Table of Contents

---

---

---

Table of Contents

---

---

---

Table of Contents

---

Table of Contents

---

Table of Contents

---

Table of Contents

---

Table of Contents

---

(1)

In May 1999, we completed the sale of our former savings and loan subsidiary. Accordingly, we have accounted for the savings and loan subsidiary as a discontinued operation.

(2)

For purposes of calculating this ratio, fixed charges consist of interest cost (interest expense plus capitalized interest), one-third of estimated rent expense as representative of the interest portion of rentals and amortization of debt expense. Earnings consist of earnings (including income distributions from unconsolidated joint ventures) before (a) income taxes, (b) interest expensed, (c) amortization of capitalized interest in cost of sales, (d) income from unconsolidated joint ventures, (e) one-third of estimated rent expense as representative of the interest portion of rentals and amortization of debt expense, (f) discontinued operations and (g) a nonrecurring noncash impairment charge of $5.4 million in 2001 related to the write-down of one homebuilding project in the San Francisco Bay Area to its estimated fair value and a noncash charge of $650,000 in 1999 related to the write down of leasehold improvements.

(3)

The following table sets forth the net new orders for the three months ended March 31, 2002, as compared to the same period for 2001.

(4)

Orders are typically subject to cancellation and may not result in sales.

(5)

EBITDA means earnings (plus cash distributions of income from unconsolidated joint ventures) before (a) income taxes, (b) interest expensed, (c) amortization of capitalized interest included in cost of sales, (d) depreciation and amortization, (e) income from unconsolidated joint ventures, (f) discontinued operations and (g) a nonrecurring noncash impairment charge of $5.4 million in 2001 related to the write-down of one homebuilding project in the San Francisco Bay Area to its estimated fair value and a noncash charge of $650,000 in 1999 related to the write-down of leasehold improvements. Other companies may calculate EBITDA differently. EBITDA is a widely accepted financial indicator of a company’s availability to service debt. However, EBITDA should not be considered as an alternative to operating income or to cash flows from operating activities (as determined in accordance with generally accepted accounting principles) and should not be construed as an indication of operating performance or as a measure of liquidity.

(6)

Interest incurred represents interest expensed and interest capitalized into real estate inventories for the applicable periods and excludes interest attributable to discontinued operations.

---

Table of Contents

•

limiting our ability to satisfy our obligations with respect to the notes;

•

requiring us to dedicate a substantial portion of our cash flows from operations to payments on our debt;

•

limiting our ability to obtain future financing for working capital, capital expenditures, acquisitions and other general corporate requirements;

•

making us more vulnerable to general adverse economic and industry conditions;

•

limiting our flexibility in planning for, or reacting to, changes in our business and the homebuilding industry; and

•

putting us at a disadvantage compared to competitors who have less debt.

---

Table of Contents

•

our financial condition, strength and credit rating;

•

the financial market’s confidence in our management team and financial reporting;

•

general economic conditions and the conditions in the housing sector; and

•

capital market conditions.

---

Table of Contents

---

Table of Contents

•

permitted land uses, levels of density and architectural designs;

•

the installation of utility services, such as water and waste disposal; and

•

the dedication of acreage for open space, parks, schools and other community services.

•

unusually heavy or prolonged precipitation;

•

earthquakes;

•

fires;

•

floods; and

•

landslides.

---

Table of Contents

Ÿ

diversion of our management's attention;

Ÿ

increased demands on our resources, including financial resources;

Ÿ

potential dilution of existing stockholders;

Ÿ

difficulties or inability to integrate the acquired company, its operations and technology into our organization effectively;

Ÿ

difficulties or inability to retain key personnel and business relationships with suppliers of the acquired company;

Ÿ

risks of entering markets in which we have no prior experience and where competitors in such markets have stronger market positions; and

Ÿ

exposure to legal claims for activities of the acquired business prior to acquisition.

---

Table of Contents

---

Table of Contents

---

(1)

For purposes of calculating this ratio, fixed charges consist of interest cost (interest expense plus capitalized interest), one third of estimated rent expense as representative of the interest portion of rentals and amortization of debt expense. Earnings consist of earnings (including income distributions from unconsolidated joint ventures) before (a) income taxes, (b) interest expensed, (c) amortization of capitalized interest included in costs of sales, (d) income from unconsolidated joint ventures, (e) one-third of estimated rent expense as representative of the interest portion of rentals and amortization of debt expense, (f) discontinued operations and an extraordinary charge from early extinguishment of debt of $1.3 million, net of taxes, in 1998 and (g) nonrecurring noncash impairment charge of $5.4 million in 2001 related to the write-down of one homebuilding project in the San Francisco Bay Area to its estimated fair value and a noncash charge of $650,000 in 1999 related to the write-down of leasehold improvements.

---

Table of Contents

•

on an actual basis; and

•

on an adjusted basis to reflect the issuance of the notes and the application of the estimated net proceeds of this offering.

---

(1)

Excludes approximately $84.2 million of debt outstanding at December 31, 2001 under our mortgage banking credit facility.

(2)

At March 31, 2002, amounts outstanding under the revolving credit facility totaled $121.4 million. The increase from December 31, 2001 was primarily the result of land acquisitions, increases in working capital and the repayment of approximately $20.2 million in trust deed notes payable. This amount does not include additional borrowings of approximately $95 million to be funded under our revolving credit facility for the acquisition of Westbrooke.

(3)

Approximately $20.2 million of these trust deed notes payable were repaid in February 2002.

(4)

Excludes 3,037,707 shares of common stock reserved at December 31, 2001 for issuance upon exercise of outstanding options under our stock incentive plans.

---

Table of Contents

Ÿ

mature on April 15, 2012;

Ÿ

be general unsecured subordinated obligations of the Company;

Ÿ

be subordinated and junior in right of payment to the prior payment in full in cash of all amounts payable under all existing and future Senior Indebtedness;

Ÿ

rank equally in right of payment with all other existing and future general unsecured obligations of the Company (except for future obligations that may be subordinated to the notes); and

Ÿ

initially be limited to $150,000,000 aggregate principal amount. The Company may “reopen” any series of debt securities (including the notes) issued under the Indenture and issue additional securities of that series without the consent of the holders of that series.

---

Table of Contents

---

Table of Contents

Ÿ

in no event shall a Payment Blockage Period extend beyond 179 days from the date the Payment Blockage Notice in respect thereof was given (provided that payment may thereafter be restricted if a payment event of default has occurred);

Ÿ

there shall be a period of at least 181 consecutive days in each 360-day period when no Payment Blockage Period is in effect; and

Ÿ

not more than one Payment Blockage Period may be commenced with respect to the notes during any period of 360 consecutive days.

---

Table of Contents

Ÿ

that a Change of Control has occurred and that such holder has the right to require the Company to purchase such holder’s notes at a purchase price in cash equal to 101% of the principal amount outstanding at the repurchase date plus accrued and unpaid interest, if any, to the date of repurchase (subject to the right of holders of record on the relevant record date to receive interest on the relevant interest payment date);

Ÿ

the circumstances and relevant facts and relevant financial information regarding such Change of Control;

Ÿ

the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and

Ÿ

the instructions determined by the Company, consistent with the covenant described hereunder, that a holder must follow in order to have its notes repurchased.

---

Table of Contents

Ÿ

the ratio of Indebtedness of the Company and the Restricted Subsidiaries (excluding, for purposes of this calculation only, (A) purchase money mortgages that are Non-Recourse Indebtedness, and (B) surety, performance or completion guarantees or bonds or similar undertakings obtained or issued in the ordinary course of business), to Consolidated Tangible Net Worth of the Company is less than 2.5 to 1; or

Ÿ

the Consolidated Coverage Ratio exceeds 2.0 to 1.

(1)

Indebtedness under one or more Bank Credit Facilities in an amount not in excess of $450 million outstanding in the aggregate at any one time;

(2)

purchase money mortgages that are Non-Recourse Indebtedness;

(3)

obligations Incurred under letters of credit, escrow agreements and surety, performance or completion guarantees or bonds or similar undertakings obtained or issued in the ordinary course of business;

(4)

Indebtedness Incurred under a Warehouse Facility, provided that the amount of such Indebtedness (excluding funding drafts issued thereunder) outstanding at any time pursuant to this clause may not exceed 98% of the value of the Mortgages pledged to secure Indebtedness thereunder;

(5)

Indebtedness Incurred solely for the purpose of refinancing or repaying any existing Indebtedness so long as:

(A)

the principal amount of such new Indebtedness does not exceed the principal amount of the existing Indebtedness refinanced or repaid (plus the premiums or other payments required to be paid in connection with such refinancing or repayment and the expenses incurred in connection therewith);

(B)

the maturity of such new Indebtedness is not earlier than that of the existing Indebtedness to be refinanced or repaid;

(C)

such new Indebtedness, determined as of the date of Incurrence, has an Average Life at least equal to the remaining Average Life of the Indebtedness to be refinanced or repaid;

---

Table of Contents

(D)

the new Indebtedness ranks equally with or is junior to the Indebtedness being refinanced or repaid; and

(E)

the existing and new Indebtedness are obligations of the same entity; and

(6)

if any Restricted Subsidiary guarantees payment of the notes pursuant to the covenant described under “Certain Covenants—Future Subsidiary Guarantees,” Indebtedness of the Company owed to a Guarantor and Indebtedness of any Guarantor owed to the Company or any other Guarantor; provided that upon any Guarantor ceasing to be a Guarantor or such Indebtedness being owed to any Person other than the Company or a Guarantor, the Company or such Restricted Subsidiary, as applicable, shall be deemed to have Incurred Indebtedness not permitted by this clause (6).

(1)

liens existing on December 31, 2001;

(2)

pledges, guarantees and deposits under workers’ compensation laws, unemployment insurance laws or similar legislation, good faith deposits under bids, tenders or contracts, deposits to secure public or statutory obligations or appeal or similar bonds, and liens created by special assessment districts used to finance infrastructure improvements;

(3)

liens existing on property or assets of any entity on the date on which it becomes a Restricted Subsidiary, which secured Indebtedness is not Incurred in contemplation of such entity becoming a Restricted Subsidiary;

(4)

liens on or leases of model home units;

(5)

Capitalized Lease Obligations entered into in the ordinary course of business in amounts not in excess of $10 million outstanding in the aggregate at any one time;

(6)

the replacement of any of the items set forth in clauses (1) through (5) above, provided that:

(A)

the principal amount of the Indebtedness secured by liens shall not be increased;

(B)

such Indebtedness, determined as of the date of Incurrence, has an Average Life at least equal to the remaining Average Life of the Indebtedness to be refinanced;

(C)

the maturity of such Indebtedness is not earlier than that of the Indebtedness to be refinanced; and

(D)

the liens shall be limited to the property or part thereof which secured the lien so replaced or property substituted therefor as a result of the destruction, condemnation or damage of such property;

(7)

liens on property acquired, constructed or improved by the Company or any Restricted Subsidiary, which liens are either existing at the time of such acquisition or at the time of completion of construction or improvement or created within 120 days after such acquisition, completion or improvement, to secure Indebtedness Incurred or assumed to finance all or part of such property, including any increase in the principal amount of such Indebtedness and any extension of the

---

Table of Contents

repayment schedule and maturity of such Indebtedness Incurred or entered into in the ordinary course of business;

(8)

liens or priorities incurred in the ordinary course of business, such as laborers’, employees’, carriers’, mechanics’, vendors’, and landlords’ liens or priorities;

(9)

liens for certain taxes and certain survey and title exceptions;

(10)

liens arising out of judgments or awards against the Company or any Restricted Subsidiary with respect to which the Company or such Restricted Subsidiary is in good faith prosecuting an appeal or proceeding for review and with respect to which it has secured a stay of execution pending such appeal or proceeding for review;

(11)

liens on property owned by any Homebuilding Joint Venture;

(12)

liens securing a Warehouse Facility, provided that such liens shall not extend to any assets other than the mortgages, promissory notes and other collateral that secures mortgage loans made by the Company or any of its Restricted Subsidiaries;

(13)

Liens securing Senior Indebtedness and, if any Restricted Subsidiary guarantees payment of the notes pursuant to the covenant described under “Certain Covenants—Future Subsidiary Guarantees,” Liens securing Indebtedness of such Restricted Subsidiary senior to such guarantee;

(14)

Liens securing the notes and, if any Restricted Subsidiary guarantees payment of the notes pursuant to the covenant described under “Certain Covenants—Future Subsidiary Guarantees,” Liens securing any such guarantee; and

(15)

liens which would otherwise be subject to the foregoing restrictions which, when the Indebtedness relating to those liens is added to all other then outstanding Indebtedness of the Company and the Restricted Subsidiaries secured by liens and not listed in clauses (1) through (14) above, does not exceed $50 million.

(1)

declare or pay any dividend on, or make any distribution in respect of, or purchase, redeem or otherwise acquire or retire for value, any Capital Stock of the Company other than through the issuance solely of the Company’s own Capital Stock (other than Disqualified Stock), or rights thereto;

(2)

make any principal payment on, or redeem, repurchase, defease or otherwise acquire or retire for value prior to scheduled principal payments or maturity, Indebtedness of the Company or any Restricted Subsidiary which is expressly subordinated in right of payment to the notes (other than Indebtedness Incurred after the issuance of the notes provided that such repayment, redemption, repurchase, defeasance or other retirement is made substantially concurrent with the receipt of proceeds from the Incurrence of Indebtedness that by its terms is both subordinated in right of payment to the notes and matures, by sinking fund or otherwise, after April 15, 2012); or

(3)

make any Restricted Investment;

(A)

at the time of, and after giving effect to, the proposed Restricted Payment, no Event of Default (and no event that, after notice or lapse of time, or both, would become an Event of Default) shall have occurred and be continuing;

(B)

the Company is able to Incur an additional $1.00 of Indebtedness pursuant to the first paragraph of the covenant described under “—Limitation on Additional Indebtedness”; and

---

Table of Contents

(C)

at the time of, and after giving effect thereto, the sum of the aggregate amount expended (or with respect to guaranties or similar arrangements the amount then guaranteed) for all such Restricted Payments (the amount expended for such purposes, if other than in cash, to be determined by the Board of Directors of the Company, whose determination shall be conclusive and evidenced by a resolution of such Board of Directors filed with the Trustee) subsequent to June 30, 1997 shall not exceed the sum of:

(I)

50% of the aggregate Consolidated Net Income (or, in case such aggregate Consolidated Net Income shall be a deficit, minus 100% of such deficit) of the Company accrued on a cumulative basis subsequent to June 30, 1997; plus

(II)

the aggregate net proceeds, including the fair market value of property other than cash (as determined by the Board of Directors of the Company, whose determination shall be conclusive and evidenced by a resolution of such Board of Directors filed with the Trustee), received by the Company from the issuance or sale, after the Original Issue Date, of Capital Stock (other than Disqualified Stock) of the Company, including Capital Stock (other than Disqualified Stock) of the Company issued subsequent to the Original Issue Date upon the conversion of Indebtedness of the Company initially issued for cash; plus

(III)

100% of dividends or distributions (the fair value of which, if other than cash, to be determined by the Board of Directors, in good faith) paid to the Company (or any Restricted Subsidiary) by an Unrestricted Subsidiary, Homebuilding Joint Venture or any other Person in which the Company (or any Restricted Subsidiary), directly or indirectly, has an ownership interest but less than a 100% ownership interest to the extent that such dividends or distributions do not exceed the amount of loans, advances or capital contributions made to any such entity or Person subsequent to the Original Issue Date and included in the calculation or Restricted Payments; plus

(IV)

$40 million.

Ÿ

the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration the making of such payment would have complied with the provisions of this limitation on dividends; provided, however, that such dividend shall be included in future calculations of Restricted Payments;

Ÿ

the retirement of any shares of the Company’s Capital Stock by exchange for, or out of proceeds of the substantially concurrent sale of, other shares of its Capital Stock (other than Disqualified Stock); provided, however, that the aggregate net proceeds from such sale shall be excluded from the calculation of the amounts under clause (C)(II) of the immediately preceding paragraph; or

Ÿ

the redemption, repayment, repurchase, defeasance or other retirement of Indebtedness with proceeds received from the substantially concurrent sale of shares of the Company’s Capital Stock (other than Disqualified Stock); provided, however, that the aggregate net proceeds from such sale shall be excluded from the calculation of the amounts under clause (C)(II) of the immediately preceding paragraph.

---

Table of Contents

(1)

the consideration received by the Company (or a Restricted Subsidiary, as the case may be) for such disposition consists of at least 70% cash; provided, however, that the amount of any liabilities assumed by the transferee and any notes or other Obligations received by the Company or a Restricted Subsidiary which are immediately converted into cash shall be deemed to be cash; and

(2)

the Company shall within 390 days after the date of such sale or sales, apply the net proceeds from such sale or sales in excess of an amount equal to 10% of the Company’s total consolidated assets to:

(A)

a purchase of or an Investment in Additional Assets (other than cash or cash equivalents);

(B)

repayments, redemptions or repurchases of Senior Indebtedness of the Company (or, if any Restricted Subsidiary guarantees payment of the notes pursuant to the covenant described under “Certain Covenants—Future Subsidiary Guarantees,” Indebtedness of such Restricted Subsidiary senior to such guarantee) or of indebtedness of the Company which ranks equally with the notes (or, if any Restricted Subsidiary guarantees payment of the notes pursuant to the covenant described under “Certain Covenants—Future Subsidiary Guarantees,” Indebtedness of such Restricted Subsidiary which ranks equally with such guarantee); and/or

(C)

make an offer to acquire all or part of the notes (or indebtedness of the Company which ranks equally with the notes) at a purchase price equal to the principal amount thereof plus accrued and unpaid interest thereon to the purchase date.

(1)

are no less favorable to the Company or such Restricted Subsidiary than those that could be obtained at the time of such transaction in arm’s-length dealings with a Person who is not such an Affiliate; and

(2)

if such Affiliate Transaction (or series of related Affiliate Transactions) involve aggregate payments in an amount in excess of $10 million in any one year:

(A)

are set forth in writing; and

---

Table of Contents

(B)

have been approved by a majority of the disinterested members of the Board of Directors.

Ÿ

any Restricted Payment permitted to be paid pursuant to the covenant described under “—Limitation on Restricted Payments” above;

Ÿ

any issuance of securities, or other payments, awards or grants in cash, securities or otherwise, pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans in the ordinary course of business and approved by the Board of Directors or a committee thereof;

Ÿ

the grant of stock options or similar rights to employees and directors of the Company in the ordinary course of business and pursuant to plans approved by the Board of Directors or a committee thereof;

Ÿ

loans or advances to employees in the ordinary course of business of the Company or its Restricted Subsidiaries;

Ÿ

fees, compensation or employee benefit arrangements paid to and indemnity provided for the benefit of directors, officers or employees of the Company or any Subsidiary in the ordinary course of business; or

Ÿ

any Affiliate Transaction between the Company and a Restricted Subsidiary or between Restricted Subsidiaries.

(1)

to pay dividends or make any other distributions on its Capital Stock to the Company or a Restricted Subsidiary or pay any Indebtedness owed to the Company;

(2)

to make any loans or advances to the Company; or

(3)

transfer any of its property or assets to the Company;

(A)

any encumbrance or restriction pursuant to an agreement in effect at or entered into on the Original Issue Date;

(B)

any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by such Restricted Subsidiary which was entered into on or prior to the date on which such Restricted Subsidiary was acquired by the Company (other than as consideration in, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Company) and outstanding on such date;

(C)

any encumbrance or restriction pursuant to an agreement effecting a Refinancing of Indebtedness Incurred pursuant to an agreement referred to in clause (A) or (B) of this covenant (or effecting a Refinancing of such Refinancing Indebtedness pursuant to this clause (C)) or contained in any amendment to an agreement referred to in clause (A) or (B) of this covenant or this clause (C); provided, however, that the encumbrances and restrictions with respect to such Restricted Subsidiary contained in any such refinancing agreement or amendment are no more restrictive in any material respect than the encumbrances and restrictions with respect to such Restricted Subsidiary contained in such agreements;

---

Table of Contents

(D)

any such encumbrance or restriction consisting of customary contractual non-assignment provisions to the extent such provisions restrict the transfer of rights, duties or obligations under such contract;

(E)

in the case of clause (3) above, restrictions contained in security agreements or mortgages securing Indebtedness of a Restricted Subsidiary to the extent such restrictions restrict the transfer of the property subject to such security agreements or mortgages;

(F)

any restriction with respect to a Restricted Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Capital Stock or assets of such Restricted Subsidiary pending the closing of such sale or disposition; and

(G)

any restriction imposed by applicable law.

Ÿ

incur at least $1.00 of Indebtedness pursuant to the first paragraph of the covenant described under “—Limitation on Additional Indebtedness” above; and

Ÿ

make a Restricted Payment of at least $1.00 pursuant to the first paragraph of the covenant described under “—Limitation on Restricted Payments” above.

Ÿ

such Person (if other than the Company) is a corporation organized under the laws of the United States or any state thereof or the District of Columbia and expressly assumes all the obligations of the Company under the Indenture and the notes;

Ÿ

immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing;

---

Table of Contents

Ÿ

the Consolidated Net Worth of the obligor of the notes immediately after such transaction (exclusive of any adjustments to Consolidated Net Worth relating to transaction costs and accounting adjustments resulting from such transaction) is not less than the Consolidated Net Worth of the Company immediately prior to such transaction; and

Ÿ

the surviving corporation would be able to Incur at least an additional $1.00 of Indebtedness pursuant to the first paragraph of the covenant described under “—Certain Covenants—Limitation on Additional Indebtedness” above.

Ÿ

failure by the Company to pay the principal of any note when due (whether or not such payment is prohibited by the subordination provisions of the Indenture);

Ÿ

failure by the Company to pay any interest on any note when due, continuing for 30 days;

Ÿ

failure by the Company to comply with its other agreements in the notes or the Indenture for the benefit of the holders of the notes upon the receipt by the Company of notice of such Default by the Trustee or the holders of at least 25% in aggregate principal amount of the notes and (except in the case of a default with respect to the covenants described in “—Mergers and Sales of Assets by the Company”) the Company’s failure to cure such Default within 60 days after receipt by the Company of such notice;

Ÿ

certain events of bankruptcy or insolvency;

Ÿ

default under any mortgage, indenture (including the Indenture) or instrument under which is issued or which secures or evidences Indebtedness of the Company or any Restricted Subsidiary (other than Non-Recourse Indebtedness) which default constitutes a failure to pay principal of such Indebtedness in an amount of $25 million or more when due and payable (other than as a result of acceleration) or results in Indebtedness (other than Non-Recourse Indebtedness) in the aggregate of $25 million or more becoming or being declared due and payable before it would otherwise become due and payable; and

Ÿ

entry of a final judgment for the payment of money against the Company or any Restricted Subsidiary in an amount of $5 million or more which remains undischarged or unstayed for a period of  60 days after the date on which the right to appeal such judgment has expired or becomes subject to an enforcement proceeding.

---

Table of Contents

Ÿ

such holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the notes;

Ÿ

the holders of at least a majority in aggregate principal amount of the outstanding notes shall have made a written request to the Trustee to pursue such remedy;

Ÿ

such holder or holders have offered to the Trustee reasonable indemnity satisfactory to the Trustee;

Ÿ

the Trustee shall have failed to comply with the request within 60 days after receipt of such request and offer of indemnity; and

Ÿ

the holders of a majority in aggregate principal amount of the notes have not given the Trustee a direction inconsistent with such request.

Ÿ

any Default or Event of Default in any payment of the principal of or interest on any note; or

Ÿ

any Default or Event of Default in respect of certain covenant or provisions in the Indenture which may not be modified without the consent of the holder of each note as described in “Modification and Waiver” below.

Ÿ

to add to the covenants, agreements and obligations of the Company for the benefit of the holders of all the notes or to surrender any right or power conferred in the Indenture upon the Company;

Ÿ

to evidence the succession of another corporation to the Company and the assumption by it of the obligations of the Company under the Indenture and the notes;

Ÿ

to provide for guarantees pursuant to the covenant described under “Certain Covenants—Future Subsidiary Guarantees,” to provide for release of a guarantor in compliance with the Indenture as so modified and to evidence the succession of another corporation to such guarantor and the assumption by it of the obligations of such guarantor under the Indenture and such guarantee;

---

Table of Contents

Ÿ

to establish the form or terms of the notes as permitted by Section 9.01(4) of the Indenture;

Ÿ

to provide for the acceptance of appointment under the Indenture of a successor Trustee with respect to the notes and to add to or change any provisions of the Indenture as shall be necessary to provide for or facilitate the administration of the trusts by more than one Trustee;

Ÿ

to provide that specific provisions of the Indenture shall not apply to a series of securities not previously issued;

Ÿ

to provide for uncertificated securities in addition to or in place of certificated securities;

Ÿ

to cure any ambiguity, omission, defect or inconsistency;

Ÿ

to secure the notes; or

Ÿ

to make any other change that does not adversely affect the rights of any holder.

Ÿ

reduce the amount of notes whose holders must consent to an amendment, supplement or waiver;

Ÿ

reduce the rate of or change the time for payment of interest, including default interest, on any note;

Ÿ

reduce the principal of or change the fixed maturity of any note or alter the provisions (including related definitions) with respect to redemptions described under “Optional Redemption” or with respect to mandatory offers to repurchase notes described under “Limitations on Asset Sales” or “Change of Control”;

Ÿ

make any note payable in money or at a place other than that stated in the note;

Ÿ

make any change in the “Waiver of Existing Defaults,” “Rights of Holders to Receive Payment” or the “With Consent of Holders” sections set forth in the Indenture;

Ÿ

adversely modify the ranking or priority of the notes; or

Ÿ

waive a continuing Default or Event of Default in the payment of principal of or interest on the notes.

---

Table of Contents

Ÿ

any property or assets (other than Indebtedness and Capital Stock) in a Related Business; or

Ÿ

the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary; provided, however, that any such Restricted Subsidiary is primarily engaged in a Related Business.

(1)

any shares of Capital Stock of a Restricted Subsidiary (other than directors’ qualifying shares and, to the extent required by local ownership laws in foreign countries, shares owned by foreign shareholders);

(2)

all or substantially all the assets of any division, business segment or comparable line of business of the Company or any Restricted Subsidiary; or

(3)

any other assets of the Company or any Restricted Subsidiary having a fair market value (as determined in good faith by the Board of Directors) in excess of $1,000,000 disposed of in a single transaction or series of related transactions outside of the ordinary course of business of the Company or such Restricted Subsidiary (other than, in the case of (1), (2) and (3) above, a disposition by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Wholly Owned Subsidiary).

Ÿ

the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment (assuming the exercise by the obligor of such Indebtedness of all unconditional (other than as to the giving of notice) extension options of each such scheduled payment date) of such Indebtedness multiplied by the amount of such principal payment by

Ÿ

the sum of all such principal payments.

---

Table of Contents

Ÿ

any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes of this clause such person or group shall be deemed to have “beneficial ownership” of all shares that any such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total voting power of the Voting Stock of the Company;

Ÿ

during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors (together with any new directors whose election by such Board of Directors or whose nomination for election by the shareholders of the Company was approved by a majority vote of the directors of the Company then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors then in office; or

Ÿ

the merger or consolidation of the Company with or into another Person or the merger of another Person with or into the Company, or the sale of all or substantially all the assets of the Company to another Person, other than any such sale to one or more Restricted Subsidiaries, and in the case of any such merger or consolidation, the securities of the Company that are outstanding immediately prior to such transaction and which represent 100% of the aggregate voting power of the Voting Stock of the Company are changed into or exchanged for cash, securities or property, unless pursuant to such transaction such securities are changed into or exchanged for, in addition to any other consideration, securities of the surviving corporation, or a parent corporation that owns all of the Capital Stock of such surviving corporation, that represent immediately after such transaction, at least a majority of the aggregate voting power of the Voting Stock of the surviving corporation or such parent corporation, as the case may be.

Ÿ

of the Person becoming a Restricted Subsidiary or

Ÿ

in the case of an acquisition of assets that constitute substantially all of an operating unit or business, relating to the assets being acquired by the Company or a Restricted Subsidiary.

---

Table of Contents

Ÿ

cash dividends paid on any Preferred Stock of the Company, times

Ÿ

a fraction, the numerator of which is one and the denominator of which is one minus the then current effective aggregate federal, state and local tax rate of the Company, expressed as a decimal.

(1)

the aggregate amount of interest which, in accordance with generally accepted accounting principles as in effect on the Original Issue Date, would be included on an income statement for the Company and its Restricted Subsidiaries on a consolidated basis, whether expensed directly, or included as a component of cost of goods sold, or allocated to joint ventures or otherwise (including, but not limited to, imputed interest included on Capitalized Lease Obligations, all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing, the net costs associated with Hedging Obligations, amortization of discount or premium, if any, and all other non-cash interest expense), excluding interest expense related to mortgage banking operations, plus or minus, without duplication;

(2)

the difference between capitalized interest for such period and the interest component of cost of goods sold for such period; plus

(3)

the product of:

(A)

cash dividends paid on any Preferred Stock of the Company times

(B)

a fraction, the numerator of which is one and the denominator of which is one minus the then current effective aggregate federal, state and local tax rate of the Company, expressed as a decimal.

(1)

the Net Income of any Person in which the Company or any Restricted Subsidiary has a joint interest with a third party (other than an Unrestricted Subsidiary) shall be included only to the extent of the lesser of:

(A)

the amount of dividends or distributions actually paid to the Company or a Restricted Subsidiary; or

(B)

the Company’s direct or indirect proportionate interest in the Net Income of such Person, provided that, so long as the Company or a Restricted Subsidiary has an unqualified legal right to require the payment of a dividend or distribution, Net Income shall be determined solely pursuant to this clause (B);

(2)

the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded;

(3)

the Net Income of any Unrestricted Subsidiary shall be included only to the extent of the amount of dividends or distributions (the fair value of which, if other than in cash, to be determined by the Board of Directors, in good faith) by such Subsidiary to the Company or to any of its consolidated Restricted Subsidiaries; and

---

Table of Contents

(4)

the Net Income of any Unrestricted Subsidiary, any Homebuilding Joint Venture or any other Person in which the Company or any Restricted Subsidiary has a joint interest with a third party that is not existing on December 31, 2001 shall be included only to the extent that the aggregate amount of dividends or distributions (the fair value of which, if other than cash, to be determined by the Board of Directors, in good faith) by such Subsidiary or Homebuilding Joint Venture to the Company or to any of its consolidated Restricted Subsidiaries exceeds the aggregate amount of unpaid loans or advances and unreturned capital contributions made by the Company or any Restricted Subsidiary in or to Subsidiary or Homebuilding Joint Venture.

(1)

that portion of any increase of each of the Unrestricted Subsidiaries’ stockholders’ equity subsequent to December 31, 2001 attributable to the Company or any of its Restricted Subsidiaries, as determined in accordance with generally accepted accounting principles as in effect on the Original Issue Date; and

(2)

the Intangible Assets of the Company and the Restricted Subsidiaries. “Intangible Assets” means the amount (to the extent reflected in determining consolidated stockholders’ equity) of:

(A)

all write-ups (other than write-ups of tangible assets of a going concern business made within twelve months after the acquisition of such business) in the book value of any asset owned by the Company or any Restricted Subsidiary; and

(B)

all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles.

Ÿ

matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise;

Ÿ

is convertible or exchangeable, at the option of the holder thereof, for Indebtedness or Disqualified Stock; or

Ÿ

is redeemable at the option of the holder thereof, in whole or in part, in each case on or prior to April 12, 2013.

---

Table of Contents

Ÿ

income tax expense;

Ÿ

depreciation expense;

Ÿ

amortization expense; and

Ÿ

all other non-cash items reducing Consolidated Net Income (other than items that will require cash payments in the future and for which an accrual or reserve is, or is required by generally accepted accounting principals as in effect on the date of issuance of the notes to be, made), less all non-cash items increasing Consolidated Net Income, in each case for such period.

Ÿ

any Unrestricted Subsidiary; and

Ÿ

any Person in which the Company or any of its Subsidiaries has an ownership interest but less than a 100% ownership interest that, in each case, was formed for and is engaged in homebuilding operations.

(1)

the principal of and premium (if any) in respect of:

(A)

indebtedness of such Person for money borrowed, and

(B)

indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable;

(2)

all Capitalized Lease Obligations of such Person;

(3)

all obligations of such Person issued or assumed as the deferred purchase price of property or services, all conditional sale obligations of such Person and all obligations of such Person under any title

---

Table of Contents

retention agreement (but excluding accounts payable and accrued expenses arising in the ordinary course of business and which are not more than 90 days past due and not in dispute) which would appear as a liability on a balance sheet of a Person prepared on a consolidated basis in accordance with generally accepted accounting principles, which purchase price or obligation is due more than six months after the date of placing such property in service or taking delivery and title thereto or the completion of such services (provided that, in the case of obligations of an acquired Person assumed in connection with an acquisition of such Person, such obligations would constitute Indebtedness of such Person);

(4)

all obligations of such Person for the reimbursement of any obligor on any letter of credit, banker’s acceptance or similar credit transaction (other than obligations with respect to letters of credit securing obligations (other than obligations described in (1) through (3) above) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the tenth Business Day following receipt by such Person of a demand for reimbursement following payment on the letter of credit);

(5)

the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any Subsidiary of such Person, any Preferred Stock (but excluding, in each case, any accrued dividends);

(6)

all obligations of the type referred to in clauses (1) through (5) of other Persons and all dividends of other Persons for the payment of which, in either case, such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any guarantee;

(7)

all obligations of the type referred to in clauses (1) through (6) of other Persons secured by any lien on any property or asset of such Person (whether or not such obligation is assumed by such Person), the amount of such obligation being deemed to be the lesser of the value of such property or assets or the amount of the obligation so secured; and

(8)

to the extent not otherwise included in this definition, Hedging Obligations of such Person.

---

Table of Contents

---

Table of Contents

---

Table of Contents

Ÿ

any Subsidiary in which the Company, directly or indirectly, has less than a 100% ownership interest,

Ÿ

any Wholly-Owned Subsidiary which, in accordance with the provisions of the Indenture, has been designated in a resolution adopted by the Board of Directors of the Company as an Unrestricted Subsidiary, in each case unless and until such Subsidiary shall, in accordance with the provisions of the Indenture, be designated by a resolution of the Company as a Restricted Subsidiary; and

Ÿ

any Wholly-Owned Subsidiary a majority of the Voting Stock of which shall at the time be owned directly or indirectly by one or more Unrestricted Subsidiaries.

Ÿ

upon deposit of the Global Notes, DTC will credit the accounts of Participants designated by the underwriters with portions of the principal amount of the Global Notes; and

Ÿ

ownership of beneficial interests in the Global Notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by DTC (with respect to the interests of DTC’s Participants), DTC’s Participants and DTC’s Indirect Participants.

---

Table of Contents

Ÿ

the Company notifies the Trustee in writing that DTC is no longer willing or able to act as a depositary and the Company is unable to locate a qualified successor within 90 days; or

Ÿ

the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of notes in definitive form under the Indenture.

---

Table of Contents

Ÿ

Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.

Ÿ

Over-allotment involves sales by the underwriters of notes in excess of the principal amount of the notes the underwriters are obligated to purchase, which creates a syndicate short position.

Ÿ

Syndicate covering transactions involve purchases of the notes in the open market after the distribution has been completed in order to cover syndicate short positions. A short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the notes in the open market after pricing that could adversely affect investors who purchase in the offering.

---

Table of Contents

Ÿ

Penalty bids permit the underwriters to reclaim a selling concession from a syndicate member when the notes originally sold by the syndicate member are purchased in a stabilizing transaction or a syndicate covering transaction to cover syndicate short positions.

Ÿ

the purchaser is entitled under applicable provincial securities laws to purchase the notes without the benefit of a prospectus qualified under those securities laws,

Ÿ

where required by law, that the purchaser is purchasing as principal and not as agent, and

Ÿ

the purchaser has reviewed the text above under Resale Restrictions.

---

Table of Contents

Ÿ

our Annual Report on Form 10-K for the year ended December 31, 2001;

Ÿ

our Proxy Statement filed pursuant to Section 14(a) of the Exchange Act on March 29, 2002;

Ÿ

the description of our common stock contained in our Registration Statement on Form 8-B   (File No. 1-10959) and any amendments or reports filed for the purpose of updating such description; and

Ÿ

the description of our preferred stock purchase rights contained in our registration statement on Form 8-A 12B (File No. 1-10959) and any amendments or reports filed for the purpose of updating such description.

---

Table of Contents