after the Planinvalidation time or (C) a transferee of any federal, state, localAcquiring Person (or any such Affiliate or foreign incomeAssociate) who became a transferee prior to or concurrently with the invalidation time pursuant to either (1) a transfer from the Acquiring Person to holders of its equity securities or to any Person with whom it has any continuing agreement, arrangement or understanding, written or otherwise, regarding the transferred Rights or (2) a transfer that the Board has determined is part of a plan, arrangement or understanding, written or otherwise, which has the purpose or effect of avoiding the provisions of this paragraph, and other taxes required by law tosubsequent transferees of such Persons, shall be withheldvoid without any further action and any holder of such Rights shall thereafter have no rights whatsoever with respect to such payment.Rights under any provision of this Agreement. The Company will use commercially reasonable efforts to ensure that the provisions of this Section 11(a)(ii) are complied with, but shall have no liability to any holder of Rights Certificates or other Person as a result of its failure to make any determinations with respect to an



      Acquiring Person or its Affiliates, Associates or transferees hereunder. From and after the invalidation time, no Right Certificates shall be issued pursuant to Section 3 or Section 6 hereof that represents Rights that are or have become void pursuant to the provisions of this paragraph, and any Right Certificates delivered to the Rights Agent that represents Rights that are or have become void pursuant to the provisions of this paragraph shall be cancelled.

      (d)        The Company may at its option substitute for a share of Class A Common Stock or Class B Common Stock, as the case may be, issuable upon the exercise of Rights in accordance with the foregoing subparagraph (ii) such number or fractions of shares of Preferred Stock having an aggregate current market value equal to the Current Per Share Market Price of a share of Class A Common Stock or Class B Common Stock, as the case may be. In the event that there shall be an insufficient number of Class A Common Stock or Class B Common Stock authorized but unissued (and unreserved) to permit the exercise in full of the Rights in accordance with the foregoing subparagraph (ii), the Board shall, with respect to such deficiency, to the extent permitted by applicable law and any material agreements then in effect to which the Company is a party (A) determine the excess of (x) the value of the shares of Common Stock issuable upon the exercise of a Right in accordance with the foregoing subparagraph (ii) (the "Current Value") over (y) the then-current Purchase Price multiplied by the number of one ten-thousandths of shares of Preferred Stock for which a Right was exercisable immediately prior to the time that the Acquiring Person became such (such excess, the "Spread"), and (B) with respect to each Right (other than Rights which have become void pursuant to Section 11(a)(ii)), make adequate provision to substitute for the shares of Class A Common Stock and/or Class B Common Stock issuable in accordance with subparagraph (ii) upon exercise of the Right and payment of the applicable Purchase Price, (1) cash, (2) a reduction in such Purchase Price, (3) shares of Preferred Stock or other equity securities of the Company (including, without limitation, shares or fractions of shares of preferred stock which, by virtue of having dividend, voting and liquidation rights substantially comparable to those of the shares of Class A Common Stock and/or Class B Common Stock, are deemed in good faith by the Board to have substantially the same value as the shares of Class A Common Stock or Class B Common Stock, as the case may be, (such shares of preferred stock and shares or fractions of shares of preferred stock are hereinafter referred to as "Common Stock equivalents") (4) debt securities of the Company, (5) other assets or (6) any combination of the foregoing, having a value which, when added to the value of the shares of Class A Common Stock and Class B Common Stock actually issued upon exercise of such Right, shall have an aggregate value equal to the Current Value (less the amount of any reduction in such Purchase Price), where such aggregate value has been determined by the Board (upon the advice of a nationally recognized investment banking firm selected by the Board in good faith);provided,however, if the Company shall not make adequate provision to deliver value pursuant to clause (B) above within thirty (30) days following the date that the Acquiring Person became such (the "Section 11(a)(ii) Trigger Date"), then the Company shall be obligated to deliver, to the extent permitted by applicable law and any material agreements then in effect to which the Company is a party, upon the surrender for exercise of a Right and without requiring payment of the Purchase Price, shares of Class A Common Stock and/or Class B Common Stock (to the extent available), and then, if necessary, such number or fractions of shares of Preferred Stock (to the extent available) and then, if necessary, cash, which shares and/or cash have an aggregate value equal to the Spread. If within the thirty (30) day period referred to above the Board shall determine in good faith that it is likely that sufficient additional shares of Class A Common Stock and/or Class B Common Stock could be authorized for issuance upon exercise in full of the Rights, then, if the Board so elects, such thirty (30) day period may be extended to the extent necessary, but not more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in order that the Company may seek stockholder approval for the authorization of such additional shares (such thirty (30) day period, as it may be extended, is hereinafter called the "Substitution Period"). To the extent that the Company determines that some action need be taken pursuant to the second and/or third sentence of this Section 11(a)(iii), the Company (x) shall provide, subject to Section 11(a)(ii) hereof and the last sentence of this Section 11(a)(iii) hereof, that such action shall apply uniformly to



      all outstanding Rights and (y) may suspend the exercisability of the Rights until the expiration of the Substitution Period in order to seek any authorization of additional shares and/or to decide the appropriate form of distribution to be made pursuant to such second sentence and to determine the value thereof. In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect.

              If the Company fixes a record date for the issuance of rights, options or warrants to all holders of shares of Preferred Stock entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase shares of Preferred Stock (or securities having equivalent rights, privileges and preferences as the shares of Preferred Stock (for purposes of this Section 11(b), "Equivalent Preferred Stock")) or securities convertible into shares of Preferred Stock or Equivalent Preferred Stock at a price per share of Preferred Stock or Equivalent Preferred Stock (or having a conversion price per share, if a security convertible into shares of Preferred Stock or Equivalent Preferred Stock) less than the Current Per Share Market Price of the shares of Preferred Stock (determined pursuant to Section 11(d)) on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which is the number of shares of Preferred Stock outstanding on such record date plus the number of shares of Preferred Stock which the aggregate offering price of the total number of shares of Preferred Stock and/or Equivalent Preferred Stock so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such Current Per Share Market Price and the denominator of which is the number of shares of Preferred Stock outstanding on such record date plus the number of additional shares of Preferred Stock and/or Equivalent Preferred Shares to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible);provided,however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock issuable upon exercise of one Right. In case such subscription price may be paid in a consideration part or all of which is in a form other than cash, the value of such consideration shall be as determined in good faith by the Board, whose determination shall be described in a written statement filed with the Rights Agent. Shares of Preferred Stock owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed, and in the event that such rights, options or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.

              If the Company fixes a record date for the making of a distribution to all holders of shares of Preferred Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) of evidences of indebtedness, cash (other than a regular periodic cash dividend), assets, stock (other than a dividend payable in shares of Preferred Stock) or subscription rights, options or warrants (excluding those referred to in Section 11(b)), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which is the Current Per Share Market Price of the shares of Preferred Stock (as determined pursuant to Section 11(d)) on such record date or, if earlier, the date on which shares of Preferred Stock begin to trade on an ex-dividend or when issued basis for such distribution, less the fair market value (as determined in good faith by the Board, whose determination shall be described in a written statement filed with the Rights Agent) of the portion of the evidences of indebtedness, cash, assets or stock so to be distributed or of such subscription rights, options or warrants applicable to one share of Preferred Stock, and the denominator of which is such Current Per Share Market Price of the shares of Preferred Stock;provided,however, that in no event shall the consideration to be paid upon the exercise of one Right but less than the aggregate par value of the shares of capital stock issuable upon exercise of one Right. Such adjustments shall be made successively whenever such a record date



      is fixed; and in the event that such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.

              For the purpose of any computation hereunder, the "Current Per Share Market Price" of any security (a "Security" for purposes of this Section 11(d) only) on any date shall be deemed to be the average of the daily closing prices per share of a share of the Class A Common Stock for the 30 consecutive Trading Days immediately prior to, but not including, such date;provided,however, that in the event that the Current Per Share Market Price of the Security is determined during a period following the announcement by the issuer of such Security of (A) a dividend or distribution on such Security payable in shares of such Security or securities convertible into such shares (other than the Rights) or (B) any subdivision, combination or reclassification of such Security, and prior to the expiration of 30 Trading Days after, but not including, the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the Current Per Share Market Price shall be appropriately adjusted to take into account ex-dividend trading or to reflect the current per share market price per share equivalent of such Security. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Security is not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Security is listed or admitted to trading or, if the Security is not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by Nasdaq or such other system then in use, or, if on any such date Security is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Security selected by the Board. If the Security is not publicly held or not so listed or traded, or is not the subject of available bid and asked quotes, the Current Per Share Market Price of such Security shall mean the fair value per share as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent.

              For the purpose of any computation hereunder, the "Current Per Share Market Price" of shares of the Preferred Stock shall be determined in accordance with the method set forth above in Section 11(d)(i) other than the last sentence thereof. If the Current Per Share Market Price of Preferred Stock cannot be determined in the manner provided above, it shall be conclusively deemed to be an amount equal to the current per share market price of the shares of Class A Common Stock multiplied by ten thousand (as such number may be appropriately adjusted to reflect events such as stock splits, stock dividends, recapitalizations or similar transactions relating to the shares of Class A Common Stock occurring after the date of this Agreement). If neither the Class A Common Stock, Class B Common Stock nor the Preferred Stock are publicly held or so listed or traded, or the subject of available bid and asked quotes, "Current Per Share Market Price" of the Preferred Stock shall mean the fair value per share as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent. For all purposes of this Agreement, the current per share market price of one ten-thousandth of a Preferred Share will be equal to the current per share market price of one Preferred Share divided by ten thousand.

              Except as set forth below, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in such price;provided,however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest one one-millionth of a share of Preferred Stock or one ten-thousandth of a share of a Class A Common Stock or Class B Common Stock or other security, as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment



      required by this Section 11 shall be made no later than the earlier of (i) three years from the date of the transaction which requires such adjustment and (ii) the Expiration Date.

              If as a result of an adjustment made pursuant to Section 11(a), the holder of any Right thereafter exercised becomes entitled to receive any securities of the Company other than shares of Preferred Stock, thereafter the number and/or kind of such other securities so receivable upon exercise of any Right (and/or the Purchase Price in respect thereof) shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares of Preferred Stock (and the Purchase Price in respect thereof) contained in this Section 11, and the provisions of Sections 7, 9, 10 and 13 with respect to the shares of Preferred Stock (and the Purchase Price in respect thereof) shall apply on like terms to any such other securities (and the Purchase Price in respect thereof).

              All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of one ten-thousandths of a share of Preferred Stock issuable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.

              Unless the Company has exercised its election as provided in Section 11(i), upon each adjustment of the Purchase Price pursuant to Section 11(b) or Section 11(c), each Right outstanding immediately prior to the making of such adjustment shall evidence the right to purchase, at the adjusted Purchase Price, that number of one ten-thousandths of a share of Preferred Stock (calculated to the nearest one one-millionth of a share of Preferred Stock) obtained by (i) multiplying (x) the number of one ten-thousandths of a share of Preferred Stock issuable upon exercise of a Right immediately prior to such adjustment of the Purchase Price by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price.

              The Company may elect, on or after the date of any adjustment of the Purchase Price, to adjust the number of Rights in substitution for any adjustment in the number of one ten-thousandths of a share of Preferred Stock issuable upon the exercise of a Right. Each person whoof the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of one ten-thousandths of a share of Preferred Stock for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one hundred-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. The Company shall also, as promptly as practicable, notify the Rights Agent in writing of same pursuant to Section 9(e) hereof and give the Rights Agent a copy of such announcement. Such record date may be the date on which the Purchase Price is adjusted or any day thereafter, but if the Rights Certificates have been issued, such record date shall be at least 10 calendar days later than the date of the public announcement. If Rights Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Rights Certificates on such record date Rights Certificates evidencing, subject to the provision of Section 13, the additional Rights to which such holders are entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Rights Certificates held by such holders prior to the date of adjustment, and upon surrender thereof if required by the Company, new Rights Certificates evidencing all the Rights to which such holders are entitled after such adjustment. Rights Certificates so to be distributed shall be issued, executed, and countersigned in the manner provided for herein (and may bear, at the option of the Company, the adjusted Purchase Price) and shall be registered in the names of the holders of record of Rights Certificates on the record date specified in the public announcement.


              Without respect to any adjustment or change in the Purchase Price and/or the number and/or kind of securities issuable upon the exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Purchase Price and the number and kind of securities which were expressed in the initial Rights Certificate issued hereunder.

              Before taking any action that would cause an adjustment reducing the Purchase Price below one ten-thousandth of the then par value, if any, of the shares of Preferred Stock or below the then par value, if any, of any other securities of the Company issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable shares of Preferred Stock or such other securities, as the case may be, at such adjusted Purchase Price.

              In any case in which this Section 11 otherwise requires that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuance to the holder of any Right exercised after such record date the number of one ten-thousandths of a share of Preferred Stock or other securities of the Company, if any, issuable upon such exercise over and above the number of one ten-thousandths of a share of Preferred Stock or other securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment;provided,however, that the Company delivers to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares of Preferred Stock or other securities upon the occurrence of the event requiring such adjustment.

              Notwithstanding anything in this Agreement to the contrary, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that in its good faith judgment the Board determines to be necessary or advisable in order that any (i) consolidation or subdivision of the shares of Preferred Stock, (ii) issuance wholly for cash of shares of Preferred Stock at less than the Current Per Share Market Price therefor, (iii) issuance wholly for cash of shares of Preferred Stock or securities which by their terms are convertible into or exchangeable for shares of Preferred Stock, (iv) stock dividends or (v) issuance of rights, options or warrants referred to in this Section 11, hereafter made by the Company to holders of its shares of Preferred Stock is not taxable to such stockholders.

              Notwithstanding anything in this Agreement to the contrary, in the event that the Company at any time servesafter the Record Date and prior to the Distribution Date (i) pays a dividend on the outstanding shares of Class A Common Stock or Class B Common Stock payable in shares of Class A Common Stock and/or Class B Common Stock, as applicable, (ii) subdivides the outstanding shares of Class A Common Stock or Class B Common Stock, (iii) combines the outstanding shares of Class A Common Stock or Class B Common Stock into a membersmaller number of shares or (iv) issues any shares of its capital stock in a reclassification of the Committeeoutstanding shares of Class A Common Stock or the Company’s Board of Directors shall be indemnified and held harmless by the Company against and from: (i)Class B Common Stock (including any loss, cost, liability or expense that may be imposed upon or reasonably incurred by such personreclassification in connection with a consolidation or resulting frommerger in which the Company is the continuing or surviving corporation), the number of Rights associated with each share of Class A Common Stock and/or each share of Class B Common Stock then outstanding, or issued or delivered thereafter but prior to the Distribution Date, shall be proportionately adjusted so that the number of Rights thereafter associated with each share of Class A Common Stock and/or each share of Class B Common Stock following any claim, action, suitsuch event equals the result obtained by multiplying the number of Rights associated with each share of Class A Common Stock or proceedingClass B Common Stock, as applicable, immediately prior to such event by a fraction the numerator of which is the total number of shares of Class A Common Stock or Class B Common Stock, as applicable, outstanding immediately prior to the occurrence of the event and the denominator of which is the total number of shares of Class A Common Stock or Class B Common Stock, as the case may be, outstanding immediately following the occurrence of such event. The adjustments provided for in this Section 11(n) shall be made successively whenever such a dividend is paid or such a subdivision, combination or reclassification is effected.


      Certificate of Adjusted Purchase Price or Number of Shares

              Whenever an adjustment is made or any event affecting the Rights or their exercisability (including without limitation an event which causes Rights to become null and void) occurs as provided in Section 11, the Company shall promptly (a) prepare a certificate setting forth such adjustment and a brief statement of the facts and calculations accounting for such adjustment or describing such event, (b) file with the Rights Agent, and with each transfer agent for the shares of Preferred Stock and the shares of Class A Common Stock and Class B Common Stock, a copy of such certificate, and (c) mail a brief summary thereof to each holder of a Rights Certificate. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained and shall not be deemed to have knowledge of any such adjustment unless and until it shall have received such certificate,provided,however, that the Rights Agent will not be entitled to such protection in cases of bad faith or willful misconduct.

      Fractional Rights and Fractional Shares

              The Company shall not be required to issue fractions of Rights or to distribute Rights Certificates which evidence fractional Rights. In lieu of such fractional Rights, the Company shall pay to the registered holders of the Rights Certificates with regard to which such personfractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of one Right. For purposes of this Section 13(a), the current market value of one Right is the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. The closing price for any Trading Day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Rights are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading or, if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the Nasdaq or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights, such market maker to be selected by the Board. If the Rights are not publicly held or are not so listed or traded, or are not the subject of available bid and asked quotes, the current market value of one Right shall mean the fair value thereof as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent.

              The Company shall not be required to issue fractions of shares of Preferred Stock (other than fractions which are integral multiples of one ten-thousandth of a share of Preferred Stock) upon exercise of the Rights or to distribute certificates which evidence fractional shares of Preferred Stock (other than fractions which are integral multiples of one ten-thousandth of a share of Preferred Stock). Fractions of Preferred Stock in integral multiples of one ten-thousandth of such Preferred Stock may, in the sole discretion of the Company, be evidenced by depositary receipts pursuant to an appropriate agreement between the Company and a depositary selected by it, provided that such agreement provides that the holders of such depositary receipts have all the rights, privileges and preferences to which they are entitled as beneficial owners of the Preferred Stock represented by such depositary receipts. In lieu of fractional shares of Preferred Stock that are not integral multiples of one ten-thousandth of a share of Preferred Stock, the Company may pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one ten-thousandth of a share of Preferred Stock. For purposes of this Section 13(b), the current market value of one ten-thousandth of a share of Preferred Stock shall be one ten-thousandth of the closing price of a share of Preferred Stock (as determined



      pursuant to Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of such exercise;provided,however, that if the closing price of the shares of the Preferred Stock cannot be so determined, the closing price of the shares of the Preferred Stock for such Trading Day shall be conclusively deemed to be an amount equal to the closing price of the shares of Class A Common Stock shares for such Trading Day multiplied by ten thousand (as such number may be a partyappropriately adjusted to reflect events such as stock splits, stock dividends, recapitalizations or insimilar transactions relating to the Class A Common Stock shares occurring after the date of this Agreement).

              Following the occurrence of any Person becoming an Acquiring Person, the Company shall not be required to issue fractions of shares of Class A Common Stock or Class B Common Stock, as the case may be, upon exercise or exchange of the Rights or to distribute certificates which evidence fractional shares of Class A Common Stock or Class B Common Stock, as the case may be. In lieu of issuing any such fractional securities, the Company may pay to any Person to whom or which such personfractional securities would otherwise be issuable an amount in cash equal to the same fraction of the current market value of one such security. For purposes of this Section 13(c), the current market value of one share of Class A Common Stock, or other security issuable upon the exercise or exchange of Rights shall be the closing price thereof (as determined pursuant to Section 11(d)(i) hereof) on the Trading Day immediately prior to the date of such exercise or exchange.

              The holder of a Right by the acceptance of the Rights expressly waives his right to receive any fractional Rights or any fractional shares upon exercise of a Right, except as permitted by this Section 13.

      Rights of Action

              (a)   All rights of action in respect of this Agreement, excepting the rights of action given to the Rights Agent hereunder, are vested in the respective registered holders of the Rights Certificates (and, prior to the Distribution Date, the registered holders of shares of Class A Common Stock and Class B Common Stock); and any registered holder of any Rights Certificate (or, prior to the Distribution Date, of the shares of Class A Common Stock and Class B Common Stock), without the consent of the Rights Agent or of the holder of any other Rights Certificate (or, prior to the Distribution Date, of the shares of Class A Common Stock or Class B Common Stock), may, in his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his right to exercise the Rights evidenced by such Rights Certificate in the manner provided in such Rights Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and shall be involvedentitled to specific performance of the obligations hereunder and injunctive relief against actual or threatened violations of the obligations hereunder of any Person subject to this Agreement.

              (b)   Notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any actionpreliminary or failure to act under the Plan; and (ii)permanent injunction or other order, judgment, decree or ruling (whether interlocutory or final) issued by a court of competent jurisdiction or by a governmental regulatory, self-regulatory or administrative agency or commission, or any and all amounts paidstatute, rule, regulation, or executive order promulgated or enacted by such person in satisfaction of judgment in any such action, suit or proceeding relating to the Plan. Each person covered by this indemnification shall give the Company an opportunity, at its own expense, to handle and defend the same before such person undertakes to handle and defend it on such person’s own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the bylaws of the Company as a matter of law,governmental authority, prohibiting or otherwise or any powerrestraining performance of such obligation;provided,however that the Company mayshall use commercially reasonable efforts to have to indemnifyany such personinjunction, order, judgment, decree or hold such person harmless.ruling lifted or otherwise overturned as soon as possible.


      Agreement of Rights Holders

      (e)  Each member        Every holder of the Committeea Right consents and the Company’s Board of Directors shall be fully justified in relying or acting in good faith upon any report made to independent public accountants of, or counsel for,agrees with the Company and upon anythe Rights Agent and with every other information furnishedholder of a Right that:

                prior to the Distribution Date, the Rights shall be transferable only in connection with the Plan. Intransfer of shares of Class A Common Stock or Class B Common Stock;

                after the Distribution Date, the Rights Certificates are transferable only on the registry books of the Rights Agent if surrendered at the principal office or offices of the Rights Agent designated for such purposes, duly endorsed and accompanied by a properly executed instrument of transfer with the appropriate forms and certificates fully executed;

                the Company and the Rights Agent may deem and treat the person in whose name a Rights Certificate (or, prior to the Distribution Date, the associated Class A Common Stock or Class B Common Stock share certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Rights Certificates or the associated Class A Common Stock or Class B Common Stock share certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary; and

                such holder expressly waives any right to receive any fractional Rights and any fractional securities upon exercise or exchange of a Right, except as otherwise provided in Section 13.

      Rights Certificate Holder Not Deemed a Stockholder

              No holder, of any Rights Certificate, by means of such possession, shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the number of one ten-thousandths of a share of Preferred Stock or any other securities of the Company which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the holder of any Rights Certificate, by means of such possession, any of the rights of a stockholder of the Company including any right to vote on any matter submitted to stockholders at any meeting thereof, including the election of directors, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 24 hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Rights Certificate have been exercised in accordance with the provisions of this Agreement.

      Concerning the Rights Agent

              The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder, and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the preparation, administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, damage, judgment, fine, penalty, claim, demand, cost or expense incurred without gross negligence, bad faith or willful misconduct on the part of the Rights Agent (which gross negligence, bad faith or willful misconduct must be determined by a final, non-appealable order, judgment, decree or ruling of a court of competent jurisdiction), for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement and the performance of its duties and responsibilities and the exercise of its rights hereunder, including the costs and expenses of defending against any claim of liability arising therefrom, directly or indirectly. The costs and expenses of enforcing this right of indemnification will also be paid by the Company. The provisions of this Section 17 shall survive the exercise, exchange, redemption or expiration of the Rights, the resignation, replacement or removal of the Rights Agent and the termination of this Agreement.


              The Rights Agent may conclusively rely on, and will be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with, its acceptance or administration of this Agreement and the exercise and performance of its duties and responsibilities and the exercise of its rights hereunder, in reliance upon any Rights Certificate or certificate evidencing shares of Preferred Stock, Class A Common Stock, Class B Common Stock or other securities of the Company, or any instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons, or otherwise upon the advice of counsel as set forth in Section19.

              Notwithstanding anything in this Agreement to the contrary, in no event will the Rights Agent be liable for special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Rights Agent has been advised of the likelihood of such loss or damage and regardless of the form of action.

      Merger, Consolidation or Change of Name of Rights Agent

              Any Person into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any Person resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent is a party, will be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided that such Person would be eligible for appointment as a successor Rights Agent under the provisions of Section 20 hereof. If at the time such successor Rights Agent shall succeed to the agency created by this Agreement any person who is orof the Rights Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of a memberpredecessor Rights Agent and deliver such Rights Certificates so countersigned; and if at that time any of the CommitteeRights Certificates shall not have been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor or in the name of the successor Rights Agent; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement.

              If at any time the name of the Rights Agent changes and at such time any of the Rights Certificates have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Rights Certificates so countersigned; and if at that time any of the Rights Certificates have been countersigned, the Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement.

      Duties of Rights Agent

              The Rights Agent undertakes to perform the duties and obligations expressly imposed by this Agreement (and no implied duties) upon the following terms and conditions, by all of which the Company and the holders of Rights Certificates, by their acceptance thereof, shall be bound:

              The Rights Agent may consult with competent legal counsel (who may be legal counsel for the Company), and the advice or opinion of such counsel shall be full and complete authorization and protection to the Rights Agent and the Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitted by it in accordance with the content of such advice or opinion.

              Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of any Acquiring Person and the determination of the Current Per Share Market Price) be proved or established by the Company prior to taking, suffering or omitting to take any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any Authorized Officer and delivered to the Rights Agent; and such certificate, pursuant to its terms, shall be full and complete authorization and protection to the Rights Agent for any action taken or suffered by it under the provisions of this Agreement in reliance upon such certificate.


              The Rights Agent shall be liable hereunder only for its own gross negligence, bad faith or willful misconduct (which gross negligence, bad faith or willful misconduct must be determined by a final, non-appealable order, judgment, decree or ruling of a court of competent jurisdiction).

              The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Rights Certificates (except its countersignature thereof) be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only.

              The Rights Agent will have no liability in respect of the validity of this Agreement or the Company’s Boardexecution and delivery hereof (except the due execution and delivery hereof by the Rights Agent) or in respect of Directorsthe validity or execution of any Rights Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant contained in this Agreement or in any Rights Certificate; nor shall it be responsible for any adjustment required under the provisions of Sections 11, 12, 22 or 23 hereof or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced by Rights Certificates after actual notice of any such adjustment); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Class A Common Stock, Class B Common Stock or Preferred Stock to be issued pursuant to this Agreement or any Rights Certificate or as to whether any shares of Class A Common Stock, Class B Common Stock or Preferred Stock shall, when so issued, be validly authorized and issued, fully paid and nonassessable.

              The Company agrees that it shall perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement.

              The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties and the exercise of the rights hereunder from any person reasonably believed by the Rights Agent to be one of the Authorized Officers, and to apply to such Authorized Officers for advice or instructions in connection with its duties, and it shall not be liable for any determination made or other action taken or any failure to actsuffered by it in reliance upongood faith in accordance with instructions of any such reportAuthorized Officer or informationfor any delay in acting while waiting for those instructions. Any application by the Rights Agent for written instructions from the Company may, at the option of the Rights Agent, set forth in writing any action proposed to be taken or omitted by the Rights Agent under this Agreement and the date on and/or after which such action shall be taken or such omission shall be effective. The Rights Agent shall not be liable for any action taken by, or omission of, the Rights Agent in accordance with a proposal included in any such application on or after the date specified in such application (which date shall not be less than five Business Days after the date any Authorized Officer of the Company actually receives such application, unless any such Authorized Officer shall have consented in writing to an earlier date) unless, prior to taking any such action (or the effective date in the case of an omission), the Rights Agent shall have received written instructions in response to such application specifying the action to be taken or omitted.

              The Rights Agent and any stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other Person.

              The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself (through its directors, officers or employees) or by or through



      its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, omission, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company or any other Person resulting from any such act, default, neglect or misconduct, provided reasonable care was exercised in the selection and continued employment thereof.

              If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, the certificate contained in the form of assignment or the form of election to purchase set forth on the reverse thereof, as the case may be, has not been completed to certify the holder is not an Acquiring Person (or an Affiliate or Associate thereof) or a transferee thereof, the Rights Agent shall not take any further action with respect to such requested exercise or transfer without first consulting with the Company.

              No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it.

              The Rights Agent will not be required to take notice or be deemed to have notice of any fact, event or determination (including, without limitation, any dates or events defined in this Agreement or the designation of any Person as an Acquiring Person, Affiliate or Associate) under this Agreement unless and until the Rights Agent is specifically notified in writing by the Company of such fact, event or determination.

              The provisions of this Section 19 shall survive the exercise, exchange, redemption or expiration of the Rights, the resignation, replacement or removal of the Rights Agent and the termination of this Agreement.

      Change of Rights Agent

              The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon thirty (30) days' written notice mailed to the Company, and to each transfer agent of the shares of Class A Common Stock, Class B Common Stock and Preferred Stock known to the Rights Agent, respectively, by registered or certified mail, and, if such resignation occurs after the Distribution Date, to the registered holders of the Rights Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon thirty (30) days' written notice, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the shares of Class A Common Stock, the Class B Common Stock and the Preferred Stock, by registered or certified mail, and, if such removal occurs after the Distribution Date, to the holders of the Rights Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall, in its sole discretion, appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of thirty (30) days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Rights Certificate (who shall, with such notice, submit his Rights Certificate for inspection by the Company), then any registered holder of any Rights Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be (a) a legal business entity organized and doing business under the laws of the United States or of the State of New York or of any other state of the United States, in good standing, which is authorized under such laws to exercise corporate trust, stock transfer or shareholder services powers and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50,000,000 or (b) an affiliate of a legal business entity described in clause (a) of this sentence. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or



      deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the shares of Class A Common Stock, the Class B Common Stock and the Preferred Stock, and, if such appointment occurs after the Distribution Date, mail a notice thereof in writing to the registered holders of the Rights Certificates. Failure to give any notice provided for in this Section 20, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.

      Issuance of New Rights Certificates

              Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by the Board to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Rights Certificates made in accordance with the provisions of this Agreement. In addition, in connection with the issuance or sale by the Company of shares of Class A Common Stock or Class B Common Stock following the Distribution Date and prior to the Expiration Date, the Company (a) shall, with respect to shares of Class A Common Stock or Class B Common Stock so issued or sold pursuant to the exercise, exchange or conversion of securities (other than Rights) issued prior to the Distribution Date which are exercisable or exchangeable for, or convertible into, shares of Class A Common Stock or Class B Common Stock and (b) may, in any other case, if deemed necessary or appropriate by the Board, issue Rights Certificates representing the appropriate number of Rights as would have been issued in respect of such shares of Class A Common Stock or Class B Common Stock if they had been issued or sold prior to the Distribution Date, as appropriately adjusted as provided herein as if they had been so issued or sold;provided,however, that (i) no such Rights Certificate shall be issued if, and to the extent that, in its good faith judgment the Board determines that the issuance of such Rights Certificate could have a material adverse tax consequence to the Company or to the Person to whom or which such Rights Certificate otherwise would be issued, and (ii) no such Rights Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof.

      Redemption

              The Board may, at any time prior to such time as any Person first becomes an Acquiring Person, redeem all but not less than all the then-outstanding Rights at the Redemption Price. The redemption of the Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish. The Company may, at its option, pay the Redemption Price in cash, securities or any other form of consideration deemed appropriate by the Board.

              Immediately upon the effectiveness of the redemption of the Rights, and without any further action and without any notice, the right to exercise the Rights shall terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price for each Right so held without interest thereon. Promptly after the effectiveness of the redemption of the Rights, the Company shall give notice of such redemption to the Rights Agent and the holders of the then outstanding Rights by mailing such notice to all such holders at each holder's last address as it appears upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the shares of Class A Common Stock and Class B Common Stock;provided however, that the failure to give, or any defect in, any such notice will not affect the validity of the Redemption of the Rights. Any notice which is mailed in the manner herein provided shall be deemed



      given, whether or not the holder receives the notice. Each such notice of redemption shall state the method by which the payment of the Redemption Price shall be made.

      Exchange

              The Board may, at its option, at any time after any Person first becomes an Acquiring Person, exchange all or part of the then-outstanding and exercisable Rights (which shall not include Rights that have not become effective or that have become void pursuant to the provisions of Section 11(a)(ii) hereof) for shares of Class A Common Stock or Class B Common Stock, as the case may be, at an exchange ratio of one share of Class A Common Stock or Class B Common Stock, as the case may be, (or ten-thousandth of a share of Preferred Stock) per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such amount per Right being hereinafter referred to as the "Exchange Ratio". The exchange of the Rights by the Board may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish.

              Immediately upon the effectiveness of the action of the Board ordering the exchange of any Rights pursuant to subsection (a) of this Section 23 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of shares of Class A Common Stock or Class B Common Stock, as the case may be, equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give public notice of any such exchange; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company shall promptly mail a notice of any such exchange to all of the holders of the Rights so exchanged at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the shares of Class A Common Stock or Class B Common Stock, for Rights shall be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become void pursuant to the provisions of Section 11(a)(ii) hereof) held by each holder of Rights.

              The Company may at its option substitute and, in the event that there shall not be sufficient shares of Class A Common Stock or Class B Common Stock issued but not outstanding or authorized but unissued (and unreserved) to permit an exchange of Rights as contemplated in accordance with this Section 23, the Company shall substitute to the extent of such insufficiency, for each share of Class A Common Stock and/or Class B Common Stock that would otherwise be issuable upon exchange of a Right, a number of shares of Preferred Stock or fraction thereof (or equivalent preferred shares as such term is defined in Section 11(b)) such that the Current Per Share Market Price of one share of Preferred Stock (or equivalent preferred share) multiplied by such number or fraction is equal to the Current Per Share Market Price as of the date of such exchange.

      Notice of Certain Events

              If the Company proposes to (i) pay any dividend payable in stock of any class to the holders of shares of Preferred Stock or to make any other distribution to the holders of shares of Preferred Stock (other than a regular periodic cash dividend), (ii) offer to the holders of shares of Preferred Stock rights, options, warrants or any similar instrument to subscribe for or to purchase any additional shares of Preferred Stock or shares of stock of any class or any other securities, rights or options, (iii) effect any reclassification of its Preferred Stock (other than a reclassification involving only the subdivision of outstanding shares of Preferred Stock), (iv) effect any consolidation or merger into or with any other Person, (v) to effect the liquidation, dissolution or winding up of the Company or (vi) declare or pay any dividend on the shares of Class A Common Stock or Class B Common Stock payable in shares of



      Class A Common Stock or Class B Common Stock, respectively, or to effect a subdivision, combination or reclassification of the Class A Common Stock or Class B Common Stock as the case may be, then, in each such case, the Company shall give to the Rights Agent and, to the extent possible, to each holder of a Rights Certificate, in accordance with Section 25 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, distribution or offering of rights, warrants, options or any similar instrument or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of the shares of Preferred Stock, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least ten (10) days prior to the record date for determining holders of the shares of Class A Common Stock, Class B Common Stock, and/or Preferred Stock for purposes of such action, and in the case of any such other action covered by clause (1) or (ii) above at least ten (10) days prior to the date of such proposed action or the date of participation therein by the holders of the shares of Preferred Stock, whichever is the earlier.

              If a Stock Acquisition Date occurs, then the Company shall as soon as practicable thereafter give to the Rights Agent and each holder of a Rights Certificate, to the extent feasible and in accordance with Section 25 hereof, a notice of the occurrence of such event, which shall specify the event and the consequences of the event to holders of Rights.

      Notices

              Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Rights Certificate to or on the Company shall be sufficiently given or made (a) immediately, if made by personal delivery to the party to be notified, (b) on the fifth (5th) day if sent by first-class mail, postage prepaid, (c) the next Business Day if by nationally recognized overnight courier or (d) upon confirmation, if transmission by facsimile combined with a phone call to the Company notifying it of such transmission, all addressed (until another address is filed in writing by the Company with the Rights) as follows:

          Hovnanian Enterprises, Inc.
          10 HWY 35
          P.O. Box 500
          Red Bank, NJ 63131

          Attention: Peter Reinhart
          Facsimile: 732.383.2716
          Phone: 732.747.6835

              Subject to the provisions of Section 20, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Rights Certificate to or on the Rights Agent shall be sufficiently given or made (a) immediately, if made by personal delivery to the party to be notified, (b) on the fifth (5th) day if sent by first-class mail, postage prepaid, (c) the next Business Day if by nationally recognized overnight courier or (d) upon confirmation, if transmission by facsimile combined with a phone call to the Rights Agent notifying it of such transmission, all addressed (until another address is filed in writing by the Rights Agent with the Company) as follows:

          National City Bank
          Shareholder Services Administration
          Suite 635—LOC 01-3116
          629 Euclid Avenue
          Cleveland, Ohio 44114
          Attention: Shareholder Services Administration


                With a copy to:

            Jones Day
            901 Lakeside Avenue
            Cleveland, Ohio 44114
            Attention: Lyle G. Ganske
            Facsimile: 216.579.0212

                Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Rights Certificate (or, if prior to the Distribution Date, to the holder of certificates representing shares of Class A Common Stock or Class B Common Stock) shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company.

        Supplements and Amendments

                Prior to the Distribution Date, the Company may in its sole and absolute discretion, and the Rights Agent shall, if the Company so directs, supplement or amend any provision of this Agreement in any respect without the approval of any holders Rights, any such supplement or amendment to be evidenced by writing signed by the Company and the Rights Agent. From and after the time at which the Rights cease to be redeemable pursuant to Section 22, the Company may and the Rights Agent shall, if the Company so directs, supplement or amend this Agreement without the approval of any holders of Rights in order (i) to cure any ambiguity, (ii) to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, (iii) to shorten or lengthen any time period hereunder or (iv) to amend or supplement the provisions hereunder in any manner which the Company may deem necessary or desirable;provided,however, that no such supplement or amendment shall adversely affect the interests of the holders of Rights (other than an Acquiring Person or any Affiliate or Associate of an Acquiring Person), and no such amendment may cause the Rights again to become redeemable or cause this Rights Agreement again to become amendable other than in accordance with this sentence. Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 26, the Rights Agent shall execute such supplement or amendment. Notwithstanding anything herein to the contrary, the Rights Agent shall not be obligated to enter into any supplement or amendment that affects the Rights Agent's own right, duties, obligations or immunities under this Agreement.

        Successors

                All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.

        Determinations and Actions by the Board

                For all purposes of this Agreement, any calculation of the number of shares of Class A Common Stock or Class B Common Stock or any other class of capital stock outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding shares of Class A Common Stock or Class B Common Stock of which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act or the provisions of Section 382 of the Code or any successor or replacement provision.

                The Board shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board or to the Company, or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the furnishingright



        and power to (i) interpret the provisions of information,this Agreement, and (ii) make all determinations and calculations deemed necessary or failureadvisable for the administration of this Agreement (including without limitation a determination to act, ifredeem or not redeem the Rights or amend this Agreement).

                All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board in good faith.faith, shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights and all other parties, and (y) not subject the Board, or any of the directors on the Board to any liability to any person, including without limitation the Rights Agent and the holders of the Rights. Unless otherwise notified, the Rights Agent shall always be entitled to assume that the Board acted in good faith and the Rights Agent shall be fully protected and shall incur no liability in reliance thereon.

        (f)  All matters relatingBenefits of this Agreement

                Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the PlanDistribution Date, registered holders of shares of Class A Common Stock or Class B Common Stock) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to Awards grantedthe Distribution Date, registered holders of shares of Class A Common Stock or Class B Common Stock).

        Severability

                If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated;provided,however, that nothing contained in this Section 30 will affect the ability of the Company under the provisions of Section 26 to supplement or amend this Agreement to replace such invalid, void or unenforceable term, provision, covenant or restriction with a legal, valid and enforceable term, provision, covenant or restriction.

        Governing Law

                This Agreement, each Right and each Rights Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts made and to be performed entirely within such State.

        Counterparts

                This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

        Descriptive Headings; Interpretation

                Descriptive headings of the several sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. For the avoidance of doubt and for clarification purposes only, if under any circumstance contemplated herein Rights become exercisable for the purchase of shares of Class A Common Stock or Class B Common Stock, such Rights may only be exercised as follows: (A) Rights issued in respect of Class A Common Stock will be exercisable only for the purchase of shares of Class A Common Stock (or any common stock equivalents issued in respect thereof) and (B) Rights issued in respect of Class B Common Stock will be exercisable only for the purchase of shares of Class B Common Stock (or any common stock equivalents issued in respect thereof).

        [REMAINDER Of PAGE LEFT INTENTIONALLY BLANK]


                IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, all as of the day and year first above written.

        HOVNANIAN ENTERPRISES


        /s/         PETER REINHART
        Name: Peter Reinhart
        Title:General Counsel
        NATIONAL CITY BANK


        /s/         SHARON BOUGHTER
        Name: Sharon Boughter
        Title:Vice President


        Exhibit A

        CERTIFICATE OF DESIGNATION
        OF
        SERIES B JUNIOR PREFERRED STOCK
        OF
        HOVNANIAN ENTERPRISES, INC.

        (Pursuant to Section 151 of the General Corporation Law of the State of Delaware.Delaware)

        (g)        Hovnanian Enterprises, Inc. (hereinafter called the "Company"), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "DGCL"), does hereby certify:

                1.     The Plan was originally effectivename of the Company is Hovnanian Enterprises, Inc.

                2.     The certificate of incorporation, as amended (the "Certificate of November 1, 1999, as approvedIncorporation") of the Company authorizes the issuance of 100,000 shares of Preferred Stock, $0.01 par value (the "Preferred Stock"), and expressly vests in the Board of Directors of the Company (the "Board") the authority provided therein to provide for the issuance of said shares in series and by filing a certificate pursuant to the affirmative voteapplicable law of holdersthe State of a majorityDelaware, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations, or restrictions thereof.

                3.     The Board, pursuant to the authority expressly vested in it as aforesaid, on July 29, 2008 adopted the following resolutions creating a "Series B Junior" series of Preferred Stock:

                RESOLVED, that a series of the class of authorized Preferred Stock of the Company be and hereby is created, and that the designation and amount thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof are as follows:


        SERIES B JUNIOR PREFERRED STOCK

                 Designation and Amount.    The shares of such series will be designated as Series B Junior Preferred Stock (the "Series B Preferred") and the number of shares constituting the Series B Preferred is 10,000. Such number of shares may be increased or decreased by resolution of the Board; provided, however, that no decrease will reduce the number of shares of Series B Preferred to a number less than the number of shares then presentoutstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or representedwarrants or upon the conversion of any outstanding securities issued by proxy withoutthe Company and convertible into Series B Preferred.

        Section 2    Dividends and Distributions.    (a) Subject to the rights of the holders of any shares of any series of Preferred Stock ranking prior to the Series B Preferred with respect to dividends, the holders of shares of Series B Preferred, in preference to the holders of Class A Common Stock, par value $0.01 per share and Class B Common Stock, par value $0.01 (collectively, the"Common Stock"), of the Company, and of any other junior stock, will be entitled to receive, when, as and if declared by the Board out of funds legally available for the purpose, dividends payable in cash (except as otherwise provided below) on such dates as are from time to time established for the payment thereforof dividends on the Common Stock (each such date being referred to herein as a"Dividend Payment Date"), commencing on the first Dividend Payment Date after the first issuance of a share or fraction of a share of Series B Preferred (the"First Dividend Payment Date"), in an amount per share (rounded to the nearest cent) equal to, subject to the provision for adjustment hereinafter set forth, the greater of (i) $1 and (ii) ten thousand (10,000) times the aggregate per share amount of all cash dividends, and ten thousand (10,000) times the aggregate per share amount (payable in kind) of all non-cash dividends, other than a dividend payable in shares of Class A Common Stock or Class B Common



        Stock, as the case may be, or a subdivision of the outstanding shares of Class A Common Stock or Class B Common Stock, as the case may be, (by reclassification or otherwise), declared on the Class A Common Stock and/or Class B Common Stock since the immediately preceding Dividend Payment Date or, with respect to the First Dividend Payment Date, since the first issuance of any share or fraction of a share of Series B Preferred. In the event that the Company at any time (i) declares a dividend on the outstanding shares of Common Stock payable in shares of Common Stock, (ii) subdivides the outstanding shares of Common Stock, (iii) combines the outstanding shares of Common Stock into a smaller number of shares or (iv) issues any shares of its capital stock in a reclassification of the outstanding shares of Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), then, in each such case and regardless of whether any shares of Series B Preferred are then issued or outstanding, the amount to which holders of shares of Series B Preferred would otherwise be entitled immediately prior to such event will be correspondingly adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

                (b)   The Company will declare a dividend on the Series B Preferred as provided in paragraph (a) of this Section 2 immediately after it declares a dividend on the Class A Common Stock and/or Class B Common Stock (other than a dividend payable in shares of Common Stock). Each such dividend on the Series B Preferred will be payable immediately prior to the time at which the related dividend on the Class A Common Stock and/or Class B Common Stock is payable.

                (c)   Dividends will accrue, and be cumulative, on outstanding shares of Series B Preferred from the Dividend Payment Date next preceding the date of issue of such shares, unless (i) the date of issue of such shares is prior to the record date for the First Dividend Payment Date, in which case dividends on such shares will accrue from the date of the first issuance of a share of Series B Preferred or (ii) the date of issue is a Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series B Preferred entitled to receive a dividend and before such Dividend Payment Date, in either of which events such dividends will accrue, and be cumulative, from such Dividend Payment Date. Accrued but unpaid dividends will cumulate from the applicable Dividend Payment Date but will not bear interest. Dividends paid on the shares of Series B Preferred in an amount less than the total amount of such dividends at the time accrued and payable on such shares will be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board may fix a record date for the determination of holders of shares of Series B Preferred entitled to receive payment of a dividend or distribution declared thereon, which record date will be not more than 60 calendar days prior to the date fixed for the payment thereof.

        Section 3    Voting Rights.

                The holders of shares of Series B Preferred shall have the following voting rights:

                (a)   Subject to the provision for adjustment hereinafter set forth and except as otherwise provided in the Certificate of Incorporation or required by law, each share of Series B Preferred shall entitle the holder thereof to 10,000 votes, on all matters upon which the holders of the Common Stock of the Company are entitled to vote. Subject to Section 4(d)In the event the Company shall at any time after the Record Date declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the Plan,outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series B Preferred were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.


                (b)   Except as otherwise provided herein, in the Certificate of Incorporation or in any other Certificate of Designations creating a series of Preferred Stock or any similar stock, and except as otherwise required by law, the holders of shares of Series B Preferred and the holders of shares of Common Stock and any other capital stock of the Company having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Company.

                (c)   Except as set forth herein, or as otherwise provided by law, holders of Series B Preferred shall have no Awardspecial voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.

        Section 4    Restrictions.

                Whenever dividends or other dividends or distributions payable on the Series B Preferred are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series B Preferred outstanding have been paid in full, the Company will not:

                  Declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) ("Junior Stock") to the shares of Series B Preferred;

                  Declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) ("Parity Stock") with the shares of Series B Preferred, except dividends paid ratably on the shares of Series B Preferred and all such Parity Stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;

                  Redeem, purchase or otherwise acquire for consideration shares of any Junior Stock; provided, however, that the Company may at any time redeem, purchase or otherwise acquire shares of any such Junior Stock in exchange for shares of any other Junior Stock of the Company; or

                  Redeem, purchase or otherwise acquire for consideration any shares of Series B Preferred, or any shares of Parity Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board) to all holders of such shares upon such terms as the Board, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, may determine in good faith will result in fair and equitable treatment among the respective series or classes.

                The Company will not permit any majority-owned subsidiary of the Company to purchase or otherwise acquire for consideration any shares of stock of the Company unless the Company could, under paragraph (a) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.

        Section 5    Reacquired Shares.    Any shares of Series B Preferred purchased or otherwise acquired by the Company in any manner whatsoever will be retired and canceled promptly after the acquisition thereof. All such shares will upon their cancellation become authorized but unissued shares of Preferred Stock and may be granted underreissued as part of a new series of Preferred Stock subject to the Plan after March 5, 2009, but Awards theretofore granted may extend beyond that date.

        A-3


        APPENDIX B

        1999 HOVNANIAN ENTERPRISES, INC.
        STOCK INCENTIVE PLAN
        (AS AMENDED AND RESTATED)

        1. PURPOSE OF THE PLAN

        The purposeconditions and restrictions on issuance set forth herein, in the Certificate of Incorporation of the Plan is to aidCompany, or in any other Certificate of Designations creating a series of Preferred Stock or any similar stock or as otherwise required by law.

        Section 6    Liquidation, Dissolution or Winding Up.    Upon any liquidation, dissolution or winding up of the Company, no distribution will be made (a) to the holders of shares of Junior Stock unless, prior thereto, the holders of shares of Series B Preferred have received an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment; provided, however, that the holders of shares of Series B Preferred will be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to a



        minimum per share liquidation payment of $10,000 but will be entitled to an aggregate per share liquidation payment of 10,000 times the payment made per share of Common Stock or (b) to the holders of shares of Parity Stock, except distributions made ratably on the shares of Series B Preferred and all such Parity Stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Company at any time (i) declares a dividend on the outstanding shares of Common Stock payable in shares of Common Stock, (ii) subdivides the outstanding shares of Common Stock, (iii) combines the outstanding shares of Common Stock into a smaller number of shares or (iv) issues any shares of its Affiliatescapital stock in recruitinga reclassification of the outstanding shares of Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), then, in each such case and retaining key employees, directorsregardless of whether any shares of Series B Preferred are then issued or consultantsoutstanding, the aggregate amount to which each holder of shares of Series B Preferred would otherwise be entitled immediately prior to such event will be correspondingly adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding abilityimmediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

        Section 7    Consolidation, Merger, Etc.    In the event that the Company enters into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then, in each such case, each share of Series B Preferred will at the same time be similarly exchanged for or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to ten thousand (10,000) times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Company at any time (a) declares a dividend on the outstanding shares of Common Stock payable in shares of Common Stock, (b) subdivides the outstanding shares of Common Stock, (c) combines the outstanding shares of Common Stock in a smaller number of shares or (d) issues any shares of its capital stock in a reclassification of the outstanding shares of Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), then, in each such case and regardless of whether any shares of Series B Preferred are then issued or outstanding, the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series B Preferred will be correspondingly adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

        Section 8    Redemption.    The shares of Series B Preferred are not redeemable.

        Section 9    Rank.    The Series B Preferred rank, with respect to the payment of dividends and the distribution of assets, junior to all other series of the Company's Preferred Stock, unless the terms of such series shall so provide.

        Section 10    Fractional Shares.    Series B Preferred may be issued in fractions of a share that shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to motivate such employees, directors or consultantshave the benefit of all other rights of holders of Series B Preferred.

                FURTHER RESOLVED, that the statements contained in the foregoing resolutions creating and designating the said Series B Junior Preferred Stock and fixing the number, powers, preferences and relative, optional, participating, and other special rights and the qualifications, limitations, restrictions, and other distinguishing characteristics thereof shall, upon the effective date of said series, be deemed to exert their best effortsbe included in and be a part of the Certificate of Incorporation of the Company pursuant to the provisions of Sections 104 and 151 of the DGCL.

        [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]


                IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf of the Company and its Affiliates by providing incentives through the grantingundersigned on August 14, 2008.




        HOVNANIAN ENTERPRISES, INC.



        By:

        Name:  Peter Reinhart
        Title:    General Counsel


        Exhibit B

        FORM OF RIGHTS CERTIFICATE

        Certificate No. R-                        Rights in respect of Awards. The Company expectsClass         Common Stock

        NOT EXERCISABLE AFTER AUGUST 14, 2018 OR EARLIER IF REDEEMED, EXCHANGED OR AMENDED. THE RIGHTS ARE SUBJECT TO REDEMPTION, EXCHANGE AND AMENDMENT AT THE OPTION OF THE COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES SPECIFIED IN THE RIGHTS AGREEMENT, RIGHTS THAT ARE OR WERE BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR AN ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) OR A TRANSFEREE THEREOF SHALL BECOME NULL AND VOID AND NO LONGER TRANSFERABLE.


        RIGHTS CERTIFICATE

        HOVNANIAN ENTERPRISES, INC.

                This certifies that                        it will benefit from, or registered assigns, is the added interest which such key employees, directors or consultants will have in the welfareregistered owner of the Company as a resultnumber of their proprietary interest in the Company’s success.

        2. DEFINITIONS

        The following capitalized terms used in the Plan have the respective meaningsRights set forth in this Section:

        (a)  Act: The Securities Exchange Actabove, each of 1934, as amended, or any successor thereto.

        (b)  Affiliate: With respectwhich entitles the owner thereof, subject 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.

        (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 Directorsterms, provisions, and conditions 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 outstand


        Rights Agreement, (the "B-1
        Rights Agreement


        ing 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.

        (i)  Company:"), by and between Hovnanian Enterprises, Inc., a Delaware corporation (the "Company"), and any successors thereto.

        (j)  Disability: InabilityNational City Bank (the "Rights Agent"), dated as of a ParticipantAugust 14, 2008, to perform in all material respects his duties and responsibilities topurchase from the Company orat any Subsidiary oftime after 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 Board may reasonably determine in good faith. The Disability determination shall be in the sole discretion of the Board and a Participant (or his representative) shall furnish the Board with medical evidence documenting the Participant’s disability or infirmity which is satisfactory to the Board.

        (k)  Effective Date: March 5,1999

        (l)  Fair Market Value: On a given date, the arithmetic mean of the high and low prices 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)  Other Stock-Based Awards: Awards granted pursuant to Section 8 of the Plan.

        (q)  Option: A stock option granted pursuant to Section 6 of the Plan.

        (r)  Option Price: The purchase price per Share of an Option, as determined pursuant to Section 6(a) of the Plan.

        (s)  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.

        B-2


        (t)  Performance-Based Awards: Certain Other Stock-Based Awards granted pursuant to Section 8(b) of the Plan.

        (u)  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).

        (v)  Plan: The 1999 Hovnanian Enterprises, Inc. Stock Incentive Plan.

        (w)  Shares: Shares of common stock of the Company.

        (x)  Stock Appreciation Right: A stock appreciation right granted pursuant to Section 7 of the Plan.

        (y)  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 Section 9 of the Plan, the total number of Shares which may be issued under the Plan is 10,000,000. The maximum number of Shares for which Options, Stock Appreciation Rights, restricted Shares or restricted Share units may be granted during a calendar year to any Participant shall be 500,000. 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 shall reduce the total number of Shares available under the Plan, as applicable. Shares which are subject to Awards which terminate or lapse may be granted again under the Plan.

        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 “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. 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 500,000 Shares (subject to the provisions of Section 9 of the Plan) in each calendar 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) asDistribution Date (as such term is defined in Section 162(m)the Rights Agreement) and prior to 5:00 p.m. (New York time) on the Expiration Date (as such term is defined in the Rights Agreement) at the office or offices of the Code;provided, however, thatRights Agent designated for such chief executive officer shall notify the Committeepurpose, one ten-thousandth of any such grants made pursuant to this Section 4.

        5. LIMITATIONS

        No Award may be granted under the Plan after the tenth anniversarya fully paid nonassessable share of the Effective Date, but Awards theretofore granted may extend beyond that date.

        Series B Junior Preferred Stock, par value $0.01 per share (the "B-3
        Preferred Shares


        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 the Shares on the date an Option is granted.

        (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, at a purchase price of $35.00 per one ten-thousandth of a Preferred Share (the "Purchase Price"), upon presentation and surrender of this Rights Certificate with the Form of Election to Purchase and related Certificate duly executed. If this Rights Certificate is exercised in part, the holder will be entitled to receive upon surrender hereof another Rights Certificate or Rights Certificates for the number of whole Rights not exercised. The number of Rights evidenced by this Rights Certificate (and the number of one ten-thousandths of a memberPreferred Share which may be purchased upon exercise thereof) set forth above, and the Purchase Price set forth above, are the number and Purchase Price as of the Board,date of the Board by specific resolution may constituteRights Agreement, based on the Preferred Shares as constituted at such chief executive officer as a committee of one which shall havedate. Terms used herein with initial capital letters and not defined herein are used herein with the authority to acceleratemeanings ascribed thereto in the date after which Options may be exercised in whole or in part.Rights Agreement.

        (c)  Exercise of Options. Except as otherwise        As provided in the Plan Rights Agreement, the Purchase Price and/or in an Award agreement, an Optionthe number and/or kind of shares of Preferred Stock (or other securities, as the case may be) which 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, (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, (iii) partly in cash and partly in such Shares or (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. 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 yearsthe Rights evidenced by this Rights Certificate are subject to adjustment upon the occurrence of certain events.

                This Rights Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities of the Rights Agent, the Company and the holders of the Rights Certificates, which limitations of rights include the temporary suspension of the exercisability of the Rights under the circumstances specified in the Rights Agreement. Copies of the Rights Agreement are on file at the principal executive offices of the Company and can be obtained from the Company without charge upon written request therefor.

                Pursuant to the Rights Agreement, from and after the dateoccurrence of grantany Person becoming an Acquiring Person, any Rights that are Beneficially Owned by (i) any Acquiring Person (or any Affiliate



        or Associate of any Acquiring Person), (ii) a transferee of any Acquiring Person (or any such Affiliate or Associate) who becomes a transferee after the occurrence of any Person becoming an Acquiring Person or (iii) a transferee of any Acquiring Person (or any such Affiliate or Associate) who became a transferee prior to or concurrently with any Person becoming an Acquiring Person pursuant to either (a) a transfer from an Acquiring Person to holders of its equity securities or to any Person with whom it has any continuing agreement, arrangement or understanding regarding the transferred Rights or (b) a transfer which the Board of Directors of the Company has determined is part of a plan, arrangement or understanding which has the purpose or effect of avoiding certain provisions of the Rights Agreement, and subsequent transferees of any of such ISO or (ii) within one yearPersons, will be void without any further action and any holder of such Rights will thereafter have no rights whatsoever with respect to such Rights under any provision of the Rights Agreement. From and after the transferoccurrence of such Sharesany Person becoming an Acquiring Person, no Rights Certificate will be issued that represents Rights that are or have become void pursuant to the Participant, shall notify the Company of such disposition andprovisions of the amount realized upon such disposition.

        7. TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS

        (a)  Grants. The Committee also may grant (i) a Stock Appreciation Right independent of an OptionRights Agreement, and any Rights Certificate delivered to the Rights Agent that represents Rights that are or (ii) a Stock Appreciation Right in connection with an Option, or a portion thereof. A Stock Appreciation Right grantedhave become void pursuant to clause (ii)the provisions of the preceding sentence (A)Rights Agreement will be canceled.

                This Rights Certificate, with or without other Rights Certificates, may be granted atexchanged for another Rights Certificate or Rights Certificates entitling the time the related Option is granted or at any time priorholder to the exercise or cancellation of the related Option, (B) shall cover the same Shares covered by an Option (or such lesserpurchase a like number of Sharesone ten-thousandths of a Preferred Share (or other securities, as the Committeecase may determine) and (C) shall be subject tobe) as the same terms and conditions asRights Certificate or Rights Certificates surrendered entitled such Option except for such additional limitations as are contemplated by this Section 7holder (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,former holder in the case of a Stock Appreciation Right granted in

        B-4


        conjunction with an Option,transfer) to purchase, upon presentation and surrender hereof at the office or a portion thereof, the Option Priceoffices of the Rights Agent designated for such purpose, with the Form of Assignment (if appropriate) and 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.Certificate duly executed.

        (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 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,Rights Agreement, the Committee shall determineRights evidenced by this Certificate may be redeemed by the Company at its option at a redemption price of $0.01 per Right or may be exchanged in whole or in part. The Rights Agreement may be supplemented and amended by the Company, as provided therein.

                The Company is not required to whom and when Other Stock-Based Awardsissue fractions of Preferred Shares (other than fractions which are integral multiples of one ten-thousandth of a Preferred Share, which may, at the option of the Company, be evidenced by depositary receipts) or other securities issuable, as the case may be, upon the exercise of any Right or Rights evidenced hereby. In lieu of issuing such fractional Preferred Shares or other Securities, the Company may make a cash payment, as provided in the Rights Agreement.

                No holder of this Rights Certificate, as such, will be made,entitled to vote or receive dividends or be deemed for any purpose the holder of the Preferred Shares or of any other securities of the Company which may at any time be issuable upon the exercise of the Right or Rights represented hereby, nor will anything contained herein or in the Rights Agreement be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Rights Certificate have been exercised in accordance with the provisions of the Rights Agreement.

                This Rights Certificate will not be valid or obligatory for any purpose until it has been countersigned by the Rights Agent.

        [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]


                WITNESS the facsimile signature of the proper officers of the Company and its corporate seal. Dated as of                        ,          .




        HOVNANIAN ENTERPRISES, INC.



        By:

        Name:  Peter Reinhart
        Title:    General Counsel

        COUNTERSIGNED:


        NATIONAL CITY BANK


        By:


        Name:
        Title:    

        Signature page for Rights Certificate



        Form of Reverse Side of Rights Certificate

        FORM OF ASSIGNMENT

        (To be executed by the registered holder if such holder desires to transfer the Rights Certificate)

        FOR VALUE RECEIVED,                        hereby sells, assigns and transfers unto


        (Please print name and address of transferee)

        this Rights Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint Attorney, to transfer the within Rights Certificate on the books of the within-named Company, with full power of substitution.

        Dated :                        ,        




        Signature

        Signature(s) Guaranteed:

        SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.

        The undersigned hereby certifies that the Rights evidenced by this Rights Certificate are not beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement).




        Signature


        CERTIFICATE

        The undersigned hereby certifies by checking the appropriate boxes that:

                (1)   the Rights evidenced by this Rights Certificateo areo are not being sold, assigned, transferred, split up, combined or exchanged by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Person (as such terms are defined in the Rights Agreement); and

                (2)   after due inquiry and to the best knowledge of the undersigned, ito dido did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.

        Dated:                        ,          




        Signature

        Form of Reverse Side of Rights Certificate—continued


        FORM OF ELECTION TO PURCHASE

        (To be executed if holder desires to exercise the Rights Certificate)

        To Hovnanian Enterprises, Inc.:

        The undersigned hereby irrevocably elects to exercise                                    Rights represented by this Rights Certificate to purchase the one ten-thousandths of a Preferred Share or other securities issuable upon the exercise of such Rights and requests that certificates for such securities be issued in the name of and delivered to:

        Please insert social security or other identifying number:

        (Please print name and address)

        If such number of SharesRights is not all the Rights evidenced by this Rights Certificate, a new Rights Certificate for the balance remaining of such Rights will be registered in the name of and delivered to:

        Please insert social security or other identifying number:

        (Please print name and address)

        Dated:,

        Signature

        Signature(s) Guaranteed:

        SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.

        The undersigned hereby certifies that the Rights evidenced by this Rights Certificate are not beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement).

        Signature


        CERTIFICATE

        The undersigned hereby certifies by checking the appropriate boxes that:

                (1)   the Rights evidenced by this Rights Certificateo areo are not being exercised by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Person (as such terms are defined pursuant to the Rights Agreement); and

                (2)   after due inquiry and to the best knowledge of the undersigned, ito dido did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was, or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.

        Dated:,

        Signature


        NOTICE

                The signature in the Form of Assignment or Form of Election to Purchase, as the case may be, awardedmust conform to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever.

                In the event the certification set forth above in the Form of Assignment or the Form of Election to Purchase, as the case may be, is not completed, such Assignment or Election to Purchase will not be honored.



        Exhibit C

        UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN ACQUIRING PERSON (AS DEFINED IN THE RIGHTS PLAN) AND CERTAIN TRANSFEREES THEREOF WILL BECOME NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.


        SUMMARY OF RIGHTS

                On July 29, 2008, the Board of Directors (the "Board") of Hovnanian Enterprises, Inc., a Delaware corporation (the "Company"), adopted a rights plan and declared a dividend of one preferred share purchase right for each outstanding share of Class A common stock and Class B common stock. The dividend is payable to our stockholders of record as of August 15, 2008. The terms of the rights and the rights plan are set forth in a Rights Agreement, by and between us and National City Bank, as Rights Agent, dated as of August 14, 2008 (the "Rights Plan").

                This summary of rights provides only a general description of the Rights Plan, and thus, should be read together with the entire Rights Plan, which is incorporated into this summary by reference. All capitalized terms used herein but not defined herein shall have the meanings ascribed to such terms in the Rights Plan. Upon written request, the Company will provide a copy of the Rights Plan free of charge to any of its stockholders.

                Our Board adopted the Rights Plan in an effort to protect stockholder value by attempting to protect against a possible limitation on our ability to use our net operating loss carryforwards (the "NOLs") to reduce potential future federal income tax obligations. We have experienced and continue to experience substantial operating losses, and under (orthe Internal Revenue Code and rules promulgated by the Internal Revenue Service, we may "carry forward" these losses in certain circumstances to offset any current and future earnings and thus reduce our federal income tax liability, subject to certain requirements and restrictions. To the extent that the NOLs do not otherwise related to)become limited, we believe that we will be able to carry forward a significant amount of NOLs, and therefore these NOLs could be a substantial asset to us. However, if we experience an "Ownership Change," as defined in Section 382 of the Internal Revenue Code, our ability to use the NOLs will be substantially limited, and the timing of the usage of the NOLs could be substantially delayed, which could therefore significantly impair the value of that asset.

                The Rights Plan is intended to act as a deterrent to any person or group acquiring 4.9% or more of our outstanding Class A common stock (an "Acquiring Person") without the approval of our Board. Stockholders who own 4.9% or more of our outstanding Class A common stock as of the close of business on August 15, 2008 will not trigger the Rights Plan so long as they do not (i) acquire any additional shares of Class A common stock or (ii) fall under 4.9% ownership of Class A common stock and then re-acquire 4.9% or more of the Class A common stock. The Rights Plan does not exempt any future acquisitions of Class A common stock by such Other Stock-Based Awards; whether such Other Stock-Based Awards shallpersons. Any rights held by an Acquiring Person are void and may not be settledexercised. Our Board may, in cash, Sharesits sole discretion, exempt any person or a combinationgroup from being deemed an Acquiring Person for purposes of cashthe Rights Plan.

                 The Rights.    Our Board authorized the issuance of one right per each outstanding share of our Class A common stock and Shares; and all otherClass B common stock payable to our stockholders of record as of August 15, 2008. Subject to the terms, provisions and conditions of such Awards (including,the Rights Plan, if the rights become exercisable, each right would initially represent the right to purchase from us one ten-thousandth of a share of our Series B Junior Preferred Stock for a purchase price of $35.00 (the "Purchase Price") . If issued, each fractional share of preferred stock would give the stockholder approximately the same dividend, voting and liquidation rights as does one share of our Class A common stock. However, prior to exercise, a right does not give its holder any rights as a stockholder of the Company, including without limitation any dividend, voting or liquidation rights.


                 Exercisability.    The rights will not be exercisable until the vesting provisions thereof and provisions ensuringearlier of (i) 10 business days after a public announcement by us 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 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 uncertainperson or group has become an Acquiring Person and (ii) no more than 9010 business days after the commencement of a tender or exchange offer by a person or group for 4.9% of the performance periodClass A common stock.

                We refer to the date that the rights become exercisable as the "Distribution Date." Until the Distribution Date, our Class A common stock and Class B common stock certificates will evidence the rights and will contain a notation to that effect. Any transfer of shares of Class A common stock and/or Class B common stock prior to the Distribution Date will constitute a transfer of the associated rights. After the Distribution Date, the rights may be transferred other than in connection with the transfer of the underlying shares of Class A common stock or Class B common stock unless and until our Board has determined not to affect an exchange pursuant to the Rights Plan (as described below).

                After the Distribution Date, each holder of a Right, other than Rights beneficially owned by the Acquiring Person (which will thereupon become void), will thereafter have the right to receive upon exercise of a Right and payment of the Purchase Price, that number of shares of Class A common stock or Class B common stock, as the case may be, having a market value of two times the Purchase Price.

                 Exchange.    After the Distribution Date, the Board may exchange the Rights (other than Rights owned by such person or group which will have become void), in whole or in part, at an exchange ratio of one share of Common Stock, or a fractional share of Series B Preferred Stock (or of a share of a similar class or series of the Company's preferred stock having similar rights, preferences and privileges) of equivalent value, per Right (subject to adjustment).

                 Expiration.    The rights and the Rights Plan will expire on the earliest of (i) August 14, 2018, (ii) the time at which the Rights are redeemed pursuant to the Rights Agreement, (iii) the time at which the Rights are exchanged pursuant to the Rights Agreement, (iv) the repeal of Section 382 of the Code or any successor statute if the Board determines that the Rights Agreement is no longer necessary for the preservation of Tax Benefits, (v) the beginning of a taxable year of the Company to which the performance goal relates or,Board determines that no Tax Benefits may be carried forward and (vi) August 14, 2009 if less,Stockholder Approval has not been obtained.

                 Redemption.    At any time prior to the time an Acquiring Person becomes such, the Board may redeem the Rights in whole, but not in part, at a price of $0.01 per Right (the "Redemption Price"). The redemption of the Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish. Immediately upon any redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.

                 Anti-Dilution Provisions.    Our Board may adjust the purchase price of the preferred shares, the number of days which is equalpreferred shares issuable and the number of outstanding rights to 25 percentprevent dilution that may occur as a result of certain events, including among others, a stock dividend, a stock split or a reclassification of the relevant performance period. The performance goals, which mustpreferred shares or our Class A common stock or Class B common stock. No adjustments to the purchase price of less than 1% will be objective, shall be based upon onemade.

                 Amendments.    Before the Distribution Date, our Board may amend or moresupplement the Rights Plan without the consent of the following criteria: (i) earnings beforeholders of the Rights. After the Distribution Date, our Board may amend or after taxes (including earnings before interest, taxes, depreciationsupplement the Rights Plan only to cure an ambiguity, to alter time period provisions, to correct inconsistent provisions, or to make any additional changes to the Rights Plan, but only to the extent that those changes do not impair or adversely affect any rights holder and amortization); (ii) net income; (iii) operating income; (iv) earnings per Share; (v) book value per Share; (vi) returndo not result in the rights again becoming redeemable, and no such amendment may cause the Rights again to become redeemable or cause this Rights Agreement again to become amendable other than in accordance with this sentence.


        FORM OF PROXY

        HOVNANIAN ENTERPRISES, INC.

        Class A Common Stock

        This Proxy is Solicited on shareholders’ equity; (vii) expense management; (viii) return on investment; (ix) improvementsBehalf 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 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)

        B-5


        cash flow; (xvii) working capital; (xviii) changes in net assets (whether or not multiplied by a constant percentage intendedeach, to represent the costundersigned at the Special Meeting of capital);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                         , 2008, and (xix) return on assets. The foregoing criteria may relateat any adjournments thereof, upon the matters set forth in the Notice of Special Meeting and Proxy Statement dated                         , 2008 and upon all other matters properly coming before said meeting.

        This proxy when properly executed will be voted (1) FOR the approval of an amendment to the Company, one or moreCompany’s Certificate of its Subsidiaries or one or moreIncorporation to restrict certain transfers of its divisions or units, or any combination ofClass A Common Stock in order to preserve 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. The maximum amount of a Performance-Based Award during a calendar year to any Participant shall be equal to the greater of (x) $15,000,000 and (y) 2.5 percent (2.5%)tax treatment of the Company’s income before income taxes, as reportednet operating losses and built-in losses; (2) FOR the approval of the Board of Directors’ decision to adopt and implement a stockholder rights plan; (3) FOR the approval of adjournment of the Special Meeting to a later date or dates, if necessary, to permit further solicitation of proxies in the Company’s audited consolidated financial statements forevent there are insufficient votes at 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, to so certify and ascertain the amounttime 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 paidSpecial Meeting to a given Participant may be less than the amount determined by the applicable performance goal formula, atapprove Proposal One and/or Proposal Two; and (4) on any other matters in accordance with 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,named proxies and agents, 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 Planno instructions to the contrary the following provisions shall apply to all Awards granted under the Plan:

        (a)  Generally. In the event of any changeare indicated 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 discretionitems (1), (2) and without liability to any person may 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 and/or (iii) any other affected terms of such Awards.(3).

        (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 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.

        B-6


        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 party 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.

        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.

        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. If the Plan is not approved by the shareholders of the Company prior to the first anniversary of the Effective Date, no Awards may be granted thereafter.

        B-7


        APPENDIX C

        HOVNANIAN ENTERPRISES, INC
        AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
        CHARTER

        I. PURPOSE

        The Audit Committee (the “Committee”) shall:

        A.Provide assistance to the Board of Directors in fulfilling its responsibility to the shareholders, potential shareholders and investment community with respect to its oversight of:

        (i)The quality and integrity of the corporation’s financial statements;

        (ii)The corporation’s compliance with legal and regulatory requirements;

        (iii)The independent auditor’s qualifications and independence; and

        (iv)The performance of the corporation’s internal audit function and independent auditors.

        B.Prepare the Audit Committee report that SEC rules require be included in the corporation’s annual proxy statement.

        II. STRUCTURE AND OPERATIONS

        Composition and Qualifications

        The Committee shall be comprised of three or more members of the Board of Directors, each of whom is determined by the Board of Directors to be “independent” under the rules of the New York Stock Exchange, Inc. and the Sarbanes-Oxley Act. No member of the Committee may serve on the audit committee of more than three public companies, including the corporation, unless the Board of Directors (i) determines that such simultaneous service would not impair the ability of such member to effectively serve on the Committee and (ii) discloses such determination in the annual proxy statement.

        All members of the Committee shall have a working familiarity with basic finance and accounting practices and at least one member must be a “financial expert” under the requirements of the Sarbanes-Oxley Act. Committee members may enhance their familiarity with finance and accounting by participating in educational programs conducted by the corporation or by an outside consultant.

        No member of the Committee shall receive compensation other than (i) director’s fees for service as a director of the corporation, including reasonable compensation for serving on the Committee and regular benefits that other directors receive and (ii) a pension or similar compensation for past performance, provided that such compensation is not conditioned on continued or future service to the corporation.

        Appointment and Removal

        The members of the Committee shall be appointed by the Board of Directors and shall serve until such member’s successor is duly elected and qualified or until such member’s earlier resignation or removal. The members of the Committee may be removed, with or without cause, by a majority vote of the Board of Directors.

        Chairman

        Unless a Chairman is elected by the full Board of Directors, the members of the Committee shall designate a Chairman by the majority vote of the full Committee membership. The Chairman shall be entitled to cast a vote to resolve any ties. The Chairman will chair all regular sessions of the Committee and set the agendas for Committee meetings.

        C-1


        III. MEETINGS

        The Committee shall meet at least quarterly, or more frequently as circumstances dictate. As part of its goal to foster open communication, the Committee shall periodically meet separately with each of management, the director of the internal auditing department and the independent auditors to discuss any matters that the Committee or each of these groups believe would be appropriate to discuss privately. In addition, the Committee should meet with the independent auditors and management quarterly to review the corporation’s financial statements in a manner consistent with that outlined in Section IV of this Charter. The Chairman of the Board or any member of the Committee may call meetings of the Committee. All meetings of the Committee may be held telephonically.

        All non-management directors that are not members of the Committee may attend meetings of the Committee but may not vote. Additionally, the Committee may invite to its meetings any director, management of the corporation and such other persons as it deems appropriate in order to carry out its responsibilities. The Committee may alsoexclude from its meetings any persons it deems appropriate in order to carry out its responsibilities.

        IV. RESPONSIBILITIES AND DUTIES

        The following functions shall be the common recurring activities of the Committee in carrying out its responsibilities outlined in Section I of this Charter. These functions should serve as a guide with the understanding that the Committee may carry out additional functions and adopt additional policies and procedures as may be appropriate in light of changing business, legislative, regulatory, legal or other conditions. The Committee shall also carry out any other responsibilities and duties delegated to it by the Board of Directors from time to time related to the purposes of the Committee outlined in Section I of this Charter.

        The Committee, in discharging its oversight role, is empowered to study or investigate any matter of interest or concern that the Committee deems appropriate. In this regard, the Committee shall have the authority to retain outside legal, accounting or other advisors for this purpose, including the authority to approve the fees payable to such advisors and any other terms of retention. The Committee shall be given full access to the corporation’s internal audit group, Board of Directors, corporate executives and independent accountants as necessary to carry out these responsibilities. While acting within the scope of its stated purpose, the Committee shall have all the authority of the Board of Directors.

        Notwithstanding the foregoing, the Committee is not responsible for certifying the corporation’s financial statements or guaranteeing the auditor’s report. The fundamental responsibility for the corporation’s financial statements and disclosures rests with management and the independent auditors.

        Documents/Reports Review

        1. Review with management and the independent auditors prior to public dissemination the corporation’s annual audited financial statements and quarterly financial statements, including the corporation’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and a discussion with the independent auditors of the matters required to be discussed by Statement of Auditing Standards No. 61.

        2. Review and discuss with management and the independent auditors the corporation’s earnings press releases (paying particular attention to the use of any “pro forma” or “adjusted” non-GAAP information), as well as financial information and earnings guidance provided to analysts and rating agencies. The Committee’s discussion in this regard may be general in nature (i.e., discussion of the types of information to be disclosed and the type of presentation to be made) and need not take place in advance of each earnings release or each instance in which the corporation may provide earnings guidance.

        3. Perform any functions required to be performed by it or otherwise appropriate under applicable law, rules or regulations, the corporation’s by-laws and the resolutions or other directives of the Board, including review of any certification required to be reviewed in accordance with applicable law or regulations of the SEC.

        C-2


        Independent Auditors

        4. Retain and terminate independent auditors and approve all audit engagement fees and terms.

        5. Inform each registered public accounting firm performing auditing work for the corporation that such firm shall report directly to the Committee.

        6. Oversee the work of any registered public accounting firm employed by the corporation, including the resolution of any disagreement between management and the auditor regarding financial reporting, for the purpose of preparing or issuing an audit report or related work.

        7. Approve in advance any significant audit or non-audit engagement or relationship between the corporation and the independent auditors, other than “prohibited non-auditing services.”


        The following shall be “prohibited non-auditing services”: (i) bookkeeping or other services related to the accounting records or financial statements of the audit client; (ii) financial information systems design and implementation; (iii) appraisal or valuation services, providing fairness opinions or preparing contribution-in-kind reports; (iv) actuarial services; (v) internal audit outsourcing services; (vi) management functions or human resources; (vii) broker or dealer, investment adviser or investment banking services; (viii) legal services and expert services unrelated to the audit; and (ix) any other service that the Public Company Accounting Oversight Board prohibits through regulation.

        Notwithstanding the foregoing, pre-approval is not necessary for minor audit services if: (i) the aggregate amount of all such non-audit services provided to the corporation constitutes not more than five percent of the total amount of revenues paid by the corporation to its auditor during the fiscal year in which the non-audit services are provided; (ii) such services were not recognized by the corporation at the time of the engagement to be non-audit services; and (iii) such services are promptly brought to the attention of the Committee and approved prior to the completion of the audit by the Committee or by one or more members of the Committee who are members of the Board to whom authority to grant such approvals has been delegated by the Committee. The Committee may delegate to one or more of its members the authority to approve in advance all significant audit or non-audit services to be provided by the independent auditors so long as it is presented to the full Committee at a later time.

        8. Review, at least annually, the qualifications, performance and independence of the independent auditors. In conducting its review and evaluation, the Committee should:

        (a) Obtain and review a report by the corporation’s independent auditor describing:(i) the auditing firm’s internal quality-control procedures;(ii) any material issues raised by the most recent internal quality-control review, or peer review, of the auditing firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the auditing firm, and any steps taken to deal with any such issues; and(iii) to assess the auditor’s independence, all relationships between the independent auditor and the corporation;

        (b) Ensure the rotation of the lead audit partner at least every five years, and consider whether there should be regular rotation of the audit firm itself.

        (c) Confirm with any independent auditor retained to provide audit services for any fiscal year that the lead (or coordinating) audit partner (having primary responsibility for the audit), or the audit partner responsible for reviewing the audit, has not performed audit services for the corporation in each of the five previous fiscal years of that corporation.

        (d) Take into account the opinions of management and the corporation’s internal auditors.

        Financial Reporting Process

        9. In consultation with the independent auditors, management and the internal auditors, review the integrity of the corporation’s financial reporting processes, both internal and external. In that connection, the Committee should obtain and discuss with management and the independent auditor reports from management and the independent auditor regarding:

        C-3


        (i) all critical accounting policies and practices to be used by the corporation;

        (ii) analyses prepared by management and/or the independent auditor setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including all alternative treatments of financial information within generally accepted accounting principles that have been discussed with the corporation’s management, the ramifications of the use of the alternative disclosures and treatments, and the treatment preferred by the independent auditor;

        (iii) major issues regarding accounting principles and financial statement presentations, including any significant changes in the corporation’s selection or application of accounting principles;

        (iv) major issues as to the adequacy of the corporation’s internal controls and any specific audit steps adopted in light of material control deficiencies; and

        (v) any other material written communications between the independent auditor and the corporation’s management.

        10. Review periodically the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the corporation.

        11. Review with the independent auditor (i) any audit problems or other difficulties encountered by the auditor in the course of the audit process, including any restrictions on the scope of the independent auditor’s activities or on access to requested information, and any significant disagreements with management and (ii) management’s responses to such matters. Without excluding other possibilities, the Committee may wish to review with the independent auditor (i) any accounting adjustments that were noted or proposed by the auditor but were “passed” (as immaterial or otherwise), (ii) any communications between the audit team and the audit firm’s national office respecting auditing or accounting issues presented by the engagement and (iii) any “management” or “internal control” letter issued, or proposed to be issued, by the independent auditor to the corporation.

        Legal Compliance/General

        12. Review periodically, with the corporation’s counsel, any legal matter that could have a significant impact on the corporation’s financial statements.

        13. Discuss with management and the independent auditors the corporation’s guidelines and policies with respect to risk assessment and risk management. The Committee should discuss the corporation’s major financial risk exposures and the steps management has taken to monitor and control such exposures.

        14. Set clear hiring policies for employees or former employees of the independent auditors. At a minimum, these policies should provide that any registered public accounting firm may not provided audit services to the corporation if the CEO, controller, CFO, chief accounting officer or any person serving in an equivalent capacity for the corporation was employed by the registered public accounting firm and participated in the audit of the corporation within one year of the initiation of the current audit.

        15. Establish procedures for: (i) the receipt, retention and treatment of complaints received by the corporation regarding accounting, internal accounting controls, or auditing matters; and (ii) the confidential, anonymous submission by employees of the corporation of concerns regarding questionable accounting or auditing matters.

        Reports

        16. Prepare all Audit Committee reports required to be included in the corporation’s proxy statement, pursuant to and in accordance with applicable rules and regulations of the SEC.

        17. Report regularly to the full Board of Directors including:

        (i) with respect to any issues that arise with respect to the quality or integrity of the corporation’s financial statements, the corporation’s compliance with legal or regulatory requirements, the performance and independence of the corporation’s independent auditors or the performance of the internal audit function;

        C-4

        (ii) reporting all meetings of the Committee; and

        (iii) with respect to such other matters as are relevant to the Committee’s discharge of its responsibilities.

        The Committee shall provide such recommendations as the Committee may deem appropriate. The report to the Board of Directors may take the form of an oral report by the Chairman or any other member of the Committee designated by the Committee to make such report.

        18. Maintain minutes or other records of meetings and activities of the Committee.

        V. ANNUAL PERFORMANCE EVALUATION

        The Committee shall perform a review and evaluation, at least annually, of the performance of the Committee and its members, including by reviewing the compliance of the Committee with this Charter. In addition, the Committee shall review and reassess, at least annually, the adequacy of this Charter and recommend to the Board of Directors any improvements to this Charter that the Committee considers necessary or valuable. The Committee shall conduct such evaluations and reviews in such manner as it deems appropriate.

        C-5

         

        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 in the Boardroom of Simpson Thacher & Bartlett LLP, 425 Lexington Ave., 30th floor, New York, N.Y. 10017, at 10:30 a.m. on March 5, 2004, and at any adjournments thereof, upon the matters set forth in the notice of meeting and Proxy Statement dated February __, 2004 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 of the Board of Directors; (2) for the ratification of the selection of Ernst & Young LLP as independent accountants; (3) for the approval of an amendment to the amended Certificate of Incorporation, which would increase the number of authorized shares of common stock; (4) for the approval of the Company’s amended and restated Senior Executive Short-Term Incentive Plan; (5) for the approval of the Company’s amended and restated 1999 Stock Incentive Plan; and (6) on any other matters in accordance with the discretion of the named attorneys and agents, if no instructions to the contrary are indicated in items (1), (2), (3), (4) and (5).

         

         

         

         

         

        Address Changes/Comments:  _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 

         

         

         

         

         

         

         

         

         

         

         

         _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

         

         

         

         

         

         

         

         

         

         

        (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)

        SEE REVERSE SIDE

        CONTINUED AND TO BE SIGNED ON REVERSE SIDE

        SEE REVERSE SIDE


        x

        Please mark your vote as in this example

        HOVNANIAN ENTERPRISES, INC.

        Proposals to be voted on at our Special Meeting are listed below along with the Board of Directors’ recommendations.

        The Board of Directors recommends that you vote FOR proposals 1, 2 and 3.

         

        FOR

        AGAINST

        ABSTAIN

        1.

        Approval of an amendment to the Company’s Certificate of Incorporation to restrict certain transfers of Class A Common Stock in order to preserve the tax treatment of the Company’s net operating losses and built-in losses.

        o

        o

        o

         

         

         



        SEE REVERSE
        SIDE

          CONTINUED AND TO BE SIGNED ON REVERSE SIDE  

        SEE REVERSE
        SIDE



        logo

        10 HIGHWAY 35
        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.

         

         

        2.


        VOTE BY PHONE - 1-800-690-6903
        Use any touch-tone telephoneApproval of the Board of Directors’ decision 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 calladopt and then follow the instructions.        implement a stockholder rights plan.

        o

        o

        o

         

         

         

         

         

        VOTE BY MAIL -
        Mark, sign and3.

        Approval of adjournment of the Special Meeting to a later date your proxy card and return itor dates, if necessary, to permit further solicitation of proxies in the postage-paid envelope we’ve provided event there are insufficient votes at the time of the Special Meeting to approve Proposal One and/or return to Hovnanian Enterprises, Inc., c/Proposal Two.

        o ADP, 51 Mercedes Way, Edgewood, NY 11717.

        o

        o

         

         

         

         

         

        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:

        4.

        HOVENBConsideration of such other business as may properly come before the Special Meeting and any adjournments thereof.

        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.

         

         

        Vote On Directors

         

         

         

        1.

        Election of Directors.

         

         

        Nominees:

         

        For
        All

        Withhold
        All

        For All
        Except

         

        To withhold authority to vote, mark “For All Except” and write the nominee’s number on the line below.

         

         

         

        (01) K. Hovnanian

        (06) J. Robbins

         

         

         

        (02) A. Hovnanian

        (07) J. Sorsby

         

         

         

         

         

         

         

        (03) G. DeCesaris, Jr.

        (08) S. Weinroth

        ¡

        ¡

        ¡

         

         

         

         

         

        (04) A. Greenbaum

        (09) E. Kangas

         

         

         

         

         

         

         

        (05) D. McDonald

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

        For

        Against

        Abstain

         

         

         

         

        Vote On Proposals

         

        For

        Against

        Abstain

         

        4.

        For the approval of the Company’s amended and restated Senior Executive Short-Term Incentive Plan.

        ¡

        ¡

        ¡

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

        2.

        Ratification of the selection of Ernst & Young LLP as independent accountants for the year ended October 31, 2004.

        ¡

        ¡

        ¡

         

        5.

        For the approval of the Company’s amended and restated 1999 Stock Incentive Plan.

        ¡

        ¡

        ¡

         

         

         

        3.

        For the approval of an amendment to the amended Certificate of Incorporation, which would increase the number of authorized shares of common stock.

        ¡

        ¡

        ¡

         

        6.

        On any other matters in accordance with the discretion of the named attorneys and agents, if no instructions to the contrary are indicated in items (1), (2), (3), (4) and (5).

         

         

         

        Please mark, sign, date and return the proxy card promptly using the enclosed envelope. This Proxy must be signed exactly as name appears hereon. Executors, administrators, trustees, etc., should give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer.

         

         

         

         

         

        For address changes and/or comments, please check this box and write them on the back where indicated

        Yes

        No

        ¡

         

         

         

         

         

         

         

         

         

         

         

         

        Please indicate if you plan to attend this meeting

        ¡

        ¡

         

         

         

         

         

         

         

         

         

         

         

         

         

        HOUSEHOLDING ELECTION - Please indicate if you consent to receive certain future investor communications in a single package per household

        ¡

        ¡

         

         

         

         

         

         

         

         


         

         

         

         

         

         

         

         

         

         

        Signature [PLEASE SIGN WITHIN BOX]  

        Date    

         

         

         

        Signature (Joint Owners)

        Date

         

         

         



        PROXY

         

         

         

        For address changes and/or comments, please check this box

        HOVNANIAN ENTERPRISES, INC.

         

         

         

        Class B Common Stock

        Date:                                 , 2008

        and write them on the back where indicated.

         

        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 in the Boardroom of Simpson Thacher & Bartlett LLP, 425 Lexington Ave., 30th floor, New York, N.Y. 10017, at 10:30 a.m. on March 5, 2004, and at any adjournments thereof, upon the matters set forth in the notice of meeting and Proxy Statement dated February __, 2004 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 of the Board of Directors; (2) for the ratification of the selection of Ernst & Young LLP as independent accountants; (3) for the approval of an amendment to the amended Certificate of Incorporation, which would increase the number of authorized shares of common stock; (4) for the approval of the Company’s amended and restated Senior Executive Short-Term Incentive Plan; (5) for the approval of the Company’s amended and restated 1999 Stock Incentive Plan; and (6) on any other matters in accordance with the discretion of the named attorneys and agents, if no instructions to the contrary are indicated in items (1), (2), (3), (4) and (5).

        o

         

         

         

         

         

         

         

        Yes

        No

        Signature

        Please indicate if you plan to attend this meeting.

        o

        o

        Signature (if held jointly)

         

         

         

         

         

        Title(s), if any

        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.


        FORM OF 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 Special 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                         , 2008, and at any adjournments thereof, upon the matters set forth in the Notice of Special Meeting and Proxy Statement dated                         , 2008 and upon all other matters properly coming before said meeting.

        This proxy when properly executed will be voted (1) FOR the approval of an amendment to the Company’s Certificate of Incorporation to restrict certain transfers of Class A Common Stock in order to preserve the tax treatment of the Company’s net operating losses and built-in losses; (2) FOR the approval of the Board of Directors’ decision to adopt and implement a stockholder rights plan; (3) FOR the approval of adjournment of the Special Meeting to a later date or dates, if necessary, to permit further solicitation of proxies in the event there are insufficient votes at the time of the Special Meeting to approve Proposal One and/or Proposal Two; 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:  _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 

         

         

         

         

         

        Address Changes/Comments:

         

         

         

         

         

         

         

         

         _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

         

         

         

         

         

         

         

         

         

         

        (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)

        SEE REVERSE SIDE

        CONTINUED AND TO BE SIGNED ON REVERSE SIDE

        SEE REVERSE SIDE


        x

        Please mark your vote as in this example

        HOVNANIAN ENTERPRISES, INC.

        Proposals to be voted on at our Special Meeting are listed below along with the Board of Directors’ recommendations.

        The Board of Directors recommends that you vote FOR proposals 1, 2 and 3.

         

        FOR

        AGAINST

        ABSTAIN

        1.

        Approval of an amendment to the Company’s Certificate of Incorporation to restrict certain transfers of Class A Common Stock in order to preserve the tax treatment of the Company’s net operating losses and built-in losses.

        o

        o

        o

         

         

         



        SEE REVERSE
        SIDE

          CONTINUED AND TO BE SIGNED ON REVERSE SIDE  

        SEE REVERSE
        SIDE



        logo

        10 HIGHWAY 35
        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.

         

         

        2.

        VOTE BY PHONE - 1-800-690-6903
        Use any touch-tone telephoneApproval of the Board of Directors’ decision 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 calladopt and then follow the instructions.        implement a stockholder rights plan.

        o

        o

        o

         

         

         

         

         

        VOTE BY MAIL -
        Mark, sign and3.

        Approval of adjournment of the Special Meeting to a later date your proxy card and return itor dates, if necessary, to permit further solicitation of proxies in the postage-paid envelope we’ve provided event there are insufficient votes at the time of the Special Meeting to approve Proposal One and/or return to Hovnanian Enterprises, Inc., c/Proposal Two.

        o ADP, 51 Mercedes Way, Edgewood, NY 11717.

        o

        o

         

         

         

         

         

        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:

        4.

        HOVENCConsideration of such other business as may properly come before the Special Meeting and any adjournments thereof.

        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.

         

         

        Vote On Directors

         

         

         

        1.

        Election of Directors.

         

         

        Nominees:

         

        For
        All

        Withhold
        All

        For All
        Except

         

        To withhold authority to vote, mark “For All Except” and write the nominee’s number on the line below.

         

         

         

        (01) K. Hovnanian

        (06) J. Robbins

         

         

         

        (02) A. Hovnanian

        (07) J. Sorsby

         

         

         

         

         

         

         

        (03) G. DeCesaris, Jr.

        (08) S. Weinroth

        ¡

        ¡

        ¡

         

         

         

         

         

        (04) A. Greenbaum

        (09) E. Kangas

         

         

         

         

         

         

         

        (05) D. McDonald

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

        For

        Against

        Abstain

         

         

         

         

        Vote On Proposals

         

        For

        Against

        Abstain

         

        4.

        For the approval of the Company’s amended and restated Senior Executive Short-Term Incentive Plan.

        ¡

        ¡

        ¡

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

        2.

        Ratification of the selection of Ernst & Young LLP as independent accountants for the year ended October 31, 2004.

        ¡

        ¡

        ¡

         

        5.

        For the approval of the Company’s amended and restated 1999 Stock Incentive Plan.

        ¡

        ¡

        ¡

         

         

         

        3.

        For the approval of an amendment to the amended Certificate of Incorporation, which would increase the number of authorized shares of common stock.

        ¡

        ¡

        ¡

         

        6.

        On any other matters in accordance with the discretion of the named attorneys and agents, if no instructions to the contrary are indicated in items (1), (2), (3), (4) and (5).

         

         

         

        Please mark, sign, date and return the proxy card promptly using the enclosed envelope. This Proxy must be signed exactly as name appears hereon. Executors, administrators, trustees, etc., should give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer.

         

         

         

         

         

        For address changes and/or comments, please check this box and write them on the back where indicated

        Yes

        No

        ¡

         

         

         

         

         

         

         

         

         

         

         

         

        Please indicate if you plan to attend this meeting

        ¡

        ¡

         

         

         

         

         

         

         

         

         

         

         

         

         

        HOUSEHOLDING ELECTION - Please indicate if you consent to receive certain future investor communications in a single package per household

        ¡

        ¡

         

         

         

         

         

         

         

         


         

         

         

         

         

         

         

         

         

         

        Signature [PLEASE SIGN WITHIN BOX]  

        Date    

         

         

         

        Signature (Joint Owners)

        Date

         

         

         



        PROXY

         

         

         

        For address changes and/or comments, please check this box

        HOVNANIAN ENTERPRISES, INC.

         

         

         

        Beneficial Owner of Class B Common Stock

        Date:                                 , 2008

        and write them on the back where indicated.

         

        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 in the Boardroom of Simpson Thacher & Bartlett LLP, 425 Lexington Ave., 30th floor, New York, N.Y. 10017, at 10:30 a.m. on March 5, 2004, and at any adjournments thereof, upon the matters set forth in the notice of meeting and Proxy Statement dated February __, 2004 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 of the Board of Directors; (2) for the ratification of the selection of Ernst & Young LLP as independent accountants; (3) for the approval of an amendment to the amended Certificate of Incorporation, which would increase the number of authorized shares of common stock; (4) for the approval of the Company’s amended and restated Senior Executive Short-Term Incentive Plan; (5) for the approval of the Company’s amended and restated 1999 Stock Incentive Plan; and (6) on any other matters in accordance with the discretion of the named attorneys and agents, if no instructions to the contrary are indicated in items (1), (2), (3), (4) and (5).

        By signing on the reverse hereof, the undersigned certifies that (A) with respect to _________ of the shares represented by this proxy, the undersigned has been the beneficial owner of such shares continuously since the date of their issuance or is a Permitted Transferee (as defined in paragraph 4(A)(i) of Article FOURTH of the Company’s amended Certificate of Incorporation) of any such beneficial owner and (B) with respect to the remaining _________ shares represented by this proxy, the undersigned has not been the beneficial owner of such shares continuously since the date of their issuance nor is the undersigned a Permitted Transferee of any such beneficial owner.

        If no certification is made, it will be deemed that all shares of Class B common stock represented by this proxy have not been held continuously, since the date of issuance, for the benefit or account of the same beneficial owner of such shares or any Permitted Transferee.

        o

         

         

         

         

         

         

         

        Yes

        No

        Signature

        Please indicate if you plan to attend this meeting.

        o

        o

        Signature (if held jointly)

         

         

         

         

         

        Title(s), if any

        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.


        FORM OF PROXY

        HOVNANIAN ENTERPRISES, INC.

        Nominee Holder of 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 Special 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                         , 2008, and at any adjournments thereof, upon the matters set forth in the Notice of Special Meeting and Proxy Statement dated                         , 2008 and upon all other matters properly coming before said meeting.

        This proxy when properly executed will be voted (1) FOR the approval of an amendment to the Company’s Certificate of Incorporation to restrict certain transfers of Class A Common Stock in order to preserve the tax treatment of the Company’s net operating losses and built-in losses; (2) FOR the approval of the Board of Directors’ decision to adopt and implement a stockholder rights plan; (3) FOR the approval of adjournment of the Special Meeting to a later date or dates, if necessary, to permit further solicitation of proxies in the event there are insufficient votes at the time of the Special Meeting to approve Proposal One and/or Proposal Two; 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:  _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 

         

         

         

         

         

        Address Changes/Comments:

         

         

         

         

         

         

         

         

         _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

         

         

         

         

         

         

         

         

         

         

        (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)

        SEE REVERSE SIDE

        CONTINUED AND TO BE SIGNED ON REVERSE SIDE

        SEE REVERSE SIDE


        x

        Please mark your vote as in this example

        HOVNANIAN ENTERPRISES, INC.

        Proposals to be voted on at our Special Meeting are listed below along with the Board of Directors’ recommendations.

        The Board of Directors recommends that you vote FOR proposals 1, 2 and 3.

         

        FOR

        AGAINST

        ABSTAIN

        1.

        Approval of an amendment to the Company’s Certificate of Incorporation to restrict certain transfers of Class A Common Stock in order to preserve the tax treatment of the Company’s net operating losses and built-in losses.

        o

        o

        o

         

         

         



        SEE REVERSE
        SIDE

          CONTINUED AND TO BE SIGNED ON REVERSE SIDE  

        SEE REVERSE
        SIDE


        logo

        10 HIGHWAY 35
        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. Voting instructions must be received not less than 3 nor more than 20 business days prior to 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.

         

         

        2.

        VOTE BY PHONE - 1-800-690-6903
        Use any touch-tone telephoneApproval of the Board of Directors’ decision to transmit your voting instructions. Voting instructions must be received not less than 3 nor more than 20 business days prior to the meeting date. Have your proxy card in hand when you calladopt and then follow the instructions.        implement a stockholder rights plan.

        o

        o

        o

         

         

         

         

         

        VOTE BY MAIL -
        Mark, sign and3.

        Approval of adjournment of the Special Meeting to a later date your proxy card and return itor dates, if necessary, to permit further solicitation of proxies in the postage-paid envelope we’ve provided event there are insufficient votes at the time of the Special Meeting to approve Proposal One and/or return to Hovnanian Enterprises, Inc., c/Proposal Two.

        o ADP, 51 Mercedes Way, Edgewood, NY 11717. Voting instructions must be received not less than 3 nor more than 20 business days prior to the meeting date.

        o

        o

         

         

         

         

         

        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:

        4.

        HOVENDConsideration of such other business as may properly come before the Special Meeting and any adjournments thereof.

        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.

         

         

        Vote On Directors

         

         

         

        1.

        Election of Directors.

         

         

        Nominees:

         

        For
        All

        Withhold
        All

        For All
        Except

         

        To withhold authority to vote, mark “For All Except” and write the nominee’s number on the line below.

         

         

         

        (01) K. Hovnanian

        (06) J. Robbins

         

         

         

        (02) A. Hovnanian

        (07) J. Sorsby

         

         

         

         

         

         

         

        (03) G. DeCesaris, Jr.

        (08) S. Weinroth

        ¡

        ¡

        ¡

         

         

         

         

         

        (04) A. Greenbaum

        (09) E. Kangas

         

         

         

         

         

         

         

        (05) D. McDonald

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

        For

        Against

        Abstain

         

         

         

         

        Vote On Proposals

         

        For

        Against

        Abstain

         

        4.

        For the approval of the Company’s amended and restated Senior Executive Short-Term Incentive Plan.

        ¡

        ¡

        ¡

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

        2.

        Ratification of the selection of Ernst & Young LLP as independent accountants for the year ended October 31, 2004.

        ¡

        ¡

        ¡

         

        5.

        For the approval of the Company’s amended and restated 1999 Stock Incentive Plan.

        ¡

        ¡

        ¡

         

         

         

        3.

        For the approval of an amendment to the amended Certificate of Incorporation, which would increase the number of authorized shares of common stock.

        ¡

        ¡

        ¡

         

        6.

        On any other matters in accordance with the discretion of the named attorneys and agents, if no instructions to the contrary are indicated in items (1), (2), (3), (4) and (5).

         

         

         

        Please mark, sign, date and return the proxy card promptly using the enclosed envelope. This Proxy must be signed exactly as name appears hereon. Executors, administrators, trustees, etc., should give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer.

         

         

         

         

         

        For address changes and/or comments, please check this box and write them on the back where indicated

        Yes

        No

        ¡

         

         

         

         

         

         

         

         

         

         

         

         

        Please indicate if you plan to attend this meeting

        ¡

        ¡

         

         

         

         

         

         

         

         

         

         

         

         

         

        HOUSEHOLDING ELECTION - Please indicate if you consent to receive certain future investor communications in a single package per household

        ¡

        ¡

         

         

         

         

         

         

         

         


         

         

         

         

         

         

         

         

         

         

        Signature [PLEASE SIGN WITHIN BOX]  

        Date    

         

         

         

        Signature (Joint Owners)

        Date

         

         

         



        PROXY

         

         

         

        For address changes and/or comments, please check this box

        HOVNANIAN ENTERPRISES, INC.

         

         

         

        Nominee Holder of Class B Common Stock

        Date:                                 , 2008

        and write them on the back where indicated.

         

        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 in the Boardroom of Simpson Thacher & Bartlett LLP, 425 Lexington Ave., 30th floor, New York, N.Y. 10017, at 10:30 a.m. on March 5, 2004, and at any adjournments thereof, upon the matters set forth in the notice of meeting and Proxy Statement dated February __, 2004 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 of the Board of Directors; (2) for the ratification of the selection of Ernst & Young LLP as independent accountants; (3) for the approval of an amendment to the amended Certificate of Incorporation, which would increase the number of authorized shares of common stock; (4) for the approval of the Company’s amended and restated Senior Executive Short-Term Incentive Plan; (5) for the approval of the Company’s amended and restated 1999 Stock Incentive Plan; and (6) on any other matters in accordance with the discretion of the named attorneys and agents, if no instructions to the contrary are indicated in items (1), (2), (3), (4) and (5).

        o

         

         

         

         

         

         

         

         

        Yes

        No

         

        Address Changes/Comments:  _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 

        Signature

         

         

         

         

         

        Please indicate if you plan to attend this meeting.

        o

         _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 

        o

         

         

         

         

        Signature (if held jointly)

         

         

         

         

         

         

         

        (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)



        SEE REVERSE
        SIDE

          CONTINUED AND TO BE SIGNED ON REVERSE SIDE  

        SEE REVERSE
        SIDE


        logo

        10 HIGHWAY 35
        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. Voting instructions must be received not less than 3 nor more than 20 business days prior to 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.        Title(s), if any

         

         

         

         

         

        VOTE BY PHONE - 1-800-690-6903
        Use any touch-tone telephone to transmit your voting instructions. Voting instructionsPlease mark, sign, date and return the proxy card promptly. This Proxy must be received not less than 3 nor more than 20 business days prior tosigned exactly as name appears hereon. Executors, administrators, trustees, etc., should give full title as such. If the meeting date. Have your proxy card in hand when you call and then followsigner is a corporation, please sign the instructions.        full corporate name by a duly authorized officer.

        VOTE BY MAIL -
        Mark, sign and date your proxy card and return it in the postage-paid envelope we’ve provided or return to Hovnanian Enterprises, Inc., c/o ADP, 51 Mercedes Way, Edgewood, NY 11717. Voting instructions must be received not less than 3 nor more than 20 business days prior to the meeting date.

        If you vote over the Internet or by telephone,
        please do not mail your card.



        QuickLinks

        YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.
        HOVNANIAN ENTERPRISES, INC. 110 WEST FRONT STREET P.O. BOX 500 RED BANK, NEW JERSEY 07701
        PROXY STATEMENT
        GENERAL
        THE NOL PROTECTIVE AMENDMENT
        THE RIGHTS PLAN
        ADJOURNMENT
        MATTERS TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:BE CONSIDERED AT SPECIAL MEETING PROPOSAL ONE: NOL PROTECTIVE AMENDMENT AMENDMENT TO CERTIFICATE OF INCORPORATION TO PRESERVE VALUE OF NET OPERATING LOSSES

        HOVENA

        KEEP THIS PORTION FOR YOUR RECORDS

        DETACH AND RETURN THIS PORTION ONLY


        THIS PROXY CARD IS VALID ONLY WHEN SIGNEDPROPOSAL TWO: APPROVAL OF RIGHTS PLAN
        PROPOSAL THREE: ADJOURNMENT
        CERTAIN CONSIDERATIONS
        VOTING RIGHTS AND DATED.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

           HOVNANIAN ENTERPRISES, INC.

         

         

        Vote On Directors

         

         

         

        1.

        Election of Directors.

         

         

        Nominees:

         

        For
        All

        Withhold
        All

        For All
        Except

         

        To withhold authority to vote, mark “For All Except” and write the nominee’s number on the line below.

         

         

         

        (01) K. Hovnanian

        (06) J. Robbins

         

         

         

        (02) A. Hovnanian

        (07) J. Sorsby

         

         

         

         

         

         

         

        (03) G. DeCesaris, Jr.

        (08) S. Weinroth

        ¡

        ¡

        ¡

         

         

         

         

         

        (04) A. Greenbaum

        (09) E. Kangas

         

         

         

         

         

         

         

        (05) D. McDonald

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

        For

        Against

        Abstain

         

         

         

         

        Vote On Proposals

         

        For

        Against

        Abstain

         

        4.

        For the approval of the Company’s amended and restated Senior Executive Short-Term Incentive Plan.

        ¡

        ¡

        ¡

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

        2.

        Ratification of the selection of Ernst & Young LLP as independent accountants for the year ended October 31, 2004.

        ¡

        ¡

        ¡

         

        5.

        For the approval of the Company’s amended and restated 1999 Stock Incentive Plan.

        ¡

        ¡

        ¡

         

         

         

        3.

        For the approval of an amendment to the amended Certificate of Incorporation, which would increase the number of authorized shares of common stock.

        ¡

        ¡

        ¡

         

        6.

        On any other matters in accordance with the discretion of the named attorneys and agents, if no instructions to the contrary are indicated in items (1), (2), (3), (4) and (5).

         

         

         

        Please mark, sign, date and return the proxy card promptly using the enclosed envelope. This Proxy must be signed exactly as name appears hereon. Executors, administrators, trustees, etc., should give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer.

         

         

         

         

         

        For address changes and/or comments, please check this box and write them on the back where indicated

        Yes

        No

        ¡

         

         

         

         

         

         

         

         

         

         

         

         

        Please indicate if you plan to attend this meeting

        ¡

        ¡

         

         

         

         

         

         

         

         

         

         

         

         

         

        HOUSEHOLDING ELECTION - Please indicate if you consent to receive certain future investor communications in a single package per household

        ¡

        ¡

         

         

         

         

         

         

         

         


         

         

         

         

         

         

         

         

         

         

        Signature [PLEASE SIGN WITHIN BOX]  

        Date    

         

         

         

        Signature (Joint Owners)

        Date

         

         

         


        GENERAL
        ANNEX A
        AMENDMENT TO CERTIFICATE OF INCORPORATION
        ANNEX B RIGHTS AGREEMENT dated as of August 14, 2008 between HOVNANIAN ENTERPRISES, INC. and National City Bank Rights Agent
        TABLE OF CONTENTS
        RIGHTS AGREEMENT
        W I T N E S S E T H
        Exhibit A
        CERTIFICATE OF DESIGNATION OF SERIES B JUNIOR PREFERRED STOCK OF HOVNANIAN ENTERPRISES, INC.
        SERIES B JUNIOR PREFERRED STOCK
        Exhibit B
        FORM OF RIGHTS CERTIFICATE
        RIGHTS CERTIFICATE HOVNANIAN ENTERPRISES, INC.
        Form of Reverse Side of Rights Certificate FORM OF ASSIGNMENT (To be executed by the registered holder if such holder desires to transfer the Rights Certificate)
        CERTIFICATE
        FORM OF ELECTION TO PURCHASE
        CERTIFICATE
        NOTICE
        Exhibit C
        SUMMARY OF RIGHTS