Document:

exv10w1

EXHIBIT 10.1

EXECUTION VERSION

FIRST LIEN PLEDGE AGREEMENT

     THIS FIRST LIEN PLEDGE AGREEMENT, dated as of November 1, 2011 (as restated, amended,
modified or supplemented from time to time, the “Agreement”), is given by K. HOVNANIAN
JV HOLDINGS, L.L.C. (“JV HOLDINGS”), HERITAGE PINES, LLC, K. HOVNANIAN AT COBBLESTONE SQUARE
CONDOMINIUMS, L.L.C., K. HOVNANIAN JV SERVICES COMPANY, L.L.C., K. HOVNANIAN HOVWEST HOLDINGS,
L.L.C. AND HOVWEST LAND ACQUISITION, LLC AND EACH OF THE OTHER PERSONS AND ENTITIES THAT
BECOME BOUND HEREBY FROM TIME TO TIME BY JOINDER, ASSUMPTION OR OTHERWISE (each a “Pledgor”
and collectively the “Pledgors”), as a Pledgor of the equity interests in the Companies (as
defined herein), as more fully set forth herein, to WILMINGTON TRUST, NATIONAL ASSOCATION, in its
capacity as collateral agent, for the benefit of itself, the Trustee (as defined below) and the
Noteholders (as defined below) (the “Collateral Agent”).

     WHEREAS, K. Hovnanian Enterprises, Inc., a California corporation (the “Issuer”),
Hovnanian Enterprises, Inc., a Delaware corporation (“Hovnanian”) and each of the other guarantors
party thereto (including the Initial Grantors) have entered into the Indenture dated as of November
1, 2011 (as amended, supplemented, amended and restated or otherwise modified from time to time,
the “Indenture”) with Wilmington Trust, National Association, a national banking association, as
trustee (in such capacity, the “Trustee”) and as Collateral Agent, pursuant to which the Issuer has
issued, and may from time to time issue, its (i) 2.00% Senior Secured Notes due 2021 (the “2.00%
Notes”) and (ii) 5.00% Senior Secured Notes due 2021 (the “5.00% Notes”, and, together with the
2.00% Notes, the “Secured Notes”) upon the terms and subject to the conditions set forth therein;

     WHEREAS, in connection with the Indenture, the Pledgors are required to execute and
deliver this Agreement to secure their obligations with respect to the Indenture and the Secured
Notes;

     WHEREAS, each Pledgor owns the outstanding capital stock, shares, securities, member
interests, partnership interests and other ownership interests of the Companies;

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

     WHEREAS, the Issuer and the Pledgors are engaged in related businesses, and each Pledgor will
derive substantial direct and indirect benefit from the issuance of the Secured Notes.

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

     1. Defined Terms.

     (a) Except as otherwise expressly provided herein, capitalized terms used in this Agreement
shall have the respective meanings assigned to them in the Indenture. Where applicable and except
as otherwise expressly provided herein, terms used herein (whether or not capitalized) that are
defined in Article 8 or Article 9 of the Uniform Commercial Code as enacted in the State of New
York, as amended from time to time (the “Code”), and are not otherwise defined herein or in
the Indenture shall have the same meanings herein as set forth therein.

 

 

     (b) “Collateral Agency Agreement” shall have the meaning ascribed to such term in the
Security Agreement.

     (c) “Company” shall mean individually each Restricted Subsidiary of JV Holdings,
including, without limitation, each of the entities listed on Schedule A hereto and
“Companies” shall mean collectively, all Restricted Subsidiaries of JV Holdings, including,
without limitation, each of the entities listed on Schedule A hereto.

     (d) “Law” shall mean any law (including common law), constitution, statute, treaty,
regulation, rule, ordinance, opinion, release, ruling, order, injunction, writ, decree, bond,
judgment, authorization or approval, lien or award of or settlement agreement with any Official
Body.

     (e) “Noteholder” shall mean “Holder” or “Holder of Notes” as defined in the Indenture.

     (f) “Noteholder Collateral Document” shall mean any agreement, document or instrument
pursuant to which a Lien is granted by any Pledgor to secure any Secured Obligations or under which
rights or remedies with respect to any such Liens are governed, as the same may be amended,
restated or otherwise modified from time to time

     (g) “Noteholder Document” shall mean collectively (a) the Indenture, the Secured Notes
and the Noteholder Collateral Documents and (b) any other related document or instrument executed
and delivered pursuant to any Noteholder Document described in clause (a) above evidencing or
governing any Secured Obligations as the same may be amended, restated or otherwise modified from
time to time.

     (h) “Official Body” shall mean any national, federal, state, local or other
governmental or political subdivision or any agency, authority, board, bureau, central bank,
commission, department or instrumentality of either, or any court, tribunal, grand jury or
arbitrator, in each case whether foreign or domestic.

     (i) “Pledged Collateral” shall mean and include the following with respect to each
Company: (i) the capital stock, shares, securities, investment property, member interests,
partnership interests, warrants, options, put rights, call rights, similar rights, and all other
ownership or participation interests, in any Company owned or held by any Pledgor at any time
including those in any Company hereafter formed or acquired, and (ii) all rights and privileges
pertaining thereto, including without limitation, all present and future securities, shares,
capital stock, investment property, dividends, distributions and other ownership interests
receivable in respect of or in exchange for any of the foregoing, all present and future rights to
subscribe for securities, shares, capital stock, investment property or other ownership interests
incident to or arising from ownership of any of the foregoing, all present and future cash,
interest, stock or other dividends or distributions paid or payable on any of the foregoing, and
all present and future books and records (whether paper, electronic or any other medium) pertaining
to any of the foregoing, including, without limitation, all stock record and transfer books and
(iii) whatever is received when any of the foregoing is sold, exchanged, replaced or otherwise
disposed of, including all proceeds, as such term is defined in the Code, thereof. Notwithstanding
the foregoing, in the event that Rule 3-16 of Regulation S-X under the Securities Act requires (or
is replaced with another rule or regulation, or any other law, rule or regulation is adopted, which
would require) the filing with the SEC of separate financial statements of any Pledgor that are not
otherwise required to be filed, then the capital stock or other securities of such Pledgor shall
automatically be deemed released and not to be and not to have been part of the Pledged Collateral
but only to the extent necessary to not be subject to such requirement. In such event, this
Agreement may be amended or modified, without the consent of any Noteholder upon the Collateral
Agent’s receipt of a written authorization from the Issuer stating that such amendment is permitted
hereunder, which the Agent shall be entitled to conclusively rely upon, to the extent necessary to
evidence the release of the lien

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created hereby on the shares of capital stock or other securities
that are so deemed to no longer constitute part of the Pledged Collateral.

     (j) “Secured Obligations” shall mean and include all Indebtedness and other
Obligations under the Indenture, the Secured Notes, the Guarantees and the Noteholder Collateral
Documents, together with any extensions, renewals, replacements or refundings thereof, and all
costs and expenses of enforcement and collection, including reasonable attorney’s fees.

     (k) “Security Agreement” shall mean the first lien security agreement dated as of the
date hereof among the Pledgors and the Collateral Agent, as amended, supplemented, amended and
restated or otherwise modified from time to time.

     2. Grant of Security Interests.

     (a) To secure on a first priority perfected basis the payment and performance of all Secured
Obligations, in full, each Pledgor hereby grants to the Collateral Agent a continuing first
priority security interest under the Code in and hereby pledges to Collateral Agent, in each case
for its benefit and the benefit of the Trustee and each Noteholder and their respective Affiliates,
all of such Pledgor’s now existing and hereafter acquired or arising right, title and interest in,
to, and under the Pledged Collateral, whether now or hereafter existing and wherever located.

     (b) Upon the execution and delivery of this Agreement, each Pledgor shall deliver to and
deposit with the Collateral Agent (or with a Person designated by Collateral Agent to hold the
Pledged Collateral on behalf of Collateral Agent) in pledge, all of such Pledgor’s certificates,
instruments or other documents comprising or evidencing the Pledged Collateral, together with
undated stock powers or similar transfer documents signed in blank by such Pledgor. In the event
that any Pledgor should ever acquire or receive certificates, securities, instruments or other
documents evidencing the Pledged Collateral, such Pledgor shall deliver to and deposit with the
Collateral Agent in pledge, all such certificates, securities, instruments or other documents which
evidence the Pledged Collateral.

     3. Further Assurances.

     Prior to or concurrently with the execution of this Agreement, and thereafter at any time and
from time to time, each Pledgor (in its capacity as a Pledgor and in its capacity as a Company)
shall execute and deliver to the Collateral Agent all financing statements, continuation financing
statements, assignments, certificates and documents of title, affidavits, reports, notices,
schedules of account, letters of authority, further pledges, powers of attorney and all other
documents (collectively, the “Security Documents”) as may be required under applicable law
to perfect and continue perfected and to create and maintain the first priority status of the
Collateral Agent’s security interest in the Pledged Collateral and to fully consummate the
transactions contemplated under this Agreement. Each Pledgor authorizes (but does not obligate)
the Collateral Agent to record any one or more financing statements under the applicable Uniform
Commercial Code with respect to the pledge and security interest herein granted. Each Pledgor
hereby irrevocably makes, constitutes and appoints the Collateral Agent (and any of the Collateral
Agent’s officers or employees or agents designated by the Collateral Agent) as such Pledgor’s true
and lawful attorney with power to sign the name of such Pledgor on all or any of the Security
Documents which, pursuant to applicable law, must be executed, filed, recorded or sent in order to
perfect or continue perfected the Collateral Agent’s security interest in the Pledged Collateral in
any jurisdiction. Such power, being coupled with an interest, is irrevocable until all of the
Secured Obligations have been indefeasibly paid, in cash, in full.

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     4. Representations and Warranties.

     Each Pledgor hereby, jointly and severally, represents and warrants to the Collateral Agent as
follows:

     (a) The Pledged Collateral of such Pledgor does not include Margin Stock. “Margin
Stock” as used in this clause (a) shall have the meaning ascribed to such term by Regulation U
of the Board of Governors of the Federal Reserve System of the United States;

     (b) Such Pledgor has and will continue to have (or, in the case of after-acquired Pledged
Collateral, at the time such Pledgor acquires rights in such Pledged Collateral, will have and will
continue to have), title to its Pledged Collateral, free and clear of all Liens other than
Permitted Liens;

     (c) The capital stock, shares, securities, member interests, partnership interests and other
ownership interests constituting the Pledged Collateral of such Pledgor have been duly authorized
and validly issued to such Pledgor, are fully paid and nonassessable and constitute one hundred
percent (100%) of the issued and outstanding capital stock, member interests or partnership
interests of each Company;

     (d) Upon the completion of the filings and other actions specified on Schedule C
attached hereto, the security interests in the Pledged Collateral granted hereunder by such Pledgor
shall be valid, perfected and of first priority, subject to the Lien of no other Person (other than
a Permitted Liens);

     (e) There are no restrictions upon the transfer of the Pledged Collateral and such Pledgor has
the power and authority and unencumbered right to transfer the Pledged Collateral owned by such
Pledgor free of any Lien (other than a Permitted Liens) and without obtaining the consent of any
other Person;

     (f) Such Pledgor has all necessary power to execute, deliver and perform this Agreement;

     (g) This Agreement has been duly executed and delivered and constitutes the valid and legally
binding obligation of each Pledgor, enforceable in accordance with its terms, except to the extent
that enforceability of this Agreement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar Laws affecting the enforceability of creditors’ rights
generally or limiting the right of specific performance;

     (h) Neither the execution or delivery by each Pledgor of this Agreement, nor the compliance
with the terms and provisions hereof, will violate any provision of any Law or conflict with or
result in a breach of any of the terms, conditions or provisions of any judgment, order,
injunction, decree or ruling of any Official Body to which any Pledgor or any of its property is
subject or any provision of any material agreement or instrument to which Pledgor is a party or by
which such Pledgor or any of its property is bound;

     (i) Each Pledgor’s exact legal name is as set forth on such Pledgor’s signature page hereto;

     (j) The jurisdiction of incorporation, formation or organization, as applicable, of each
Pledgor is as set forth in the Perfection Certificate;

     (k) Such Pledgor’s chief executive office is as set forth in the Perfection Certificate; and

     (l) All rights of such Pledgor in connection with its ownership of each of the Companies are
evidenced and governed solely by the stock certificates, instruments or other documents (if any)
evidencing ownership of each of the

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Companies and the organizational documents of each of the
Companies, and no shareholder, voting, or other similar agreements are applicable to any of the
Pledged Collateral or any of any Pledgor’s rights with respect thereto, and no such certificate,
instrument or other document provides that any member interest, partnership interest or other
intangible ownership interest in any limited liability company or partnership constituting Pledged
Collateral is a “security” within the meaning of and subject to Article 8 of the Code, except
pursuant to Section 5(f) hereof; and the organizational documents of each Company contain no
restrictions on the rights of shareholders, members or partners other than those that normally
would apply to a company organized under the laws of the jurisdiction of organization of each of
the Companies; and none of the limited liability company interests or partnership interest
constituting Pledged Collateral is represented by a certificate, except with respect to the
Companies as set forth on Schedule B attached hereto.

     5. General Covenants.

     Each Pledgor, jointly and severally, hereby covenants and agrees as follows:

     (a) Each Pledgor shall do all reasonable acts that may be necessary and appropriate to
maintain, preserve and protect the Pledged Collateral; and each Pledgor shall be responsible for
the risk of loss of, damage to, or destruction of the Pledged Collateral owned by such Pledgor,
unless such loss is the result of the gross negligence or willful misconduct of the Collateral
Agent;

     (b) Each Pledgor shall appear in and defend any action or proceeding of which such Pledgor is
aware which could reasonably be expected to affect, in any material respect, any Pledgor’s title
to, or the Collateral Agent’s interest in, the Pledged Collateral or the proceeds thereof;
provided, however, that with the prior written consent of the Collateral Agent,
such Pledgor may settle such actions or proceedings with respect to the Pledged Collateral;

     (c) The books and records of each of the Pledgors and Companies, as applicable, shall disclose
the Collateral Agent’s security interest in the Pledged Collateral;

     (d) To the extent, following the date hereof, any Pledgor acquires capital stock, shares,
securities, member interests, partnership interests, investment property and other ownership
interests of any of the Companies or any other Restricted Subsidiary or any of the rights, property
or securities, shares, capital stock, member interests, partnership interests, investment property
or any other ownership interests described in the definition of Pledged Collateral with respect to
any of the Companies or any other Restricted Subsidiary, all such ownership interests shall be
subject to the terms hereof and, upon such acquisition, shall be deemed to be hereby pledged to the
Collateral Agent; and each Pledgor thereupon, in confirmation thereof, shall promptly deliver all
such securities, shares, capital stock, member interests, partnership interests, investment
property and other ownership interests (to the extent such items are certificated), to the
Collateral Agent, together with undated stock powers or other similar transfer documents, and all
such control agreements, financing statements, and any other documents necessary to implement the
provisions and purposes of this Agreement as the Collateral Agent may request related thereto;

     (e) Each Pledgor shall notify the Collateral Agent in writing within thirty (30) calendar days
after any change in any Pledgor’s chief executive office address, legal name, or state of
incorporation, formation or organization; and

     (f) Subject to Section 4(l) hereof, during the term of this Agreement, no Pledgor shall permit
or cause any Company which is a limited liability company or a limited partnership to (and no
Pledgor (in its capacity as Company) shall) issue any certificates evidencing the ownership
interests of such Company or elect to treat any ownership interests as securities that are subject
to Article 8 of the Code unless such

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securities are immediately delivered to the Collateral Agent
upon issuance, together with all evidence of such election and issuance and all Security Documents
as set forth in Section 3 hereof, and an updated Schedule Bhereto.

     6. Other Rights With Respect to Pledged Collateral.

     In addition to the other rights with respect to the Pledged Collateral granted to the
Collateral Agent hereunder, at any time and from time to time, after and during the continuation of
an Event of Default, the Collateral Agent, at its option and at the expense of the Pledgors, may,
subject to any Collateral Agency Agreement, (a) transfer into its own name, or into the name of its
nominee, all or any part of the Pledged Collateral, thereafter receiving all dividends, income or
other distributions upon the Pledged Collateral; (b) take control of and manage all or any of the
Pledged Collateral; (c) apply to the payment of any of the Secured Obligations, whether any be due
and payable or not, any moneys, including cash dividends and income from any Pledged Collateral,
now or hereafter in the hands of the Collateral Agent or any Affiliate of the Collateral Agent, on
deposit or otherwise, belonging to any Pledgor, as the Collateral Agent in its sole discretion
shall determine; and (d) do anything which any Pledgor is required but fails to do hereunder. The
Collateral Agent shall endeavor to provide the Issuer with notice at or about the time of the
exercise of its rights pursuant to the preceding sentence, provided that the failure to provide
such notice shall not in any way compromise or adversely affect the exercise of any rights or
remedies hereunder.

     7. Additional Remedies Upon Event of Default.

     Upon the occurrence of any Event of Default and while such Event of Default shall be
continuing, the Collateral Agent shall have, in addition to all rights and remedies of a secured
party under the Code or other applicable Law, and in addition to its rights under Section 6 above
and under the other Noteholder Documents, the following rights and remedies, in each case subject
to any Collateral Agency Agreement:

     (a) The Collateral Agent may, after ten (10) days’ advance notice to a Pledgor, sell, assign,
give an option or options to purchase or otherwise dispose of such Pledgor’s Pledged Collateral or
any part thereof at public or private sale, at any of the Collateral Agent’s offices or elsewhere,
for cash, on credit or for future delivery, and upon such other terms as the Collateral Agent may
deem commercially reasonable. Each Pledgor agrees that ten (10) days’ advance notice of the time
and place of any public sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Collateral Agent shall not be obligated to make any sale
of Pledged Collateral regardless of notice of sale having been given. The Collateral Agent may
adjourn any public or private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and place to which it was
so adjourned. Each Pledgor recognizes that the Collateral Agent may be compelled to resort to one
or more private sales of the Pledged Collateral to a restricted group of purchasers who will be
obliged to agree, among other things, to acquire such securities, shares, capital stock, member
interests, partnership interests, investment property or ownership interests for their own account
for investment and not with a view to the distribution or resale thereof.

     (b) The proceeds of any collection, sale or other disposition of the Pledged Collateral, or
any part thereof, shall, after the Collateral Agent has made all deductions of expenses, including
but not limited to attorneys’ fees (including the allocated costs of staff counsel) and other
expenses incurred in connection with repossession, collection, sale or disposition of such Pledged
Collateral or in connection with the enforcement of the Collateral Agent’s rights with respect to
the Pledged Collateral, including in any insolvency, bankruptcy or reorganization proceedings, be
applied against the Secured Obligations, whether or not all the same be then due and payable, as
provided in Section 5.05 of the Indenture.

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     8. Collateral Agent’s Duties.

     The powers conferred on the Collateral Agent hereunder are solely to protect its interest (on
behalf of itself, the Trustee and the Noteholders) in the Pledged Collateral and shall not impose
any duty upon it to exercise any such powers. Except for the safe custody of any Pledged
Collateral in its possession and the accounting for moneys actually received by it hereunder, the
Collateral Agent shall have no duty as to any Pledged Collateral or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights pertaining to any
Pledged Collateral.

     9. Additional Pledgors.

     It is anticipated that additional persons may from time to time become Restricted Subsidiaries
of JV Holdings, each of whom will be required to join this Agreement as a Pledgor hereunder to the
extent that such new Subsidiary owns equity interests in any other Person that is a Restricted
Subsidiary. It is acknowledged and agreed that such new Restricted Subsidiaries of JV Holdings may
become Pledgors hereunder and will be bound hereby simply by executing and delivering to the
Collateral Agent a Supplemental Indenture (in the form of Exhibit B to the Indenture) and a Joinder
Agreement in the form of Exhibit B to the Security Agreement. No notice of the addition of any
Pledgor shall be required to be given to any pre-existing Pledgor, and each Pledgor hereby consents
thereto.

     10. No Waiver; Cumulative Remedies.

     No failure to exercise, and no delay in exercising, on the part of the Collateral Agent, any
right, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder preclude any further exercise thereof
or the exercise of any other right, power or privilege. No waiver of a single Event of Default
shall be deemed a waiver of a subsequent Event of Default. The remedies herein provided are
cumulative and not exclusive of any remedies provided under the other Noteholder Documents or by
Law, rule or regulation and the Collateral Agent may enforce any one or more remedies hereunder
successively or concurrently at its option. Each Pledgor waives any right to require the
Collateral Agent to proceed against any other Person or to exhaust any of the Pledged Collateral or
other security for the Secured Obligations or to pursue any remedy in the Collateral Agent’s power.

     11. Waivers; Consents.

     (a) Each Pledgor hereby waives any and all defenses which any Pledgor may now or hereafter
have based on principles of suretyship, impairment of collateral, or the like and each Pledgor
hereby waives any defense to or limitation on its obligations under this Agreement arising out of
or based on any event or circumstance referred to in the immediately preceding Section hereof.
Without limiting the generality of the foregoing and to the fullest extent permitted by applicable
law, each Pledgor hereby further waives each of the following:

     (i) All notices, disclosures and demands of any nature which otherwise might be
required from time to time to preserve intact any rights against such Pledgor, including the
following: any notice of any event or circumstance described in the immediately preceding
Section hereof; any notice required by any law, regulation or order now or hereafter in
effect in any jurisdiction; any notice of nonpayment, nonperformance, dishonor, or protest
under any Noteholder Document or any of the Secured Obligations; any notice of the
incurrence of any Secured Obligation; any notice of any default or any failure on the part
of such Pledgor or the Issuer or any other Person to comply with any Noteholder Document or
any of the Secured Obligations or any requirement pertaining to any direct or indirect
security for any of the Secured

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Obligations; and any notice or other information pertaining
to the business, operations, condition (financial or otherwise), or prospects of the Issuer
or any other Person;

     (ii) Any right to any marshalling of assets, to the filing of any claim against such
Pledgor or the Issuer or any other Person in the event of any bankruptcy, insolvency,
reorganization, or similar proceeding, or to the exercise against such Pledgor or the
Issuer, or any other Person of any other right or remedy under or in connection with any
Noteholder Document or any of the Secured Obligations or any direct or indirect security for
any of the Secured Obligations; any requirement of promptness or diligence on the part of
the Collateral Agent, the Trustee, the Noteholders or any other Person; any requirement to
exhaust any remedies under or in connection with, or to mitigate the damages resulting from
default under, any Noteholder Document or any of the Secured Obligations or any direct or
indirect security for any of the Secured Obligations; any benefit of any statute of
limitations; and any requirement of acceptance of this Agreement or any other Noteholder
Document, and any requirement that any Pledgor receive notice of any such acceptance; and

     (iii) Any defense or other right arising by reason of any Law now or hereafter in
effect in any jurisdiction pertaining to election of remedies (including anti-deficiency
laws, “one action” laws, or the like), or by reason of any election of remedies or other
action or inaction by the Collateral Agent, the Trustee or the Noteholders (including
commencement or completion of any judicial proceeding or nonjudicial sale or other action in
respect of collateral security for any of the Secured Obligations), which results in denial
or impairment of the right of the Collateral Agent, the Trustee or the Noteholders to seek a
deficiency against the Issuer or any other Person or which otherwise discharges or impairs
any of the Secured Obligations.

     (b) Each Pledgor (in its capacity as a Pledgor and, if applicable, in its capacity as a
Company) hereby consents to the pledge of the Pledged Collateral to the Collateral Agent as
contemplated hereby.

     12. Assignment.

     All rights of the Collateral Agent under this Agreement shall inure to the benefit of its
successors and assigns. All obligations of each Pledgor shall bind its successors and assigns;
provided, however, that no Pledgor may assign or transfer any of its rights and
obligations hereunder or any interest herein, and any such purported assignment or transfer shall
be null and void.

     13. Severability.

     Any provision (or portion thereof) of this Agreement which shall be held invalid or
unenforceable shall be ineffective without invalidating the remaining provisions hereof (or
portions thereof).

     14. Governing Law.

     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,
except to the extent the validity or perfection of the security interests or the remedies hereunder
in respect of any Pledged Collateral are governed by the law of a jurisdiction other than the State
of New York.

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     15. Notices.

     All notices, requests, demands, directions and other communications (collectively,
“notices”) given to or made upon any party hereto under the provisions of this Agreement
shall be given or made as set forth in Section 13.03 of the Indenture, and the Pledgors (in their
capacity as Pledgors and in their capacity as Companies) shall simultaneously send to the
Collateral Agent any notices such Pledgor or such Company delivers to each other regarding any of
the Pledged Collateral.

     16. Specific Performance.

     Each Pledgor acknowledges and agrees that, in addition to the other rights of the Collateral
Agent hereunder and under the other Noteholder Documents, because the Collateral Agent’s remedies
at law for failure of any Pledgor to comply with the provisions hereof relating to the Collateral
Agent’s rights (i) to inspect the books and records related to the Pledged Collateral, (ii) to
receive the various notifications any Pledgor is required to deliver hereunder, (iii) to obtain
copies of agreements and documents as provided herein with respect to the Pledged Collateral,
(iv) to enforce the provisions hereof pursuant to which any Pledgor has appointed the Collateral
Agent its attorney-in-fact, and (v) to enforce the Collateral Agent’s remedies hereunder, would be
inadequate and that any such failure would not be adequately compensable in damages, such Pledgor
agrees that each such provision hereof may be specifically enforced.

     17. Voting Rights in Respect of the Pledged Collateral.

          So long as no Event of Default shall occur and be continuing under the Indenture, each Pledgor
may exercise any and all voting and other consensual rights pertaining to the Pledged Collateral or
any part thereof for any purpose not inconsistent with the terms of this Agreement or the other
Noteholder Documents; provided, however, that such Pledgor will not exercise or
will refrain from exercising any such voting and other consensual right pertaining to the Pledged
Collateral, as the case may be, if such action would have a material adverse effect on the value of
any Pledged Collateral. At any time and from time to time, after and during the continuation of an
Event of Default, no Pledgor shall be permitted to exercise any of its respective voting and other
consensual rights whatsoever pertaining to the Pledged Collateral or any part thereof;
provided, however, in addition to the other rights with respect to the Pledged
Collateral granted to the Collateral Agent, the Trustee and the Noteholders for the benefit of
itself and the Noteholders, hereunder, at any time and from time to time, after and during the
continuation of an Event of Default and subject to the provisions of any Collateral Agency
Agreement, the Collateral Agent may exercise any and all voting and other consensual rights of each
and every Pledgor pertaining to the Pledged Collateral or any part thereof. The Collateral Agent
shall endeavor to provide the Issuer with notice at or about the time of the exercise by Collateral
Agent of the voting or other consensual rights of such Pledgor pertaining to the Pledged
Collateral, provided that the failure to provide such notice shall not in any way compromise or
adversely affect the exercise of Collateral Agent’s rights or remedies hereunder. Without limiting
the generality of the foregoing and in addition thereto, Pledgors shall not vote to enable, or take
any other action to permit, any Company to: (i) issue any other ownership interests of any nature
or to issue any other securities, investment property or other ownership interests convertible into
or granting the right to purchase or exchange for any other ownership interests of any nature of
any such Company, except as expressly permitted by the Indenture; or (ii) to enter into any
agreement or undertaking restricting the right or ability of such Pledgor or the Collateral Agent
to sell, assign or transfer any of the Pledged Collateral without the Collateral Agent’s prior
written consent.

9

 

     18. Consent to Jurisdiction.

     Each Pledgor (as a Pledgor and, if applicable, as a Company) and each of the Companies (i)
hereby irrevocably submits to the nonexclusive jurisdiction of the courts of the State of New York
and the United States District Court 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 15 hereof and service so made shall
be deemed to be completed upon actual receipt thereof. Nothing herein shall limit the Collateral
Agent’s, Trustee’s or any Noteholder ‘s right to bring any suit, action or other proceeding against
any Pledgor or any of any Pledgor’s assets or to serve process on any Pledgor by any means
authorized by Law.

     19. Waiver of Jury Trial.

     EXCEPT AS PROHIBITED BY LAW, EACH PLEDGOR (AS A PLEDGOR AND, IF APPLICABLE, AS A COMPANY),
EACH OF THE COMPANIES AND THE COLLATERAL AGENT, ON BEHALF OF ITSELF, THE TRUSTEE AND THE
NOTEHOLDERS, HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY A JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
DOCUMENTS OR TRANSACTIONS RELATING THERETO.

     20. Entire Agreement; Additional Pledgors; Amendments.

     (a) This Agreement constitutes the entire agreement between the parties with respect to the
subject matter hereof and supersedes all prior agreements relating to a grant of a security
interest in the Pledged Collateral by any Pledgor to the Collateral Agent.

     (b) At any time after the initial execution and delivery of this Agreement to the Collateral
Agent, the Trustee and the Noteholders, additional Persons may become parties to this Agreement
and thereby acquire the duties and rights of being Pledgors hereunder by executing and delivering
to the Collateral Agent a Joinder Agreement pursuant to the Security Agreement. No notice of the
addition of any Pledgor shall be required to be given to any pre-exiting Pledgor and each Pledgor
hereby consents thereto.

     (c) Except as expressly provided in (i) Section 5(f) with respect to certificated securities
issued by Companies that are limited liability companies or limited partnerships, (ii) in Section 9
with respect to additional Pledgors, (iii) in Section 21 with respect to the release of Pledgors
and Companies, and (iv) Section 8.1 of the Security Agreement with respect to reflecting the
incurrence of Additional Secured Obligations (as defined in the Security Agreement) and the
granting of Additional Pari Passu Liens (as defined in the Security Agreement), this Agreement may
not be amended or supplemented except by a writing signed by the Collateral Agent and the Pledgors.

10

 

     21. Automatic Release of Related Collateral and Equity.

     At any time after the initial execution and delivery of this Agreement to the Collateral
Agent, the Pledgors and their respective Pledged Collateral and the Companies may be released from
this Agreement in accordance with and pursuant to Section 11.04 of the Indenture. No notice of
such release of any Pledgor or such Pledgor’s Pledged Collateral shall be required to be given to
any other Pledgor and each Pledgor hereby consents thereto.

     22. Counterparts; Telecopy Signatures.

     This Agreement may be executed in any number of counterparts, and by different parties hereto
in separate counterparts, each of which, when so executed, shall be deemed an original, but all
such counterparts shall constitute one and the same instrument. Each Pledgor acknowledges and
agrees that a telecopy or electronic (i.e., “e-mail” or “portable document folio” (“pdf”))
transmission to the Collateral Agent of the signature pages hereof purporting to be signed on
behalf of any Pledgor shall constitute effective and binding execution and delivery hereof by such
Pledgor.

     23. Construction.

     The rules of construction contained in Section 1.02 of the Indenture apply to this Agreement.

     24. Collateral Agent Privileges, Powers and Immunities.

     In the performance of its obligations, powers and rights hereunder, the Collateral Agent shall
be entitled to the privileges, powers and immunities afforded to it as Collateral Agent under the
Indenture. The Collateral Agent shall be entitled to refuse to take or refrain from taking any
discretionary action or exercise any discretionary powers set forth in this 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
Collateral 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).

[SIGNATURE PAGES FOLLOW]

11

 

     IN WITNESS WHEREOF, and intending to be legally bound, the parties hereto have caused
this Agreement to be duly executed as of the date first above written.

	 	 	 	 	 
	 	WILMINGTON TRUST, NATIONAL ASSOCIATION, 

as Collateral Agent

 	 
	 	By:  	/s/ Joshua C. Jones
 	 
	 	 	Name:  	Joshua C. Jones 	 
	 	 	Title:  	Banking Officer 	 

12

 

	 	 	 	 	 
	 	Pledgors: 

K. HOVNANIAN JV HOLDINGS, L.L.C.

HERITAGE PINES, LLC

K. HOVNANIAN AT COBBLESTONE SQUARE

CONDOMINIUMS, L.L.C.

K. HOVNANIAN JV SERVICES COMPANY, L.L.C.

K. HOVNANIAN HOVWEST HOLDINGS. L.L.C.

HOVWEST LAND ACQUISITION, LLC

 	 
	 	By:  	/s/ David G. Valiaveedan
 	 
	 	 	Name:  	David G. Valiaveedan 	 
	 	 	Title:  	Vice President Finance and
Treasurer 	 

 

 

	 	 	 	 	 

SCHEDULE A

TO

PLEDGE AGREEMENT

Heritage Pines, LLC

K. Hovnanian at Cobblestone Square Condominiums, L.L.C.

K. Hovnanian JV Services Company, L.L.C.

K. Hovnanian HovWest Holdings, L.L.C.

HovWest Land Acquisition, LLC

 

 

SCHEDULE B

TO

PLEDGE AGREEMENT

None.

 

 

SCHEDULE C

Actions to Perfect

	1.	 	With respect to each Pledgor organized under the laws of the state of California, the filing
of a Uniform Commercial Code Financing Statement that reasonably identifies the Pledged
Collateral with the California Secretary of State.
	 
	2.	 	With respect to each Pledgor organized under the laws of the state of Delaware, the filing of
a Uniform Commercial Code Financing Statement that reasonably identifies the Pledged
Collateral with the Delaware Secretary of State.
	 
	3.	 	With respect to each Pledgor organized under the laws of the state of North Carolina, the
filing of a Uniform Commercial Code Financing Statement that reasonably identifies the Pledged
Collateral with the North Carolina Secretary of State.
	 
	4.	 	With respect to each Pledgor organized under the laws of the state of Virginia, the filing of
a Uniform Commercial Code Financing Statement that reasonably identifies the Pledged
Collateral with the Virginia State Corporation Commission.exv10w2

EXHIBIT 10.2

EXECUTION VERSION

 

FIRST LIEN SECURITY AGREEMENT

made by

K. HOVNANIAN JV HOLDINGS, L.L.C.

HERITAGE PINES, LLC

K. HOVNANIAN AT COBBLESTONE SQUARE CONDOMINIUMS, L.L.C.

K. HOVNANIAN JV SERVICES COMPANY, L.L.C.

K. HOVNANIAN HOVWEST HOLDINGS, L.L.C.

HOVWEST LAND ACQUISITION, LLC

in favor of

WILMINGTON TRUST, NATIONAL ASSOCIATION

as Collateral Agent

Dated as of November 1, 2011

 

 

 

 TABLE OF CONTENTS

 

	 	 	 	 	 
	 	 	Page
	 ARTICLE 1

	 Defined Terms

	 
	 	 	 	 
	Section 1.01. Definitions

	 	 	1	 
	Section 1.02. Other Definitional Provisions.

	 	 	6	 
	 
	 	 	 	 
	 ARTICLE 2

	 Grant of Security Interest

	 
	 	 	 	 
	 ARTICLE 3

	Representations and Warranties

	 
	 	 	 	 
	Section 3.01. Title; No Other Liens

	 	 	9	 
	Section 3.02. Perfected First Priority Liens

	 	 	9	 
	Section 3.03. Jurisdiction of Organization; Chief Executive Office

	 	 	9	 
	Section 3.04. Farm Products

	 	 	9	 
	Section 3.05. Investment Property

	 	 	9	 
	Section 3.06. Receivables

	 	 	10	 
	 
	 	 	 	 
	 ARTICLE 4

	 Covenants

	 
	 	 	 	 
	Section 4.01. Maintenance of Perfected
Security Interest; Further Documentation

	 	 	10	 
	Section 4.02. Changes In Name, Etc.

	 	 	11	 
	Section 4.03. Delivery of Instruments,
Certificated Securities and Chattel Paper

	 	 	11	 
	Section 4.04. Intellectual Property

	 	 	11	 
	 
	 	 	 	 
	 ARTICLE 5

	Investing Amounts in the Securities Accounts

	 
	 	 	 	 
	Section 5.01. Investments

	 	 	11	 
	Section 5.02. Liability

	 	 	12	 
	 
	 	 	 	 
	 ARTICLE 6

	 Remedial Provisions

	 
	 	 	 	 
	Section 6.01. Certain Matters Relating to Receivables.

	 	 	12	 
	Section 6.02. Communications with Obligors: Grantors Remain Liable

	 	 	13	 

i

 

	 	 	 	 	 
	 	 	Page
	Section 6.03. Proceeds to Be Turned Over to Agent

	 	 	13	 
	Section 6.04. Application of Proceeds

	 	 	14	 
	Section 6.05. Code and Other Remedies

	 	 	14	 
	Section 6.06. Subordination

	 	 	15	 
	Section 6.07. Deficiency

	 	 	15	 
	 
	 	 	 	 
	 ARTICLE 7
	 	 	 	 
	 The Agent
	 	 	 	 
	 
	 	 	 	 
	Section 7.01. Agent’s Appointment as Attorney-in-fact, Etc.

	 	 	15	 
	Section 7.02. Duty of Agent

	 	 	17	 
	Section 7.03. Execution of Financing Statements

	 	 	18	 
	Section 7.04. Authority of Agent

	 	 	18	 
	 
	 	 	 	 
	 ARTICLE 8
	 	 	 	 
	 Miscellaneous
	 	 	 	 
	 
	 	 	 	 
	Section 8.01. Amendments in Writing

	 	 	18	 
	Section 8.02. Notices

	 	 	19	 
	Section 8.03. No Waiver by Course of Conduct; Cumulative Remedies

	 	 	19	 
	Section 8.04. Enforcement Expenses; Indemnification

	 	 	19	 
	Section 8.05. Successors and Assigns

	 	 	20	 
	Section 8.06. Set-off

	 	 	20	 
	Section 8.07. Counterparts

	 	 	20	 
	Section 8.08. Severability

	 	 	21	 
	Section 8.09. Section Headings

	 	 	21	 
	Section 8.10. Integration

	 	 	21	 
	Section 8.11. Governing Law

	 	 	21	 
	Section 8.12. Submission to Jurisdiction; Waivers

	 	 	21	 
	Section 8.13. Acknowledgements

	 	 	22	 
	Section 8.14. Additional Grantors

	 	 	22	 
	Section 8.15. Releases

	 	 	22	 
	Section 8.16. Waiver of Jury Trial

	 	 	23	 
	Section 8.17. Control Agreements

	 	 	23	 
	Section 8.18. Agent Privileges, Powers and Immunities

	 	 	23	 

Schedule A — Commercial Tort Claims

Schedule B — Perfection Certificate

Schedule C — Actions Required To Perfect

Exhibit A — Intellectual Property Security Agreement

Exhibit B — Joinder Agreement

ii

 

FIRST LIEN SECURITY AGREEMENT

     THIS FIRST LIEN SECURITY AGREEMENT (the “Agreement”), dated as of November 1, 2011, is made by
K. Hovnanian JV Holdings, L.L.C. (“JV Holdings”), Heritage Pines, LLC, K. Hovnanian at Cobblestone
Square Condominiums, L.L.C., K. Hovnanian JV Services Company, L.L.C., K. Hovnanian HovWest
Holdings, L.L.C. and HovWest Land Acquisition, LLC (the “Initial Grantors”; and the Initial
Grantors, together with any other entity (other than the Agent or its successors) that may become a
party hereto as provided herein, the “Grantors”), in favor of Wilmington Trust, National
Association, as Collateral Agent (in such capacity, the “Agent”) for the benefit of itself, the
Trustee (as defined below) and the Noteholders (as defined below).

W I T N E S S E T H:

     WHEREAS, K. Hovnanian Enterprises, Inc., a California corporation (the “Issuer”), Hovnanian
Enterprises, Inc., a Delaware corporation (“Hovnanian”) and each of the other guarantors party
thereto (including the Initial Grantors) have entered into the Indenture dated as of November 1,
2011 (as amended, supplemented, amended and restated or otherwise modified from time to time, the
“Indenture”) with Wilmington Trust, National Association, a national banking association, as
trustee (in such capacity, the “Trustee”) and as Collateral Agent, pursuant to which the Issuer has
issued, and may from time to time issue, its (i) 2.00% Senior Secured Notes due 2021 (the “2.00%
Notes”) and (ii) 5.00% Senior Secured Notes due 2021 (the “5.00% Notes” and, together with the
2.00% Notes, the “Secured Notes”) upon the terms and subject to the conditions set forth therein;

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

     WHEREAS, the Issuer and the Grantors are engaged in related businesses, and each Grantor will
derive substantial direct and indirect benefit from the issuance of the Secured Notes; and

     NOW, THEREFORE, in consideration of the premises and to induce Noteholders to purchase Secured
Notes, each Grantor hereby agrees with the Agent, for the ratable benefit of the Secured Parties,
as follows:

ARTICLE 1

Defined Terms

     Section 1.01. Definitions. (a) Definitions set forth above are incorporated herein and
unless otherwise defined herein, terms defined in the Indenture and

1

 

used herein shall have the meanings respectively given to them in the Indenture, and the
following terms are used herein as defined in the New York UCC: Accounts, Chattel Paper, Commercial
Tort Claims, Deposit Account, Documents, Equipment, Electronic Chattel Paper, Farm Products,
Fixtures, General Intangibles, Goods, Payment Intangibles, Instruments, Inventory, Investment
Property, Letter of Credit Rights, Payment Intangibles, Securities Accounts, Software and
Supporting Obligations.

     (b) The following terms shall have the following meanings:

     “Additional Pari Passu Liens”: any liens on the Collateral which secure Additional Secured
Obligations on an equal and ratable basis with the Secured Obligations, provided that such liens
are permitted by clauses (a)(ii) or (a)(iii) of the definition of Permitted Collateral Liens in the
Indenture.

     “Additional Pari Passu Collateral Agent”: the agent or other representative with respect to
any Additional Secured Obligations in favor of which any Additional Pari Passu Liens are granted.

     “Additional Secured Obligations”: any obligations arising pursuant to any Indebtedness
permitted to be secured on a pari passu basis with the Secured Notes pursuant to clauses (a)(ii) or
(a)(iii) of the definition of Permitted Collateral Liens in the Indenture (including for the
avoidance of doubt any guarantees with respect thereto).

     “Agreement”: this Security Agreement, as the same may be amended, restated, supplemented or
otherwise modified from time to time.

     “Cash Equivalents”: (i) cash, marketable direct obligations of the United States of America or
any agency thereof, and certificates of deposit, demand deposits, time deposits, or repurchase
agreements issued by any bank with a capital and surplus of at least $25,000,000 organized under
the laws of the United States of America or any state thereof, state or municipal securities with a
rating of A-1 or better by Standard & Poor’s or by Moody’s or F-1 by Fitch, provided that such
obligations, certificates of deposit, demand deposits, time deposits, and repurchase agreements
have a maturity of less than one year from the date of purchase, and (ii) investment grade
commercial paper or debt or commercial paper issued by any bank with a capital and surplus of at
least $25,000,000 organized under the laws of the United States of America or any state thereof
having a maturity date of one year or less from the date of purchase, and (iii) funds holding
assets primarily consisting of those described in clause (i) and (ii).

     “Collateral”: as defined in Article 2.

2

 

     “Collateral Agency Agreement”: an intercreditor or collateral agency agreement entered into
between the Additional Pari Passu Collateral Agent(s) and the Agent on terms reasonably
satisfactory to the Agent, the Issuer and Hovnanian, setting forth the respective rights of the
Secured Parties and the Additional Pari Passu Collateral Agent(s) and the holders of Additional
Secured Obligations with respect to the Collateral and providing, among other things, that (x) the
Additional Pari Passu Liens shall rank equally with the liens securing the Secured Obligations, (y)
any proceeds of the Collateral shall be applied ratably to the Secured Obligations and the
Additional Secured Obligations and (z) the Agent, including at the direction of the Noteholders,
shall be entitled to take such actions, or to direct any agent appointed pursuant to the Collateral
Agency Agreement to take such actions, as are permitted hereby and by the Indenture independently
of any direction or vote of the holders of the Additional Secured Obligations.

     “Contracts”: any contracts and agreements for the purchase, acquisition or sale of real or
personal property or the receipt or performance of services, any contract rights relating thereto,
and all other rights to such contract or agreements and any right to payment for or to receive
moneys due or to become due for items sold or leased or for services rendered, together with all
rights of any Grantor to damages arising thereunder or to perform and to exercise all remedies
thereunder.

     “Collateral Account”: any collateral account established by the Agent as provided in Section
6.01 or 6.03.

     “Copyright Licenses”: 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.

     “Copyrights”: (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, and (ii) the right to obtain all renewals thereof.

     “Deposit Accounts”: the collective reference to each Deposit Account (as such term is defined
in Section 1.01(a) hereof) in the name of the applicable Grantor, together with any one or more
securities accounts into which any monies on deposit in any such Deposit Account may be swept or
otherwise transferred now or hereafter and from time to time, and any additional, substitute or
successor Deposit Account.

     “Excluded Accounts” shall mean at any time those deposit, checking or securities accounts of
any of the Grantors (i) that individually have an average

3

 

monthly balance (over the most recent ended 3-month period) less than $250,000 and which
together do not have an average monthly balance (for such 3-month period) in excess of $500,000 in
the aggregate and (ii) all escrow accounts (in which funds are held for or of others by virtue of
customary real estate practice or contractual or legal requirements).

     “Intellectual Property”: 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.

     “Investment Property”: the collective reference to (i) all “investment property” as such term
is defined in Section 9-102(a)(49) of the New York UCC, and (ii) whether or not constituting
“investment property” as so defined, all Pledged Notes.

     “Issuers”: the collective reference to each issuer of any Investment Property.

     “Law”: any law (including common law), constitution, statute, treaty, regulation, rule,
ordinance, opinion, release, ruling, order, injunction, writ, decree, bond, judgment, authorization
or approval, lien or award of or settlement agreement with any Official Body.

     “New York UCC”: the Uniform Commercial Code as from time to time in effect in the State of New
York.

     “Noteholder”: “Holder” or “Holder of Notes” as defined in the Indenture.

     “Noteholder Collateral Document”: any agreement, document or instrument pursuant to which a
Lien is granted by any Grantor to secure any Secured Obligations or under which rights or remedies
with respect to any such Liens are governed, as the same may be amended, restated or otherwise
modified from time to time.

     “Noteholder Document”: collectively, (a) the Indenture, the Secured Notes and the Noteholder
Collateral Documents and (b) any other related document or instrument executed and delivered
pursuant to any Noteholder Document described in clause (a) above evidencing or governing any
Secured Obligations as the same may be amended, restated or otherwise modified from time to time.

4

 

     “Official Body”: any national, federal, state, local or other governmental or political
subdivision or any agency, authority, board, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury or arbitrator, in each case whether
foreign or domestic.

     “Patent License”: 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.

     “Patents”: (i) all letters patent of the United States, any other country or any political
subdivision thereof, all reissues and extensions thereof, (ii) all applications for letters patent
of the United States or any other country and all divisions, continuations and
continuations-in-part thereof, and (iii) all rights to obtain any reissues or extensions of the
foregoing.

     “Perfection Certificate”: with respect to any Grantor, a certificate substantially in the form
of Schedule B, completed and supplemented with the schedules contemplated thereby, and signed by an
officer of such Grantor.

     “Pledged Notes”: all promissory notes issued to or held by any Grantor.

     “Proceeds”: all “proceeds” as such term is defined in Section 9-102(a)(64) of the New York UCC
and, in any event, shall include, without limitation, all dividends or other income from the
Investment Property, collections thereon or distributions or payments with respect thereto.

     “Receivable”: any right to payment for real or personal property sold or leased or for
services rendered, whether or not such right is evidenced by a Contract, an Instrument or Chattel
Paper and whether or not it has been earned by performance (including, without limitation, any
Account).

     “Secured Obligations”: all Indebtedness and other Obligations under the Indenture, the Secured
Notes, the Guarantees and the Noteholder Collateral Documents, together with any extensions,
renewals, replacements or refundings thereof and all costs and expenses of enforcement and
collection, including reasonable attorney’s fees.

     “Secured Parties”: the collective reference to the Agent, the Trustee and the Noteholders, in
each case to which any Secured Obligations are owed.

     “Securities Accounts”: the collective reference to the securities accounts in the name of the
applicable Grantor and any additional, substitute or successor account.

     “Trademark License”: any written agreement providing for the grant by or to any Grantor of any
right to use any Trademark.

5

 

     “Trademarks”: (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, and (ii) the right to obtain all renewals thereof.

     “Vehicles”: all cars, trucks, trailers, construction and earth moving equipment and other
vehicles covered by a certificate of title law of any state and all tires and other appurtenances
to any of the foregoing.

     Section 1.02. Other Definitional Provisions.

     (a) The words “hereof,” “herein”, “hereto” and “hereunder” and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to any particular provision
of this Agreement, and Section and Schedule references are to this Agreement unless otherwise
specified.

     (b) The meanings given to terms defined herein shall be equally applicable to both the
singular and plural forms of such terms.

     (c) Where the context requires, terms relating to the Collateral or any part thereof, when
used in relation to a Grantor, shall refer to such Grantor’s Collateral or the relevant part
thereof.

ARTICLE 2

Grant of Security Interest

     Each Grantor hereby grants to the Agent, for the ratable benefit of the Secured Parties, a
security interest in, all of the following property now owned or at any time hereafter acquired by
such Grantor or in which such Grantor now has or at any time in the future may acquire any right,
title or interest (collectively, the “Collateral”), as collateral security for the prompt and
complete payment and performance when due (whether at the stated maturity, by acceleration or
otherwise) of the Secured Obligations:

     (a) all Accounts;

     (b) all Chattel Paper (including, Electronic Chattel Paper);

6

 

     (c) all Commercial Tort Claims (including those claims listed on Schedule A hereto, in which
the claim amount individually exceeds $2,000,000, as such schedule is amended or supplemented from
time to time);

     (d) all Contracts;

     (e) all Securities Accounts;

     (f) all Deposit Accounts;

     (g) all Documents (other than title documents with respect to vehicles);

     (h) all Equipment;

     (i) all Fixtures;

     (j) all General Intangibles;

     (k) all Goods;

     (l) all Instruments;

     (m) all Intellectual Property;

     (n) all Inventory;

     (o) all Investment Property;

     (p) all letters of credit;

     (q) all Letter of Credit Rights;

     (r) all Payment Intangibles;

     (s) all Vehicles and title documents with respect to Vehicles;

     (t) all Receivables;

     (u) all Software;

     (v) all Supporting Obligations;

     (w) to the extent, if any, not included in clauses (a) through (v) above, each and every other
item of personal property whether now existing or hereafter arising or acquired;

     (x) all books and records pertaining to any of the Collateral; and

7

 

     (y) to the extent not otherwise included, all Proceeds, Supporting Obligations and products of
any and all of the foregoing and all collateral security and guarantees given by any Person with
respect to any of the foregoing;

provided, however, that notwithstanding any of the other provisions set forth in this Article 2
(and notwithstanding any recording of the Agent’s Lien in the U.S. Patent and Trademark Office or
other registry office in any jurisdiction), this Agreement shall not constitute a grant of a
security interest in, and the Collateral shall not include, (i) any property or assets constituting
“Excluded Property” in the Indenture or (ii) 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 or, in the case
of any Investment Property, or Pledged Note, any applicable shareholder or similar agreement
governing such Investment Property, or Pledged Note, except to the extent that such Law or the term
in such contract, license, agreement, instrument or other document or shareholder or similar
agreement providing for such prohibition, breach, default or termination or requiring such consent
is ineffective under applicable Law including Sections 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 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, each Grantor acknowledges that such interest in
such trademark or service mark applications will become part of the Collateral. The Agent agrees
that, at any 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 Officers’ Certificate or an Opinion of Counsel to that
effect. Notwithstanding the foregoing, in the event that Rule 3-16 of Regulation S-X under the
Securities Act requires (or is replaced with another rule or regulation, or any other law, rule or
regulation is adopted, which would require) the filing with the SEC of separate financial
statements of any Grantor, then the capital stock or other securities of such Grantor, shall
automatically be deemed released and not to be and not to have been part of the Collateral but only
to the extent necessary to not be subject to such requirement. In such event, this Agreement may
be amended or modified,

8

 

without the consent of any Noteholder, upon the Agent’s receipt of a written authorization from the
Issuer stating that such amendment is permitted hereunder, which the Agent shall be entitled to
conclusively rely upon, to the extent necessary to evidence the release of the lien created hereby
on the shares of capital stock or other securities that are so deemed to no longer constitute part
of the Collateral.

ARTICLE 3

Representations and Warranties

     To induce the Noteholders to purchase the Secured Notes, each Grantor hereby represents and
warrants to the Agent and each other Secured Party that:

     Section 3.01. Title; No Other Liens. Except for the security interest granted to the Agent
for the ratable benefit of the Secured Parties pursuant to this Agreement, such Grantor owns each
item of the Collateral free and clear of any and all Liens or claims of others except for the
Permitted Liens. No financing statement or other public notice with respect to all or any part of
the Collateral is on file or of record in any public office, except with respect to Permitted
Liens.

     Section 3.02. Perfected First Priority Liens. The security interests granted pursuant to
this Agreement (a) upon completion of the filings and other actions specified on Schedule C by the
Grantors (which, in the case of all filings and other documents referred to on said Schedule, have
been delivered, or will be delivered within the time periods set forth in Schedule C, to the Agent
in completed form) will constitute valid perfected (to the extent such security interest can be
perfected by such filings or actions) security interests in all of the Collateral in favor of the
Agent, for the ratable benefit of the Secured Parties, as collateral security for the Secured
Obligations, enforceable in accordance with the terms hereof against all creditors of such Grantor
and any Persons purporting to purchase any Collateral from such Grantor and (b) are prior to all
other Liens on the Collateral in existence on the date hereof except for Permitted Liens.

     Section 3.03. Jurisdiction of Organization; Chief Executive Office. On the date hereof, such
Grantor’s exact legal name, jurisdiction of organization, identification number from the
jurisdiction of organization (if any), and the location of such Grantor’s chief executive office or
sole place of business or principal residence, as the case may be, are specified in the Perfection
Certificate.

     Section 3.04. Farm Products. None of the Collateral constitutes, or is the Proceeds of, Farm
Products.

     Section 3.05. Investment Property. Such Grantor is the record and beneficial owner of, and
has good title to, the Investment Property pledged by it

9

 

hereunder, free of any and all Liens or options in favor of, or claims of, any other Person,
except the Permitted Liens.

     Section 3.06. Receivables. No amount payable in excess of $1,000,000 in the aggregate to all
Grantors under or in connection with any Receivables is evidenced by any Instrument or Chattel
Paper which has not been delivered to the Agent.

ARTICLE 4

Covenants

     Each Grantor covenants and agrees with the Agent and the other Secured Parties that, from and
after the date of this Agreement until the payment in full of all outstanding Secured Obligations:

     Section 4.01. Maintenance of Perfected Security Interest; Further Documentation. (a) Such
Grantor shall maintain the security interest created by this Agreement as a perfected security
interest to the extent required by this Agreement having at least the priority described in Section
3.02 and shall defend such security interest against the claims and demands of all Persons
whomsoever other than any holder of Permitted Liens.

     (b) At any time and from time to time, and at the sole expense of such Grantor, such Grantor
will promptly and duly execute and deliver, and have recorded, such further instruments and
documents and take such further actions as shall be required by applicable law for the purpose of
obtaining, perfecting or preserving the security interests purported to be granted under this
Agreement and of the rights and remedies herein granted, including, without limitation, (i) filing
any financing or continuation statements under the Uniform Commercial Code (or other similar laws)
in effect in any jurisdiction with respect to the security interests created hereby and (ii) in the
case of the Deposit Accounts, Investment Property, Letter of Credit Rights and the Securities
Accounts and any other relevant Collateral, taking any actions necessary to enable the Agent to
obtain “control” (within the meaning of the applicable Uniform Commercial Code) with respect
thereto, provided that the Grantor shall not be required to take any of the actions set forth in
this clause (ii) with respect to Excluded Accounts.

     (c) If any Grantor shall at any time acquire a Commercial Tort Claim, in which the claim
amount individually exceeds $2,000,000, such Grantor shall promptly notify the Agent in a writing
signed by such Grantor of the details thereof and grant to the Agent for the benefit of the Secured
Parties in such writing a security interest therein and in the Proceeds thereof, with such writing
to be in form and substance required by applicable law and such writing shall constitute a
supplement to Schedule A hereto.

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     Section 4.02. Changes In Name, Etc. Such Grantor will, within thirty (30) calendar days
after any change its jurisdiction of organization or change its name, provide written notice
thereof to the Agent.

     Section 4.03. Delivery of Instruments, Certificated Securities and Chattel Paper. If any
amount in excess of $1,000,000 in the aggregate payable under or in connection with any of the
Collateral shall be or become evidenced by any Instrument, certificated security or Chattel Paper,
such Instrument, certificated security or Chattel Paper shall be promptly delivered to the Agent,
duly indorsed, to be held as Collateral pursuant to this Agreement.

     Section 4.04. Intellectual Property. (a) Whenever such Grantor, either by itself or through
any agent, employee, licensee or designee, shall file an application for the registration of any
Intellectual Property with the United States Patent and Trademark Office, the United States
Copyright Office or any similar office or agency in any other country or any political subdivision
thereof, such Grantor shall report such filing to the Agent on or before the date upon which
Hovnanian is required to file reports with the Trustee pursuant to Section 4.15 of the Indenture
for the fiscal quarter in which such filing occurs. Such Grantor shall execute and deliver, and
have recorded, any and all agreements, instruments, documents, and papers as may be necessary to
create and perfect the Agent’s and the other Secured Parties’ security interest in any registered
or applied for Copyright, Patent or Trademark and the goodwill and General Intangibles of such
Grantor relating thereto or represented thereby.

     (b) Such Grantor’s obligations under Section 4.04(a) above shall include executing and
delivering, and having recorded, with respect to such Collateral, an agreement substantially in the
form of the Intellectual Property Security Agreement attached hereto as Exhibit A.

ARTICLE 5

Investing Amounts in the Securities Accounts

     Section 5.01. Investments. If requested by any Grantor in writing, the Agent will, from time
to time, invest amounts on deposit in the Deposit Accounts or Securities Accounts in which the
Agent for the benefit of the Secured Parties holds a first priority, perfected security interest,
in Cash Equivalents pursuant to the written instructions of any Grantor. All investments may be
made in the name of the Agent or a nominee of the Agent and in a manner that preserves such
Grantor’s ownership of, and the Agent’s perfected first priority Lien on, such investments (it
being understood that the Grantors shall be responsible for ensuring the preservation of the
Agent’s perfected first priority Lien). All income received from such investments shall accrue for
the benefit of the applicable Grantor and shall be credited (promptly upon receipt by the Agent) to
a Deposit

11

 

Account or Securities Account, in which Agent for the benefit of the Secured Parties holds a
first priority, perfected security interest. The Grantors will only direct the Agent to make
investments in which the Agent can obtain a first priority, perfected security interest, and each
Grantor hereby agrees to execute promptly any documents which may be required to implement or
effectuate the provisions of this Section.

     Section 5.02. Liability. The Agent shall have no responsibility to the Issuer or any Grantor
for any loss or liability arising in respect of the investments in the Deposit Accounts or
Securities Accounts in which the Agent for the benefit of the Secured Parties holds a first
priority perfected security interest (including, without limitation, as a result of the liquidation
of any thereof before maturity), except to the extent that such loss or liability is found to be
based on the Agent’s gross negligence or willful misconduct as determined by a final and
nonappealable decision of a court of competent jurisdiction.

ARTICLE 6

Remedial Provisions

     Section 6.01. Certain Matters Relating to Receivables.

     (a) At any time during the continuance of an Event of Default, the Agent shall have the right
to make test verifications of the Receivables in any manner and through any medium that it
reasonably considers advisable, and each Grantor shall furnish all such assistance and information
as the Agent may require in connection with such test verifications. The Agent shall endeavor to
provide the Issuer with notice at or about the time of such verifications, provided that the
failure to provide such notice shall not in any way compromise or adversely affect the exercise of
such remedy or the Agent’s rights hereunder.

     (b) The Agent hereby authorizes each Grantor to collect such Grantor’s Receivables and the
Agent may curtail or terminate said authority at any time after the occurrence and during the
continuance of an Event of Default. The Agent shall endeavor to provide the Issuer with notice at
or about the time of the exercise of its rights pursuant to the preceding sentence, provided that
the failure to provide such notice shall not in any way compromise or adversely affect the exercise
of any rights or remedies hereunder. If requested in writing by the Agent at any time after the
occurrence and during the continuance of an Event of Default, any payments of Receivables, when
collected by any Grantor, (i) shall be forthwith (and, in any event, within two Business Days)
deposited by such Grantor in the exact form received, duly indorsed by such Grantor to the Agent if
required, in a Collateral Account maintained under the sole dominion and control of the Agent,
subject to withdrawal by the Agent for the account of the Secured Parties only as provided in
Section 6.04, and (ii) until so turned over, shall be held

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by such Grantor in trust for the Agent and the Secured Parties, segregated from other funds of
such Grantor.

     (c) At the Agent’s written request at any time after the occurrence and during the continuance
of an Event of Default, each Grantor shall deliver to the Agent all original and other documents
evidencing, and relating to, the agreements and transactions which gave rise to the Receivables,
including without limitation, all original orders, invoices and shipping receipts.

     Section 6.02. Communications with Obligors: Grantors Remain Liable.

     (a) The Agent in its own name or in the name of others may after the occurrence and during the
continuance of an Event of Default communicate with obligors under the Receivables and parties to
the Contracts to verify with them to the Agent’s satisfaction the existence, amount and terms of
any Receivables or Contracts. The Agent shall endeavor to provide the Issuer with notice at or
about the time of the exercise of its rights pursuant to the preceding sentence, provided that the
failure to provide such notice shall not in any way compromise or adversely affect the exercise of
any rights or remedies hereunder.

     (b) Upon the written request of the Agent at any time after the occurrence and during the
continuance of an Event of Default, each Grantor shall notify obligors on the Receivables and
parties to the Contracts that the Receivables and the Contracts, as the case may be, have been
assigned to the Agent for the ratable benefit of the Secured Parties and that payments in respect
thereof shall be made directly to the Agent.

     (c) Anything herein to the contrary notwithstanding, each Grantor shall remain liable under
each of the Receivables and Contracts to observe and perform all the conditions and obligations to
be observed and performed by it thereunder, all in accordance with the terms of any agreement
giving rise thereto. Neither the Agent nor any Secured Party shall have any obligation or liability
under any Receivable (or any agreement giving rise thereto) or Contract by reason of or arising out
of this Agreement or the receipt by the Agent or any Secured Party of any payment relating thereto,
nor shall the Agent or any Secured Party be obligated in any manner to perform any of the
obligations of any Grantor under or pursuant to any Receivable (or any agreement giving rise
thereto) or Contract, to make any payment, to make any inquiry as to the nature or the sufficiency
of any payment received by it or as to the sufficiency of any performance by any party thereunder,
to present or file any claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to it or to which it may be entitled at any
time or times.

     Section 6.03. Proceeds to Be Turned Over to Agent. In addition to the rights of the Agent
and the Secured Parties specified in Section 6.01 with respect

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to payments of Receivables, if an Event of Default shall occur and be continuing, upon written
request from the Agent, all Proceeds received by any Grantor consisting of cash, checks and other
near-cash items shall be held by such Grantor in trust for the Agent and the Secured Parties,
segregated from other funds of such Grantor, and shall, forthwith upon receipt by such Grantor, be
turned over to the Agent in the exact form received by such Grantor (duly indorsed by such Grantor
to the Agent, if requested). All Proceeds received by the Agent hereunder shall be held by the
Agent in a Collateral Account maintained under its sole dominion and control. All such Proceeds
while held by the Agent in a Collateral Account (or by such Grantor in trust for the Agent and the
Secured Parties) shall continue to be held as collateral security for all the Secured Obligations
and shall not constitute payment thereof until applied as provided in Section 6.04.

     Section 6.04. Application of Proceeds. If an Event of Default shall have occurred and be
continuing, at any time at the Agent’s election, subject to any Collateral Agency Agreement, the
Agent may apply all or any part of the Collateral, whether or not held in the Deposit Accounts, the
Securities Accounts or any other Collateral Account, first to the payment of all reasonable costs
and expenses of every kind incurred by the Agent in connection with the sale, care or safekeeping
of any of the Collateral or in any way relating to the Collateral or the rights of the Agent and
the Secured Parties hereunder, including, without limitation, reasonable attorneys fees and
disbursements, and then in payment of the Secured Obligations in the order set forth in Section
5.05 of the Indenture.

     Section 6.05. Code and Other Remedies. If an Event of Default shall occur and be continuing,
the Agent, on behalf of the Secured Parties, may exercise, in addition to all other rights and
remedies granted to them in this Agreement and in any other instrument or agreement securing,
evidencing or relating to the Secured Obligations, all rights and remedies of a secured party under
the New York UCC or any other applicable law. Without limiting the generality of the foregoing, the
Agent, without prior demand of performance or other demand, presentment, protest, advertisement or
notice of any kind (except any prior notice required by law referred to below) to or upon any
Grantor or any other Person (all and each of which demands, defenses, advertisements and notices
are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize
upon the Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give option or
options to purchase, or otherwise dispose of and deliver the Collateral or any part thereof (or
contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at
any exchange, broker’s board or office of the Agent or any Secured Party or elsewhere upon such
terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or
on credit or for future delivery without assumption of any credit risk. The Agent shall endeavor to
provide the applicable Grantor with notice at or about the time of the exercise of remedies in the
proceeding sentence, provided that the failure to provide such notice shall not in any way
compromise

14

 

or adversely affect the exercise of such remedies or the Agent’s rights hereunder. The Agent
or any Secured Party shall have the right upon any such public sale or sales, and, to the extent
permitted by law, upon any such private sale or sales, to purchase the whole or any part of the
Collateral so sold, free of any right or equity of redemption in any Grantor, which right or equity
is hereby waived and released. Each Grantor further agrees, at the Agent’s request, to assemble the
Collateral and make it available to the Agent at places which the Agent shall reasonably select,
whether at such Grantor’s premises or elsewhere. The Agent shall apply the net proceeds of any
action taken by it pursuant to this Section 6.05, after deducting all reasonable costs and expenses
of every kind incurred in connection therewith or incidental to the care or safekeeping of any of
the Collateral or in any way relating to the Collateral or the rights of the Agent and the Secured
Parties hereunder, including, without limitation, reasonable attorneys’ fees and disbursements, to
the payment in whole or in part of the Secured Obligations, in such order as required by Section
5.05 of the Indenture, and only after such application and after the payment by the Agent of any
other amount required by any provision of law, including, without limitation, Section 9-615(a)(3)
of the New York UCC, need the Agent account for the surplus, if any, to any Grantor. To the extent
permitted by applicable law, each Grantor waives all claims, damages and demands it may acquire
against the Agent or any Secured Party arising out of the exercise by them of any rights hereunder.
If any prior notice of a proposed sale or other disposition of Collateral shall be required by law,
such notice shall be deemed reasonable and proper if given at least 10 days before such sale or
other disposition.

     Section 6.06. Subordination. Each Grantor hereby agrees that, upon the occurrence and during
the continuance of an Event of Default, unless otherwise agreed by the Agent, all Indebtedness
owing to it by the Issuer or any Subsidiary of the Issuer shall be fully subordinated to the
indefeasible payment in full in cash of the Secured Obligations.

     Section 6.07. Deficiency. Each Grantor shall remain liable for any deficiency if the
proceeds of any sale or other disposition of the Collateral are insufficient to pay the Secured
Obligations and the fees and disbursements of any attorneys employed by the Agent or any Secured
Party to collect such deficiency.

ARTICLE 7

The Agent

     Section 7.01. Agent’s Appointment as Attorney-in-fact, Etc. (a) Each Grantor hereby
irrevocably constitutes and appoints the Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in
the place and stead of such

15

 

Grantor and in the name of such Grantor or in its own name, for the purpose of carrying out
the terms of this Agreement, to take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to accomplish the purposes of this
Agreement, and, without limiting the generality of the foregoing, each Grantor hereby gives the
Agent the power and right, on behalf of such Grantor, without prior notice to or assent by such
Grantor, to do any or all of the following:

     (i) in the name of such Grantor or its own name, or otherwise, take possession of and
indorse and collect any checks, drafts, notes, acceptances or other instruments for the
payment of moneys due under any Receivable or Contract or with respect to any other
Collateral and file any claim or take any other action or proceeding in any court of law
or equity or otherwise deemed appropriate by the Agent for the purpose of collecting any
and all such moneys due under any Receivable or Contract or with respect to any other
Collateral whenever payable;

     (ii) in the case of any Intellectual Property, execute and deliver, and have
recorded, any and all agreements, instruments, documents and papers as the Agent may
request to evidence the Agent’s and the Secured Parties’ security interest in such
Intellectual Property and the goodwill and General Intangibles of such Grantors relating
thereto or represented thereby;

     (iii) pay or discharge taxes and Liens levied or placed on or threatened against the
Collateral, effect any repairs or any insurance called for by the terms of this Agreement
and pay all or any part of the premiums therefor and the costs thereof;

     (iv) execute, in connection with any sale provided for in Section 6.05, any
endorsements, assignments or other instruments of conveyance or transfer with respect to
the Collateral; and

     (v) (A) direct any party liable for any payment under any of the Collateral to make
payment of any and all moneys due or to become due thereunder directly to the Agent or as
the Agent shall direct; (B) ask or demand for, collect, and receive payment of and receipt
for, any and all moneys, claims and other amounts due or to become due at any time in
respect of or arising out of any Collateral; (C) sign and indorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications, notices and other documents in connection with any of the
Collateral; (D) commence and prosecute any suits, actions or proceedings at law or in
equity in any court of competent jurisdiction to collect the Collateral or any portion
thereof and to enforce any other right in respect of any Collateral; (E)

16

 

defend any suit, action or proceeding brought against such Grantor with respect to
any Collateral; (F) settle, compromise or adjust any such suit, action or proceeding and,
in connection therewith, give such discharges or releases as the Agent may deem
appropriate; (G) assign any Copyright, Patent or Trademark (along with the goodwill of the
business to which any such Copyright, Patent or Trademark pertains), through the world for
such term or terms, on such conditions, in such manner, as the Agent shall in its sole
discretion determine; and (H) generally, sell, transfer, pledge and make any agreement
with respect to or otherwise deal with any of the Collateral as fully and completely as
though the Agent were the absolute owner thereof for all purposes, and do, at the Agent’s
option and such Grantor’s expense, at any time, or from time to time, all acts and things
which the Agent deems necessary to protect, preserve or realize upon the Collateral and
the Agent’s and the Secured Parties’ security interests therein and to effect the intent
of this Agreement, all as fully and effectively as such Grantor might do.

     The Agent shall endeavor to provide the Issuer with notice at or about the time of the
exercise of its rights in the preceding clause (a), provided that the failure to provide such
notice shall not in any way compromise or adversely affect the exercise of any rights or remedies
hereunder.

     (b) If any Grantor fails to perform or comply with any of its agreements contained herein, the
Agent, at its option, but without any obligation so to do, may perform or comply, or otherwise
cause performance or compliance, with such agreement.

     (c) The expenses of the Agent incurred in connection with actions undertaken as provided in
this Section 7.01, together with, if past due, interest thereon at a rate per annum equal to the
interest rate on the 5.00% Notes (or, if no 5.00% Notes are outstanding at such time, the 2.00%
Notes), from the date when due to the Agent to the date reimbursed by the relevant Grantor, shall
be payable by such Grantor to the Agent upon not less than five (5) Business Days notice.

     (d) Each Grantor hereby ratifies all that said attorneys shall lawfully do or cause to be done
by virtue hereof. All powers, authorizations and agencies contained in this Agreement are coupled
with an interest and are irrevocable until this Agreement is terminated and the security interests
created hereby are released.

     Section 7.02. Duty of Agent. The Agent’s sole duty with respect to the custody, safekeeping
and physical preservation of the Collateral in its possession, under Section 9-207 of the New York
UCC or otherwise, shall be to deal with it in the same manner as the Agent deals with similar
property for its own account. Neither the Agent, any Secured Party nor any of their respective
officers, directors, employees or agents shall be liable for failure to demand, collect or realize
upon

17

 

any of the Collateral or for any delay in doing so or shall be under any obligation to sell or
otherwise dispose of any Collateral upon the request of any Grantor or any other Person or to take
any other action whatsoever with regard to the Collateral or any part thereof. The powers conferred
on the Agent and the Secured Parties hereunder are solely to protect the Agent’s and the Secured
Parties’ interests in the Collateral and shall not impose any duty upon the Agent or any Secured
Party to exercise any such powers. The Agent and the Secured Parties shall be accountable only for
amounts that they actually receive as a result of the exercise of such powers, and neither they nor
any of their officers, directors, employees or agents shall be responsible to any Grantor for any
act or failure to act hereunder, except for their own gross negligence or willful misconduct.

     Section 7.03. Execution of Financing Statements. Pursuant to any applicable law, each
Grantor authorizes the Agent to file or record financing statements and other filing or recording
documents or instruments with respect to the Collateral without the signature of such Grantor in
such form and in such offices is required by applicable law to perfect the security interests of
the Agent under this Agreement. Each Grantor authorizes the Agent to use the collateral description
“all personal property” or “all assets” in any such financing statements.

     Section 7.04. Authority of Agent. Each Grantor acknowledges that the rights and
responsibilities of the Agent under this Agreement with respect to any action taken by the Agent or
the exercise or non-exercise by the Agent of any option, voting right, request, judgment or other
right or remedy provided for herein or resulting or arising out of this Agreement shall, as between
the Agent and the Secured Parties, be governed by the Indenture and by such other agreements with
respect thereto as may exist from time to time among them, but, as between the Agent and the
Grantors, the Agent shall be conclusively presumed to be acting as agent for the Secured Parties
with full and valid authority so to act or refrain from acting, and no Grantor shall be under any
obligation, or entitlement, to make any inquiry respecting such authority.

ARTICLE 8

Miscellaneous

     Section 8.01. Amendments in Writing. None of the terms or provisions of this Agreement may
be waived, amended, supplemented or otherwise modified except in accordance with the Indenture.
For the avoidance of doubt, the Issuer and the Agent may, without the need to obtain the consent of
the Noteholders, amend, supplement or otherwise modify any provision hereof or of any other
Noteholder Collateral Document (including by entering into any Collateral Agency Agreement or any
other new or supplemental agreements) to reflect and give effect to the matters referred to in the
definition of Collateral Agency

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Agreement in connection with the incurrence of Additional Secured Obligations and the granting
of Additional Pari Passu Liens, to the extent such incurrence or grant is permitted by, and in
accordance with, the Indenture (which shall be established by and stated in an Officer’s
Certificate and Opinion of Counsel which the Agent shall be entitled to receive prior to entering
into any such amendment).

     Section 8.02. Notices. All notices, requests and demands to or upon the Agent or any Grantor
hereunder shall be effected in the manner provided for in Section 13.03 the Indenture.

     Section 8.03. No Waiver by Course of Conduct; Cumulative Remedies. Neither the Agent nor any
Secured Party shall by any act (except by a written instrument pursuant to Section 8.01), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default. No failure to exercise, nor any delay in exercising,
on the part of the Agent or any Secured Party, any right, power or privilege hereunder shall
operate as a waiver thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise of any other right,
power or privilege. A waiver by the Agent or any Secured Party of any right or remedy hereunder on
any one occasion shall not be construed as a bar to any right or remedy which the Agent or such
Secured Party would otherwise have on any future occasion. The rights and remedies herein provided
are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights
or remedies provided by law.

     Section 8.04. Enforcement Expenses; Indemnification. (a) Each Grantor agrees to pay or
reimburse each Secured Party and the Agent for all its costs and expenses incurred in enforcing or
preserving any rights under this Agreement and the other Noteholder Documents to which such Grantor
is a party, including, without limitation, the reasonable fees and disbursements of counsel
(including the allocated fees and expenses of in-house counsel) to the Agent and the Secured
Parties.

     (b) Each Grantor agrees to pay, indemnify against and to save the Agent and the Secured
Parties harmless from, any and all liabilities with respect to, or resulting from any delay in
paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be
payable with respect to any of the Collateral or in connection with any of the transactions
contemplated by this Agreement.

     (c) Each Grantor agrees to pay, and to save the Agent and the Secured Parties harmless from,
any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery,
enforcement,

19

 

performance and administration of this Agreement to the extent the Issuer would be required to
do so pursuant to Section 7.07 of the Indenture except those resulting from the Agent’s or any
Secured Party’s willful misconduct or gross negligence.

     (d) The agreements in this Section 8.04 shall survive repayment of the Secured Obligations and
termination of the Noteholder Documents and the resignation or removal of the Agent.

     Section 8.05. Successors and Assigns. This Agreement shall be binding upon the successors
and assigns of each Grantor and shall inure to the benefit of the Agent and the Secured Parties and
their successors and assigns; provided that except as permitted by the Indenture, no Grantor may
assign, transfer or delegate any of its rights or obligations under this Agreement without the
prior written consent of the Agent.

     Section 8.06. Set-off. Each Grantor hereby irrevocably authorizes the Agent and each other
Secured Party at any time and from time to time while an Event of Default has occurred and is
continuing, without notice to such Grantor or any other Grantor, any such notice being expressly
waived by each Grantor, to set-off and appropriate and apply any and all deposits (general or
special, time or demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by the Agent or such other Secured
Party to or for the credit or the account of such Grantor, or any part thereof in such amounts as
the Agent or such other Secured Party may elect, against and on account of the obligations and
liabilities of such Grantor to the Agent or such other Secured Party hereunder and claims of every
nature and description of the Agent or such other Secured Party against such Grantor, in any
currency, whether arising hereunder, under the Indenture or any other Noteholder Document, as the
Agent or such other Secured Party may elect, whether or not the Agent or any other Secured Party
has made any demand for payment and although such obligations, liabilities and claims may be
contingent or unmatured. The Agent and each other Secured Party shall endeavor to notify the Issuer
promptly of any such set-off and the application made by the Agent or such other Secured Party of
the proceeds thereof, provided that the failure to give such notice shall not affect the validity
of such set-off and application. The rights of the Agent and each other Secured Party under this
Section 8.06 are in addition to other rights and remedies (including, without limitation, other
rights of set-off) which the Agent or such other Secured Party may have.

     Section 8.07. Counterparts. This Agreement may be executed by one or more of the parties to
this Agreement on any number of separate counterparts (including by telecopy), and all of said
counterparts taken together shall be deemed to constitute one and the same instrument.

20

 

     Section 8.08. Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

     Section 8.09. Section Headings. The Section headings used in this Agreement are for
convenience of reference only and are not to affect the construction hereof or be taken into
consideration in the interpretation hereof.

     Section 8.10. Integration. This Agreement and the other Noteholder Documents represent the
agreement of the Grantors, the Agent and the Secured Parties with respect to the subject matter
hereof and thereof, and there are no promises, undertakings, representations or warranties by the
Agent or any Secured Parties relative to subject matter hereof and thereof not expressly set forth
or referred to herein or in the other Noteholder Documents.

     Section 8.11. Governing Law. 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.

     Section 8.12. Submission to Jurisdiction; Waivers. Each Grantor hereby irrevocably and
unconditionally:

     (a) submits for itself and its property in any legal action or proceeding relating to this
Agreement and the other Noteholder Documents to which it is a party, or for recognition and
enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the
courts of the State of New York, the courts of the United States of America for the Southern
District of New York, and appellate courts from any thereof;

     (b) consents that any such action or proceeding may be brought in such courts and waives any
objection that it may now or hereafter have to the venue of any such action or proceeding in any
such court or that such action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;

     (c) agrees that service of process in any such action or proceeding may be effected by mailing
a copy thereof by registered or certified mail (or any substantially similar form of mail), postage
prepaid, to such Grantor at its address referred to in Section 8.02 or at such other address of
which the Agent shall have been notified pursuant thereto;

21

 

     (d) agrees that nothing herein shall affect the right to effect service of process in any
other manner permitted by law or shall limit the right to sue in any other jurisdiction; and

     (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or
recover in any legal action or proceeding referred to in this Section any special, exemplary,
punitive or consequential damages.

     Section 8.13. Acknowledgements. Each Grantor hereby acknowledges that:

     (a) it has been advised by counsel in the negotiation, execution and delivery of this
Agreement and the other Noteholder Documents to which it is a party;

     (b) neither the Agent nor any Secured Party has any fiduciary relationship with or duty to any
Grantor arising out of or in connection with this Agreement or any of the other Noteholder
Documents, and the relationship between the Grantors, on the one hand, and the Agent and Secured
Parties, on the other hand, in connection herewith or therewith is solely that of debtor and
creditor; and

     (c) no joint venture is created hereby or by the other Noteholder Documents or otherwise
exists by virtue of the transactions contemplated hereby among the Secured Parties or among the
Grantors and the Secured Parties;

     (d) the Agent may at any time and from time to time appoint a collateral agent to maintain any
of the Collateral, maintain books and records regarding any Collateral, release Collateral, and
assist in any aspect arising in connection with the Collateral as Agent may desire; and the Agent
may appoint itself, any affiliate or a third party as the Collateral Agent, and all reasonable
costs of the Collateral Agent shall be borne by the Grantors;

     Section 8.14. Additional Grantors. Each Restricted Subsidiary of JV Holdings shall become a
Grantor for all purposes of this Agreement upon execution and delivery by such Subsidiary of a
Joinder Agreement, substantially in the form of Exhibit B hereto.

     Section 8.15. Releases. (a) Upon the indefeasible payment in full of all outstanding Secured
Obligations, the Collateral shall be automatically released from the Liens created hereby, and this
Agreement and all obligations (other than those expressly stated to survive such termination) of
the Agent and each Grantor hereunder shall automatically terminate, all without delivery of any
instrument or performance of any act by any party, and all rights to the Collateral shall revert to
the Grantors.

22

 

     (b) All or a portion of the Collateral shall be released from the Liens created hereby, and a
Grantor may be released from its obligations hereunder, in each case pursuant to and as provided in
Section 11.04 of the Indenture.

     Section 8.16. Waiver of Jury Trial. EACH GRANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER
NOTEHOLDER DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

     Section 8.17. Control Agreements. In connection with each agreement made at any time
pursuant to Sections 9-104 or 8-106 of the Uniform Commercial Code among the Agent, any one or more
Grantors, and any depository financial institution or issuer of uncertificated mutual fund shares
or other uncertificated securities and any other Person party thereto, the Agent shall not deliver
to any such depository or issuer, instructions directing the disposition of the deposit or
uncertificated fund shares or other securities unless an Event of Default has occurred and is
continuing at such time.

     Section 8.18. Agent Privileges, Powers and Immunities. 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 this 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).

[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]

23

 

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

	 	 	 	 	 
	 	

Secured Party:

WILMINGTON TRUST, NATIONAL ASSOCIATION,

as Agent

 	 
	 	By:  	/s/ Joshua C. Jones
 	 
	 	 	Name:  	Joshua C. Jones 	 
	 	 	Title:  	Banking Officer 	 

24

 

	 	 	 	 	 

     Initial Grantors:

	 	 	 	 	 
	 	K. HOVNANIAN JV HOLDINGS, L.L.C.

HERITAGE PINES, LLC

K. HOVNANIAN AT COBBLESTONE SQUARE

CONDOMINIUMS, L.L.C.

K. HOVNANIAN JV SERVICES COMPANY, L.L.C.

K. HOVNANIAN HOVWEST HOLDINGS, L.L.C.

HOVWEST LAND ACQUISITION, LLC

 	 
	 	By:  	/s/ David G. Valiaveedan
 	 
	 	 	Name:  	David G. Valiaveedan 	 
	 	 	Title:  	Vice President Finance and
Treasurer 	 

25

 

	 	 	 	 	 

SCHEDULE A

COMMERCIAL TORT CLAIMS

None.

26

 

SCHEDULE B

FORM OF PERFECTION CERTIFICATE

     The undersigned is a duly authorized officer of each of the entities listed on Schedule
1 hereto (each such entity, a “Grantor”). With reference to the First Lien Security Agreement
dated as of November 1, 2011 among K. Hovnanian JV Holdings, L.L.C., Heritage Pines, LLC, K.
Hovnanian at Cobblestone Square Condominiums, L.L.C., K. Hovnanian JV Services Company, L.L.C., K.
Hovnanian HovWest Holdings, L.L.C. and HovWest Land Acquisition, LLC, in favor of Wilmington Trust,
National Association, as Collateral Agent (terms defined therein being used herein as therein
defined), each of the undersigned certifies to the Collateral Agent and each other Secured Party as
follows:

     1. Names. The exact legal name of each Grantor (as it appears in each respective certificate
or articles of incorporation, limited liability membership agreement or similar organizational
documents), the type of entity, the jurisdiction of organization (or formation, as applicable) and
the organizational identification number for each Grantor is set forth in Schedule 1 hereto.

     2. Lien Search Grantors. (a) Set forth on Schedule 2(a) is the name of each Grantor and the
county in which each Grantor’s chief executive office is located, if such office is not located at
110 West Front Street, P.O. Box 500 , Red Bank, New Jersey 07701, as applicable.

     (b) Set forth in Schedule 2(b) hereto is each other corporate name (including trade
names or similar appellations) each Grantor has had in the last five years, together with the date
of the relevant change.

     (c) Except as set forth in Schedule 2(c) hereto, no Grantor has changed its identity
or corporate structure in any way within the past five years.

     3. UCC Filings. In order to perfect the Liens granted by each Grantor, a duly completed
financing statement on Form UCC-1, with the collateral described as set forth on Schedule 3
hereto, has been filed in the Uniform Commercial Code filing office in each jurisdiction identified
in paragraph 1 above, as applicable.

     4. Deposit Accounts and Securities Accounts. Set forth as Schedule 4 hereto is a true
and complete list of all Deposit Accounts and Securities Accounts maintained by each Grantor,
including the name of each institution where each such account is held, the name of each Grantor
that holds each account and the balance of each account as of the date hereof.

27

 

     IN WITNESS WHEREOF, I have hereunto set my hand this ___ day of ______________, 2011.

	 	 	 	 	 
	 	GRANTORS (as listed on Schedule 1)

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

 

 

	 	 	 	 	 

SCHEDULE C

ACTIONS REQUIRED TO PERFECT

	1.	 	With respect to each Grantor organized under the laws of the state of California, the
filing of a Uniform Commercial Code Financing Statement that reasonably identifies the
Collateral with the California Secretary of State.

	2.	 	With respect to each Grantor organized under the laws of the state of Delaware, the filing of
a Uniform Commercial Code Financing Statement that reasonably identifies the Collateral with
the Delaware Secretary of State.

	3.	 	With respect to each Grantor organized under the laws of the state of North Carolina, the
filing of a Uniform Commercial Code Financing Statement that reasonably identifies the
Collateral with the North Carolina Secretary of State.

	4.	 	With respect to each Grantor organized under the laws of the state of Virginia, the filing of
a Uniform Commercial Code Financing Statement that reasonably identifies the Collateral with
the Virginia State Corporation Commission.

2

 

EXHIBIT A

Form of Intellectual Property Security Agreement

INTELLECTUAL PROPERTY SECURITY AGREEMENT

     This Intellectual Property Security Agreement (the “Agreement”), dated as of November 1, 2011
is made by [_______________], a [_______________] (the “Grantor”) in favor of Wilmington Trust,
National Association, 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 “Issuer”), Hovnanian
Enterprises, Inc., a Delaware corporation (“Hovnanian”) and each of the other guarantors party
thereto (including the Grantor) have entered into the Indenture dated as of November 1, 2011 (as
amended, supplemented, amended and restated or otherwise modified from time to time, the
“Indenture”) with Wilmington Trust, National Association, a national banking association, as
trustee (in such capacity, the “Trustee”) and as Collateral Agent, pursuant to which the Issuer has
issued, and may from time to time issue, its (i) 2.00% Senior Secured Notes due 2021 (the “2.00%
Notes”) and (ii) 5.00% Senior Secured Notes due 2021 (the “5.00% Notes” and, together with the
2.00% Notes, the “Secured Notes”) upon the terms and subject to the conditions set forth therein;

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

     WHEREAS, the Issuer and the Grantors are engaged in related businesses, and each Grantor 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
November 1, 2011 (the “Security Agreement”) among the Initial Grantors party 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.

3

 

     (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.

     (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.

4

 

     (g) “Secured Obligations” shall mean all Indebtedness and other Obligations under the
Indenture, the Secured Notes, the Guarantees (as defined in the Indenture) and the
Noteholder Collateral Documents, 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 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

5

 

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 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 the Grantor’s obligations under this Agreement, without the Agent’s prior written
consent which shall not be unreasonably withheld except that the 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 the 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

6

 

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 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.

7

 

     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), 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

8

 

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]

9

 

     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, NATIONAL ASSOCIATION, 
as Collateral Agent

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	 	Grantor:

[Name of Grantor]

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

10

 

	 	 	 	 	 

EXHIBIT B

Form of Joinder Agreement

This JOINDER AND ASSUMPTION AGREEMENT is made ___________ by ____________________, a
______________ (the “New Grantor”).

Reference is made to (i) the Indenture dated as of November 1, 2011 (as amended, supplemented,
amended and restated or otherwise modified from time to time, the “Indenture”) between the
K. Hovnanian Enterprises, Inc., a California corporation (“Issuer”), Hovnanian Enterprises,
Inc., a Delaware corporation (“Hovnanian”), each of the other Guarantors party thereto and
Wilmington Trust, National Association, a Delaware banking corporation, as trustee (in such
capacity, the “Trustee”) and as Collateral Agent, pursuant to which the Issuer has issued,
and may from time to time issue, its (A) 2.0% Senior Secured Notes due 2021 and (B) 5.00% Senior
Secured Notes due 2021 (A) and (B) (collectively, the “Secured Notes”), (ii) the
Supplemental Indenture dated [__] pursuant to which the New Grantor became party to the Indenture
as a Guarantor, (iii) the First Lien Security Agreement by each of the Grantors (as defined
therein) in favor of the Collateral Agent (in such capacity, the “Agent”) for the benefit
of itself, the Trustee and the Noteholders (as the same may be modified, supplemented, amended or
restated, the “Security Agreement”) and (iv) the First Lien Pledge Agreement by each of the
Pledgors (as defined therein) in favor of the Agent for the benefit of itself, the Trustee and the
Noteholders (as the same may be modified, supplemented, amended or restated, the “Pledge
Agreement”). Capitalized terms used but not otherwise defined herein shall have the meaning set
forth in the Security Agreement or, if not defined therein, the Pledge Agreement.

The New Grantor hereby agrees that effective as of the date hereof it hereby is, and shall be
deemed to be, a Grantor under the Security Agreement and a Pledgor under the Pledge Agreement and
agrees that from the date hereof until the payment in full of the Secured Obligations and the
performance of all other obligations of Issuer under the Noteholder Documents, New Grantor has
assumed the obligations of a Grantor and Pledgor under, and New Grantor shall perform, comply with
and be subject to and bound by, jointly and severally, each of the terms, provisions and waivers
of, the Security Agreement, the Pledge Agreement, and each of the other Noteholder Documents which
are stated to apply to or are made by a Grantor. Without limiting the generality of the foregoing,
the New Grantor hereby represents and warrants that each of the representations and warranties set
forth in the Security Agreement and the Pledge Agreement is true and correct as to New Grantor on
and as of the date hereof as if made on and as of the date hereof by New Grantor.

New Grantor hereby makes, affirms, and ratifies in favor of the Secured Parties and the Agent the
Security Agreement, the Pledge Agreement and each of the other Noteholder Documents given by the
Grantors to the Agent. In furtherance of the foregoing, New Grantor shall execute and deliver or
cause to be executed and delivered at any time and from time to time such further instruments and
documents and do or cause to be done such further acts as may be reasonably necessary to carry out
more effectively the

11

 

provisions and purposes of this Joinder Agreement.

IN WITNESS WHEREOF, the New Grantor has duly executed this Joinder Agreement and delivered the same
to the Agent for the benefit of the Secured Parties, as of the date and year first written above.

	 	 	 	 	 
	 	

[NAME OF NEW GRANTOR]

 	 
	 	By:  	 	 
	 	 	Title: 	 
	 	 	 	 
	 

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