Exhibit 10.5





Exhibit 10.5




FORM
OF INTELLECTUAL PROPERTY SECURITY AGREEMENT




This Intellectual Property Security Agreement (the “Agreement”), dated as of October 20, 2009
is made by                                         ,
a                                         
(“the Grantor”) in favor of Wilmington Trust Company, as
Collateral Agent (in such capacity, the “Agent”) for the benefit of itself, the Trustee (as defined
below) and the Noteholders (as defined below).



WHEREAS, K. Hovnanian Enterprises, Inc., a California corporation (the “Borrower”), Hovnanian
Enterprises, Inc. (“Hovnanian”) and each of the other Guarantors party thereto entered into the
indenture dated as of May 27, 2008, as amended, supplemented, amended and restated or otherwise
modified from time to time, with Wilmington Trust Company (as successor to Deutsche Bank National
Trust Company) as trustee pursuant to which the Issuer issued 11 1/2 % Senior Secured Notes due
2013;



WHEREAS, the Borrower, Hovnanian and each of the other Guarantors party thereto have entered
into the indenture dated as of December 3, 2008, as amended, supplemented, amended and restated or
otherwise modified from time to time, with Wilmington Trust Company as trustee pursuant to which
the Issuer issued 18.0% Senior Secured Notes due 2017;



WHEREAS, the Borrower, Hovnanian and each of the other Guarantors have entered into the
Indenture dated as of October 20, 2009 (as amended, supplemented, amended and restated or otherwise
modified from time to time, the “Indenture”) with Wilmington Trust Company, a Delaware banking
corporation, as trustee (in such capacity, the “Trustee”), pursuant to which the Issuer (as defined
in the Indenture) issued 10 5/8% Senior Secured Notes due 2016 (collectively, the “Secured Notes”)
upon the terms and subject to the conditions set forth therein;



WHEREAS, the Borrower, Hovnanian, certain subsidiaries of Hovnanian party thereto, PNC Bank,
National Association, as Senior Credit Agent and Wilmington Trust Company, as Mortgage Tax
Collateral Agent have entered into the Intercreditor Agreement dated as of May 27, 2008 (the “May
2008 Intercreditor Agreement”);



WHEREAS, the Borrower, Hovnanian, certain subsidiaries of Hovnanian party thereto, PNC Bank,
National Association, as Senior Credit Agent and First-Lien Administrative Agent, the Senior
Trustee, the Senior Noteholder Collateral Agent, the Junior Trustee, the Junior Agent and
Wilmington Trust Company, as Mortgage Tax Collateral Agent have entered into the Intercreditor
Agreement dated as of December 3, 2008, as amended, supplemented, amended
or restated or otherwise modified from time to time (together with the May 2008 Intercreditor
Agreement, the “Intercreditor Agreements”);


 


 









 





WHEREAS, the Secured Notes constitute First Lien Indebtedness under each of the Intercreditor
Agreements;



WHEREAS, the Borrower is a member of an affiliated group of companies that includes Hovnanian,
the Borrower’s parent company, and each other Guarantor;



WHEREAS, the Borrower and the other Guarantors are engaged in related businesses, and each
Guarantor will derive substantial direct and indirect benefit from the issuance of the Secured
Notes;



WHEREAS, pursuant to and under the Indenture and the First Lien Security Agreement dated as of
October 20, 2009 (the “Security Agreement”) among the Borrower, Hovnanian, each of the signatories
listed on Schedule A thereto (together with any other entity that may become a party thereto) and
the Agent, the Grantor has agreed to enter into this Agreement in order to grant a security
interest to the Agent in certain Patents, Trademarks, Copyrights and other Intellectual Property as
security for such loans and other obligations as more fully described herein; and



NOW, THEREFORE, intending to be legally bound hereby, the parties hereto agree as follows:



1. Defined Terms.




(a) Except as otherwise expressly provided herein, (i) capitalized terms used in this
Agreement shall have the respective meanings assigned to them in the Security Agreement
and (ii) the rules of construction set forth in Section 1.02 of the Indenture shall apply
to this Agreement. Where applicable and except as otherwise expressly provided herein,
terms used herein (whether or not capitalized) shall have the respective meanings assigned
to them in the Uniform Commercial Code as enacted in New York as amended from time to time
(the “Code”).




(b) “Copyright Licenses” shall mean any written agreement naming any Grantor as
licensor or licensee, granting any right under any Copyright, including, without
limitation, the grant of rights to distribute, exploit and sell materials derived from any
Copyright, including, without limitation, any of the foregoing referred to in Schedule A.




(c) “Copyrights” shall mean (i) all copyrights arising under the laws of the United
States, any other country or any political subdivision thereof, whether registered or
unregistered and whether published or unpublished, all registrations and recordings
thereof, and all applications in connection therewith, including, without limitation, all
registrations, recordings and applications in the United States Copyright Office
referred to in Schedule A, and (ii) the right to obtain all renewals thereof.


 


2









 






(d) “Intellectual Property” shall mean the collective reference to all rights,
priorities and privileges, whether arising under United States, multinational or foreign
laws, in, to and under the Copyrights, the Copyright Licenses, the Patents, the Patent
Licenses, the Trademarks and the Trademark Licenses, and all rights to sue at law or in
equity for any infringement or other impairment thereof, including the right to receive
all proceeds and damages therefrom.




(e) “Patent License” shall mean all written agreements providing for the grant by or
to any Grantor of any right to manufacture, use or sell any invention covered in whole or
in part by a Patent, including, without limitation, any of the foregoing referred to in
Schedule A.




(f) “Patents” shall mean (i) all letters patent of the United States, any other
country or any political subdivision thereof, all reissues and extensions thereof,
including, without limitation, any of the foregoing referred to in Schedule A, (ii) all
applications for letters patent of the United States or any other country and all
divisions, continuations and continuations-in-part thereof, including, without limitation,
any of the foregoing referred to in Schedule A, and (iii) all rights to obtain any
reissues or extensions of the foregoing.




(g) “Secured Obligations” shall mean all now existing and hereafter arising
Obligations (as defined in the Indenture) of the Borrower and each and every other
Grantor, together with any extensions, renewals, replacements or refundings thereof, and
all costs and expenses of enforcement and collection, including reasonable attorney’s
fees.




(h) “Secured Parties” shall mean the collective reference to the Agent, the Trustee
and the Noteholders, in each case to which any Secured Obligations are owed.




(i) “Trademarks” shall mean (i) all trademarks, trade names, corporate names, company
names, business names, fictitious business names, trade styles, service marks, logos and
other source or business identifiers, and all goodwill associated therewith, now owned or
hereafter acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other country or
any political subdivision thereof, and all common-law rights related thereto, including,
without limitation, any of the foregoing referred to in Schedule A, and (ii) the right to
obtain all renewals thereof.




(j) “Trademark License” shall mean any written agreement providing for the grant by
or to any Grantor of any right to use any


 


3









 






Trademark, including, without limitation, any of the foregoing referred to in Schedule A.



2. To secure the full payment and performance of all Secured Obligations, the Grantor hereby
grants to the Agent a security interest in the entire right, title and interest of such Grantor in
and to all of its Intellectual Property; provided, however, that notwithstanding any of the other
provisions set forth in this Section 2 (and notwithstanding any recording of the Agent’s Lien made
in the U.S. Patent and Trademark Office, U.S. Copyright Office, or other registry office in any
other jurisdiction), this Agreement shall not constitute a grant of a security interest in any
property to the extent that such grant of a security interest is prohibited by any applicable Law
of an Official Body, requires a consent not obtained of any Official Body pursuant to such Law or
is prohibited by, or constitutes a breach or default under or results in the termination of or
gives rise to any right of acceleration, modification or cancellation or requires any consent not
obtained under, any contract, license, agreement, instrument or other document evidencing or giving
rise to such property, except to the extent that such Law or the term in such contract, license,
agreement, instrument or other document or similar agreement providing for such prohibition,
breach, default or termination or requiring such consent is ineffective under applicable Law
including 9-406, 9-407, 9-408 or 9-409 of the New York UCC (or any successor provision or
provisions); provided, further, that no security interest shall be granted in any United States
“intent-to-use” trademark or service mark applications unless and until acceptable evidence of use
of the trademark or service mark has been filed with and accepted by the U.S. Patent and Trademark
Office pursuant to Section 1(c) or Section 1(d) of the Lanham Act (U.S.C. 1051, et seq.), and to
the extent that, and solely during the period in which, the grant of a security interest therein
would impair the validity or enforceability of such “intent-to-use” trademark or service mark
applications under applicable federal Law. After such period and after such evidence of use has
been filed and accepted, the Grantor acknowledges that such interest in such trademark or service
mark applications will become part of the Collateral. The Agent agrees that, at the Grantor’s
reasonable request and expense, it will provide such Grantor confirmation that the assets described
in this paragraph are in fact excluded from the Collateral during such limited period only upon
receipt of an Officer’s Certificate or an Opinion of Counsel to that effect.



3. The Grantor covenants and warrants that:




(a) To the knowledge of the Grantor, on the date hereof, all material Intellectual
Property owned by the Grantor is valid, subsisting and unexpired, has not been abandoned
and does not, to the knowledge of the Grantor, infringe the intellectual property rights
of any other Person;




(b) The Grantor is the owner of each item of Intellectual Property listed on Schedule
A, free and clear of any and all Liens or claims of others except for the Permitted Liens.
No financing statement or



 


4









 






other public notice with respect to all or any part of the
Collateral is on file or of record in any public office, except as permitted pursuant to
this Agreement or as permitted by the Indenture;



4. The Grantor agrees that, until all of the Secured Obligations shall have been indefeasibly
satisfied in full, it will not enter into any agreement (for example, a license agreement) which is
inconsistent with Grantor’s obligations under this Agreement, without Agent’s prior written consent
which shall not be unreasonably withheld except Grantor may license technology in the ordinary
course of business without the Agent’s consent to suppliers and customers to facilitate the
manufacture and use of such Grantor’s products.



5. Agent shall have, in addition to all other rights and remedies given it by this Agreement
and those rights and remedies set forth in the Security Agreement and the Indenture, those allowed
by applicable Law and the rights and remedies of a secured party under the Uniform Commercial Code
as enacted in any jurisdiction in which the Intellectual Property may be located and, without
limiting the generality of the foregoing, solely if an Event of Default has occurred and is
continuing, Agent may immediately, without demand of performance and without other notice (except
as set forth below) or demand whatsoever to the Grantor, all of which are hereby expressly waived,
and without advertisement, sell at public or private sale or otherwise realize upon, in a city that
the Agent shall designate by notice to the Grantor, in Pittsburgh, Pennsylvania or elsewhere, the
whole or from time to time any part of the Intellectual Property, or any interest which the Grantor
may have therein and, after deducting from the proceeds of sale or other disposition of the
Intellectual Property all expenses (including fees and expenses for brokers and attorneys), shall
apply the remainder of such proceeds toward the payment of the Secured Obligations as the Agent, in
its sole discretion, shall determine. Any remainder of the proceeds after payment in full of the
Secured Obligations shall be paid over to the Grantor. Notice of any sale or other disposition of
the Intellectual Property shall be given to the Grantor at least ten (10) days before the time of
any intended public or private sale or other disposition of the Intellectual Property is to be
made, which the Grantor hereby agrees shall be reasonable notice of such sale or other disposition.
At any such sale or other disposition, Agent may, to the extent permissible under applicable Law,
purchase the whole or any part of the Intellectual Property sold, free from any right of redemption
on the part of the Grantor, which right is hereby waived and released. The Agent shall endeavor to
provide the Borrower with notice at or about the time of the exercise of remedies in the preceding
sentence, provided that the failure to provide such notice shall not in any way compromise or
adversely affect the exercise of such remedies or the Agent’s rights hereunder.



6. All of Agent’s rights and remedies with respect to the Intellectual Property, whether
established hereby, by the Security Agreement or by the
Indenture or by any other agreements or by Law, shall be cumulative and may be exercised
singularly or concurrently. In the event of any irreconcilable


 


5









 





inconsistency in the terms of this
Agreement and the Security Agreement, the Security Agreement shall control.



7. The provisions of this Agreement are severable, and if any clause or provision shall be
held invalid and unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction,
and shall not in any manner affect such clause or provision in any other jurisdiction, or any
clause or provision of this Agreement in any jurisdiction.



8. The benefits and burdens of this Agreement shall inure to the benefit of and be binding
upon the respective successors and permitted assigns of the parties, provided, however, that except
as permitted by the Indenture, the Grantor may not assign or transfer any of its rights or
obligations hereunder or any interest herein and any such purported assignment or transfer shall be
null and void.



9. This Agreement and the rights and obligations of the parties under this agreement shall be
governed by, and construed and interpreted in accordance with, the Law of the State of New York.



10. The Grantor (i) hereby irrevocably submits to the nonexclusive general jurisdiction of the
courts of the State of New York and the courts of the United States of America for the Southern
District of New York, or any successor to said court (hereinafter referred to as the “New York
Courts”) for purposes of any suit, action or other proceeding which relates to this Agreement or
any other Noteholder Document, (ii) to the extent permitted by applicable Law, hereby waives and
agrees not to assert by way of motion, as a defense or otherwise in any such suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of the New York Courts,
that such suit, action or proceeding is brought in an inconvenient forum, that the venue of such
suit, action or proceeding is improper, or that this Agreement or any Noteholder Document may not
be enforced in or by the New York Courts, (iii) hereby agrees not to seek, and hereby waives, any
collateral review by any other court, which may be called upon to enforce the judgment of any of
the New York Courts, of the merits of any such suit, action or proceeding or the jurisdiction of
the New York Courts, and (iv) waives personal service of any and all process upon it and consents
that all such service of process be made by certified or registered mail addressed as provided in
Section 13 hereof or at such other address of which the Agent shall have been notified pursuant
thereto and service so made shall be deemed to be completed upon actual receipt thereof. Nothing
herein shall limit any Secured Party’s right to bring any suit, action or other proceeding against
the Grantor or any of any of the Grantor’s assets or to serve process on the Grantor by any means
authorized by Law.



11. This Agreement may be executed by one or more of the parties to this Agreement on any
number of separate counterparts (including by telecopy),


 


6









 





and all of said counterparts taken
together shall be deemed to constitute one and the same instrument.



12. THE GRANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY A JURY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER NOTEHOLDER DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.



13. All notices, requests and demands to or upon the Agent or the Grantor shall be effected in
the manner provided for in Section 13.03 of the Indenture.



14. In the performance of its obligations, powers and rights hereunder, the Agent shall be
entitled to the privileges, powers and immunities afforded to it as Collateral Agent under the
Indenture. The Agent shall be entitled to refuse to take or refrain from taking any discretionary
action or exercise any discretionary powers set forth in the Security Agreement unless it has
received with respect thereto written direction of the Issuer or a majority of Noteholders in
accordance with the Indenture. Notwithstanding anything to the contrary contained herein, the
Agent shall have no responsibility for the creation, perfection, priority, sufficiency or
protection of any liens securing Secured Obligations (including, but not limited to, no obligation
to prepare, record, file, re-record or re-file any financing statement, continuation statement or
other instrument in any public office).



[SIGNATURES APPEAR ON FOLLOWING PAGE]




 


7









 







IN WITNESS WHEREOF, each of the undersigned has caused this Intellectual Property Security
Agreement to be duly executed and delivered as of the date first above written.



	 	 	 	 	 
	 	WILMINGTON TRUST COMPANY, as Collateral Agent

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



	 	 	 	 	 
	 	Grantor: 	 
	 	 	 
	 	
By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



 


8









 






SCHEDULE A




LIST OF REGISTERED AND APPLIED FOR PATENTS, COPYRIGHTS

AND TRADEMARKS





 


9