I'm using 1.6.2 adding to my server configuration eliminated the warning 
about ORIENTDB_HOME.

<entry name="plugin.dynamic" value="false"/>

I did not have to add:
<entry name="server.database.path" value="db"/>

Because the path now defaults to db.

This should be documented on:
https://github.com/orientechnologies/orientdb/wiki/Embedded-Server
(PS the example under "Use an embedded configuration" is missing the 
.activate() method call)

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