Exhibit 10(b)

MEMORANDUM

TO:
                             
FROM:
              
Kevork S. Hovnanian
DATE:
              
May 4, 1993
SUBJECT:
              
Bonus Compensation Plan

 

We have established a bonus program for corporate level personnel. The maximum
amount of such bonus will be based on how the corporate fares in its return on
equity (ROE). ROE will be calculated as follows: net income as reported to the
public (with no adjustments) divided by average shareholders’ equity for the
period. Average shareholders’ equity for any fiscal year will be determined by
averaging shareholder equity of five quarter endings beginning with the end of
the prior fiscal year and ending with the current fiscal year.

The Bonus available for payment to you will be a percentage of your base salary
as per the ROE scale following in the text of this plan. The overall bonus will
be divided into two parts. The first part will be 60% of the available bonus
based on actual ROE performance as outlined in the first paragraph.

The remaining 40% is discretionary. The actual amount paid to you will be
determined on your individual efforts in meeting specific objectives by you and
for your functional area and how you fostered a spirit of teamwork, excellence,
and integrity. Your actual performance will be compared to your specific
objectives and will be used, in part, to determine your individual discretionary
bonus payment. This discretionary portion does not mean that if you did an
“average” job you should expect a payment of the full 40%. The role of a
corporate officer is one of leadership, teambuilding, and working for the good
of the entire corporate entity. Your personal goals should foster this spirit.

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Your potential bonus will be based on ROE and a percentage of your base pay as
follows:

Return
on Equity

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         Percentage of
Base Pay Potential

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 0.00 –  5.00
                             
 5.01 –  7.50
                             
 7.51 – 10.00
                             
10.01 – 12.50
                             
12.51 – 15.00
                             
15.01 – 17.50
                             
17.51 – 20.00
                             
20.01 – 22.50
                             
22.51 – 25.00
                             
25.01 +
                             

 

Both portions of the bonus awards will be paid in one installment on May 13,
1994. If your employment is terminated prior to March 1, 1994, any and all
rights to the bonus payment outlined above will be cancelled. If you voluntarily
terminate your employment after February 28, 1994, any unpaid portion of the
portion of the bonus outlined above will be forfeited.

Please sign in the space below acknowledging your understanding of the bonus
program. This plan applies to fiscal 1993/94 results but may be extended to
subsequent fiscal years.

 
ACKNOWLEDGED:
 

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DATE:
 

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