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 [_]

Filed by a Party other than the Registrant [X]

Check the appropriate box:

[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement

[_] Definitive Additional Materials

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

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

Payment of Filing Fee (Check the appropriate box):

[_] No fee required.

[_] 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:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):

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[_] Fee paid previously with preliminary materials.

[_] 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:

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(4) Date Filed:

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Notes:

[LETTERHEAD OF HOVNANIAN ENTERPRISES, INC.]

February 28, 1997

Dear Shareholder:

You are cordially invited to attend the Annual Meeting of Shareholders which
will be held on Tuesday, April 15, 1997, 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, ratification of the selection of
independent accountants and the approval of certain amendments to the Company's
Cash Bonus Plan.

We sincerely hope you will be able to attend and participate in the Company's
1997 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
FEBRUARY 28, 1997

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

Notice is Hereby Given that the Annual Meeting of Shareholders of Hovnanian
Enterprises, Inc. will be held on Tuesday, April 15, 1997, 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 Ernst & Young LLP as independent
accountants to examine financial statements for the Company for the year
ended October 31, 1997.

3. The approval of amendments to 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 February 21, 1997 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
October 31, 1996.

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,
Peter S. Reinhart
Secretary

February 28, 1997

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

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PROXY STATEMENT

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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 February 28, 1997 to each shareholder entitled to
vote. The Company's Annual Report for the year ended October 31, 1996
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, for the approval of
certain amendments to 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.

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 February 21, 1997. On February 21, 1997,
the voting securities of the Company outstanding consisted of 15,139,425 shares
of Class A Common Stock, each share entitling the holder thereof to one vote
and 7,847,625 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 February 21, 1997 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).. 5,653,787 37.3% 5,843,837 74.5%
Ara K. Hovnanian(4)........ 1,426,228 9.2% 1,234,096 15.3%
Paul W. Buchanan........... 31,853 .2% 21,480 .3%
Arthur M. Greenbaum........ 1,500 -- 1,500 --
Desmond P. McDonald........ 3,750 -- 3,750 --
Peter S. Reinhart.......... 27,235 .2% 16,955 .2%
John J. Schimpf............ 109,525 .7% 53,052 .7%
J. Larry Sorsby............ 48,827 .3% 21,840 .3%
Stephen D. Weinroth........ 2,250 -- 2,250 --
All Directors and officers
as a group
(9 persons)............... 7,304,955 46.7% 7,198,760 88.1%

- --------
Notes:
(1) The figures in the table in respect of Class A Common Stock do not include
the shares of Class B Common Stock beneficially owned by the specified
persons, which shares of Class B Common Stock are convertible at any time
on a share for share basis to Class A Common Stock. The figures in the
table represent beneficial ownership (including ownership of 514,060 Class
A Common Stock Options and 320,940 Class B Common Stock Options, currently
exercisable or exercisable within 60 days) and sole voting power and sole
investment power except as noted in notes (3), (4) and (5) below.
(2) Based upon the number of shares outstanding plus options for such
director, nominee or holder.
(3) Includes 317,812 shares of Class A Common Stock and 320,012 shares of
Class B Common Stock as to which Kevork S. Hovnanian has shared voting
power and shared investment power. Kevork S. Hovnanian's address is 10 Hwy
35, P.O. Box 500, Red Bank, New Jersey 07701.
(4) Includes 8,350 shares of Class A Common Stock and 10,150 shares of Class B
Common Stock as to which Ara K. Hovnanian has shared voting power and
shared investment power. Ara K. Hovnanian's address is 10 Hwy 35, P.O. Box
500, Red Bank, New Jersey 07701.
(5) Includes 2,829,413 shares of Class B Common Stock held by the Kevork S.
Hovnanian Family Limited Partnership, a Connecticut limited partnership
(the "Limited Partnership"), beneficial ownership of which is disclaimed
by Kevork S. Hovnanian. Kevork S. Hovnanian's wife, Sirwart Hovnanian, as
trustee of the Sirwart Hovnanian 1994 Marital Trust, is the Managing
General Partner of the Limited Partnership and as such has the sole power
to vote and dispose of the shares of Class B Common Stock held by the
Limited Partnership. Also includes 279,562 shares of Class A Common Stock
and 264,562 shares of Class B Common Stock held in trust for Mr.
Hovnanian's daughter over which Sirwart Hovnanian, as trustee, shares with
her daughter the power to dispose of and vote. In addition, includes
18,250 shares of Class A Common Stock and 55,450 shares of Class B Common
Stock held in trust for Mr. Hovnanian's grandchildren, over which Sirwart
Hovnanian, as trustee, has sole power to dispose of and vote and includes
20,000 shares of Class A Common Stock held in the name of Sirwart
Hovnanian over which she has sole power to dispose of and vote. Mr.
Hovnanian disclaims beneficial ownership of the shares described in the
preceding three sentences.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers, directors, persons who own more than ten
percent of a registered class of the Company's equity securities and certain
entities associated with the foregoing ("Reporting Persons") to file reports
of ownership and changes in ownership on Forms 3, 4 and 5 with the Securities
and Exchange Commission (the "SEC") and the American Stock Exchange (the
"ASE"). These Reporting Persons are required by SEC regulation to furnish the
Company with copies of all Forms 3, 4 and 5 they file with the SEC and the
ASE. Based solely on the Company's review of the copies of such forms it has
received, the Company knows of no failure to file.

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............. 73 Chairman of the Board, Chief 1967
Executive Officer and
Director of the Company.
Ara K. Hovnanian................ 39 President and Director of the 1981
Company.
Paul W. Buchanan................ 46 Senior Vice President-- 1982
Corporate Controller and
Director of the Company.
Arthur M. Greenbaum............. 71 Director of the Company. 1992
Desmond P. McDonald............. 69 Director of the Company. 1982
Peter S. Reinhart............... 46 Senior Vice President and 1981
General Counsel/Secretary
and Director of the Company.
John J. Schimpf................. 47 Executive Vice President and 1986
Director of the Company.
J. Larry Sorsby................. 41 Senior Vice President, 1997
Treasurer and Chief
Financial Officer and
Director of the Company.
Stephen D. Weinroth............. 58 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. 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 has been Senior Vice President--Corporate Controller since May
1990.

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. McDonald was a Director of Midlantic Bank N.A. from 1976 to December,
1995, Executive Committee Chairman of Midlantic Bank N.A. from August 1992 to
December, 1995 and was President of Midlantic Bank N.A. from 1976 to June 1992.
He was also a Director of Midlantic Corporation to December, 1995 and was Vice
Chairman of Midlantic Corporation from June 1990 to July 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. He was elected Secretary of the Company in February 1997.

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

Mr. Sorsby was appointed Senior Vice President, Treasurer and Chief Financial
Officer of the Company in February, 1996 after serving as Senior Vice
President-Finance/Treasurer of the Company since March 1991 and Vice
President/Finance since September 1988.

Mr. Weinroth is Chairman of the Board of Core Laboratories N.V., a publicly-
owned worldwide oil field services and manufacturing company. He is also a
senior partner in Andersen, Weinroth & Co., L.P. a merchant banking firm. He
has held such positions since 1994 and the beginning of 1996, respectively.
From November 1993 until December 1995, he was Co-Chairman and Co-Chief
Executive Officer of VETTA Sports, Inc., a supplier of bicycle parts and
accessories. From 1989 to the present, Mr. Weinroth has been Co-Chairman of the
Board of Directors and Chairman of the Investment Committee of First Brittania
N.V., an international buyout firm. 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 are Messrs.
McDonald and Weinroth and former Director Timothy P. 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 the year ended October
31, 1996 the Audit Committee met twice.

The Compensation Committee consists of Messrs. McDonald and Weinroth. 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 the year
ended October 31, 1996 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 year ended October 31, 1996 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, $2,000
for special meetings 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 October 31, 1996, including an accrued bonus
paid on February 13, 1997, Mr. McDonald received $20,000, Mr. Greenbaum
received $18,000 and Mr. Weinroth received $20,000.

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 year ended October 31, 1997 is to be
submitted to the meeting for ratification. Ernst & Young LLP 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 Ernst & Young LLP 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.

AMENDMENTS TO CASH BONUS PLAN

On February 13, 1997 the Compensation Committee presented to the Board of
Directors amendments to the Company's Cash Bonus Plan ("CBP") which was
approved by the Board of Directors subject to the approval of the Shareholders.
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 was 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.

The amended CBP bonus amounts are based on various levels of ROE which are as
follows:

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

5.00% $150,000 12.50% $ 600,000
7.50% $300,000 15.00% $ 800,000
10.00% $450,000 17.50% $1,100,000

Under the CBP as amended bonuses up to the $1,100,000 maximum will be
calculated using the actual ROE and interpolating between the bonus amounts
shown. In addition, for the transition period to the end of fiscal year 1997
the bonus will be determined using an annualized ROE for the nine months ending
October 31, 1997, but in no event will a 1997 bonus exceed the bonus amount
that would have been awarded using the actual ROE for the full year ending
October 31, 1997.

The Compensation Committee will continue to administer the CBP and determine
whether the various targets have been met. The amended CBP will be in effect as
of February 1, 1997 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 may be 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 years ended October 31, 1996 and 1995, the
eight month transition period ended October 31, 1994 and the year ended
February 28, 1994.

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

Kevork S. Hovnanian..... 1996 $786,067 $200,000 $0 $0 0 N/A $10,115
Chairman of the Board
of 1995 $739,335 $200,000 $0 $0 0 N/A $ 9,885
Directors, Chief Execu-
tive 10/94 $506,160 $133,334 $0 $0 0 N/A $ 7,811
Officer, and Director
of 1994 $720,352 $300,000 $0 $0 0 N/A $11,038
the Company
Ara K. Hovnanian........ 1996 $678,610 $200,000 $0 $0 0 N/A $10,481
President and Director 1995 $678,182 $200,000 $0 $0 50,000 N/A $10,270
of the Company 10/94 $487,794 $133,334 $0 $0 0 N/A $ 6,932
1994 $632,600 $300,000 $0 $0 0 N/A $16,143
John J. Schimpf......... 1996 $245,360 $100,006 $0 $0 0 N/A $17,745
Executive Vice Presi-
dent 1995 $213,638 $ 74,139 $0 $0 25,000 N/A $19,937
and Director of the 10/94 $144,086 $ 48,251 $0 $0 0 N/A $18,443
Company 1994 $200,277 $100,000 $0 $0 0 N/A $15,304
J. Larry Sorsby......... 1996 $198,836 $ 69,997 $0 $0 0 N/A $14,349
Senior Vice President, 1995 $185,202 $ 63,000 $0 $0 20,000 N/A $16,158
Treasurer and Chief 10/94 $121,403 $ 50,833 $0 $0 0 N/A $11,085
Financial Officer and 1994 $169,371 $ 82,500 $0 $0 0 N/A $ 7,953
Director of the Company
Peter S. Reinhart....... 1996 $156,804 $ 46,500 $0 $0 0 N/A $12,822
Senior Vice President/ 1995 $152,481 $ 45,119 $0 $0 15,000 N/A $13,998
General Counsel and 10/94 $102,879 $ 29,394 $0 $0 0 N/A $13,748
Director of the Company 1994 $152,022 $ 56,800 $0 $0 0 N/A $12,141

- --------
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 the year ended October 31, 1996 as follows:

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

K. Hovnanian........................ $9,750 $ 0 $365 $10,115
A. Hovnanian........................ $9,750 $ 0 $731 $10,481
Schimpf............................. $9,750 $7,379 $616 $17,745
Sorsby.............................. $9,750 $4,104 $495 $14,349
Reinhart............................ $9,750 $2,699 $373 $12,822

OPTION GRANTS IN LAST FISCAL YEAR

There were no options granted during the year ended October 31, 1996.

AGGREGATED OPTION EXERCISES DURING THE YEAR ENDED OCTOBER 31, 1996 AND OPTION
VALUES AT OCTOBER 31, 1996

The following table provides information on option exercises during the year
ended October 31, 1996 by the named executive officers and the value of such
officers' unexercised options at October 31, 1996.

SECURITIES UNDERLYING
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED OCTOBER 31, 1996(1) OCTOBER 31, 1996(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 $ 0 536,667 33,333 $81,758 $ 391
John J. Schimpf......... 0 $ 0 138,333 16,667 $54,062 $3,125
J. Larry Sorsby......... 0 $ 0 62,667 13,333 $19,625 $2,500
Peter S. Reinhart....... 0 $ 0 44,000 10,000 $21,938 $1,875

- --------
Notes:
(1) The closing price of the Class A Common Stock on the last trading day of
October, 1996 on the American Stock Exchange was $6.00.

TEN-YEAR OPTION REPRICINGS

For the year ended October 31, 1996, 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 during the year ended October 31, 1996 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 during the year ended October 31, 1996 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
year ended October 31, 1996 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 October 31, 1996, 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 a fixed amount bonus
based on the Company's ROE. All other executive officers participate in a plan
based on ROE 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 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 bonus plan for executives receiving
compensation in excess of $1,000,000 was approved by shareholders at the July
13, 1994 Annual Meeting of Shareholders 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. Weinroth is Chairman of the Compensation Committee which also includes
Mr. McDonald. Both Messrs. McDonald and Weinroth are non-employee directors and
were never officers or employees of the Company. See "CERTAIN TRANSACTIONS" for
information concerning Mr. Greenbaum's business relationship with the Company.

PERFORMANCE GRAPH

The following graph compares on a cumulative basis the yearly percentage
change over the five year period ending October 31, 1996 in (i) the total
shareholder return on the Class A 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 October 31, 1991 for the
preparation of the graph. 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 graph is not
necessarily indicative of future price performance.

Hovnanian Enterprises, Broad Market Peer Group

1990 100.00 100.00 100.00
1991 207.69 133.51 216.89
1992 292.31 146.83 313.30
1993 546.15 168.78 450.17
1994 184.62 175.31 269.42
1995 219.23 221.67 371.45

Hovnanian Enterprises, Broad Market Peer Group

1992 100.00 100.00 100.00
1993 186.84 114.95 142.97
1994 63.16 119.40 85.87
1995 75.00 150.97 117.46

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 October 31, 1996, loans under this policy
amounted to $1,908,000. Notwithstanding the policy stated above, the Board of
Directors of the Company concluded that the following transactions were in the
best interests of the Company.

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 the year ended February 29, 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 during the year ended February 28, 1994. 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. During the year ended October 31, 1996, the loan plus accrued
interest was paid in full net of the $300,000 prepayment discount which was
charged to operations.

The Company provides property management services to various limited
partnerships including one partnership 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 October
31, 1996, no amounts were due the Company by these partnerships.

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, then
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.

On August 2, 1994, the Board of Directors approved the acquisition of the 15%
minority interest in the New Fortis Corporation owned primarily by Marvin D.
Gentry, President of the New Fortis Corporation. For the 15% interest, the
Company issued 135,000 shares of Class A Common Stock to Mr. Gentry and the
other owners.

Mr. Arthur Greenbaum is a senior partner of Greenbaum, Rowe, Smith, Ravin &
Davis, a law firm retained by the Company during the year ended October 31,
1996.

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 and in favor of
the ratification of selected independent accountants. 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 Boston EquiServe,
the Company's transfer agent, not less than 3 nor more than 20 business days
prior to April 15, 1997. Completed proxy cards should be sent to P.O. Box 9381,
Boston, Massachusetts 02266-9381, Attention: Proxy Department.

All items to be acted upon at this 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
1998 ANNUAL MEETING

Shareholder proposals for inclusion in the proxy materials related to the
1998 Annual Meeting of Shareholders must be received by the Company no later
than November 8, 1997.

By Order of the Board of Directors

Hovnanian Enterprises, Inc.

Red Bank, New Jersey
February 28, 1997

DETACH HERE HV1 F

PROXY

HOVNANIAN ENTERPRISES, INC.

Class A Common Stock

This Proxy is Solicited on Behalf of the Board of Directors

The undersigned hereby constitutes and appoints 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 April 15, 1997, and at any
adjournments thereof, upon the matters set forth in the notice of meeting and
Proxy Statement dated February 28, 1997 and upon all other matters properly
coming before said meeting.

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

DETACH HERE HV1, HV2, HV3 F

[X] Please mark
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
Ernst & Young LLP as independent accountants; (3) for the approval of the
amendments to 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 AGAINST ABSTAIN
1. Election of Directors 2. Ratification of the selection of Ernst [ ] [ ] [ ]
NOMINEES: K. Hovnanian, A. Hovnanian, P. Buchanan, A. Greenbaum, & Young LLP as independent
D. McDonald, P. Reinhart, J. Schimpf, J. Sorsby, S. Weinroth accountants for the year ended
FOR WITHHELD October 31, 1997.
[ ] [ ]
3. Approval of amendments to the [ ] [ ] [ ]
Company's Cash Bonus Plan.

[ ] 4. In their discretion, upon other matters as may properly come
------------------------------------------- before the meeting.
For all nominees except as noted above

MARK HERE
FOR ADDRESS [ ]
CHANGE AND
NOTE AT LEFT

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.

Signature: Date: Signature: Date:
------------------------------------ -------- ---------------------------- ---------

DETACH HERE HV2 F

PROXY

HOVNANIAN ENTERPRISES, INC.

Class B common Stock

This Proxy is Solicited on Behalf of the Board of Directors

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

DETACH HERE HV1, HV2, HV3 F

[X] Please mark
votes as in
this example.

[ ] 4. In their discretion, upon other matters as may properly come
------------------------------------------- before the meeting.
For all nominees except as noted above

MARK HERE
FOR ADDRESS [ ]
CHANGE AND
NOTE AT LEFT

Signature: Date: Signature: Date:
------------------------------------ -------- ---------------------------- ---------

DETACH HERE HV3 F

PROXY

HOVNANIAN ENTERPRISES, INC.

Beneficial Owners Class B Common Stock

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 or 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
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
-----------

DETACH HERE HV1, HV2, HV3 F

[X] Please mark
votes as in
this example.

[ ] 4. In their discretion, upon other matters as may properly come
------------------------------------------- before the meeting.
For all nominees except as noted above

MARK HERE
FOR ADDRESS [ ]
CHANGE AND
NOTE AT LEFT

Signature: Date: Signature: Date:
------------------------------------ -------- ---------------------------- ---------

DETACH HERE HV4 F

PROXY

HOVNANIAN ENTERPRISES, INC.

Nominee Holder of Class B Common Stock

This Proxy is Solicited on Behalf of the Board of Directors

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

DETACH HERE HV4 F

[X] Please mark
votes as in
this example.

[ ] 4. In their discretion, upon other matters as may properly come
---------------------------------------------- before the meeting.
If you have elected cumulative voting, use
the space above to record individual nominees'
names and shares allocated.
MARK HERE
FOR ADDRESS [ ]
CHANGE AND
NOTE AT LEFT

Signature: Date: Signature: Date:
------------------------------------ -------- ---------------------------- ---------

VOTING PROCEDURES--BENEFICIAL OWNERS
CLASS B COMMON STOCK OF HOVNANIAN ENTERPRISES, INC.

TO ALL BANKS, BROKERS AND NOMINEES:

In accordance with the Certificate of Incorporation of Hovnanian Enterprises,
Inc. (the "Company"), each share of Class B Common Stock entitles the holder
thereof to ten votes; provided, however, 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 it is established to the Company's satisfaction 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 (as defined in the
Certificate of Incorporation).

To enable the Company to tabulate the voting by beneficial owners of Class B
Common Stock held in your name, a special proxy card has been devised in
accordance with suggestions made by representatives of brokerage houses and
banks. On this card, the beneficial owner will certify the number of ten-vote
shares and one-vote shares, respectively, he or she is entitled to vote, and
will by the same signature give instructions as to the voting of those shares.
ALL UNCERTIFIED SHARES, WHETHER INSTRUCTED OR NOT, ARE TO BE LISTED AS ONE-VOTE
SHARES. THIS IS NOT TO BE REGARDED AS A NON-ROUTINE VOTE MERELY BECAUSE OF THE
NATURE OF THE VOTING RIGHTS OF THE CLASS B COMMON STOCK. The beneficial owner
proxy card certification is as follows:

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.

The nominee's proxy card has also been designed to accommodate the voting of
the Class B Common Stock.

Please note, you do not have to tabulate, only record the numbers shown on
the certification. Please note also that you do not certify if you are a
nominee, the beneficial owner certifies.

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 Boston
EquiServe, the Company's transfer agent, not less than 3 nor more than 20
business days prior to April 15, 1997. Completed proxy cards should be sent to
P.O. Box 9381, Boston, Massachusetts 02266-9381, Attention: Proxy Department.

By order of the Board of Directors,

Peter S. Reinhart
Secretary