Document:

Commitment Letter for Revolving Credit Agreement

 

Exhibit 10.26

December 9, 2005

Preferred Home Mortgage Company

1410 N. Westshore Blvd, Suite 700

Tampa, FL 33607

Attn: Pete Strawser, President

Re: Commitment Letter for Revolving Credit and Security Agreement

Ladies and Gentlemen:

This Commitment Letter is made and entered into, as of the date set forth above, by and between
Countrywide Warehouse Lending, a California corporation (“Lender”) and Preferred Home Mortgage
Company, a Florida corporation (“Borrower”). This Commitment Letter supplements the Revolving
Credit and Security Agreement (the “Agreement”) by and between Lender and Borrower. In the event
there exists any inconsistency between the Agreement and this Commitment Letter, the latter shall
be controlling notwithstanding anything contained in the Agreement to the contrary. All
capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to
such terms in the Agreement. This Commitment Letter supercedes all previous Commitment Letter and
amendments as of the Effective Date.

	 	 	 
	Effective Date:

	 	December 9, 2005
	 
	 	 
	Term:

	 	364 days, maturing on December 8, 2006.
	 
	 	 
	Aggregate Credit Limit:

	 	One Hundred Fifty Million Dollars ($150,000,000).
	 
	 	 
	Financial Covenants:

	 	The ongoing availability of the Agreement is subject to the maintenance
of the following financial covenants:

	 	(a)	 	Minimum Tangible Net Worth: $10,000,000.
	 
	 	(b)	 	Minimum Liquidity: Borrower to maintain cash or
Cash Equivalents, meeting the investment quality
requirements as defined in the Agreement, in a
minimum amount equal to 50% of Tangible Net
Worth, inclusive of the Over/Under Account
Balance and inclusive of the difference between
the unpaid principal balance of loans held for
sale and Borrower’s warehouse liability for the
respective loans.
	 
	 	(c)	 	Maximum ratio of Total Liabilities and Warehouse
Debt (Warehouse Debt is inclusive of
outstandings on warehouse lines, repurchase
facilities or other off balance sheet financing
to Tangible Net Worth: 12:1. (excluding
Countrywide’s Early Purchase Program)
	 
	 	(d)	 	Net Income: Borrower shall show positive
pre-tax net income, on a quarterly basis.

Acknowledged:

CWL: /s/ RW

Preferred Home: /s/ PJS

*  Confidential portions omitted and filed separately with the Commission.

 

 

Preferred Home Mortgage Company

December 9, 2005

Page 2

	 	(e)	 	Borrower shall not add additional mortgage
financing facilities (including warehouse,
repurchase, purchase or off-balance sheet
facilities) without the prior written consent of
Lender). Lender acknowledges that Borrower will
increase existing facility with Guaranty Bank to
$30,000,000 and also Borrower will add a
$20,000,000 off balance sheet facility with
Guaranty Bank.

	 	 	 
	Other Covenants:

	 	The ongoing availability of credit under the Agreement is subject
to Borrower’s compliance with all other covenants in the Agreement, including, without
limitation;
	 
	 	 
	 

	 	(i) Not making any material changes to its secondary
marketing, underwriting, origination source and
interest rate risk management practices without
providing Lender with a minimum of thirty (30) days
prior written notice.
	 
	 	 
	Advance Request Deadline
(upon receipt by Lender of all
requirements):

	 	4:00 p.m. (Eastern time).
	 
	 	 
	Deadline for daily receipt
of funds and Purchase Advices by
Lender:

	 	4:00 p.m. (Eastern time).
	 
	 	 
	Commitment Fee:

	 	Due annually, 10 bps, payable in quarterly installments, with the first
installment due prior to the Effective Date. The entire commitment fee is due even in
the event of termination by Borrower. The fee is payable based on Aggregate Credit
Limit only and will be prorated in event of increases.
	 
	 	 
	Unused Facility Fees:

	 	Waived
	 
	 	 
	Minimum Over/Under

Account Balance:

	 	$1,500,000. Borrower to be entitled to interest on a monthly basis thereon
at an annual rate based on the schedule below on the monthly average Over/Under Account
Balance. For the purpose of this calculation, average monthly Advances shall include
Borrower’s Loans subject to the Review Period under Borrower’s Early Purchase Facility
with Countrywide Home Loans.

	 	 	 	 	 	 
	 	Actual average Over/Under Account Balance
	 	 	Annualized interest rate	 
	 	$0 to the Minimum Over/Under Account Balance
	 	 	LIBOR minus 0.25%	 
	 	Amounts > Minimum Over/Under Account

Balance, up to the monthly average outstanding

Advances
	 	 	LIBOR plus Tranche A spread	 
	 	For amounts in excess of the monthly average

outstanding Advances
	 	 	LIBOR minus 0.25%	 
	 

Acknowledged:

CWL: /s/ RW

Preferred Home: /s/ PJS

*  Confidential portions omitted and filed separately with the Commission.

 

 

Preferred Home Mortgage Company

December 9, 2005

Page 3

	 	 	 
	Eligible Loan:

	 	Prior to each Advance and for so long as a mortgage loan is pledged to
Lender, each such mortgage loan will satisfy Lender’s eligibility criteria, including,
but not limited to:

	 	(a)	 	Each mortgage loan will be in compliance with
all representations and warranties contained in
the Agreement;
	 
	 	(b)	 	Excluding Tranche I, No mortgage loan will be
more than 30 days past its original funding date
and no loan will be contractually delinquent 30
days or more;
	 
	 	(c)	 	No mortgage loan will be subject to either HOEPA
requirements or any similar state or local “high
cost” law or regulation;
	 
	 	(d)	 	Eligible property types are Single Family
Residence, Condominium, Townhouse, Planned Urban
Development (PUD) and multiple unit properties
of 2-4 units; ineligible property types include
co-op, mobile home, land, commercial and multi
units of 5+units, or otherwise not eligible per
agency guidelines.

	 	 	 	With respect to loans in Tranche F the following
additional criteria apply:

	 	(e)	 	Each mortgage loan will conform in all material
respects to Borrower’s underwriting guidelines,
which shall be provided to, and approved by,
Lender;
	 
	 	(f)	 	No more than 5% of the aggregate outstanding
balance will consist of mortgage loans with a
manufactured dwelling property type and no such
mortgage loan will have an LTV in excess of 85%;
	 
	 	(g)	 	No more than 5% of the aggregate outstanding
balance will consist of mortgage loans having
credit grades of C, C- or D;
	 
	 	(h)	 	No loan shall have a FICO score, on the primary
borrower, of less than 500; with the exception
of loans that have received a CLUES or CLOUT
approval.
	 
	 	(i)	 	No mortgage loan shall have an LTV or CLTV in
excess of 100%;
	 
	 	(j)	 	No more than 5% of the aggregate outstanding
balance will consist of mortgage loans that are
stated income investment property;
	 
	 	(k)	 	No loan shall have an overall debt-to-income
ratio in excess of 55.0%; with the exception of
loans that have received a CLUES or CLOUT
approval.

	 	 	 	There will be no adverse selection with respect to
mortgage loans delivered hereunder and that the
characteristics with respect to, but not limited to,
note rate distribution, LTV, loan grade, credit
score and geographic distribution shall be
consistent with the characteristics of Borrower’s
overall loan production.

Acknowledged:

CWL: /s/ RW

Preferred Home: /s/ PJS

*  Confidential portions omitted and filed separately with the Commission.

 

 

Preferred Home Mortgage Company

December 9, 2005

Page 4

	 	 	 
	Reporting requirements:

	 	Financial Reports: Borrower to provide Lender with
Interim financials together with all other
financial information requested by Lender no more
than thirty (30) days following the last day of
the previous quarter end. Borrower to provide
Lender with audited financials together with all
other financial information requested by Lender no
more than ninety (90) days following the last day
of the fiscal year.
	 
	 	 
	 

	 	Borrower to provide Lender with funding and
production volume for the previous quarter along
with its financial reports.
	 
	 	 
	 

	 	If requested by Lender, Borrower shall provide to
Lender within five (5) days of such request, in a
form reasonably acceptable to Lender, a detailed
aging report of all outstanding loans on
warehouse/ purchase / repurchase facilities,
detail of all uninsured government loans.
	 
	 	 
	 

	 	Borrower shall deliver to Lender each Monday a
Hedging Report or as requested by Lender.
	 
	 	 
	Reimbursement of Expenses:

	 	Borrower shall reimburse Lender for
certain out-of-pocket expenses under the following circumstances:

	 	(a)	 	Amendment Fee: A fee of $2,500 will be charged
for any future amendments to the Credit
Agreement, Commitment Letter, EPP Addendum or
other required legal documents.

	 	 	 
	Fees and Expenses:

	 	Borrower to pay Lender the following fees and expenses in
connection with the Agreement:

	 	•	 	Wire Transfer Fee: $10.00 per Advance
	 
	 	•	 	Shipping Fee: $5.00 for all investors other
than Countrywide, and $0 for all Countrywide
loans, per Advance
	 
	 	•	 	Cashier’s Check Fee: N/A
	 
	 	•	 	Funding Draft Fee: N/A
	 
	 	•	 	File Fee: $15.00 per Advance
	 
	 	•	 	Non compliant Fee: $25.00
	 
	 	•	 	Wet Deficiency Fee: $10.00 per day
	 
	 	(a)	 	Other Fees: As set forth in Schedule 1 hereto.

	 	 	 
	Guarantors:

	 	None

Acknowledged:

CWL: /s/ RW

Preferred Home: /s/ PJS

*  Confidential portions omitted and filed separately with the Commission.

 

 

Preferred Home Mortgage Company

December 9, 2005

Page 5

SCHEDULE 1 (Collateral)

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 

	 	 	Tranche
Sublimit
	 	 	Margin over 30 day
LIBOR (B)
	 	 	Advance

Rate (A)
	 	 	Maximum

Dwell Time
	 	 	Commitment

Requirements	 
	 	Tranche A:

Conventional Conforming Mortgage Loans

(1st mortgages only)

	 	 	 	100	%	 	 	*
	 	 	*
	 	 	45 days
	 	 	None	 
	 	Tranche B:

Government Mortgage Loans

(1st mortgages only)

	 	 	 	100	%	 	 	*
	 	 	*
	 	 	45 days
	 	 	None	 
	 	Tranche C:

Jumbo Mortgage Loans
(1st mortgages with loan amounts to
$1,000,000)

	 	 	 	25	%	 	 	*
	 	 	*
	 	 	45 days
	 	 	None	 
	 	Tranche D:

Super Jumbo Mortgage Loans
(1st mortgages with loan amounts from
$1,000,001 to $1,500,000)

	 	 	 	25	%	 	 	*
	 	 	*
	 	 	45 days
	 	 	None	 
	 	Tranche E:

Expanded Criteria Mortgage Loans

(1st mortgages only)

	 	 	 	20	%	 	 	*
	 	 	*
	 	 	45 days
	 	 	Rate lock and DU,
LP, CLUES,
3rd
party or investor
prior approval	 
	 	Tranche F:

Subprime Mortgage Loans
(1st and 2nd mortgages, maximum
loan amount of $500,000 for a 1st
mortgage)

	 	 	 	10	%	 	 	*
	 	 	*
	 	 	45 days
	 	 	Rate lock and
CLUES or investor
prior approval	 
	 	Tranche G:

Closed-End Second Mortgage Loans (A credit grade only)

	 	 	 	20	%	 	 	*
	 	 	*
	 	 	45 days
	 	 	None	 
	 	Tranche H:

HELOC 1st and 2nd Mortgage Loans
(A credit grade only)

	 	 	 	20	%	 	 	*
	 	 	*
	 	 	45 days
	 	 	None	 
	 	Tranche K:

Specialty ARM’s (PayOption ARM’s loan amounts to
$1,000,000 sold to Countrywide Home Loans only)

	 	 	 	20	%	 	 	*
	 	 	*

*
	 	 	45 days
	 	 	None	 
	 	Tranche K-1:

Specialty ARM’s Plus (PayOption ARM’s sold to
Countrywide Home Loans only, loan amounts from
$1,000,001 to $1,500,000)

	 	 	 	10	%	 	 	*
	 	 	*

*
	 	 	45 days
	 	 	Rate lock and
Countrywide prior
approval	 
	 

Acknowledged:

CWL: /s/ RW

Preferred Home: /s/ PJS

*  Confidential portions omitted and filed separately with the Commission.

 

 

Preferred Home Mortgage Company

December 9, 2005

Page 6

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Tranche I:

Nonperforming/Subperforming

Mortgage Loans (1st mortgages

only)

	 	 	 	7	%	 	 	*
	 	 	*
	 	 	90 days
	 	 	See Exhibit B	 
	 	Tranche J:

Noncompliant Mortgage Loans

	 	 	 	7	%	 	 	*
	 	 	*
	 	 	75 days	 	 	 	 
	 	Wet Mortgage Loans

	 	 	40%.

with an additional

20% for the first

and last 5 calendar

days of each month	 	 	*
	 	 	*
	 	 	6 business days	 	 	 	 
	 

 

			
	(1)	 	Countrywide Home Loans, Inc. is Investor
	 
	(2)	 	Person other than Countrywide Home Loans, Inc. is investor
	 
	(A)	 	Advances will be calculated and equal to multiplying the unpaid principal balance times the
lesser of (i) the Advance Rate times the lesser of par, takeout price or current market price or;
(ii) 98% of the takeout price or current market price.
	 
	(B)	 	Countrywide reserves the right to review the Margin over 30 day LIBOR for Specialty ARM’s and
Specialty ARM’s Plus on the first day of each month, and in its sole discretion Countrywide
reserves the right to change the Margin over 30 day LIBOR from note rate for Specialty ARM’s and
Specialty ARM’s Plus.
	 
	(C)	 	All dwell times and aging are calculated from loan creation date.

Schedule 1 Continued

	•	 	All fundings are to the closing table.
	 
	•	 	All dwell times and aging are calculated from loan creation date.

	 	 	 	 	 	 
	 	 

	 	 	Commitment Requirement Definitions	 
	 	Rate lock

	 	 	A valid unexpired takeout commitment from an approved takeout investor	 
	 	Other AUS

	 	 	Assetwise automated underwriting decision; Approve/Eligible	 
	 	DU

	 	 	FNMA desktop underwriting decision: Approve/Eligible	 
	 	LP

	 	 	FHLMC Loan Prospector underwriting decision: Accept/Eligible	 
	 	CLUES

	 	 	Countrywide CLUES or E-qual underwriting decision: Accept	 
	 	3rd Party

	 	 	MI contract underwriting decision: Approved per takeout investor
guidelines with no remaining prior to doc or prior to close
conditions	 
	 	Investor prior approval

	 	 	Takeout investor underwriting decision: Approved per takeout
investor guidelines with no remaining prior to doc or prior to close
conditions	 
	 

Schedule 2

Tranche J (Applicable to dry advances only)

	 	 	 	 	 	 
	 	Days over Maximum Dwell Time
	 	 	Reduction in Advance Rate	 
	 	1 to 15 Days
	 	 	5	 
	 	16 to 45 Days
	 	 	15	 
	 	46 to 75 Days
	 	 	20	 
	 	Investor Rejects
	 	 	25	 
	 

Acknowledged:

CWL: /s/ RW

Preferred Home: /s/ PJS

*  Confidential portions omitted and filed separately with the Commission.

 

 

Preferred Home Mortgage Company

December 9, 2005

Page 7

Exhibit A

Loan Amounts over $1,500,000

CWL agrees to fund loans over $1,500,000 by exception only. An exception fee of $300 will be
assessed on all loans that go through the exception process; if the loan is prior approved by
Countrywide’s Correspondent Lending Division the exception fee shall be waived. All items must be
received no less than 48 hours or 2 business days prior to the funding request date. Copies of the
following documents are required if the loan has not been prior approved by Countrywide’s
Correspondent Lending Division.

	•	 	1003
	 
	•	 	1008
	 
	•	 	all appraisals
	 
	•	 	prior approval with all conditions cleared
	 
	•	 	takeout commitment

Non-performing/sub-performing loans — 1st mortgages only

Borrower shall provide Lender with the following items 2 business days prior to requesting an
advance on the non-performing/sub-performing tranche:

	•	 	Original note with endorsement to Lender or signed bailee letter from investor or warehouse lender
	 
	•	 	Lender’s Collateral Data Record
	 
	•	 	Repurchase request from investor
	 
	•	 	Copy of mortgage
	 
	•	 	Appraisal
	 
	•	 	Payment history
	 
	•	 	Copy of title commitment/final
	 
	•	 	Payoff instructions with wiring instructions
	 
	•	 	Assignment of Mortgage to blank, and copies of all intervening assignments
	 
	•	 	A summary from Borrower on their proposed resolution, including how , when, to whom and at what price they intend to
sell the loan
	 
	•	 	Additional documentation or information as required by Lender

Please acknowledge your agreement to the terms and conditions of this Commitment Letter by signing
in the appropriate space below and returning a copy of the same to the undersigned. Facsimile
signatures shall be deemed valid and binding to the same extent as the original.

	 	 	 
	Sincerely,	 	
Agreed to and Accepted by:
	COUNTRYWIDE WAREHOUSE LENDING	 	
PREFERRED HOME MORTGAGE COMPANY
	 
	By:     /s/ Riju Walia
 

Name:   Riju Walia

Title:
1st VP,
Credit & Compliance

Countrywide Warehouse Lending

Date:	 	

By:   /s/  Peter J. Strawser
 

Name: Peter J. Strawser

Title:                President

Date:                 12/9/05

Acknowledged:

CWL: /s/ RW

Preferred Home: /s/ PJS

*  Confidential portions omitted and filed separately with the Commission.Amend. to Restated Employment Agreement

 

Exhibit 10.27

AMENDMENT TO THE

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

     This Amendment to the Amended and Restated Employment Agreement (this “Amendment”), made this
13th day of January, 2006 is by and between Technical Olympic USA, Inc., a Delaware
corporation (the “Company”), and Antonio B. Mon, an individual (the “Executive”).

BACKGROUND

     The Company and the Executive previously entered into the Amended and Restated Employment
Agreement, including Attachment B thereto (together the “Agreement”), effective July 26, 2003. The
Company and the Executive mutually desire to amend the Agreement as set forth below.

AGREEMENT

     Now, therefore, in consideration of the facts, mutual promises, and covenants contained herein
and intending to be legally bound hereby, the Company and the Executive agree as follows:

1. Sections 5.2 and 5.3 of the Agreement shall each be modified to replace all references of
“twenty (20) Business Days” with “sixty (60) Business Days.”

2. Section 5.5 of the Agreement is hereby amended as follows:

     (a) On January 13, 2006, the Company shall grant to the Executive the right to purchase up to
1,323,940 shares of the common stock, par value $.01 per share, of the Company (the “Capital
Stock”), with an exercise price of $23.62 per share, in accordance with the terms and conditions
set forth in the Stock Option Agreement attached as Exhibit A hereto and the provisions of the
Company’s Annual and Long-Term Incentive Plan (as amended and restated effective as of October 5,
2004, and as further amended from time to time (the “LTIP Plan”)).

     (b) For the calendar year ending December 31, 2006, the Company shall pay to the Executive a
bonus in the amount of $8,711,525, if and only if, the performance criteria established by the
Compensation Committee on or before March 31, 2006 pursuant to the terms of the LTIP Plan for
payment of such bonus are satisfied. In the event that the performance criteria are satisfied, the
Company shall pay the bonus to the Executive on January 2, 2007, or on such later date as the
Compensation Committee shall determine and certify in accordance with Section 162(m)(4)(C)(iii)
that the performance criteria have been satisfied.

     (c) This Amendment Section 2 shall replace Section 5.5 of the Agreement and Attachment C
referenced therein in its entirety; provided, however, that if at the 2006 Annual Meeting of
Stockholders, the stockholders of the Company fail to properly approve funding of the LTIP Plan
with sufficient shares of Capital Stock of the Company to implement this Section 2, then this
Section 2 shall have no further effect and Executive’s rights to the equity grants described in
Section 5.5 of the Agreement and Attachment C referenced therein shall be restored in full.

 

 

     (d) For the avoidance of doubt, this Amendment Section 2 is intended to effectuate the equity
grant in Section 5.5 of the Agreement and is not intended to replace or otherwise modify any other
compensation or bonus provisions in the Agreement. For the calendar year ending on December 31,
2006, the bonus described in Section 2(b) above shall be in addition to such other incentive
compensation that may be payable to Executive pursuant to the Agreement.

3. Attachment B of the Agreement shall be modified as follows:

     a. All references to “Net Income” shall be changed to “Adjusted Net Income.”

     b. “Adjusted Net Income,” as used therein, shall mean the Company’s net income for the fiscal
year as determined in accordance with U.S. generally accepted accounting principles, adjusted for
the following:

     (i) charges or credits related to any stock-based compensation expenses;

     (ii) charges for the cost of payments made under the Management Services Agreement; and

     (iii) the impact of any changes in accounting principles and policies from those that existed
on December 31, 2001.

     c. The net income impact of (i) through (iii) is determined by multiplying the sum of such
items for each fiscal year by the reciprocal of the Company’s effective tax rate as shown in the
Company’s audited financial statement for the pertinent fiscal year.

4. Section I. A. 3. of Attachment B of the Agreement shall be modified to replace 3.25% with 4.0%.

5. Attachment B of the Agreement shall be further modified to replace Section I. C. (including
heading) in its entirety with the following language:

     “Compensation Deferral. All payments hereunder may be deferred at your election
pursuant to the Company’s Non-Qualified Deferred Compensation Plan. All such compensation deferrals
must comply with the Plan’s requirements and provisions and with then-applicable law. Upon
termination of employment, all withdrawals shall comply with the Plan’s provisions and with
then-applicable law and shall be duly reported to the relevant taxing authorities, including the
U.S. Internal Revenue Service, as required by law.”

6. Attachment B of the Agreement shall be further modified to replace Section III in its entirety
with the following language:

     “Calculations and Payments. All calculations under this Agreement shall be made by
the Company, reviewed and approved by you, and approved by the Company’s Human Resources Department
and the Human Resources, Compensation and Benefits Committee of the Board of Directors. Committee
approval and full payment shall be made in cash no later than sixty (60) days after the end of the
applicable Bonus Year, except where the Executive has elected to defer all or a portion of the
payment as contemplated by Section I.C. Compensation Deferral.”

2

 

7. A new Section 15.12 shall be added to the Agreement to read as follows:

     15.12 Section 409A Compliance.

          (a) To the extent the Executive would otherwise be entitled to any payment (whether pursuant
to this Agreement or otherwise) during the six months beginning on termination of employment that
would be subject to the additional tax imposed under Section 409A of the Code (“Section 409A”), the
payment will be paid to the Executive on the earlier of the six-month anniversary of the
Executive’s date of termination of employment or the Executive’s death or disability (within the
meaning of Section 409A). Similarly, to the extent the Executive would otherwise be entitled to any
benefit (other than a payment) during the six months beginning on termination of employment that
would be subject to the Section 409A additional tax, the benefit will be delayed and will begin
being provided (together, if applicable, with an adjustment to compensate the Executive for the
delay) on the earlier of the six-month anniversary of the date of termination, death or disability
(within the meaning of Section 409A).

          (b) It is the Company’s intention that the benefits and rights to which the Executive could
become entitled pursuant to the provisions of this Agreement will comply with Section 409A. If the
Executive or the Company believes, at any time, that any of such benefit or right does not comply,
it shall promptly advise the other and shall negotiate reasonably and in good faith to amend the
terms of such arrangement such that it complies (with the most limited reasonable economic effect
on the Executive and on the Company).

          (c) The Company shall indemnify the Executive, on a fully grossed-up basis, for any additional
tax, interest, penalties or other liabilities payable or incurred by the Executive by reason of the
failure of any provision of this Agreement to comply with Section 409A and that cannot be
reasonably cured by an amendment negotiated in good faith pursuant to Section 15.12(b) hereof. The
provisions of Sections 8.1 through 8.4 of the Agreement, relating to Gross-Up Payments as therein
defined, shall apply with respect to any payment required under this Section 15.12(c).

8. All other provisions of the Agreement remain unchanged and in full force and effect.

	 	 	 	 	 
	 	Human Resources, Compensation and Benefits

Committee of the Board of Directors of

Technical Olympic U.S.A., Inc.

 	 
	 	By:  	/s/ Michael Poulos
 	 
	 	 	Michael Poulos 	 
	 	 	 	 
	 
	 	 	 
	 	By:  	     /s/ Susan Parks
 	 
	 	 	Susan Parks 	 
	 	 	 	 
	 
	 	 	 
	 	By:  	     /s/ Larry Horner
 	 
	 	 	Larry Horner 	 
	 	 	 	 
	 
	 	 	 
	 	     /s/ Antonio B. Mon
 	 
	 	Antonio B. Mon 	 
	 	 	 

3

 

	 	 	 	 	 

EXHIBIT A TO AMENDMENT TO THE

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

FORM OF STOCK OPTION AGREEMENT

Technical Olympic USA, Inc.

Annual and Long-Term Incentive Plan

Non-Qualified Stock Option Agreement

     AGREEMENT made as of January 13, 2006, between Technical Olympic USA, Inc., a Delaware
corporation (the “Company”), and Antonio B. Mon (“Employee”).

     To carry out the purposes of the Technical Olympic USA, Inc. Annual and Long-Term Incentive
Plan (the “Plan”), by affording Employee the opportunity to purchase shares of Class A common
stock, par value $.01, (“Stock”) of Technical Olympic USA, Inc. (the “Company”), the Company and
Employee hereby agree as follows:

	1.	 	Grant of Option. The Company hereby irrevocably grants to Employee the right and
option (“Option”) to purchase all or any part of an aggregate of 1,323,940 shares of Stock on
the terms and conditions set forth herein and in the Plan, which Plan is incorporated herein
by reference as a part of this Agreement. In the event of any conflict between the terms of
this Agreement and the Plan, the Plan shall control. Capitalized terms used but not defined
in this Agreement shall have the meaning attributed to such terms under the Plan, unless the
context requires otherwise. Notwithstanding anything contained herein to the contrary, the
grant of this Option is subject to, and contingent upon, the approval by the shareholders of
the Company of an amendment to the Plan authorizing an increase in the number of shares of
Stock with respect to which Awards may be made under the Plan to a number sufficient to cover
the Award being made pursuant to this Agreement.

	2.	 	Purchase Price. The purchase price per share of Stock purchased pursuant to the
exercise of this Option shall be $______________.

	3.	 	Exercise of Option. This Option shall become vested and may be exercised in
accordance with the following schedule, provided that Employee shall first provide the Company
24 hours’ written notice of Employee’s intent to exercise all or any portion of this Option,
addressed to the Company’s principal executive office and to the attention of its Secretary
(or such other officer or employee of the Company as the Company may designate from time to
time):

a. with respect to 50% of the Option, at any time and from time to time on and after
December 31, 2007; and

b. with respect to the remaining 50% of the Option, at any time and from time to time on and
after December 31, 2008.

4

 

Notwithstanding the above schedule, upon the occurrence of the following events, this Option
shall vest and become exercisable as provided below:

a. If Employee’s employment with the Company terminates by reason of Disability (as defined
in the Amended and Restated Employment Agreement between the parties dated January 27, 2004,
as such has been amended through the date hereof (the “Employment Agreement”)), this Option
may be exercised, at any time during the one-year period following such termination, by
Employee or by Employee’s guardian or legal representative (or by Employee’s estate or the
person who acquires this Option by will or the laws of descent and distribution or otherwise
by reason of the death of Employee if Employee dies during such one-year period), but only
as to the vested number of shares of Stock, if any, that Employee was entitled to purchase
hereunder as of the date Employee’s employment so terminates.

b. If Employee dies while in the employ of the Company, Employee’s estate (or the person who
acquires this Option by will or the laws of descent and distribution or otherwise by reason
of the death of Employee) may exercise this Option at any time during the one-year period
following the date of Employee’s death, but only as to the vested number of shares of Stock,
if any, that Employee was entitled to purchase hereunder as of the date of Employee’s death.

c. If Employee’s employment with the Company is terminated by the Company for any reason
other than due to a Disability or for Cause (as such terms are defined in the Employment
Agreement), but excluding a termination as provided in (f) below, or, if Employee’s
employment is terminated by Employee for Good Reason on or following a Change of Control (as
such terms are defined in the Employment Agreement), this Option shall be fully vested and
may be exercised, at any time during the three-year period following such termination, by
Employee or by Employee’s guardian or legal representative (or by Employee’s estate or the
person who acquires this Option by will or the laws of descent and distribution or otherwise
by reason of the death of Employee if Employee dies during such period).

d. If Employee terminates his employment with the Company for any reason other than a Good
Reason, but excluding a termination as provided in (f) below, or the Company terminates
Employee for Cause, this Option, to the extent vested on the date of termination, may be
exercised, at any time during the 90-day period following such termination, by Employee or
by Employee’s guardian or legal representative (or by Employee’s estate or the person who
acquires this Option by will or the laws of descent and distribution or otherwise by reason
of the death of Employee if Employee dies during such 90-day period), but in each case only
as to the vested number of shares of Stock, if any, that Employee was entitled to purchase
hereunder as of the date Employee’s employment so terminates.

e. If Employee’s employment is terminated by Employee for Good Reason prior to a Change of
Control (as such terms are defined in the Employment Agreement), this Option shall be fully
vested and may be exercised, at any time during the one-year period following such
termination, by Employee or by Employee’s estate (or the person who acquires this Option by
will or the laws of descent and distribution or otherwise by reason

5

 

of the death of Employee) if Employee dies during such period, but in each case only as to
the number of shares of Stock that Employee was entitled to purchase hereunder as of the
date Employee’s employment so terminates.

f. If Employee’s employment is terminated on December 31, 2008 due to the termination of the
Employment Agreement pursuant to Section 3 thereof, this Option may be exercised at any time
during the one-year period following such termination by Employee or by Employee’s guardian
or legal representative (or by Employee’s estate or the person who acquires this Option by
will or the laws or descent and distribution or otherwise by reason of the death of Employee
if Employee dies during such one-year period).

g. Notwithstanding the foregoing, there is no minimum or maximum number of shares of Stock
that must be purchased by Employee upon exercise of this Option. Instead, Employee may, at
any time and from time to time, purchase any number of shares of Stock that are then vested
and exercisable according to the provisions of this Agreement.

h. Notwithstanding the foregoing, no portion of this Option shall be exercisable in any
event after the expiration of 10 years from the date on which that portion first became
exercisable.

The purchase price of the shares of Stock as to which this Option is exercised shall be paid
in full at the time of exercise (a) in cash (including by check acceptable to the Company),
(b) if the shares are readily tradable on a national securities market or exchange, through
a “cashless broker exercise” procedure in accordance with a program established by the
Company, or (c) any combination of the foregoing. No fraction of a share shall be issued by
the Company upon exercise of an Option. Unless and until a certificate or certificates
representing such shares shall have been issued by the Company to Employee, Employee (or the
person permitted to exercise this Option in the event of Employee’s death) shall not be or
have any of the rights or privileges of a shareholder of the Company with respect to shares
acquirable upon an exercise of this Option.

	4.	 	Withholding of Tax. To the extent that the exercise of this Option or the
disposition of shares acquired by exercise of this Option results in wages to Employee for
federal, state or local tax purposes, Employee shall deliver to the Company at the time of
such exercise or disposition such amount of money, if any, as the Company may require to meet
its minimum withholding obligations under applicable tax laws or regulations. No exercise of
this Option shall be effective until Employee (or the person entitled to exercise this Option,
as applicable) has made arrangements approved by the Company to satisfy all applicable minimum
tax withholding requirements of the Company.
	 
	5.	 	Compliance with Securities Laws. Employee agrees that the shares which Employee may
acquire by exercising this Option will not be sold or otherwise disposed of in any manner
which would constitute a violation of any applicable federal or state securities laws.
Employee also agrees that (i) the certificates representing the shares purchased under this
Option may bear such legend or legends as the Committee deems appropriate in order to assure
compliance with applicable securities laws, (ii) the Company may

6

 

refuse to register the transfer of the shares purchased under this Option on the stock
transfer records of the Company if such proposed transfer would in the opinion of counsel
satisfactory to the Company constitute a violation of any applicable securities law, and
(iii) the Company may give related instructions to its transfer agent, if any, to stop
registration of the transfer of the shares purchased under this Option.

	6.	 	Binding Effect. This Agreement shall be binding upon and inure to the benefit of any
successors to the Company and all persons lawfully claiming under Employee.

	7.	 	Entire Agreement. This Agreement constitutes the entire agreement of the parties
with regard to the subject matter hereof, and contains all the covenants, promises,
representations, warranties and agreements between the parties with respect to the Option
granted hereby. Without limiting the scope of the preceding sentence, all prior
understandings and agreements, if any, among the parties hereto relating to the subject matter
hereof are hereby null and void and of no further force and effect. Any modification of this
Agreement shall be effective only if it is in writing and signed by both Employee and an
authorized officer of the Company.

	8.	 	Governing Law. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware, without regard to conflicts of laws principles
thereof.

	9.	 	Adverse Actions or Decisions. Notwithstanding any provision of this Agreement or the
Plan to the contrary, in no event shall the Company or the Committee make any change to the
Plan or take any action authorized pursuant to the Plan which degrades or adversely affects in
any manner the rights of Employee hereunder, unless Employee consents thereto in writing.

     IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly
authorized officer, and Employee has executed this Agreement, all effective as of the day and year
first above written.

	 	 	 	 	 
	 	TECHNICAL OLYMPIC USA, INC.

 	 
	 	By:  	/s/
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	EMPLOYEE

 	 
	 	/s/
 	 
	 	Antonio B. Mon 	 
	 	 	 
	 

7

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