As of the 120th calendar day prior to ~~March 27, 2013,~~January 28, 2014, 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.

~~(3) APPROVAL OF AN AMENDMENT TO THE COMPANY’S CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF CLASS A COMMON STOCK~~10

~~On December 14,~~

(3) APPROVAL OF THE 2012 ~~subject~~HOVNANIAN ENTERPRISES, INC.
AMENDED AND RESTATED STOCK INCENTIVE PLAN

Shareholders are being asked to ~~shareholder approval,~~consider and approve a proposal to amend and restate the Board authorized an amendment to our Certificate of Incorporation to increase the number of authorized shares of Class A Common Stock (the “Class A Common Stock”) from 200,000,000 shares to 400,000,000 shares (the “Class A Amendment”). Pursuant to Proposal 4, we are separately proposing an increase to our authorized Class B Common Stock, but we are not proposing an increase to the number of authorized shares of Preferred Stock.

We are not seeking to make any other changes to the terms of the plan document other than certain technical changes.

The Company’s Board of Directors has approved the adoption of the Amended Plan and, if the Amended Plan is approved by shareholders at the 2014 Annual Meeting, it will become immediately effective as of the date of the 2014 Annual Meeting. If shareholders do not approve the Amended Plan, the Existing Plan will continue to remain in effect according to its terms, and we may continue to make awards (subject to the authorized limit of 5,000,000 shares) under the Existing Plan.

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In reaching our conclusion as to the appropriateness of the additional share proposal, we reviewed key metrics that are typically used to evaluate such proposals. One such metric many investors use is a calculation that quantifies how quickly a company uses its shareholder capital. The ~~increase~~total number of shares issuable under awards we have granted under the Existing Plan, the 2008 Stock Incentive Plan and theSenior Executive Short-Term Incentive Plan, as a percentage of our annual weighted average common stock outstanding (commonly referred to as the “burn rate”) has been on average 1.06% over the last three completed fiscal years, which is below the ISS unadjusted industry median of 1.37%. As applicable for the award, this calculation is based on the amount of shares issuable at the target level of performance under awards as of the dates they were granted. In addition to burn rate, many investors look at the economic effect of dilution. Assuming all 6,450,000 shares of common stock of the Company being requested to be added to the share reserve pursuant to this proposal were fully dilutive as of January 14, 2014, the dilutive effect on all outstanding shares would be approximately 4.5%.

For a discussion of the Amended Plan, see “Material Features of the Amended Plan” below. The Amended Plan is set forth in Appendix A hereto.

The Company’s Board of Directors recommends that shareholders vote for the approval of the Amended Plan.

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

The purpose of the Amended Plan is to aid the Company and its affiliates in recruiting and retaining key employees, directors and consultants of outstanding ability and to motivate those employees, directors and consultants to exert their best efforts on behalf of the Company and its affiliates by providing incentives through the granting of “Awards”, which consist of options, stock appreciation rights or other stock-based Awards (including performance-based Awards) granted pursuant to the Amended Plan. All employees, directors and consultants of the Company and its affiliates are eligible to participate in the ~~authorized~~Amended Plan if they are selected by the Compensation Committee of the Board of Directors (the “Committee”) to participate in the Amended Plan (any such individual, a “Participant”). For the fiscal year ended October 31, 2013, approximately 12 employees, 5 directors (includes non-employee directors only), and no consultants were selected by the Committee to participate in the Existing Plan. The Company anticipates that future participation by employees and directors under the Amended Plan will be at levels similar to their past participation under the Existing Plan.

The Amended Plan is generally administered by the Committee, which may delegate its duties and powers in whole or in part to any subcommittee thereof consisting solely of at least two individuals who are each intended to be “Non-Employee Directors” within the meaning of Rule 16b-3 under the Exchange Act, “outside directors” within the meaning of Section 162(m), 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. Additionally, if the Company’s Chief Executive Officer is serving as a member of the Board of Directors, the Board of Directors may by specific resolution constitute the Chief Executive Officer as a “committee of one” with the authority to grant Awards covering up to 1,000,000 shares per fiscal year to certain non-executive officer Participants.

Awards are determined (“granted”) by the Committee and are subject to the terms and conditions stated in the Amended Plan and to such other terms and conditions, not inconsistent therewith as the Committee shall determine. Any stock options or stock appreciation rights granted must have a per share exercise price that is not less than 100% of the fair market value of the Company’s common stock underlying such awards on the date an award is granted (other than in the case of awards granted in substitution of previously granted awards). The maximum term for stock options and stock appreciation rights granted under the Amended Plan is ten years from the initial date of grant.

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In the event a performance-based Award is granted under the Amended Plan, it may be granted in a manner that is intended to cause the Award to be deductible by the Company under Section 162(m), however, there can be no guarantee that a performance-based Award will be treated as “performance-based compensation” under Section 162(m). To that end, performance-based Awards intended to be deductible under Section 162(m) must be based on the attainment of written performance goals approved by the Committee. Within 90 days after the start of a designated performance period (or, if less, the number of days which is equal to 25% of such performance period), the Committee will establish the objective performance goals for each Participant. The performance goals will be based on one or more of the following criteria: (1) earnings before or after taxes (including earnings before interest, taxes, depreciation and amortization); (2) net income; (3) operating income; (4) earnings per share of common stock of the Company; (5) book value per share; (6) return on shareholders’ equity; (7) total shareholder return; (8) expense management; (9) return on investment before or after the cost of capital; (10) improvements in capital structure; (11) profitability of an identifiable business unit or product; (12) maintenance or improvements of profit margins; (13) stock price; (14) market share; (15) revenues or sales; (16) costs; (17) cash flow; (18) working capital; (19) changes in net assets (whether or not multiplied by a constant percentage intended to represent the cost of capital); and (20) return on assets. The Committee may also approve grants of Awards or other compensation that do not qualify for a deduction under Section 162(m) if it determines that it is appropriate to do so in light of other competing interests and goals, such as the attraction and retention of key executives.

Prior to the payment of any Award that is intended to qualify as performance-based compensation for purposes of Section 162(m), the Committee will certify that the applicable performance goals have been met. In connection with such certification, the Committee may decide to pay amounts, which are less than the Award otherwise payable for achievement of the applicable performance goals at the sole discretion of the Committee. Payment of such an Award to a Participant will occur only after such certification and will be made as determined by the Committee in its sole discretion after the end of such performance period.

In the event of any change in the outstanding shares of common stock by reason of any stock dividend or split, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other corporate exchange or change in capital structure, any distribution to shareholders of common stock other than regular cash dividends or any similar event, the Committee in its sole discretion and without liability to any person shall make such substitution or adjustment, if any, as it deems to be equitable, as to (1) the number or kind of common stock or other securities that may be issued as set forth in the Amended Plan or pursuant to outstanding Awards, (2) the exercise price relating to outstanding options or stock appreciation rights, (3) the maximum number or amount of Awards that may be granted to a Participant during a fiscal year and/or (4) any other affected terms of such Awards. Except as otherwise provided in an Award agreement, in the event of a Change in Control (as defined in the Amended Plan), the Committee in its sole discretion and without liability to any person may take such actions, if any, as it deems necessary or desirable with respect to any Award (including, without limitation, (1) the acceleration of an Award, (2) the payment of a cash amount in exchange for the cancellation of an Award which, in the case of options and stock appreciation rights, may equal the excess, if any, of value of the consideration to be paid in the Change in Control transaction to holders of the same number of shares of common stock of the Company subject to such options or stock appreciation rights (or, if no consideration is paid in any such transaction, the fair market value of the shares of common stock of the Company subject to such options or stock appreciation rights) over the aggregate exercise price of such options or stock appreciation rights and/or (3) the requiring of the issuance of substitute Awards that will substantially preserve the value, rights and benefits of any affected Awards previously granted under the Amended Plan) as of the date of the consummation of the Change in Control.

The Amended Plan provides that the total number of shares of common stock of the Company that may be issued under the Amended Plan (inclusive of the 5,000,000 shares initially reserved under the Existing Plan and the additional 6,450,000 shares which are being requested under this proposal) is 11,450,000. The maximum amount that may be paid with respect to performance-based Awards (other than Awards denominated in shares) during a fiscal year to any Participant shall be equal to the greater of (x) $15 million and (y) 2.5% of the Company’s income before income taxes as reported in the Company’s audited consolidated financial statements prepared for the year in respect of which the performance-based Award is to be paid or distributed, as applicable. The number of shares covered by Awards granted under the Amended Plan that terminate or lapse without the payment of consideration will be available for future grants under the Amended Plan. Additionally, the maximum number of shares of common stock of the Company for which options or stock appreciation rights may be granted during a fiscal year to any Participant is 2,000,000, and the maximum number of shares that may be subject to other share-denominated performance Awards granted during a fiscal year to any Participant is also 2,000,000. The Amended Plan also provides that the maximum number of shares subject to Awards granted during a calendar year to any non-employee director serving on the Board, taken together with any cash fees paid to such non-employee director during such calendar year, shall not exceed $600,000 in total value (calculating the value of any such Awards based on the grant date fair value of such Awards for financial reporting purposes).

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No Award may be granted under the Amended Plan after the tenth anniversary of January 10, 2012 (i.e., the date when the Board of Directors adopted the Existing Plan), but Awards theretofore granted may be extended beyond that date.

The Amended Plan generally prohibits the Company from taking actions that would constitute a “repricing” of stock options or stock appreciation rights (for example, lowering exercise prices for outstanding Awards). Additionally, the Amended Plan precludes the payment of dividends or dividend equivalent rights on performance-based Awards unless and until the corresponding performance-based Award has been earned in accordance with its terms.

The Committee may amend, alter or discontinue the Amended Plan, but no amendment, alteration or discontinuation shall be made which, (a) without the approval of the shareholders of the Company, would (except as provided in the Amended 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 Amended Plan or change the maximum number of shares of common stock of the Company for which Awards may be granted to any Participant or amend the prohibitions on repricing set forth above or (b) without the consent of a Participant, would materially impair any of the rights or obligations under any Award theretofore granted to such Participant under the Amended Plan; provided, however, that the Committee may amend the Amended Plan in such manner as it deems necessary to permit the granting of Awards meeting the requirements of the Code or other applicable laws. The Committee may not amend, alter or discontinue the provisions relating to a Change in Control (as defined in the Amended Plan) after the occurrence of a Change in Control.

Any Awards granted under the Amended Plan may be subject to reduction, cancellation, forfeiture or recoupment to the extent required by applicable law or listed company rules, to the extent otherwise provided in an Award agreement at the time of grant or as determined pursuant to the Company’s recoupment policy.

Unless otherwise determined by the Committee, an Award shall not be transferable or assignable by the Participant otherwise than by will or by the laws of descent and distribution. Notwithstanding the foregoing, and subject to the conditions stated in the Amended Plan, a Participant may transfer an option (other than an option that is also an incentive stock option granted pursuant to the Amended Plan) or stock appreciation right in whole or in part by gift or domestic relations order to a family member of the Participant. Under no circumstances will the Committee permit the transfer of an Award for value.

An employee to whom an incentive stock option (“ISO”) that qualifies under Section 422 of the Code is granted will not recognize income at the time of grant or exercise of such option. No federal income tax deduction will be allowable to the Company upon the grant or exercise of such ISO. However, upon the exercise of an ISO, special alternative minimum tax rules apply for the employee.

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When the employee sells shares acquired through the exercise of an ISO more than one year after the date of transfer of such shares and more than two years after the date of grant of such ISO, the employee will normally recognize a long-term capital gain or loss equal to the difference, if any, between the sale prices of such shares and the option price. If the employee does not hold such shares for this period, when the employee sells such shares, the employee will recognize ordinary compensation income and possibly capital gain or loss in such amounts as are prescribed by the Code and regulations thereunder, and the Company will generally be entitled to a federal income tax deduction in the amount of such ordinary compensation income.

An employee to whom an option that is not an ISO (a “non-qualified option”) is granted will not recognize income at the time of grant of such option. When such employee exercises a non-qualified option, the employee will recognize ordinary compensation income equal to the excess, if any, of the fair market value as of the date of a non-qualified option exercise of the shares the employee receives, over the option exercise price. The tax basis of such shares will be equal to the exercise price paid plus the amount includable in the employee’s gross income, and the employee’s holding period for such shares will commence on the day after which the employee recognized taxable income in respect of such shares. Any subsequent sale of the shares by the employee will result in long- or short-term capital gain or loss, depending on the applicable holding period. Subject to applicable provisions of the Code and regulations thereunder, the Company will generally be entitled to a federal income tax deduction in respect of the exercise of non-qualified options in an amount equal to the ordinary compensation income recognized by the employee. Any such compensation includable in the gross income of an employee in respect of a non-qualified option will be subject to appropriate federal, state, local and foreign income and employment taxes.

Unless an election is made by the Participant under Section 83(b) of the Code, the grant of an Award of restricted stock will have no immediate tax consequences to the Participant. Generally, upon the lapse of restrictions (as determined by the applicable restricted stock agreement between the Participant and the Company), a Participant will recognize ordinary income in an amount equal to the product of (x) the fair market value of a share of common stock of the Company on the date on which the restrictions lapse, less any amount paid with respect to the Award of restricted stock, multiplied by (y) the number of shares of restricted stock with respect to which restrictions lapse on such date. The Participant’s tax basis will be equal to the sum of the amount of ordinary income recognized upon the lapse of restrictions and any amount paid for such restricted stock. The Participant’s holding period will commence on the date on which the restrictions lapse.

A Participant may make an election under Section 83(b) of the Code within 30 days after the date of transfer of an Award of restricted stock to recognize ordinary income on the date of award based on the fair market value of common stock of the Company on such date. An employee making such an election will have a tax basis in the shares of restricted stock equal to the sum of the amount the employee recognizes as ordinary income and any amount paid for such restricted stock, and the employee’s holding period for such restricted stock for tax purposes will commence on the date after such date.

With respect to shares of restricted stock upon which restrictions have lapsed, when the employee sells such shares, the employee will recognize capital gain or loss consistent with the treatment of the sale of shares received upon the exercise of non-qualified options, as described above.

A Participant to whom a restricted stock unit (“RSU”) is granted generally will not recognize income at the time of grant (although the Participant may become subject to employment taxes when the right to receive shares becomes “vested” due to retirement eligibility or otherwise). Upon delivery of shares of common stock of the Company in respect of an RSU, a Participant will recognize ordinary income in an amount equal to the product of (x) the fair market value of a share of common stock of the Company on the date on which the common stock of the Company is delivered, multiplied by (y) the number of shares of common stock of the Company delivered.

With respect to other stock-based Awards paid in cash or common stock, Participants will generally recognize income equal to the fair market value of the Award on the date on which the Award is delivered to the recipient.

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Section 409A (“Section 409A”) of the Code generally sets forth rules that must be followed with respect to covered deferred compensation arrangements in order to avoid the imposition of an additional 20% tax (plus interest) upon the service provider who is entitled to receive the deferred compensation. Certain Awards that may be granted under the Amended Plan may constitute “deferred compensation” within the meaning of and subject to Section 409A. While the Committee intends to administer and operate the Amended Plan and establish terms (or make required amendments) with respect to Awards subject to Section 409A in a manner that will avoid the imposition of additional taxation under Section 409A upon a Participant, there can be no assurance that additional taxation under Section 409A will be avoided in all cases. In the event the Company is required to delay delivery of shares or any other payment under an Award in order to avoid the imposition of an additional tax under Section 409A, the Company will deliver such shares (or make such payment) on the first day that would not result in the Participant incurring any tax liability under Section 409A. The Committee may amend the Amended Plan and outstanding Awards to preserve the intended benefits of Awards granted under the Amended Plan and to avoid the imposition of an additional tax under Section 409A of the Code.

Ordinary income recognized by virtue of the exercise of non-qualified options, the lapse of restrictions on restricted stock or RSUs or payments made in cash or shares of common stock of the Company is subject to applicable tax withholding as required by law.

The Company generally will be entitled to a federal tax deduction to the extent permitted by the Code at the time and in the amount that ordinary income is recognized by Participants.

The discussion set forth above does not purport to be a complete analysis of all potential tax consequences relevant to recipients of options or other Awards or to their employers or to describe tax consequences based on particular circumstances. It is based on federal income tax law and interpretational authorities as of the date of this proxy statement, which are subject to change at any time.

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The following table sets forth information on awards granted under the Existing Plan since its adoption and after giving effect to shares forfeited and reincluded in the Existing Plan pool. The closing price of the Class A Common Stock on the NYSE on January 14, 2014 (the record date for the 2014 Annual Meeting) was $6.17 per share (shares of Class B Common Stock convert on a one-for-one basis to shares of Class A Common Stock).

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The following table provides information as of October 31, 2013, with respect to compensation plans (including individual compensation arrangements) under which our equity securities are authorized for issuance.

The following is the Company’s overhang information, which measures the number of shares subject to equity-based awards outstanding but unexercised or unvested, as of October 31, 2013 regarding all of its existing equity compensation plans, as well as certain other information relating to outstanding awards under the plans:

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The following table sets forth the number of time-based stock options and ~~the subsequent issuance of such shares could, however, have the effect of delaying or preventing a change of control of~~time-based RSU awards granted by the Company without further action by shareholders. Shares of authorized and unissued Class A Common Stock could (within the limits imposed by applicable law) be issued in one or more transactions that could make a change of control of the Company less likely. The additional authorized shares could be used to discourage persons from attempting to gain control of the Company by diluting the voting power of shares then outstanding or by increasing the voting power of persons who would support the Board in a potential takeover scenario. However, this proposal is not made in response to any effort of which we are aware to accumulate our stock or to obtain control of us, nor do we have a present intent to use the additional shares of authorized Class A Common Stock to oppose a hostile takeover attempt or to delay or prevent changes in control of management. In addition, members of the Hovnanian family, including Ara Hovnanian, the Chairman of our Board, President and Chief Executive Officer, have the power to cast a majority of the votes that can be cast by the holders of all our currently outstanding common stock, voting together, through personal holdings, the Limited Partnership, family trusts and shares held by the Estate of Kevork S. Hovnanian.

~~Possible Effects~~20

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The Short-Term Incentive 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 Exchange Act, or any successor thereto, “outside directors” as defined under Section 162(m) and “independent directors” within the meaning of the ~~Increase~~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 “Committee”). The Compensation Committee may select senior executives of the Company and its affiliates who are “covered employees”, as defined in ~~Class B Common Stock~~

~~You will not realize any dilution in your percentage ownership or your voting rights~~22

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Information as ~~a result~~ of ~~increasing~~October 31, 2013 with respect to compensation plans (including individual compensation arrangements) under which our equity securities are authorized ~~Class B Common Stock. Issuances of additional shares of our Class B Common Stock in the future would dilute your percentage ownership and the voting power~~for issuance is set forth under Proposal (3) “Approval of the ~~outstanding shares of our Class A Common Stock. In addition shareholders do not have preemptive rights.~~

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Bonus opportunities are intended to be competitive with industry-wide practices in order to retain and attract executive talent. For fiscal ~~2012,~~2013, as in fiscal years 2009 through ~~2011,~~2012, the earned bonuses for the NEOs were paid 100% in cash.

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Although the Committee views both the stock and cash portions of the 2010 LTIP as multi-year incentive plan awards, they are reported differently for purposes of the Summary Compensation ~~Table.~~Table under “Executive Compensation” below. The share payout portions ~~are~~were reflected as “Stock Awards” in fiscal 2010 at their grant date fair value under Financial Accounting Standards Board ("FASB") Accounting Standards Codification Topic 718, Compensation – Stock Compensation ("ASC Topic 718"), which was based on the probable outcome as of the ~~Grant Date.~~grant date. Conversely, the actual amounts earned on the cash payout portions, if any, ~~will be~~are reflected in the Summary Compensation Table as “Non-Equity Incentive Plan Compensation” infor fiscal 2013 (which coincides with the end of the performance period) or, if participants ~~achieve~~had achieved a minimum performance payment during an earlier fiscal year, even though such payment remains subject to subsequent vesting restrictions, then such minimum payment would behave been reflected in that earlier fiscal year. ~~At the end of fiscal 2012, the Company did not reach breakeven or positive Pre-tax Profit (as defined below), so no minimum payment was achieved for this year.~~

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As a condition of earning each portion of the award, and as a retention inducement, following the performance period, a participant must also be employed through the vesting dates outlined below (other than in cases of death, disability or qualified retirement, or in the case of Messrs. O’Connor and Valiaveedan, specified termination following a change in control of the Company). The vesting percentages relate to the earned award value as of October 31, 2013.

with the cash portion of the earned award value becoming vested and payable before any share portion of the earned award value becomes vested and payable.

In fiscal 2013, the Company adopted a Long-Term Incentive Program (the “2013 LTIP”) under its stockholder-approved Stock Plan to further aid the Company in retaining key employees and to motivate them to exert their best efforts to achieve greater levels of profitability and to extend the maturity and/or reduce the amount of existing homebuilding debt by providing rewards at the end of a multi-year period. The 2013 LTIP is intended to incentivize achievement of specified pre-tax profit goals and specified improvements in the Company’s capital structure through refinancings of, or reductions in, homebuilding debt.

Each of the NEOs is a participant in the 2013 LTIP and their award payouts, if any, will be determined based on actual performance for the full 31-month performance period, subject to vesting requirements over an additional 24-month period, as described below. This performance period commenced on March 11, 2013 and will end on October 31, 2015 (that is, the performance period covers a portion of fiscal 2013 and all of fiscal years 2014 and 2015). After the performance period, the awards, to the extent earned, remain subject to vesting conditions during fiscal 2016 and 2017. The executive will not receive the full award unless the Company achieves the pre-tax profit and refinancings and/or reductions in existing homebuilding debt performance goals and the executive remains employed for the entire 55-month period.

Pre-tax profit and refinancings and/or reductions in existing homebuilding debt were chosen as the performance metrics for the 2013 LTIP to focus management on improving the operating performance of the Company while ensuring an adequate capital structure for growth.

Award payouts, if any, will be based on a specific target multiple of each participant’s base salary in effect on the date the participant was granted the award (the “grant date,” or March 11, 2013, for all NEOs). The target number of shares was set based on the closing price of the Class A Common Stock on the grant date, regardless of whether the share price increases or decreases by the time the award is determined or distributed. In order to manage the potential dilution impact of the 2013 LTIP, the Committee required that 40% of the payout be in the form of cash. All stock awards under the 2013 LTIP were made in the form of rights to receive shares of Class A Common Stock, except for the CEO whose award was made in the form of rights to receive shares of Class B Common Stock because the Committee took into consideration the potential benefits to the Company previously expressed by the Board of Directors of the continuity of share ownership and control of the Hovnanian family. The following describes the target multiple of base salary and form of payout for each NEO:

Although the Committee views both the stock and cash portions of the 2013 LTIP as multi-year incentive plan awards, they are reported differently for purposes of the Summary Compensation Table under “Executive Compensation” below. The share payout portions are reflected as “Stock Awards” in fiscal 2013 at their grant date fair value under FASB ASC Topic 718, which was based on the probable outcome as of the grant date. Conversely, the actual amounts earned on the cash payout portions, if any, will be reflected in the Summary Compensation Table as “Non-Equity Incentive Plan Compensation” in fiscal 2015 (which coincides with the end of the performance period) even though such payment remains subject to subsequent vesting restrictions.

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For purposes of the 2013 LTIP, “pre-tax profit” is defined as earnings (loss) before income tax expense as reflected on our audited financial statements, excluding the impact of any items deemed to be extraordinary items for financial reporting purposes and excluding losses from land impairments and losses from debt repurchases/debt retirement such as call premiums, above par purchase prices and related issuance costs. “Existing Homebuilding Debt” is defined as total (recourse) notes payable excluding accrued interest, as reflected on our consolidated audited balance sheet as of January 31, 2013 (the most current balance sheet at the time the 2013 LTIP was adopted), less any debt that has an equity component such as debt convertible into equity, tangible equity units and/or exchangeable notes. To qualify under the 2013 LTIP as a refinancing of “Existing Homebuilding Debt,” any such refinanced Existing Homebuilding Debt must have a minimum maturity date of five years from the date of the refinancing or be refinanced with a revolving line of credit.

The following table illustrates the percent of the target award that can be achieved at each performance level. Awards will be interpolated on a linear basis between performance levels but will not be extrapolated above the maximum performance levels listed below.

with the cash portion of the earned award value becoming vested and payable before any share portion of the earned award value becomes vested and payable.

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For fiscal ~~2012,~~2013, total perquisites and other personal benefits, and those that exceeded the greater of $25,000 or 10% of total perquisites and other personal benefits for each NEO, were as follows:

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~~(8)~~

Beginning in fiscal 2010, the Committee approved a $250,000 increase in the maximum annual bonus amount for the CEO, reported under “Non-Equity Incentive Plan Compensation,” in recognition of his increased responsibilities in assuming the position of Chairman of the Board.

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(2) ~~GRANTS~~GRANTS OF PLAN-BASED AWARDS IN FISCAL ~~2012~~

2013

The following table summarizes both:

(1) The potential equity and non-equity incentive plan awards that could have been or could be earned by each of the NEOs at the defined levels of “Threshold,” “Target” and “Maximum” based on the performance-based awards granted to the NEOs in fiscal ~~2012;~~2013; and

(2) All other plan-based awards, such as stock options and RSUs, granted in fiscal ~~2012.~~

2013.

Each of the following columns is described in the footnotes below the table.

Grants of Plan-Based Awards in Fiscal ~~2012~~

Grant
Estimated Possible Payouts Under Non-Equity
Incentive Plan Awards

Estimated Future
Payouts Under Equity Incentive Plan Awards (#)
All Other Stock Awards: Number of Shares of Stock or Units All Other Option Awards: Number of Securities Underlying Options (#) Exercise or Base Price of Option Awards ($/Sh) Grant Date Fair Value of Stock and Option Awards
Name Date Threshold Target Maximum Threshold Target Maximum (#) (4) (5) (6)
Ara K. (1) $0 — $949,500 N/A N/A N/A N/A
Hovnanian 02/10/2012 (2) 0 337,500 337,500 $1.93 $0
06/08/2012 (3) 600,000 $2.88 $1,032,000

J. Larry (1) $0 $350,000 $350,000 N/A N/A N/A N/A
Sorsby 02/10/2012 (2) 0 67,500 67,500 $1.93 $0
06/08/2012 (3) 120,000 $2.88 $206,400

Thomas J. (1) $0 $225,000 $350,000 N/A N/A N/A N/A
Pellerito 06/08/2012 (3) 80,000 $2.88 $137,600

Brad G. (1) $62,000 $93,000 $93,000 N/A N/A N/A N/A
O’Connor 06/08/2012 (3) 20,000 $2.16 $35,600

David G. (1) $72,500 $72,500 $72,500 N/A N/A N/A N/A
Valiaveedan 06/08/2012 (3) 15,000 $2.16 $26,700

2013

	Grant		Estimated Possible Payouts Under Non-Equity Incentive Plan Awards			Estimated Future Payouts Under Equity Incentive Plan Awards (#)			All Other Stock Awards: Number of Shares of Stock or Units	All Other Option Awards: Number of Securities Underlying Options (#)	Exercise or Base Price of Option Awards ($/Sh)	Grant Date Fair Value of Stock and Option Awards
Name	Date		Threshold	Target	Maximum	Threshold	Target	Maximum	(#)	(5)	(6)	(7)
Ara K.		(1)	$0	$—	$1,500,000	N/A	N/A	N/A	N/A
Hovnanian	3/11/2013	(2)				0	331,093	827,733				$1,966,692
	3/11/2013	(3)	$0	$1,311,127	$3,277,818
	6/14/2013	(4)				0	300,000	300,000		300,000	$6.28	$3,084,000

J. Larry		(1)	$0	$575,000	$575,000	N/A	N/A	N/A	N/A
Sorsby	3/11/2013	(2)				0	121,212	303,030				$719,999
	3/11/2013	(3)	$0	$480,000	$1,200,000
	6/14/2013	(4)				0	60,000	60,000		60,000	$6.28	$616,800

Thomas J.		(1)	$0	$415,000	$575,000	N/A	N/A	N/A	N/A
Pellerito	3/11/2013	(2)				0	121,212	303,030				$719,999
	3/11/2013	(3)	$0	$480,000	$1,200,000
	6/14/2013	(4)				0	40,000	40,000		40,000	$6.28	$411,200

Brad G.		(1)	$63,860	$191,580	$191,580	N/A	N/A	N/A	N/A
O’Connor	3/11/2013	(2)				0	32,253	80,633				$191,583
	3/11/2013	(3)	$0	$127,720	$319,300
	6/14/2013	(4)								20,000	$6.28	$102,800

David G.		(1)	$74,675	$149,350	$149,350	N/A	N/A	N/A	N/A
Valiaveedan	3/11/2013	(2)				0	30,172	75,430				$179,222
	3/11/2013	(3)	$0	$119,480	$298,700
	6/14/2013	(4)								15,000	$6.28	$77,100

(1)

Regular Bonuses for CEO and CFO. As stated above under “Regular Bonuses” in the Compensation Discussion and Analysis, the fiscal ~~2012~~2013 bonus formulas for Messrs. Hovnanian and Sorsby were based on the greater of (a) the ROACE calculation method or (b) the sum of the Adjusted EBITDA and ~~the EBITDA Improvement~~Cash Balances calculation method, ~~provided~~except that their ~~final~~total bonuses could not exceed ~~$949,500~~$1,500,000 and ~~$350,000,~~$575,000, respectively. These NEOs would not earn any bonus under the ROACE calculation method if the ROACE percentage (as defined above under “Regular Bonuses” in the Compensation Discussion and Analysis) was zero or lower (as was the case in fiscal ~~2012)~~2013) and would not earn any bonus under the Adjusted EBITDA ~~Improvement~~ calculation method if the Adjusted EBITDA ~~improvement~~ calculation (as discussed above under “Regular Bonuses” in the Compensation Discussion and Analysis) was $0 or lower. Because bonus amounts above those levels, however, would be interpolated, $0 has been disclosed at the “threshold” level for purposes of the above table for these NEOs.

For purposes of the above table presentation, bonuses earned at the “target” levels for the CEO and the CFO would be equal to the greater of (a) the ROACE calculation method assuming a “target” percentage of 15% in accordance with the respective bonus formula tables and (b) the amount that could be earned under the EBITDA Improvement calculation at the “target” level or the “mid-point” range of the respective bonus formula tables as described above under “Regular Bonuses” in the Compensation Discussion and Analysis, provided that their final bonuses could not exceed $949,500 and $350,000 for the CEO and CFO, respectively. Based on the greater of both components of their respective “target” levels of the bonus formulas, the ROACE portion of the bonus formulas would be greater than the EBITDA Improvement portion for Mr. Sorsby. As a result, the total cash bonus payable to Mr. Sorsby at this level would be capped at $350,000. Mr. Hovnanian’s ROACE calculation method would provide for a payment of 1.5% of pre-tax income and, because pre-tax income was not determinable at the time the fiscal 2012 bonus formula was established, no target amount is reflected for Mr. Hovnanian in the above table.

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The maximum cash bonuses that could be earned by Messrs. Hovnanian and Sorsby for fiscal 2012 under either the ROACE calculation method or the EBITDA Improvement calculation method in total were $949,500 and $350,000, respectively.

~~Regular Bonus for COO.~~ As stated above under “Regular Bonuses” in the Compensation Discussion and Analysis, the fiscal 2012 bonus formula for Mr. Pellerito was based on the EBITDA Improvement calculation method, provided that his bonus could not exceed $250,000. Mr. Pellerito would not earn any bonus under the EBITDA Improvement calculation method if the EBITDA improvement calculation (as discussed above under “Regular Bonuses” in the Compensation Discussion and Analysis) was $0 or lower. Because bonus amounts above that level, however, would be interpolated and because Mr. Pellerito would not earn any bonus under the Pre-tax Profit in Third and Fourth Fiscal Quarters component if the Company did not achieve pre-tax profitability in both the third and the fourth quarters of fiscal 2012, $0 has been disclosed at the “threshold” level for purposes of the above table for this NEO.

For purposes of the above table presentation, the bonus earned at the “target” level for the COO would be the amount that could be earned under the EBITDA Improvement calculation at the “target” level or the “mid-point” range of the bonus formula as described above under “Regular Bonuses” in the Compensation Discussion and Analysis plus an additional $100,000 if the Company achieved positive pre-tax profit in both the third and fourth fiscal quarters. The total cash bonus payable to Mr. Pellerito at this level would be $225,000.

The maximum cash bonus that could be earned by Mr. Pellerito for fiscal 2012 was $350,000, which consisted of the maximum bonus of $250,000 based on the EBITDA Improvement calculation method plus an additional $100,000 if the Company achieved positive pre-tax profit in both the third and fourth quarters of fiscal 2012.

~~Regular Bonuses for the Vice President — Chief Accounting Officer and Corporate Controller and the Vice President — Finance and Treasurer.~~ ~~As stated above under “Regular Bonuses” of the Compensation Discussion and Analysis, the fiscal 2012~~

For purposes of the above table presentation, bonuses earned at the “target” levels for the CEO and the CFO would be equal to the greater of (a) the ROACE calculation method assuming a “target” percentage of 15% in accordance with the respective bonus formula tables or (b) the amount that could be earned under the Adjusted EBITDA and Cash Balances calculation at the “target” level or the “mid-point” range of the respective bonus formula tables as described above under “Regular Bonuses” in the Compensation Discussion and Analysis, except that their total bonuses could not exceed $1,500,000 and $575,000 for the CEO and CFO, respectively. Based on the greater of both components of their respective “target” levels of the bonus formulas, the ROACE portion of the bonus formulas would be greater than the Adjusted EBITDA and Cash Balances portion for Mr. Sorsby. As a result, the total cash bonus payable to Mr. Sorsby at this level would be capped at $575,000. Mr. Hovnanian’s ROACE calculation method would provide for a payment of 1.5% of Pre-tax Profit and, because Pre-tax Profit was not determinable at the time the fiscal 2013 bonus formula was established, no target amount is reflected for Mr. Hovnanian in the above table.

The maximum cash bonuses that could be earned by Messrs. Hovnanian and Sorsby for fiscal 2013 under either the ROACE calculation method or the Adjusted EBITDA and Cash Balances calculation method in total were $1,500,000 and $575,000, respectively.

Regular Bonus for COO. As described above under “Regular Bonuses” in the Compensation Discussion and Analysis, the fiscal 2013 bonus formula for Mr. Pellerito was based solely on the Adjusted EBITDA and Cash Balances calculation method, except that his bonus could not exceed $575,000. Mr. Pellerito would not earn any bonus under the Adjusted EBITDA calculation method if the Adjusted EBITDA calculation (as discussed above under “Regular Bonuses” in the Compensation Discussion and Analysis) was $0 or lower. Because bonus amounts above that level, however, would be interpolated, $0 has been disclosed at the “threshold” level for purposes of the above table for this NEO.

For purposes of the above table presentation, the bonus earned at the “target” level for the COO would be the amount that could be earned under the Adjusted EBITDA and Cash Balances calculation at the “target” level of the bonus formula as described above under “Regular Bonuses” in the Compensation Discussion and Analysis. The total cash bonus payable to Mr. Pellerito at this level would be $415,000.

The maximum cash bonus that could be earned by Mr. Pellerito for fiscal 2013 was $575,000.

Regular Bonuses for the Vice President — Chief Accounting Officer and Corporate Controller and the Vice President — Finance and Treasurer.As stated above under “Regular Bonuses” of the Compensation Discussion and Analysis, the fiscal 2013 bonus formulas for Messrs. O’Connor and Valiaveedan were based on both the ROACE calculation method and the “Meeting Personal Objectives” method, subject to a cap equal to the maximum percentages of base salary they could achieve under the personal objectives portion of their respective bonus formulas. If the Company achieved positive Pre-tax Profit in fiscal 2013, the caps were 60% and 50% of base salary, respectively. If the Company did not achieve positive Pre-tax Profit in fiscal 2013, the caps would be 30% and 25% respectively.

For purposes of the above table presentation, the “threshold” level is defined as when the ROACE percentage and Pre-tax Profit are at or below zero and the “threshold” achievement of the personal objectives established for Messrs. O’Connor and Valiaveedan at the beginning of the fiscal year (as described above in the Compensation Discussion and Analysis under “Regular Bonuses”) is achieved. Based on the “threshold” level, these NEOs would not have earned a bonus payout for fiscal 2013 based on the ROACE percentage, but, based upon the “threshold” achievement of their personal objectives, Messrs. O’Connor and Valiaveedan would have earned bonus payouts of 20% and 30% of their base salary, respectively. However, because Mr. Valiaveedan’s bonus payout would exceed the cap of 25% of his base salary, his award would be capped. As a result, for fiscal 2013, Messrs. O’Connor and Valiaveedan at “threshold” would have earned total cash bonuses of $63,860 and $74,675, respectively.

For purposes of the above table presentation, the “target” level assumes the Company’s ROACE percentage is at 15%, the Company achieves positive Pre-tax Profit and the “target” or a “substantial” percentage of the personal objectives established for Messrs. O’Connor and Valiaveedan at the beginning of the fiscal year is achieved. Since the payouts based on their respective “target” levels would exceed the maximum percentages of base salary they could achieve under the personal objectives portion of their respective bonus formulas, the bonuses for Messrs. O’Connor and Valiaveedan at this level would be capped. The applicable caps of 60% and 50% of base salary for Messrs. O’Connor and Valiaveedan, respectively, would result in bonuses of $191,580 and $149,350, respectively.

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For purposes of this table presentation, the “maximum” level is defined as when the Company achieves Pre-tax Profit and when the maximum award earned under the ROACE calculation method and the maximum award if all or an “outstanding” percentage of the personal objectives established for Messrs. O’Connor and Valiaveedan at the beginning of the fiscal year are achieved. The maximum bonus payable under the ROACE calculation is capped at a 20% ROACE level for Messrs. O’Connor and Valiaveedan. Since the payouts based on the maximum level would exceed the maximum percentages of base salary they could achieve under the personal objectives portion of their respective bonus formulas, the bonuses for Messrs. O’Connor and Valiaveedan would be capped. The applicable caps of 60% and 50% of base salary for Messrs. O’Connor and Valiaveedan, respectively, would result in bonuses of $191,580 and $149,350, respectively.

(2)

2013 LTIP Stock Awards. Represents the share portion of each NEO’s 2013 LTIP award. Mr. Hovnanian’s share award was granted in the form of rights to receive shares of Class B Common Stock and the share portions of the 2013 LTIP awards for the remaining NEOs were granted in the form of rights to receive shares of Class A Common Stock. As a multi-year plan, the Committee considered the annualized target value of cash and share portions of the 2013 LTIP awards of $1,268,997, $464,576, $464,576, $123,616 and $115,641 for Messrs. Hovnanian, Sorsby, Pellerito, O’Connor and Valiaveedan, were based on both the ROACE calculation method and the “Meeting Personal Objectives” method, subject to a cap of 50% of the maximum percentages of base salary they could otherwise achieve under the personal objectives portion of their respective bonus formulas (the caps were 30% and 25% of base salary, respectively).respectively, in making its grants.

For purposes of the above table presentation, the “threshold” level is defined as when ~~the ROACE percentage~~pre-tax profit is at$50 million or ~~below zero~~less and ~~the “threshold” achievement~~refinancings of ~~the personal objectives established for Messrs. O’Connor and Valiaveedan~~or reductions in existing homebuilding debt are less than $125 million. Because payout levels above that level, however, would be interpolated, 0 shares has been disclosed at ~~the beginning of the fiscal year as described above in the Compensation Discussion and Analysis under “Regular Bonuses” is achieved. Based on~~ the “threshold” level ~~these NEOs would not have earned a bonus payout~~ for ~~fiscal 2012 based on~~purposes of the ROACE percentage, but, based upon the “threshold” achievement of their personal objectives, Messrs. O’Connor and Valiaveedan would have earned bonus payouts of 20% and 30% of their base salary, respectively. As a result, for fiscal 2012, Messrs. O’Connor and Valiaveedan at “threshold” would have earned total cash bonuses of $62,000 and $72,500, respectively. Since the payout based on Mr. Valiaveedan’sabove table. The “target” level ~~would exceed 50%~~is defined as when pre-tax profit is $100 million and refinancings of the maximum percentage of base salary he could otherwise achieve under the personal objectives portion of his bonus formula, the bonus for Mr. Valiaveedan at this level would be capped at $72,500 which is 25% of his base salary.

~~For purposes of this table presentation, the “target” level assumes the Company’s ROACE percentage is at 15% and the “target”~~ or a “substantial” percentage of the personal objectives established for Messrs. O’Connor and Valiaveedan at the beginning of the fiscal year is achieved. Since the payouts based on their respective “target” levels would exceed 50% of the maximum percentages of base salary they could otherwise achieve under the personal objectives portion of their respective bonus formulas, the bonuses for Messrs. O’Connor and Valiaveedan at this level would be capped at $93,000 and $72,500, respectively (the caps were 30% and 25% of base salary, respectively).

~~For purposes of this table presentation, the~~reductions in existing homebuilding debt are $205 million. The “maximum” level is defined as ~~the~~when pre-tax profit is $200 million or greater and refinancings of or reductions in existing homebuilding debt are $325 million or greater. The maximum ~~award earned under the ROACE calculation method and the maximum award if all or an “outstanding” percentage~~values of the ~~personal objectives established~~share portion of the 2013 LTIP awards were $4,916,734, $1,799,998, $1,799,998, $478,960 and $448,054 for Messrs. Hovnanian, Sorsby, Pellerito, O’Connor and Valiaveedan, ~~at the beginning~~respectively. The grant date fair value of the ~~fiscal year are achieved. The maximum bonus payable~~share portion of the 2013 LTIP awards is determined under ~~the ROACE calculation is capped at a 20% ROACE level for Messrs. O’Connor and Valiaveedan. Since the payouts based~~FASB ASC Topic 718 on the ~~maximum level would exceed 50%~~basis of the ~~maximum percentages~~expected outcome as of ~~base salary they could otherwise achieve under~~ the personal objectives portion of their respective bonus formulas, the bonuses for Messrs. O’Connor and Valiaveedan at this level would be capped at $93,000 and $72,500, respectively (30% and 25% of base salary, respectively).

~~(2)~~

Awards reported reflect the options modified on February 10, 2012. On February 10, 2012, the June 10, 2011 option awards of 337,500 and 67,500 for the CEO and CFO, respectively, and the June 10, 2011 RSU awards of 12,500 and 2,500 for the CEO and CFO, respectively, were amended to require that, asgrant date.

As a condition of ~~vesting,~~earning each portion of the ~~Company’s Adjusted EBITDA must exceed “fiscal 2011 actual EBITDA” for two consecutive fiscal years,~~2013 LTIP award, except in the case of ~~options, during~~death, disability or qualified retirement (as defined below), the ~~option term and, in~~NEO must be employed through the ~~case~~vesting dates. In the event of ~~RSUs,~~death prior to the ~~tenth anniversary~~end of the ~~grant date. Regardless~~performance period, the NEO’s beneficiary would be eligible for a pro rata award in January 2016 based on results for the full performance period and the number full months of ~~when~~service during the performance ~~criteria are met, vesting will not occur sooner than 25% per year beginning~~period. In the event of death following the end of the performance period, the NEO’s beneficiary would be eligible to receive any unpaid, earned portion of the award. In the event of termination due to disability prior to the end of the performance period, the NEO would be eligible to receive a pro rata award on the ~~second anniversary~~scheduled payout dates based on results for the full performance period and the number full months of service during the performance period. In the event of termination due to disability following the end of the ~~grant date.~~performance period, the NEO would be eligible to receive any unpaid, earned portions of the award on the scheduled payout dates as if there was no termination of employment. In the event of a qualified retirement following the end of the performance period, the NEO would be eligible to receive any unpaid, earned portions of the award on the scheduled payout dates as if there was no termination of employment. "Retirement" means termination of employment on or after age 60, or on or after age 58 with at least 15 years of "Service" to the Company and its subsidiaries immediately preceding such termination of employment. For this purpose, ~~“fiscal 2011 actual EBITDA” is~~"Service" means the ~~amount from our consolidated financial statements for~~period of employment immediately preceding Retirement, plus any prior periods of employment with the ~~year ended October 31, 2011. Adjusted EBITDA will be based on EBITDA from~~Company and its subsidiaries of one or more years' duration, unless they were succeeded by a period of non-employment with the ~~consolidated financial statements for~~Company and its subsidiaries of more than three years' duration.

(3)

2013 LTIP Cash Awards. Represents the ~~applicable fiscal year-end, excluding inventory impairment losses and land option write-offs and gains or losses on extinguishment~~cash portion of ~~debt. At the end of fiscal 2012,~~each NEO’s 2013 LTIP award. As a multi-year plan, the Committee ~~determined that~~considered the ~~Company’s Adjusted EBITDA exceeded fiscal 2011 actual EBITDA. No incremental fair~~annualized target value ~~was recognized under FASB AFC Topic 718~~of cash and share portions of the 2013 LTIP awards of: $1,268,997, $464,576, $464,576, $123,616 and $115,641 for Messrs. Hovnanian, Sorsby, Pellerito, O’Connor and Valiaveedan, respectively, in ~~connection with the modification of these options or RSU awards.~~making its grants.

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For purposes of the above table presentation, the “threshold” level is defined as when pre-tax profit is $50 million or less and refinancings of or reductions in existing homebuilding debt are less than $125 million. Because payout levels above that level, however, would be interpolated, $0 has been disclosed at the “threshold” level for purposes of the above table. The “target” level is defined as when pre-tax profit is $100 million and refinancings of or reductions in existing homebuilding debt are $205 million. The “maximum” level is defined as when pre-tax profit is $200 million or greater and refinancings of or reductions in existing homebuilding debt are $325 million or greater.

For the other conditions to earning each portion of the 2013 LTIP awards, see footnote (2) above.

~~(3)~~

(4)

Stock Option Awards.These rows represent the number of stock options ~~awarded~~granted to each NEO in fiscal ~~2012.~~2013. For the CEO, CFO and COO, 50% of the fiscal 2013 stock option awards were granted in the form of performance-based options. These performance-based options ~~have a premium exercise price set 33 1/3% above the closing stock price~~generally vest in four equal annual installments, commencing on the second anniversary of the grant ~~date.~~date, except that no portion of the award will vest unless the Committee determines that the Company achieved $100 million in pre-tax profit in at least one of fiscal 2014, fiscal 2015 or fiscal 2016. Mr. Hovnanian’s stock option award was granted in the form of options to purchase shares of Class B Common Stock and the stock option awards for the other NEOs were granted in the form of options to purchase shares of Class A Common Stock.

~~(4)~~

(5)

“All Other Option Awards: Number of Securities Underlying Options” Column. This column discloses the number of stock options (not tied to any financial or personal objectives performance measure) awarded to an NEO in fiscal ~~2012.~~ 2013. These stock options generally vest in four equal installments, commencing on the second anniversary of the grant date.

~~(5)~~

(6)

“Exercise or Base Price of Option Awards” Column. ~~With the exception of the June 8, 2012 grants for the CEO, CFO and COO, the~~The option exercise price is the closing price per share of the Company’s Class A Common Stock on the NYSE on the day of the option grant. ~~For the CEO, CFO and COO, options granted on June 8, 2012 have a premium exercise price set 33 1/3% above the closing stock price on the grant date.~~

~~(6)~~

(7)

“Grant Date Fair Value of Stock and Option Awards” Column.The grant date fair value of the stock option grants was computed in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts are set forth in Footnotes 3 and 1516 to the Company’s audited financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, ~~2012. This~~2013. The value for options was calculated based on the Black-Scholes option pricing model in which the option fair value as of the grant date ~~June 8, 2012~~(June 14, 2013) was determined to be ~~$1.72 for the CEO, CFO and COO and $1.78 for the other NEOs.~~ $5.14.

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(3) ~~OUTSTANDING~~OUTSTANDING EQUITY AWARDS AT FISCAL ~~2012~~2013 YEAR-END

The following table shows all unexercised stock options, unvested deferred shares, and unvested restricted stock units held at the end of fiscal ~~2012~~2013 by the NEOs.

Outstanding Equity Awards at Fiscal ~~2012~~2013 Year-End

OPTION AWARDS STOCK AWARDS
Name
Grant
Date (1)

Number of
Securities
Underlying
Unexercised
Options #
Exercisable

Number of
Securities
Underlying
Unexercised
Options #
Unexercisable

Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options #
Option Exercise Price ($)
Option
Expiration Date

Number of Shares or Units of
Stock that
have not
vested (#)

Market Value
of Shares or Units of
Stock that
have not
vested ($)

Equity
Incentive
Plan Awards:
Number of
Unearned
Shares or
other Rights
that have not
vested (#)

Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares or
other Rights
that have not
vested ($)

Ara Hovnanian (4) 06/13/08 281,250 93,750 — $ 6.46 06/12/18 — $ — — $ —
06/12/09 375,000 (2 ) 375,000 (2 ) — $ 2.55 06/11/19 — $ — — $ —
06/11/10 93,750 281,250 — $ 4.73 06/10/20 — $ — 1,385,970 (3 ) $ 5,959,671 (3 )
06/10/11 — — 337,500 (5 ) $ 1.93 06/09/21 — $ — 12,500 (5 ) $ 53,750
06/08/12 — 600,000 — $ 2.88 06/07/22 — $ — — $ —

J. Larry Sorsby (4) 06/13/08 56,250 18,750 — $ 6.46 06/12/18 — $ — — $ —
06/12/09 75,000 (2 ) 75,000 (2 ) — $ 2.55 06/11/19 — $ — — $ —
06/11/10 18,750 56,250 — $ 4.73 06/10/20 — $ — 507,400 (3 ) $ 2,181,820 (3 )
06/10/11 — — 67,500 (5 ) $ 1.93 06/09/21 — $ — 2,500 (5 ) $ 10,750
06/08/12 — 120,000 — $ 2.88 06/07/22 — $ — — $ —

Thomas J. Pellerito 01/23/03 20,000 — — $ 15.95 01/22/13 — $ — — $ —
06/13/08 10,000 — — $ 6.46 06/12/18 — $ — — $ —
06/12/09 35,000 — — $ 2.55 06/11/19 — $ — — $ —
06/11/10 50,000 — — $ 4.73 06/10/20 — $ — 422,833 (3 ) $ 1,818,182 (3 )
06/10/11 45,000 — — $ 1.93 06/09/21 — $ — — $ —
06/08/12 80,000 — — $ 2.88 06/07/22 — $ — — $ —

Brad G. O’Connor 06/13/08 11,250 3,750 — $ 6.46 06/12/18 — $ — — $ —
10/31/08 — — — $ — — — $ — 2,621 $ 11,270
06/12/09 12,500 12,500 — $ 2.55 06/11/19 — $ — — $ —
06/11/10 3,750 11,250 — $ 4.73 06/10/20 — $ — 118,393 (3 ) $ 509,090 (3 )
06/10/11 — 13,500 — $ 1.93 06/09/21 500 $ 2,150 — $ —
06/08/12 — 20,000 — $ 2.16 06/07/22 — $ — — $ —

David G. Valiaveedan 06/13/08 5,625 1,875 — $ 6.46 06/12/18 206 $ 886 — $ —
10/31/08 — — — $ — — — $ — 1,844 $ 7,929
06/12/09 6,564 6,561 — $ 2.55 06/11/19 728 $ 3,130 — $ —
06/11/10 2,813 8,437 — $ 4.73 06/10/20 937 $ 4,029 114,165 (3 ) $ 490,910 (3 )
06/10/11 — 11,250 — $ 1.93 06/09/21 1,250 $ 5,375 — $ —
06/08/12 — 15,000 — $ 2.16 06/07/22 — $ — — $ —

		OPTION AWARDS								STOCK AWARDS
Name	Grant Date (1)	Number of Securities Underlying Unexercised Options # Exercisable		Number of Securities Underlying Unexercised Options # Unexercisable		Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options #		OptionExercisePrice ($)	Option Expiration Date	Number of Shares or Units of Stock that have not vested (#)		Market Value of Shares or Units of Stock that have not vested ($)		Equity Incentive Plan Awards: Number of Unearned Shares or other Rights that have not vested (#)		Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares or other Rights that have not vested ($)
Ara Hovnanian	06/13/08	375,000		—		—		$6.46	06/12/18	—		—		—		—
	06/12/09	562,500	(2)	187,500	(2)	—		$2.55	06/11/19	—		—		—		—
	06/11/10	187,500		187,500		—		$4.73	06/10/20	539,462	(3)	$2,729,678	(3)	—		—
	06/10/11	84,375	(4)	253,125		—		$1.93	06/09/21	9,375	(4)	$47,438		—		—
	06/08/12	—		600,000		—		$2.88	06/07/22	—		—		—		—
	03/11/13	—		—		—		—	—	—		—		0	(5)	$0	(5)
	06/14/13	—		300,000		300,000	(6)	$6.28	06/13/23	—		—		—		—

J. Larry Sorsby	06/13/08	75,000		—		—		$6.46	06/12/18	—		—		—		—
	06/12/09	150,000	(2)	—		—		$2.55	06/11/19	—		—		—		—
	06/11/10	75,000		—		—		$4.73	06/10/20	—	(3)	—	(3)	—		—
	06/10/11	67,500	(4)	—		—		$1.93	06/09/21	1,875	(4)	$9,488		—		—
	06/08/12	120,000		—		—		$2.88	06/07/22	—		—		—		—
	03/11/13	—		—		—		—	—	—		—		0	(5)	$0	(5)
	06/14/13	60,000		—		60,000	(6)	$6.28	06/13/23	—		—		—		—

Thomas J. Pellerito	06/13/08	10,000		—		—		$6.46	06/12/18	—		—		—		—
	06/12/09	35,000		—		—		$2.55	06/11/19	—		—		—		—
	06/11/10	50,000		—		—		$4.73	06/10/20	—	(3)	—	(3)	—		—
	06/10/11	45,000		—		—		$1.93	06/09/21	—		—		—		—
	06/08/12	80,000		—		—		$2.88	06/07/22	—		—		—		—
	03/11/13	—		—		—		—	—	—		—		0	(5)	$0	(5)
	06/14/13	40,000		—		40,000	(6)	$6.28	06/13/23	—		—		—		—

Brad G. O’Connor	06/13/08	15,000		—		—		$6.46	06/12/18	—		—		—		—
	06/12/09	18,750		6,250		—		$2.55	06/11/19	—		—		—		—
	06/11/10	7,500		7,500		—		$4.73	06/10/20	46,082	(3)	$233,175	(3)	—		—
	06/10/11	3,375		10,125		—		$1.93	06/09/21	375		$1,898		—		—
	06/08/12	—		20,000		—		$2.16	06/07/22	—		—		—		—
	03/11/13	—		—		—		—	—	—		—		0	(5)	$0	(5)
	06/14/13	—		20,000		—		$6.28	06/13/23	—		—

David G. Valiaveedan	06/13/08	7,500		—		—		$6.46	06/12/18	—		—		—		—
	06/12/09	9,846		3,279		—		$2.55	06/11/19	363		$1,837		—		—
	06/11/10	5,626		5,624		—		$4.73	06/10/20	45,060	(3)	$228,004	(3)	—		—
	06/10/11	2,813		8,437		—		$1.93	06/09/21	937		$4,741		—		—
	06/08/12	—		15,000		—		$2.16	06/07/22	—		—		—		—
	03/11/13	—		—		—		—	—	—		—		0	(5)	$0	(5)
	06/14/13	—		15,000		—		$6.28	06/13/23	—		—		—		—

(1)

The options represented in the table (except as discussed in footnotes (2), (4) and ~~(5)~~(6) below) vest 25% per year beginning on the second ~~anniversary of the date of grant except for Mr. Pellerito whose January 23, 2003 option grant vested 25% per year beginning on the first~~ anniversary of the date of grant. In each case, upon termination due to death, disability or qualified retirement, the options, to the extent not previously vested and exercised, would become fully vested and ~~exercisable.~~exercisable, subject, in the case of the 2013 grants, to meeting the performance conditions discussed in footnote (6) below. The RSU awards represented in the table (except as discussed in footnote (4) below) vest 25% per year beginning on the second anniversary of the date of grant. In each case, upon termination due to death, disability or qualified retirement, but only if such retirement occurs on or after the first anniversary of the date of the grant, the RSUs, to the extent not previously vested and distributed, would become fully vested and distributable. Currently, ~~Mr.~~Messrs. Sorsby and Pellerito isare the only ~~NEO~~NEOs who isare retirement eligible and ~~qualifies~~qualify for accelerated vesting on the basis of retirement. Therefore, all of ~~Mr. Pellerito’s~~these NEOs’ outstanding options for which the performance conditions, if any, have been met have been treated as immediately vested, and ~~his~~Mr. Pellerito’s RSUs are treated as vested on the first anniversary of the grant date, for purposes of this table. In connection with the amendments to their options and RSUs awarded in fiscal 2011 described under footnote ~~(5)~~(4) below, Messrs. Hovnanian and Sorsby agreed to eliminate accelerated vesting of such RSUs on the basis of qualified retirement. In addition, following fiscal 2011 year-end, the Company entered into change in control severance agreements with Messrs. O’Connor and Valiaveedan pursuant to which their unvested options would become fully vested and exercisable if they are terminated under specified conditions following a change in control of the Company. All stock option and RSU grants were made in the form of Class A Common Stock except for the CEO, whose grants were made in the form of Class B Common Stock.

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(2)

Included in these numbers are 375,000 and 75,000 performance-based options for Mr. Hovnanian and Mr. Sorsby, respectively (50% of the options reflected in each column). These performance-based options follow the same ~~time~~ vesting schedule as standard stock options, ~~provided~~except that the Committee ~~determined~~must determine that ~~(1)~~(a) the Company’s EBITDA for fiscal 2009 was at least ~~$200,000,000~~$200 million greater than the Company’s EBITDA for fiscal 2008 and ~~(2)~~(b) the Company’s EBITDA for fiscal 2010 was at least ~~$300,000,000~~$300 million greater than the Company’s EBITDA for fiscal 2008. For this purpose, “EBITDA” was defined as the Company’s consolidated earnings before interest expense, income taxes, depreciation and amortization (but including inventory impairment loss and land option write-offs and gain on extinguishment of debt), determined in a manner consistent with the Company’s ordinary course practices for quarterly press release financial reporting purposes. At the end of fiscal 2009, the Committee determined that the first performance hurdle was achieved since the Company’s EBITDA for fiscal 2009 was at least ~~$200,000,000~~$200 million greater than in fiscal 2008. At the end of fiscal 2010, the Committee determined that the second performance hurdle was achieved since the Company’s EBITDA for fiscal 2010 was at least ~~$300,000,000~~$300 million greater than in fiscal 2008.

(3)

Represents the number and value of shares underlying the share portion of the 2010 LTIP awards granted on June 11, ~~2010. Because performance through the end of fiscal 2012 was between the target and maximum levels, the number and value of shares underlying the awards are~~2010 based on ~~maximum performance. There is no assurance~~actual results that are still subject to future vesting and reflecting the ~~LTIP awards will be earned at~~fact that Messrs. Sorsby and Pellerito are “retirement eligible” and qualify for accelerated vesting on the ~~levels shown above, and actual awards could be zero if the performance goals are not achieved.~~basis of retirement.

(4)

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

~~(5)~~

In February 2012, these awards were amended to require that, as a condition of vesting, the Company’s Adjusted EBITDA must exceed “fiscal 2011 actual EBITDA” for two consecutive fiscal years, in the case of options, during the option term and, in the case of RSUs, prior to the tenth anniversary of the grant date. Regardless of when the performance criteria are met, vesting will not occur sooner than 25% per year beginning on the second anniversary of the grant date. For this purpose, “fiscal 2011 actual EBITDA” is the amount from our consolidated financial statements for the year ended October 31, 2011. Adjusted EBITDA will be based on EBITDA from the consolidated financial statements for the applicable fiscal year-end, excluding inventory impairment losses and land option write-offs and gains or losses on extinguishment of debt. At the end of both fiscal 2012 and fiscal 2013, the Committee determined that the Company’s Adjusted EBITDA exceeded fiscal 2011 actual EBITDA and that the performance criteria of “two consecutive fiscal years” had ~~not yet~~ been met.

(5)

Represents the number and value of the shares underlying the share portion of the 2013 LTIP awards granted on March 11, 2013. Because no progress was made toward the 2013 LTIP goals through the end of fiscal 2013, the number and value of shares underlying the awards are reflected in the table at “threshold”, which is zero.

(6)

In fiscal 2013, the Committee determined that 50% of the stock options granted in June 2013 to the CEO, CFO and COO would be subject to performance conditions. These performance-based options vest in four equal annual installments, commencing on the second anniversary date of the grant, except that no portion of the award will vest unless the Committee determines that the Company achieved $100 million in pre-tax profit in at least one of fiscal 2014, fiscal 2015 or fiscal 2016. For this purpose, “pre-tax profit” is defined as earnings (losses) before income tax expense as reflected on our audited financial statements, excluding the impact of any items deemed by the Committee to be extraordinary items (for example, losses from land impairments and losses from debt repurchases/debt retirement such as call premiums, above par purchase prices and related issuance costs or gains from debt repurchases).

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The following table shows the total value of all unexercised stock options (exercisable and unexercisable) that each of the NEOs held at the end of fiscal ~~2012:~~

2013:

Value of Outstanding Option Awards at Fiscal ~~2012~~2013 Year-End (Supplemental Table)

Name Grant Date Number of Securities Underlying Unexercised Options Exercisable (#)
Value of Unexercised In The Money Options Exercisable
($) (a)
Number of Securities Underlying Unexercised Options Unexercisable (#) Value of Unexercised In The Money Options Unexercisable ($) (a)
Ara Hovnanian 06/13/08 281,250 $ 0 93,750 $ 0
06/12/09 375,000 $ 656,250 375,000 $ 656,250
06/11/10 93,750 $ 0 281,250 $ 0
06/10/11 — $ 0 337,500 $ 799,875
06/08/12 — $ 0 600,000 $ 852,000

J. Larry Sorsby 06/13/08 56,250 $ 0 18,750 $ 0
06/12/09 75,000 $ 131,250 75,000 $ 131,250
06/11/10 18,750 $ 0 56,250 $ 0
06/10/11 — $ 0 67,500 $ 159,975
06/08/12 — $ 0 120,000 $ 170,400

Thomas J. Pellerito 01/23/03 20,000 $ 0 — $ 0
06/13/08 10,000 $ 0 — $ 0
06/12/09 35,000 $ 61,250 — $ 0
06/11/10 50,000 $ 0 — $ 0
06/10/11 45,000 $ 106,650 — $ 0
06/08/12 80,000 $ 113,600 — $ 0

Brad G. O’Connor 06/13/08 11,250 $ 0 3,750 $ 0
06/12/09 12,500 $ 21,875 12,500 $ 21,875
06/11/10 3,750 $ 0 11,250 $ 0
06/10/11 — $ 0 13,500 $ 31,995
06/08/12 — $ 0 20,000 $ 42,800

David G. Valiaveedan 06/13/08 5,625 $ 0 1,875 $ 0
06/12/09 6,564 $ 11,487 6,561 $ 11,482
06/11/10 2,813 $ 0 8,437 $ 0
06/10/11 — $ 0 11,250 $ 26,663
06/08/12 — $ 0 15,000 $ 32,100

Name	Grant Date	Number of Securities Underlying Unexercised Options Exercisable (#)	Value of Unexercised In The Money Options Exercisable ($) (a)	Number of Securities Underlying Unexercised Options Unexercisable (#)	Value of Unexercised In The Money Options Unexercisable ($) (a)
Ara Hovnanian	06/13/08	375,000	$0	—	—
	06/12/09	562,500	$1,411,875	187,500	$470,625
	06/11/10	187,500	$61,875	187,500	$61,875
	06/10/11	84,375	$264,094	253,125	$792,281
	06/08/12	—	—	600,000	$1,308,000
	06/14/13	—	—	600,000	$0

J. Larry Sorsby	06/13/08	75,000	$0	—	—
	06/12/09	150,000	$376,500	—	—
	06/11/10	75,000	$24,750	—	—
	06/10/11	67,500	$211,275	—	—
	06/08/12	120,000	$261,600	—	—
	06/14/13	60,000	$0	60,000	$0

Thomas J. Pellerito	06/13/08	10,000	$0	—	—
	06/12/09	35,000	$87,850	—	—
	06/11/10	50,000	$16,500	—	—
	06/10/11	45,000	$140,850	—	—
	06/08/12	80,000	$174,400	—	—
	06/14/13	40,000	$0	40,000	$0

Brad G. O’Connor	06/13/08	15,000	$0	—	—
	06/12/09	18,750	$47,063	6,250	$15,688
	06/11/10	7,500	$2,475	7,500	$2,475
	06/10/11	3,375	$10,564	10,125	$31,691
	06/08/12	—	—	20,000	$58,000
	06/14/13	—	—	20,000	$0

David G. Valiaveedan	06/13/08	7,500	$0	—	—
	06/12/09	9,846	$24,713	3,279	$8,230
	06/11/10	5,626	$1,857	5,624	$1,856
	06/10/11	2,813	$8,805	8,437	$26,408
	06/08/12	—	—	15,000	$43,500
	06/14/13	—	—	15,000	$0

~~(a)~~

(a)

Based on the difference between the closing market price of the Company’s Class A Common Stock on the NYSE at October 31, ~~2012~~2013 and the exercise price of the options.

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(4) ~~OPTION~~OPTION EXERCISES AND STOCK VESTED IN FISCAL ~~2012~~

2013

The following table discloses information with respect to stock options exercised by the NEOs in fiscal ~~2012~~2013 and stock awards held by them that vested in fiscal ~~2012:~~

~~Option Exercises and Stock Vested in Fiscal 2012~~

Option Awards Stock Awards

Number of
Shares Acquired
on Exercise

Value Realized
on Exercise

Number of
Shares Acquired
on Vesting

Value Realized
on Vesting
Name (#) ($) (#) ($)
Ara K. Hovnanian   — — — —
J. Larry Sorsby — — — —
Thomas J. Pellerito — — 1,667 $3,517 (1)
Brad G, O’Connor   — — 3,779 $5,083 (2)
David G. Valiaveedan — — 3,365 $5,180 (2)

2013:

Option Exercises and Stock Vested in Fiscal 2013

	Option Awards		Stock Awards
	Number of Shares Acquired on Exercise	Value Realized on Exercise	Number of Shares Acquired on Vesting	Value Realized on Vesting
Name	(#)	($)	(#)	($)(6)
Ara K. Hovnanian	—	—	338,210	$1,711,343	(1)
J. Larry Sorsby	—	—	320,794	$1,623,218	(2)
Thomas J. Pellerito	—	—	266,807	$1,350,043	(3)
Brad G. O’Connor	—	—	31,370	$157,378	(4)
David G. Valiaveedan	—	—	30,643	$155,087	(5)

(1)

~~(1)~~

Represents 335,085 shares from the 2010 LTIP award and 3,125 shares from June 10, 2011 RSU grant that vested during fiscal 2013.

(2)

Represents ~~1,667 RSUs granted to Mr. Pellerito in fiscal 2011~~320,169 shares from the 2010 LTIP award that were all considered vested in fiscal ~~2012~~2013 due to Mr. Sorsby’s “retirement eligibility.” 122,674 of these shares were distributed in January 2014 and the remaining 197,495 shares are reflected in the Nonqualified Deferred Compensation Table. Also represents 625 shares from June 10, 2011 RSU grant that vested during fiscal 2013.

(3)

Represents 266,807 shares from the 2010 LTIP award that were all considered vested in fiscal 2013 due to Mr. Pellerito’s “retirement ~~eligibility,~~eligibility.” ~~but that~~102,228 of these shares were ~~not delivered~~distributed in January 2014 and the remaining 164,579 shares are reflected in the Nonqualified Deferred Compensation Table.

(4)

Represents (a) 28,624 shares from the 2010 LTIP award; (b) 125 shares from June 10, 2011 RSU grant; and (c) 2,621 shares from the deferred shares award granted for service performed in fiscal ~~2012. These RSUs had a market value of $3,517 as of~~year 2008 that vested during fiscal 2013.

(5)

Represents: (a) 27,602 shares from the 2010 LTIP award; (b) 206, 365, 313 and 313 shares from June 13, 2008, June 12, 2009, June 11, ~~2012, based~~2010 and June 10, 2011 RSU grants, respectively; and (c) 1,844 shares from the deferred shares award granted for service performed in fiscal year 2008 that vested during fiscal 2013.

(6)

Based on the closing price ~~for shares of Class A Common Stock on the first business day after the June 10, 2012 deemed vesting date.~~

~~(2)~~

~~Based on the closing market price~~ of the ~~Company's~~Company’s Class A Common Stock on the NYSE on the ~~date of vesting.~~vesting date.

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(5) ~~NONQUALIFIED~~NONQUALIFIED DEFERRED COMPENSATION FOR FISCAL ~~2012~~

2013

The following table provides a summary of the NEOs’ participation in the Company’s nonqualified executive deferred compensation plan ~~(“EDCP”)~~(EDCP) during fiscal ~~2012.~~2013. No deferrals under the EDCP were permitted in fiscal ~~2012.~~2013, and Messrs. O’Connor and Valiaveedan ~~are~~were not eligible to participate in the ~~EDCP. For~~EDCP prior to fiscal 2014. The table provides (1) for Mr. Pellerito, ~~the table also provides~~ information regarding RSUs that were considered to have vested in a prior fiscal year due to his “retirement eligibility” because of age and/or years of service, but upon which the underlying shares of Class A Common Stock have not yet been delivered, and (2) for Messrs. Sorsby and Pellerito, information regarding the stock portion of their 2010 LTIP awards that were considered to have vested in fiscal 2013 due to their “retirement eligibility” because of age and/or years of service, but upon which the underlying shares of Class A Common Stock have not yet been delivered.

Nonqualified Deferred Compensation for Fiscal ~~2012~~

Name
Executive
Contributions in
Last Fiscal Year

Registrant
Contributions in
Last Fiscal Year (1)

Aggregate
Earnings
in
Last Fiscal
Year (2)

Aggregate
Withdrawals/
Distributions (3)

Aggregate Balance at
Last Fiscal
Year (4)

Ara K. Hovnanian $ — $ — $ 990,293 $ 181,968 $ 1,469,486
J. Larry Sorsby $ — $ — $ 550,270 $ — $ 827,329
Thomas J. Pellerito $ — $ — $ — $ — $ —
$ — $ 3,517 $ 6,678 $ 1,851 $ 10,741
Brad G. O’Connor $ — $ — $ — $ — $ —
David G. Valiaveedan $ — $ — $ — $ — $ —

2013

Name	Executive Contributions in Last Fiscal Year	Registrant Contributions in Last Fiscal Year (1)	Aggregate Earnings in Last Fiscal Year (2)	Aggregate Withdrawals/ Distributions (3)	Aggregate Balance at Last Fiscal Year (4)
Ara K. Hovnanian	—	—	$259,723	—	$1,729,209
J. Larry Sorsby	—	—	$146,226	—	$973,554
	—	$999,325	—	—	$999,325
Thomas J. Pellerito	—	—	—	—	—
	—	$832,770	$3,192	$7,608	$839,095
Brad G. O’Connor	—	—	—	—	—
David G. Valiaveedan	—	—	—	—	—

(1)

~~(1)~~

~~Represents 1,667 RSUs granted to Mr. Pellerito~~

“Registrant Contributions in ~~fiscal 2011 that were considered vested in fiscal 2012 with a~~Last Fiscal Year” Column. This column represents the market value of ~~$3,517 as~~the share portion of ~~June 11, 2012,~~the 2010 LTIP awards for these NEOs that are deemed vested due to retirement eligibility but which will not be delivered until future years, based onupon the closing market price ~~for shares~~ of the Company’s Class A Common Stock on the ~~first business~~NYSE as of October 31, 2013, the last day ~~after~~of the ~~June 10, 2012 deemed vesting date.~~performance period of the 2010 LTIP. Of the amounts in this column, $592,173 and $493,477 were previously reported in the Summary Compensation Table for Messrs. Sorsby and Pellerito, respectively, and represent the FASB ASC Topic 718 grant date fair value assuming the probable outcome of the performance conditions.

(2)

~~(2)~~

“Aggregate Earnings in Last Fiscal Year” Column.This column represents the unrealized earnings/(losses) of the EDCP’s total account balance. For Mr. Pellerito, the second row under his name represents ~~earnings/(losses)~~earnings on the undelivered ~~portion~~portions of the shares of Class A Common Stock underlying his RSUs that had been considered vested in a prior fiscal ~~year,~~years, which ~~earnings/(losses)~~earnings have been “realized” only to the extent of the shares delivered during fiscal ~~2012. Also includes earnings/(losses) on the 1,667 RSUs that were considered vested in fiscal 2012.~~2013. No such earnings are considered above-market or preferential and, accordingly, are not included in the Summary Compensation Table.

(3)

~~(3)~~

“Aggregate Withdrawals/Distribution” Column.This column represents the payouts or distributions to the NEOs of vested amounts of deferred compensation pursuant to their elections. For Mr. Pellerito, the second row under his name represents the value “realized” upon the delivery of the ~~third~~fourth 25% of the shares of Class A Common Stock underlying his RSUs that had been considered vested in ~~a prior~~ fiscal ~~year,~~2009 and the first 25% of the shares of Class A Common Stock underlying his RSUs that had been considered vested in fiscal 2012, based upon the closing market price of the Company’s Class A Common Stock on the NYSE on the date of delivery.

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(4)

~~(4)~~

“Aggregate Balance at Last Fiscal Year” Column.For ~~Messrs.~~Mr. Hovnanian and ~~Sorsby,~~ the first row under Mr. Sorsby’s name,this column represents the net balance of their EDCP Deferred Share Deferral accounts based on the value of 341,741 and 192,402 deferred shares, respectively, as of October 31, ~~2012.~~2013. Such totals have been previously reported in the Summary Compensation Table and, due to the decrease in value, were previously reported as $12,144,650 and $2,439,784 for Messrs. Hovnanian and Sorsby, respectively, as the employee’s compensation. For ~~Mr. Pellerito,~~ the second row under ~~his name~~Messrs. Sorsby and Pellerito’s names, this column represents the market value of the ~~undelivered shares~~share portion of ~~Class A Common Stock underlying his RSUs granted in fiscal 2011~~their 2010 LTIP awards that ~~were considered~~are deemed vested ~~in fiscal 2012 (1,667 RSUs) and the remaining undelivered shares underlying his RSUs granted in fiscal 2008 that were considered vested in fiscal 2009 (831 RSUs),~~due to retirement eligibility but which will not be delivered until future years, based upon the closing market price of the Company’s Class A Common Stock on the NYSE as of October 31, ~~2012.~~2013. The grant date fair value of the ~~1,667~~2010 LTIP awards were $592,173 and $493,477 for Messrs. Sorsby and Pellerito, respectively, based upon the probable outcome of the performance conditions on the grant date and was included in the Summary Compensation Table in fiscal 2010. For Mr. Pellerito, the second row under his name also represents the market value of the undelivered shares of Class A Common Stock underlying his 1,250 RSUs granted in fiscal 2011 that were considered vested in fiscal ~~2012~~2013, based upon the closing market price of the Company’s Class A Common Stock on the NYSE as of October 31, 2013. The grant date fair value of the 1,250 RSUs granted to Mr. Pellerito that were considered vested in fiscal 2013 was ~~$3,217,~~$2,413, which amount was reported in the Summary Compensation Table in fiscal 2011. The grant date fair value of the remaining undelivered shares that were considered vested in fiscal 2009 was $5,368. Because these shares were awarded to Mr. Pellerito in fiscal 2008 prior to his becoming an NEO, this grant was not reflected in the Summary Compensation Table in fiscal 2008.

Narrative to the Nonqualified Deferred Compensation for Fiscal ~~2012~~2013 Table

The EDCP’s total account balance is equal to the “Deferred Share Deferral Account” balance. The “Deferred Share Deferral Account” balance includes the value of vested stock awarded under any Company stock incentive plan for which shares may have been deferred under the EDCP. Upon a termination of employment before retirement, EDCP account balances generally are paid in a lump sum during the 60-day period immediately following the last day of the calendar quarter of termination. Upon a termination of employment due to retirement, EDCP account balances for Messrs. Hovnanian and Sorsby will be paid in a lump sum no earlier than six months after the date of retirement or in installments over 2 to 15 years. In the event of Mr. Sorsby’s or Mr. Pellerito’s termination of employment for any reason, including death, disability or qualified retirement, all undelivered shares of Class A Common Stock underlying their 2010 LTIP awards and, in the case of Mr. Pellerito, his RSUs, that have been considered vested will be ~~delivered.~~delivered in accordance with the terms of these awards. See footnote (4) to the “Nonqualified Deferred Compensation for Fiscal ~~2012”~~2013” table above.

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(6) ~~POTENTIAL~~POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL TABLE

The following table summarizes payments and benefits that would be payable to each of the NEOs in the event of their termination of employment or upon the occurrence of a change-in-control (“triggering event”). For purposes of this table, the effective date of termination is assumed to be October 31, ~~2012,~~2013, the last business day of fiscal ~~2012.~~2013. The table does not include any payments that are described in the “Nonqualified Deferred Compensation for Fiscal ~~2012”~~2013” table above.

Potential Payments Upon Termination Or Change-In-Control Table

Named Executive Officer Voluntary Termination Involuntary Termination Change in Control (5)
Form of Compensation
With or Without Good
Reason

Normal
Retirement

Without
Cause
With Cause Death or Disability
Without
Termination
With Involuntary Termination Other Than for Cause or Termination with Good Reason
Ara K. Hovnanian
Accelerated vesting of annual bonus awards (1) — — $ 949,500 — $ 949,500 — —
Accelerated vesting of equity awards (2) — — — — $ 2,361,875 — —
Accelerated vesting of LTIP awards (3) — — — — $ 2,634,177 — —
Contractual disability/death payment (4) — — — — $ 10,000,000 —
Cash severance payment — — — — — — —
Accrued and unpaid vacation (6) — — — — — — —
Total — — $ 949,500 — $ 15,945,552 — —

J. Larry Sorsby
Accelerated vesting of annual bonus awards (1) — — $ 350,000 — $ 350,000 — —
Accelerated vesting of equity awards (2) — — — — $ 472,375 — —
Accelerated vesting of LTIP awards (3) — — — — $ 964.370 — —
Contractual disability/death payment — — — — — — —
Cash severance payment — — — — — — —
Accrued and unpaid vacation (6) $ 93,569 $
93,569
$
93,569
$
93,569
$
93,569
— $
93,569

Total $
93,569
$
93,569
$ 443,569 $
93,569
$ 1,880,314 — $
93,569

Thomas J. Pellerito
Accelerated vesting of annual bonus awards (1) $ 250,000 $ 250,000 $ 250,000 — $ 250,000 — —
Accelerated vesting of equity awards (2) —
—

—

—

—
— —
Accelerated vesting of LTIP awards (3) — — — — $ 803,640 — —
Contractual disability/death payment — — — — — — —
Cash severance payment — — — — — — —
Accrued and unpaid vacation (6) $ 32,682 $
32,682
$
32,682
$
32,682
$
32,682
— $
32,682

Total $ 282,682 $
282,682
$
282,682
$ 32,682 $ 1,086,322 — $
32,682

Brad G. O’Connor
Accelerated vesting of annual bonus awards (1) — — $ 93,000 — $ 93,000 — —
Accelerated vesting of equity awards (2) — — — — $ 110,090 — $ 110,090
Accelerated vesting of LTIP awards (3) — — — — $ 225,023 — —
Contractual disability/death payment — — — — — — —
Cash severance payment — — — — — — $ 397,560
Accrued and unpaid vacation (6) $ 16,526 $
16,526
$
16,526
$
16,526
$
16,526
— $
16,526

Total $
16,526
$
16,526
$ 109,526 $
16,526
$ 444,639 — $ 524,176

David G. Valiaveedan
Accelerated vesting of annual bonus awards (1) — — $ 72,500 — $ 72,500 — —
Accelerated vesting of equity awards (2) — — — — $ 91,595 — $ 91,595
Accelerated vesting of LTIP awards (3) — — — — $ 216,985 — —
Contractual disability/death payment — — — — — — —
Cash severance payment — — — — — — $ 359,617
Accrued and unpaid vacation (6) $ 19,920 $
19,920
$
19,920
$
19,920
$
19,920
— $
19,920

Total $
19,920
$
19,920
$ 92,420 $
19,920
$ 401,001 — $ 471,132

Named Executive Officer	Voluntary Termination		Involuntary Termination			Change in Control
Form of Compensation	With or Without Good Reason	Qualified Retirement	Without Cause	With Cause	Death or Disability	Without Termination	With Involuntary Termination Other Than for Cause or Termination with Good Reason
Ara K. Hovnanian
Accelerated vesting of annual bonus awards (1)	—	—	—	—	$1,500,000	—	—
Accelerated vesting of equity awards (2)	—	—	—	—	$2,680,219	—	—
Accelerated vesting of LTIP awards (3)	—	—	—	—	$2,729,678	—	—
Contractual disability/death payment (4)	—	—	—	—	$10,000,000	—	—
Cash severance payment	—	—	—	—	—	—	—
Accrued and unpaid vacation (6)	—	—	—	—	—	—	—
Total	—	—	—	—	$16,909,897	—	—

J. Larry Sorsby
Accelerated vesting of annual bonus awards (1)	$575,000	$575,000	—	—	$575,000	—	—
Accelerated vesting of equity awards (2)	—	—	—	—	$9,488	—	—
Accelerated vesting of LTIP awards (3)	—	—	—	—	—	—	—
Contractual disability/death payment	—	—	—	—	—	—	—
Cash severance payment	—	—	—	—	—	—	—
Accrued and unpaid vacation (6)	$95,877	$95,877	$95,877	$95,877	$95,877	—	$95,877
Total	$670,877	$670,877	$95,877	$95,877	$680,365	—	$95,877

Thomas J. Pellerito
Accelerated vesting of annual bonus awards (1)	$575,000	$575,000	—	—	$575,000	—	—
Accelerated vesting of equity awards (2)	—	—	—	—	—	—	—
Accelerated vesting of LTIP awards (3)	—	—	—	—	—	—	—
Contractual disability/death payment	—	—	—	—	—	—	—
Cash severance payment	—	—	—	—	—	—	—
Accrued and unpaid vacation (6)	$37,933	$37,933	$37,933	$37,933	$37,933	—	$37,933
Total	$612,933	$612,933	$37,933	$37,933	$612,933	—	$37,933

Brad G. O’Connor
Accelerated vesting of annual bonus awards (1)	—	—	—	—	$191,580	—	—
Accelerated vesting of equity awards (2) (5)	—	—	—	—	$109,751	—	$109,751
Accelerated vesting of LTIP awards (3) (5)	—	—	—	—	$233,175	—	$233,175
Contractual disability/death payment	—	—	—	—	—	—	—
Cash severance payment (5)	—	—	—	—	—	—	$442,720
Accrued and unpaid vacation (6)	$14,583	$14,583	$14,583	$14,583	$14,583	—	$14,583
Total	$14,583	$14,583	$14,583	$14,583	$549,089	—	$800,229

David G. Valiaveedan
Accelerated vesting of annual bonus awards (1)	—	—	—	—	$149,350	—	—
Accelerated vesting of equity awards (2) (5)	—	—	—	—	$89,729	—	$89,729
Accelerated vesting of LTIP awards (3) (5)	—	—	—	—	$224,846	—	$224,846
Contractual disability/death payment	—	—	—	—	—	—	—
Cash severance payment (5)	—	—	—	—	—	—	$395,600
Accrued and unpaid vacation (6)	$17,089	$17,089	$17,089	$17,089	$17,089	—	$17,089
Total	$17,089	$17,089	$17,089	$17,089	$481,014	—	$727,264

For purposes of this table presentation, consideration of the forms of compensation or additional payments or benefits to an NEO in the event of a triggering event includes:

(1)

Accelerated vesting of annual bonus awards.According to the Company’s bonus program’s policies and procedures, the fiscal ~~2012~~2013 performance-based bonus award is considered earned only if an NEO is on the payroll and employed by the Company on the date that it is scheduled to be paid. However, if an NEO’s termination were due to retirement on or after age 58, a reduction in force, position elimination, death or disability, the NEO would be eligible for a prorated payment through his termination date, less any amounts previously paid. The values in the table represent 100% of the NEOs’ fiscal ~~2012~~2013 bonuses that were payable no later than January 15, ~~2013.~~2014. Because ~~Mr.~~Messrs. Sorsby and Pellerito ~~has~~have reached age 58, any voluntary termination of ~~his~~their employment ~~other than for cause,~~ would be considered a qualified retirement. Bonus amounts payable with respect of fiscal 2013 are reflected in the Summary Compensation Table.

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(2)

Accelerated vesting of equity awards.Under circumstances other than death, disability or qualified retirement, any unvested stock options and RSUs are cancelled in accordance with the Company’s stock option and RSU agreements. ~~Due to~~Both Mr. ~~Pellerito's "retirement eligibility"~~Sorsby and Mr. Pellerito are “retirement eligible” under ~~these~~their stock option agreements and all of their outstanding stock options for which the performance conditions, if any, have been met are already considered vested. In addition, Mr. ~~Pellerito's~~Pellerito is “retirement eligible” under his RSU agreement and all of his outstanding ~~options and~~ RSUs are already considered vested. In February 2012, when Mr. Sorsby’s RSU award granted on June 10, 2011 was amended to include performance conditions, Mr. Sorsby forfeited his right to accelerated vesting upon retirement. The amounts in this table are calculated at the closing market price of the Company’s stock on October 31, ~~2012~~2013 ($~~4.30)~~5.06).

(3)

Accelerated vesting of LTIP awards.Except in the case of death, disability or ~~disability,~~qualified retirement, 2010 LTIP participants who terminate prior to the ~~end~~date of ~~the performance period (October 31, 2013)~~vesting forfeit ~~all of~~ their unvested 2010 LTIP awards. Therefore, no amounts are shown under “Voluntary Termination.” Similarly, no amounts are shown under “Involuntary Termination” except in the case of death or disability. In the case of death ~~prior to~~following the end of the performance period, the participant is eligible to receive ~~a prorated award payable in January 2014.~~the unpaid portion within 75 days. In the case of disability or qualified retirement, the participant is eligible to receive ~~a prorated award~~the unpaid portion in accordance with the following schedule: (1) 50% of the award ~~will become~~became vested on October 31, 2013 and payable in January 2014, (2) 30% of the award will become vested on October 31, 2014 and payable in January 2015 and (3) 20% of the award will become vested on October 31, 2015 and payable in January 2016. The values in the “Death or Disability” column represent ~~two-thirds~~the unvested portion (50%) of the NEOs’ LTIP award based on ~~performance through October 31, 2012~~actual results and, for the stock portion, based on the closing market price of the Company’s stock on October 31, ~~2012~~2013 ($~~4.30)~~5.06). Both Mr. Sorsby and Mr. Pellerito are “retirement eligible” under their 2010 LTIP agreements and all of their outstanding LTIP awards are already considered vested. No amounts have yet been earned under the 2013 LTIP.

(4)

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

(5)

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

(6)

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

For purposes of this table, the following programs were also considered.

●

Base salary continuation plan payments.The Company does not maintain such plans.

●

Contractual disability/death payments.Only Mr. Hovnanian has this arrangement, which is described under footnote (4) above.

●

Other perquisites and benefits.Except as noted above, there are no existing severance arrangements or policies which would extend perquisites or other benefits to the NEOs upon a triggering event that would not otherwise be also available to any employee of the Company.

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~~NON-EMPLOYEE~~

NON-EMPLOYEE DIRECTOR COMPENSATION

The Committee annually reviews the compensation program for ~~directors~~Directors who are not employees of the Company and makes recommendations to the Board of Directors for their approval. The Committee has periodically engaged ~~PM&P~~a consultant to conduct independent, comprehensive reviews of non-employee Director compensation, including a review of Director compensation for the Peer ~~Group which PM&P last conducted in 2010.~~Group. After consideration of the compensation philosophy, the historical and marketplace compensation values and practices for Directorcompensation, as well as the anticipated Director time commitments and value added activities for fiscal ~~2012,~~2013, the Committee recommended, and the Board of Directors approved, the continuation for fiscal ~~2012~~2013 of the annual retainers and meeting fees at the same levels as fiscal ~~2011.~~2012. These retainer and meeting fee levels have remain unchanged since fiscal 2005.

Prior to fiscal 2012, non-employee Directors generally received an annual grant consisting of a fixed number of 15,000 stock options with an additional 6,000 stock options for each committee on which a Director served. In fiscal 2011, however, due to the limited share reserves under the 2008 Plan, non-employee Directors received an annual grant consisting of a fixed number of 13,500 stock options and 500 RSUs with an additional 5,400 stock options and 200 RSUs for each committee on which a Director served. In May 2012, the Committee reviewed and determined the level of annual and committee equity grants. The Committee considered the grant date fair value of equity grants in comparison with historical grant values, information on general industry and Peer Group director compensation levels and practices, including a comprehensive review of non-employee Director compensation for the Peer Group prepared by the Company’s compensation department, and the added value and guidance the non-employee Directors provided in the strategic decisions concerning the Company’s capital structure and refinancing of the Company’s debt. Based on these factors, the Committee recommended and the Board of Directors approved for fiscal 2012, the adoption of a fixed value approach for Director equity awards, which is described below. The fixed value approach is a majority practice among general industry companies and is intended to avoid significant fluctuations in non-employee Director compensation from year-to-year. The Committee continued this approach in fiscal 2013. The total value of non-employee Director stock and stock option awards for fiscal ~~2012~~2013 was near the median of the Peer Group.

In May 2012, the Committee also authorized the amendment of the Executive Deferred Compensation Plan ~~(“EDCP”)~~(EDCP) to allow for Director deferrals of retainers, meeting fees and restricted share units, including a choice to defer such compensation until termination from the Board of Directors. Deferrals of stock retainers had been previously authorized under the EDCP.

Below is a summary of non-employee Director compensation for fiscal ~~2012:~~

2013:

●

Annual board retainer of $40,000 with an additional retainer of $20,000 for each committee on which a Director serves, ~~(each paid~~payable either 100% in ~~cash);~~cash or 50% in cash and 50% in stock at the Director’s election.

●

Annual ~~fixed value restricted share unit~~equity award valued at $50,000 for ~~each Director~~board service plus an additional $15,000 for each committee on which a Director ~~serves,~~serves. Directors may elect to receive RSUs based on the closing stock price on the date of grant ~~provided that, for fiscal 2012, Directors were given the opportunity to elect prior to~~or stock options based on the grant date ~~to receive stock options in lieu of restricted share units at a ratio 1.4 stock options per restricted share unit.~~Black-Scholes value.

●

Meeting fees of $3,000 per board meeting held in person, $2,000 per telephonic board meeting, $5,000 per committee meeting held in person and $2,500 per telephonic committee meeting.

For fiscal ~~2013,~~2014, the Committee determined that ~~the amounts of the annual and committee retainer payments to~~ non-employee ~~Directors~~Director compensation would remain the same ~~but~~as that ~~at each non-employee Director’s election, such payments may be made either 50%~~ in ~~cash and 50% in stock or 100% in cash. The Committee also determined that meeting fees would remain the same for~~ fiscal 2013.

In ~~addition, the Committee determined that, for fiscal~~connection with his departure in March 2013, ~~each Director would receive an annual fixed value restricted share unit~~Mr. Robbins received a $7,801 cash award ~~valued at $50,000 plus an additional $15,000 for each committee on which the Director serves, based on the closing stock price on the date~~in recognition of ~~grant, provided that, Directors will be given the opportunity to elect prior~~his many years of service to the ~~grant date to receive an equivalent value~~Board of ~~stock options in lieu of restricted share units.~~

Directors.

For additional information related to non-employee Director compensation, please also refer to the “Director Compensation for Fiscal ~~2012”~~2013” table below.

In conjunction with promoting high ethical standards for the distribution of equity-based incentives, the Committee ~~also~~ established the second Friday in January of each year as the date for payment of the non-employee Director annual and committee retainers and the date for establishment of the stock price for purposes of calculation of ~~the~~any stock portion of the non-employee Director annual and committee retainers. The Committee also established the second Friday in June as the date of the annual stock option and RSU grants for all non-employee Directors of the Company (other than newly elected directors), which is the same as the grant date for all employees. The Company’s practice of setting “fixed” equity award grant dates is designed to avoid the possibility that the Company could grant stock awards prior to the release of material, non-public information that is likely to result in an increase in its stock price, or delay the grant of stock awards until after the release of material, non-public information that is likely to result in a decrease in the Company’s stock price. Exercise prices of stock options granted to non-employee Directors were set at the closing price per share of the Company’s Class A Common Stock on the NYSE on the date the options were granted.

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The Board of Directors of the Company has adopted stock ownership guidelines, ~~recommended by the Committee,~~ which set forth recommended minimum amounts of stock ownership, directly or beneficially, for the Company’s non-employee Directors. The guidelines provide that non-employee Directors are requested to achieve and maintain stock ownership amounts which equal 2x3 times the total value of their annual retainer exclusive of any committee retainers (which represents ~~$80,000~~$120,000 in total) within 5five years after they become subject to the guidelines. Under the policy, once the stock ownership guidelines are met, they are deemed satisfied for subsequent annual review periods, regardless of decreases in the Company’s stock price on the New York Stock ~~Exchange, so long as the non-employee Director does not sell any portion of the share amounts which were originally included in determining that the recommended thresholds were met.~~

~~On an annual basis, the~~Exchange.

The Corporate Governance and Nominating Committee reviews adherence to the Company’s stock ownership guidelines ~~which are incorporated into the Company’s Corporate Governance Guidelines.~~on an annual basis. The Company believes these ownership guidelines further enhance the Company’s commitment to aligning the interests of non-employee Directors with those of its stockholders. As of ~~November 1, 2012,~~January 14, 2014, all incumbent, non-employee Directors were in compliance with these stock ownership guidelines.

Mr. Pagano was elected to the Board of Directors in March 2013 and has until March 2018 to meet these guidelines.

The following table summarizes the compensation of the Company’s non-employee Directors related to their ~~services~~service in fiscal ~~2012.~~

2013.

Director Compensation for Fiscal ~~2012~~

Name
Fees Earned
or Paid in Cash (1)
Stock Awards (2) Option Awards (3) Non-Equity Incentive Plan Compensation Change in Pension Value and Nonqualified Deferred Compensation Earnings
All Other
Compensation
Total
Robert B. Coutts $ 94,000 $ 65,001 $ — — — — $ 159,001
Edward A. Kangas $ 201,500 $ 94,999 $ — — — — $ 296,499
Joseph A. Marengi $ 89,000 $ 65,001 $ — — — — $ 154,001
John J. Robbins $ 134,000 $ — $ 74,991 — — — $ 208,991
Stephen D. Weinroth $ 206,500 $ — $ 109,600 — — — $ 316,100

2013

Name	Fees Earned or Paid in Cash (1)	Stock Awards (2)	Option Awards (3)	Non-Equity Incentive Plan Compensation	Change in Pension Value and Nonqualified Deferred Compensation Earnings	All Other Compensation (4)	Total
Robert B. Coutts	$128,500	$80,001	—	—	—	—	$208,501
Edward A. Kangas	$196,000	$94,998	—	—	—	—	$290,998
Joseph A. Marengi	$108,500	$80,001	—	—	—	—	$188,501
Vincent Pagano	$66,000	$64,998	—	—	—	—	$130,998
John J. Robbins	$55,500	—	—	—	—	$7,801	$63,301
Stephen D. Weinroth	$193,500	$80,001	—	—	—	—	$273,501

(1)

“Fees Earned or Paid in Cash” Column.The amounts in this column represent the combined value of fiscal ~~2012~~2013 annual retainer and meeting fees paid in cash or in stock, at non-employee Director’s election, as shown below. For a full description of the annual retainer and meeting fees, share awards and stock option awards to non-employee ~~directors,~~Directors, see the discussion preceding this table.

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Total Fees Earned ~~and~~or Paid in Cash (Supplemental Table)

Name FY12 Meeting Fees (a) FY12 Annual Retainer Fees Cash Payment (represents 100% of the total Annual Retainer Fees) Cash Total
Robert B. Coutts $ 34,000 $ 60,000 $ 94,000
Edward A. Kangas $ 101,500 $ 100,000 $ 201,500
Joseph A. Marengi $ 29,000 $ 60,000 $ 89,000
John J. Robbins $ 74,000 $ 60,000 $ 134,000
Stephen D. Weinroth $ 106,500 $ 100,000 $ 206,500

Name	FY13 Meeting Fees	FY13 Annual Retainer Fees	TotalFees Earned orPaid inCash
Robert B. Coutts (a)	$58,500	$70,000	$128,500
Edward A. Kangas	$96,000	$100,000	$196,000
Joseph A. Marengi (b)	$38,500	$70,000	$108,500
Vincent Pagano (c)	$16,000	$50,000	$66,000
John J. Robbins (d)	$25,500	$30,000	$55,500
Stephen D. Weinroth	$93,500	$100,000	$193,500

(a)

~~FY12 Meeting Fees include fees due to~~

Mr. Coutts received 50% of the annual committee retainer for his service on the Audit Committee ~~members~~since such service did not commence until March 2013.

(b)

Mr. Marengi received 50% of the annual committee retainer for his service on the Compensation Committee since such service did not commence until March 2013.

(c)

Mr. Pagano received 50% of the annual committee retainer for his service on the Corporate Governance and Nominating Committee since such service did not commence until March 2013.

(d)

Mr. Robbins received 50% of the annual board and committee retainer for his service on the Board and Audit Committee ~~Earnings Press Release~~since such service ended in March 2013.

Total Annual Retainer (Supplemental Table)

Name	FY13 Annual Retainer Fees Stock Payment (a) (b)	Number of Shares Represented	FY13 Annual Retainer Fees Cash Payment (b)	Total FY13 Annual Retainer Fees
Robert B. Coutts	$29,997	4,687	$40,003	$70,000
Edward A. Kangas	—	—	$100,000	$100,000
Joseph A. Marengi	—	—	$70,000	$70,000
Vincent Pagano	$24,996	4,370	$25,004	$50,000
John J. Robbins	—	—	$30,000	$30,000
Stephen D. Weinroth	—	—	$100,000	$100,000

(a)

Non-employee Director stock awards for the Annual Retainer Fee have no vesting restrictions and ~~Form 10-Q telephonic meetings that occurred between~~are valued as of the ~~third quarter~~closing market price of ~~fiscal 2010 through~~ the ~~first quarter~~Company's Class A Common Stock on the NYSE on the date of fiscal 2012. Such payments had not been paid to the Audit Committee members in prior years. The amounts related to prior years are $30,000, $35,000 and $32,500 for Messrs. Kangas, Robbins and Weinroth, respectively.grant.

(b)

Subject to rounding.

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(2)

“Stock Awards” Column.The amounts in this column represent the ~~aggregate~~ grant date fair value of RSUs awarded in fiscal ~~2012 and are~~2013 computed in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts are set forth in Footnotes 3 and 1516 to the Company’s audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, ~~2012.~~2013.

Grant Date Fair Value for the Total RSUs Granted to Non-Employee Directors in Fiscal ~~2012 (Supplemental~~2013

(Supplemental Table)

Name
Grant
Date

Number of RSUs
Granted (a)

Total Grant Date
Fair Value of RSUs

Robert B. Coutts 06/08/2012 30,093 $ 65,001
Edward A. Kangas 06/08/2012 43,981 $ 94,999
Joseph A. Marengi 06/08/2012 30,093 $ 65,001
John J. Robbins — — $ —
Stephen D. Weinroth — — $ —

Name	Grant Date	Number ofRSUs Granted (a)	Total Grant Date Fair Value of RSUs
Robert B. Coutts	06/14/2013	12,739	$80,001
Edward A. Kangas	06/14/2013	15,127	$94,998
Joseph A. Marengi	06/14/2013	12,739	$80,001
Vincent Pagano	06/14/2013	10,350	$64,998
John J. Robbins	—	—	—
Stephen D. Weinroth	06/14/2013	12,739	$80,001

(a)

For fiscal ~~2012,~~2013, non-employee Directors were granted RSUs valued at $50,000 on the grant date for serving on the Company’s Board of Directors and additional RSUs valued at $15,000 on the grant date for each Board committee on which the non-employee Director served, ~~provided~~except that Directors were given the opportunity to elect prior to the grant date to receive the equivalent value of options to purchase shares of Class A Common Stock in lieu of RSUs ~~at a ratio 1.4~~based on the grant date Black-Scholes value. No Directors elected to receive stock options ~~per RSU.~~in fiscal 2013. The vesting terms of RSUs are set forth in footnote (a) to the Outstanding Non-Employee Director Equity Awards at Fiscal 2013 Year-End (Supplemental Table) below. Mr. Robbins did not receive any RSUs since his service on the Board ended prior to the grant date.

(3)

“Option Awards” Column. ~~The amounts in this column reflect~~ No options to purchase shares of Class A Common Stock were awarded to any non-employee Director in fiscal ~~2012 and are based on the aggregate grant date fair value~~2013.

(4)

“All Other Compensation” Column. In connection with his departure in March 2013, Mr. Robbins received a $7,801 cash award in recognition of ~~the option awards computed in accordance with FASB ASC Topic 718. Assumptions used in the calculation~~his many years of ~~these amounts are set forth in Footnotes 3 and 15~~service to the ~~Company’s audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2012.~~Board of Directors.

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

~~Grant Date Fair Value for the Total Stock Options Granted to Non-Employee Directors in Fiscal 2012~~

~~(Supplemental Table)~~

Name

Grant
Date

Number of Options
Granted (a)
Total Grant Date Fair Value of Options
Robert B. Coutts — — $ —
Edward A. Kangas — — $ —
Joseph A. Marengi — — $ —
John J. Robbins 06/08/2012 42,130 $ 74,991
Stephen D. Weinroth 06/08/2012 61,573 $ 109,600

~~(a)~~

For fiscal 2012, non-employee Directors were given the opportunity to elect prior to the grant date to receive options to purchase shares of Class A Common Stock in lieu of RSUs at a ratio of 1.4 stock options per RSU.

The following table shows all unexercised stock options and unvested RSUs that each of the non-employee ~~directors~~Directors held at the end of fiscal ~~2012:~~

2013:

Outstanding Non-Employee Director Equity Awards at Fiscal ~~2012~~2013 Year-End (Supplemental Table)

OPTION AWARDS STOCK AWARDS
Name
Grant Date
(a)
Number of Securities Underlying Unexercised Options Exercisable (#)
Value of Unexercised
In The Money Options Exercisable
($) (b)
Number of Securities Underlying Unexercised Options Unexercisable (#)
Value of Unexercised
In The Money Options Unexercisable ($) (b)

Option
Exercise
Price ($)
Option
Expiration Date
Number of Shares or Units of Stock that have not vested (#) Market Value of Shares or Units of Stock that have not vested ($)
Robert B. Coutts 06/13/08 7,000 $ 0 — $ 0 $ 6.46 06/12/18 — $ —
06/12/09 21,000 $ 36,750 — $ 0 $ 2.55 06/11/19 — $ —
06/11/10 21,000 $ 0 — $ 0 $ 4.73 06/10/20 — $ —
06/10/11 18,900 $ 44,793 — $ 0 $ 1.93 06/09/21 — $ —
06/08/12 — $ 0 — $ 0 $ 2.16 06/07/22 30,093 $ 129,400

Edward A. Kangas 06/13/08 11,000 $ 0 — $ 0 $ 6.46 06/12/18 — $ —
06/12/09 33,000 $ 57,750 — $ 0 $ 2.55 06/11/19 — $ —
06/11/10 33,000 $ 0 — $ 0 $ 4.73 06/10/20 — $ —
06/10/11 29,700 $ 70,389 — $ 0 $ 1.93 06/09/21 — $ —
06/08/12 — $ 0 — $ 0 $ 2.16 06/07/22 43,981 $ 189,118

Joseph A. Marengi 06/13/08 7,000 $ 0 — $ 0 $ 6.46 06/12/18 — $ —
06/12/09 21,000 $ 36,750
—
$ 0 $ 2.55 06/11/19 — $ —
06/11/10 14,000 $ 0 7,000 $ 0 $ 4.73 06/10/20 — $ —
06/10/11 6,300 $ 14,931 12,600 $ 29,862 $ 1.93 06/09/21 466 $ 2,004
06/08/12 — $ 0 — $ 0 $ 2.16 06/07/22 30,093 $ 129,400

John J. Robbins 06/13/08 7,000 $ 0 — $ 0 $ 6.46 06/12/18 — $ —
06/12/09 21,000 $ 36,750 — $ 0 $ 2.55 06/11/19 — $ —
06/11/10 21,000 $ 0 — $ 0 $ 4.73 06/10/20 — $ —
06/10/11 18,900 $ 44,793 — $ 0 $ 1.93 06/09/21 — $ —
06/08/12 42,130 $ 90,158 — $ 0 $ 2.16 06/07/22 — $ —

Stephen D. Weinroth 06/13/08 11,000 $ 0 — $ 0 $ 6.46 06/12/18 — $ —
06/12/09 33,000 $ 57,750 — $ 0 $ 2.55 06/11/19 — $ —
06/11/10 33,000 $ 0 — $ 0 $ 4.73 06/10/20 — $ —
06/10/11 29,700 $ 70,389 — $ 0 $ 1.93 06/09/21 — $ —
06/08/12 61,573 $ 131,766 — $ 0 $ 2.16 06/07/22 — $ —

		OPTION AWARDS						STOCK AWARDS
Name	Grant Date (a)	Number of Securities Underlying Unexercised Options Exercisable (#)	Value of Unexercised In The Money Options Exercisable ($) (b)	Number of Securities Underlying Unexercised Options Unexercisable (#)	Value of Unexercised In The Money Options Unexercisable ($) (b)	Option Exercise Price ($)	Option Expiration Date	Number of Shares or Units of Stock that have not vested (#)	Market Value of Shares or Units of Stock that have not vested ($)
Robert B. Coutts	06/13/08	7,000	$0	—	—	$6.46	06/12/18	—	—
	06/12/09	21,000	$52,710	—	—	$2.55	06/11/19	—	—
	06/11/10	21,000	$6,930	—	—	$4.73	06/10/20	—	—
	06/10/11	18,900	$59,157	—	—	$1.93	06/09/21	—	—
	06/08/12	—	—	—	—	$2.16	06/07/22	—	—
	06/14/13	—	—	—	—	$6.28	06/13/23	12,739	$64,459

Edward A. Kangas	06/13/08	11,000	$0	—	—	$6.46	06/12/18	—	—
	06/12/09	33,000	$82,830	—	—	$2.55	06/11/19	—	—
	06/11/10	33,000	$10,890	—	—	$4.73	06/10/20	—	—
	06/10/11	29,700	$92,961	—	—	$1.93	06/09/21	—	—
	06/08/12	—	—	—	—	$2.16	06/07/22	—	—
	06/14/13	—	—	—	—	$6.28	06/13/23	15,127	$76,543

Joseph A. Marengi	06/13/08	7,000	$0	—	—	$6.46	06/12/18	—	—
	06/12/09	21,000	$52,710	—	—	$2.55	06/11/19	—	—
	06/11/10	21,000	$6,930	—	—	$4.73	06/10/20	—	—
	06/10/11	18,900	$59,157	—	—	$1.93	06/09/21	—	—
	06/08/12	—	—	—	—	$2.16	06/07/22	—	—
	06/14/13	—	—	—	—	$6.28	06/13/23	12,739	$64,459

Vincent Pagano	06/14/13	—	—	—	—	$6.28	06/13/23	10,350	$52,371

John J. Robbins	06/13/08	7,000	$0	—	—	$6.46	06/12/18	—	—
	06/12/09	21,000	$52,710	—	—	$2.55	06/11/19	—	—
	06/11/10	21,000	$6,930	—	—	$4.73	06/10/20	—	—
	06/10/11	18,900	$59,157	—	—	$1.93	06/09/21	—	—
	06/08/12	42,130	$122,177	—	—	$2.16	06/07/22	—	—

Stephen D. Weinroth	06/13/08	11,000	$0	—	—	$6.46	06/12/18	—	—
	06/12/09	33,000	$82,830	—	—	$2.55	06/11/19	—	—
	06/11/10	33,000	$10,890	—	—	$4.73	06/10/20	—	—
	06/10/11	29,700	$92,961	—	—	$1.93	06/09/21	—	—
	06/08/12	61,573	$178,562	—	—	$2.16	06/07/22	—	—
	06/14/13	—	—	—	—	$6.28	06/13/23	12,739	$64,459

(a)

Stock options vest one-third per year beginning on the first anniversary of the date of grant. If, prior to the stock option termination date, the non-employee Director ceases to be a member of the Board of Directors due to death, disability or ~~Retirement,~~retirement, the stock option, to the extent not previously vested and exercised, immediately becomes fully vested and exercisable. RSUs vest one-third per year beginning on the first anniversary of the date of grant; provided, however, that, if the non-employee Director ceases to be a member of the Board of Directors due to death, disability or ~~Retirement, but~~retirement (but only if such ~~Retirement~~retirement occurs on or after the first anniversary of the date of the ~~grant,~~grant), the RSUs, to the extent not previously vested and distributed, would become fully vested and distributable. “Retirement” is defined as termination as a member of the Board of Directors on or after age 60, or on or after age 58 with at least 15 years of ~~Service~~service to the Company immediately preceding such termination. All stock option and RSU grants were made in the form of Class A Common Stock. Currently, ~~Messrs. Coutts, Kangas, Robbins and Weinroth qualify~~each non-employee Director qualifies for accelerated vesting on the basis of ~~their~~his eligibility for retirement and, therefore, all options granted to these Directors are treated as immediately vested, and all RSUs are treated as vested on the first anniversary of the grant date for the purposes of this table.

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(b)

Based on the difference between the closing market price of the Company’s Class A Common Stock on the NYSE at October 31, ~~2012~~2013 and the exercise price of the options.

~~THE~~

THE AUDIT COMMITTEE

Membership, Independence, & Qualifications

For fiscal ~~2012,~~2013, Messrs. Kangas, as Chairman, ~~Robbins~~Coutts and Weinroth were the members of the Audit Committee. The Company’s Board of Directors has determined that each member of the Audit Committee is independent as required by both the rules of the NYSE and regulations of the SEC, and that Messrs. Kangas and Weinroth are each an “audit committee financial expert” in accordance with SEC regulations. With regard to Mr. Kangas, the Board of Directors considered his significant experience, expertise and background with regard to accounting matters, including the broad perspective brought by his experience in consulting to clients in many diverse industries. With regard to Mr. Robbins, the Board of Directors considered his significant experience, expertise and background with regard to accounting matters, which includes specialization in homebuilding companies. With regard to Mr. Weinroth, the Board of Directors considered his many years of experience as a Managing Member or partner in several merchant and investment banking ~~companies, which are very valuable~~companies. In addition, with regard to Mr. Coutts, the Board of Directors considered the following in appointing him to the ~~Company as it continues to evaluate its debt profile~~audit committee: his significant experience, expertise and ~~capital structure and~~background serving in various ~~financing and refinancing alternatives.~~

executive management positions, including at Fortune 500 companies.

Responsibilities of the Audit Committee & Charter

The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors and is governed by its Charter, which is available on the Company’s public website, www.khov.com, under “Investor Relations/Corporate Governance.”

Policies & Procedures Established By Audit Committee

In accordance with SEC regulations, the Audit Committee has established procedures for the appointment, compensation, retention and oversight of the independent registered public accounting firm engaged to prepare or issue an audit report or other audit, review, or attest services. The Company’s independent registered public accounting firm reports directly to the Audit Committee, and the Audit Committee is responsible for the resolution of disagreements between such firm and management regarding financial reporting.

~~In fiscal year 2003, the~~

The Audit Committee has established whistle blowing procedures as required by Section 301 of the Sarbanes-Oxley Act of 2002 and ~~Section 303A.07(c)(iii)~~Rule 10A-3 of the ~~NYSE Corporate Governance Rules.~~Exchange Act. These procedures are discussed in the Company’s Code of Ethics ~~(Section IV.G.)~~ which is available on the Company’s public website at www.khov.com under “Investor Relations/Corporate Governance.”

Audit and Non-Audit Services Pre-Approval Policy

The Audit Committee has also established procedures for the pre-approval of audit and permitted non-audit services provided by an independent registered public accounting firm. The Company’s “Audit and Non-Audit Services Pre-Approval Policy” (“Pre-Approval Policy”) was most recently reviewed and approved by the Audit Committee at its meeting held on ~~November 13, 2012.~~

October 17, 2013.

As set forth in the Pre-Approval Policy, audit services require specific approval by the Audit Committee, except for certain services that have received general pre-approval by the Audit Committee.

In accordance with the Pre-Approval Policy, the Audit Committee annually reviews and pre-approves the services that may be provided by the independent registered public accounting firm without obtaining specific pre-approval from the Audit Committee. Prior to establishing the list of pre-approved services, the Audit Committee determines if the Company’s independent registered public accounting firm is an effective provider of services. The Audit Committee may revise the list of general pre-approved services from time to time, based on subsequent determinations. For fiscal year ~~2012,~~2013, there ~~are~~were four categories of services that ~~have~~ received general pre-approval by the Audit Committee: Audit, Audit-Related, Tax and All Other Services and the pre-approved dollar amount for such services may not exceed $100,000 per engagement.

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The Audit Committee may delegate to one or more of its members the authority to approve in advance all significant audit or permitted non-audit services to be provided by the independent registered public accounting firm, so long as decisions are presented to the full Audit Committee at its next scheduled meeting.

~~THE~~

THE AUDIT COMMITTEE REPORT

Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls over financial reporting. In fulfilling its oversight responsibilities, the Audit Committee has reviewed and discussed the audited financial statements for the fiscal year ended October 31, ~~2012~~2013 with management. This review included a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements.

The Audit Committee has reviewed with the independent registered public accounting firm, which is responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles:

●

the overall scope and plans for such accounting firm’s ~~respective~~ audits of the Company,

●

such accounting firm’s judgments as to the quality, not just the acceptability, of the Company’s accounting principles,

●

such accounting firm’s independence from management and the Company, including matters in the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Accounting Oversight Board, which we refer to as the PCAOB, concerning independence and received by the Company, and

●

such other matters as are required to be discussed with the Audit Committee under generally accepted auditing standards and under ~~Statements on Auditing Standards~~PCAOB Standard No. ~~61, as amended (AICPA, Professional Standards Vol. I. AU Section 380), as adopted by the Public Company Accounting Oversight Board, which we refer to as the PCAOB, in Rule 3200T,~~16, “Communications with Audit Committees,” other standards of the PCAOB, rules of the ~~Securities and Exchange Commission,~~SEC, and other applicable regulations.

The Audit Committee, under the Audit Committee Charter, reviews with management the Company’s annual audited financial statements and quarterly financial statements prior to their being filed with the SEC. The Audit Committee, in reliance on the reviews and discussions referred to above, recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, ~~2012.~~

2013.

AUDIT COMMITTEE

Edward A. Kangas, Chair

~~John J. Robbins~~

Robert B. Coutts

Stephen D. Weinroth

~~FEES~~

FEES PAID TO PRINCIPAL ACCOUNTANT

Audit Fees

The aggregate fees billed by Deloitte & Touche LLP in each of fiscal ~~2012~~2013 and ~~2011~~2012 for professional services rendered for the audit of our consolidated financial statements, for the reviews of the unaudited condensed consolidated financial statements included in our Quarterly Reports on Form 10-Q for the quarterly periods during fiscal ~~2012~~2013 and ~~2011,~~2012, the audit of the effectiveness of the Company’s internal control over financial reporting as of October 31, 2013 and 2012, and ~~2011, or~~ for services normally provided by our independent registered public accounting firm in connection with statutory or regulatory filings or engagements, including comfort and consent letters in connection with SEC filings and financing transactions, were ~~$2,995,940~~$2,039,000 and ~~$2,721,000,~~$2,308,300, respectively. ~~There were no fees billed by Ernst & Young LLP in fiscal 2012 for these audit services. The aggregate fees billed by Ernst & Young LLP in fiscal 2011 for these audit services were $208,000.~~

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Audit-Related Fees

The aggregate fees billed by Deloitte & Touche LLP in ~~both~~each of fiscal ~~2012~~2013 and ~~2011~~2012 for assurance and related services that were reasonably related to performance of the audit or review of the Company’s consolidated financial statements and that are not reported under “Audit Fees” above were ~~$2,000.~~$2,500 and $2,000, respectively. These fees were primarily for electronic access to the Deloitte & Touche LLP Technical Library. ~~There were no fees billed by Ernst & Young LLP in either of fiscal 2012 and 2011 for these audit-related services~~

Tax Fees

The aggregate fees billed by Deloitte & Touche LLP in fiscal 2012 ~~and 2011~~ for professional services rendered for tax compliance, tax advice and tax planning were ~~$21,000 and $22,000, respectively. The aggregate~~$7,900. There were no fees billed for professional services rendered for tax compliance, tax advice or tax planning by ~~Ernst~~Deloitte & ~~Young~~Touche LLP in ~~each of~~ fiscal ~~2012 and 2011 for these tax services were $33,000 and $38,000, respectively.~~

2013.

All Other Fees

There were no fees billed for products and services provided by Deloitte & Touche LLP ~~or by Ernst & Young LLP~~ in either of fiscal 2013 or 2012 ~~and 2011~~ other than the services described above.

Pre-Approval Policies and Procedures

All of the services covered under the captions “Audit Fees,” “Audit-Related Fees,” “Tax Fees” and “All Other Fees” were pre-approved by the Audit Committee. For a discussion of the Audit Committee’s pre-approval policies and procedures, see “The Audit Committee” above.

~~PRINCIPAL~~

PRINCIPAL ACCOUNTANT INDEPENDENCE

The Audit Committee has determined that the provision of all non-audit services performed by Deloitte & Touche LLP ~~and Ernst & Young LLP~~ were compatible with maintaining the independence of ~~each~~such firm.

~~CORPORATE~~

CORPORATE GOVERNANCE

The Corporate Governance and Nominating Committee is primarily responsible for reviewing the Company’s existing Corporate Governance Guidelines and further developing such guidelines and other policies and procedures that enhance the Company’s corporate governance.

In accordance with promoting strong corporate governance, the Company has adopted a Code of Ethics that applies to its principal executive officer, principal financial officer, controller and all other associates of the Company, including its Directors and other officers. The Company has also adopted Corporate Governance Guidelines.

The Company makes available to the public various corporate governance related information on its public website (www.khov.com) under “Investor Relations/Governance” and to any shareholder who requests such information in writing. Information on the website includes the Company’s Code of Ethics, Corporate Governance Guidelines (including the Related Person Transaction Policy) and Charters of the Audit Committee, the Compensation Committee, and the Corporate Governance and Nominating Committee.

Shareholders, associates of the Company and other interested parties may communicate directly with the Board of Directors by corresponding to the address below. Correspondence will be discussed at the next scheduled meeting of the Board of Directors, or as indicated by the urgency of the matter.

Attn: Board of Directors of Hovnanian Enterprises, Inc.

c/o Mr. Edward A. Kangas, Director & Chairman of the Audit Committee

Privileged & Confidential

Hovnanian Enterprises, Inc.

110 West Front Street

P.O. Box 500

Red Bank, N.J. 07701

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The Company’s non-employee Directors meet without management after each regularly scheduled meeting of the Board of Directors. The presiding Director is selected to preside at these executive sessions by the directors in attendance.

Shareholders, associates of the Company and other interested parties may communicate directly with non-employee Directors as a group by corresponding to the address below. Following this Annual Meeting and, assuming the election of all the director nominees, members of the non-employee Director group will include: Messrs. Coutts, Kangas, Marengi, Pagano and Weinroth. All such non-employee Directors are “independent” in accordance with NYSE rules and as defined under the Company's Certificate of Incorporation. Mr. Kangas will report to all non-employee Directors any correspondence which is received by him as indicated by the urgency of the matter, or at the next scheduled meeting of non-employee Directors.

Attn: Non-Employee Directors of Hovnanian Enterprises, Inc.

c/o Mr. Edward A. Kangas, Director & Chairman of the Audit Committee

Privileged & Confidential

Hovnanian Enterprises, Inc.

110 West Front Street

P.O. Box 500

Red Bank, N.J. 07701

In addition, associates of the Company may anonymously report concerns or complaints via the K. Hovnanian Corporate Governance Hotline or by following the procedure discussed in the Company’s Code of Ethics.

~~OVERSIGHT~~

OVERSIGHT OF RISK MANAGEMENT

The Company is exposed to a number of risks and undertakes at least annually an Enterprise Risk Management review to identify and evaluate these risks and to develop plans to manage them effectively. The Company’s Executive Vice President and Chief Financial Officer, Mr. Sorsby (who is himself a member of the Board of Directors), is directly responsible for the Company’s Enterprise Risk Management function and reports both to the President, Chief Executive Officer and Chairman and to the Audit Committee in this capacity. In fulfilling his risk management responsibilities, the CFO works closely with members ofsenior management,including the Vice President — Corporate Counsel, Vice President — Risk Management, Vice President — Human Resources, Vice President — Chief Information Officer, Vice President — Audit Services, including persons performing the functions of such officers, and others.

On behalf of the Board of Directors, the Audit Committee plays a key role in the oversight of the Company’s Enterprise Risk Management function. In that regard, the CFO meets with the Audit Committee at least four times a year to discuss the risks facing the Company, highlighting any new risks that may have arisen since they last met. The Audit Committee also reports to the Board of Directors on a regular basis to apprise them of their discussions with the CFO regarding the Company’s Enterprise Risk Management efforts. ~~Finally,~~

In fiscal 2013, we systematically reviewed all of our incentive compensation programs for potential risk areas as well the ~~CFO reports directly~~key enterprise risks facing the Company and concluded that our compensation programs were not reasonably likely to have a material adverse effect on the ~~Board of Directors on at least an annual basis to apprise them directly of the Company’s Enterprise Risk Management efforts.~~

Company.

By design, the Company’s compensation program for executive officers does not incentivize excessive risk-taking. Our base salary component of compensation does not encourage risk-taking because it is a fixed amount. The remaining elements of executive officer compensation have the following risk-limiting characteristics:

●

We do not provide guaranteed bonuses, nor have we awarded excessively large equity grants with unlimited upside but no downside risk;

●

In recent years ~~when~~as industry conditions have been difficult and ROACE bonuses were not attainable, bonuses based on ~~net debt or EBITDA improvements~~the other bonus metrics have been capped based on specific dollar amounts;

●

We maintain a balanced portfolio between long-term and short-term; fixed and variable; and cash and equity in our compensation program;

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●

We use a variety of performance measures ~~are used~~ in our short-term and long-term incentive plans;

●

We do not provide lucrative severance packages or any ~~supplemental~~defined benefit pension plans;

●

A large portion of our compensation program is tied to long-term and sustained company performance, and our LTIP ~~grant requires~~grants require a two-year holding period for full vesting even after awards are earned after a ~~three-year~~multi-year performance period;

●

Our incentive plans are not tied to formulas that could focus executives on specific short-term outcomes to the detriment of long-term results;

●

The Compensation Committee reserves the right to apply negative discretion to bonus amounts calculated under the bonus formulas; and

●

Our CEO, CFO and COO are subject to our stock ownership and holding guidelines, discussed on page ~~36; and~~49.

~~Our compensation programs do not provide high or inappropriate pay opportunities compared to our Peer Group and broad-based compensation survey data.~~

~~LEADERSHIP~~

LEADERSHIP STRUCTURE

From 1997 to 2009, the Company had separate individuals serving as Chairman of the Board and as Chief Executive Officer. This structure reflected the continuing strong leadership, energy and passion brought to the Board of Directors by our founder, Mr. Kevork Hovnanian, and the day-to-day management direction of the Company under Mr. Ara Hovnanian as President and CEO. Following the death of Mr. K. Hovnanian in September 2009, the Board of Directors appointed Mr. A. Hovnanian to the additional position of Chairman, believing that his more than 30 years of service to the Company, vast industry experience and close relationship with our founder uniquely qualified him for this role. The Board of Directors believes that combining these positions under Mr. A. Hovnanian’s leadership has enabled him to carry on the tradition of a strong leader that has always marked this family-controlled company and to successfully navigate the Company through the current challenging economic environment, as well as any future challenges. In the view of the Board of Directors, this leadership structure also enables the Board of Directors to better fulfill its risk oversight responsibilities, as described above under “Oversight of Risk Management.”

Although the Board of Directors has not formally designated a lead independent Director, Mr. Kangas, the chairman of the Audit Committee, serves as the Director to whom correspondence may be directed on behalf of both the Board of Directors and the non-employee Directors, as described above under “Corporate Governance” beginning on page ~~58.~~

~~CERTAIN~~73.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Board of Directors has adopted a written Related Person Transaction Policy (the “Related Person Transaction Policy”) to assist it in reviewing, approving and ratifying related person transactions and to assist the Company in the preparation of related disclosures required by the SEC. This Related Person Transaction Policy supplements the Company’s other policies that may apply to transactions with related persons, such as the Company’s Corporate Governance Guidelines and its Code of Ethics.

The Related Person Transaction Policy provides that all Related Person Transactions (as defined in the Related Person Transaction Policy) covered by the Related Person Transaction Policy and involving a director, director ~~nominees,~~nominee, executive officer or greater than 5% shareholder or an immediate family member of any such person are prohibited, unless approved or ratified by the disinterested members of the Board of Directors or the Corporate Governance and Nominating Committee. The Company’s employees, directors, director nominees, executive officers and their immediate family members are required to provide prompt and detailed notice of any purported Related Person Transaction to the Company’s Corporate Counsel or Chief Financial Officer, who in turn must promptly forward such notice and information to the Chairperson of the Board of Directors or the Corporate Governance and Nominating Committee and will advise the Corporate Governance and Nominating Committee or disinterested directors as to whether the Related Person Transaction will be required to be disclosed in applicable regulatory filings. The Company’s Corporate Counsel will document all non-reportable and reportable Related Person Transactions.

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In reviewing Related Person Transactions for approval or ratification, the Corporate Governance and Nominating Committee or disinterested directors will consider the relevant facts and circumstances, including, without limitation:

●

the commercial reasonableness of the terms of the transaction;

	●
	·	the benefit and perceived benefit (or lack thereof) to the Company;

	●
	·	opportunity costs of alternate transactions;

●

the materiality and character of the related person’s direct or indirect interest, and the actual or apparent conflict of interest of the related person; and

	●
	·	with respect to a non-employee director or nominee, whether the transaction would compromise the director’s (1) independence under the NYSE rules and Rule 10A-3 of the Exchange Act, if such non-employee director serves on the Audit Committee; (2) independence under the Company’s Certificate of Incorporation; (3) status as an “outside director” under Section 162(m) of the Internal Revenue Code if such non-employee director serves on the Compensation Committee; or (4) status as a “non-employee director” under Rule 16b-3 of the Exchange Act if such non-employee director serves on the Compensation Committee.

The Corporate Governance and Nominating Committee or the disinterested directors will not approve or ratify a Related Person Transaction unless, after considering all relevant information, it has determined that the transaction is in, or is not inconsistent with, the Company’s best interests and the best interests of its shareholders.

Generally, the Related Person Transaction Policy applies to any current or proposed transaction in which:

●

the Company was or is to be a participant;

	●
	·	the amount involved exceeds $120,000; and

	●
	·	any related person had or will have a direct or indirect material interest.

A copy of our Related Person Transaction Policy is available as part of our Corporate Governance Guidelines on our website at www.khov.com under “Investors Relations/Corporate Governance.”

Related Person Transactions

~~The related transactions discussed below were entered into prior to the adoption of our Related Person Transaction Policy and were approved by the Board of Directors.~~

During the year ended October 31, 2003, we entered into an agreement (as subsequently amended) to purchase land in California for approximately $31.4 million from an entity that is owned by Hirair Hovnanian, a family relative of our Chairman of the Board and Chief Executive Officer. As of October 31, 2012, we have an option deposit of $3.0 million related to this land acquisition agreement. In accordance with ASC 810-10, we no longer have any balance consolidated under “Consolidated inventory not owned” in the Consolidated Balance Sheets. Neither the Company nor the Chairman of the Board and Chief Executive Officer has a financial interest in the relative’s company from whom the land was purchased.

The following transactions were reviewed, approved and ratified by the Board of Directors or by the Corporate Governance and Nominating Committee in accordance with our Related Person Transaction Policy:

During the fiscal years ended October 31, 2013, 2012 ~~2011~~ and ~~2010,~~2011, an engineering firm owned by Tavit Najarian, a relative of our Chairman of the Board and Chief Executive Officer, provided services to the Company totaling $0.8 million, $0.9 million, ~~$1.0 million~~ and ~~$1.3~~$1.0 million, respectively. Neither the Company nor the Chairman of the Board and Chief Executive Officer has a financial interest in the relative’s company from whom the services were provided.

During the fiscal ~~years~~year ended October 31, 2011, ~~and 2010,~~ a real estate development firm owned by Mazin Kalian, a relative of our Chairman of the Board and Chief Executive Officer, provided consulting services to the Company totaling less than $0.1 million, ~~and $0.2 million, respectively,~~ including significant travel related expenses. The consulting services consisted primarily of negotiations, community design and cost analysis on a potential joint venture. During the fiscal ~~year~~years ended October 31, 2013 and 2012, there were no consulting services provided. Neither the Company nor the Chairman of the Board and Chief Executive Officer has or had a financial interest in the relative’s company from whom the services were provided.

In November 2012, one of our joint ventures in which we have a 50% interest sold an option to acquire a parcel of land for approximately $5.5 million. The total cost to the buyer was approximately $11.1 million and on which the commission was paid. ~~The~~John Pellerito, the son of Mr. Pellerito, one of our executive officers, was employed by the brokerage firm that handled the transaction and received $145,710 as a commission in connection with the transaction. Mr. Pellerito did not have a financial interest in the brokerage firm involved in the transaction nor did he receive any portion of the commission paid to his son.

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Ms. Jovana Pellerito, the daughter-in-law of Mr. Pellerito, one of our executive officers, is employed by the Company and, in fiscal 2013, her total compensation, including salary, commissions and other benefits, totaled approximately $172,000. Her compensation is commensurate with that of similarly situated employees in her position.

The Company has a significant interest in the amount of estate tax liabilities and any necessary sales by the Estate of Kevork S. Hovnanian, deceased, and other members of the Hovnanian family of their assets (which includes a significant amount of shares of the Company’s Class A Common Stock and Class B Common Stock) to pay such liabilities because the benefit of federal net operating loss carryforwards (“NOLs”) to the Company would be significantly reduced or eliminated if we were to experience an “ownership change” as defined in Section 382 of the Internal Revenue Code. Based on recent impairments and current financial performance, the Company has generated NOLs of approximately $1.5 billion through the fiscal year ended October 31, 2013, and may generate NOLs in future years. During fiscal 2013, an outside law firm was retained to advise the Executors of the Estate and other members of the Hovnanian family in connection with estate tax planning. The fees and other charges of such legal services during fiscal 2013 totaled $249,653, of which (1) the Company and (2) the Estate and Hovnanian family each paid half. Kevork S. Hovnanian was the founder and former Chairman of our Company. Our current Chairman of the Board and Chief Executive Officer and other members of his immediate family are Executors and among the beneficiaries of the will of Kevork S. Hovnanian.

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~~IMPORTANT~~

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON MARCH ~~12, 2013~~

11, 2014

Our ~~2013~~2014 proxy statement, the Company’s Annual Report to Shareholders for the year ended October 31, ~~2012~~2013 (which is not deemed to be part of the official proxy soliciting materials), proxy cards (for Class A Common Stock shareholders and registered Class B Common Stock shareholders) and any amendments to the foregoing materials that are required to be furnished to shareholders are available online atwww.proxyvote.com.

For information on how to obtain directions to the Company’s ~~2013~~2014 Annual Meeting, please call our Investor Relations department at 1-800-815-9680.

~~GENERAL~~

GENERAL

Solicitation

The solicitation of proxies is being made by our Board of Directors on our behalf primarily through the internet and by mail, but directors, officers, employees, and contractors retained by us may also engage in the solicitation of proxies by telephone. The cost of soliciting proxies will be borne by us. In addition, we may reimburse brokers, custodians, nominees and other record holders for their reasonable out-of-pocket expenses in forwarding proxy material to beneficial owners.

Voting

Unless otherwise directed, the persons named in the proxy card(s) intend to vote all shares represented by proxies received by them in favor of the election of the nominees to the Board of Directors of the Company named herein, in favor of the ratification of the selected independent registered public accounting firm, in favor of ~~amending~~ the ~~Certificate of Incorporation to increase the number of authorized shares of Class A Common~~2012 Hovnanian Enterprises, Inc. Amended and Restated Stock Incentive Plan, in favor of ~~amending~~ the ~~Certificate of Incorporation to increase the number of authorized shares of Class B Common Stock,~~Amended and Restated Hovnanian Enterprises, Inc. Senior Executive Short-Term Incentive Plan and in favor of the compensation of the Company’s named executive officers, and as recommended by the Board of Directors. All proxies will be voted as specified.

Each share of Class A Common Stock entitles the holder thereof to one vote, and each share of Class B Common Stock entitles the holder thereof to ten votes (except as provided below). Votes of Class A Common Stock and Class B Common Stock will be counted together without regard to class for proposals that require the affirmative vote of the holders of a majority of the votes cast. All votes will be certified by the Inspectors of Election, who are employees of the Company. Abstentions and broker non-votes will have no effect on the vote for proposal one and proposal five, because such shares are not considered votes cast. Abstentions will have no effect on the vote for ~~proposals~~proposal two, ~~three and four~~ because such shares are not considered votes cast. Under the rules of the NYSE, abstentions will count as a vote “against” proposals three and four, and broker non-votes will have no effect on the vote for proposals three and four. Brokers may vote shares with respect to ~~proposals~~proposal two ~~three and four~~ in the absence of client instructions and thus there will be no broker non-votes with respect to ~~proposals two, three and four.~~

proposal two.

Notwithstanding the foregoing, the Company’s Certificate of Incorporation provides that each share of Class B Common Stock held, to the extent of the Company’s knowledge, in nominee name by a stockbroker, bank or otherwise will be entitled to only one vote per share unless the Company is satisfied that such shares have been held continuously, since the date of issuance, for the benefit or account of the same named beneficial owner of such shares (as defined in the Certificate of Incorporation) or any Permitted Transferee (as defined in the Certificate of Incorporation). Beneficial owners of shares of Class B Common Stock held in nominee name wishing to cast ten votes for each share of such stock must properly complete their voting instruction card, which is specially designed for beneficial owners of Class B Common Stock. The Company has also supplied nominee holders of Class B Common Stock with instructions and specially designed proxy cards to accommodate the voting of the Class B Common Stock. In accordance with the Company’s Certificate of Incorporation, shares of Class B Common Stock held in nominee name will be entitled to ten votes per share only if the beneficial owner voting instruction card and the nominee proxy card relating to such shares is properly completed, mailed, and received not less than 3 nor more than 20 business days prior to March ~~12, 2013.~~11, 2014. Proxy cards should be mailed to Vote Processing, c/o Broadridge Financial Solutions, Inc., 51 Mercedes Way, Edgewood, N.Y. 11717.

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Additional Matters

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

~~SHAREHOLDER~~

SHAREHOLDER PROPOSALS FOR THE ~~2014~~2015 ANNUAL MEETING

Under the SEC’s rules and regulations, any stockholder desiring to submit a proposal to be included in our ~~2014~~2015 proxy statement must submit such proposal to us at our principal executive offices to the attention of our Secretary no later than the close of business on September ~~28, 2013.~~

29, 2014.

Our restated bylaws require timely notice of business to be brought before a shareholders’ meeting, including nominations of persons for election as directors. To be timely, a stockholder’s notice must be delivered to our Secretary at our principal executive offices not earlier than 120 days prior to the first anniversary of the ~~2013~~2014 Annual Meeting (November ~~12, 2013)~~11, 2014) but not later than 90 days prior to such anniversary date (December ~~12, 2013)~~11, 2014), provided, however, that in the event that the date of the ~~2014~~2015 annual meeting is advanced by more than 20 days, or delayed by more than 70 days, from such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made. Our restated bylaws have other requirements that must be followed in connection with submitting director nominations and any other business for consideration at a shareholders’ meeting.

By Order of the Board of Directors

HOVNANIAN ENTERPRISES, INC.

Red Bank, New Jersey

January ~~28, 2013~~

27, 2014

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Appendix A

2012 HOVNANIAN ENTERPRISES, INC.

AMENDED AND RESTATED STOCK INCENTIVE PLAN

1.
PURPOSE OF THE PLAN

The purpose of the Plan is to aid the Company and its Affiliates in recruiting and retaining key employees, directors and consultants of outstanding ability and to motivate such employees, directors and consultants to exert their best efforts on behalf of the Company and its Affiliates by providing incentives through the granting of Awards. The Company expects that it will benefit from the added interest which such key employees, directors or consultants will have in the welfare of the Company as a result of their proprietary interest in the Company’s success.

2.
DEFINITIONS

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

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

(b) Affiliate: With respect to the Company, any entity directly or indirectly controlling, controlled by, or under common control with, the Company or any other entity designated by the Board in which the Company or an Affiliate has an interest.

(d) Beneficial Owner: A “beneficial owner”, as such term is defined in Rule 13d-3 under the Act (or any successor rule thereto).

(e) Board: The Board of Directors of the Company.

(f) Change in Control:

The occurrence of any of the following events:

(i) any Person (other than a Person holding securities representing 10% or more of the combined voting power of the Company’s outstanding securities as of the Effective Date, or any Family Member of such a Person, the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company), becomes the Beneficial Owner, directly or indirectly, of securities of the Company, representing 50% or more of the combined voting power of the Company’s then-outstanding securities;

(ii) during any period of twenty-four consecutive months (not including any period prior to the Effective Date), individuals who at the beginning of such period constitute the Board, and any new director (other than (A) a director nominated by a Person who has entered into an agreement with the Company to effect a transaction described in Sections 2(f) (i), (iii) or (iv) of the Plan or (B) a director nominated by any Person (including the Company) who publicly announces an intention to take or to consider taking actions (including, but not limited to, an actual or threatened proxy contest) which if consummated would constitute a Change in Control) whose election by the Board or nomination for election by the Company’s shareholders was approved in advance by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof;

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(iii) the consummation of any transaction or series of transactions under which the Company is merged or consolidated with any other company, other than a merger or consolidation which results in the shareholders of the Company immediately prior thereto continuing to own (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 65% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or

(iv) the consummation of a complete liquidation of the Company or the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a liquidation of the Company into a wholly-owned subsidiary.

(g) Code: The Internal Revenue Code of 1986, as amended, or any successor thereto.

(h) Committee: The Compensation Committee of the Board (or a subcommittee thereof as provided under Section 4), or such other committee of the Board to which the Board has delegated power to act under or pursuant to the provisions of the Plan, or the full Board.

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

(j) Disability: Inability of a Participant to perform in all material respects his duties and responsibilities to the Company, or any Subsidiary of the Company, by reason of a physical or mental disability or infirmity which inability is reasonably expected to be permanent and has continued (i) for a period of six consecutive months or (ii) such shorter period as the Committee may reasonably determine in good faith. The Disability determination shall be in the sole discretion of the Committee and a Participant (or his representative) shall furnish the Committee with medical evidence documenting the Participant’s disability or infirmity which is satisfactory to the Committee.

(k) Effective Date: January 10, 2012, the date the Plan (prior to the amendment and restatement thereof) was initially adopted by the Board.

(l) Fair Market Value: On a given date, the closing price of the Shares as reported on such date on the Composite Tape of the principal national securities exchange on which such Shares are listed or admitted to trading, or, if no Composite Tape exists for such national securities exchange on such date, then on the principal national securities exchange on which such Shares are listed or admitted to trading, or, if the Shares are not listed or admitted on a national securities exchange, the arithmetic mean of the per Share closing bid price and per Share closing asked price on such date as quoted on the National Association of Securities Dealers Automated Quotation System (or such market in which such prices are regularly quoted), or, if there is no market on which the Shares are regularly quoted, the Fair Market Value shall be the value established by the Committee in good faith. If no sale of Shares shall have been reported on such Composite Tape or such national securities exchange on such date or quoted on the National Association of Securities Dealer Automated Quotation System on such date, then the immediately preceding date on which sales of the Shares have been so reported or quoted shall be used.

(m) Family Member:

(i) any Person holding securities representing 10% or more of the combined voting power of the Company’s outstanding securities as of the Effective Date;

(ii) any spouse of such a person;

(iii) any descendant of such a person;

(iv) any spouse of any descendant of such a person; or

(v) any trust for the benefit of any of the aforementioned persons.

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(n) ISO: An Option that is also an incentive stock option granted pursuant to Section 6(d) of the Plan.

(o) Other Stock-Based Awards: Awards granted pursuant to Section 8 of the Plan.

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

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

(r) 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.

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

(t) 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).

(u) Plan: The 2012 Hovnanian Enterprises, Inc. Amended and Restated Stock Incentive Plan.

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

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

(x) Subsidiary: A subsidiary corporation, as defined in Section 424(f) of the Code (or any successor section thereto).

3.
SHARES SUBJECT TO THE PLAN

Subject to Sections 4, 6(f) and 9 of the Plan, the total number of Shares which may be issued under the Plan pursuant to grants of ISOs or other Awards is 11,450,000 (inclusive of the 5,000,000 Shares initially reserved under the Plan as of the Effective Date, and the 6,450,000 Shares added to the Plan pursuant to the 2014 amendment and restatement thereof) and the maximum number of Shares for which Options or Stock Appreciation Rights may be granted during a fiscal year to any Participant shall be 2,000,000. The Shares may consist, in whole or in part, of unissued Shares or treasury Shares. The issuance of Shares upon the exercise of an Award or in consideration of the cancellation or termination of an Award shall reduce the total number of Shares available under the Plan, as applicable. In the event that any Awards under the Plan terminate or lapse for any reason without payment of consideration, the number of Shares subject to such terminated or lapsed Awards shall be available for future Award grants under the Plan. The maximum number of Shares subject to Awards granted during a calendar year to any non-employee director serving on the Board, taken together with any cash fees paid to such non-employee director during such calendar year, shall not exceed $600,000 in total value (calculating the value of any such Awards based on the grant date fair value of such Awards for financial reporting purposes).

4.
ADMINISTRATION

The Plan shall be administered by the Committee, which may delegate its duties and powers in whole or in part to any subcommittee thereof consisting solely of at least two individuals who are each intended to qualify as “non-employee directors” within the meaning of Rule 16b-3 under the Act (or any successor rule thereto), “outside directors” within the meaning of Section 162(m) of the Code (or any successor section thereto) and “independent directors” within the meaning of the applicable rules, if any, of any national securities exchange on which Shares are listed or admitted to trading; provided, however, that any action permitted to be taken by the Committee may be taken by the Board, in its discretion. The Committee is authorized to interpret the Plan, to establish, amend and rescind any rules and regulations relating to the Plan, and to make any other determinations that it deems necessary or desirable for the administration of the Plan. The Committee may correct any defect or omission or reconcile any inconsistency in the Plan in the manner and to the extent the Committee deems necessary or desirable. Any decision of the Committee in the interpretation and administrations of the Plan, as described herein, shall lie within its sole and absolute discretion and shall be final, conclusive and binding on all parties concerned (including, but not limited to Participants and their beneficiaries or successors). Determinations made by the Committee under the Plan need not be uniform and may be made selectively among Participants, whether or not such Participants are similarly situated. Awards may, in the discretion of the Committee, be made under the Plan in assumption of, or in substitution for, outstanding awards previously granted by the Company or its Affiliates or a company acquired by the Company or with which the Company combines. The number of Shares underlying such substitute awards shall be counted against the aggregate number of Shares available for Awards under the Plan. The Committee shall require payment of any minimum amount it may determine to be necessary to withhold for federal, state, local or other, taxes as a result of the exercise or vesting of an Award. Unless the Committee specifies otherwise, the Participant may elect to pay a portion or all of such minimum withholding taxes by (a) delivery in Shares or (b) having Shares withheld by the Company from any Shares that would have otherwise been received by the Participant. The number of Shares so delivered or withheld shall have an aggregate Fair Market Value sufficient to satisfy the applicable minimum withholding taxes. If the chief executive officer of the Company is a member of the Board, the Board by specific resolution may constitute such chief executive officer as a committee of one which shall have the authority to grant Awards of up to an aggregate of 1,000,000 Shares in each fiscal year to Participants who are (i) not subject to the rules promulgated under Section 16 of the Act (or any successor section thereto) or (ii) covered employees (or anticipated to become covered employees) as such term is defined in Section 162(m) of the Code; provided, however, that such chief executive officer shall notify the Committee of any such grants made pursuant to this Section 4.

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5.
LIMITATIONS

No Award may be granted under the Plan after the tenth anniversary of the Effective Date, but Awards theretofore granted may extend beyond that date.

6.
TERMS AND CONDITIONS OF OPTIONS

Options granted under the Plan shall be, as determined by the Committee, non-qualified or incentive stock options for federal income tax purposes, as evidenced by the related Award agreements, and shall be subject to the foregoing and the following terms and conditions and to such other terms and conditions, not inconsistent therewith, as the Committee shall determine:

(a) Option Price. The Option Price per Share shall be determined by the Committee, but shall not be less than 100% of the Fair Market Value of a Share on the date an Option is granted (other than in the case of Options granted in substitution of previously granted awards, as described in Section 4).

(b) Exercisability. Options granted under the Plan shall be exercisable at such time and upon such terms and conditions as may be determined by the Committee, but in no event shall an Option be exercisable more than ten years after the date it is granted. The Committee may, in its discretion, accelerate the date after which Options may be exercised in whole or in part. If the chief executive officer of the Company is a member of the Board, the Board by specific resolution may constitute such chief executive officer as a committee of one which shall have the authority to accelerate the date after which Options may be exercised in whole or in part.

(c) Exercise of Options. Except as otherwise provided in the Plan or in an Award agreement, an Option may be exercised for all, or from time to time any part, of the Shares for which it is then exercisable. For purposes of Section 6 of the Plan, the exercise date of an Option shall be the later of the date a notice of exercise is received by the Company and, if applicable, the date payment is received by the Company pursuant to clauses (i), (ii), (iii) or (iv) in the following sentence. The purchase price for the Shares as to which an Option is exercised shall be paid to the Company in full not later than at the time that the Shares being purchased are delivered to or at the direction of the Participant, in each case at the election of the Participant to the extent permitted by law and as designated by the Committee, (i) in cash, (ii) in Shares having a Fair Market Value equal to the aggregate Option Price for the Shares being purchased and satisfying such other requirements as may be imposed by the Committee; provided, that such Shares have been held by the Participant for no less than six months (or such other period as established from time to time by the Committee in order to avoid adverse accounting treatment applying generally accepted accounting principles), (iii) partly in cash and partly in such Shares, (iv) through the delivery of irrevocable instruments to a broker to deliver promptly to the Company an amount equal to the aggregate Option Price for the Shares being purchased or (v) through net settlement in Shares. No Participant shall have any rights to dividends or other rights of a shareholder with respect to Shares subject to an Option until the Participant has given written notice of exercise of the Option, paid in full for such Shares and, if applicable, has satisfied any other conditions imposed by the Committee pursuant to the Plan.

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(d) ISOs. The Committee may grant Options under the Plan that are intended to be ISOs. Such ISOs shall comply with the requirements of Section 422 of the Code (or any successor section thereto). No ISO may be granted to any Participant who at the time of such grant, owns more than 10% of the total combined voting power of all classes of stock of the Company or of any Subsidiary, unless (i) the Option Price for such ISO is at least 110% of the Fair Market Value of a Share on the date the ISO is granted and (ii) the date on which such ISO terminates is a date not later than the day preceding the fifth anniversary of the date on which the ISO is granted. Any Participant who disposes of Shares acquired upon the exercise of an ISO either (i) within two years after the date of grant of such ISO or (ii) within one year after the transfer of such Shares to the Participant, shall notify the Company of such disposition and of the amount realized upon such disposition. All Options granted under the Plan are intended to be nonqualified stock options, unless the applicable Award agreement expressly states that the Option is intended to be an ISO. If an Option is intended to be an ISO, and if for any reason such Option (or portion thereof) shall not qualify as an ISO, then, to the extent of such nonqualification, such Option (or portion thereof) shall be regarded as a nonqualified stock option granted under the Plan; provided that such Option (or portion thereof) otherwise complies with the Plan’s requirements relating to nonqualified stock options. In no event shall any member of the Committee, the Company or any of its Affiliates (or their respective employees, officers or directors) have any liability to any Participant (or any other Person) due to the failure of an Option to qualify for any reason as an ISO.

(e) Attestation. Wherever in this Plan or any agreement evidencing an Award a Participant is permitted to pay the exercise price of an Option or taxes relating to the exercise of an Option by delivering Shares, the Participant may, subject to procedures satisfactory to the Committee, satisfy such delivery requirement by presenting proof of beneficial ownership of such Shares, in which case the Company shall treat the Option as exercised without further payment and/or shall withhold such number of Shares from the Shares acquired by the exercise of the Option, as appropriate.

(f) Repricing of Options. Notwithstanding any other provisions under the Plan, no action shall be taken under the Plan to (i) lower the exercise prices of any Company stock options after they are granted, (ii) exchange stock options for stock options with lower exercise prices or cancel an Option when the Option Price exceeds the Fair Market Value in exchange for cash or other Awards (other than pursuant to Section 9 hereof) or (iii) take any other action that is treated as a “repricing” of stock options under generally accepted accounting principles. Any such approved action shall be treated as a grant of a new Award to the extent required under Sections 162(m), 422 or 424 of the Code (for individuals who are “covered employees” under Section 162(m) of the Code at the time of such action, or for stock options that are intended to retain their status as ISOs).

7.
TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS

(a) Grants. The Committee also may grant (i) a Stock Appreciation Right independent of an Option or (ii) a Stock Appreciation Right in connection with an Option, or a portion thereof. A Stock Appreciation Right granted pursuant to clause (ii) of the preceding sentence (A) may be granted at the time the related Option is granted or at any time prior to the exercise or cancellation of the related Option, (B) shall cover the same number of Shares covered by an Option (or such lesser number of Shares as the Committee may determine) and (C) shall be subject to the same terms and conditions as such Option except for such additional limitations as are contemplated by this Section 7 (or such additional limitations as may be included in an Award agreement).

(b) Terms. The exercise price per Share of a Stock Appreciation Right shall be an amount determined by the Committee but in no event shall such amount be less than the greater of (i) the Fair Market Value of a Share on the date the Stock Appreciation Right is granted or, in the case of a Stock Appreciation Right granted in conjunction with an Option, or a portion thereof, the Option Price of the related Option and (ii) an amount permitted by applicable laws, rules, restated By-laws or policies of regulatory authorities or stock exchanges. Each Stock Appreciation Right granted independent of an Option shall entitle a Participant upon exercise to an amount equal to (i) the excess of (A) the Fair Market Value on the exercise date of one Share over (B) the exercise price per Share, times (ii) the number of Shares covered by the Stock Appreciation Right. Each Stock Appreciation Right granted in conjunction with an Option, or a portion thereof, shall entitle a Participant to surrender to the Company the unexercised Option, or any portion thereof, and to receive from the Company in exchange therefor an amount equal to (i) the excess of (A) the Fair Market Value on the exercise date of one Share over (B) the Option Price per Share, times (ii) the number of Shares covered by the Option, or portion thereof, which is surrendered. The date a notice of exercise is received by the Company shall be the exercise date. Payment shall be made in Shares or in cash, or partly in Shares and partly in cash (any such Shares valued at such Fair Market Value), all as shall be determined by the Committee. Stock Appreciation Rights may be exercised from time to time upon actual receipt by the Company of written notice of exercise stating the number of Shares with respect to which the Stock Appreciation Right is being exercised. No fractional Shares will be issued in payment for Stock Appreciation Rights, but instead cash will be paid for a fraction or, if the Committee should so determine, the number of Shares will be rounded downward to the next whole Share.

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(c) Limitations. The Committee may impose, in its discretion, such conditions upon the exercisability or transferability of Stock Appreciation Rights as it may deem fit.

(d) Repricing of Stock Appreciation Rights. Notwithstanding any other provisions under the Plan, no action shall be taken under the Plan to (i) lower the exercise prices of any Company stock appreciation right after they are granted, (ii) exchange stock appreciation rights for stock appreciation rights with lower exercise prices or cancel a stock appreciation right when the exercise price exceeds the Fair Market Value in exchange for cash or other Awards (other than pursuant to Section 9 hereof) or (iii) take any other action that is treated as a "repricing" of stock appreciation rights under generally accepted accounting principles. Any such approved action shall be treated as a grant of a new Award to the extent required under Section 162(m) of the Code (for individuals who are "covered employees" under Section 162(m) of the Code at the time of such action).

8.
OTHER STOCK-BASED AWARDS

(a) Generally. The Committee, in its sole discretion, may grant or sell Awards of Shares, Awards of restricted Shares and Awards that are valued in whole or in part by reference to, or are otherwise based on the Fair Market Value of, Shares (“Other Stock-Based Awards”). Such Other Stock-Based Awards shall be in such form, and dependent on such conditions, as the Committee shall determine, including, without limitation, the right to receive one or more Shares (or the equivalent cash value of such Shares or a combination thereof) upon the completion of a specified period of service, the occurrence of an event and/or the attainment of performance objectives. Other Stock-Based Awards may be granted alone or in addition to any other Awards granted under the Plan. Subject to the provisions of the Plan, the Committee shall determine to whom and when Other Stock-Based Awards will be made, the number of Shares to be awarded under (or otherwise related to) such Other Stock-Based Awards; whether such Other Stock-Based Awards shall be settled in cash, Shares or a combination of cash and Shares; and all other terms and conditions of such Awards (including, without limitation, the vesting provisions thereof and provisions ensuring that all Shares so awarded and issued shall be fully paid and non-assessable).

(b) Performance-Based Awards. Notwithstanding anything to the contrary herein, certain Other Stock-Based Awards granted under this Section 8 may be granted in a manner which is intended to be deductible by the Company under Section 162(m) of the Code (or any successor section thereto) (“Performance-Based Awards”). A Participant’s Performance-Based Award shall be determined based on the attainment of written performance goals approved by the Committee for a performance period established by the Committee (i) while the outcome for that performance period is substantially uncertain and (ii) no more than 90 days after the commencement of the performance period to which the performance goal relates or, if less, the number of days which is equal to 25 percent of the relevant performance period. The performance goals, which must be objective, shall be based upon one or more of the following criteria: (i) earnings before or after taxes (including earnings before interest, taxes, depreciation and amortization); (ii) net income; (iii) operating income; (iv) earnings per Share; (v) book value per Share; (vi) return on shareholders’ equity; (vii) total shareholder return; (viii) expense management; (ix) return on investment before or after the cost of capital; (x) improvements in capital structure; (xi) profitability of an identifiable business unit or product; (xii) maintenance or improvement of profit margins; (xiii) stock price; (xiv) market share; (xv) revenues or sales; (xvi) costs; (xvii) cash flow; (xviii) working capital; (xix) changes in net assets (whether or not multiplied by a constant percentage intended to represent the cost of capital); and (xx) return on assets. The foregoing criteria may relate to the Company, one or more of its Affiliates or one or more of its divisions or units, or any combination of the foregoing, and may be applied on an absolute basis and/or be relative to one or more peer group companies or indices, or any combination thereof, all as the Committee shall determine. In addition, to the degree consistent with Section 162(m) of the Code (or any successor section thereto), the performance goals may be calculated without regard to extraordinary items. In any event, the performance goals shall be based on an objective formula or standard. The maximum amount of Shares that may be granted as subject to a Performance-Based Award denominated in Shares shall be 2,000,000 Shares per fiscal year for any Participant. The maximum amount payable in respect of a Performance-Based Award that is not denominated in Shares during a fiscal year to any Participant shall be equal to the greater of (x) $15,000,000 and (y) 2.5 percent (2.5%) of the Company’s income before income taxes, as reported in the Company’s audited consolidated financial statements for the year in respect of which the Performance-Based Award is to be payable or distributed, as applicable. The Committee shall determine whether, with respect to a performance period, the applicable performance goals have been met with respect to a given Participant and, if they have, shall so certify and ascertain the amount of the applicable Performance-Based Award. No Performance-Based Awards will be paid for such performance period until such certification is made by the Committee. The amount of the Performance-Based Award actually paid to a given Participant may be less than the amount determined by the applicable performance goal formula, at the discretion of the Committee. The amount of the Performance-Based Award determined by the Committee for a performance period shall be paid to the Participant at such time as determined by the Committee in its sole discretion after the end of such performance period; provided, however, that a Participant may, if and to the extent permitted by the Committee and consistent with the provisions of Section 162(m) of the Code, elect to defer payment of a Performance-Based Award. To the extent that any dividends or dividend equivalent payments may be paid with respect to any Performance-Based Award, no such dividend or dividend equivalent payments will be made unless and until the corresponding portion of the underlying Performance-Based Award is earned.

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9.
ADJUSTMENTS UPON CERTAIN EVENTS

Notwithstanding any other provisions in the Plan to the contrary, the following provisions shall apply to all Awards granted under the Plan:

(a) Generally. In the event of any change in the outstanding Shares after the Effective Date by reason of any Share dividend or split, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of Shares or other corporate exchange or change in capital structure, any distribution to shareholders other than regular cash dividends or any similar event, the Committee in its sole discretion and without liability to any person shall make such substitution or adjustment, if any, as it deems to be equitable, as to (i) the number or kind of Shares or other securities issued or reserved for issuance as set forth in Section 3 of the Plan or pursuant to outstanding Awards, (ii)the exercise price relating to outstanding Options or Stock Appreciation Rights, (iii) the maximum number or amount of Awards that may be granted to any Participant during a fiscal year and/or (iv) any other affected terms of such Awards.

(b) Change in Control. Except as otherwise provided in an Award agreement, in the event of a Change in Control, the Committee in its sole discretion and without liability to any person may take such actions, if any, as it deems necessary or desirable with respect to any Award (including, without limitation, (i) the acceleration of an Award, (ii) the payment of a cash amount in exchange for the cancellation of an Award which, in the case of Options and Stock Appreciation Rights, may equal the excess, if any, of value of the consideration to be paid in the Change in Control transaction to holders of the same number of Shares subject to such Options or Stock Appreciation Rights (or, if no consideration is paid in any such transaction, the Fair Market Value of the Shares subject to such Options or Stock Appreciation Rights) over the aggregate exercise price of such Options or Stock Appreciation Rights and/or (iii) the requiring of the issuance of substitute Awards that will substantially preserve the value, rights and benefits of any affected Awards previously granted hereunder) as of the date of the consummation of the Change in Control.

10.
NO RIGHT TO EMPLOYMENT

The granting of an Award under the Plan shall impose no obligation on the Company or any Subsidiary to continue the employment of a Participant and shall not lessen or affect the Company’s or Subsidiary’s right to terminate the employment of such Participant.

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11.
SUCCESSORS AND ASSIGNS

The Plan shall be binding on all successors and assigns of the Company and a Participant; including without limitation, the estate of such Participant and the executor, administrator or trustee of such estate, or any receiver or trustee in bankruptcy or representative of the Participant’s creditors.

12.
NONTRANSFERABILITY OF AWARDS

Unless otherwise determined by the Committee, an Award shall not be transferable or assignable by the Participant otherwise than by will or by the laws of descent and distribution, and any Award transfers authorized by the Committee shall not be transferred for value. Notwithstanding the foregoing, a Participant may transfer an Option (other than an ISO) or a stock appreciation right in whole or in part by gift or domestic relations order to a family member of the Participant (a “Permitted Transferee”) and, following any such transfer such Option or stock appreciation right or portion thereof shall be exercisable only by the Permitted Transferee, provided that no such Option or stock appreciation right or portion thereof is transferred for value, and provided further that, following any such transfer, neither such Option or stock appreciation right or any portion thereof nor any right hereunder shall be transferable other than to the Participant or otherwise than by will or the laws of descent and distribution or be subject to attachment, execution or other similar process. For purposes of this Section 12, “family member” includes any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive relationships, any person sharing the Participant’s household (other than a tenant or employee), trust in which these persons have more than 50% of the beneficial interest, a foundation in which these persons (or the Participant) control the management of assets and any other entity in which these persons (or the Participant) own more than 50% of the voting interests. An Award exercisable after the death of a Participant may be exercised by the legatees, personal representatives or distributees of the Participant.

13.
AMENDMENTS OR TERMINATION

The Committee may amend, alter or discontinue the Plan, but no amendment, alteration or discontinuation shall be made which, (a) without the approval of the shareholders of the Company, would (except as is provided in the Plan for adjustments in certain events), increase the total number of Shares reserved for the purposes of the Plan or change the maximum number of Shares for which Awards may be granted to any Participant or amend the repricing prohibitions under Sections 6(f) and 7(d) or (b) without the consent of a Participant, would materially impair any of the rights or obligations under any Award theretofore granted to such Participant under the Plan; provided, however, that the Committee may amend the Plan in such manner as it deems necessary to permit the granting of Awards meeting the requirements of the Code or other applicable laws. Notwithstanding anything to the contrary herein, the Committee may not amend, alter or discontinue the provisions relating to Section 9(b) of the Plan after the occurrence of a Change in Control.

Without limiting the generality of the foregoing, to the extent applicable, notwithstanding anything herein to the contrary, this Plan and Awards issued hereunder shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretative guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Effective Date. Notwithstanding any provision of the Plan to the contrary, in the event that the Committee determines that any amounts payable hereunder will be taxable to a Participant under Section 409A of the Code and related Department of Treasury guidance prior to payment to such Participant of such amount, the Company may (a) adopt such amendments to the Plan and Awards and appropriate policies and procedures, including amendments and policies with retroactive effect, that the Committee determines necessary or appropriate to preserve the intended tax treatment of the benefits provided by the Plan and Awards hereunder and/or (b) take such other actions as the Committee determines necessary or appropriate to avoid the imposition of an additional tax under Section 409A of the Code.

14.
INTERNATIONAL PARTICIPANTS

With respect to Participants who reside or work outside the United States of America and who are not (and who are not expected to be) “covered employees” within the meaning of Section 162(m) of the Code, the Committee may, in its sole discretion, amend the terms of the Plan or Awards with respect to such Participants in order to conform such terms with the requirements of local law or to obtain more favorable tax or other treatment for a Participant, the Company or an Affiliate.

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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 was initially effective as of the Effective Date, subject to the approval of the Company’s shareholders. The Plan as amended and restated was approved by the Board on January 16, 2014, subject to the approval of the Company's shareholders.

17.
SECTION 409A

Notwithstanding other provisions of the Plan or any Award agreements thereunder, no Award shall be granted, deferred, accelerated, extended, paid out or modified under this Plan in a manner that would result in the imposition of an additional tax under Section 409A of the Code upon a Participant. In the event that it is reasonably determined by the Committee that, as a result of Section 409A of the Code, payments or deliveries of shares in respect of any Award under the Plan may not be made at the time contemplated by the terms of the Plan or the relevant Award agreement, as the case may be, without causing the Participant holding such Award to be subject to taxation under Section 409A of the Code, the Company will make such payment or delivery of shares on the first day that would not result in the Participant incurring any tax liability under Section 409A of the Code. In the case of a Participant who is a “specified employee” (within the meaning of Section 409A(a)(2)(B)(i) of the Code), payments and/or deliveries of shares in respect of any Award subject to Section 409A of the Code that are linked to the date of the Participant’s separation from service shall not be made prior to the date which is six (6) months after the date of such Participant’s separation from service from the Company and its affiliates, determined in accordance with Section 409A of the Code and the regulations promulgated thereunder. The Company shall use commercially reasonable efforts to implement the provisions of this Section 17 in good faith; provided that neither the Company, the Committee nor any of the Company’s employees, directors or representatives shall have any liability to Participants with respect to this Section 17.

18.
FORFEITURE/CLAWBACK

Any Awards granted under the Plan may be subject to reduction, cancellation, forfeiture or recoupment to the extent required by applicable law or listed company rules or to the extent otherwise provided in an Award agreement at the time of grant.

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Appendix B

HOVNANIAN ENTERPRISES, INC.

SENIOR EXECUTIVE SHORT-TERM INCENTIVE PLAN

(AS AMENDED AND RESTATED)

1.
PURPOSE.

The purpose of the Senior Executive Short-Term Incentive Plan (the “Plan”) is to advance the interests of Hovnanian Enterprises, Inc. (the “Company”), and its shareholders by providing incentives in the form of periodic bonus awards (“Awards”) to certain senior executive employees of the Company and its affiliates, thereby motivating such executives to attain corporate performance goals articulated under the Plan.

2.
ADMINISTRATION.

(a) The Plan shall be administered by two or more individuals who are each “non-employee directors” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended, or any successor thereto, “outside directors” as defined under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and “independent directors” within the meaning of the applicable rules, if any, of any national securities exchange on which shares of common stock of the Company are listed or admitted to trading, unless otherwise determined by the Company's Board of Directors to act as the committee (the “Committee”).

(b) The Committee shall have the exclusive authority to select the senior executives to be granted Awards under the Plan, to determine the size and terms of the Award (subject to the limitations imposed on Awards in Section 4 below), to modify the terms of any of the Award that has been granted (except for any modification that would increase the amount of the Award payable to an executive), to determine the time when Awards will be made and the performance period to which they relate, to establish performance objectives in respect of such performance periods, and to certify that such performance objectives were attained; provided, however, that any such action shall be intended to be consistent with the applicable provisions of Section 162(m) of the Code. The Committee is authorized to interpret the plan, to establish, amend and rescind any rules and regulations relating to the Plan, and to make any other determinations that it deems necessary or desirable for the administration of the Plan. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan in the manner and to the extent the Committee deems necessary or desirable. Any decision of the Committee in the interpretation and administration of the Plan, as described herein, shall be final, conclusive and binding on all parties concerned.

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 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); (xix) return on assets and (xx) total shareholder return. The foregoing criteria may relate to the Company, one or more of its affiliates or one or more of its divisions or units, or any combination of the foregoing, and may be applied on an absolute basis and/or be relative to one or more peer group companies or other indices, or any combination thereof, all as the Committee shall determine. In addition, to the degree consistent with Section 162(m) of the Code, the performance goals may be calculated without regard to extraordinary items. In any event, the performance goals shall be based on an objective formula or standard. The maximum amount of an Award to any Participant with respect to a fiscal year of the Company shall be the greater of (x) $15,000,000 and (y) 2.5 percent (2.5%) of the Company's income before income taxes, as reported in the Company's audited consolidated financial statements for the year in respect of which the Award is to be payable or distributed, as applicable.

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(b) The Committee shall determine whether, with respect to a performance period, the specified performance goals have been met 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 in a manner consistent with Sections 162(m) and 409A of the Code.

(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 in a manner generally intended to secure 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 to defer receipt of all or any portion of such Award (in a manner consistent with Sections 162(m) and 409A of the Code) into a right to receive shares of common stock of the Company or cash at a future date. Any such shares or share-based awards issued in settlement of an Award shall be granted pursuant to the Company’s 2012 Amended and Restated Stock Incentive Plan (as amended from time to time) (the “Stock Plan”), or any successor plan thereto. Except as otherwise provided in an Award agreement, in the event of a Change in Control (as defined in the Stock Plan), the Committee in its sole discretion and without liability to any person may take such actions, if any, as it deems necessary or desirable with respect to any Award.

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 termination of the Plan shall be made which (i) without the Participant's consent, materially impairs any of the rights or obligations under any Award theretofore granted to a Participant under the Plan or (ii) without the approval of the shareholders of the Company 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.

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.

(b) A Participant's rights 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 owed to the Company or any of its affiliates by the Participant. Any attempted assignment or transfer, hypothecation or encumbrance shall be void and of no effect.

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(c) The Company and its affiliates shall have the right to deduct from any payment made under the Plan any federal, state, local or foreign income and other taxes required by law to be withheld with respect to such payment.

(d) Each person who is or at any time serves as a member of the Committee or the Company's Board of Directors shall be indemnified and held harmless by the Company against and from: (i) any loss, cost, liability or expense that may be imposed upon or reasonably incurred by such person in connection with or resulting from any claim, action, suit or proceeding to which such person may be a party or in which such person may be involved by reason of any action or failure to act under the Plan; and (ii) any and all amounts paid 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, or otherwise, or any power that the Company may have to indemnify such person or hold such person harmless.

(e) Each member of the Committee and the Company's Board of Directors shall be fully justified in relying or acting in good faith upon any report made by independent public accountants of, or counsel for, the Company and upon any other information furnished in connection with the Plan. In no event shall any person who is or shall have been a member of the Committee or the Company's Board of Directors be liable for any determination made or other action taken or any failure to act in reliance upon any such report or information or for any action taken, including without limitation the furnishing of information, or failure to act, if in good faith.

(f) All matters relating to the Plan or to Awards granted hereunder shall be governed by and construed in accordance with the laws of the State of Delaware.

(g) The Plan was originally effective as of November 1, 1999, as approved by the affirmative vote of holders of a majority of the shares of the Company then present or represented by proxy without payment therefor and entitled to vote, and the Plan was most recently re-approved by the Company’s shareholders on March 31, 2008. The Plan has been submitted for re-approval by the Company’s shareholders on March 11, 2014 (the “2014 Annual Meeting”). Assuming the Plan is re-approved at the 2014 Annual Meeting, no Award may be granted under the Plan after the date of the Company’s first shareholders’ meeting that occurs during 2019, but Awards theretofore granted may extend beyond that date.

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GENERAL	1
VOTING RIGHTS AND SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	2
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE	3 4
(1) ELECTION OF DIRECTORS	4 5
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS	7 8
(2) RATIFICATION OF THE SELECTION OF AN INDEPENDENT REGISTERED PUBIC ACCOUNTING FIRM	9 10
(3) APPROVAL OF ~~AN AMENDMENT TO~~ THE ~~COMPANY’S CERTIFICATE OF INCORPORATION TO INCREASE~~ ~~THE NUMBER OF AUTHORIZED SHARES OF CLASS A COMMON~~2012 HOVNANIAN ENTERPRISES, INC. AMENDED AND RESTATED STOCK INCENTIVE PLAN	9 11
(4) APPROVAL OF ~~AN AMENDMENT TO~~ THE ~~COMPANY’S CERTIFICATE OF INCORPORATION TO INCREASE~~ ~~THE NUMBER OF AUTHORIZED SHARES OF CLASS B COMMON STOCK~~ AMENDED AND RESTATED HOVNANIAN ENTERRISES, INC. SENIOR EXECUTIVE SHORT-TERM INCENTIVE PLAN	12 19
(5) ADVISORY VOTE ON EXECUTIVE COMPENSATION	14 23
THE COMPENSATION COMMITTEE	16 25
COMPENSATION DISCUSSION AND ANALYSIS	18 27
Executive Summary	18 27
Compensation Philosophy and Objectives	22 31
Fiscal ~~2012~~2013 Compensation Elements and Compensation Mix	24 34
Details of Compensation Elements	25 35
Actions for Fiscal ~~2013~~2014	35 47
Tax Deductibility and Accounting Implications	36 48
Timing and Pricing of Stock Options	36 48
Stock Ownership Guidelines	36 49
EXECUTIVE COMPENSATION	37 50
Summary Compensation Table	37 50
Grants of Plan-Based Awards in Fiscal ~~2012~~2013	41 54
Outstanding Equity Awards at Fiscal ~~2012~~2013 Year-End	44 58
Option Exercises and Stock Vested in Fiscal ~~2012~~2013	47 61
Nonqualified Deferred Compensation for Fiscal ~~2012~~2013	47 62
Potential Payments Upon Termination or Change-in-Control Table	49 64
NON-EMPLOYEE DIRECTOR COMPENSATION	51 66
THE AUDIT COMMITTEE	56 71
THE AUDIT COMMITTEE REPORT	57 72
FEES PAID TO PRINCIPAL ACCOUNTANT	57 72
PRINCIPAL ACCOUNTANT INDEPENDENCE	58 73
CORPORATE GOVERNANCE	58 73
OVERSIGHT OF RISK MANAGEMENT	59 74
LEADERSHIP STRUCTURE	60 75
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	60 75
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON MARCH ~~12, 2013~~ 11, 2014	62 78
GENERAL	62 78
SHAREHOLDER PROPOSALS FOR THE ~~2014~~2015 ANNUAL MEETING	63 79

	Class A Common Stock (1)					Class B Common Stock (1)					Depositary Shares(1) (3)
	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)
Directors, Nominees for Director, Named Executive Officers and Directors and Executive Officers as a Group
Ara K. Hovnanian (4)		3,786,237		3.03	%		2,466,227		15.40	%		—		—
Robert B. Coutts		142,199		0.11	%		—		—			—		—
Edward A. Kangas		239,217		0.19	%		—		—			—		—
Joseph A. Marengi		131,112		0.10	%		—		—			—		—
Brad G. O’Connor		73,908		0.06	%		—		—			—		—
Vincent Pagano Jr.		9,170		0.01	%		—		—			—		—
Thomas J. Pellerito		1,262,914		1.01	%		—		—			—		—
J. Larry Sorsby		747,114		0.60	%		—		—			—		—
David G. Valiaveedan		52,219		0.04	%		—		—			2,000		0.04	%
Stephen D. Weinroth		282,509		0.23	%		4,500		0.03	%		—		—
All Directors and executive officers as a group (10 persons)		13,853,991		10.98	%		9,609,373		60.00	%		2,000		0.04	%

Holders of More Than 5%
Estate of Kevork S. Hovnanian (5)		6,596,543		5.28	%		3,255,251		21.99	%		—		—
Peter S. Reinhart as Trustee of the Sirwart Hovnanian 1994 Marital Trust (6)		—		—			5,210,091		35.19	%		—		—
Hovnanian Family 2012L.L.C. (7)		970,849		0.78	%		3,883,395		26.23	%		—		—

Name & Position	Stock Option Grants # of Shares Covered		Restricted Stock Unit Grants # of Shares Covered (1)		Total of All Columns in Table # of Shares Covered
Ara K. Hovnanian, President, Chief Executive Officer and Chairman of the Board		1,200,000		827,733		2,027,733
J. Larry Sorsby, Executive Vice President, Chief Financial Officer and Director		240,000		303,030		543,030
Thomas J. Pellerito, Chief Operating Officer		160,000		303,030		463,030
Brad G. O’Connor, Vice President, Chief Accounting Officer and Corporate Controller		40,000		80,633		120,633
David G. Valiaveedan, Vice President — Finance and Treasurer		30,000		75,430		105,430
Current Executive Officers as a Group		1,670,000		1,589,856		3,259,856
Robert B. Coutts, Director		0		53,919		53,919
Edward A. Kangas, Director		0		67,108		67,108
Joseph A. Marengi, Director		0		42,832		42,832
Vincent Pagano Jr., Director		0		19,520		19,520
Stephen D. Weinroth, Director		61,573		15,939		77,512
Current Non-Executive Directors as a Group (2)		61,573		199,318		260,891
All Employees, including All Current Officers who are not Executive Officers, as a Group		386,125		709,257		1,095,382

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

	By order of the Board of Directors,

	MICHAEL DISCAFANI Secretary

	Class A Common Stock (1)					Class B Common Stock (1)					Depositary Shares (1) (3)
Directors, Nominees for Director, Certain Executive Officers, Directors and Executive Officers as a Group and Holders of More Than 5%	Amount and Nature of Beneficial Ownership		Percent of Class (2)			Amount and Nature of Beneficial Ownership		Percent of Class (2)			Amount and Nature of Beneficial Ownership		Percent of Class (2)
Estate of Kevork S. Hovnanian (4)		7,567,392		6.40	%		7,138,646		48.70	%		—		—
Ara K. Hovnanian (5)		4,137,001		3.50	%		1,856,314		12.05	%		—		—
Robert B. Coutts		131,112		0.11	%		—		—			—		—
Edward A. Kangas		231,217		0.20	%		—		—			—		—
Joseph A. Marengi		121,512		0.10	%		—		—			—		—
Brad G. O’Connor		38,895		0.03	%		—		—			—		—
Vincent Pagano Jr.		—		—			—		—			—		—
Thomas J. Pellerito		1,243,668		1.05	%		—		—			—		—
Peter S. Reinhart as Trustee of the Sirwart Hovnanian 1994 Marital Trust (6)		—		—			5,210,091		35.54	%		—		—
John J. Robbins		160,705		0.14	%		—		—			—		—
J. Larry Sorsby		274,302		0.23	%		—		—			—		—
David G. Valiaveedan		26,105		0.02	%		—		—			2,000		0.04	%
Stephen D. Weinroth		279,309		0.24	%		4,500		0.03	%		—		—
All Directors and executive officers as a group (10 persons)		13,771,218		11.55	%		8,999,460		58.41	%		2,000		0.04	%

Name	Age	Company Affiliation	Year First Became a Director
Ara K. Hovnanian	56	President, Chief Executive Officer, Chairman of the Board & Director		1981
Robert B. Coutts	63	Director		2006
Edward A. Kangas	69	Director		2002
Joseph A. Marengi	60	Director		2006
Vincent Pagano Jr.	63	Director		2013
J. Larry Sorsby	58	Executive Vice President, Chief Financial Officer & Director		1997
Stephen D. Weinroth	75	Director		1982

	Mr. Kangas was the Global Chairman and Chief Executive Officer of Deloitte ~~Touche Tohmatsu~~LLP from December 1989 to May 2000, when he retired. He also serves on the Boards of Directors of United Technologies Corp. (NYSE), Tenet Healthcare Corporation, Inc. (NYSE), ~~and~~ Intuit, Inc. (NASDAQ) and Intelsat (NYSE). He was on the Board of Directors of ~~Electronic Data Systems, Inc. (NYSE) from 2004 to 2008 and~~ AllScripts, Inc. (NASDAQ) (and, prior to its merger with AllScripts, Inc., Eclipsys Corporation (NASDAQ)) from 2004 to 2012. Mr. Kangas is the past Chairman of the Board of the National Multiple Sclerosis Society. Mr. Kangas was elected as a Director of Hovnanian Enterprises, Inc. in September 2002, is Chairman of the Company’s Audit Committee and a member of the Company’s Compensation Committee and Corporate Governance and Nominating Committee.

	Mr. Marengi, from July 2007 to March 2012, served as a Venture Partner for Austin Ventures. Prior to that date, Mr. Marengi served as senior vice president for the Commercial Business Group of Dell Inc. (NASDAQ). In this role, Mr. Marengi was responsible for the Dell units serving medium business, large corporate, government, education and healthcare customers in the United States. Mr. Marengi joined Dell in July 1997 from Novell Inc. (NASDAQ), where he was president and chief operating officer. He joined Novell in 1989 and moved through successive promotions to become executive vice president of worldwide sales and field operations. ~~He is~~Mr. Marengi also ~~an outside Director for~~served on the Boards of Directors of Quantum Corporation (NYSE) from 2008 to 2013 and ~~sits on the Board~~ of Entorian Technologies, Inc. (formerly, the OTC Markets). from 2008 to 2012. Mr. Marengi was elected to the Board of Directors of Hovnanian Enterprises, Inc. in March 2006 and is a member of the Company’s Compensation Committee and Corporate Governance and Nominating Committee.

	Mr. Pagano was a partner at Simpson Thacher & Bartlett LLP until his retirement at the end of 2012. He was the head of the firm’s capital markets practice from 1999 to 2012, and, before that, administrative partner of the firm from 1996 to 1999. He was a member of the firm’s executive committee during nearly all of ~~that~~the 1996 - 2012 period. He also serves on the ~~Board~~Boards of Directors of Cheniere Energy Partners GP, LLC, the general partner of Cheniere Energy Partners (NYSE MKT) and L-3 Communications Holdings, Inc. (NYSE). Mr. Pagano serves on the Engineering Advisory Council of Lehigh University. Mr. Pagano was elected to the Board of Directors of Hovnanian Enterprises, Inc. in March 2013 and is the Chairman of the Company’s Corporate Governance and Nominating Committee.


	Mr. Sorsby has been Chief Financial Officer of Hovnanian Enterprises, Inc. since 1996, and Executive Vice President since November 2000. Mr. Sorsby was also Senior Vice President from March 1991 to November 2000 and was elected as a Director of the Company in 1997. He is Chairman of the Board of Visitors for Urology at The Children’s Hospital of Philadelphia (“CHOP”) and also serves on the Institutional Advancement Committee at CHOP.

	Mr. Weinroth was from 2003 to mid-2008 a Managing Member of Hudson Capital Advisors, LLC and since then he has been an advisor to Coral Reef Capital Partners, a successor firm to some of the Hudson Capital employees. He is Chairman of the Board (Emeritus) of Core Laboratories, N.V. (NYSE), a global oil field service company where he had previously been Chairman from 1994 through 2001. From l989 to 2003, he served as Co-Chairman and head of the Investment Committee of First Britannia Mezzanine, N.V., a European private investment firm. He is presently Chairman of the Central Asia Education Foundation, a successor to the Central Asian-American Enterprise Fund, to which he was appointed by the President of the United States. Mr. Weinroth has been Chairman of four NYSE-listed companies and Chief Executive of three of them. He is also a Trustee and the immediate past Chairman of The Joyce Theatre Foundation, Inc., and Vice Chairman and a Trustee of the Paul Taylor Dance Foundation as well as a Board member of the Flea Theater. Mr. Weinroth has been a Director of Hovnanian Enterprises, Inc. since 1982, is Chairman of the Company's Compensation Committee and ~~Corporate Governance and Nominating Committee, and~~ is a member of its Audit Committee.

	Number of Class A Common Stocksecurities to beissued uponexercise ofoutstandingoptions,warrants andrights(2)(5)	Number of ClassB Common Stocksecurities to beissued uponexercise ofoutstandingoptions,warrants andrights(2)(5)	Weightedaverageexerciseprice ofoutstandingClass ACommon Stockoptions,warrants andrights(3)	Weightedaverageexerciseprice ofoutstandingClass BCommon Stockoptions,warrants andrights(4)	Number ofsecuritiesremainingavailable forfuture issuanceunder equitycompensationplans(excludingsecuritiesreflected incolumns (a))(1)(6)
Plan Category	(a)	(a)	(b)	(b)	(c)
Equity compensation plans approved by security holders:	6,660,018	5,094,021	$7.20	$4.03	339,141
Equity compensation plans not approved by security holders:	—	—	—	—	—
Total	6,660,018	5,094,021	$7.20	$4.03	339,141

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

(2)	Includes the maximum number of shares that are potentially issuable under the share portion of the 2013 Long-Term Incentive Program under the Existing Plan and the actual number of shares for which performance has been met that are issuable under the 2010 Long-Term Incentive Program under the 2008 Hovnanian Enterprises, Inc. Stock Incentive Plan, subject to vesting.

(3)	Does not take into account 2,914,062 shares that may be issued upon the vesting of restricted stock and performance-based awards discussed in (2) above, or 192,402 shares of restricted stock vested and deferred at the associates' election, because they have no exercise price.

	Sincerely yours,


	Ara K. Hovnanian Chairman of the Board

(4)	Does not take into account 1,714,780 shares that may be issued upon the vesting of the performance-based awards discussed in (2) above, or 341,741 shares of restricted stock vested and deferred at the associates’ election, because they have no exercise price.

(5)	These shares include 2,233,175 shares that would be issued in full only if the maximum level of performance for performance-based awards is achieved for the 2013 Long-Term Incentive Program under the Existing Plan, which is not currently expected. These shares also include 483,875 shares that may be issued upon exercise of outstanding options with exercise prices greater than $20.00 per share.

	●	Weighted average exercise price of outstanding stock options: $5.74

	●	Weighted average remaining contractual term of outstanding stock options: 6.8 years

	●	Nonvested RSUs (including RSU awards for performance-based long-term incentive plans based on achieving the actual outcome, where known, or the target outcome, where the performance period has not ended): 2,463,647

Fiscal Year	Number of Time-Based Stock Options Granted		Number of Time-Based RSUs Granted		Number of Shares of Common Stock Granted Related to Performance-Based Awards (1)		Weighted Average Number of Shares of Common Stock Outstanding (2)
2013		487,500		104,944		1,293,269		145,087,291
2012		1,334,828		133,855		—		126,350,000
2011		269,100		29,468		420,000		100,444,000

	(1)	Includes RSU and stock option awards granted under the 2008 Hovnanian Enterprises, Inc. Stock Incentive Plan (as amended and restated) and the Existing Plan (including the 2013 Long-Term Incentive Program), based on achieving the target outcome for the performance criteria under the performance-based awards.

Name And Position		Bonus Awards Dollar Value (1)
Ara K. Hovnanian, President, Chief Executive Officer and Chairman of the Board		$2,500,000
J. Larry Sorsby, Executive Vice President, Chief Financial Officer and Director		$950,000
Thomas J. Pellerito, Chief Operating Officer		$950,000
Brad G. O’Connor, Vice President, Chief Accounting Officer and Corporate Controller		$197,327
David G. Valiaveedan, Vice President — Finance and Treasurer		$153,831
Executive Officer Group		$4,751,158
Non-Executive Director Group		N/A
Non-Executive Officer Employee Group		N/A

	(1)	Represents the value of the vested portion of the 2010 Long-Term Incentive Program award for performance during fiscal 2011, 2012 and 2013 and the value of the vested portion of the June 10, 2011 restricted stock unit award (the only restricted stock unit award vesting in these years) for performance during fiscal 2012 and 2013. The CEO did not exercise any stock options during the fiscal 2011-2013 periods.
		The following graph demonstrates the link between the CEO’s annual realized pay and the Company’s Total Shareholder Return (“TSR”). Annual realized pay includes salary, annual bonus, perquisites and other compensation plus the realized value of options exercised and shares vesting during the fiscal year.

	(1)	Reflects the sum of base salary, annual bonus/incentive and long-term incentive awards (including the annualized value of long-term incentive program awards at the target outcome for the performance criteria) and excludes all other compensation elements.

	· (2)	Long-term incentives include the annualized value of long-term incentive program awards at the target outcome for the performance criteria.

	●
	·	Other NEOs: The Company’s Vice President — Chief Accounting Officer and Corporate Controller, Mr. Brad G. O’Connor, and Vice President — Finance and Treasurer, Mr. David G. Valiaveedan, have, as result of their respective positions, less direct influence on the Company’s strategic and operational decisions. Therefore, overall compensation levels for these NEOs reflect both objective financial measures of the Company and the attainment of personal objectives (as determined by the Committee, which may consult with the CFO, the CEO and other members of senior management).

	CEO	CFO	COO	Vice President — Chief Accounting Officer and Corporate Controller	Vice President — Finance and Treasurer

Return on Average Common Equity ("ROACE") (1)	% of Pre-tax ~~Income~~Profit based on ROACE	$ Bonus based on ROACE	N/A	$ Bonus based on ROACE	$ Bonus based on ROACE
~~EBITDA Improvement~~

Adjusted EBITDA and Cash Balances	$ Bonus based on Adjusted EBITDA ~~Improvement~~plus Cash Balances	$ Bonus based on Adjusted EBITDA ~~Improvement~~plus Cash Balances	$ Bonus based on Adjusted EBITDA ~~Improvement~~ plus Cash Balances	N/A	N/A
	~~N/A~~	~~N/A~~
~~Positive Pre-tax Profit in Both the Third and Fourth Fiscal Quarters (1)~~	~~N/A~~	~~N/A~~	~~$ Bonus based on achievement of Positive Pre-tax Profit in Both the Third and Fourth Fiscal Quarters~~
	~~N/A~~	~~N/A~~
Tailored Personal Objectives	N/A	N/A	N/A	$ Bonus based on achievement of specific goals	$ Bonus based on achievement of specific goals
~~Formula~~

Formula	Total award is greater of (a) ROACE or (b) sum of Adjusted EBITDA ~~improvement~~plus Cash Balances factors, with maximum amount of ~~$949,500~~$1,500,000	Total award is greater of (a) ROACE or (b) sum of Adjusted EBITDA ~~improvement~~plus Cash Balances factors, with maximum amount of ~~$350,000~~$575,000	Total award is ~~sum of~~determined solely by Adjusted EBITDA ~~improvement and Positive Pre-tax Profit~~plus Cash Balances factors, with a maximum amount of ~~$350,000~~$575,000	Total award is sum of ROACE and personal objectives factors, with maximum amount of ~~30%~~60% of base salary if the Company achieves positive Pre-tax Profit (otherwise the maximum is 30%)	Total award is sum of ROACE and personal objectives factors, with maximum amount of ~~25%~~50% of base salary if the Company achieves positive Pre-tax Profit (otherwise the maximum is 25%)

ROACE percentage	% Pre-tax Income
0.0%	0.00%
5.0%	1.00%
10.0%	1.25%
15.0%	1.50%
20.0%	2.00%

ROACE percentage	% Pre-tax Profit
0.0%	0.00%
5.0%	1.00%
10.0%	1.25%
15.0%	1.50%
20.0%	2.00%

EBITDA Improvement (millions)		$	0.0			$	37.5			$	75.0
Bonus (thousands)		$	0.0			$	474.8			$	949.5

Adjusted EBITDA (millions)	Bonus (thousands)
$0.0	$0.0
$96.7	$675.0
$107.4	$750.0
$118.2	$850.0
$123.5	$1,000.0
$128.9 or greater	$1,150.0

Number of Fiscal 2013 Quarter-Ends at or Above $170 Million Cash	Bonus (thousands)
Less than 2	$0.0
2	$150.0
3	$250.0
4	$350.0

ROACE percentage	Bonus (thousands)
0.0%	$ 0.0
5.0%	$ 375.0
7.67%	$ 575.0
10.0%	$ 575.0
15.0%	$ 575.0	Capped
20.0%	$ 575.0
25.0%	$ 575.0

~~Pre-tax Profit~~		~~Greater than zero in both third and fourth quarters~~
~~Bonus (thousands)~~		$	~~100.0~~