Edgar Filing: HOVNANIAN ENTERPRISES INC

HOVNANIAN ENTERPRISES, INC.
[ LOGO ] Hovnanian -------------------------------------------------------------------------
10 HIGHWAY 35, P.O. BOX 500, RED BANK, NEW JERSEY 07701 M (732) 747-7800

February 4, 2002

Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
which will be held on Friday, March 8, 2002, at the offices of Simpson Thacher &
Bartlett, 425 Lexington Avenue, 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 and ratification of the selection
of independent accountants.
We sincerely hope you will be able to attend and participate in the
Company's 2002 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

HOVNANIAN ENTERPRISES, INC.

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

Notice of Annual Meeting of Shareholders
February 4, 2002

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

Notice is Hereby Given that the Annual Meeting of Shareholders of
Hovnanian Enterprises, Inc. will be held on Friday, March 8, 2002, at the
offices of Simpson Thacher & Bartlett, 425 Lexington Avenue, 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, 2002.
3. 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 January 18,
2002 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, 2001.
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,

/s/ Peter S. Reinhart
--------------------------
Peter S. Reinhart
Secretary

February 4, 2002

--------------------------------------------------------------------------------
If you are a stockholder of record and you plan to attend the Annual
Meeting, please mark the appropriate box on your proxy card. If your shares are
held by a bank, broker or other intermediary and you plan to attend, please send
written notice to Hovnanian Enterprises, Inc., 10 Highway 35, P.O. Box 500, Red
Bank, New Jersey 07701, Attention: Peter S. Reinhart, Secretary, and enclose
evidence of your ownership (such as a letter from the bank, broker or
intermediary confirming your ownership or a bank or brokerage firm account
statement). The names of all those planning to attend will be placed on an
admission list held at the registration desk at the entrance to the meeting. If
you do not plan to attend the Annual Meeting, please vote your shares by mail.
If you choose to vote by mail, please sign the proxy card and return it in the
envelope so that your shares will be voted. The envelope requires no postage if
mailed in the United States.
--------------------------------------------------------------------------------

HOVNANIAN ENTERPRISES, INC.
10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701

------------------------
PROXY STATEMENT
------------------------

General
The accompanying proxy is solicited on behalf of 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 4, 2002 to each shareholder entitled to vote. The
Company's Annual Report for the year ended October 31, 2001 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, 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 January 18, 2002. On January 18,
2002, the voting securities of the Company outstanding consisted of 22,856,444
shares of Class A Common Stock, each share entitling the holder thereof to one
vote and 7,467,381 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 January 18, 2002 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).................. 5,361,325 23.5% 5,843,837 78.2%
Ara K. Hovnanian(4)........................ 1,422,522 6.1% 1,121,596 14.8%
Paul W. Buchanan........................... 62,895 .3% 6,480 .1%
Geaton A. DeCesaris, Jr.(6)................ 1,318,098 5.7% -- --%
Arthur M. Greenbaum........................ 15,167 .1% 1,500 --%
Desmond P. McDonald........................ 15,418 .1% 3,750 .1%
Peter S. Reinhart.......................... 31,275 .1% 4,945 .1%
John J. Robbins............................ 2,500 --% -- --%
J. Larry Sorsby............................ 95,660 .4% 11,340 .2%
Stephen D. Weinroth........................ 29,418 .1% 2,250 --%
Dimension Fund Advisors Inc. (7)........... 1,134,584 5.0% -- --
All Directors and officers as a group
(11 persons)......................... 8,354,278 35.2% 6,995,698 92.2%

------------------------------
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 890,717 Class
A Common Stock Options and 118,260 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), (5) and (6) below.
(2) Based upon the number of shares outstanding plus options for such director,
nominee or holder.
(3) Includes 113,250 shares of Class A Common Stock and 320,012 shares of Class
B Common Stock as to which Kevork S. Hovnanian has shared voting power and
shared investment power. Kevork S. Hovnanian's address is 10 Hwy 35, P.O.
Box 500, Red Bank, New Jersey 07701.
(4) Includes 35,217 shares of Class A Common Stock and 94,167 shares of Class B
Common Stock as to which Ara K. Hovnanian has shared voting power and
shared investment power. Ara K. Hovnanian's address is 10 Hwy 35, P.O. Box
500, Red Bank, New Jersey 07701.
(5) Includes 2,829,413 shares of Class B Common Stock held by the Kevork S.
Hovnanian Family Limited Partnership, a Connecticut limited partnership
(the "Limited Partnership"), beneficial ownership of which is disclaimed by
Kevork S. Hovnanian. Kevork S. Hovnanian's wife, Sirwart Hovnanian, as
trustee of the Sirwart Hovnanian 1994 Marital Trust, is the Managing
General Partner of the Limited Partnership and as such has the sole power
to vote and dispose of the shares of Class B Common Stock held by the
Limited Partnership. Also includes 264,562 shares of Class B Common Stock
held in trust for Mr. Hovnanian's daughter over which Sirwart Hovnanian, as
trustee, shares with her daughter the power to dispose of and vote. In
addition, includes 18,250 shares of Class A Common Stock and 55,450 shares
of Class B Common Stock held in trust for Mr. Hovnanian's grandchildren,
over which Sirwart Hovnanian, as trustee, has sole power to dispose of and
vote and includes 95,000 shares of Class A Common Stock held in the name of
Sirwart Hovnanian over which she has sole power to dispose of and vote. Mr.
Hovnanian disclaims beneficial ownership of the shares described in the
preceding three sentences.
(6) Includes 375,320 shares of Class A Common Stock as to which Geaton A.
DeCesaris, Jr. has shared voting power and shared investment power. Mr.
DeCesaris's address is 1802 Brightseat Rd., Landover, MD 20785.
(7) Based solely upon information contained in a statement on Schedule 13G
filed with the Securities and Exchange Commission as of February 12, 2001.
Address: 1299 Ocean Ave., 11th Floor, Santa Monica, CA 90401.

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 no more than eleven 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............. 78 Chairman of the Board, and 1967
Director of the Company.
Ara K. Hovnanian................ 44 President, Chief Executive 1981
Officer and Director
of the Company.
Paul W. Buchanan................ 51 Senior Vice President-- 1982
Corporate Controller and
Director of the Company.
Geaton A. DeCesaris, Jr......... 46 President of Homebuilding 2001
Operations and Chief
Operating Officer and
Director of the Company.
Arthur M. Greenbaum............. 76 Director of the Company. 1992
Desmond P. McDonald............. 74 Director of the Company. 1982
Peter S. Reinhart............... 51 Senior Vice President and 1981
General Counsel/Secretary
and Director of the Company.
John J. Robbins................. 62 Director of the Company 2001
J. Larry Sorsby................. 46 Executive Vice President 1998
and Chief Financial Officer
and Director of the Company.
Stephen D. Weinroth............. 63 Director of the Company. 1982

Mr. K. Hovnanian founded the predecessor of the Company in 1959 and has
served as Chairman of the Board since its initial incorporation in 1967. Mr. K.
Hovnanian was also Chief Executive Officer of the Company from 1967 to July
1997.
Mr. A. Hovnanian was appointed President in April 1988, after serving
as Executive Vice President from March 1983. He has also served as Chief
Executive Officer since July 1997. Mr. A. Hovnanian is the son of Mr. K.
Hovnanian.
Mr. Buchanan has been Senior Vice President -- Corporate Controller
since May 1990.

Mr. DeCesaris was appointed President of Homebuilding Operations and
Chief Operating Officer in January 2001. From August 1988 to January 2001, he
was President, Chief Executive Officer and a Director of Washington Homes, Inc.
("WHI") and from April 1999 Chairman of the Board of WHI.
Mr. Greenbaum has been a senior partner of Greenbaum, Rowe, Smith,
Ravin, Davis & Himmel, a law firm since 1950. 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. Robbins was a partner with Kenneth Leventhal & Company from 1973 to
1992 when he retired. Mr. Robbins was managing partner of the New York office
and an executive committee partner when he retired. He is also a trustee of
Keene Creditors Trust. Mr. Robbins qualifies as an independent Director as
defined in the Company's Certificate of Incorporation.
Mr. Sorsby was appointed Executive Vice President and Chief Financial
Officer of the Company in November, 2000 after serving as Senior Vice President,
Treasurer and Chief Financial Officer of the Company since February 1996.
Mr. Weinroth is Chairman of the Board of Core Laboratories N.V., a New
York Stock Exchange listed worldwide oil field services 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
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 mezzanine and equity fund. He is also a director of Financial
Federal Corp. a NYSE listed equipment leasing company. Mr. Weinroth is Vice
Chairman of the Central Asian-American Enterprise Fund, a development lender and
investor in five countries formerly in the Soviet Union; the Fund receives its
capital from an agency of the United States government. 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, Robbins and Weinroth. The Audit Committee is chaired by Mr.
McDonald and is responsible for reviewing and approving the scope of the annual
audit undertaken by the Company's independent accountants and meeting with them
to review the results of their work as well as their recommendations. The Audit
Committee 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 understanding of
operating issues and the results of the Audit Department's approximately 50
audits annually of the various aspects of the Company's business. The Audit
Committee authorizes staffing and compensation of the internal audit department.
The Company's Chief Accounting Officer reports directly to the Audit Committee
on significant accounting issues. During the year ended October 31, 2001 the
Audit Committee met twice and had numerous telephonic meetings with the Internal
Audit Manager.
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, 2001 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, 2001 the Board of Directors held four
regularly scheduled meetings and one telephonic meeting. 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 attended, $1,000 for each committee meeting attended
on a board meeting day, $2,000 for each committee meeting attended on a day
other than a board meeting day, $2,000 for special meetings attended and a
bonus. Members of the Audit Committee receive an additional $7,500 payable
semi-annual. From time to time, these directors are also granted stock options.
All directors are reimbursed for expenses related to their attendance at Board
of Directors and committee meetings. During the year ended October 31, 2001, Mr.
McDonald received $43,500, Mr. Greenbaum received $32,000, Mr. Robbins received
$40,500 and Mr. Weinroth received $43,500 including a bonus paid in December
2001. In addition, on November 6, 2001 these four directors were granted 7,500
stock options each at an exercise price of $11.15 (market price on the date of
the grant). The options vest 331/3% a year starting on the first anniversary
date of the grant and terminate November 5, 2011.

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,
2002 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.
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, 2001, 2000 and 1999.

Long-Term Compensation
-----------------------------
Awards
--------------------
Annual Compensation
---------------------------------
Number of
Other Securities All
Year Annual Restricted Underlying Other
or Compen- Stock Options/ LTIP Compen-
Name and Principal Position Period Salary Bonus(1) sation(2) Awards(3) SARs(4) Payouts sation(5)
------------------------------ ------- ---------- ----------- --------- ---------- -------- ------- ---------

Kevork S. Hovnanian.................... 2001 $917,807 $2,364,000 -- $0 0 N/A $ 13,072
Chairman of the Board, 2000 $869,986 $1,206,000 -- $0 0 N/A $ 12,901
and Director of the Company 1999 $831,299 $ 720,000 -- $0 0 N/A $ 12,313

Ara K. Hovnanian....................... 2001 $860,772 $1,655,220 -- $851,256 125,000 N/A $110,209
President, Chief Executive 2000 $809,480 $ 904,500 -- $361,800 125,000 N/A $106,537
Officer and Director 1999 $771,827 $ 627,321 -- $172,800 75,000 N/A $ 60,118

Geaton A. DeCesaris, Jr................ 2001 $384,939 $1,244,617 -- $774,438 0 N/A $ 8,366
President of Homebuilding
Operations and Chief
Operating Officer and
Director of the Company

J. Larry Sorsby........................ 2001 $262,184 $ 399,002 -- $205,201 25,000 N/A $ 33,092
Executive Vice President 2000 $260,369 $ 181,449 -- $ 72,580 20,000 N/A $ 32,182
and Chief Financial Officer 1999 $221,317 $ 156,992 -- $ 47,098 20,000 N/A $ 22,060
and Director of the Company

Peter S. Reinhart...................... 2001 $204,052 $ 91,626 -- $ 47,122 0 N/A $ 22,200
Senior Vice President/ 2000 $186,451 $ 73,405 -- $ 29,362 10,000 N/A $ 22,025
General Counsel and 1999 $177,115 $ 76,800 -- $ 23,040 0 N/A $ 16,279
Director 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 less than either $50,000 or 10% of the total of annual salary and
bonus reported for the named executive officer.
(3) Represents the right to receive Class A Common Stock after vesting 25% a
year for four years. Any Executive with 20 years of service or who reaches
the age of 58 vests immediately. Awards of restricted stock during the year
ended October 31, 2001 amounting to 72,757 shares for A Hovnanian, 66,192
shares for G DeCecaris, 13,154 shares for J Sorsby and 4,028 shares for P
Reinhart vest during the next three years. The aggregate number of shares
of restricted stock held as of October 31, 2001, and the value thereof as
of such date, were as follows: A Hovnanian: 129,510 shares ($1,515,267); G
DeCecaris: 66,192 shares ($774,446); J Sorsby: 36,313 shares ($424,862); P
Reinhart: 4,028 shares ($47,128).
(4) The Company does not have a stock appreciation right ("SAR") program.
(5) Includes accruals under the Company's savings and investment retirement
plan (the "Retirement Plan"), deferred compensation plan (the "Deferred
Plan") and term life insurance premiums for each of the named executive
officers for the year ended October 31, 2001 as follows:

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

K. Hovnanian ............ $ 12,750 $ 0 $322 $ 13,072
A. Hovnanian ............ $ 12,750 $96,834 $625 $110,209
DeCesaris ............... $ 8,058 $ 0 $308 $ 8,366
Sorsby .................. $ 12,750 $19,802 $540 $ 33,092
Reinhart ................ $ 12,750 $ 9,014 $436 $ 22,220

OPTION GRANTS IN LAST FISCAL YEAR

The following table provides information on option grants in fiscal 2001 to
the named executive officers.

INDIVIDUAL GRANTS POTENTIAL
----------------------------------------------- REALIZED VALUE AT
% OF TOTAL ASSUMED ANNUAL
NUMBER OF OPTIONS EXERCISE RATES OF STOCK PRICE
SECURITIES GRANTED TO OR BASE APPRECIATION
UNDERLYING EMPLOYEES PRICE FOR OPTION TERM(1)
OPTIONS IN FISCAL PER EXPIRATION --------------------
NAME GRANTED 2001 SHARE DATE 5% 10%
------ ---------- --------- --------- ---------- -------- --------

Kevork S. Hovnanian ............ 0 N/A N/A N/A N/A N/A
Ara K. Hovnanian ............... 125,000 11.9% $12.70 3/12/11 $998,370 $2,530,066
Geaton A. DeCesaris, Jr. ....... 0 N/A N/A N/A N/A N/A
J. Larry Sorsby ................ 25,000 2.4% $10.69 2/28/11 $168,072 $ 425,928
Peter S. Reinhart .............. 0 N/A N/A N/A N/A N/A
--------------

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

AGGREGATED OPTION EXERCISES DURING THE YEAR ENDED
OCTOBER 31, 2001 AND OPTION VALUES AT OCTOBER 31, 2001

The following table provides information on option exercises during the
year ended October 31, 2001 by the named executive officers and the value of
such officers' unexercised options at October 31, 2001.

NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED OCTOBER 31, 2001(1) OCTOBER 31, 2001(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 $ 0 663,750 381,250 $2,279,234 $1,340,703
Geaton A. DeCesaris, Jr. . 41,700 $ 459,914 90,350 0 $ 682,847 $ 0
J. Larry Sorsby .......... 2,000 $ 25,282 99,000 80,000 $ 368,738 $ 254,688
Peter S. Reinhart ........ 35,250 $ 268,637 31,250 17,500 $ 141,172 $ 73,969
--------------

Note:
(1) The closing price of the Class A Common Stock on the last trading day of
October, 2001 on the New York Stock Exchange was $11.70.

TEN-YEAR OPTION REPRICINGS

For the year ended October 31, 2001, there was no adjustment or amendment
to the exercise price of the stock options previously awarded.

EMPLOYMENT CONTRACTS

Effective January 23, 2001, K. Hovnanian Enterprises, Inc. ("K
Hovnanian") entered into an Employment Agreement with Geaton A. DeCesaris, Jr.
for the position of Chief Operating Officer and President of Homebuilding
Operations. The term of the Agreement ends on October 31, 2003. The Employment
Agreement also provides that Mr. DeCesaris will serve as a member of the
Strategic Planning Committee of the Company during the term of the Agreement,
and as a member of Board of Directors of the Company for the period ending on
the earlier of the second anniversary of his termination of employment for any
reason other than "cause", death or disability, and the date he no longer holds
500,000 shares of common stock of the Company.

If Mr. DeCesaris' employment is terminated due to death or by K Hovnanian
due to disability, he will be entitled to a pro rata portion of any annual bonus
that he would have been entitled to receive for the period prior to his
termination date. If K Hovnanian terminates Mr. DeCesaris' employment for
reasons other than "cause", death or disability or if Mr. DeCesaris terminates
his employment for "good reason" then he will be entitled to (i) a pro rata
portion of any annual bonus that he would have been entitled to receive for the
period prior to his termination date, and (ii) an amount equal to two times the
sum of (a) his then current annual base salary plus (b) the average of his last
two fiscal years' annual bonus.

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, 2001 was determined in accordance with the compensation program and policies
described below.

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

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, 2001 generally were believed to be necessary to retain their
services.

Base salaries, including that of Mr. K. Hovnanian, the Company's Chairman
of the Board, 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. A. Hovnanian set the year ended October 31, 2001 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.

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.

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

The Company's annual bonus program is designed to be cost and tax
effective. In accordance with section 162(m) of the Code, the bonus plan for
executives receiving compensation in excess of $1,000,000 was approved by
shareholders at the April 15, 1997 and March 16, 2000 Annual Meetings of
Shareholders and reflects the Compensation Committee's policies of maximizing
corporate tax deductions, wherever feasible.

STOCK INCENTIVE PLAN

The Stock Incentive 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 Stock Incentive
Plan include vesting and termination provisions which the Compensation Committee
believes will encourage option holders to remain employees of the Company.

The Stock Incentive 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 Stock Incentive
Plan.

COMPENSATION COMMITTEE

Stephen D. Weinroth
Desmond P. McDonald

REPORT OF THE AUDIT COMMITTEE

The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors and is governed by its Charter (filed as
Exhibit A, to the Company's Proxy Statement dated February 2, 2001) which was
adopted in March of 2000. Management has the primary responsibility for the
financial statements and the reporting process including the systems of internal
controls. In fulfilling its oversight responsibilities the committee reviewed
the audited financial statements in the Annual Report with management, including
a discussion of the quality, not just the acceptability, of the accounting
principles, the reasonableness of significant judgements, and the clarity of
disclosures in the financial statements.

The committee reviewed with the independent auditors, who are responsible
for expressing an opinion on the conformity of those audited financial
statements with generally accepted accounting principles:

o the overall scope and plans for their respective audits,
o their judgements as to the quality, not just the acceptability, of the
Company's accounting principles,
o their independence from management and the Company including matters
in the written disclosures and the letter from the independent
accountants required by the Independence Standards Board No. 1,
o and such other matters as are required to be discussed with the
committee under generally accepted auditing standards.

Messrs. McDonald, Robbins and Weinroth are independent audit committee
members based on discussions with the Company's independent auditors and their
disclosures as required by the Independence Standards Board, Standard No. 1.
They are also independent in accordance with the listing standards of the New
York Stock Exchange.

The audit committee, as part of its Charter, reviews quarterly with
management the Company's financial statements prior to filing with the
Securities and Exchange Commission and discusses with the independent auditors
matters required to be discussed by Statement on Auditing Standards No. 61. In
addition, the committee in reliance on the reviews and discussions referred to
above, has recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the year
ended October 31, 2001.

AUDIT COMMITTEE

Desmond P. McDonald
John J. Robbins
Stephen D. Weinroth

FEES PAID TO PRINCIPAL ACCOUNTANT

AUDIT FEES
We were billed a total of $360,000 by Ernst & Young LLP for services
rendered in connection with the audit of the Hovnanian Enterprises, Inc. and
consolidated subsidiaries financial statements for the fiscal year ended October
31, 2001 and $27,000 for the reviews of the interim financial statements.

FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no fees billed by Ernst & Young LLP for services rendered in
connection with financial information systems design and implementation during
the fiscal year ended October 31, 2001.

ALL OTHER FEES
All other fees billed for services rendered by Ernst & Young LLP other than
those above were $300,600.

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

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 graphs compare on a cumulative basis the yearly percentage
change over the five and three year periods ending October 31, 2001 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 Index and with (iii) the total
shareholder return on the peer group of thirteen 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, 1996 and 1998 for the preparation of the five and three
years graphs, respectively. The peer group index is composed of the following
companies: Centex Corporation, D R Horton, Inc., Kaufman & Broad Home
Corporation, Lennar Corporation, Orleans Homebuilders, Inc., Pulte Corporation,
Rottlund, Inc., Ryland Group, Inc., Schuler Homes, Inc., Standard Pacific
Corporation, Sundance Homes, Inc., Toll Brothers, Inc., and William Lyon Homes.

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

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN OF HOVNANIAN ENTERPRISES, INC.,
THE S&P 500 Index and a Peer Group Index

[ PERFORMANCE GRAPH]

HOVNANIAN ENTERPRISES INC

CUMULATIVE TOTAL RETURN
---------------------------------------------------------------
10/96 10/97 10/98 10/99 10/00 10/01

HOVNANIAN ENTERPRISES, INC 100.00 123.96 141.67 1 120.83 195.00
S&P 500 100.00 132.11 161.16 202.54 214.87 161.36
PEER GROUP 100.00 164.19 175.47 139.26 226.83 253.29

COMPARISON OF THREE-YEAR CUMULATIVE TOTAL RETURN OF HOVNANIAN ENTERPRISES, INC.,
THE S&P 500 Index and a Peer Group Index

[PERFORMANCE GRAPH]

HOVNANIAN ENTERPRISES INC

CUMULATIVE TOTAL RETURN
---------------------------------------------
10/98 10/99 10/00 10/01

HOVNANIAN ENTERPRISES, INC. 100.00 75.00 85.29 137.65
S&P 500 100.00 125.67 133.33 100.12
PEER GROUP 100.00 79.37 129.27 144.35

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 $3,000,000 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, 2001, there were three loans under
this policy to Mr. K. Hovnanian, Chairman of the Board amounting to $18,000, Mr.
A. Hovnanian, President, Chief Executive Officer and a Director of the Company
amounting to $961,000 and $140,000 to a non-board officer, all for personal
matters, at an interest rate equal to the six month U.S. Treasury Bill.
The Company provides property management services to various limited
partnerships including one limited partnership in which Mr. A. Hovnanian is
general partner, and members of his family and certain officers and directors of
the Company are limited partners. At October 31, 2001, no amounts were due the
Company by these partnerships.
During the year ended October 31, 2001, the Company entered into an
agreement to purchase land from an entity that is controlled by the brother of
the Company's Chairman of the Board. As of October 31, 2001, land aggregating
$2,384,000 has been purchased. The Company remains obligated under the agreement
to purchase an additional $26.9 million of land from this entity over the next
three years. Neither the Company nor the Chairman of the Board has a financial
interest in the entity from which the land was purchased.

Mr. Arthur Greenbaum is a senior partner of Greenbaum, Rowe, Smith,
Ravin, Davis & Himmel, a law firm retained by the Company during the year ended
October 31, 2001.

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 EquiServe, the Company's transfer
agent, not less than 3 nor more than 20 business days prior to March 8, 2002.
Completed proxy cards should be sent to P.O. Box 9395, Boston, Massachusetts
02205-9956, 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
2003 ANNUAL MEETING

Shareholder proposals for inclusion in the proxy materials related to
the 2003 Annual Meeting of Shareholders must be received by the Company no later
than November 29, 2002. To be properly brought before the Annual Meeting, any
proposal must be received 45 days prior to the 2003 Annual Meeting.

By Order of the Board of Directors
Hovnanian Enterprises, Inc.

Red Bank, New Jersey
February 4, 2002

DETACH HERE

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 at the offices of Simpson Thacher & Bartlett, 425 Lexington Avenue,
New York, New York, at 10:30 A.M. on March 8, 2002, and at any adjournments
thereof, upon the matters set forth in the notice of meeting and Proxy Statement
dated February 4, 2002 and upon all other matters properly coming before said
meeting.

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

HOVNANIAN ENTERPRISES INC.

C/O EQUISERVE
P.O.BOX 9398
BOSTON, MA 02205-9398

DETACH HERE

PLEASE MARK
/X/ VOTES AS IN
THIS EXAMPLE. X

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; AND (3) 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) AND (3).
1. Election of Directors.
NOMINEES: (01) K. Hovnanian, (02) A. Hovnanian, (03) P. Buchanan,
(04) G. DeCesaris, Jr., (05) A. Greenbaum, (06) D. McDonald,
(07) P. Reinhart, (08) J. Robbins, (09) J. Sorsby, (10) S. Weinroth

FOR WITHHELD
/ / / /

/ /
----------------------------------------
For all nominees except as noted above

2. Ratification of the selection of Ernst & Young LLP FOR AGAINST ABSTAIN
as independent accountants for the year ended / / / / / /
October 31, 2002.

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

MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /

MARK HERE IF YOU PLAN TO ATTEND 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.

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

DETACH HERE

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 SEE REVERSE
SIDE SIDE
-------------- --------------

HOVNANIAN ENTERPRISES INC.

C/O EQUISERVE
P.O.BOX 9398
BOSTON, MA 02205-9398

DETACH HERE

PLEASE MARK
/X/ VOTES AS IN
THIS EXAMPLE. X

FOR WITHHELD
/ / / /

/ /
----------------------------------------
For all nominees except as noted above

2. Ratification of the selection of Ernst & Young LLP FOR AGAINST ABSTAIN
as independent accountants for the year ended / / / / / /
October 31, 2002.

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

MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /

MARK HERE IF YOU PLAN TO ATTEND THE MEETING / /

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

DETACH HERE ZHVO52

PROXY

HOVNANIAN ENTERPRISES, INC.

BENEFICIAL OWNER OF 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 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 CONTINUED AND TO BE SIGNED ON REVERSE SEE REVERSE
SIDE SIDE
------------- -------------

HOVNANIAN ENTERPRISES INC.

C/O EQUISERVE
P.O. BOX 9398
BOSTON, MA 02205-9398

DETACH HERE ZHVN41

PLEASE MARK
/X/ VOTES AS IN
THIS EXAMPLE.

1. Election of Directors. FOR AGAINST ABSTAIN
NOMINEES: (01) K. Hovnanian, (02) A. Hovnanian, 2. Ratification of the selection of / / / / / /
(03) P. Buchanan, (04) G. Decesaris, Jr., Ernst & Young LLP as independent
(05) A. Greenbaum, (06) D. Mcdonald, accountants for the year ended
(07) P. Reinhart, (08) J. Robbins, October 31, 2002.
(09) J. Sorsby, (10) S. Weinroth

FOR WITHHELD
/ / / /

3. 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 / /

MARK HERE IF YOU PLAN TO ATTEND 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.

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

DETACH HERE ZHVN42

PROXY

HOVNANIAN ENTERPRISES, INC.

NOMINEE HOLDER OF CLASS B COMMON STOCK

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

THE UNDERSIGNED HEREBY CONSTITUTES AND APPOINTS 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 AT THE OFFICES OF SIMPSON THACHER & BARTLETT, 425 LEXINGTON AVENUE,
NEW YORK, NEW YORK, AT 10:30 A.M. ON MARCH 8, 2002, AND AT ANY ADJOURNMENTS
THEREOF, UPON THE MATTERS SET FORTH IN THE NOTICE OF MEETING AND PROXY STATEMENT
DATED FEBRUARY 4, 2002 AND UPON ALL OTHER MATTERS PROPERLY COMING BEFORE SAID
MEETING.

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

HOVNANIAN ENTERPRISES INC.

C/O EQUISERVE
P.O. BOX 9398
BOSTON, MA 02205-9398

DETACH HERE ZHVN41

PLEASE MARK
/X/ VOTES AS IN
THIS EXAMPLE.

FOR WITHHELD
/ / / /

3. 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 / /

MARK HERE IF YOU PLAN TO ATTEND THE MEETING / /

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