2008 HOVNANIAN ENTERPRISES, INC. STOCK INCENTIVE PLAN

2008 HOVNANIAN ENTERPRISES, INC.

STOCK INCENTIVE PLAN

INCENTIVE STOCK OPTION AGREEMENT

(Performance Option Grant)

1. Grant of the Option . For valuable consideration, receipt of which is hereby acknowledged, Hovnanian Enterprises, Inc., a Delaware Corporation (The "Company"), hereby grants the right and option (the "Option") to purchase, on the terms and conditions hereinafter set forth, all or any part of an aggregate number of Class A Shares set forth above. This grant is made subject to the terms and conditions of the 2008 Company Stock Incentive Plan (the "Plan"), which Plan is incorporated herein by reference and subject to amendments to the Plan. The purchase price of the Shares subject to the Option (the "Grant Price") shall be the price per Share set forth above. This Option is an Incentive Stock Option within the meaning of Section 422 of the Internal Revenue Code of 1986 (the "Code").

2.     Vesting . In the event that the performance goals set forth in the following sentence are achieved, this Option will vest in accordance with the schedule set forth above, subject to Section 3 of this Agreement. No portion of the Option will vest unless the Committee determines that (i) the Company's EBITDA (as defined below) for the fiscal year ending October 31, 2009 ("FY 2009") is at least $200,000,000 greater than the Company's EBITDA for the fiscal year ended October 31, 2008 ("FY 2008") and (ii) the Company's EBITDA for the fiscal year ending October 31, 2010 ("FY 2010") is at least $300,000,000 greater than the Company's EBITDA for FY 2008. As used herein, "EBITDA" shall mean the Company's consolidated earnings before interest expense, income taxes, depreciation and amortization (but including inventory impairment loss and land option write-offs and gain on extinguishment of debt), determined in a manner consistent with the Company's normal practices for quarterly press release financial reporting purposes.

(i)      In General . The Option must be exercised before the Option Termination Date set forth above (the "Option Termination Date"). The Participant may exercise less than the full installment available to him or her under this Option, but the Participant must exercise this Option in full shares of the Common Stock of the Company. The Participant is limited to ten exercises during the term of this Option.

(ii)     Termination of Employment Other Than Due to Death, Disability or Retirement . If, prior to the Option Termination Date, the Participant ceases to be employed by the Company or a subsidiary thereof (otherwise than by reason of death, Disability or Retirement), the nonvested portion of the Option shall be canceled and the vested portion of the Option, to the extent not previously exercised, shall remain exercisable until the earlier of (a) the Option Termination Date and (b) the sixtieth (60 ^th ) day after the date of cessation of employment, and thereafter all Options, to the extent not previously exercised, shall terminate together with all other rights hereunder. This Option shall be wholly void and of no effect after the Option Termination Date. For purposes of this Agreement, "Disability" shall mean disability within the meaning of Section 22(e)(3) of the Code, and "Retirement" shall mean termination of employment on or after age 60, or on or after age 58 with at least 15 years of "Service" to the Company and its Subsidiaries immediately preceding such termination of employment. For this purpose, "Service" means the period of employment immediately preceding Retirement, plus any prior periods of employment with the Company and its Subsidiaries of one or more years' duration, unless they were succeeded by a period of non-employment with the Company and its Subsidiaries of more than three years' duration.

(iii)   Termination of Employment Due to Death . If, prior to the Option Termination Date, the Participant ceases to be employed by the Company or a subsidiary thereof due to the Participant's death, the Option, to the extent not previously vested and exercised, shall immediately become fully vested and exercisable and remain exercisable until the earlier of (i) the Option Termination Date and (ii) the first anniversary of the Participant's death, and thereafter all Options, to the extent not previously exercised, shall terminate together with all other rights hereunder. During such time, the Option will be exercisable by the person or persons to whom the Participant's rights under the Option shall pass by will or by the applicable laws of descent and distribution.

(iv)    Termination of Employment Due to Disability . If prior to the Option Termination Date the Participant ceases to be employed by the Company or a subsidiary thereof by reason of Disability, the Option, to the extent not previously vested and exercised, shall immediately become fully vested and exercisable and shall remain exercisable until the earlier of (i) the Option Termination Date and (ii) the first anniversary of the date of cessation of employment due to Disability, by the Participant or his or her designated personal representative on the Participant's behalf, and thereafter all Options, to the extent not previously exercised, shall terminate together with all other rights hereunder.

(v)     Termination of Employment Due to Retirement . If prior to the Option Termination Date the Participant ceases to be employed by the Company or a subsidiary thereof due to Participant's Retirement, the Option, to the extent not previously vested and exercised, shall immediately become fully vested and exercisable and remain exercisable until the earlier of (i) the Option Termination Date and (ii) the first anniversary of the Participant's

Retirement, and thereafter all Options, to the extent not previously exercised, shall terminate together with all other rights hereunder.

(vi)    Failure to Achieve Performance Goals . In the event that the Committee determines that the Company has failed to achieve its EBITDA performance goals for either or both of FY 2009 or FY 2010 as set forth under Section 2, then the entire Option shall terminate together with all other rights hereunder.

(b)    Method of Exercise . Subject to the provisions of the Plan, this Option may be exercised by written notice to the Company stating the number of shares with respect to which it is being exercised and accompanied by payment of the Option Price (a) by certified or bank cashier's check payable to the order of the Company in New York Clearing House Funds, (b) by surrender or delivery to the Company of shares of its Common Stock that have been held by t