SEC Filing | Hovnanian Enterprises, Inc.

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SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

[_] Preliminary Proxy Statement

[X] Definitive Proxy Statement

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12

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

Hovnanian Enterprises, Inc.
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):

[x] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).

[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*

(4) Proposed maximum aggregate value of transaction:
- - - --------
* Set forth the amount on which the filing fee is calculated and state how it
was determined.

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

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:

Notes:

[LETTERHEAD OF HOVNAVIAN ENTERPRISES, INC.]

June 22, 1994

Dear Shareholder:

You are cordially invited to attend the 1994 Annual Meeting of Shareholders
which will be held on Wednesday, July 13, 1994, in the Boardroom of the
American Stock Exchange, 13th Floor, 86 Trinity Place, New York, New York. The
meeting will start promptly at 10:30 a.m.

It is important that your shares be represented and voted at the meeting.
Therefore, we urge you to complete, sign, date and return the enclosed proxy
card in the envelope provided for this purpose. Of course, if you attend the
meeting, you may still choose to vote your shares personally, even though you
have already returned a signed proxy. Important items to be acted upon at the
meeting include the election of directors, the ratification of the selection of
independent accountants and the ratification of the Company's Cash Bonus Plan.

We sincerely hope you will be able to attend and participate in the Company's
1994 Annual Meeting. We welcome the opportunity to meet with many of you and
give you a firsthand report on the progress of your Company.

Sincerely yours,

/s/ Kevork S. Hovnanian

Kevork S. Hovnanian
Chairman of the Board
and
Chief Executive Officer

HOVNANIAN ENTERPRISES, INC.

----------------

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 22, 1994

----------------

Notice is Hereby Given that the Annual Meeting of Shareholders of Hovnanian
Enterprises, Inc. will be held on Wednesday, July 13, 1994, in the Board Room
of the American Stock Exchange, 13th Floor, 86 Trinity Place, New York, New
York at 10:30 a.m. for the following purposes:

1. The election of Directors of the Company for the ensuing year, to
serve until the next Annual Meeting of Shareholders of the Company and
until their respective successors may be elected and qualified.

2. The ratification of the selection of Kenneth Leventhal & Company as
independent accountants to examine financial statements for the Company for
the eight month transition period ended October 31, 1994.

3. The ratification of the Company's Cash Bonus Plan.

4. The transaction of such other business as may properly come before the
meeting and any adjournment thereof.

Only shareholders of record at the close of business on June 17, 1994 are
entitled to notice of and to vote at the meeting.

Accompanying this Notice of Annual Meeting of Shareholders is a proxy
statement, a form of proxy and the Company's Annual Report for the year ended
February 28, 1994.

All shareholders are urged to attend the meeting in person or by proxy.
Shareholders who do not expect to attend the meeting are requested to complete,
sign and date the enclosed proxy and return it promptly in the self-addressed
envelope provided.

By order of the Board of Directors,
Timothy P. Mason
Secretary

June 22, 1994

PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD,
DATE AND SIGN IT, AND RETURN IT IN THE ENVELOPE PROVIDED. NO POSTAGE IS
NECESSARY IF MAILED IN THE UNITED STATES.

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

----------------

PROXY STATEMENT

----------------

GENERAL

The accompanying proxy is solicited on behalf of the Board of Directors of
Hovnanian Enterprises, Inc. (the "Company") for use at the Annual Meeting of
Shareholders referred to in the foregoing notice and at any adjournment
thereof. It is expected that this Proxy Statement and the accompanying proxy
will be mailed commencing June 22, 1994 to each shareholder entitled to vote.
The Company's Annual Report for fiscal 1994 accompanies this Proxy Statement.

Shares represented by properly executed proxies, if such proxies are received
in time and not revoked, will be voted in accordance with the specifications
thereon. If no specifications are made, the persons named in the accompanying
proxy will vote such proxy for the Board of Directors' slate of Directors, for
the ratification of selected independent accountants, to approve the Company's
Cash Bonus Plan and as recommended by the Board of Directors unless contrary
instructions are given. Any person executing a proxy may revoke it at any time
before it is exercised by delivering written notice of revocation to the
Secretary of the Company or by voting in person at the meeting.

CHANGE IN FISCAL YEAR

On May 10, 1994, the Board of Directors of the Company adopted a resolution
providing that the date for the end of the fiscal year of the Company be
changed from the last day of February to October 31. The report covering the
eight month transition period of March 1 through October 31, 1994 will be filed
on Form 10-K. Any reference to fiscal 1994 in this proxy statement refers to
the fiscal year ended February 28, 1994.

VOTING RIGHTS AND SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The record date for the determination of shareholders entitled to vote at the
meeting is the close of business on June 17, 1994. On June 17, 1994, the voting
securities of the Company outstanding consisted of 14,446,428 shares of Class A
Common Stock, each share entitling the holder thereof to one vote and 8,440,825
shares of Class B Common Stock, each share entitling the holder thereof to ten
votes.

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

The following table sets forth as of June 17, 1994 the Class A Common Stock
and Class B Common Stock of the Company beneficially owned by each Director and
nominee for Director, by all Directors and officers of the Company as a group
(including the named individuals) and holders of more than 5%:

CLASS A COMMON STOCK CLASS B COMMON STOCK
-------------------- --------------------
AMOUNT AND AMOUNT AND
NATURE OF NATURE OF
DIRECTORS, NOMINEES AND BENEFICIAL PERCENT BENEFICIAL PERCENT
HOLDERS OF MORE THAN 5% OWNERSHIP(1) OF CLASS(2) OWNERSHIP(1) OF CLASS(2)
----------------------- ------------ ----------- ------------ -----------

Kevork S. Hovnanian(3)..... 5,617,687 38.1% 5,668,387 65.3%
Ara K. Hovnanian(3)........ 1,276,614 8.7% 1,241,376 14.3%
Paul W. Buchanan........... 19,507 .1% 17,160 .2%
Arthur M. Greenbaum........ 1,500 -- 1,500 --
Timothy P. Mason........... 26,200 .2% 13,177 .2%
Desmond P. McDonald........ 3,750 -- 3,750 --
Peter S. Reinhart.......... 15,475 .1% 13,715 .2%
John J. Schimpf............ 69,645 .5% 37,932 .4%
Stephen D. Weinroth........ 2,250 -- 2,250 --
All Directors and officers
as a group
(10 persons).............. 7,051,015 47.8% 7,013,527 80.8%

- - - --------
Notes:
(1) The figures in the table represent beneficial ownership (including
ownership of 292,273 Class A Common Stock Options and 240,060 Class B
Common Stock Options, currently exercisable or exercisable within 60 days)
and sole voting and investment power.
(2) Based upon the number of shares outstanding plus options referred to in
Note(1).
(3) Address: 10 Highway 35, P.O. Box 500, Red Bank, New Jersey 07701.

ELECTION OF DIRECTORS

The Company's By-laws provide that the Board of Directors shall consist of
nine Directors who shall be elected annually by the shareholders. The Company's
Certificate of Incorporation requires that, at any time when any shares of
Class B Common Stock are outstanding, one-third of the Directors shall be
independent. The following persons are proposed as Directors of the Company to
hold office until the next Annual Meeting of Shareholders and until their
respective successors have been duly elected and qualified. In the event that
any of the nominees for Directors should become unavailable, it is intended
that the shares represented by the proxies will be voted for such substitute
nominees as may be nominated by the Board of Directors, unless the number of
Directors constituting a full Board of Directors is reduced. The Company has no
reason to believe, however, that any of the nominees is, or will be,
unavailable to serve as a Director.

YEAR FIRST
BECAME A
NAME AGE COMPANY AFFILIATION DIRECTOR
---- --- -------------------- ----------

Kevork S. Hovnanian............. 71 Chairman of the Board and 1967
Director of the Company.
Ara K. Hovnanian................ 36 President and Director of the 1981
Company.

YEAR FIRST
BECAME A
NAME AGE COMPANY AFFILIATION DIRECTOR
---- --- ------------------- ----------

Paul W. Buchanan................ 43 Senior Vice President-- 1982
Corporate Controller and
Director of the Company.
Arthur M. Greenbaum............. 69 Director of the Company. 1992
Timothy P. Mason................ 54 Senior Vice President-- 1980
Administration/Secretary and
Director of the Company.
Desmond P. McDonald............. 66 Director of the Company. 1982
Peter S. Reinhart............... 44 Senior Vice President and 1981
General Counsel and Director
of the Company.
John J. Schimpf................. 45 Executive Vice President and 1986
Director of the Company.
Stephen D. Weinroth............. 55 Director of the Company. 1982

- - - --------

Mr. K. Hovnanian founded the predecessor of the Company in 1959 and has
served as Chairman of the Board and Chief Executive Officer of the Company
since its initial incorporation in 1967. Mr. K. Hovnanian was also President of
the Company from 1967 to April 1988. Mr. K. Hovnanian is also a director of
Midlantic Corporation.

Mr. A. Hovnanian was appointed President in April 1988, after serving as
Executive Vice President from March 1983. Mr. A. Hovnanian is the son of Mr. K.
Hovnanian.

Mr. Buchanan was appointed Senior Vice President--Corporate Controller in May
1990, after serving as Vice President--Corporate Controller from March 1983.

Mr. Greenbaum has been a senior partner of Greenbaum, Rowe, Smith, Ravin &
Davis, a law firm since 1953. Mr. Greenbaum qualifies as an independent
Director as defined in the Company's Certificate of Incorporation.

Mr. Mason was appointed Senior Vice President of Administration/Secretary in
March 1991 after serving as Vice President--Administration and
Secretary/Treasurer from March 1982.

Mr. McDonald has been a Director of Midlantic National Bank since 1976,
Executive Committee Chairman of Midlantic National Bank since August 1992, a
Vice Chairman of Midlantic Corporation from June 1990 to July 1992 and is also
a Director of Midlantic Corporation. Mr. McDonald was the President of
Midlantic National Bank from 1976 to June 1992. Mr. McDonald qualifies as an
independent Director as defined in the Company's Certificate of Incorporation.

Mr. Reinhart has been Senior Vice President and General Counsel since April
1985.

Mr. Schimpf has been Executive Vice President of the Company since April
1988.

Mr. Weinroth is Co-chairman of the Board and Chief Executive Officer of VETTA
Sports, Inc., a worldwide supplier of bicycle parts and accessories and Vice
Chairman of SCS Communications, Inc., a media company with publishing and
magazine interests. He has held such positions since November 1993 and August
1993 respectively. He is also an independent investor and financial advisor.
From July 1989 to April 1992 he was Chairman of the Board and Chief Executive
Officer of Integrated

Resources, Inc. He was a Managing Director and a member of the Board of
Directors of Drexel Burnham Lambert Incorporated from 1981 until 1989. Mr.
Weinroth was also Chairman and Chief Executive Officer of Drexel Burnham
Lambert Commercial Paper Incorporated during that time. He is a director of
First Britannia Capital B.V.; SCS Communications, Inc. and VETTA Sports, Inc.
In February 1990 and May 1990, Integrated Resources, Inc. and Drexel Burnham
Lambert Incorporated, respectively, filed for protection under Chapter 11 of
the Federal Bankruptcy Code. Mr. Weinroth qualifies as an independent Director
as defined in the Company's Certificate of Incorporation.

MEETINGS OF BOARD OF DIRECTORS

The members of the Audit Committee of the Board of Directors currently are
Messrs. McDonald, Weinroth and Mason. The Audit Committee is chaired by Mr.
McDonald and is responsible for reviewing and approving the scope of the annual
audit undertaken by the Company's independent accountants and meeting with them
to review the results of their work as well as their recommendations. The Audit
Committee has direct access to the Company's independent accountants and also
reviews the fees of independent accountants and recommends to the Board of
Directors the appointment of independent accountants.

The Internal Audit Manager for the Company reports directly to the Audit
Committee on, among other things, the Company's compliance with certain Company
procedures which are designed to enhance management's consideration of all
aspects of major transactions involving the Company. The Audit Committee has
direct control over staffing, including compensation, of the internal audit
department. The Company's Chief Accounting Officer reports directly to the
Audit Committee on significant accounting issues. During fiscal 1994 the Audit
Committee met twice.

The Compensation Committee consists currently of Messrs. McDonald and
Weinroth. Mr. K. Hovnanian, a member of the Compensation Committee during
fiscal 1994, resigned on May 10, 1994. The Compensation Committee is currently
chaired by Mr. Weinroth and is active in reviewing salaries, bonuses and other
forms of compensation for officers and key employees of the Company, in
establishing salaries and in other compensation and personnel areas as the
Board of Directors from time to time may request. For a discussion of the
criteria utilized and factors considered by the Compensation Committee in
reviewing and establishing executive compensation, see "Report of the
Compensation Committee" below. During fiscal 1994 the Compensation Committee
met once.

The Company has no executive or nominating committees. Procedures for
nominating persons for election to the Board of Directors are contained in the
Company's Bylaws.

During the fiscal year ended February 28, 1994 the Board of Directors held
four regularly scheduled meetings. In addition, the directors considered
Company matters and had numerous communications with the Chairman of the Board
of Directors and others wholly apart from the formal meetings.

DIRECTOR COMPENSATION

Each director who is not an officer of the Company is paid $2,000 per
regularly scheduled meeting, $1,000 for each committee meeting attended and a
bonus. All directors are reimbursed for expenses related to his attendance at
Board of Directors and committee meetings. During the year ended February 28,
1994, including an accrued bonus paid on May 10, 1994, Mr. McDonald received
$21,000, Mr. Greenbaum received $18,000 and Mr. Weinroth received $21,000.

RATIFICATION OF THE SELECTION OF AND
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS

The selection of independent accountants to examine financial statements of
the Company made available or transmitted to shareholders and filed with the
Securities and Exchange Commission for the eight months ended October 31, 1994
is to be submitted to the meeting for ratification. Kenneth Leventhal & Company
has been selected by the Board of Directors of the Company to examine such
financial statements.

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

CASH BONUS PLAN

On May 10, 1994, the Compensation Committee presented to the Board of
Directors the Cash Bonus Plan ("CBP") which was approved by the Board of
Directors subject to the approval of the Shareholders. The CBP is identical to
the bonus plan that was in effect for the year ended February 28, 1994. The CBP
was established for Mr. K. Hovnanian, Chairman of the Board and Chief Executive
Officer and Mr. A. Hovnanian, President and Chief Operating Officer. It is
intended to establish "performance-based" compensation and therefore will be
exempt from the limitations on deductibility under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"). Under certain 1993
amendments to the Code, publicly held corporations generally may not deduct
compensation for certain employees to the extent that such compensation exceeds
$1,000,000.

The sole participants in the CBP are Mr. K. Hovnanian and Mr. A. Hovnanian.
The cash bonus paid under the CBP is based on the Company's annual Return on
Equity ("ROE"). ROE is computed by dividing net income of the Company by its
weighted average equity for each fiscal year. For the transition period ended
October 31, 1994, the bonus for the ROE calculated for the year ended October
31, 1994 will be multiplied by two thirds. The cash bonus to be paid based on
various levels of ROE is as follows:

ROE BONUS ROE BONUS
---------------- -------- ------------------ ----------

0.00% to 5.00% 0 15.01% to 17.50% $ 500,000
5.01% to 7.50% $100,000 17.51% to 20.00% $ 750,000
7.51% to 10.00% $200,000 20.01% to 22.50% $1,000,000
10.01% to 12.50% $300,000 22.51% to 25.00% $1,250,000
12.51% to 15.00% $400,000 25.01% and Higher $1,375,000

The bonus for the eight month period ended October 31, 1994 cannot be
determined. If the CBP had been in effect for the fiscal year ended February
28, 1994, both participants would have received $300,000.

The Compensation Committee will administer the CBP and determine whether the
various targets have been met. The CBP will be in effect as of March 1, 1994
for the transition period ended October 31, 1994 and shall continue until
terminated by the Board of Directors. The CBP may be amended by the Company
from time to time provided written approval is obtained from the participants
if the bonus payment is reduced or shareholder approval if the bonus payment is
increased.

The CBP is designed to maintain the deductibility of compensation for the
Company's Chief Executive Officer and Chief Operating Officer under the
limitation of Section 162(m). The recipients of bonuses under the CBP will pay
Federal income tax on such bonuses at ordinary income rates, which currently
are at a maximum rate of 39.6%. Each participant is required to make
appropriate arrangements with the Company for satisfaction of any Federal,
state or local income tax withholding requirements and Social Security or other
tax requirements applicable to the accrual or payment of benefits under the
CBP. If no other arrangements are made, the Company may provide, at its
discretion, for any withholding and tax payments as maybe required.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table summarizes the compensation paid or accrued by the
Company for the chief executive officer and the other four most highly
compensated executives during the year ended February 28(29), 1994, 1993 and
1992.

LONG-TERM COMPENSATION
-----------------------------
ANNUAL COMPENSATION AWARDS
--------------------------- -----------------------------
NUMBER OF
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING ALL OTHER
NAME AND PRINCIPAL FISCAL COMPEN- STOCK OPTIONS/ LTIP COMPEN-
POSITION YEAR SALARY BONUS(1) SATION(2) AWARDS SARS(3) PAYOUTS SATION(4)
------------------ ------ -------- -------- --------- ---------- ---------- ------- ---------

Kevork S. Hovnanian..... 1994 $720,352 $300,000 $ 0 $ 0 0 N/A $11,038
Chairman of the Board 1993 $681,178 $150,000 $0 $0 0 N/A $ 9,744
of Directors, Chief 1992 $643,946 $ 50,000 $0 $0 0 N/A $ 9,661
Executive Officer, and
Director of the Company

Ara K. Hovnanian........ 1994 $632,600 $300,000 $ 0 $ 0 0 N/A $16,143
President and Director 1993 $619,381 $200,000 $0 $0 295,000 N/A $ 947
of the Company 1992 $524,954 $150,000 $0 $0 0 N/A $ 1,730

John J. Schimpf......... 1994 $200,277 $100,000 $ 0 $ 0 0 N/A $15,304
Executive Vice Presi- 1993 $186,599 $ 80,000 $0 $0 70,000 N/A $11,463
dent and Director of 1992 $175,078 $ 35,000 $0 $0 0 N/A $18,479
the Company

J. Larry Sorsby......... 1994 $169,371 $ 82,500 $0 $0 0 N/A $ 7,953
Senior Vice President/ 1993 $157,223 $ 60,000 $0 $0 35,000 N/A $ 5,264
Finance and Treasurer 1992 $144,675 $ 30,000 $0 $0 0 N/A $ 7,207
of the Company

Peter S. Reinhart....... 1994 $152,022 $ 56,800 $0 $0 0 N/A $12,141
Senior Vice President/ 1993 $137,945 $ 50,000 $0 $0 15,000 N/A $10,445
General Counsel and Di- 1992 $147,936 $ 20,000 $0 $0 0 N/A $16,161
rector of the Company

- - - --------
Notes:
(1) Includes awards not paid until after year end.
(2) Includes perquisites and other personal benefits unless the aggregate amount
is lesser than either $50,000 or 10% of the total of annual salary and bonus
reported for the named executive officer.
(3) The Company does not have a stock appreciation right ("SAR") program.

(4) Includes accruals under the Company's savings and investment retirement
plan (the "Retirement Plan"), deferred compensation plan (the "Deferred
Plan") and term life insurance premiums for each of the named executive
officers for fiscal 1994 as follows:

RETIREMENT DEFERRED TERM
PLAN PLAN INSURANCE TOTAL
---------- -------- --------- -------

K. Hovnanian........................ $10,446 $ 0 $592 $11,038
A. Hovnanian........................ $15,196 $ 0 $947 $16,143
Schimpf............................. $10,217 $4,455 $632 $15,304
Sorsby.............................. $ 5,903 $1,485 $565 $ 7,953
Reinhart............................ $ 9,971 $1,719 $451 $12,141

OPTION GRANTS IN LAST FISCAL YEAR

There were no options granted in fiscal 1994.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

The following table provides information on option exercises in fiscal 1994
by the named executive officers and the value of such officers' unexercised
options at February 28, 1994.

SECURITIES UNDERLYING
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED FISCAL 1994 YEAR END(1) FISCAL 1994 YEAR END(1)
ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - - ------------------------ -------- -------- ----------- ------------- ----------- -------------

Kevork S. Hovnanian..... 0 $ 0 None None N/A N/A
Ara K. Hovnanian........ 0 $ 0 323,333 196,667 $1,804,062 $295,000
John J. Schimpf......... 23,500 $132,438 83,333 46,667 $ 507,499 $ 70,001
J. Larry Sorsby......... 0 $ 0 32,667 23,333 $ 182,875 $ 35,000
Peter S. Reinhart....... 8,000 $ 12,500 29,000 10,000 $ 196,500 $ 15,000

- - - --------
Notes:
(1) Fiscal year ended February 28, 1994. The closing price of the Class A
Common Stock on the last trading day of February, 1994 on the American
Stock Exchange was $13.00.

TEN-YEAR OPTION REPRICINGS

For the year ended February 28, 1994, there was no adjustment or amendment to
the exercise price of the stock options previously awarded.

REPORT OF THE COMPENSATION COMMITTEE

The Compensation Committee is charged with the responsibility of determining
the cash and other incentive compensation, if any, to be paid to the Company's
executive officers and key employees. The amount and nature of the compensation
received by the Company's executives in fiscal 1994 was determined in
accordance with the compensation program and policies described below.

The executive compensation program is designed to attract, retain and reward
highly qualified executives while maintaining a strong and direct link between
executive pay, the Company's financial performance and total shareholder
return. The executive compensation program contains three major components:
base salaries, annual bonuses and stock options.

Base Salary

The Compensation Committee believes that, due to the Company's success in its
principal markets, other companies seeking proven executives may view members
of the Company's highly experienced executive team as potential targets. The
base salaries paid to the Company's executive officers in fiscal 1994 generally
were believed to be necessary to retain their services.

Base salaries, including that of Mr. K. Hovnanian, the Company's Chief
Executive Officer, are reviewed annually and are adjusted based on the
performance of the executive, any increased responsibilities assumed by the
executive, average salary increases or decreases in the industry and the going
rate for similar positions at comparable companies. Mr. K. Hovnanian set the
fiscal 1994 base salaries of the Company's executive officers. Each executive
officer's base salary, including the base salary of Mr. K. Hovnanian, was
reviewed in accordance with the above criteria by the members of the
Compensation Committee and thereafter approved.

Annual Bonus Program

The Company maintains an annual bonus program under which executive officers
and other key management employees have the opportunity to earn cash bonuses.
The annual bonus program is intended to motivate and reward executives for the
achievement of individual performance objectives and for the attainment by the
Company of strategic and financial performance goals, including levels of
return on equity.

For the year ended February 28, 1994, the Company's executives received a
bonus based on the Company's overall Return on Equity ("ROE"). Mr. K.
Hovnanian, Chairman of the Board and Chief Executive Officer and Mr. A.
Hovnanian, President and Chief Operating Officer received bonuses based on the
Cash Bonus Plan as described in "Cash Bonus Plan" above. All other executive
officers participate in a plan similar to the Cash Bonus Plan but instead of
receiving a fixed amount, they receive a percentage of their base salary. As
the Company's ROE reaches higher targeted levels, the bonus percentage of
salary increases. The Company's executives received discretionary bonuses
during fiscal 1993 and fiscal 1992.

The Company's annual bonus program is designed to be cost and tax effective.
Accordingly, in light of recent federal tax law changes under the Omnibus
Budget Reconciliation Act of 1993, the Cash Bonus Plan is being recommended for
shareholder approval and reflects the Compensation Committee's policies of
maximizing corporate tax deductions, wherever feasible.

Stock Option Plan

The Option Plan established by the Board of Directors is intended to align
the interests of the Company's executives and shareholders in the enhancement
of shareholder value. The ultimate value received by option holders is directly
tied to increases in the Company's stock price and, therefore, stock options
serve to closely link the interests of management and shareholders and motivate
executives to make decisions that will serve to increase the long-term total
return to shareholders. Additionally, grants under the Option Plan include
vesting and termination provisions which the Compensation Committee believes
will encourage option holders to remain employees of the Company.

The Option Plan is administered by the Compensation Committee. See "Option
Grants in Last Fiscal Year" above. No member of the Compensation Committee,
while a member, is eligible to participate in the Option Plan.

COMPENSATION COMMITTEE

Stephen D. Weinroth
Desmond P. McDonald

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Mr. K. Hovnanian who is Chairman of the Board of Directors and Chief
Executive Officer of the Company resigned from the Compensation Committee on
May 10, 1994. Messrs. McDonald and Weinroth who are non-employee directors and
members of the Compensation Committee were never officers or employees of the
Company. See "CERTAIN TRANSACTIONS" for information concerning Mr. McDonald's
business relationship with the Company.

PERFORMANCE GRAPH

The following graphs compare on a cumulative basis the yearly percentage
change over the three and five year period ending February 28, 1994 in (i) the
total shareholder return on the Common Stock of the Company with (ii) the total
return on the Standard & Poor's 500 Composite Stock Price Index and with (iii)
the total shareholder return on the common stocks of a peer group of twelve
companies. Such yearly percentage change has been measured by dividing (i) the
sum of (a) the amount of dividends for the measurement period, assuming
dividend reinvestment, and (b) the price per share at the end of the
measurement period less the price per share at the beginning of the measurement
period, by (ii) the price per share at the beginning of the measurement period.
The price of each unit has been set at $100 on February 28, 1991 and 1989,
respectively for the preparation of the graphs. The peer group index is
composed of the following peer companies: Hovnanian Enterprises, Inc., Centex
Corporation, PHM Corporation, U.S. Home Corporation, Standard Pacific Corp.,
The Ryland Group, Inc., MDC Holdings, Inc., NVR L.P., Toll Brothers, Inc.,
Kaufman and Broad Home Corporation, Lennar Corporation and UDC-Universal
Development L.P.

Note: The stock price performance shown on the following graphs is not
necessarily indicative of future price performance.

[GRAPH TO COME]

COMPARISON OF THREE-YEAR CUMULATIVE TOTAL RETURNS OF
HOVNANIAN ENTERPRISES, INC.,
THE S & P 500 INDEX AND A PEER GROUP INDEX
(FEBRUARY 28/29)

Measurement period Hovnanian Broad Peer
(Fiscal year Covered) Enterprises, Inc. Market Index Group Index
- - - --------------------- ----------------- ------------ -----------

Measurement PT -
1991 $ 100 $ 100 $ 100

FYE 1992 $ 219.61 $ 116.01 $ 173.54
FYE 1993 $ 180.39 $ 128.39 $ 176.78
FYE 1994 $ 203.92 $ 139.09 $ 205.47

[GRAPH TO COME]

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN OF
HOVNANIAN ENTERPRISES, INC.,
THE S & P 500 INDEX AND A PEER GROUP INDEX
(FEBRUARY 28/29)

Measurement period Hovanian Broad Peer
(Fiscal year Covered) Enterprises, Inc. Market Index Group Index
- - - --------------------- ----------------- ------------ -----------

Measurement PT -
1989 $ 100 $ 100 $ 100

FYE 1990 $ 85.29 $ 118.91 $ 111.11
FYE 1991 $ 75 $ 136.33 $ 101.54
FYE 1992 $ 164.71 $ 158.15 $ 172.78
FYE 1993 $ 135.29 $ 175.02 $ 172.2
FYE 1994 $ 152.94 $ 189.62 $ 199.7

CERTAIN TRANSACTIONS

The Company's Board of Directors has adopted a general policy providing that
it will not make loans to officers or directors of the Company or their
relatives at an interest rate less than the interest rate at the date of the
loan on six month U.S. Treasury Bills, that the aggregate of such loans will
not exceed $2,000,000 at any one time, and that such loans will be made only
with the approval of the members of the Company's Board of Directors who have
no interest in the transaction. At February 28, 1994, loans under this policy
amounted to $1,384,000.

On March 1, 1990, the Company sold all of the assets and liabilities of its
wholly owned engineering subsidiary Najarian & Associates, Inc. ("N & A") for
$3,600,000 to Najarian & Associates L.P., a partnership consisting of the
employees of N & A. One of these employees and former President of N & A was
Tavit O. Najarian, the son-in-law of Mr. K. Hovnanian, Chairman of the Board of
the Company. At the closing, the Company received a cash payment of $720,000
and a $2,880,000 note. The sale was approved by disinterested members of the
Company's Board of Directors. Originally the note carried an annual interest
rate of 10% and was to amortize over ten years. As long as any portion of the
note is outstanding, the Company receives 25% of the net cash flow of Najarian
& Associates, L.P. During fiscal 1992, Najarian & Associates, L.P. began to

experience a significant decrease in business activity. As a result, the note
was modified to change the interest rate to prime, to add accrued interest from
September 1, 1991 to September 1, 1992 to principal and to reschedule principal
payments over the balance of the term of the note. As a result of continued
financial difficulties, a committee consisting of independent directors of the
Board of Directors of the Company (the "Committee") engaged an outside
consultant to determine the fair market value of the above note. Based on the
consultant's findings, the Committee recommended a reduction in the note
including accrued interest from $2,983,000 to $1,100,000 at February 28, 1994.
This reduction of the note was charged to operations in the current fiscal
year. In addition, the Committee recommended a new term of ten years with
annual interest on the note of 5% for the first two years adjusting to prime
thereafter. Amortization would begin in year three with an annual minimum
amount of 5%, ranging up to 30% in year 10, or 85% of cash flow after interest,
whichever is greater. The Committee also recommended a $300,000 discount if the
loan was paid in full during the first two years.

On May 10, 1994, the Board of Directors approved the acquisition of the 10%
minority interest in certain Florida subsidiaries owned by Paul W. Asfahl,
President of the Company's Florida Division. For his 10% interest, the Company
issued 45,000 shares of Class A Common Stock to Mr. Asfahl.

The Company provides property management services to various limited
partnerships including two partnerships in which Mr. A. Hovnanian, President
and a Director of the Company, is general partner, and members of his family
and certain officers and directors of the Company are limited partners. At
February 28, 1994, loans by the Company to these partnerships amounted to
$27,000.

Mr. Desmond McDonald, a Director of the Company, was the President of
Midlantic National Bank ("Midlantic") until July 1992. Mr. McDonald currently
owns 10,794 shares of common stock of Midlantic. From time to time the Company
obtains services and financing from Midlantic. The Company has a Revolving
Credit Agreement with a group of banks, including Midlantic. At February 28,
1994 the Company and its subsidiaries owed $39,307,000 to Midlantic pursuant to
a Revolving Credit Agreement and other financing arrangements.

Mr. Arthur Greenbaum is a senior partner of Greenbaum, Rowe, Smith, Ravin &
Davis, a law firm retained by the Company during fiscal 1994.

GENERAL

The expense of this solicitation is to be borne by the Company. The Company
may also reimburse persons holding shares in their names or in the names of
their nominees for their expenses in sending proxies and proxy material to
their principals.

Unless otherwise directed, the persons named in the accompanying form of
proxy intend to vote all proxies received by them in favor of the election of
nominees to the Board of Directors of the Company named herein, in favor of the
ratification of selected independent accountants and to approve the Cash Bonus
Plan. All proxies will be voted as specified.

Each share of Class A Common Stock entitles the holder thereof to one vote
and each share of Class B Common Stock entitles the holder thereof to ten
votes. Votes of Class A Common Stock and Class B Common Stock will be counted
together without regard to class and will be certified by the Inspectors of
Election, who are employees of the Company. 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, since the date
of issuance, for the benefit or account of the same beneficial owner of such
shares or any permitted transferee. 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 (i) obtain from their nominee a proxy card designed for
beneficial owners of Class B Common Stock, (ii) complete the certification on
such card and (iii) execute the card and return it to their nominee. The
Company has also supplied nominee holders of Class B Common Stock with
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 proxy card or the nominee proxy card
relating to such shares is properly completed and received by Midlantic
National Bank, the Company's transfer agent, not less than 3 nor more than 20
business days prior to July 13, 1994. Completed proxy cards should be sent to
Post Office Box 600, Edison, New Jersey 08818, Attention: Corporate Trust
Department.

All items to be acted upon at the 1994 Annual Meeting of Shareholders will be
determined by a majority of the votes cast. Mr. K. Hovnanian and certain
members of his family have informed the Company that they intend to vote in
favor of all proposals submitted on behalf of the Company. Because of the
voting power of Mr. K. Hovnanian and such members of his family, all of the
foregoing proposals are assured passage.

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 do so. If other matters requiring
the vote of the shareholders properly come before the meeting and any
adjournments thereof, it is the intention of the persons named in the
accompanying form of proxy to vote the proxies held by them in accordance with
their judgment on such matters.

SHAREHOLDER PROPOSALS FOR THE
1995 ANNUAL MEETING

Shareholder proposals for inclusion in the proxy materials related to the
1995 Annual Meeting of Shareholders must be received by the Company no later
than October 31, 1994.

By Order of the Board of Directors

Hovnanian Enterprises, Inc.

Red Bank, New Jersey
June 22, 1994

HOVNANIAN ENTERPRISES, INC.

P
R CLASS A COMMON STOCK
O
X
Y THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby constitutes and appoints Kevork S. Hovnanian, Ara
K. Hovnanian and Desmond P. McDonald, and each of them, his true and
lawful agents and proxies with full power of substitution in each, to
represent the undersigned at the Annual Meeting of Shareholders of
HOVNANIAN ENTERPRISES, INC. to be held in the Boardroom of the American
Stock Exchange, 13th Floor, 86 Trinity Place, New York, New York, at 10:30
A.M. on July 13, 1994, and at any adjournments thereof, upon the matters
set forth in the notice of meeting and Proxy Statement dated June 22, 1994
and upon all other matters properly coming before said meeting.

SEE REVERSE SIDE

X PLEASE MARK YOUR 0000
VOTES AS IN THIS
EXAMPLE. ----

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED (1) FOR THE ELECTION OF THE
NOMINEES OF THE BOARD OF DIRECTORS; (2) FOR THE RATIFICATION OF THE SELECTION
OF KENNETH LEVENTHAL & COMPANY AS INDEPENDENT ACCOUNTANTS; (3) FOR RATIFICATION
OF THE COMPANY'S CASH BONUS PLAN; AND (4) ON ANY OTHER MATTERS IN ACCORDANCE
WITH THE DISCRETION OF THE NAMED ATTORNEYS AND AGENTS, IF NO INSTRUCTIONS TO
THE CONTRARY ARE INDICATED IN ITEMS (1), (2), (3) AND (4).

FOR WITHHELD
1. Election of Directors, Nominees: + + + + + + + +
K. Hovnanian, + + + +
A. Hovnanian, + + + + + + + +
P. Buchanan,
A. Greenbaum,
T. Mason,
D. McDonald,
P. Reinhart,
J. Schimpf,
S. Weinroth

For, except vote withheld from the following nominee(s):
- - - -------------------------------------------------------------------------------

2. Ratification of the selection of Kenneth Leventhal & Company as independent
accountants for the eight months ended October 31, 1994.

FOR AGAINST ABSTAIN
+ + + + + + + + + + + +
+ + + + + +
+ + + + + + + + + + + +

3. Ratification of the Company's Cash Bonus Plan.

FOR AGAINST ABSTAIN
+ + + + + + + + + + + +
+ + + + + +
+ + + + + + + + + + + +

4. In their discretion, upon other matters as may properly come before the
meeting.

Please mark, sign, date and return the proxy card promptly using the enclosed
envelope. This Proxy must be signed exactly as name appears hereon. Executors,
administrators, trustees, etc., should give full title as such. If the signer
is a corporation, please sign full corporate name by duly authorized officer.

--------------------------------------------------------

1994
--------------------------------------------------------
Class A Common Stock SIGNATURE(S) DATE

HOVNANIAN ENTERPRISES, INC.

P
R CLASS B COMMON STOCK
O
X
Y THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

SEE REVERSE SIDE

X PLEASE MARK YOUR 0000
VOTES AS IN THIS
EXAMPLE. -----

For, except vote withheld from the following nominee(s):
- - - --------------------------------------------------------------------------------

2. Ratification of the selection of Kenneth Leventhal & Company as independent
accountants for the eight months ended October 31, 1994.

FOR AGAINST ABSTAIN
+ + + + + + + + + + + +
+ + + + + +
+ + + + + + + + + + + +

3. Ratification of the Company's Cash Bonus Plan.

FOR AGAINST ABSTAIN
+ + + + + + + + + + + +
+ + + + + +
+ + + + + + + + + + + +

4. In their discretion, upon other matters as may properly come before the
meeting.

------------------------------------------------------

1994
------------------------------------------------------
Class B Common Stock SIGNATURE(S) DATE

HOVNANIAN ENTERPRISES, INC.

P
R BENEFICIAL OWNER OF CLASS B COMMON STOCK
O
X
Y THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

By signing on the reverse hereof, the undersigned certifies that (A) with
respect to of the shares represented by this proxy, the undersigned
has been the beneficial owner of such shares since the date of their
issuance or is a Permitted Transferee (as defined in paragraph 4(A) of
Article FOURTH of the Company's Certificate of Incorporation) of any such
beneficial owner and (B) with respect to the remaining shares
represented by this proxy, the undersigned has not been the beneficial
owner of such shares since the date of their issuance nor is the
undersigned a Permitted Transferee of any such beneficial owner.

If no certification is made, it will be deemed that all shares of Class B
Common Stock represented by this proxy have not been held, since the date
of issuance, for the benefit or account of the same beneficial owner of
such shares or any Permitted Transferee.

SEE REVERSE SIDE

X PLEASE MARK YOUR 0000
VOTES AS IN THIS
EXAMPLE. ----

For, except vote withheld from the following nominee(s):
- - - --------------------------------------------------------------------------------

2. Ratification of the selection of Kenneth Leventhal & Company as independent
accountants for the eight months ended October 31, 1994.

FOR AGAINST ABSTAIN
+ + + + + + + + + + + +
+ + + + + +
+ + + + + + + + + + + +

3. Ratification of the Company's Cash Bonus Plan.

FOR AGAINST ABSTAIN
+ + + + + + + + + + + +
+ + + + + +
+ + + + + + + + + + + +

4. In their discretion, upon other matters as may properly come before the
meeting.

-------------------------------------------------
1994

-------------------------------------------------
Class B Common Stock SIGNATURE(S) DATE

HOVNANIAN ENTERPRISES, INC.

P
R NOMINEE HOLDER OF CLASS B COMMON STOCK
O
X
Y THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

SEE REVERSE SIDE

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED (1) FOR THE ELECTION OF THE
NOMINEES OF THE BOARD OF DIRECTORS; (2) FOR THE RATIFICATION OF THE SELECTION
OF KENNETH LEVENTHAL & COMPANY AS INDEPENDENT ACCOUNTANTS FOR FISCAL YEAR
1994; (3) FOR RATIFICATION OF THE COMPANY'S CASH BONUS PLAN; AND (4) ON ANY
OTHER MATTERS IN ACCORDANCE WITH THE DISCRETION OF THE NAMED ATTORNEYS AND
AGENTS, IF NO INSTRUCTIONS TO THE CONTRARY ARE INDICATED IN ITEMS (1), (2),
(3) AND (4).

CLASS B COMMON STOCK SHARES CLASS B COMMON STOCK SHARES NOT
OWNED BY SAME BENEFICIAL OWNER OWNED BY SAME BENEFICIAL OWNER
OR PERMITTED TRANSFEREE SINCE OR PERMITTED TRANSFEREE SINCE
ISSUANCE ISSUANCE
------------------------------ -------------------------------
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
--------- --------- --------- --------- --------- ---------
(POST NUMBER OF SHARES NOT (POST NUMBER OF SHARES NOT
NUMBER OF VOTES) NUMBER OF VOTES)

1. Directors:
K. Hovnanian ____ shs. ____ shs. ____ shs. ____ shs. ____ shs. ____ shs.
A. Hovnanian ____ shs. ____ shs. ____ shs. ____ shs. ____ shs. ____ shs.
P. Buchanan ____ shs. ____ shs. ____ shs. ____ shs. ____ shs. ____ shs.
A. Greenbaum ____ shs. ____ shs. ____ shs. ____ shs. ____ shs. ____ shs.
T. Mason ____ shs. ____ shs. ____ shs. ____ shs. ____ shs. ____ shs.
D. McDonald ____ shs. ____ shs. ____ shs. ____ shs. ____ shs. ____ shs.
P. Reinhart ____ shs. ____ shs. ____ shs. ____ shs. ____ shs. ____ shs.
J. Schimpf ____ shs. ____ shs. ____ shs. ____ shs. ____ shs. ____ shs.
S. Weinroth ____ shs. ____ shs. ____ shs. ____ shs. ____ shs. ____ shs.
2. Ratification of
independent accountants ____ shs. ____ shs. ____ shs. ____ shs. ____ shs. ____ shs.
3. Ratification of the
Company's Cash Bonus
Plan ____ shs. ____ shs. ____ shs. ____ shs. ____ shs. ____ shs.

4.In their discretion, upon other matters as may properly come before the
meeting.

Please mark, sign, date and return the proxy card promptly using the enclosed
envelope. This proxy must be signed exactly as name appears hereon. Executors,
administrators, trustees, etc., should give full title as such. If the signer
is a corporation, please sign full corporate name by duly authorized officer.

---------------------------------------------------
1994

---------------------------------------------------
Class B Common Stock SIGNATURE(S) DATE