**EXHIBIT 10.45****SETTLEMENT AND RELEASE AGREEMENT****(SENIOR MEZZANINE)**     This SETTLEMENT AND RELEASE AGREEMENT (the “Settlement Agreement”) is made and enteredinto as of June 29, 2007, by and among: (i) Technical Olympic S.A. (“Technical Olympic”);(ii) TOUSA, Inc. f/k/a Technical Olympic USA, Inc. (“TOUSA”); (iii) TOUSA, LLC; (iv) TOI,LLC.; (v) TOUSA Homes, L.P. (“TOUSA Homes,” and collectively with TOUSA, TOUSA, LLC andTOI, LLC, the “TOUSA Entities”); (vi) TE/TOUSA, LLC (“TE/TOUSA”); (vii) TE/TOUSAMezzanine Two, LLC (“TE/TOUSA Mezz Two”); (viii) TE/TOUSA Mezzanine, LLC (“TE/TOUSAMezz”); (ix) TE/TOUSA Senior, LLC (“TE/TOUSA Senior”); (x) EH/Transeastern, LLC(“EHT,” and collectively with TE/TOUSA, TE/TOUSA Mezz Two, TE/TOUSA Mezz and TE/TOUSASenior, the “Transeastern JV Entities”); and (xi) the lenders party to that certain$137,500,000 Senior Mezzanine Credit Agreement (such agreement together with all amendments,modifications, renewals thereof and all documents, ancillary or otherwise, entered into inconnection therewith are collectively referred to herein as the “Senior MezzanineAgreement”), dated as of August 1, 2005, by and among TE/TOUSA Mezz, as Borrower, Deutsche BankTrust Company Americas (in its individual capacity, “DBTCA”), as Administrative Agent (insuch capacity, the “Senior Mezzanine Administrative Agent”), the lenders now or hereafter aparty thereto (the “Senior Mezzanine Lenders”), and Deutsche Bank Securities Inc.(“DBSI”), as Sole Lead Arranger and Sole Book Running Manager, which is secured by, amongother assets, a pledge of the membership interests of TE/TOUSA Senior held by TE/TOUSA Mezz (the“Senior Mezzanine Debt”). Technical Olympic, the TOUSA Entities, the Transeastern JVEntities, the Senior Mezzanine Administrative Agent, DBTCA, DBSI, the Senior Mezzanine Lenders andany subsequent Person (as such term, and each capitalized term used but not otherwise definedherein, is defined in the Senior Mezzanine Agreement) that becomes a party hereto in accordancewith the terms hereof are each referred to herein as a “Party,” and collectively, the“Parties.”W I T N E S S E T H:     WHEREAS, EHT, Transeastern Properties, Inc., Arthur J. Falcone, Edward W. Falcone, Falcon/TEPHoldings, LLC f/k/a Falcone/Ritchie LLC (“Falcone/Ritchie”) and certain affiliates thereof(collectively, the “Falcone Entities”) entered into that certain Asset Purchase Agreement,dated as of June 6, 2005 (the “Asset Purchase Agreement”), providing for, among otherthings, the purchase of the homebuilding business and assets of Transeastern Properties, Inc. andthe assignment of certain rights and the assumption of obligations under certain land bankagreements to EHT, including, without limitation, the right to exercise certain options to purchasetracts of land subject to those land bank agreements and build improvements thereon and theobligation to perform certain development and other activities in connection with such tracts ofland;     WHEREAS, on or about June 6, 2005, TOUSA and DBSI entered into a letter agreement with respectto the acquisition of the assets of Transeastern Properties, Inc. (the “Letter Agreement”);
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     WHEREAS, TE/TOUSA Senior and EHT entered into that certain $450,000,000 Credit Agreement (the“Senior Debt”), dated as of August 1, 2005, by and among EHT and TE/TOUSA Senior, asBorrowers, DBTCA, as Administrative Agent (in such capacity, the “Senior PredecessorAdministrative Agent”), and the lenders from time to time a party thereto (the “SeniorLenders”), which Senior Debt is secured by liens on substantially all the assets of EHT and apledge of the membership interests in EHT held by TE/TOUSA Senior;     WHEREAS, pursuant to that certain Amendment No. 2 and Administrative Appointment, dated as ofMarch 13, 2007, among EHT and TE/TOUSA Senior, Senior Predecessor Administrative Agent, and THE CITGROUP/BUSINESS CREDIT, INC. (“CIT”), CIT has replaced Senior Predecessor AdministrativeAgent as Administrative Agent with respect to the Senior Debt (CIT, in such capacity, the“Senior Successor Administrative Agent”);     WHEREAS, TE/TOUSA Mezz Two entered into that certain $87,500,000 Junior Mezzanine CreditAgreement (such agreement together with all amendments, modifications, renewals thereof and alldocuments, ancillary or otherwise, entered into in connection therewith are collectively referredto herein as the “Junior Mezzanine Agreement,” and together with the Senior MezzanineAgreement, the “Mezzanine Credit Agreements”), dated as of August 1, 2005, by and amongTE/TOUSA Mezz Two, as Borrower, DBTCA, as Administrative Agent (in such capacity, the “JuniorMezzanine Administrative Agent”), the lenders now or hereafter a party thereto (the “JuniorMezzanine Lenders” and together with the Senior Mezzanine Lenders, the “MezzanineLenders”), and DBSI, as Sole Lead Arranger and Sole Book Running Manager, which JuniorMezzanine Debt is secured by, among other assets, a pledge of the membership interests of TE/TOUSAMezz and TE/TOUSA Mezz Two held, respectively, by TE/TOUSA Mezz Two and TE/TOUSA (the “JuniorMezzanine Debt” and together with the Senior Mezzanine Debt, the “Mezzanine Debt”);     WHEREAS, the Senior Mezzanine Administrative Agent and the Junior Mezzanine AdministrativeAgent entered into that certain Mezzanine Intercreditor Agreement, dated as of August 1, 2005;     WHEREAS, TOUSA Homes, TOUSA and Falcone/Ritchie entered into certain carve-out guaranties(each, a “Carve-Out Guaranty” and collectively, the “Carve-Out Guaranties”), alldated as of August 1, 2005, in connection with the issuances of the Senior Debt, the SeniorMezzanine Debt and the Junior Mezzanine Debt;     WHEREAS, TOUSA Homes and TOUSA entered into certain completion guaranties (each, a“Completion Guaranty” and collectively, the “Completion Guaranties”), all dated asof August 1, 2005, in connection with the issuances of the Senior Debt, the Senior Mezzanine Debt,and the Junior Mezzanine Debt;     WHEREAS, disputes have arisen among the TOUSA Entities, the Transeastern JV Entities, theSenior Lenders, the Senior Mezzanine Lenders and the Junior Mezzanine Lenders relating to allegeddefaults under the various loan documents executed and delivered in connection with the SeniorDebt, the Senior Mezzanine Debt and the Junior Mezzanine Debt;
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     WHEREAS, the Senior Predecessor Administrative Agent, the Senior Mezzanine AdministrativeAgent and the Junior Mezzanine Administrative Agent have each made demands on TOUSA and TOUSA Homesunder their respective Carve-Out Guaranties and Completion Guarantees;     WHEREAS, on November 28, 2006, TOUSA and TOUSA Homes filed a single-court declaratory-judgmentaction in the Circuit Court for the Seventeenth Judicial District in and for Broward County,Florida, styled Technical Olympic USA, Inc. v. Deutsche Bank Trust Company Americas etal., No. 06019157 (the “Florida Action”), pursuant to which TOUSA sought a declarationthat no obligations have been triggered under the Carve-Out Guaranties and Completion Guarantiesexecuted in connection with the Mezzanine Credit Agreements;     WHEREAS, on November 29, 2006, DBTCA, in its capacities as the Senior PredecessorAdministrative Agent, the Senior Mezzanine Administrative Agent and the Junior MezzanineAdministrative Agent, commenced an action in the Commercial Division of the Supreme Court of theState of New York, styled Deutsche Bank Trust Company Americas v. Technical OlympicUSA, Inc., Index No. 06/604118 (the “New York Action”), pursuant to which DBTCA, insuch capacities, seeks damages for the alleged breach of the Carve-Out Guaranties and CompletionGuaranties;     WHEREAS, the following stockholder plaintiffs filed lawsuits in the United States DistrictCourt for the Southern District of Florida seeking class action status and alleging that TOUSA andcertain of its current and former officers violated the Securities Exchange Act of 1934 and theSecurities Act of 1933: Durgin v. Technical Olympic USA, Inc. et al., No. 06-61844 (S.D.Fla.), docketed on December 11, 2006; Henley v. Technical Olympic USA, Inc. et al., No.06-61928 (S.D. Fla.), docketed on December 28, 2006; Jutkowitz v. Technical Olympic USA, Inc.et al., No. 06-61938 (S.D. Fla.), docketed on December 29, 2006; Bui v. Technical OlympicUSA, Inc. et al., No. 07-60009 (S.D. Fla.), docketed on January 8, 2007 (collectively, the“Securities Lawsuits”);     WHEREAS, the Securities Lawsuits have been consolidated and captioned George Durgin et al.v. Technical Olympic USA, Inc. et al., No. 06-61844-CIV (as may be amended or furtherconsolidated from time to time, the “Securities Litigation”);     WHEREAS, on March 26, 2007, DBSI commenced an action in the Commercial Division of the SupremeCourt for the State of New York, County of New York, styled Deutsche Bank Securities Inc.v. Technical Olympic USA, Inc., EH/Transeastern, LLC and TE/TOUSA Senior, LLC, Index No.600974/07 (the “DBSI Action” and together with the New York Action and the Florida Action,the “Legal Actions”), in which DBSI, among other things, seeks a declaration that (i) it isnot liable to TOUSA for any claims made under the Letter Agreement in connection with consummationof the Asset Purchase Agreement and (ii) TOUSA, EHT, and TE/TOUSA Senior must indemnify DBSI andits affiliates and the Senior Predecessor Administrative Agent from any and all liabilitiesrelating to or arising out of the Asset Purchase Agreement and/or DBSI’s engagement under theLetter Agreement;     WHEREAS, on April 27, 2007, the Florida Action was voluntarily dismissed without prejudice bystipulation of the parties;
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     WHEREAS, on May 25, 2007, TOUSA filed certain counterclaims against DBSI in connection withthe DBSI Action;     WHEREAS, the Parties have agreed to a global settlement, as set forth in this SettlementAgreement (this “Settlement Agreement”), which shall be effected in the manner and subjectto the conditions set forth herein; and     WHEREAS, each of the Parties has reviewed, or has had the opportunity to review, thisSettlement Agreement with the assistance of their respective legal and financial advisors of theirown choosing.     NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements set forthherein and for other good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, the Parties hereby agree as follows:     Section 1. Non-Admission of Liability. Each Party denies any and all wrongdoing ofany kind whatsoever on the part of itself, its subsidiaries, affiliates and any relatedcorporations or entities, and any shareholders, officers, directors, agents, partners, or employeesof any of the foregoing entities; and denies that it or any of the foregoing persons and entitieshas breached any agreement or violated any statute or provision of the common law of anyjurisdiction. Nothing contained in this Settlement Agreement is or shall in any event be construedas or deemed to be an admission or concession of the merit or validity of any claims asserted bythe Senior Mezzanine Lenders, the Senior Mezzanine Administrative Agent, DBTCA and/or DBSI againstthe TOUSA Entities and/or the Transeastern JV Entities, on the one hand, or of any claims assertedby the TOUSA Entities and/or the Transeastern JV Entities against the Senior Mezzanine Lenders, theSenior Mezzanine Administrative Agent, DBTCA and/or DBSI, on the other hand.     Section 2. Acceptance of Consideration. Subject to the satisfaction of the terms andconditions hereof, including, without limitation, the conditions set forth in Section 9, withoutlimiting the other terms hereof, the Senior Mezzanine Lenders hereby accept the consideration setforth herein, including pursuant to Section 3 of this Settlement Agreement, in substitution,exchange and satisfaction of all principal, interest, default interest, fees or any otherobligations whatsoever that are due and owing, or may become due and owing under the terms andconditions of the Senior Mezzanine Agreement and all ancillary agreements thereto (collectively,the “Senior Mezzanine Obligations”), and as a result of such substitution, exchange andsatisfaction hereby agree that all Senior Mezzanine Obligations are hereby novated, cancelled,satisfied, retired or otherwise terminated as a result of this Settlement Agreement upon theoccurrence of the Effective Date (as defined below).     Section 3. Satisfaction and Discharge of All of the Senior Mezzanine Debt. Subject tothe satisfaction of the terms and conditions hereof, including, without limitation, the conditionsset forth in Section 9, without limiting the other terms hereof, in consideration for thecancellation, satisfaction, retirement or termination of the Senior Mezzanine Debt held by theSenior Mezzanine Lenders in accordance with Section 2 of this Settlement Agreement, TOUSA shallissue the following consideration (through TE/TOUSA or its successors or assigns) to the SeniorMezzanine Administrative Agent for the benefit of the Senior Mezzanine Lenders:
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          (a) Issuance of Senior Subordinated PIK Election Notes by TOUSA. Pursuant to theterms and conditions of the indenture agreement (the “Indenture”), which is attached heretoas Exhibit A and expressly incorporated by reference in this Settlement Agreement and madepart of this Settlement Agreement, on the Effective Date, TOUSA shall issue (through TE/TOUSA orits successors or assigns) $20 million in aggregate principal amount of new 14.75% seniorsubordinated paid-in-kind notes due July 1, 2015 (the “Senior Subordinated PIK Notes”), andenter into a registration rights agreement relating to such Senior Subordinated PIK Notes (the“Notes Registration Rights Agreement”), which is attached hereto as Exhibit B.          (b) Issuance of Convertible Preferred Stock by TOUSA. Pursuant to the terms andconditions of the certificate of designation of 8% Series A Convertible Pay-in-Kind Preferred Stock(the “Certificate of Designation”) and the registration rights agreement for the underlyingcommon stock related thereto (the “Convertible Preferred Registration Rights Agreement,”and together with the Notes Registration Rights Agreement, the “Registration RightsAgreement”), each of which is attached hereto as Exhibit C and Exhibit D,respectively, and expressly incorporated by reference in this Settlement Agreement and made part ofthis Settlement Agreement, on the Effective Date, TOUSA shall issue (through TE/TOUSA or itssuccessors or assigns) and deliver $117.5 million (at $1,000 per share) of 8% Series A ConvertiblePay-in-Kind Preferred Stock (the “Convertible Preferred” and together with the SeniorSubordinated PIK Notes, the “Securities”).     Section 4. Release of the TOUSA Entities and the Transeastern JV Entities by the SeniorMezzanine Lenders, the Senior Mezzanine Administrative Agent, DBTCA and DBSI. As of theEffective Date, except with respect to the obligations expressly contained in this SettlementAgreement and the Final Documentation (as defined in Section 10), each of the Senior MezzanineLenders, the Senior Mezzanine Administrative Agent, DBTCA and DBSI hereby release each of the TOUSAEntities, each of the Transeastern JV Entities and each of their respective directors, officers,managers, members, agents, employees, partners, stockholders, attorneys, legal representatives,financial advisors, appraisers, subsidiaries, successors, assigns and other affiliates (the“TOUSA/Transeastern JV Released Parties”), from any and all claims, demands, rights,actions or causes of action, liabilities, damages, losses, obligations, judgments, suits, matters,any claims acquired as a result of subrogation or assignment and issues of any kind or naturewhatsoever, known or unknown, contingent or absolute, suspected or unsuspected, disclosed orundisclosed, hidden or concealed, matured or unmatured arising out of or in any way relating to (i)Senior Mezzanine Debt, (ii) the Senior Mezzanine Credit Agreement, (iii) the Senior MezzanineObligations, including, without limitation, the Carve-Out Guaranties and the Completion Guaranties,(iv) the acquisition of Transeastern Properties, Inc., (v) the Transeastern JV Entities’operations, (vi) the Legal Actions, (vii) the Letter Agreement and (viii) the SecuritiesLitigation; provided, however, (x) any and all rights to indemnification andcontribution under existing contracts or otherwise (and any defenses thereto) shall survive and befully exercisable as against the TOUSA/Transeastern JV Released Parties to the extent that DBTCA,DBSI or any of their affiliates are named as parties in any capacity (and not as third-partywitnesses) as a result of any act of any of the TOUSA/Transeastern JV Released Parties fromDecember 11, 2006 in connection with (a) the disclosures that are explicitly identified in thecomplaint or complaints filed in the Securities Litigation as of the Effective Date or (b) anotherlawsuit filed solely with respect to the
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disclosures that are explicitly identified in the complaint or complaints filed in theSecurities Lawsuits as of the Effective Date (the “Related Securities Lawsuits”), (y) thatany and all claims relating to TOUSA’s $800,000,000 Amended and Restated Credit Agreement, datedJanuary 30, 2007 (as amended from time to time, the “Credit Agreement”) and the indenturesgoverning TOUSA’s Senior Notes and Subordinated Notes (each of the foregoing capitalized terms asdefined in the Credit Agreement) (together, the “Notes”), solely to the extent that a Partyhereto is a lender under the Credit Agreement or a holder of the Notes, are expressly reserved and(z) that any and all claims and defenses relating to the 8 1/4% Senior Notes due 2011 issued onApril 12, 2006, are expressly reserved.     Section 5. Release of the Senior Mezzanine Lenders, the Senior Mezzanine AdministrativeAgent, DBTCA and DBSI by the TOUSA Entities and the Transeastern JV Entities. As of theEffective Date, except with respect to the obligations expressly contained in this SettlementAgreement and the Final Documentation (as defined in Section 10), each of the TOUSA Entities andeach of the Transeastern JV Entities hereby release each of the Senior Mezzanine Lenders, theSenior Mezzanine Administrative Agent, DBTCA and DBSI, and each of their affiliates, and each oftheir respective directors, officers, managers, members, agents, employees, partners, stockholders,attorneys, legal representatives, financial advisors, appraisers, subsidiaries, successors, assignsand other affiliates, from any and all claims, demands, rights, actions or causes of action,liabilities, damages, losses, obligations, judgments, suits, matters, any claims acquired as aresult of subrogation or assignment and issues of any kind or nature whatsoever, known or unknown,contingent or absolute, suspected or unsuspected, disclosed or undisclosed, hidden or concealed,matured or unmatured arising out of or in any way relating to the (i) Senior Mezzanine Debt, (ii)the Senior Mezzanine Credit Agreement, (iii) the Senior Mezzanine Obligations, including, withoutlimitation, the Carve-Out Guaranties and the Completion Guaranties, (iv) the acquisition ofTranseastern Properties, Inc., (v) the Transeastern JV Entities’ operations, (vi) the LegalActions, (vii) the Letter Agreement and (viii) the Securities Litigation; provided,however, (x) that if DBTCA, DBSI or any of their affiliates asserts a contribution claimagainst any TOUSA/Transeastern JV Released Party with respect to the Securities Litigation or anyRelated Securities Lawsuits in connection with the limited circumstances permitted under Section4(x), then any and all rights of the TOUSA Entities to assert defenses to any such contributionclaims shall survive and be fully exercisable as against DBTCA, DBSI or any of their affiliates,(y) that any and all claims relating to TOUSA’s Credit Agreement and the indentures governingTOUSA’s Notes, solely to the extent that a Party hereto is a lender under the Credit Agreement or aholder of the Notes, are expressly reserved, and (z) that any and all claims and defenses relatingto the 8 1/4% Senior Notes due 2011 issued on April 12, 2006, are expressly reserved.     Section 6. Representations and Warranties.          (a) Each of the Parties severally represents and warrants to each of the other Parties thatthe following statements are true and correct as of the date hereof and as of the Effective Date:               (1) Power and Authority. It has all requisite corporate, partnership, or limitedliability (as the case may be) power and authority to enter into this
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Settlement Agreement and to carry out the actions contemplated by, and perform its respectiveobligations under, this Settlement Agreement.               (2) Authorization. The execution and delivery of this Settlement Agreement and theperformance of its obligations hereunder have been duly authorized by all necessary action on itspart.               (3) No Conflicts. The execution, delivery and performance by it of this SettlementAgreement do not and shall not: (A) violate any provision of law, rule or regulation applicable toit or its certificate of incorporation or by-laws (or other organizational documents); or (B)conflict with, result in a breach of or constitute (with due notice or lapse of time or both) adefault under any material contractual obligation to which it is a party or under its certificateof incorporation or by-laws (or other organizational documents).               (4) Governmental Consents. The execution, delivery and performance by it of thisSettlement Agreement do not and shall not require any registration or filing with, consent orapproval of, notice to or other action with, or by, any Federal, state or other governmentalauthority or regulatory body, except: (A) such filings as may be necessary and/or required fordisclosure by the U.S. Securities and Exchange Commission, the New York Stock Exchange andapplicable state securities or “blue sky” laws; and (B) in the case of the Transeastern JVEntities, other registrations, filings, consents, approvals, notices or other actions that arereasonably necessary to maintain permits, licenses, qualifications and governmental approvals tocarry on the businesses of the Transeastern JV Entities.               (5) Proceedings. No order has been entered by a state or federal court enjoining theconsummation of the transactions contemplated by this Settlement Agreement.          (b) Each Senior Mezzanine Lender severally represents and warrants to the TOUSA Entities andthe Transeastern JV Entities that the following are true and correct statements as of the datehereof and as of the Effective Date:               (1) Ownership. Except as otherwise provided in that certain trade confirmation, datedJune 26, 2007, a copy of which was provided to TOUSA’s counsel, such Senior Mezzanine Lender is thesole beneficial owner and/or the investment advisor or manager for the beneficial owners of theSenior Mezzanine Debt in the principal amount of Senior Mezzanine Debt identified on such SeniorMezzanine Lender’s signature page attached hereto, and in each case is entitled (for its ownaccount or for the account of other Persons claiming through it) to all of the rights and economicbenefits of such Senior Mezzanine Debt.               (2) Non-Transfer of Senior Mezzanine Debt Prior to the Effective Date. Except asotherwise provided in that certain trade confirmation, dated June 26, 2007, a copy of which wasprovided to TOUSA’s counsel, such Senior Mezzanine Lender has made no prior assignment, sale,participation, grant, conveyance, or other transfer of, and has not entered into any otheragreement to assign, sell, participate, grant, or otherwise transfer, in whole or in part, anyportion of its right, title, or interest in the Senior Mezzanine Debt that would
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render such Senior Mezzanine Lender otherwise unable to comply with its obligations under thisSettlement Agreement.                    (3) Laws. Such Senior Mezzanine Lender is (i) a sophisticated investor with respectto the transactions described herein with sufficient knowledge and experience in financial andbusiness matters and is capable of evaluating the merits and risks of owning and investing insecurities similar to the Senior Subordinated PIK Notes and the Convertible Preferred, making aninformed decision with respect thereto, and evaluating properly the terms and conditions of thisSettlement Agreement, and it has made its own analysis and decision to enter into this SettlementAgreement; and (ii) is a “qualified institutional buyer” within the meaning of Rule 144A of theSecurities Act of 1933, as amended.               (c) TOUSA represents and warrants to each of the Senior Mezzanine Lenders and the SeniorMezzanine Administrative Agent that, with respect to the Securities, the following statements aretrue and correct as of the date hereof and as of the Effective Date:                    (1) There are no outstanding options, warrants or other rights to acquire or purchase, orinstruments convertible into or exchangeable for, any equity interests of TOUSA or any of theSubsidiaries other than listed on TOUSA’s most recent Form10-K.                    (2) Each of TOUSA and each Subsidiary (A) is a corporation, limited liability company,partnership or other entity duly organized and validly existing under the laws of the jurisdictionof its organization; (B) has all requisite corporate or other power and authority necessary to ownits property and carry on its business as now being conducted and (C) is qualified to do businessand is in good standing in all jurisdictions in which the nature of the business conducted by it orits ownership of property makes such qualification necessary, except where the failure to be soqualified and be in good standing, in the aggregate, could not reasonably be expected to have, inthe aggregate, a Material Adverse Effect. A “Material Adverse Effect” means (x) a material adverseeffect on the business, condition (financial or other), results of operations, performance,properties of TOUSA and the Subsidiaries, taken as a whole, or (y) an adverse effect on the abilityto consummate the transactions contemplated by the Settlement Agreement on a timely basis.                    (3) The public accountants whose report is included in TOUSA’s most recent Form 10-K areindependent within the meaning of the Act. The historical financial statements (including thenotes thereto) included in TOUSA’s most recent 10-K present fairly in all material respects theconsolidated financial position, results of operations, cash flows and changes in stockholder’sequity of the entities to which they relate at the respective dates and for the respective periodsindicated. All such financial statements have been prepared in accordance with generally acceptedaccounting principles in the United States (“GAAP”) applied on a consistent basisthroughout the periods presented (except as disclosed therein) and in compliance with RegulationS-X (“Regulation S-X”) under the Exchange Act.                    (4) TOUSA is not, and after giving effect to the transactions contemplated by this SettlementAgreement will not be, required to be registered as an “investment company” or a company“controlled” by an “investment company” within the meaning of the Investment Company Act of 1940,as amended.
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                    (5) The issuance of the Securities as contemplated by this Settlement Agreement will not causeany holder of any shares of capital stock, securities convertible into or exchangeable orexercisable for capital stock or options, warrants or other rights to purchase capital stock or anyother securities of TOUSA to have any right to acquire any shares of preferred stock or commonstock of TOUSA, other than the Convertible Preferred Stock and warrants issued to the JuniorMezzanine Lenders.     Section 7. Covenants. Upon execution of the Settlement Agreement and pending theEffective Date or Termination (as such terms are defined below), the Parties severally hereby agreeand covenant that, subject to the conditions set forth in this Settlement Agreement:          (a) Each of the Senior Mezzanine Lenders shall not, directly or indirectly, sell, pledge,hypothecate, or otherwise transfer any Senior Mezzanine Debt, or any option, right to acquire, orvoting, participation or any other interest therein (each, a “Transfer”), except to apurchaser or other entity that represents that it will execute and deliver (and who does so executeand deliver) to TOUSA and the Senior Mezzanine Lender within two business days of settlement ofsuch trade or transfer an agreement in writing to assume and be bound by all of the terms of thisSettlement Agreement with respect to the Senior Mezzanine Debt, including, without limitation, allof the releases provided for herein (which agreement shall include the representations andwarranties set forth in Section 6 hereof) (the “Assumption Agreement”); provided,however, that any Transfer shall be deemed ineffective without an executed AssumptionAgreement;          (b) the Senior Mezzanine Lenders and the Senior Mezzanine Administrative Agent shall refrainfrom commencing any action, lawsuit or proceeding, or taking any action whatsoever, against any ofthe (i) TOUSA Entities, (ii) Transeastern JV Entities, (iii) Falcone Entities or (iv) KendallEntities (as defined below), that would in any way impair the consummation of the SettlementAgreement;          (c) the TOUSA Entities and/or the Transeastern JV Entities shall refrain from commencing anyaction, lawsuit or proceeding, or taking any action whatsoever, against any of the Senior MezzanineLenders or the Senior Mezzanine Administrative Agent, that would in any way impair the consummationof the Settlement Agreement;          (d) the Parties shall use commercially reasonable efforts to take or cause to be taken allcommercially reasonable actions necessary to effectuate, support and consummate the transactionsset forth in this Settlement Agreement subject to the terms and conditions hereof;          (e) the TOUSA Entities agree not to, and not to permit any Subsidiary to, sell, offer for saleor solicit offers to buy any security (as defined in the Act) that would be integrated with thesale of the Securities in a manner that would require the registration under the Act of theplacement of the Securities with the Senior Mezzanine Lenders;          (f) the TOUSA Entities agree not to, and to cause its Affiliates not to, resell any of theSecurities that have been reacquired by any of them;
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          (g) the TOUSA Entities agree not to engage, not to allow any Subsidiary to engage, and tocause its other Affiliates and any Person acting on their behalf not to engage, in any form ofgeneral solicitation or general advertising (within the meaning of Regulation D under the Act) inconnection with any offer or sale of the Securities in the United States;          (h) the TOUSA Entities agree to comply with their obligations under the letter ofrepresentations to Depository Trust Company (“DTC”) relating to the approval of theSecurities by DTC for “book-entry” transfer and to use their best efforts to obtain approval of theSecurities by DTC for “book-entry” transfer; and          (i) the TOUSA Entities agree that from and after the Effective Date, for so long as anyConvertible Preferred Stock remains outstanding, reserve a sufficient number of shares of CommonStock for issuance upon conversion of such Convertible Preferred Stock.     Section 8. No Waiver of Participation and Reservation of Rights. This SettlementAgreement is part of a proposed settlement of disputes among the Parties. Except as expresslyprovided in this Settlement Agreement, nothing herein is intended to, does or shall be deemed inany manner to waive, limit, impair or restrict the ability of each of the Parties to protect andpreserve its respective rights, remedies and interests. Without limiting the foregoing sentence inany way, if the actions contemplated by this Settlement Agreement are not consummated, if aTermination Event (as defined below) occurs or if this Settlement Agreement is otherwise terminatedfor any reason, the Parties each fully reserve any and all rights, remedies and interests.     Section 9. Conditions Precedent to the Effective Date. Notwithstanding anythingcontained herein, it is understood and agreed that this Settlement Agreement, and the Parties’obligations hereunder, shall be effective on the date (the “Effective Date”) that all ofthe conditions contained in this Section 9 (the “Closing Conditions”) are satisfied:          (a) TOUSA Closing Conditions:               (1) The Indenture, substantially in the form attached hereto as Exhibit A, shall havebeen executed and delivered by each of the parties thereto;               (2) the Notes Registration Rights Agreement relating to the Senior Subordinated PIK Notes,substantially in the form attached hereto as Exhibit B, shall have been executed anddelivered by each of the Parties thereto;               (3) the Certificate of Designation, substantially in the form attached hereto as ExhibitC, shall have been executed by an authorized officer of TOUSA and filed with the Secretary ofState of the State of Delaware;               (4) the Convertible Preferred Registration Rights Agreement relating to the ConvertiblePreferred Stock, substantially in the form attached hereto as Exhibit D, shall have beenexecuted and delivered by each of the Parties thereto;
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               (5) the TOUSA Entities shall have consummated a financing in an amount not less than $500million on substantially similar terms and conditions as set forth in the financing commitmentletter issued to TOUSA by Citibank Global Markets, Inc. and certain of its affiliates(“Citibank”), dated June 20, 2007 (the “Commitment Letter”), no later than July 312007, a true, correct and complete copy of which has been provided to the Senior MezzanineAdministrative Agent;               (6) the TOUSA Entities shall have entered into an amendment to TOUSA’s Credit Agreement onsubstantially similar terms and conditions as set forth in the Commitment Letter no later than July31, 2007;               (7) the Senior Mezzanine Lenders and the Senior Mezzanine Administrative Agent shall be incompliance with the applicable representations and warranties set forth in Section 6;               (8) the TOUSA Entities shall have received (i) from the Senior Successor Administrative Agenta payoff letter (the “Payoff Letter”) acknowledging repayment of all principal, interestand fees comprising the Senior Debt and providing for the assignment to Citibank of the mortgagespledged to the Senior Lenders in connection with issuance of the Senior Debt and (ii) from 100% ofthe Senior Lenders a release and discharge of all claims relating to the Senior Debt, including,without limitation, all liabilities under the Carve-Out Guaranties and the Completion Guaranties,in form and substance satisfactory to TOUSA in its sole discretion;               (9) the TOUSA Entities and the Falcone Entities shall have consummated a global settlement;               (10) the TOUSA Entities shall have obtained and consummated a global settlement with KendallLand Development, LLC, Boschetti Capital Partners LLC, Prestige Builders Capital Investments, LLC,Jose Boschetti, Sylvia Boschetti, Martin Caparros, Jr. and Patricia Caparros (collectively the“Kendall Entities”);               (11) the TOUSA Entities shall have executed and consummated a global settlement with 100% ofthe Junior Mezzanine Lenders, the Junior Mezzanine Administrative Agent, DBTCA and DBSI, providingfor the release and discharge of claims in any way relating to the Junior Mezzanine Debt and anyancillary agreements thereto, including, without limitation, all liabilities under the Carve-OutGuaranties and the Completion Guaranties in exchange for consideration provided in such settlementagreement;               (12) 100% of the Senior Lenders shall have executed a mutual release and consent agreementwith the Falcone Entities providing for the release and discharge of claims in any way relating tothe Senior Debt, including, without limitation, all liabilities under the Carve-Out Guaranties;               (13) 100% of the Senior Mezzanine Lenders and the Senior Mezzanine Administrative Agent shallhave executed and consummated a global settlement with the Falcone Entities providing for mutualreleases and discharge of claims in form and substance satisfactory to the parties thereto;
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               (14) 100% of the Junior Mezzanine Lenders and the Junior Mezzanine Administrative Agent shallhave executed and consummated a global settlement with the Falcone Entities providing for mutualreleases and discharge of claims in form and substance satisfactory to the parties thereto;               (15) the Senior Successor Administrative Agent shall have delivered to Kendall LandDevelopment, LLC (“KLD”) executed documents reasonably required by KLD in connection withthe Property acknowledging the termination of that certain Option and Development Agreement by andbetween KLD and EHT, as successor in interest to Transeastern Vizcaya, LLC, dated August 31, 2004(the “Option Agreement”) and agreeing that the liens created by the Collateral Assignmentof Contracts, Contract Rights and Related Property, dated August 1, 2005, are no longer in effectand that the Senior Successor Administrative Agent has no further rights of any nature with respectto the property that is subject to the Option Agreement;               (16) 100% of the Senior Mezzanine Lenders and the Senior Mezzanine Administrative Agent shallhave executed and consummated a global settlement with the Kendall Entities providing for themutual releases and discharge of claims in form and substance satisfactory to the parties thereto;               (17) 100% of the Junior Mezzanine Lenders and the Junior Administrative Agent shall haveexecuted and consummated a global settlement with the Kendall Entities providing for the releaseand discharge of claims in form and substance satisfactory to the Parties;               (18) no order has been entered by a state or federal court enjoining the consummation of thetransactions contemplated by this Settlement Agreement; and               (19) the Senior Mezzanine Lenders and the Senior Mezzanine Administrative Agent will not be inbreach of the terms or conditions of, or their respective obligations relating to, this SettlementAgreement, which shall be in full force and effect;provided, however, the determination of whether the Closing Conditions of thisSection 9(a) have been satisfied shall be within the reasonable discretion of the TOUSA Entities;providedfurther, that any Closing Condition in this Section 9(a) may be waived bythe TOUSA Entities in their sole discretion.          (b) Senior Mezzanine Lenders’ Closing Conditions:               (1) The Indenture, substantially in the form attached as Exhibit A, shall have beenexecuted and delivered by each of the parties thereto;               (2) the Notes Registration Rights Agreement relating to the Senior Subordinated PIK Notes,substantially in the form attached hereto as Exhibit B, shall have been executed anddelivered by each of the Parties thereto;
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               (3) the Certificate of Designation, substantially in the form attached hereto as ExhibitC, shall have been executed by an authorized officer of TOUSA and filed with the Secretary ofState of the State of Delaware;               (4) the Convertible Preferred Registration Rights Agreement relating to the ConvertiblePreferred Stock, substantially in the form attached hereto as Exhibit D, shall have beenexecuted and delivered by each of the parties thereto;               (5) the TOUSA Entities shall have consummated a financing in an amount not less than $500million on substantially similar terms and conditions as set forth in Commitment Letter, no laterthan July 31 2007, a true, correct and complete copy of which has been provided to the SeniorMezzanine Administrative Agent;               (6) the TOUSA Entities shall have entered into an amendment to TOUSA’s Credit Agreement onsubstantially similar terms and conditions as set forth in the Commitment Letter no later than July31, 2007;               (7) the TOUSA Entities shall be in compliance with the applicable representations andwarranties set forth in Section 6;               (8) the TOUSA Entities shall have paid the amounts set forth in the Payoff Letter to theSenior Lenders with respect to the Senior Debt, a true, correct and complete copy of which Payoffletter has been provided to the Senior Mezzanine Administrative Agent;               (9) the TOUSA Entities shall have executed and consummated a global settlement with 100% ofthe Junior Mezzanine Lenders, the Junior Mezzanine Administrative Agent, DBTCA and DBSI, providingfor the release and discharge of claims in any way relating to the Junior Mezzanine Debt and anyancillary agreements thereto, including, without limitation, all liabilities under the Carve-OutGuaranties and the Completion Guaranties in exchange for consideration provided in such settlementagreement;               (10) 100% of the Senior Mezzanine Lenders and the Senior Mezzanine Administrative Agent shallhave executed and consummated a global settlement with the Falcone Entities providing for mutualreleases and discharge of claims in form and substance satisfactory to the parties thereto;               (11) 100% of the Junior Mezzanine Lenders and the Junior Mezzanine Administrative Agent shallhave executed and consummated a global settlement with the Falcone Entities providing for mutualreleases and discharge of claims in form and substance satisfactory to the parties thereto;               (12) 100% of the Senior Mezzanine Lenders and the Senior Mezzanine Administrative Agent shallhave executed and delivered mutual releases and discharge of claims in form and substance andsatisfactory to the parties thereto;
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               (13) TOUSA shall have provided the Senior Mezzanine Administrative Agent and the SeniorMezzanine Lenders with customary legal opinions for private issuances of securities similar to theSecurities;               (14) TOUSA shall have paid all professional fees and expenses in accordance with the terms andconditions set forth in Section 10;               (15) no order has been entered by a state or federal court enjoining the consummation of thetransactions contemplated by this Settlement Agreement;               (16) the TOUSA Entities and the Transeastern JV Entities will not be in breach of the terms orconditions of, or their respective obligations relating to, this Settlement Agreement, which willbe in full force and effect;provided, however, the determination of whether the Closing Conditions of thisSection 9(b) have been satisfied shall be within the reasonable discretion of the Senior MezzanineLenders holding in excess of 66 2/3% of the Senior Mezzanine Debt; providedfurther, that any closing condition in this Section 9(b) may be waived by such SeniorMezzanine Lenders in their reasonable discretion.     Section 10. Professional Fees and Expenses. On the Effective Date, and subject to thesubmission of reasonably detailed invoices (subject to redaction) to TOUSA, TOUSA shall pay thereasonable professional fees and expenses incurred by White & Case LLP, The Blackstone Group andHaynes and Boone, LLP in connection with the restructuring of the Senior Mezzanine Obligations andthe Legal Actions; provided, however, that the fee payable to The Blackstone Groupshall be in the amount as previously disclosed to TOUSA; provided, further,however, that on and after June 26, 2007, TOUSA shall not be responsible for, and shall notpay, any professional fees and expenses incurred by White & Case LLP and Haynes & Boone, LLP withrespect to any matter other than the documentation and consummation of this Settlement Agreement(including the satisfaction of the conditions set forth in Section 9) and the final documentationof the Indenture, Certificate of Designation and Registration Rights Agreements and thedocumentation contemplated thereby (the “Final Documentation”), including, withoutlimitation, any professional fees and expenses relating to the Legal Actions or litigation relatingto the Final Documentation (except to the extent provided therein).     Section 11. Discontinuance and Dismissal of the Legal Actions. Upon execution of theSettlement Agreement and pending the Effective Date or Termination (as defined below) of thisSettlement Agreement, the Parties agree to (a) cease all litigation efforts or any other activitywith respect to the Legal Actions and (b) execute and submit any and all appropriate stipulationsextending deadlines with respect to the Legal Actions. On the Effective Date, the Parties shalltake all actions necessary to dismiss and/or discontinue the Legal Actions, and any notice orstipulation of dismissal shall be attached hereto.     Section 12. Trading Restrictions. From and after the Effective Date, the SeniorMezzanine Lenders (and as holders of the Convertible Preferred) and each other Party, and each oftheir respective subsidiaries, officers, directors, employees, and affiliates, will be restrictedfrom trading in, owning (except for common stock owned by the Parties hereto on the date
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hereof) or shorting, or taking any action, directly or indirectly, to cause a third party totrade in, own or short, TOUSA’s common stock until the end of the pricing period as set forth inSection 15 of the Certificate of Designation.     Section 13. Termination. This Settlement Agreement shall terminate (i) immediatelyupon written agreement of all Parties to terminate the Settlement Agreement or (ii) upon thenon-occurrence of the Effective Date on or before July 31, 2007, unless otherwise agreed to by theTOUSA Entities and the Senior Mezzanine Lenders holding in excess of 66 2/3% of the thenoutstanding Senior Mezzanine Debt; provided, however, that such termination of theSettlement Agreement shall not restrict the Parties’ rights and remedies for any prior breach ofthe Settlement Agreement by any Party.     Section 14. Effect of Termination. In the event this Settlement Agreement terminatespursuant to Section 13 (the “Termination”), this Settlement Agreement shall terminate as toall Parties. Upon a Termination, the obligations of each of the Parties hereunder, including (forthe avoidance of doubt) the releases in Sections 4 and 5 hereof, shall be null and void and be ofno further force and effect; provided, however, that no such Termination shallrelieve any Party from liability for its breach or non-performance of its obligations hereunderprior to the date of such Termination.     Section 15. Governing Law; Jurisdiction. This Settlement Agreement shall be governedby, and construed in accordance with, the laws of the State of New York, regardless of the lawsthat might otherwise govern under applicable principles of conflict of laws of the State of NewYork. By its execution and delivery of this Settlement Agreement, each of the Parties heretohereby irrevocably and unconditionally agrees for itself that any legal action, suit or proceedingagainst it with respect to any matter under or arising out of or in connection with this SettlementAgreement or for recognition or enforcement of any judgment rendered in any such action, suit orproceeding, shall be brought in a state or federal court of competent jurisdiction in the State ofNew York County of New York. By execution and delivery of this Settlement Agreement, each of theParties hereto hereby irrevocably accepts and submits to the nonexclusive jurisdiction of suchcourt, generally and unconditionally, with respect to any such action, suit or proceeding.     Section 16. Notices. All demands, notices, requests, consents and communicationshereunder shall be in writing and shall be deemed to have been duly given if delivered personallyor by courier service, messenger, facsimile or, if duly deposited in the mails, by certified orregistered mail, postage pre-paid, return receipt requested, and shall be deemed to have been dulygiven or made: (a) upon delivery, if delivered personally or by courier service or messenger, ineach case with record of receipt; (b) upon transmission with confirmed delivery, if sent byfacsimile or telecopy; or (c) when received after being sent by certified or registered mail,postage pre-paid, return receipt requested, to the following addresses or such other addresses asmay be furnished hereafter by notice in writing, to the following Parties:
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                **If to the TOUSA Entities****:** Attn: Antonio B. Mon