-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JQNpeyKUk4A5fkGgxKtrbHbLoBolIpzxgTVLNV8NrrL2C2hTC/x/q8cG9YYx6x21 JfIAWU5niuibChOUE1RQ9g== 0000950134-03-008827.txt : 20030723 0000950134-03-008827.hdr.sgml : 20030723 20030602211516 ACCESSION NUMBER: 0000950134-03-008827 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030603 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTEX CORP CENTRAL INDEX KEY: 0000018532 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 750778259 STATE OF INCORPORATION: NV FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06776 FILM NUMBER: 03729017 BUSINESS ADDRESS: STREET 1: 2728 N HARWOOD STREET 2: - CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 214-981-5000 MAIL ADDRESS: STREET 1: PO BOX 199000 STREET 2: - CITY: DALLAS STATE: TX ZIP: 75219 FORMER COMPANY: FORMER CONFORMED NAME: CENTEX CONSTRUCTION CO INC DATE OF NAME CHANGE: 19681211 FILER: COMPANY DATA: COMPANY CONFORMED NAME: 3333 HOLDING CORP CENTRAL INDEX KEY: 0000818762 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 752178860 STATE OF INCORPORATION: NV FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09624 FILM NUMBER: 03729019 BUSINESS ADDRESS: STREET 1: 2728 N. HARWOOD STREET 2: - CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 214-981-6770 MAIL ADDRESS: STREET 1: PO BOX 199000 STREET 2: - CITY: DALLAS STATE: TX ZIP: 75219 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTEX DEVELOPMENT CO LP CENTRAL INDEX KEY: 0000818764 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 752168471 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09625 FILM NUMBER: 03729018 BUSINESS ADDRESS: STREET 1: 2728 N. HARWOOD STREET 2: - CITY: DALLAS STATE: TX ZIP: 75219 BUSINESS PHONE: 214-981-6770 MAIL ADDRESS: STREET 1: PO BOX 199000 STREET 2: - CITY: DALLAS STATE: TX ZIP: 75219 10-K 1 d05408e10vk.htm FORM 10-K e10vk
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

JOINT ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended March 31, 2003

     
Commission File No. 1-6776   Commission File Nos. 1-9624 and 1-9625, respectively
CENTEX CORPORATION   3333 HOLDING CORPORATION and
    CENTEX DEVELOPMENT COMPANY, L.P.
(Exact name of registrant as specified in its charter)   (Exact name of registrants as specified in their charters)
Nevada   Nevada and Delaware, respectively
(State of incorporation)   (States of incorporation or organization)
75-0778259   75-2178860 and 75-2168471, respectively
(I.R.S. Employer Identification No.)   (I.R.S. Employer Identification Nos.)
2728 N. Harwood, Dallas, Texas 75201   2728 N. Harwood, Dallas, Texas 75201
(Address of principal executive office, including zip code)   (Address of principal executive office, including zip code)
(214) 981-5000   (214) 981-6770
(Registrant’s telephone number)   (Registrants’ telephone number)

Securities registered pursuant to Section 12(b) of the Act:

             
    Name of each       Name of each
    exchange on which       exchange on which
Title of each class   registered   Title of each class   registered
 
 
 
Centex Corporation   3333 Holding Corporation
Common Stock   New York Stock Exchange   Common Stock   New York Stock Exchange
($.25 par value)       ($.01 par value)    
    London Stock Exchange       London Stock Exchange
             
        Centex Development Company, L.P.
        Warrants to Purchase   New York Stock Exchange
        Class B Units of    
        Limited Partnership   London Stock Exchange
        Interest Expiring    
        November 30, 2007    

Securities registered pursuant to Section 12(g) of the Act: None

     Indicate by check mark whether each registrant: (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that each such registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [   ] .

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrants’ knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [   ]

     Indicate by check mark whether the registrants are an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [X] No [   ].

     On September 30, 2002 (the last business day of the registrants’ most recently completed second fiscal quarter), the aggregate market value of the tandem traded Centex Corporation common stock, 3333 Holding Corporation common stock and Centex Development Company, L.P. warrants to purchase Class B units of limited partnership interest held by non-affiliates of the registrants was $2.68 billion based upon the last sale price reported for such date on the New York Stock Exchange. For purposes of determining this amount only, registrants have defined affiliates as the executive officers and directors of Centex Corporation.

     Indicate the number of shares of each of the registrants’ classes of common stock (or other similar equity securities) outstanding as of the close of business on May 15, 2003:

               
Centex Corporation   Common Stock     62,251,136   shares
3333 Holding Corporation   Common Stock     1,000   shares
Centex Development Company, L.P.   Class A Units of Limited Partnership Interest     32,260   units
Centex Development Company, L.P.   Class C Units of Limited Partnership Interest     208,330   units

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following documents are incorporated by reference in Parts A.III and B.III of this Report:

(a)  Proxy statements for the annual meetings of stockholders of Centex Corporation and 3333 Holding Corporation to be held on July 17, 2003.

JOINT EXPLANATORY STATEMENT
PART A. CENTEX CORPORATION AND SUBSIDIARIES
PART I
ITEM 1. BUSINESS
ITEM 2.PROPERTIES
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 14. CONTROLS AND PROCEDURES
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
ITEM 16. PRINCIPAL ACCOUNTANT FEES AND SERVICES
SIGNATURES
PART B. 3333 HOLDING CORPORATION AND SUBSIDIARY AND CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES
PART I
ITEM 1. BUSINESS
ITEM 2. PROPERTIES
ITEM 3. LEGAL PROCEEDINGS
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II
ITEM 5. MARKET FOR REGISTRANTS’ COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
ITEM 11. EXECUTIVE COMPENSATION
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
ITEM 16. PRINCIPAL ACCOUNTANT FEES AND SERVICES
SIGNATURES
INDEX TO EXHIBITS
EX-10.2 6th Amended/Restated ENQ Stock Option Plan
EX-10.3 Amended Centex Corp 2001 Stock Plan
Ex-10.A 1st Amendment to Employment Agreement
EX-10.3B Profits Agreement with Richard C. Decker
Ex-10.6A Supplemental Agreement
EX-10.8 Amended and Restated SERP
EX-10.10 Amended/Restated Long Term Incentive Plan
EX-21 List of Subsidiaries
EX-23.A Consent of Independent Auditors
EX-23.B Consent of Independent Auditors
EX-24.1 Powers of Attorney
EX-24.2 Powers of Attorney
EX-24.3 Powers of Attorney
EX-99.1 Schedule III

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JOINT ANNUAL REPORT ON

FORM 10-K
FOR THE FISCAL YEAR ENDED MARCH 31, 2003

CENTEX CORPORATION AND SUBSIDIARIES

AND
3333 HOLDING CORPORATION AND SUBSIDIARY
AND CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES

JOINT EXPLANATORY STATEMENT

     On November 30, 1987, Centex Corporation distributed as a dividend to its stockholders, through a nominee, all of the 1,000 issued and outstanding shares of common stock of 3333 Holding Corporation and 900 warrants to purchase Class B Units of limited partnership interest in Centex Development Company, L.P. Pursuant to an agreement with the nominee, the nominee is the record holder of the 3333 Holding Corporation common stock and warrants to purchase Class B Units of Centex Development Company on behalf of and for the benefit of persons who are from time to time the holders of the Centex Corporation common stock. Each Centex Corporation stockholder owns a beneficial interest in that portion of the common stock of 3333 Holding Corporation and the warrants to purchase Class B Units of Centex Development Company that the total number of shares of Centex Corporation common stock held by such stockholder bears to the total number of shares of Centex Corporation common stock outstanding from time to time. This beneficial interest is not represented by a separate certificate or receipt. Instead, each stockholder’s beneficial interest in such pro rata portion of the shares of 3333 Holding Corporation common stock and the Centex Development Company warrants is represented by the certificate or certificates evidencing his Centex Corporation common stock and is currently tradable only in tandem with, and as a part of, each stockholder’s Centex Corporation common stock. The tandem securities are listed and traded on the New York Stock Exchange and the London Stock Exchange and are registered with the Securities and Exchange Commission separately under Section 12(b) of the Securities Exchange Act of 1934, or the Exchange Act. 3333 Holding Corporation and Centex Development Company were each organized in 1987 in connection with the distribution described above. 3333 Development Corporation, a wholly-owned subsidiary of 3333 Holding Corporation, holds a 1% interest in, and is the sole general partner of, Centex Development Company. Centex Corporation indirectly owns 100% of the Class A Units and 100% of the Class C Units of the limited partnership interest in Centex Development Company. These units are collectively convertible into 20% of the Class B Units of the limited partnership in Centex Development Company. Please refer to the ownership chart on page 3.

     At present, Centex Corporation, 3333 Holding Corporation and Centex Development Company have elected to satisfy their respective periodic reporting obligations under the Exchange Act by preparing and filing joint periodic reports. Part A of this Annual Report on Form 10-K for the fiscal year ended March 31, 2003, or fiscal 2003, relates to Centex Corporation and its subsidiaries. Part B of this Report relates to 3333 Holding and its subsidiary, 3333 Development Corporation and to Centex Development Company and its subsidiaries.

     You should read this Report together with the proxy statements of Centex Corporation and 3333 Holding Corporation for their respective 2003 annual meetings of stockholders, the Annual Report to Stockholders of Centex Corporation for fiscal 2003 and the Annual Report to Stockholders of 3333 Holding Corporation and Centex Development Company for fiscal 2003. For a complete understanding of the tandem-traded securities, you should read both Part A and Part B of this Report.

     We include information concerning the earnings and financial condition of the three companies, on an aggregate basis, in Note (G), “Centex Development Company, L.P.,” of the Notes to Consolidated Financial Statements of Centex Corporation and subsidiaries on pages 84-85 of this Report.

2

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For a description of this ownership chart, please see the Joint Explanatory Statement on the previous page.

OWNERSHIP CHART

(FLOWCHART)

3

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TABLE OF CONTENTS

FORM 10-K

             
        Page  
       
 
JOINT EXPLANATORY STATEMENT
     2  
Part A. CENTEX CORPORATION AND SUBSIDIARIES
        
PART I
Item 1. Business
     6  
Item 2. Properties
     23  
Item 3. Legal Proceedings
     24  
Item 4. Submission of Matters to a Vote of Security Holders
     24  
PART II
Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters
     26  
Item 6. Selected Financial Data
     27  
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
     28  
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
     56  
Item 8. Financial Statements and Supplementary Data
     59  
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
     101  
PART III
Item 10. Directors and Executive Officers of the Registrant
     101  
Item 11. Executive Compensation
     102  
Item 12. Security Ownership of Certain Beneficial Owners and Management
     102  
Item 13. Certain Relationships and Related Transactions
     102  
Item 14. Controls and Procedures
     102  
PART IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
     102  
Item 16. Principal Accountant Fess and Services
     103  
SIGNATURES
     104  

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TABLE OF CONTENTS (continued)

         
Part B. 3333 HOLDING CORPORATION AND SUBSIDIARY AND    
    CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES    
        Page
       
PART I
Item 1. Business   107
Item 2. Properties   114
Item 3. Legal Proceedings   117
Item 4. Submission of Matters to a Vote of Security Holders   117
PART II
Item 5. Market for Registrants’ Common Equity and Related Stockholder Matters   119
Item 6. Selected Financial Data   121
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
   
122
Item 7A. Quantitative and Qualitative Disclosures about Market Risk   134
Item 8. Financial Statements and Supplementary Data   135
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
   160
PART III
Item 10. Directors and Executive Officers of the Registrants   161
Item 11. Executive Compensation   162
Item 12. Security Ownership of Certain Beneficial Owners and Management   163
Item 13. Certain Relationships and Related Transactions   166
Item 14. Controls and Procedures   166
PART IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K   167
Item 16. Principal Accountant Fees and Services   168
SIGNATURES   169
             
    __________________    
             
INDICES TO EXHIBITS    
CENTEX CORPORATION AND SUBSIDIARIES    
3333 HOLDING CORPORATION AND SUBSIDIARY    
CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES    

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PART A.

CENTEX CORPORATION AND SUBSIDIARIES

PREFATORY STATEMENT

     Part A of this Report (pages 6 through 106) includes information relating to Centex Corporation and its subsidiaries, SEC File No. 1-6776. See Joint Explanatory Statement on page 2 of this Report. Part B of this Report (pages 107 through 174) includes information relating separately to 3333 Holding Corporation and its subsidiary, to 3333 Development Corporation and to Centex Development Company, L.P. and subsidiaries.

PART I

ITEM 1. BUSINESS

General Development of Business

     Centex Corporation is a Nevada corporation. Our common stock, par value $.25 per share, began trading publicly in 1969. Our common stock is traded on the New York Stock Exchange, or the NYSE, and the London Stock Exchange. As of May 15, 2003, 62,251,136 shares of our common stock were outstanding. Any reference herein to we, us or our includes Centex Corporation and its subsidiary companies.

     Since our founding in 1950 as a Dallas, Texas-based residential construction company, we have evolved into a multi-industry company. Our subsidiary companies operate in five principal business segments: Home Building, Financial Services, Construction Products, Construction Services and Investment Real Estate. We provide a brief overview of each segment below, and we provide a more detailed discussion of each segment later in this section.

     Our Home Building operations currently involve the purchase and development of land or lots and the construction and sale of single-family homes, townhomes and low-rise condominiums. We have participated in the conventional homebuilding business since 1950. Home Building internally tracks its performance compared to the last reported twelve months of revenues for its competitors. Based on Home Building's comparisons, we believe that it ranked as the nation’s fourth largest homebuilder at March 31, 2003.

     Our Financial Services operations primarily are engaged in the residential mortgage banking business, as well as in other financial services that are in large part related to the residential mortgage market. These operations include mortgage origination, servicing and other related services for purchasers of homes sold by our Home Building operations and other homebuilders, as well as sub-prime home equity lending and the sale of title insurance and various other insurance coverages. We have been in the mortgage banking business since 1973.

     Our Construction Products operations involve the manufacture, production, distribution and sale of cement, gypsum wallboard, recycled paperboard, aggregates and readymix concrete. Our involvement in the construction products business started in 1963 when we began construction of our first cement plant. During the quarter ended June 30, 1994, our construction products subsidiary, Centex Construction

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Products, Inc., completed an initial public offering of 51% of its stock and began trading on the NYSE under the symbol “CXP.” Primarily as a result of Construction Products’ repurchase of its own stock, our ownership has increased to 65.1% as of March 31, 2003. Accordingly, we have consolidated Construction Products’ financial statements with our financial statements for the years ended March 31, 2003, 2002 and 2001, or fiscal 2003, 2002 and 2001.

     Our Construction Services operations involve the construction of buildings for both private and government interests, including office, commercial and industrial buildings, hospitals, hotels, correctional facilities, educational institutions, museums, libraries, airport facilities and sports facilities. We entered the Construction Services business in 1966 by acquiring a Dallas-based contractor that had been in business since 1936. We also acquired significant construction companies in 1978, 1982, 1987 and 1990.

     Our Investment Real Estate operations involve the acquisition, development and sale of land, primarily for industrial, office, multi-family, retail, residential and mixed-use projects. Through our investment in Centex Development Company, the operations also include the International Home Building business located in the United Kingdom.

     In fiscal 1988, we established Centex Development Company. Please refer to Part B of this Report for a discussion of the business of Centex Development Company.

Financial Information about Industry Segments

     Note (J), “Business Segments,” of the Notes to Consolidated Financial Statements of Centex Corporation and subsidiaries on pages 88-91 of this Report contains additional information about our business segments for fiscal 2003, 2002 and 2001.

Narrative Description of Business

HOME BUILDING

     Our conventional homebuilding subsidiary, Centex Homes, purchases and develops land or lots and constructs and sells single-family homes, townhomes and low-rise condominiums. Centex Homes is the only company to rank among the nation’s top 10 homebuilders for each of the past 35 years according to Professional Builder magazine. Centex Homes sells to both first-time and move-up buyers. In fiscal 2003, over 81% of the homes we sold were single-family detached homes, and the remainder were townhomes and low-rise condominiums.

Markets

     Centex Homes follows a strategy of reducing exposure to local market volatility by diversifying operations across geographically and economically diverse markets. As of March 31, 2003, Centex Homes was building in 92 market areas, including Washington, D.C., and in 26 states. The markets are listed below by geographic areas.

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Region   States   Markets
 
 
Mid-Atlantic   Maryland   Baltimore
    New Jersey   Atlantic/Cape May
        Middlesex/Hunterdon/Sommerset
        Monmouth/Ocean
        Trenton
    North Carolina   Charlotte/Gastonia/Rock Hill
        Greensboro/Winston Salem/High Point
        Raleigh/Durham/Chapel Hill
        Wilmington
    Pennsylvania   Philadelphia
        Pittsburgh
    South Carolina   Charleston/North Charleston
        Hilton Head
        Myrtle Beach
    Virginia   Norfolk/Virginia Beach/Newport
        Richmond/Petersburg
        Washington, D.C.
         
Midwest   Colorado   Boulder/Longmont
        Denver
        Eagle
        Fort Collins/Loveland
        Greeley
    Indiana   Indianapolis
        Fort Wayne
    Illinois   Chicago
    Kentucky   Louisville
    Michigan   Ann Arbor
        Detroit
        Grand Rapids/Muskegon/Holland
        Kalamazoo/Battle Creek
    Minnesota   Minneapolis/St. Paul
        Rochester
    Missouri   St. Louis
    Ohio   Akron
        Canton/Massillon
        Cincinnati
        Cleveland/Lorain/Elyria
        Columbus
        Dayton/Springfield
        Mansfield
        Steubenville/Weirton
        Toledo
        Youngstown/Warren
    Utah   Salt Lake City

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Region   States   Markets
 
 
Southwest   Arizona   Phoenix/Mesa
    Nevada   Las Vegas
    New Mexico   Albuquerque
        Santa Fe
    Texas   Austin/San Marcos
        Brazoria
        Dallas
        Ft. Worth/Arlington
        Galveston/Texas City
        Houston
        Killeen/Temple
        San Antonio
         
Southeast   Florida   Daytona Beach
        Ft. Lauderdale
        Ft. Myers/Cape Coral
        Ft. Pierce/St. Lucie
        Ft. Walton Beach
        Jacksonville
        Lakeland/Winter Haven
        Naples
        Orlando
        Punta Gorda
        Sarasota/Bradenton
        Tampa/St. Petersburg/Clearwater
        West Palm Beach/Boca Raton
    Georgia   Atlanta
    South Carolina   Columbia
        Greenville/Spartanburg/Anderson
    Tennessee   Nashville
         
West Coast   California   Bakersfield
        Fresno
        Kings County
        Los Angeles/Long Beach
        Oakland
        Orange County
        Riverside/San Bernardino
        Sacramento
        San Diego
        San Jose
        San Luis Obispo
        Visalia/Tulare/Porterville
        Yolo
    Hawaii   Hawaii
    Nevada   Reno
    Oregon   Eugene
        Portland/Vancouver
    Washington   Seattle/Bellevue/Everett
        Tacoma

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     In fiscal 2003, Centex Homes closed 26,427 homes, including first-time, move-up and, in some markets, custom homes, ranging in price from approximately $57,000 to about $1.6 million. The average sale price in fiscal 2003 was $220,183.

     Our practice has been to acquire land, build homes on the land and sell the homes within 24 to 36 months from the date of land acquisition. Generally, this involves acquiring land that is properly zoned and is either ready for development or, to some degree, already developed. The purchase of finished lots generally allows us to shorten the lead time to commence construction and reduces the risk of unforeseen improvement costs and volatile market conditions. We have acquired a substantial amount of finished and partially improved lots and land through option agreements that we exercise over specified time periods or, in certain cases, as the lots are needed. At March 31, 2003, Centex Homes owned approximately 60,000 lots and had rights to purchase approximately 71,000 lots. In addition, Centex Homes enters into joint ventures for land acquisition, development and other activities. Centex Homes holds less than a majority interest in these joint ventures, therefore we do not consolidate these joint ventures in our financial statements.

     Our growth strategy for Centex Homes has been focused primarily on internally generated, organic growth opportunities through land acquisition and development in existing business units. As a secondary driver, we have also grown the business through the acquisition of other homebuilding companies. Since April 1998 we have acquired homebuilding operations of the following companies:

             
Company   Date Acquired   Description    
 
 
   
Wayne Homes   April 1998   Builds single-family homes in the “on-your-lot” market segment.    
Teal Homes   May 1998   Builds single-family homes for the first-time and move-up buyer in the Richmond, Virginia area.    
Calton Homes   December 1998   Builds single-family homes for the first-time and move-up buyer in New Jersey.    
Real Homes   September 1999   Builds single-family homes for the first-time and move-up buyer in the Las Vegas, Nevada area.    
Selective Group   March 2001   Builds single-family homes for the first-time and move-up buyer in the Detroit, Michigan area.    
CityHomes   March 2001   Builds upscale urban townhomes and condominiums in the Dallas, Texas area.    
Jones Company   January 2003   Builds single-family homes for the first-time and move-up buyer in the St. Louis, Missouri and Indianapolis, Indiana areas.    

     In addition, in July 1999, we acquired substantially all of the land and other operating assets for the construction of single-family homes, townhomes and duplexes from Sundance Homes, a suburban Chicago homebuilder. Sundance Homes retained its name and continues to operate in other markets in which we do not compete.

     The table below summarizes by geographic area Centex Homes’ home closings, sales (orders) backlog and sales (orders) for the five most recent fiscal years. Some of the prior year balances have been reclassified to be consistent with the fiscal 2003 presentation.

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Closings (in units):

                                           
      For the Years Ended March 31,  
     
 
      2003     2002     2001     2000     1999  
     
   
   
   
   
 
 
Mid-Atlantic
     4,501       3,877       3,395       3,058       2,332  
 
Southeast
     4,851       4,440       4,137       4,142       3,559  
 
Midwest
     4,695       3,688       3,296       3,089       2,062  
 
Southwest
     8,157       6,910       5,661       4,923       3,779  
 
West Coast
     4,223       4,045       4,170       3,692       3,060  
 
  
   
   
   
   
 
 
     26,427       22,960       20,659       18,904       14,792  
 
  
   
   
   
   
 
Average Sales Price (in 000’s)
   $ 220     $ 214     $ 206     $ 192     $ 186  
 
  
   
   
   
   
 

Sales (Orders) Backlog, at the end of the period (in units):

                                         
    For the Years Ended March 31,  
   
 
    2003     2002     2001     2000     1999  
   
   
   
   
   
 
Mid-Atlantic
     2,148       1,503       1,365       1,210       1,061  
Southeast
     2,713       2,315       1,936       1,891       1,831  
Midwest
     2,920       2,093       2,037       1,628       1,355  
Southwest
     2,258       2,361       2,546       1,861       1,624  
West Coast
     2,011       1,099       1,381       989       921  
 
  
   
   
   
   
 
 
     12,050       9,371       9,265       7,579       6,792  
 
  
   
   
   
   
 

Sales (Orders) (in units):

                                         
    For the Years Ended March 31,  
   
 
    2003     2002     2001     2000     1999  
   
   
   
   
   
 
Mid-Atlantic
     5,146       3,936       3,550       3,207       2,464  
Southeast
     5,249       4,819       4,182       4,202       3,952  
Midwest
     5,087       3,744       3,572       3,207       2,515  
Southwest
     8,054       6,725       6,325       5,031       4,010  
West Coast
     5,132       3,763       4,562       3,760       2,990  
 
  
   
   
   
   
 
 
     28,668       22,987       22,191       19,407       15,931  
 
  
   
   
   
   
 

     We define backlog units as units that have been sold, as indicated by a signed contract, but not closed. Substantially all of these orders are expected to be filled during fiscal year 2004.

Competition and Other Factors

     The conventional homebuilding industry is essentially a “local” business and is highly competitive. We compete in each of Centex Homes’ market areas with numerous other homebuilders, including national, regional and local builders. Centex Homes’ top six competitors based on revenues for their most recent year-end are as follows: Beazer Homes, D. R. Horton, Inc., KB Homes, Lennar Corporation, Pulte and Ryland. Centex Homes’ operations accounted for approximately 1.6% of the total for-sale housing starts in the United States for the twelve months ended March 31, 2003. The main competitive factors affecting

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Centex Homes’ operations are location, price, availability of mortgage financing for customers, construction costs, design and quality of homes, customer service, marketing expertise, availability of land, price of land and reputation. We believe that Centex Homes competes effectively by maintaining geographic diversity, being responsive to the specific demands of each market and managing the operations at a local level.

     The homebuilding industry is cyclical and is particularly affected by changes in national and local economic conditions, job growth, long-term and short-term interest rates, consumer confidence, governmental policies, zoning restrictions and, to a lesser extent, changes in property taxes, energy costs, federal income tax laws, federal mortgage financing programs and various demographic factors. The political and economic environments affect both the demand for housing constructed and the subsequent cost of financing. Unexpected climatic conditions, such as unusually heavy or prolonged rain or snow, may affect operations in certain areas.

     The homebuilding industry is subject to extensive and complex regulations. Centex Homes and its subcontractors must comply with various federal, state and local laws and regulations, including worker health and safety, zoning, building standards, advertising, consumer credit rules and regulations and the extensive and changing federal, state and local laws, regulations and ordinances governing the protection of the environment, including the protection of endangered species. Centex Homes is also subject to other rules and regulations in connection with its manufacturing and sales activities, including requirements as to incorporated building materials and building designs. All of these regulatory requirements are applicable to all homebuilding companies, and, to date, compliance with these requirements has not had a material impact on us. We believe that Centex Homes is in material compliance with these requirements.

     We purchase materials, services and land from numerous sources and believe that we can deal effectively with the problems we may experience relating to the supply or availability of materials, services and land.

FINANCIAL SERVICES

     Our Financial Services operations primarily are engaged in the residential mortgage banking business, as well as in other financial services that are in large part related to the residential mortgage market. These operations include mortgage origination, servicing and other related services for purchasers of homes sold by our Home Building operations and other homebuilders, as well as sub-prime home equity lending and the sale of title insurance and various other insurance coverages.

Conforming Mortgage Banking

     We established CTX Mortgage Company, L.L.C., or CTX Mortgage, together with its predecessors and affiliates, to provide mortgage financing for homes built by Centex Homes. By opening CTX Mortgage offices in Centex Homes’ housing markets, we have been able to provide mortgage financing for an average of 68% of Centex Homes’ sales, other than cash sales, over the past five years. In fiscal 2003, this capture ratio was 73%. In 1985, we expanded CTX Mortgage’s operations to include mortgage loans that are not associated with the sale of homes built by Centex Homes. We refer to mortgage financing for homes built by Centex Homes as Builder loans and to mortgage financing for homes built by others as Retail loans.

     At March 31, 2003, CTX Mortgage had 223 offices located in 36 states. The offices vary in size depending on loan volume.

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     The following table shows the unit breakdown of Builder and Retail loans for CTX Mortgage for the five years ended March 31, 2003:

                                           
      For the Years Ended March 31,  
     
 
      2003     2002     2001     2000     1999  
     
   
   
   
   
 
Loan Types:
                                        
 
Builder
     18,127       15,435       12,506       10,958       9,882  
 
Retail
     66,807       64,949       48,244       48,301       66,496  
 
  
   
   
   
   
 
 
     84,934       80,384       60,750       59,259       76,378  
 
  
   
   
   
   
 
Origination Volume (in billions)
   $ 13.99     $ 12.45     $ 8.88     $ 8.11     $ 10.06  
Percent of Centex Homes Non-Cash Closings Financed
     73 %     72 %     64 %     61 %     70 %

     We provide mortgage origination and other mortgage-related services for the Federal Housing Administration, or FHA, the Department of Veterans’ Affairs, or VA, and conventional loans on homes that Centex Homes or others build and sell, as well as resale homes and refinancing of existing mortgages. Our loans are generally first-lien mortgages secured by one- to four-family residences. A majority of the loans qualify for inclusion in programs sponsored by the Government National Mortgage Association, or GNMA, the Federal National Mortgage Association, or FNMA, or the Federal Home Loan Mortgage Corporation, or FHLMC. These loans are known in the industry as “conforming” loans. The remainder of the loans are either pre-approved and individually underwritten by CTX Mortgage or private investors who subsequently purchase the loans or are funded by private investors who pay a broker fee to CTX Mortgage for referring a loan.

     CTX Mortgage’s principal sources of income consist of sales of mortgage loans, inclusive of all service rights, and, to a lesser extent, net interest income and other fees. Generally, we sell our right to service the mortgage loans and retain no other residual interests.

     We also participate in joint-venture agreements with third-party homebuilders and other real estate professionals to provide mortgage originations for their customers. These joint venture companies are fully consolidated in CTX Mortgage’s financial statements. At March 31, 2003, CTX Mortgage had 23 of these agreements, operating in 24 offices located in 11 states.

     In fiscal 2000, CTX Mortgage entered into a mortgage loan purchase agreement with Harwood Street Funding I, L.L.C., or HSF-I, that we refer to as the HSF-I Purchase Agreement. HSF-I is an unaffiliated entity that is not consolidated with Financial Services or Centex Corporation at March 31, 2003. Under the terms of the HSF-I Purchase Agreement, CTX Mortgage may elect to sell to HSF-I, and HSF-I is obligated to purchase from CTX Mortgage, mortgage loans that satisfy certain eligibility criteria and portfolio requirements. At March 31, 2003, the maximum amount of mortgage loans that HSF-I is allowed to carry in its inventory under the HSF-I Purchase Agreement is limited to $2.50 billion. Under the terms of the sales agreement, CTX Mortgage is the sole manager of HSF-I and, in that capacity, arranges for the sale of these loans into the secondary market. For a subservicing fee, CTX Mortgage also acts as servicer of these mortgage loans for HSF-I until HSF-I sells the loans. At March 31, 2003, CTX Mortgage was servicing approximately $2.27 billion of mortgage loans owned by HSF-I. For further discussion of HSF-I and the implication of recent accounting pronouncements on HSF-I, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Certain Off-Balance-Sheet and Other Obligations” below.

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Sub-Prime Home Equity Lending

     We formed the predecessors of Centex Home Equity Company, L.L.C., or Home Equity, in fiscal 1995. The business of Home Equity involves the origination of primarily nonconforming home equity mortgage loans. The sub-prime lending market comprises borrowers whose financing needs are not being met by traditional mortgage lenders for a variety of reasons, including credit histories that may limit a borrower’s access to credit or a borrower’s need for specialized loan products such as cash-out refinance and jumbo loans. Since its inception, Home Equity has focused on lending to individuals who have substantial equity in their homes but have impaired or limited credit histories. Home Equity’s mortgage loans to these borrowers are made primarily for such purposes as debt consolidation, refinancing, home improvement or educational expenses. Substantially all of Home Equity’s mortgage loans are secured by first mortgage liens on one- to four-family residences and have amortization schedules ranging from 5 to 30 years.

     At March 31, 2003, Home Equity had 162 offices and was doing business in 47 states. Home Equity originates home equity loans through five major origination sources:

  •   a retail branch network;
 
  •   a broker referral network;
 
  •   referrals from its conforming mortgage affiliate, CTX Mortgage;
 
  •   a correspondent mortgage banker network; and
 
  •   Home Equity’s direct sales unit that sources loans primarily through the Internet.

     The following table summarizes Home Equity’s origination statistics for the five-year period ended March 31, 2003:

                                         
    For the Years Ended March 31,  
   
 
    2003     2002     2001     2000     1999  
   
   
   
   
   
 
Loans
     29,448       26,955       26,418       20,568       15,582  
Origination Volume (in billions)
   $ 2.51     $ 2.09     $ 1.72     $ 1.32     $ 1.02  

     We began servicing loans through Home Equity in fiscal 1997. Servicing fees for sub-prime loans are significantly higher than for conforming loans primarily due to the frequency of contact with customers. Servicing encompasses, among other activities, the following processes: billing, collection of payments, movement of cash to the payment clearing bank accounts, investor reporting, customer help, recovery of delinquent payments, instituting foreclosure and liquidation of the underlying collateral. As of March 31, 2003, Home Equity was servicing a sub-prime loan portfolio of approximately $5.48 billion.

     From October 1997 through March 2000, a majority of Home Equity’s loans originated were included in securitizations that utilized a structure that resulted in the securitizations of the loans being accounted for as sales. Under this structure, Home Equity retained a residual interest in, as well as the servicing rights to, the securitized loans. We call this retained residual interest the mortgage securitization residual interest, or MSRI. As a result of the sales accounting treatment, our balance sheet does not reflect the mortgage loans receivable and offsetting debt resulting from these securitizations. The estimated gain on the sale of these loans was included in earnings during the period in which the securitization transaction closed. Between February 1998 and March 2000, Home Equity completed nine securitizations totaling approximately $2.38 billion in loans under this structure. As of March 31, 2003, Home Equity had a remaining MSRI of $106.4 million.

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     We changed the structure of securitizations beginning April 1, 2000. Subsequent to March 31, 2000, securitizations have been accounted for as borrowings; interest has been recorded over the life of the loans using the interest, or actuarial, method; the mortgage loans receivable and the securitization debt have remained on Home Equity’s balance sheet and the related interest margin has been reflected in our income statement. Under both structures, recourse on the securitized debt is limited to the payments received on the underlying mortgage collateral with no recourse to Home Equity or Centex Corporation. As is common in these structures, Home Equity remains liable for customary loan representations. The change in structure of the securitizations has no effect on the cash flow and profit recognized over the life of the mortgages. However, the change did affect the timing of profit recognition. Interest margin, rather than gain on sale of loans, is now Home Equity’s primary source of operating income. From April 1, 2000 to March 31, 2003, Home Equity completed 11 securitizations totaling approximately $5.34 billion in loans under this structure.

     Home Equity’s principal sources of income are from interest income, loan origination fees and servicing fees.

Other Financial Services Operations

     We offer title agent, title underwriting, closing, appraisal and other settlement services in 25 states under the names of Commerce Title Company, Commerce Title Agency and Commerce Title Insurance Company. Our Optima Information Solutions subsidiary provides property information reports, document recording and retrieval, due diligence reports and pre-foreclosure information electronically in all 50 states. Through Westwood Insurance, a multi-line property and casualty insurance agency, we market homeowners and auto insurance to some of our customers and customers of approximately 24 other homebuilders in 50 states. Westwood Insurance also provides coverage for some commercial customers. Our Technologies Group, headquartered in Edmond, Oklahoma, provides mortgage quality control services, owns and operates an automated mortgage processing system and provides the mortgage industry with regulations and guidelines in an electronic format.

Competition and Other Factors

     The financial services industry in the United States is highly competitive. CTX Mortgage competes with commercial banks, other mortgage banking companies and other financial institutions to supply mortgage financing at attractive rates to purchasers of homes, as well as to the general public. Home Equity competes with commercial banks, other sub-prime lenders and other financial institutions to supply sub-prime financing at attractive rates. Our title and insurance operations compete with other providers of title and insurance products to sell their products to purchasers of our homes, as well as to the general public. Many of the competitors of our financial services companies have greater resources than we do. During fiscal 2003, Financial Services continued to operate in a very competitive environment.

     The Financial Services operations are subject to extensive state and federal regulations, as well as the rules and regulations of, and examinations by, FNMA, FHLMC, FHA, VA, Department of Housing and Urban Development, or HUD, GNMA and state regulatory authorities with respect to originating, processing, underwriting, making, selling, securitizing and servicing loans and providing title and other insurance products. In addition, there are other federal and state statutes and regulations affecting such activities. These rules and regulations, among other things, impose licensing obligations on our Financial Services operations, specify standards for origination procedures, establish eligibility criteria for mortgage loans, provide for inspection and appraisals of properties, regulate payment features and, in some cases, fix maximum interest rates, fees, loan amounts and premiums for title and other insurance. Our Financial Services operations are required to maintain specified net worth levels and submit annual audited financial statements to HUD, VA, FNMA, FHLMC, GNMA and some state regulators.

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     As an approved FHA mortgagee, CTX Mortgage is subject to examination by the Federal Housing Commissioner at all times to ensure compliance with FHA regulations, policies and procedures. Our title and insurance operations are subject to examination by state authorities. Mortgage origination and servicing activities are subject to the Equal Credit Opportunity Act, the Fair Housing Act, the Fair Credit Reporting Act, the Federal Truth-In-Lending Act, the Real Estate Settlement Procedures Act, that also applies to our insurance operations, the Riegle Community Development and Regulatory Improvement Act, the Home Ownership and Equity Protection Act and the regulations promulgated under such statutes, among other federal and state consumer credit laws. These statutes prohibit discrimination and unlawful kickbacks and referral fees and require the disclosure of certain information to borrowers concerning credit and settlement costs. Many of these regulatory requirements seek to protect the interest of consumers, while others protect the owners or insurers of mortgage loans. Failure to comply with these requirements can lead to loss of approved status, demands for indemnification or loan repurchases from investors, class action lawsuits by borrowers, administrative enforcement actions and, in some cases, rescission or voiding of the loan by the consumer.

CONSTRUCTION PRODUCTS

     Construction Products’ operations include the manufacture, production, distribution and sale of cement, gypsum wallboard, recycled paperboard, aggregates and readymix concrete. As of March 31, 2003, our ownership in Construction Products was approximately 65.1%.

Cement

     Construction Products operates cement plants in or near Buda, Texas; LaSalle, Illinois; Fernley, Nevada and Laramie, Wyoming. The plants in Buda and LaSalle are owned by separate partnerships in which Construction Products has a 50% interest. Construction Products proportionally consolidates its pro rata interest in the revenues, expenses, assets and liabilities of those extractive industry joint ventures. The kiln start-up dates of the cement plants were as follows: Buda, Texas, 1978 (expanded 1983); LaSalle, Illinois, 1974; Fernley, Nevada (2 kilns), 1964 and 1969 and Laramie, Wyoming (2 kilns), 1988 and 1996. All four of the cement plants are fuel-efficient dry process plants.

     Construction Products’ net cement production, excluding the partners’ 50% interest in the Buda and LaSalle plants, totaled approximately 2.27 million tons in fiscal 2003 and 2.24 million tons in fiscal 2002. Total net cement sales were 2.36 million tons in fiscal 2003 and 2.44 million tons in fiscal 2002, as all four cement plants sold all of the product they produced. During the past five years, Construction Products purchased cement from others to be resold. In fiscal 2003, 6.7% of the cement sold by Construction Products was acquired from outside sources, compared to 10.5% in fiscal 2002.

Raw Materials and Fuel Supplies

     The principal raw material used in the production of portland cement is calcium carbonate in the form of limestone. Construction Products obtains limestone principally through mining and extraction operations at quarries owned or leased by Construction Products or its partnerships that are located in close proximity to the plants. Construction Products’ management believes that the estimated recoverable limestone reserves owned or leased by it or its partnerships will permit its Buda, Texas; LaSalle, Illinois and Laramie, Wyoming plants to operate at present production capacity for at least 30 years and the Fernley, Nevada plant to operate at its present production capacity for at least 12 years. Construction Products’ management expects that additional limestone reserves for the Fernley plant will be available when needed on an economically feasible basis, although such reserves may be more distant and more expensive to transport than the Fernley plant's existing reserves.

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     The cement plants use coal and coke as their primary fuel but are equipped to burn natural gas as an alternative fuel. Electric power is a major cost component in the manufacture of cement. Construction Products seeks to diminish overall power costs by adopting interruptible power supply agreements, which may expose the plants to some production interruptions during periods of power curtailment. While power and coal costs generally increased during fiscal 2003 because of the location of Construction Product's cement plants, such increases are not expected to significantly impact cement manufacturing costs in fiscal 2004.

Sales and Distribution

     Demand for cement is highly cyclical and depends on the demand for concrete products, which, in turn, depends on the demand for construction. According to estimates of the Portland Cement Association, the primary construction sectors that account for the largest shares of cement consumption are public works construction, non-residential construction and residential construction. These sectors comprised 49%, 23% and 22%, respectively, of U.S. cement consumption in calendar year 2002. No single customer of Construction Products accounted for as much as 10% of total cement sales during fiscal 2003. The principal geographic markets for Construction Products’ cement are Texas and western Louisiana, which are serviced by the Buda, Texas plant; Illinois and southern Wisconsin, which are serviced by the LaSalle, Illinois plant; Nevada, except Las Vegas, and northern California, which are serviced by the Fernley, Nevada plant and Wyoming, Utah, northern Colorado, western Nebraska and eastern Nevada, which are serviced by the Laramie, Wyoming plant.

     We distribute our cement principally by common carriers and customer pickup. In addition, we transport our cement principally by rail to storage and distribution terminals for further distribution, which expands each plant’s selling area.

Competition and Other Factors

     The cement business is extremely competitive. In every geographic area in which Construction Products sells cement, one or more other domestic producers compete. In addition, foreign companies compete in most sales areas by importing cement into the United States. The number of principal competitors operating in the same geographic areas as Construction Products’ cement plants are: six in Buda, six in LaSalle, six in Fernley and four in Laramie. Construction Products competes by operating efficient cement plants, merchandising a high quality product and providing good service and competitive pricing.

Gypsum Wallboard

     Construction Products owns and operates four gypsum wallboard manufacturing facilities: two located in Albuquerque and nearby Bernalillo, New Mexico, one located in Gypsum, Colorado (near Vail) and one located in Duke, Oklahoma, acquired in November 2000.

     Construction Products’ gypsum wallboard production totaled 1,956 million square feet in fiscal 2003 and 1,890 million square feet in fiscal 2002. Total gypsum wallboard sales were 1,933 million square feet in fiscal 2003 and 1,930 million square feet in fiscal 2002.

Raw Materials and Fuel Supplies

     Construction Products mines and extracts natural gypsum rock, the principal raw material used in the manufacture of gypsum wallboard, from mines and quarries owned, leased or subject to claims owned by Construction Products and located near its plants. Construction Products estimates that the New Mexico,

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Colorado and Oklahoma mines and quarries contain approximately 50 million tons, 21 million tons and 15 million tons of gypsum reserves. Based on its current production capacity, Construction Products’ management estimates that the life of its existing gypsum rock reserves is at least 80 years in New Mexico, 35 years in Colorado and 15 years in Oklahoma. Construction Products believes other gypsum deposits are located in the immediate area of the Oklahoma plant and may be obtained at a reasonable cost when needed.

     Prior to November 2000, Construction Products purchased paper used in manufacturing gypsum wallboard from third-party suppliers. As a result of the acquisition of paperboard manufacturing operations in November 2000, Construction Products now manufactures almost all of the paper needed for its gypsum wallboard productions.

     Construction Products’ wallboard plants use large quantities of natural gas and electrical power. Construction Products currently obtains a portion of its natural gas requirements from three gas producers under gas supply agreements expiring in September 2003 for Colorado, November 2003 for New Mexico and June 2004 for Oklahoma. If the agreements are not renewed, Construction Products’ management expects to be able to obtain its gas supplies from other suppliers at competitive prices. Power for the Gypsum, Colorado plant is supplied by the cogeneration power facility that was acquired along with the gypsum wallboard plant in 1997. Natural gas costs generally increased during fiscal 2003 and are likely to remain above average fiscal 2003 gas costs in fiscal 2004. If gas costs remain at the current high level, such costs are expected to significantly impact fiscal 2004 gypsum wallboard manufacturing costs.

Sales and Distribution

     The principal sources of demand for gypsum wallboard are residential and non-residential construction, repair and remodeling. While the gypsum wallboard industry remains highly cyclical, recent growth in the repair and remodeling segment has partially mitigated the impact of fluctuations on overall levels of new construction. Construction Products sells wallboard to numerous building materials dealers, wallboard specialty distributors, home center chains and other customers located throughout the United States. Although wallboard is distributed principally in regional areas, Construction Products and some other producers have the ability to ship wallboard by rail outside their usual regional distribution areas to take advantage of other regional increases in demand. Construction Products’ rail distribution capabilities permit it to reach customers in all states west of the Mississippi River and many eastern states. During fiscal 2003, approximately 22% of Construction Products’ sales volume of gypsum wallboard was transported by rail. Construction Products had two customers that together accounted for approximately 23% of its wallboard sales during fiscal 2003.

Competition and Other Factors

     There currently are eight manufacturers of wallboard in the United States operating a total of 81 plants. Construction Products estimates that the three largest producers, of which Construction Products is not one, accounted for approximately 65% of wallboard sales in the United States in calendar year 2002. Competition among wallboard producers is primarily on a regional basis with local producers benefiting from lower transportation costs and, to a lesser extent, on a national basis. Currently, the wallboard industry has production capacity in excess of demand. This excess capacity has historically resulted in volatile pricing. Because of the commodity nature of the product, competition is based principally on price and, to a lesser extent, on product quality and customer service.

Recycled Paperboard Operations

     Construction Products conducts its recycled paperboard manufacturing operations at its Lawton, Oklahoma mill. The Lawton mill commenced commercial operation in March 2000 and was acquired by

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Construction Products in November 2000. The Lawton mill has the capacity to produce up to approximately 275,000 tons, of gypsum-grade recycled paperboard annually. In fiscal 2003, its total recycled paperboard production was approximately 232,000 tons.

     Construction Products produces all of the paperboard products manufactured at the paperboard mills from 100% reclaimed paper fiber. These products are classified by the industry as recycled paperboard. Recycled paperboard products include the facing paper used in the manufacture of gypsum wallboard and recycled paperboard used by manufacturers of consumer and industrial paperboard products. The principal raw materials used by the recycled paperboard mills are reclaimed paper fiber, chemicals and water. Construction Products currently purchases reclaimed paper fiber from several sources. The recycled paperboard products are sold primarily to gypsum wallboard manufacturers. During fiscal 2003, approximately 31% of the recycled paperboard manufactured and shipped by Construction Products’ recycled paperboard mills was consumed by its own gypsum wallboard manufacturing operations and approximately 53% was shipped to two other gypsum wallboard manufacturers. Construction Products supplies one of these gypsum wallboard manufacturers through a long-term supply agreement. The loss of one or more gypsum wallboard manufacturers as customers, unless replaced by a commercially similar arrangement within a reasonable time period, could have an adverse effect on recycled paperboard sales and profit margins. The remaining 16% of the recycled paperboard manufactured and shipped by Construction Products’ recycled paperboard mills was not gypsum-grade and was shipped to various customers.

     The demand for recycled paperboard directly corresponds to the cyclical gypsum wallboard market. Construction Products competes with approximately nine other manufacturers of gypsum-grade paperboard, six of which have gypsum wallboard manufacturing operations. Substantially all of these competitors have greater financial resources. Price, quality, personal relationships and timeliness of deliveries are the principal methods of competition among paperboard producers.

Concrete and Aggregates

     Construction Products’ concrete and aggregates operations are located in and around Austin, Texas and northern California. The 10,000-acre aggregates deposit in northern California contains sufficient estimated reserves to meet current mining requirements for aggregates for a period of more than 100 years. Construction Products sells aggregates from this deposit to customers in the Sacramento, California area and in nearby counties. No single customer accounted for as much as 10% of Construction Products’ concrete and aggregates sales during fiscal 2003. Competition among concrete producers within Construction Products’ northern California and Austin markets is strong.

Environmental Matters

     The operations of Construction Products, are subject to numerous federal, state and local laws and regulations governing the protection of health and safety and the environment. Some of these laws impose permitting requirements and govern the nature and amount of emissions that may be generated when conducting particular operations. Other laws impose obligations to clean up or remediate spins of hazardous materials into the environment. We believe that Construction Products has obtained all the material permits that are necessary to conduct its operations. We further believe that Construction Products is conducting its operations in material compliance with these permits.

     Two environmental issues deserve special mention. First, cement kiln dust or CKD is generated in connection with the operations of Construction Products’ cement plants. The federal Environmental Protection Agency or EPA has been evaluating the regulatory status of CKD under the federal Resource Conservation and Recovery Act (“RCRA”) for a number of years. In 1999, the EPA proposed a rule that would allow states to regulate properly managed CKD as a non-hazardous waste under state laws and

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regulations governing solid waste. In contrast, CKD that was not properly managed would be treated as a hazardous waste under RCRA. In 2002, the EPA confirmed its intention to exempt properly managed CKD from the hazardous waste requirements of RCRA. The agency announced that it would collect additional data over the next three to five years to determine if the states’ regulation of CKD is effective, which may lead the EPA to withdraw its 1999 proposal to treat any CKD as a hazardous waste. Final action implementing the 2002 announcement is expected to occur in June 2003.

     Currently, substantially all CKD produced in connection with Construction Products’ present operations is recycled, and therefore such CKD is not viewed as a waste. However, CKD was historically collected and stored on-site at Construction Products’ cement plants. If either the EPA or the states decide to impose management standards on this CKD at some point in the future, Construction Products could incur additional costs to comply with those requirements.

     A second environmental issue involves the potential regulation of greenhouse gasses from cement plants under the federal Clean Air Act. Although no restrictions have been imposed, it is possible that cement plants may be targeted because of the large amounts of carbon dioxide generated during the manufacturing process.

     Any additional environmental requirements imposed on Construction Products would also be imposed on other members of the construction products industry. Although we believe that Construction Products’ practices and procedures are consistent with industry standards, there can be no assurance that there will not be environmental liabilities or claims imposed in the future. In addition, there is always the risk of more stringent environmental laws being enacted or enforced in such a way that necessitate significant capital outlays.

CONSTRUCTION SERVICES

     Construction Services is made up of four principal operating companies with various geographic locations and project niches. Healthcare facility construction has represented nearly one-fourth of Construction Services’ business mix during recent years. New contracts for the group for fiscal 2003 totaled $0.86 billion versus $1.46 billion for fiscal 2002. The backlog of uncompleted contracts at March 31, 2003 was $1.52 billion compared to $2.18 billion at March 31, 2002. Approximately $1.20 billion of the backlog of uncompleted contracts at March 31, 2003 is projected to be put into place during fiscal year 2004. We define backlog as the uncompleted portion of all signed contracts. Construction Services’ principal subsidiaries are as follows:

     
    Centex Construction Company, Inc. — This subsidiary has operational offices in Dallas, Houston and San Antonio, Texas; Fairfax, Virginia; Charlotte, North Carolina and Atlanta, Georgia. This company pursues negotiated work in its regional market areas.
     
    Centex Rodgers, Inc. — This subsidiary is a nationwide healthcare construction specialist and is headquartered in Nashville, Tennessee with operational offices in Pasadena, California; Detroit, Michigan; West Palm Beach, Florida; Rochester, Minnesota and Indianapolis, Indiana.
     
    Centex-Rooney Construction Co., Inc. — This subsidiary, based in Plantation, Florida, performs all types of work, principally within the state of Florida, and has operational offices in Miami, Orlando, Tampa, Tallahassee, Jacksonville, Ft. Myers and West Palm Beach.

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    Centex Engineering & Construction, Inc. — This subsidiary, which focuses on industrial client construction projects, is located in Dyersburg, Tennessee and operates principally within the state of Tennessee. The company has additional marketing offices in Memphis, Tennessee; Lexington, Kentucky and Dallas, Texas.

     As a general contractor or construction manager, Construction Services provides supervisory personnel for the construction of facilities. In addition, Construction Services may perform varying amounts of the actual construction work on a project but will generally hire subcontractors to perform the majority of the work.

     Construction contracts primarily fit into one of two formats: negotiated or competitive bid. In a negotiated format, the contractor bids a fee (fixed or percentage) over the cost of the project and, in many instances, agrees that the final cost will not exceed a designated amount. These contracts may include a provision whereby the owner will pay a part of any savings from the guaranteed amount to the contractor. In a competitive bid format, Construction Services will bid a fixed amount to construct the project based on an evaluation of detailed plans and specifications. At March 31, 2003, approximately 86% of uncompleted backlog was negotiated. Construction Services’ projects include hospitals, hotels, office buildings, correctional facilities, schools, shopping centers, airports, parking garages, sport stadiums, post offices and convention and performing arts centers.

Competition and Other Factors

     The construction industry is very competitive, and Construction Services competes with numerous other companies. With respect to competitively bid projects and negotiated healthcare work, Construction Services generally competes throughout the United States with local, regional and national contractors, depending upon the nature of the project. For negotiated projects other than healthcare, Construction Services generally competes in the subsidiary’s primary geographical area with other local, regional and national contractors. Construction Services solicits new projects by attending project bid meetings, by meeting with builders and owners and through existing customers. Construction Services competes successfully on the basis of its reputation, financial strength, knowledge and understanding of its clients’ needs.

     Construction Services’ operations are affected by federal, state and local laws and regulations relating to worker health and safety, as well as environmental laws. With respect to health and safety matters, we believe that Construction Services has taken appropriate precautions to protect employees and others from workplace hazards. Current environmental laws may require Construction Services’ operating subsidiaries to work in concert with project owners to acquire the necessary permits or other authorizations for certain activities, including the construction of projects located in or near wetland areas. Construction Services’ operations are also affected by environmental laws regulating the use and disposal of hazardous materials encountered during demolition operations.

     We believe that Construction Services’ current procedures and practices are consistent with industry standards and that compliance with the health and safety laws and environmental laws does not constitute a material burden or expense.

     Construction Services’ operations obtain materials and services from numerous sources. Our construction companies have been able to deal effectively with problems they have experienced to date in the supply of materials and services.

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INVESTMENT REAL ESTATE

     Investment Real Estate conducts its operations directly and through our investment in Centex Development Company. As noted in Note (G), “Centex Development Company, L.P.,” on pages 84-85 of this Report, our investment in Centex Development Company is not consolidated and is accounted for on the equity method of accounting. Investment Real Estate’s operations involve the acquisition, development and sale of land, primarily for industrial, office, multi-family, retail, residential and mixed-use projects. Through our investment in Centex Development Company, the operations also include the International Home Building business located in the United Kingdom.

     As of March 31, 2003, Investment Real Estate’s property portfolio consisted of land located in five states. We have major conventional homebuilding operations in most markets where Investment Real Estate owns substantial property.

     Investment Real Estate’s land portfolio, by state, at March 31, 2003 is shown in the following table:

             
State   Acres     Zoning
 
   
Texas     319     Industrial, Office, Retail & Residential
California     204     Residential
Florida     155     Industrial & Office
North Carolina     60     Industrial & Office
Virginia     13     Multi-Family

     At March 31, 2003, Investment Real Estate also owned, either directly or through interests in joint ventures, approximately 303,000 square feet of office and retail buildings located in Arizona and Texas.

     In addition, Investment Real Estate owns a limited partnership interest in Centex Development Company. At March 31, 2003, Centex Development Company owned or controlled: 4,739 plots in 98 residential developments located throughout England; 101 homes in 37 residential developments located throughout England; 304 acres of land located in California, Florida, Hawaii, Michigan and South Carolina and 2.1 million square feet of industrial, medical, office and retail buildings in California, Massachusetts, Michigan, Mississippi, North Carolina and Texas. At March 31, 2003, Centex Development Company had projects under development totaling approximately 200,000 square feet of office, industrial and retail projects in California and Texas, 661 multi-family units in Florida and Texas and six acres of land in a mixed-use development in Minnesota.

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EMPLOYEES

     The following table presents the breakdown of employees in each line of business as of March 31, 2003:

         
Line of Business   Employees  
 
 
Home Building
     5,764  
Financial Services
     5,704  
Construction Products
     1,529  
Construction Services
     1,596  
Investment Real Estate
     605  
Other Operations
     2,187  
Corporate
     155  
 
  
 
 
     17,540  
 
  
 

     The 155 corporate employees are employed by Centex Corporation; all others are employees of our various subsidiaries. The 2,187 Other Operations employees are employed by our manufactured homes and home services operations.

AVAILABLE INFORMATION

     Shareholders, securities analysts and others seeking information about our business operations and financial performance can receive copies of the 2003 Annual Report to Shareholders, Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, all amendments to those reports and other publications filed with the Securities and Exchange Commission in Washington, D.C., without charge, by contacting our Corporate Communications office at (214) 981-6503; by writing to Centex Corporation, Investor Relations, P.O. Box 199000, Dallas, Texas 75219 or via email at ir@centex.com. In addition, all filings with the Securities and Exchange Commission, news releases and quarterly earnings announcements, including live audio and replays of recent quarterly earnings webcasts, can be accessed free of charge on our web site (www.centex.com). We make our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act available on our web site as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission. To retrieve any of this information, go to www.centex.com, select “Investor Relations” and select “SEC Filings.”

ITEM 2. PROPERTIES

     The following properties are used in the operation of our business:

     Centex Homes owns property in Dallas, Texas. This property consists of office and warehouse buildings situated on approximately 18 acres. Centex Homes also owns smaller parcels of land in rural areas of Ohio, Indiana, Pennsylvania, Florida, North Carolina, Minnesota and Washington. Situated on this land are sales offices for its “on-your-lot” market segment.

     Financial Services owns property in Edmond, Oklahoma. This property consists of two office buildings situated on approximately 12 acres of a 20-acre parcel of land. The remaining eight acres of the parcel are being held for future development or sale.

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     Construction Products operates cement plants, quarries and related facilities at Buda, Texas; LaSalle, Illinois; Fernley, Nevada and Laramie, Wyoming. Construction Products owns the Fernley and Laramie facilities, and the Buda and LaSalle plants are each owned by separate joint ventures or partnerships in which Construction Products has a 50% interest. Construction Products owns its principal aggregate plants and quarries, which are located near Austin, Texas and Marysville, California. In addition, Construction Products owns gypsum wallboard plants in Albuquerque and nearby Bernalillo, New Mexico; Gypsum, Colorado and Duke, Oklahoma. Construction Products owns a paperboard mill in Lawton, Oklahoma.

     Our wholly-owned subsidiaries also own an office building and land located in Ocala, Florida.

     See “Item 1. Business” on pages 6-23 of this Report for additional information relating to the Company’s properties.

ITEM 3. LEGAL PROCEEDINGS

     In the normal course of our business, we and/or our subsidiaries are named as defendants in suits filed in various state and federal courts. We believe that none of the litigation matters in which we, or any of our subsidiaries, are involved would have a material adverse effect on our consolidated financial condition or operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     Not applicable.

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EXECUTIVE OFFICERS OF CENTEX (See Item 10 of Part III of this Report)

     The following is an alphabetical listing of our executive officers, as such term is defined under the rules and regulations of the Securities and Exchange Commission. All of these executive officers were elected by our Board of Directors at our Annual Meeting on July 18, 2002 to serve until the next Annual Meeting of Directors or until the respective successors are duly elected and qualified. There is no family relationship between any of these officers.

             
Name   Age     Positions with Centex or Business Experience
 
   
Leldon E. Echols     47     Executive Vice President and Chief Financial Officer of Centex Corporation since June 2000; Partner and employee at Arthur Andersen LLP from December 1978 to May 2000
               
Timothy R. Eller     54     President and Chief Operating Officer of Centex Corporation since April 2002; Executive Vice President of Centex Corporation since August 1998; Chairman of the Board and Chief Executive Officer of Centex Real Estate Corporation (Chairman of the Board since April 1998; Chief Executive Officer of Centex Real Estate Corporation since July 1991; President and Chief Operating Officer of Centex Real Estate Corporation from January 1990 to March 1998; Executive Vice President from July 1985 to January 1990)
               
Laurence E. Hirsch     57     Chairman of the Board and Chief Executive Officer of Centex Corporation (Chairman of the Board since July 1991; Chief Executive Officer since July 1988; President from March 1985 until July 1991)
               
Mark D. Kemp     41     Vice President and Controller of Centex Corporation since December 2002; Partner and employee at Arthur Andersen LLP from December 1983 to August 2002
               
Raymond G. Smerge     59     Executive Vice President, Chief Legal Officer, General Counsel and Secretary of Centex Corporation (Executive Vice President since July 1997; Chief Legal Officer since September 1985; General Counsel and Secretary since April 1993; Vice President from September 1985 to July 1997)
               
Robert S. Stewart     49     Senior Vice President of Centex Corporation since May 2000; Employee at the Weyerhaeuser Company from March 1977 to May 2000, during which time he held a range of key management positions, including positions in strategic planning

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Stock Prices and Dividends

                                                                 
    Year Ended March 31, 2003     Year Ended March 31, 2002  
   
   
 
    Price                     Price          
   
                   
         
    High     Low         Dividends   High     Low       Dividends  
   
   
     
   
   
     
 
Quarter
                                                
First
   $ 58.89     $ 48.90         $ .04         $ 45.98     $ 34.00         $ .04      
Second
   $ 59.19     $ 42.53         $ .04         $ 50.00     $ 28.03         $ .04      
Third
   $ 52.68     $ 38.31         $ .04         $ 58.80     $ 32.56         $ .04      
Fourth
   $ 57.58     $ 48.30         $ .04         $ 63.09     $ 51.25         $ .04      

The principal market for our common stock is the New York Stock Exchange (ticker symbol CTX). Our common stock also trades on the London Stock Exchange. The approximate number of record holders of our common stock at May 15, 2003 was 3,260.

On November 30, 1987, we distributed as a dividend to our stockholders securities relating to Centex Development Company, L.P. (see Note (G), “Centex Development Company, L.P.,” on pages 84-85 of this Report). Since this distribution, these securities have traded in tandem with, and as a part of, our common stock.

Amounts represent cash dividends per share paid by us on our common stock. 3333 Holding Corporation has paid no dividends on its common stock since its incorporation. We currently expect that comparable cash dividends will continue to be paid for the balance of fiscal year 2004.

The remaining information called for by this item relating to securities authorized for issuance under equity compensation plans is reported in Note (L), “Capital Stock and Employee Benefit Plans,” on pages 93-96 of this Report.

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ITEM 6. SELECTED FINANCIAL DATA

Summary of Selected Financial Data (Unaudited)
(Dollars in thousands, except per share data)

                                               
          For the Years Ended March 31,  
         
 
          2003     2002     2001     2000     1999  
         
   
   
   
   
 
Revenues
   $ 9,117,241     $ 7,748,430     $ 6,710,735     $ 6,008,136     $ 5,200,666  
Net Earnings
   $ 555,919     $ 382,226     $ 281,977     $ 257,132     $ 231,962  
Stockholders’ Equity
   $ 2,657,846     $ 2,116,773     $ 1,714,064     $ 1,419,349     $ 1,197,639  
Net Earnings as a Percentage of Beginning Stockholders’ Equity
     26.3 %     22.3 %     19.9 %     21.5 %     23.4 %
Total Assets
   $ 11,610,536     $ 8,985,455     $ 6,649,043     $ 3,987,903     $ 4,267,909  
Deferred Income Tax Asset
   $ 52,929     $ 76,167     $ 58,454     $ 49,907     $ 49,107  
Total Long-term Debt, Consolidated
   $ 6,237,213     $ 4,943,524     $ 3,040,861     $ 751,160     $ 284,299  
Debt (with Financial Services reflected on the equity method) (1)
   $ 2,105,880     $ 1,791,752     $ 1,464,993     $ 898,068     $ 587,955  
Financial Services’ Debt
     4,998,819       3,485,027       2,054,898       415,327       1,322,944  
 
  
   
   
   
   
 
Total Debt, Consolidated
   $ 7,104,699     $ 5,276,779     $ 3,519,891     $ 1,313,395     $ 1,910,899  
 
  
   
   
   
   
 
Capitalization (with Financial Services reflected on the equity method)(1)(2)
   $ 4,932,217     $ 4,063,296     $ 3,320,548     $ 2,495,784     $ 1,991,298  
Financial Services Capitalization (2)
     5,380,226       3,797,355       2,323,155       620,080       1,443,890  
Consolidation Adjustments
     (379,671 )     (313,809 )     (266,124 )     (202,931 )     (119,092 )
 
  
   
   
   
   
 
Total Capitalization, Consolidated
   $ 9,932,772     $ 7,546,842     $ 5,377,579     $ 2,912,933     $ 3,316,096  
 
  
   
   
   
   
 
Debt as a Percentage of Capitalization (2)
                                        
 
Debt (with Financial Services reflected on the equity method) (1)
     42.7 %     44.1 %     44.1 %     36.0 %     29.5 %
 
Total Debt, Consolidated
     71.5 %     69.9 %     65.5 %     45.1 %     57.6 %
Per Common Share
                                        
 
Earnings Per Share — Basic
   $ 9.15     $ 6.31     $ 4.77     $ 4.34     $ 3.90  
 
Earnings Per Share — Diluted
   $ 8.83     $ 6.11     $ 4.65     $ 4.22     $ 3.75  
 
Cash Dividends
   $ .16     $ .16     $ .16     $ .16     $ .16  
 
Book Value Based on Shares
                                        
     
Outstanding at Year End
   $ 43.69     $ 34.60     $ 28.60     $ 24.14     $ 20.17  
Stock Prices
                                        
 
High
   $ 59.19     $ 63.09     $ 46.20     $ 42.88     $ 45.75  
 
Low
   $ 38.31     $ 28.03     $ 20.63     $ 17.50     $ 26.00  

On November 30, 1987, we distributed as a dividend to our stockholders securities relating to 3333 Holding Corporation and 3333 Development Corporation (See Note (G), “Centex Development Company, L.P.,” on pages 84-85 of this Report). Since this distribution, those securities have traded in tandem with, and as a part of, our common stock.

(1)   Represents a supplemental presentation that reflects the Financial Services segment as if accounted for under the equity method. We believe that separate disclosure of the consolidating information is useful because the Financial Services subsidiaries operate in a distinctly different financial environment that generally requires significantly less equity to support their higher debt levels compared to the operations of our other subsidiaries; the Financial Services subsidiaries have structured their financing programs substantially on a stand alone basis; and we have limited obligations with respect to the indebtedness of our Financial Services subsidiaries. Management uses this information in its financial and strategic planning. We also use this presentation to allow investors to compare us to homebuilders that do not have financial services operations.
 
(2)   Capitalization is composed of Debt, Negative Goodwill, Minority Interest and Stockholders’ Equity.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FISCAL YEAR 2003 COMPARED TO FISCAL YEAR 2002

     We reported consolidated revenues of $9.12 billion for fiscal 2003, 17.7% above the $7.75 billion reported for fiscal 2002. Earnings before income taxes were $794.9 million, 28.5% more than the $618.8 million of earnings before income taxes reported last year. Net earnings for fiscal 2003 reached $555.9 million, a historical high and a 45.4% improvement over net earnings of $382.2 million in fiscal 2002. Earnings per share for fiscal 2003 were $9.15 and $8.83 for basic and diluted, respectively, compared to $6.31 and $6.11 for the prior year. The increase in net earnings is significantly higher than the increase in earnings before income taxes due to a reduction in our effective tax rate. Our effective tax rate decreased to 30.1% for the year ended March 31, 2003 from 38.2% for the year ended March 31, 2002. The decrease in the effective tax rate is primarily the result of the utilization of net operating loss carryforwards during fiscal 2003. We expect that the effective tax rate will increase slightly in fiscal 2004 to approximately 32%.

HOME BUILDING

     The following summarizes the results of our Home Building operations for the two-year period ended March 31, 2003 (dollars in millions, except per unit data):

                                 
    For the Years Ended March 31,
   
    2003   2002
   
 
            % of Revenues           % of Revenues
Revenues
   $ 5,934.5       100.0 %   $ 4,984.8       100.0 %
Cost of Sales
     (4,388.5 )     (73.9 %)     (3,713.4 )     (74.5 %)
Selling, General and Administrative Expenses
     (865.2 )     (14.6 %)     (743.9 )     (14.9 %)
 
  
   
   
   
 
Operating Earnings
   $ 680.8       11.5 %   $ 527.5       10.6 %
 
  
   
   
   
 
 
           % Change           % Change
Units Closed
     26,427       15.1 %     22,960       11.1 %
Average Unit Sales Price
   $ 220,183       3.0 %   $ 213,738       3.8 %
Operating Earnings Per Unit
   $ 25,761       12.1 %   $ 22,973       11.6 %
Backlog Units
     12,050       28.6 %     9,371       1.1 %
Ending Operating Neighborhoods
     552       16.5 %     474       (1.5 %)

     Revenues for the year ended March 31, 2003 increased 19.1% versus prior year, primarily due to an increase in units closed and higher unit sales prices. Units closed during fiscal 2003 increased 15.1% from 22,960 units to 26,427 units, and the average unit sales price increased 3.0% from $213,738 to $220,183. The increase in units closed was the result of a higher number of operating neighborhoods in the current year versus last year. The increase in the unit sales price was largely driven by higher selling prices in the Washington, D.C., New Jersey and California markets.

     Cost of sales was 73.9% of revenues for the year ended March 31, 2003 compared to 74.5% of revenues for the same period last year. The decrease in cost of sales as a percentage of revenue is a result of higher per unit sales price and ongoing cost reduction efforts.

     Selling, general and administrative expenses for the year ended March 31, 2003 were $865.2 million, or 14.6% of revenues, as compared to the $743.9 million and 14.9% of revenues reported for the same period last year. The dollar increase was due to incremental costs associated with closing more homes and higher personnel costs to support Home Building’s growth in neighborhoods.

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     Operating earnings for the year ended March 31, 2003 were 11.5% of revenues and approximately $25,761 on a per-unit basis, compared to operating earnings of 10.6% of revenues and approximately $22,973 on a per-unit basis for the same period last year.

     Units in backlog increased 28.6% to 12,050 units at March 31, 2003 compared to 9,371 units at March 31, 2002. The increase in backlog resulted from a 16.5% increase in neighborhoods and a 24.7% increase in sales versus the prior year. Centex Homes defines backlog units as units that have been sold, as indicated by a signed contract, but not closed. Centex Homes enters fiscal 2004 with a record year end backlog of home sales and expects to continue to add more neighborhoods.

FINANCIAL SERVICES

     The Financial Services segment primarily is engaged in the residential mortgage banking business, as well as in other financial services that are in large part related to the residential mortgage market. Its operations include mortgage origination, servicing and other related services for purchasers of homes sold by our Home Building operations and other homebuilders, as well as sub-prime home equity lending and the sale of title insurance and various other insurance coverages. The following summarizes Financial Services’ results for the two-year period ended March 31, 2003 (dollars in millions):

                     
        For the Years Ended March 31,  
       
 
        2003     2002  
       
   
 
Revenues
   $ 855.0     $ 699.8  
 
  
   
 
Interest Margin
   $ 172.4     $ 107.7  
 
  
   
 
Operating Earnings
   $ 161.8     $ 114.7  
 
  
   
 
Origination Volume
   $ 16,497.4     $ 14,537.9  
 
  
   
 
Number of Loans Originated
                
 
CTX Mortgage Company, L.L.C.
                
   
Centex-built Homes (“Builder”)
     18,127       15,435  
   
Non-Centex-built Homes (“Retail”)
     66,807       64,949  
 
  
   
 
 
     84,934       80,384  
 
Centex Home Equity Company, L.L.C.
     29,448       26,955  
 
  
   
 
 
     114,382       107,339  
 
  
   
 
                                 
    CTX Mortgage     Centex Home Equity  
    Company, L.L.C.     Company, L.L.C.  
   
   
 
    For the Years Ended March 31,     For the Years Ended March 31,  
   
   
 
    2003     2002     2003     2002  
   
   
   
   
 
Average Interest Earnings Assets
   $ 198.6     $ 243.7     $ 3,895.5     $ 2,625.1  
Average Yield
     7.18 %     7.86 %     8.76 %     9.38 %
Average Interest Bearing Liabilities
   $ 132.4     $ 211.0     $ 4,049.2     $ 2,653.9  
Average Rate Paid
     4.08 %     5.57 %     4.38 %     5.46 %

     Financial Services’ results are primarily derived from conforming mortgage banking and sub-prime home equity lending operations as described below.

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Conforming Mortgage Banking

     The revenues and operating earnings of CTX Mortgage Company, L.L.C. and related entities, or CTX Mortgage, are derived primarily from the sale of mortgage loans, inclusive of all service rights and, to a lesser extent, interest income and other fees. Our business strategy of selling conforming loans reduces our capital investment and related risks, provides substantial liquidity and is an efficient process given the size and maturity of the conforming mortgage loan secondary capital markets. CTX Mortgage originates mortgage loans, holds them for a short period and sells them to investors and Harwood Street Funding I, L.L.C., or HSF-I. HSF-I is an unaffiliated entity that is not consolidated with Financial Services or Centex Corporation and subsidiaries at March 31, 2003. HSF-I purchases mortgage loans, at closing, from CTX Mortgage with the proceeds from the issuance of securitized term debt, secured liquidity notes and subordinated certificates that are extendable for up to five years. The debt, interest income and interest expense of HSF-I are not reflected in the financial statements of Financial Services or Centex Corporation and subsidiaries. CTX Mortgage sold $10.55 billion and $10.20 billion of mortgage loans to HSF-I and repurchased $6.9 million and $1.1 million of delinquent or foreclosed mortgage loans from HSF-I during the years ended March 31, 2003 and 2002, respectively. CTX Mortgage recognized gains on the sale of mortgage loans of $254.6 million and $188.9 million for the years ended March 31, 2003 and 2002, respectively. For additional information regarding HSF-I and the implication of recent accounting pronouncements on HSF-I, see “Certain Off-Balance-Sheet and Other Obligations” on pages 49-51 of this Report.

     Revenues increased 14.3% to $453.9 million for the year ended March 31, 2003 as compared to the same period last year. The increase in revenues for the year is primarily related to an increase in CTX Mortgage originations as well as higher revenue from Title and Insurance operations. The increase in originations and Title and Insurance revenues for the year ended March 31, 2003 was due, in large part, to an increase in mortgage loans originated for Centex Homes’ buyers and an increase in refinancing business.

     CTX Mortgage’s selling, general and administrative expenses increased $38.9 million to $332.2 million at March 31, 2003. This increase primarily was due to increased employee count and related costs at our Title and Insurance operations as a result of the increased volume of business discussed above. CTX Mortgage’s operating earnings were $116.3 million for the year ended March 31, 2003, resulting in a 27.2% increase as compared to the same period last year. The increase in operating earnings for the year primarily is due to the increase in revenues discussed above and a decrease in the cost per loan originated.

     In the normal course of its activities, CTX Mortgage carries inventories of loans pending sale to investors other than HSF-I and earns an interest margin, that we define as the difference between interest revenue on mortgage loans held for sale or investment and interest expense on debt used to fund the mortgage loans. CTX Mortgage uses short-term mortgage warehouse facilities to finance these inventories of loans. The fact that the average rate paid on interest bearing liabilities decreased significantly more than the yield earned on interest earning assets decreased and the increase in originations noted above led to a 32.8% increase in net interest margin for fiscal 2003 as compared to the same period last year, from $6.4 million to $8.5 million.

     For the year ended March 31, 2003, originations totaled 84,934 compared to 80,384 originations in the same period last year; loan volume was $13.99 billion compared to $12.45 billion for the same period last year; the per-loan profit was $1,369, an increase of 20.4% compared to $1,137 for the same period last year and total mortgage applications increased 17.6% to 89,986 from 76,532 applications for the same period last year. For the year ended March 31, 2003, originations increased due to an increase in mortgage loans originated for Centex Homes’ buyers and an increase in refinancing business. For the year ended March 31, 2003, per-loan profit increased due to increased operational leverage as a result of the increase in the volume of originations, as well as an increase in Title and Insurance revenues and an improvement in the

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spread between the weighted-average coupon rate of loans originated by CTX Mortgage and its cost of funds.

     The results of operations of CTX Mortgage depend to a significant extent on the level of interest rates. Any significant increases in mortgage rates above currently prevailing levels could adversely affect the volume of loan originations and may result in a significant curtailment of refinancing activity, which represents a substantial portion of our business. There can be no assurance that mortgage rates will remain at the current level in the future.

Sub-Prime Home Equity Lending

     The revenues of Centex Home Equity Company, L.L.C., or Home Equity, increased 32.6% to $401.1 million for the year ended March 31, 2003 as a result of continued growth in our portfolio of residential mortgage loans held for investment. Interest margin,which we define as the difference between interest revenue on mortgage loans held for sale or investment and interest expense on debt used to fund the mortgage loans, increased to $163.9 million for the year ended March 31, 2003 as compared to $101.3 million for the same period last year. The increase in interest margin is primarily a result of an increase in the portfolio of mortgage loans held for investment and a decrease in interest rates on debt used to fund mortgage loans. Home Equity reported operating earnings of $47.1 million for the year ended March 31, 2003, as compared to operating earnings of $25.1 million for the same period last year. The increase in Home Equity’s operating earnings is primarily the result of the increase in interest margin, as noted above. Interest income will be positively affected as the portfolio of mortgage loans held for investment increases and matures. The increase in interest margin was partially offset by an increase in servicing and production costs, mostly attributable to loan volume and loan servicing growth, and an increase in the provision for losses on residential mortgage loans held for investment. Home Equity’s selling, general and administrative expenses increased $44.0 million to $176.5 million for the year ended March 31, 2003 as a result of Home Equity’s growth. Home Equity’s increase in loan production volume, the expansion of its branch offices and the increase in the number of its employees are directly related to a corresponding increase in salaries and related costs, rent expense, group insurance costs and advertising expenditures totaling approximately $26.5 million. The remainder of the increase was due to higher charges to the provision for loan losses, as discussed below.

     From October 1997 through March 2000, a majority of Home Equity’s loans originated were included in securitizations that utilized a structure that caused them to be accounted for as sales. Under this structure, Home Equity retained a residual interest in, as well as the servicing rights to, the securitized loans. We call this retained residual interest the mortgage securitization residual interest, or MSRI. As a result, our balance sheet does not reflect the mortgage loans receivable and offsetting debt resulting from these securitizations. The estimated gain on the sale of these loans was included in earnings during the period in which the securitization transaction closed. The structure of securitizations changed beginning April 1, 2000. As a result of the change, subsequent securitizations have been accounted for as borrowings; interest has been recorded over the life of the loans using the interest, or actuarial method; the mortgage loans receivable and the securitization debt have remained on Home Equity’s balance sheet and the related interest margin has been reflected in our income statement. Under both structures, recourse on the securitized debt is limited to the payments received on the underlying mortgage collateral with no recourse to Home Equity or Centex Corporation. As is common in these structures, Home Equity remains liable for customary loan representations. The change in structure of the securitizations has no effect on the ultimate cash flow and profit recognized over the life of the mortgages. However, the change in accounting for securitizations did affect the timing of profit recognition. Interest margin, which is recognized over the life of the loan, is now Home Equity’s primary source of operating income as compared to gain on sale of loans, which previously was recognized upon securitization. Home equity loans are securitized to provide a low

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cost method for funding our mortgage operations, to increase our liquidity and to reduce our interest rate exposure on fixed rate loans.

     For the year ended March 31, 2003, originations totaled 29,448 compared to 26,955 originations for the same period last year; origination volume was $2.51 billion compared to $2.09 billion for the same period last year and total applications increased 43.9% to 248,150 from 172,498 applications for the same period last year. For the year ended March 31, 2003, originations increased 9.2% while origination volume increased 19.8% due to an increase in average loan size. The slight increase in the number of originations relative to the larger increase in total applications is reflective of Home Equity’s continued adherence to its credit underwriting guidelines. Average interest earning assets increased 48.4%, from $2,625.1 million in fiscal 2002 to $3,895.5 million in fiscal 2003, and the corresponding average interest bearing liabilities increased 52.6%, from $2,653.9 million in fiscal 2002 to $4,049.2 million in fiscal 2003, primarily due to an increase in the volume of loan originations and an increase in average loan size. The average yield earned on these assets decreased from 9.38% in fiscal 2002 to 8.76% in fiscal 2003, and the average rate paid on these liabilities decreased from 5.46% in fiscal 2002 to 4.38% in fiscal 2003, primarily due to lower interest rates in fiscal 2003 compared to fiscal 2002. The fact that the average rate paid on interest bearing liabilities decreased significantly more than the yield earned on interest earning assets decreased and the increase in originations noted above led to a 61.8% increase in net interest margin from $101.3 million in fiscal 2002 to $163.9 million in fiscal 2003.

     At March 31, 2003, Home Equity’s total servicing portfolio consisted of 74,402 loans totaling $5.48 billion compared to 62,833 loans totaling $4.37 billion at March 31, 2002. For the year ended March 31, 2003, service fee income related to this servicing was $51.4 million compared to $38.2 million for the same period last year.

     The primary risks in Home Equity’s operations are consistent with those of the financial services industry and include credit risk associated with its loans, liquidity risk related to funding its loans and interest rate risk prior to securitization of the loans. In addition, as Home Equity services its loans, it is also subject to customer prepayment risks.

Allowance for Losses

     Home Equity originates and purchases loans in accordance with standard underwriting criteria. The underwriting standards are primarily intended to assess the creditworthiness of the mortgagee and the value of the mortgaged property and to evaluate the adequacy of the property as collateral for the home equity loan.

     Home Equity establishes an allowance for losses by charging the provision for losses in the statement of consolidated earnings when it believes the event causing the loss has occurred. When Home Equity determines that a residential mortgage loan held for investment is partially or fully uncollectible, the estimated loss is charged against the allowance for losses. Recoveries on losses previously charged to the allowance are credited to the allowance at the time the recovery is collected.

     We believe that the allowance for losses is sufficient to provide for credit losses in the existing residential mortgage loans held for investment, which include real estate owned. We evaluate the allowance on an aggregate basis considering, among other things, the relationship of the allowance to residential mortgage loans held for investment and historical credit losses. The allowance reflects our judgment of the present loss exposure at the end of the reporting period. A range of expected credit losses is estimated using historical losses, static pool loss curves and delinquency modeling. These tools take into consideration historical information regarding delinquency and loss severity experience and apply that information to the portfolio at each reporting date.

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     Although we consider the allowance for losses on residential mortgage loans held for investment reflected in our consolidated balance sheet to be adequate, there can be no assurance that this allowance will prove to be adequate over time to cover ultimate losses. This allowance may prove to be inadequate due to unanticipated adverse changes in the economy or discrete events adversely affecting specific customers or industries.

     Changes in the allowance for losses on residential mortgage loans held for investment were as follows (dollars in thousands):

                   
        For the Years Ended March 31,  
     
 
      2003     2002
     
   
Balance at Beginning of Period
 $ 14,106     $ 2,814  
 
Provision for Losses
     34,859       17,415  
 
Recoveries on Loans Charged Off
     160       259  
 
Losses Sustained
     (20,741 )     (6,382 )
 
   
 
Balance at End of Period
 $ 28,384     $ 14,106  
 
   
 
Allowance as a Percentage of Gross Loans Held for Investment
   0.6 %     0.4 %
Allowance as a Percentage of 90+ Days Contractual Delinquency
   23.2 %     16.9 %
90+ Days Contractual Delinquency                
 
Total Dollars Delinquent
   $ 122,479     $ 83,490  
 
% Delinquent
     2.6 %     2.6 %

     The increase in the allowance for losses in fiscal 2003 occurred primarily because the amount of the residential mortgage loans held for investment increased and the residential mortgage loan portfolio continued to mature. As the age and size of the residential mortgage loan portfolio continues to mature and grow, we expect the balance in the allowance for losses, the loans charged off and the allowance ratio to continue to increase. The increase in 90+ days contractual delinquency at March 31, 2003 occurred primarily because the residential mortgage loan portfolio continued to mature.

CONSTRUCTION PRODUCTS

     The following summarizes Construction Products’ results for the two-year period ended March 31, 2003 (dollars in millions):

                   
      For the Years Ended March 31,  
     
 
      2003     2002
     
   
Revenues
   $ 501.3     $ 471.1  
Interest Income
     0.1       2.5  
Cost of Sales and Expenses
     (399.4 )     (392.2 )
Selling, General and Administrative Expenses
     (5.7 )     (5.5 )
 
    
   
 
Operating Earnings *
   $ 96.3     $ 75.9  
 
    
   
 

+ Represents Construction Products’ Corporate general and administrative expenses.

*Before Minority Interest of $30.3 million and $20.8 million for fiscal 2003 and 2002, respectively.

     Construction Products’ revenues for the year ended March 31, 2003 were 6.4% higher than the same period last year. These increases were primarily the result of a $29.3 million increase in gypsum wallboard

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revenues and a $8.6 million increase in paperboard revenues, partially offset by a $10.0 million decrease in cement revenues for the year ended March 31, 2003. The increase in gypsum wallboard and paperboard revenues was primarily caused by higher average net sales prices when compared to the same period last year. The decrease in cement revenues was primarily caused by lower average net sales prices when compared to the same period last year.

     Construction Products’ cost of sales remained relatively consistent with the prior year. For the year ended March 31, 2003, cost of sales was 1.8% higher than the same period last year, primarily due to higher power, fuel and maintenance costs for cement and higher energy costs for gypsum wallboard.

     Construction Products’ selling, general and administrative expenses for the year ended March 31, 2003 were 3.6% higher than the same period last year. This increase was primarily the result of higher office and professional expenses.

     For the year ended March 31, 2003, Construction Products’ operating earnings, net of minority interest, increased 27% from results for the same period a year ago. Operating earnings increased primarily due to the increase in gypsum wallboard and paperboard pricing noted above.

CONSTRUCTION SERVICES

     The following summarizes Construction Services’ results for the two-year period ended March 31, 2003 (dollars in millions):

                 
    For the Years Ended March 31,  
   
 
    2003     2002  
   
   
 
Revenues
   $ 1,517.8     $ 1,296.0  
 
  
   
 
Operating Earnings
   $ 30.7     $ 36.2  
 
  
   
 
New Contracts Executed
   $ 857     $ 1,455  
 
  
   
 
Backlog of Uncompleted Contracts
   $ 1,520     $ 2,180  
 
  
   
 

     Construction Services’ revenues for the year ended March 31, 2003 were 17.1% higher than revenues for the same period last year. The increase in revenues was primarily the result of the stage of execution of certain longer-term contracts, as well as an increase in the volume of shorter-term contracts. Operating earnings for the group decreased 15.2% in the year ended March 31, 2003 compared to the same period last year primarily as a result of a decrease in project margins reflective of the current construction environment. In addition, in fiscal 2003, Construction Services recorded a project profit write-down of $2.1 million related to a single project and a $2.4 million write-down of a long-lived asset. For the year ended March 31, 2003, new contracts executed decreased 41.1% from the same period last year, and backlog of uncompleted contracts decreased 30.3% from March 31, 2002, due to reduced activity in the commercial construction industry and delays in the execution of contracts for awarded projects. Construction Services defines backlog as the uncompleted portion of all signed contracts. Future operating margins and earnings are likely to be impacted by this reduced activity and our lower backlog.

     The Construction Services segment provided a positive average net cash flow in excess of our investment in the segment of $126.5 million for the year ended March 31, 2003 compared to $121.5 million for the same period last year.

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INVESTMENT REAL ESTATE

     The following summarizes Investment Real Estate’s results for the two-year period ended March 31, 2003 (dollars in millions):

                 
    For the Years Ended March 31,  
   
 
    2003     2002  
   
   
 
Revenues
   $ 66.9     $ 72.4  
 
  
   
 
Operating Earnings
   $ 54.3     $ 48.1  
 
  
   
 

     Investment Real Estate’s revenues for the year ended March 31, 2003 were 7.6% lower than revenues for the same period last year. Operating earnings from Investment Real Estate for the year ended March 31, 2003 totaled $54.3 million compared to $48.1 million in the same period last year. The fluctuations in revenues and operating earnings were primarily related to the timing of property sales and, as discussed below, fluctuations in results from Investment Real Estate’s investment in Centex Development Company, L.P., or the Partnership.

     Property sales contributed operating earnings of $18.3 million for the year ended March 31, 2003 and $35.8 million for the same period last year. The timing of land sales is uncertain and can vary significantly from period to period. It is not currently anticipated that any significant capital will be allocated to Investment Real Estate for new business development. Through its investment in the Partnership, Investment Real Estate will focus on the International Home Building operations and evaluate opportunistic real estate transactions.

     Included in Investment Real Estate’s operating earnings for the year ended March 31, 2003 were earnings of $33.6 million derived from its investment in the Partnership compared to earnings of $18.7 million for the same period last year. As noted in Note (G), “Centex Development Company, L.P.,” of the Notes to Consolidated Financial Statements of Centex, the investment in the Partnership is not consolidated and is accounted for on the equity method of accounting.

     The largest component of the Partnership is its International Home Building segment, based in London, England. Included in Investment Real Estate’s operating earnings were earnings of $20.4 million and $12.3 million for the years ended March 31, 2003 and 2002, respectively, derived from International Home Building. The increase in earnings from last year was primarily due to an increase in profits from sales of certain land holdings and an improvement in homebuilding operating margins, offset by an increase in general and administrative expenses resulting primarily from personnel additions. For the years ended March 31, 2003 and 2002, this segment closed 1,492 units at an average sales price per unit of $235,930 and 1,387 units at an average sales price per unit of $204,251, respectively. Operating earnings per unit, before interest, were $15,369 and $10,358 for the years ended March 31, 2003 and 2002, respectively.

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OTHER

     Our Other segment includes Corporate general and administrative expense, interest expense and minority interest. Also included in our Other segment are our manufactured housing operations and our home services operations, which are not material for purposes of segment reporting.

                 
    For the Years Ended March 31,  
   
 
    2003     2002  
   
   
 
Operating Loss from Manufactured Housing
   $ (9.2 )   $ (0.9 )
Operating (Loss) Earnings from Home Services
     (9.6 )     4.0  
 
  
   
 
 
   $ (18.8 )   $ 3.1  
 
  
   
 
Corporate General and Administrative Expense
   $ 60.3     $ 50.2  
 
  
   
 
Interest Expense
   $ 119.6     $ 115.7  
 
  
   
 
Minority Interest
   $ 30.3     $ 20.8  
 
  
   
 

     The increase in our manufactured housing division’s operating loss in the current year is due to expenses related to the spin-off referred to below and operations that will be discontinued, including, among other things, a write-down of the value of property, plant and equipment of retail operations, a write-down in the value of the Texas manufacturing facility and a write-down in retail inventories. The decrease in our home services division’s operating earnings in the current year is primarily due to higher general and administrative expenses, including higher marketing costs, and an $8.0 million provision in the fourth quarter to reduce the carrying value of its remaining home security assets to estimated fair value. Our home services operations sold its chemical lawn care business in the second quarter. The sale of this business did not have a material effect on home service’s operating earnings.

     Subsequent to year end, on April 22, 2003, we announced the tax-free spin-off of the significant part of our manufactured homes operations to our shareholders. The spin-off will not have a material impact on our future earnings or debt coverage ratios.

     Corporate general and administrative expense represents compensation and other costs not identifiable with a specific segment. The increase in corporate general and administrative expense is primarily related to an increase in personnel and higher compensation resulting from continued improvements in our performance.

     The change in interest expense is primarily related to an increase in average debt outstanding for the year ended March 31, 2003 as compared to the same period last year. This increase is offset by an increase in net interest capitalized and lower interest rates during the year ended March 31, 2003 as compared to the same period last year.

     The increase in minority interest is primarily related to an increase in the earnings of Centex Construction Products, Inc.

     Our effective tax rate decreased to 30.1% for the year ended March 31, 2003 from 38.2% for the year ended March 31, 2002. The decrease in the effective tax rate is primarily the result of the utilization of net operating loss carryforwards during fiscal 2003. We expect that the effective tax rate will increase slightly in fiscal 2004 to approximately 32%.

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FISCAL YEAR 2002 COMPARED TO FISCAL YEAR 2001

     We reported consolidated revenues of $7.75 billion for fiscal 2002, 15% above the $6.71 billion reported for fiscal 2001. Earnings before income taxes were $618.8 million, 42% more than the $436.3 million of earnings before income taxes reported last year. Net earnings for fiscal 2002 reached $382.2 million, a historical high and a 36% improvement over net earnings of $282.0 million in fiscal 2001. Earnings per share for fiscal 2002 were $6.31 and $6.11 for basic and diluted, respectively, compared to $4.77 and $4.65 for the prior year.

HOME BUILDING

     The following summarizes the results of our Home Building operations for the two-year period ended March 31, 2002 (dollars in millions, except per unit data):

                                                 
  For the Years Ended March 31,
 
  2002   2001
 
 
                    % of Revenues                   % of Revenues
Revenues
   $ 4,984.8               100.0 %   $ 4,356.2               100.0 %
Cost of Sales
     (3,713.4 )             (74.5 %)     (3,304.9 )             (75.9 %)
Selling, General and Administrative Expenses
     (743.9 )             (14.9 %)     (625.9 )             (14.3 %)
 
  
           
   
           
 
Operating Earnings
   $ 527.5               10.6 %   $ 425.4               9.8 %
 
  
           
   
           
 
 
                   % Change                   % Change
Units Closed
     22,960               11.1 %     20,659               9.3 %
Average Unit Sales Price
   $ 213,738               3.8 %   $ 205,913               7.5 %
Operating Earnings Per Unit
   $ 22,973               11.6 %   $ 20,594               20.4 %
Backlog Units
     9,371               1.1 %     9,265               22.2 %

     Revenues increased 14.4% in fiscal 2002 versus prior year, primarily due to the 11% increase in units closed, from 20,659 units to 22,960 units, and the 4% increase in average unit sales price, from $205,913 to $213,738.

     Selling, general and administrative expenses increased 19% to $743.9 million in fiscal 2002 compared to $625.9 million in fiscal 2001. The increase primarily relates to higher compensation resulting from growth in Home Building’s business and profitability.

     Operating earnings for fiscal 2002 increased as a percentage of revenues and on a per-unit basis in comparison to fiscal 2001 as a result of several factors. Home Building continued to focus on reducing costs and improving operating margins through the reduction of direct construction costs. Moderate interest rates and softness in the prices of several key building materials, including lumber, cement and gypsum wallboard, are some of the factors that influenced the improved performance of the Home Building operation. Additional factors that contributed to an improved operating margin include purchasing efficiencies through regional and national programs, higher realized sales prices for our homes and more efficient house designs.

     Centex Homes responded to the events of September 11, 2001 through increased marketing efforts, purchase incentives and price discounting. These activities helped stimulate demand, increase traffic to our neighborhoods and minimize unsold housing inventory. After a brief slowdown, the business recovered and no long term impacts have been noted.

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FINANCIAL SERVICES

     Our Financial Services operations primarily are engaged in the residential mortgage banking business, as well as in other financial services that are in large part related to the residential mortgage market. These operations include mortgage origination, servicing and other related services for purchasers of homes sold by our Home Building operations and other homebuilders, as well as sub-prime home equity lending and the sale of title insurance and various other insurance coverages. The following summarizes Financial Services’ results for the two-year period ended March 31, 2002 (dollars in millions):

                     
        For the Years Ended March 31,  
       
 
        2002     2001  
       
   
 
Revenues
   $ 699.8     $ 463.6  
 
  
   
 
Interest Margin
   $ 107.7     $ 31.2  
 
  
   
 
Operating Earnings
   $ 114.7     $ 19.7  
 
  
   
 
Origination Volume
   $ 14,537.9     $ 10,598.5  
 
  
   
 
Number of Loans Originated
                  
 
CTX Mortgage Company, L.L.C.
                  
   
Centex-built Homes
     15,435       12,506  
   
Non-Centex-built Homes
     64,949       48,244  
 
  
   
 
 
     80,384       60,750  
 
Centex Home Equity Company, L.L.C.
     26,955       26,418  
 
  
   
 
 
     107,339       87,168  
 
  
   
 
                                 
    CTX Mortgage     Centex Home Equity  
    Company, L.L.C.     Company, L.L.C.  
   
   
 
    For the Years Ended March 31,     For the Years Ended March 31,  
   
   
 
    2002     2001     2002     2001  
   
   
   
   
 
Average Interest Earnings Assets
   $ 243.7     $ 219.4     $ 2,625.1     $ 1,038.8  
Average Yield
     7.86 %     7.79 %     9.38 %     10.10 %
Average Interest Bearing Liabilities
   $ 211.0     $ 193.3     $ 2,653.9     $ 1,002.2  
Average Rate Paid
     5.57 %     5.78 %     5.46 %     7.44 %

     Financial Services’ results are primarily derived from conforming mortgage banking and sub-prime home equity lending operations as described below.

Conforming Mortgage Banking

     The operating earnings of CTX Mortgage are derived primarily from the sale of mortgage loans, inclusive of all service rights and, to a lesser extent, net interest income and other fees. CTX Mortgage originates mortgage loans, holds them for a short period and sells them to investors and HSF-I. HSF-I is an unaffiliated entity that is not consolidated with Financial Services or Centex Corporation and subsidiaries. HSF-I purchases mortgage loans, at closing, from CTX Mortgage with the proceeds from the issuance of securitized term debt, secured liquidity notes and five-year extendable subordinated certificates. The debt, interest income and interest expense of HSF-I are not reflected in the financial statements of Financial Services or Centex Corporation and subsidiaries. CTX Mortgage sold $10.20 billion and $6.69 billion of mortgage loans to HSF-I and repurchased $1.1 million and $0.3 million of delinquent or foreclosed mortgage loans from HSF-I during the years ended March 31, 2002 and 2001, respectively. CTX Mortgage recognized gains on the sale of mortgage loans of $188.9 million and $153.6 million for the years ended

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March 31, 2002 and 2001, respectively. For additional information regarding HSF-I, see “Certain Off-Balance-Sheet and Other Obligations” on pages 49-51 of this Report.

     CTX Mortgage’s operating earnings were $91.4 million for fiscal 2002, 169% higher than earnings of $34.0 million for fiscal 2001. The increase in CTX Mortgage’s operating earnings is primarily due to a significant increase in mortgage origination volume, including substantial mortgage refinancing activity, that was the result of lower mortgage rates in the first, second and third quarters of fiscal 2002 compared to the same periods last year. For the year ended March 31, 2002, originations totaled 80,384 compared to 60,750 originations last fiscal year; loan volume was $12.45 billion compared to $8.88 billion for last fiscal year; the per-loan profit was $1,137, an increase of 103% compared to $560 for last fiscal year and total mortgage applications increased 8% to 76,532 from 70,642 applications for last fiscal year. For the year ended March 31, 2002, per-loan profit increased primarily due to an increase in Title and Insurance revenues, an improvement in the spread between the weighted average coupon rate of loans originated by CTX Mortgage and its cost of funds and a decrease in CTX Mortgage’s cost per loan originated.

     In the normal course of its activities, CTX Mortgage carries inventories of loans pending sale to investors other than HSF-I and earns an interest margin, that we define as the difference between interest revenue on mortgage loans held for sale or investment and interest expense on debt used to fund the mortgage loans. CTX Mortgage uses short-term mortgage warehouse facilities to finance these inventories of loans. CTX Mortgage’s interest income increased 9% in fiscal 2002 to $20.6 million from $18.9 million for last fiscal year. CTX Mortgage’s interest expense for fiscal 2002 was $14.2 million, a 22% decrease from $18.1 million for last year. The increase in CTX Mortgage’s interest margin from $0.8 million to $6.4 million was primarily due to increased origination volume resulting from an increase in refinancing activities and lower interest rates on borrowings.

Sub-Prime Home Equity Lending

     Home Equity returned to profitability in fiscal 2002 after having begun to account for its securitizations completed subsequent to March 31, 2000 as borrowings rather than as sales, as discussed further below. Home Equity reported operating earnings of $25.1 million for fiscal 2002, as compared to an operating loss of $14.3 million for fiscal 2001. The increase in Home Equity’s operating earnings is primarily the result of an increase in interest margin to $101.3 million in fiscal 2002 from $30.3 million in fiscal 2001. Interest margin increased primarily as a result of an increase in the portfolio of mortgage loans held for investment.

     From October 1997 through March 2000, a majority of Home Equity’s loans originated were included in securitizations that utilized a structure that caused them to be accounted for as sales. The estimated gain on the sale of these loans was included in earnings during the period in which the securitization transaction closed. We changed the structure of securitizations beginning April 1, 2000. As a result of the change, subsequent securitizations have been accounted for as borrowings. Under this structure, we record interest over the life of the loans using the interest, or actuarial method. The mortgage loans receivable and the securitization debt remain on Home Equity’s balance sheet and the related interest margin is reflected in our income statement. The change in structure of the securitizations has no effect on the ultimate cash flow and profit recognized over the life of the mortgages. However, the change in accounting for securitizations did affect the timing of profit recognition. Interest margin, which is recognized over the life of the loan, is now Home Equity’s primary source of operating income as compared to gain on sale of loans, which previously was recognized upon securitization. As the balance of securitizations accounted for as borrowings increases, the operating earnings should continue to increase. For the fiscal year ended March 31, 2002, originations totaled 26,955 compared to 26,418 originations for last fiscal year; loan volume was $2.09 billion compared to $1.72 billion for last fiscal year and total applications increased 16% to 172,498 from 148,702 applications for last fiscal year. Average interest

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earning assets increased 152.7%, from $1,038.8 million in fiscal 2001 to $2,625.1 million in fiscal 2002, and the corresponding average interest bearing liabilities increased 164.8%, from $1,002.2 million in fiscal 2001 to $2,653.9 million in fiscal 2002, primarily due to an increase in the volume of loan originations and an increase in average loan size. The average yield earned on these assets decreased from 10.10% in fiscal 2001 to 9.38% in fiscal 2002, and the average rate paid on these liabilities decreased from 7.44% in fiscal 2001 to 5.46% in fiscal 2002, primarily due to lower interest rates in fiscal 2002 compared to fiscal 2001. The fact that the average rate paid on interest bearing liabilities decreased significantly more than the yield earned on interest earning assets decreased and the increase in originations noted above led to a 234.3% increase in net interest margin, from $30.3 million in fiscal 2001 to $101.3 million in fiscal 2002.

     At March 31, 2002, Home Equity’s total servicing portfolio consisted of 62,833 loans totaling $4.37 billion compared to 49,717 loans totaling $3.27 billion at March 31, 2001. For fiscal 2002, service fee income related to this long-term servicing was $38.2 million compared to $25.9 million for fiscal 2001.

Allowance for Losses

     Home Equity originates and purchases loans in accordance with standard underwriting criteria. The underwriting standards are primarily intended to assess the creditworthiness of the mortgagee and the value of the mortgaged property and to evaluate the adequacy of the property as collateral for the home equity loan.

     Home Equity establishes an allowance for losses by charging the provision for losses in the statement of consolidated earnings when it believes the event causing the loss has occurred. When Home Equity determines that a residential mortgage loan held for investment is partially or fully uncollectible, the estimated loss is charged against the allowance for losses. Recoveries on losses previously charged to the allowance are credited to the allowance at the time the recovery is collected.

     We believe that the allowance for losses is sufficient to provide for credit losses in the existing residential mortgage loans held for investment, which include real estate owned. We evaluate the allowance on an aggregate basis considering, among other things, the relationship of the allowance to residential mortgage loans held for investment and historical credit losses. The allowance reflects our judgment of the present loss exposure at the end of the reporting period. A range of expected credit losses is estimated using historical losses, static pool loss curves and delinquency modeling. These tools take into consideration historical information regarding delinquency and loss severity experience and apply that information to the portfolio at each reporting date.

     Although we consider the allowance for losses on residential mortgage loans held for investment reflected in our consolidated balance sheet to be adequate, there can be no assurance that this allowance will prove to be adequate over time to cover ultimate losses. This allowance may prove to be inadequate due to unanticipated adverse changes in the economy or discrete events adversely affecting specific customers or industries.

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     Changes in the allowance for losses on residential mortgage loans held for investment were as follows (dollars in thousands):

                   
      For the Years Ended March 31,  
     
 
      2002     2001  
     
   
 
Balance at Beginning of Period
   $ 2,814     $ —  
 
Provision for Losses
     17,415       4,453  
 
Recoveries on Loans Charged Off
     259       11  
 
Losses Sustained
     (6,382 )     (1,650 )
 
  
   
 
Balance at End of Period
   $ 14,106     $ 2,814  
 
  
   
 
Allowance as a Percentage of Gross Loans Held for Investment
     0.4 %     0.2 %
Allowance as a Percentage of 90+ Days of Contractual Delinquency
     16.9 %     10.0 %
90+ Days Contractual Delinquency
                
 
Total Dollars Delinquent
   $ 83,490     $ 28,013  
 
% Delinquent
     2.6 %     1.6 %

     The allowance for losses on residential mortgage loans held for investment has increased to $14.1 million at March 31, 2002 from $2.8 million at March 31, 2001. In addition, the ratio of allowance for losses to residential mortgage loans held for investment, or the allowance ratio, increased to 0.4% at March 31, 2002 from 0.2% at March 31, 2001. Prior to April 2000, the residential mortgage loans were recorded as sales and anticipated future credit losses were considered in valuing the MSRI. As a result, no allowance for losses was necessary. After April 2000, we began recording residential mortgage loans held for investment on the balance sheet, as previously discussed, and, accordingly, began recording an allowance for losses based on management’s judgment of loss exposure. The increase in the allowance for losses occurred primarily because the amount of the residential mortgage loans held for investment increased and the residential mortgage loan portfolio continued to mature. As the age and size of the residential mortgage loan portfolio continues to mature and grow, we expect the balance in the allowance for losses, the loans charged off and the allowance ratio to continue to increase. The increase in 90+ days contractual delinquency at March 31, 2002 occurred primarily because the residential mortgage loan portfolio continued to mature.

CONSTRUCTION PRODUCTS

     The following summarizes Construction Products’ results for the two-year period ended March 31, 2002 (dollars in millions):

                 
    For the Years Ended March 31,  
   
 
    2002     2001  
   
   
 
Revenues
   $ 471.1     $ 441.1  
Interest Income
     2.5       6.7  
Cost of Sales and Expenses
     (392.2 )     (341.8 )
Selling, General and Administrative Expenses +
     (5.5 )     (6.6 )
 
  
   
 
Operating Earnings *
   $ 75.9     $ 99.4  
 
  
   
 

+Represents Construction Products’ Corporate general and administrative expenses.
*Before Minority Interest of $20.8 million and $32.4 million for fiscal 2002 and 2001, respectively.

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     Construction Products’ revenues were 7% higher than the same period last year. This increase was primarily the result of an increase in cement and paperboard revenues and from a full year of sales at the Oklahoma wallboard plant that was acquired in November 2000 as discussed below. Sales volume improved for every product except concrete. However, pricing for gypsum wallboard fell 20% compared to the prior year. For the current year, Construction Products’ operating earnings, net of minority interest, represented a 24% decrease from results for the same period a year ago. Operating earnings declined primarily as a result of an 83% decrease in gypsum wallboard earnings resulting from the previously discussed decline in gypsum wallboard prices. During the first two quarters of fiscal 2002, gypsum wallboard pricing declined primarily as a result of excess supply. However, gypsum wallboard prices rebounded in the third and fourth quarters of fiscal 2002, softening the negative impact on earnings.

     During November 2000, Construction Products purchased selected strategic assets summarized below, and assumed certain liabilities. The purchase price, including the assumption of debt, was approximately $442 million. Funding came from cash on hand and borrowings under Construction Products’ $325 million senior credit facility. The acquisition was accounted for as a purchase, and accordingly, the purchase price was allocated to the underlying assets acquired and liabilities assumed based on their fair market values at the date of the acquisition. The results of operations of the asset purchase since November 10, 2000 are included in Construction Products’ financial information.

     The principal assets Construction Products acquired in November 2000 were: a gypsum wallboard plant located in Duke, Oklahoma with a production capacity of 1.1 billion square feet of wallboard; a short line railroad and railcars linking the Duke plant to adjacent railroads; a recently completed 220,000 ton-per-year lightweight recycled paper mill in Lawton, Oklahoma; a 50,000 ton-per-year Commerce City (Denver), Colorado recycled paper mill and three recycled paper fiber collection sites. The Commerce City, Colorado paperboard mill was idled on April 23, 2001. The idled facility was recorded at its estimated net realizable value of $5.0 million at the purchase date, which approximates current fair market value. The paper operations are headquartered in Lawton, Oklahoma and focus primarily on the gypsum wallboard paper business.

CONSTRUCTION SERVICES

     The following summarizes Construction Services’ results for the two-year period ended March 31, 2002 (dollars in millions):

                 
    For the Years Ended March 31,  
   
 
    2002     2001  
   
   
 
Revenues
   $ 1,296.0     $ 1,290.4  
 
  
   
 
Operating Earnings
   $ 36.2     $ 30.9  
 
  
   
 
New Contracts Executed
   $ 1,455.0     $ 1,930.1  
 
  
   
 
Backlog of Uncompleted Contracts
   $ 2,180.3     $ 2,021.7  
 
  
   
 

     Construction Services’ revenues for fiscal 2002 were 0.4% higher than last year’s revenues. Operating earnings for the group improved in fiscal 2002 as a result of a continuing shift in recent years to higher-margin negotiated projects from lower-margin bid work. New Contracts Executed decreased 25% from prior year and Backlog of Uncompleted Contracts increased 8% in fiscal 2002, primarily due to uncertainties in the marketplace following the events of September 11, 2001. No long term impact from these events has been noted.

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     The Construction Services segment provided a positive average annual net cash flow in excess of our investment in the segment of $121.5 million in fiscal 2002 and $97.8 million in fiscal 2001.

INVESTMENT REAL ESTATE

     The following summarizes Investment Real Estate’s results for the two-year period ended March 31, 2002 (dollars in millions):

                 
    For the Years Ended March 31,  
   
 
    2002     2001  
   
   
 
Revenues
   $ 72.4     $ 33.0  
 
  
   
 
Operating Earnings
   $ 48.1     $ 50.9  
 
  
   
 

     Included in Investment Real Estate’s fiscal 2002 revenues and operating earnings was $18.7 million derived from its investment in Centex Development Company compared to $4.6 million in fiscal 2001. As noted in Note (G), “Centex Development Company, L.P.,” on pages 84-85 of this Report, the investment in Centex Development Company is not consolidated and is accounted for on the equity method of accounting. Property sales contributed revenues and operating earnings of $47.9 million and $35.8 million, respectively, in fiscal 2002 and $24.6 million and $13.6 million, respectively, in fiscal 2001. The timing of land sales is uncertain and can vary significantly from period to period.

     Fiscal 2002 operating earnings from Investment Real Estate totaled $48.1 million compared to $50.9 million in the prior year. During fiscal 2001, the remaining negative goodwill was fully accreted.

     The largest component of Centex Development Company is its International Home Building segment, which operates through Fairclough Homes Group Limited, or Fairclough, a London, England-based homebuilder. Investment Real Estate’s investment in Fairclough, through Centex Development Company, resulted in revenues and operating earnings of $12.3 million in fiscal 2002 and an operating loss of $34,000 in fiscal 2001. The increase in Fairclough’s operating earnings was primarily due to the fact that the obligation to pay a preferred distribution on certain preference shares, issued when Centex Development Company acquired Fairclough, ended at the end of fiscal 2001. For fiscal 2002 and 2001, Fairclough closed 1,387 units at an average sales price per unit of $204,251 and 1,243 units at an average sales price per unit of $203,587, respectively. Operating earnings per unit, before interest, were $10,358 and $6,339 for fiscal 2002 and 2001, respectively.

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OTHER

     Our Other segment includes Corporate general and administrative expense, interest expense and minority interest. Also included in our Other segment are our manufactured homes operations and our home services operations, which are not material for purposes of segment reporting.

                 
    For the Years Ended March 31,  
   
 
    2002     2001  
   
   
 
Operating Loss from Manufactured Housing
   $ (0.9 )   $ (26.1 )
Operating Earnings from Home Services
     4.0       1.1  
Operating Earnings from Other, net
     —       3.4  
 
  
   
 
 
   $ 3.1     $ (21.6 )
 
  
   
 
       
Corporate General and Administrative Expense
   $ 50.2     $ 36.9  
 
  
   
 
Interest Expense
   $ 115.7     $ 99.1  
 
  
   
 
Minority Interest
   $ 20.8     $ 32.4  
 
  
   
 

     Our manufactured homes operations had an operating loss of $0.9 million for fiscal 2002 versus a loss of $26.1 million for fiscal 2001. The fiscal 2001 loss is primarily due to a noncash charge of $19.2 million. This charge primarily was comprised of $9.5 million for the impairment of goodwill related to the manufactured homes’ retail operations and $6.5 million related to the idling of two manufacturing facilities. The charge for impairment was the result of continued losses in the retail division, which are consistent with trends of losses recognized throughout this industry.

     Our home services operations reported operating earnings of $4.0 million for fiscal 2002 compared to operating earnings of $1.1 million for fiscal 2001. The increase in operating earnings primarily relates to growth in the pest and lawn operations.

     Corporate general and administrative expense increased 36% to $50.2 million in fiscal 2002 compared to $36.9 million in fiscal 2001. The increase primarily relates to higher compensation resulting from growth in our profitability. Corporate general and administrative expenses represent compensation and other costs not identifiable with a specific segment.

     Interest expense increased 17% to $115.7 million in fiscal 2002 compared to $99.1 million in fiscal 2001. Higher average debt levels, partially offset by lower interest rates, caused most of the increase in interest expense.

     Our effective tax rate increased to 38% in fiscal 2002 from 35% in fiscal 2001. The increase in state income taxes and the absence of negative goodwill accretion in fiscal 2002 primarily caused this increase.

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FINANCIAL CONDITION AND LIQUIDITY

     At March 31, 2003, we had cash and cash equivalents of $472.1 million, including $15.1 million in Financial Services and $13.6 million belonging to our 65.1%-owned Construction Products subsidiary. The consolidating net cash used in or provided by the operating, investing and financing activities for the years March 31, 2003, 2002 and 2001 is summarized below (dollars in thousands). See “Statements of Consolidated Cash Flows with Consolidating Details” on pages 64-65 of this Report for the detail supporting this summary. Note that we use the term Centex to represent a supplemental consolidating presentation that reflects the Financial Services segment as if accounted for under the equity method.

                             
        For the Years Ended March 31,  
       
 
        2003     2002     2001  
       
   
   
 
Net Cash (Used in) Provided by
Centex*
                        
   
Operating Activities
   $ (132,884 )   $ 10,890     $ 93,049  
   
Investing Activities
     107,333       (232,487 )     (659,417 )
   
Financing Activities
     289,931       368,201       492,654  
 
  
   
   
 
 
     264,380       146,604       (73,714 )
 
  
   
   
 
 
Financial Services
                        
   
Operating Activities
     (38,348 )     185,678       107,320  
   
Investing Activities
     (1,413,710 )     (1,506,994 )     (1,801,278 )
   
Financing Activities
     1,440,015       1,336,676       1,689,571  
 
  
   
   
 
 
     (12,043 )     15,360       (4,387 )
 
  
   
   
 
 
Centex Corporation and Subsidiaries
                        
   
Operating Activities
     (5,509 )     67,886       214,543  
   
Investing Activities
     (1,545,877 )     (1,636,719 )     (2,424,869 )
   
Financing Activities
     1,803,723       1,730,797       2,132,225  
 
  
   
   
 
Net Increase (Decrease) in Cash
   $ 252,337     $ 161,964     $ (78,101 )
 
  
   
   
 

*   “Centex” represents a supplemental presentation that reflects the Financial Services segment as if accounted for under the equity method. We believe that separate disclosure of the consolidating information is useful because the Financial Services subsidiaries operate in a distinctly different financial environment that generally requires significantly less equity to support their higher debt levels compared to the operations of our other subsidiaries; the Financial Services subsidiaries have structured their financing programs substantially on a stand alone basis; and we have limited obligations with respect to the indebtedness of our Financial Services subsidiaries. Management uses this information in its financial and strategic planning. We also use this presentation to allow investors to compare us to homebuilders that do not have financial services operations.

     We generally fund our Centex operating and other short-term needs through cash from operations, borrowings from commercial paper and other short-term credit arrangements and the issuance of medium-term notes and other debt securities. During fiscal 2003, cash was primarily used in Centex Operating Activities to finance increases in housing inventories relating to the increased level of sales and resulting units under construction during the year and for the acquisition of land held for development. The funds provided by Centex Financing Activities were primarily from new debt used to fund the increased homebuilding activity.

     We generally fund our Financial Services operating and other short-term needs through credit facilities, securitizations, proceeds from the sale of mortgage loans to HSF-I and cash flows from operations, as described below. During fiscal 2003, cash was primarily used in Financial Services Investing Activities to finance increases in residential mortgage loans held for investment. The funds provided by Financial Services Financing Activities were primarily from new debt used to fund the increased residential mortgage loan activity.

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     Centex Corporation currently has an investment-grade credit rating from each of the principal credit rating agencies. Our ability to finance our activities on favorable terms is dependent to a significant extent on whether we are able to maintain our investment-grade credit ratings. We attempt to manage our debt levels in order to maintain investment-grade ratings. If, however, our debt ratings were downgraded, we would not have access to the commercial paper markets and might need to draw on our existing committed backup facility, which exceeds our commercial paper program size.

     Our existing credit facilities and available capacity as of March 31, 2003 are summarized below (dollars in thousands):

                   
      Existing Credit     Available  
      Facilities     Capacity  
     
   
 
Centex
                
 
Centex Corporation
                
 
Multi-Bank Revolving Credit Facility
   $ 700,000     $ 700,000  (1)
 
Uncommitted Bank Lines
     60,000       60,000  
 
 
                
 
Construction Products
                
 
Senior Revolving Credit Facility
     155,000       91,200  (2)
 
Annually Renewable Commercial Paper Conduit
     50,000       24,743  (2)
 
  
   
 
 
     965,000       875,943  
 
  
   
 
Financial Services
                
 
Unsecured Credit Facilities
     125,000       53,500  (3)
 
Secured Credit Facilities
     415,000       202,806  (4)
 
Harwood Street Funding II, L.L.C. Facility
     1,500,000       865,917  
 
  
   
 
 
     2,040,000       1,122,223  
 
  
   
 
 
   $ 3,005,000     $ 1,998,166  (5)
 
  
   
 

(1)   This is a committed, multi-bank revolving credit facility, maturing in August 2005, which serves as backup for commercial paper borrowings. As of March 31, 2003, there were no borrowings under this backup facility, and our $600 million commercial paper program had no issuance outstanding. We have not borrowed under this facility since its inception.
 
(2)   These committed facilities were entered into by Construction Products and have no recourse to Centex Corporation. The Senior Revolving Credit Facility matures in March 2006 and the Annually Renewable Commercial Paper Conduit matures in June 2004.
 
(3)   Centex Corporation, CTX Mortgage and Home Equity, on a joint and several basis, share in a $125 million uncommitted, unsecured credit facility.
(4)   CTX Mortgage and Home Equity share in a $250 million committed secured credit facility to finance mortgage inventory. CTX Mortgage also maintains $155 million of committed secured mortgage warehouse facilities to finance mortgages not sold to HSF-I. Home Equity also maintains a $10 million committed secured mortgage warehouse facility to finance mortgages.
 
(5)   The amount of available capacity consists of $1.88 billion of committed borrowings and $113.5 million of uncommitted borrowings as of March 31, 2003. Although we believe that the uncommitted capacity is currently available, there can be no assurance that the lenders under the applicable facilities would elect to make advances to Centex Corporation or its subsidiaries if and when requested to do so.

     CTX Mortgage finances its inventory of mortgage loans principally through sales of Jumbo “A” and conforming loans to HSF-I. HSF-I acquires mortgage loans from CTX Mortgage, holds them for a period averaging between 45 and 60 days and then resells them into the secondary market. HSF-I obtains the funds needed to purchase eligible mortgage loans from CTX Mortgage by issuing investment grade senior debt obligations and subordinated certificates. The purpose of this arrangement is to allow CTX Mortgage to reduce the cost of financing the mortgage loans originated by it and to improve its liquidity. For additional

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information regarding HSF-I, see “Certain Off-Balance-Sheet and Other Obligations” on pages 49-51 of this Report.

     Home Equity finances its inventory of mortgage loans through HSF-II, a wholly-owned, consolidated entity, under a revolving sales agreement that expires upon final payment of the senior and subordinated debt issued by HSF-II. This arrangement, where HSF-II has committed to finance all eligible loans, gives Home Equity daily access to HSF-II’s capacity of $1.50 billion. HSF-II obtains funds through the sale of subordinated notes that are rated BBB by Standard & Poor’s, or S&P, Baa2 by Moody’s Investors Service, or Moody’s, and BBB by Fitch Ratings, or Fitch, and short-term secured liquidity notes that are rated A1+ by S&P, P1 by Moody’s and F1+ by Fitch. Because HSF-II is a consolidated entity, the debt, interest income and interest expense of HSF-II are reflected in the financial statements of Financial Services.

     Under our debt covenants, we are required to maintain certain leverage and interest coverage ratios and a minimum tangible net worth. At March 31, 2003, we were in compliance with all of these covenants.

     As of March 31, 2003, our short-term debt was $867.5 million, approximately $842.2 million of which was applicable to Financial Services and $25.3 million of which was applicable to Construction Products. Excluding Financial Services and Construction Products, our short-term borrowings are generally financed at prevailing market interest rates from our commercial paper programs and from uncommitted bank facilities.

     During fiscal 2003, we issued three senior notes and issued notes under a medium-term note program. The senior notes included $225.0 million at 5.80%, maturing in fiscal year 2010; $35.0 million at 5.46%, maturing in fiscal year 2008 and $300.0 million at 4.75%, maturing in fiscal year 2008. The issuance under the medium-term note program was for $15.0 million at three month LIBOR plus 1.75% (initial rate 3.36%), maturing in fiscal year 2006.

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     Our outstanding debt as of March 31, 2003 was as follows (dollars in thousands) (1):

             
Centex
        
 
Short-Term Notes Payable
   $ 25,257  
 
Senior Debt:
        
   
Medium-Term Note Programs, weighted-average 4.79%, due through 2007
     281,000  
   
Long-Term Notes, weighted-average 7.05%, due through 2012
     1,508,116  
   
Other Indebtedness, weighted-average 2.81%, due through 2010
     91,919  
 
Subordinated Debt:
        
   
Subordinated Debentures, 7.38%, due in 2006
     99,894  
   
Subordinated Debentures, 8.75%, due in 2007
     99,694  
 
  
 
 
     2,105,880  
 
  
 
Financial Services
        
 
Short-Term Debt:
        
   
Short-Term Notes Payable
     283,146  
   
Harwood Street Funding II, L.L.C. Secured Liquidity Notes
     559,083  
 
Home Equity Loans Asset-Backed Certificates, weighted-average 4.52%, due through 2033
     4,081,590  
 
Harwood Street Funding II, L.L.C. Variable Rate Subordinated Notes, weighted-average 3.38%, due through 2008
     75,000  
 
  
 
 
     4,998,819  
 
  
 
Total
   $ 7,104,699  
 
  
 

(1)   Certain of the borrowings described in the table above vary on a seasonal basis and depend on the working capital needs of our operations.

     Our future obligations primarily consist of long-term debt and operating leases. We had no future obligations related to capital leases, purchase obligations or other long-term liabilities at March 31, 2003. Maturities of long-term debt and future obligations under operating leases of Centex and Financial Services (in thousands) during the next five years ending March 31 are:

                                   
     
         
      Long-term Debt          
     
    Total  
              Financial             Operating  
      Centex     Services     Total     Leases  
     
   
   
   
 
 
2004
   $ 27,571     $ 1,085,397     $ 1,112,968     $ 47,666  
 
2005
     32,444       877,255       909,699       39,940  
 
2006
     395,124       666,675       1,061,799       31,326  
 
2007
     290,414       632,240       922,654       24,972  
 
2008
     359,341       771,340       1,130,681       25,093  
Thereafter
     975,729       123,683       1,099,412       49,539  
 
  
   
   
   
 
 
   $ 2,080,623     $ 4,156,590     $ 6,237,213     $ 218,536  
 
 
  
   
   
   
 

     Financial Services debt related to securitized residential mortgage loans structured as collateralized borrowings (Home Equity Loans Asset-Backed Certificates) was $4.08 billion at March 31, 2003 and has no recourse to Home Equity or Centex Corporation. The principal and interest on these notes are paid using the cash flow from the underlying residential mortgage loans, which serve as collateral for the debt. Accordingly, the timing of the principal payments on these notes is dependent upon the payment received on the underlying residential mortgage loans. The expected maturities of this component of long-term debt are based on contractual maturities adjusted for projected repayments and prepayments of principal. As is common in these structures, Home Equity remains liable for customary loan representations.

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CERTAIN OFF-BALANCE-SHEET AND OTHER OBLIGATIONS

     The following is a summary of certain off-balance-sheet arrangements and other obligations and their possible effects on our liquidity and capital resources.

Harwood Street Funding I, L.L.C.

     HSF-I is an unaffiliated entity established in July 1999 that is not consolidated with Financial Services or Centex Corporation and subsidiaries as of March 31, 2003. Since December 1999, CTX Mortgage has sold substantially all of the Jumbo “A” and conforming mortgage loans that it originates to HSF-I in accordance with the HSF-I Purchase Agreement. When HSF-I acquires these loans, it typically holds them for a period averaging between 45 and 60 days and then resells them into the secondary market. HSF-I obtains the funds needed to purchase eligible mortgage loans from CTX Mortgage by issuing (1) securitized medium-term debt that is currently rated AAA by S&P and Aaa by Moody’s, (2) short-term secured liquidity notes that are currently rated A1+ by S&P and P1 by Moody’s and (3) subordinated certificates maturing in September 2004 and November 2005, extendable for up to five years, that are rated BBB by S&P and Baa2 by Moody’s. This arrangement provides CTX Mortgage with reduced financing cost for eligible mortgage loans it originates and improves its liquidity.

     Under the terms of the HSF-I Purchase Agreement, CTX Mortgage may elect to sell to HSF-I, and HSF-I is obligated to purchase from CTX Mortgage, mortgage loans that satisfy certain eligibility criteria and portfolio requirements. The maximum amount of mortgage loans that HSF-I is allowed to carry in its inventory under the HSF-I Purchase Agreement is limited to $2.50 billion.

     HSF-I’s commitment to purchase eligible mortgage loans continues in effect until the occurrence of certain termination events described in the HSF-I Purchase Agreement. These termination events primarily relate to events of default under, or other failure to comply with, the provisions, including loan portfolio limitations, of the agreements that govern the mortgage loan warehouse program but also include a downgrade in Centex Corporation’s credit ratings below BB+ by S&P or Ba1 by Moody’s. In the event CTX Mortgage was unable to sell loans to HSF-I, it would draw on existing credit facilities currently held in addition to HSF-I. In addition, it might need to make other customary financing arrangements to fund its mortgage loan origination activities. Although we believe that CTX Mortgage could arrange for alternative financing that is common for non-investment grade mortgage companies, there can be no assurance that such financing would be available on satisfactory terms, and any delay in obtaining such financing could adversely affect the results of operations of CTX Mortgage.

     In accordance with the HSF-I Purchase Agreement, CTX Mortgage acts as servicer of the loans owned by HSF-I and arranges for the sale of the eligible mortgage loans into the secondary market. In its capacity as servicer, CTX Mortgage must act in the best interests of HSF-I so as to maximize the proceeds of sales of eligible mortgage loans. The performance of obligations of CTX Mortgage, solely in its capacity as servicer, is guaranteed by Centex Corporation. CTX Mortgage received $13.3 million, $9.8 million and $5.0 million in fees for servicing loans owned by HSF-I in fiscal 2003, 2002 and 2001, respectively. These servicer obligations include repurchasing a mortgage loan from HSF-I in the event of a breach of the servicer’s representations and warranties, which materially and adversely affects the value of the mortgage loan and is not cured within 60 days.

     HSF-I has entered into a swap arrangement with a bank, that we refer to as the Harwood Swap, under which the bank has agreed to make certain payments to HSF-I, and HSF-I has agreed to make certain payments to the bank, the net effect of which is that the bank has agreed to bear certain interest rate risks, non-credit related market risks and prepayment risks related to the mortgage loans held by HSF-I. The

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purpose of this arrangement is to provide credit enhancement to HSF-I by permitting it to hedge these risks with a counterparty having a short-term credit rating of A1+ from S&P and P1 from Moody’s. Additionally, we have entered into a separate swap arrangement with the bank pursuant to which we have agreed to pay to the bank all amounts that the bank is required to pay to HSF-I pursuant to the Harwood Swap plus a monthly fee equal to a percentage of the notional amount of the Harwood Swap, and the bank is required to pay to us all amounts that the bank receives from HSF-I pursuant to the Harwood Swap. Accordingly, we effectively bear all interest rate risks, non-credit related market risks and prepayment risks that are the subject of the Harwood Swap. Financial Services executes the forward sales of CTX Mortgage’s loans to hedge the risk of reductions in value of mortgages sold to HSF-I or maintained under secured financing agreements. This offsets most of our risk as the counterparty to the swap supporting the payment requirements of HSF-I. We are also required to reimburse the bank for certain expenses, costs and damages that it may incur.

     As of March 31, 2003, HSF-I owned $2.27 billion in securitized residential mortgage loans sold to it by CTX Mortgage and had $2.16 billion of outstanding securitized term debt and $0.11 billion of outstanding subordinated certificates. We do not guarantee the payment of any debt or subordinated certificates of HSF-I, and we are not liable for credit losses relating to securitized residential mortgage loans sold to HSF-I. However, we do retain certain risks related to the portfolio of mortgage loans held by HSF-I. In particular, CTX Mortgage makes representations and warranties to HSF-I to the effect that each mortgage loan sold to HSF-I satisfies the eligibility criteria and portfolio requirements discussed above. CTX Mortgage may be required to repurchase mortgage loans sold to HSF-I if such mortgage loans are determined to be ineligible loans or there occur certain other breaches of representations and warranties of CTX Mortgage, as seller or servicer. Centex Corporation guarantees CTX Mortgage’s obligation to repurchase such loans. CTX Mortgage records a liability for its estimated losses for these obligations and such amount is included in its loan origination reserve. CTX Mortgage sold $10.55 billion, $10.20 billion and $6.69 billion of mortgage loans to HSF-I and repurchased $6.9 million, $1.1 million and $0.3 million of delinquent or foreclosed mortgage loans from HSF-I during the years ended March 31, 2003, 2002 and 2001, respectively. CTX Mortgage recognized gains on the sale of mortgage loans of $254.6 million, $188.9 million and $153.6 million for the years ended March 31, 2003, 2002 and 2001, respectively.

     In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”), which clarifies the accounting for certain entities in which equity investors do not have a controlling financial interest or the entity is unable to finance its activities without additional subordinated financial support from other parties. We believe it is probable that our interest in HSF-I will qualify as a variable interest under FIN 46, resulting in the consolidation of HSF-I in our financial statements beginning July 1, 2003. The consolidation of HSF-I will increase our residential mortgage loans held for sale, with a corresponding increase to our financial services debt. The impact on our financial position and results will be dependent upon the amount of residential mortgage loans and debt held by HSF-I upon adoption of FIN 46.

3333 Holding Corporation, 3333 Development Corporation and Centex Development Company, L.P.

     3333 Holding Corporation, 3333 Development Corporation and the Partnership are entities that are neither affiliates of nor consolidated with Centex Corporation and subsidiaries at March 31, 2003. These entities were established in 1987 to broaden the range of business activities that may be conducted for the benefit of our stockholders to include general real estate development. We determined that this expansion would improve stockholder value through longer-term real estate investments, real estate developments and the benefits of the partnership form of business. The Partnership is managed by its general partner, 3333 Development Corporation, a wholly-owned subsidiary of 3333 Holding Corporation. We generally are not liable for the obligations of 3333 Holding Corporation, 3333 Development Corporation or the Partnership. However, as of March 31, 2003, we guaranteed approximately $1.1 million of indebtedness of the

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Partnership. In addition, we enter into certain land purchase and other transactions with the Partnership. For additional information regarding these entities, see the Joint Explanatory Note at the beginning of this Report and the financial statements of the Partnership, filed in tandem with this Report. In addition, for information regarding these entities and Centex Corporation and subsidiaries, on an aggregate basis, see Note (G), “Centex Development Company, L.P.,” of the Notes to Consolidated Financial Statements of Centex Corporation. For a discussion of the impact of FIN 46 on our accounting for transactions with these entities, see “Recent Accounting Pronouncements” below.

Joint Ventures

     We conduct a portion of our land acquisition, development and other activities through our participation in joint ventures in which we hold less than a majority interest. These joint ventures are typically large in nature, and partnering with other developers allows Centex Homes to share the risks and rewards of ownership while providing for efficient asset utilization. Our investment in these non-consolidated joint ventures, accounted for using the equity method, was $102.3 million and $94.6 million at March 31, 2003 and 2002, respectively. These joint ventures had total outstanding secured construction debt of approximately $232.5 million and $144.6 million at March 31, 2003 and 2002, respectively. Our liability with respect to this debt, based on our ownership percentage of the related joint ventures, is limited to approximately $56.4 million and $27.9 million at March 31, 2003 and 2002, respectively. Under the structure of this debt, we become liable up to these amounts only to the extent that the construction debt exceeds a certain percentage of the value of the project. At March 31, 2003 and 2002, we were not liable for any of this debt. For a discussion of the impact of FIN 46 on our accounting for transactions with non-consolidated joint ventures, see “Recent Accounting Pronouncements” below.

Letters of Credit and Guarantees

     At March 31, 2003, we had outstanding letters of credit of $116.8 million that primarily relate to development obligations of Home Building. We expect that the obligations secured by these letters of credit will generally be performed by our subsidiaries in the ordinary course of business and in accordance with the applicable contractual terms. To the extent that the underlying commercial obligations are performed by our subsidiaries, the related letters of credit will be released and we will not have any continuing obligations. We have no material third-party guarantees.

CRITICAL ACCOUNTING POLICIES

     Some of our critical accounting policies require the use of judgment in their application or require estimates of inherently uncertain matters. Although our accounting policies are in compliance with generally accepted accounting principles, a change in the facts and circumstances of the underlying transactions could significantly change the application of the accounting policies and the resulting financial statement impact. Listed below are those policies that we believe are critical and require the use of complex judgment in their application.

Impairment of Long-Lived Assets

     Housing projects and land held for development and sale are stated at the lower of cost (including direct construction costs, capitalized interest and real estate taxes) or fair value less cost to sell. Property and equipment is carried at cost less accumulated depreciation. We assess these assets for recoverability in accordance with the provisions of Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” or SFAS No. 144. SFAS No. 144 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets is measured by comparing the

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carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. These evaluations for impairment are significantly impacted by estimates of revenues, costs and expenses and other factors. If these assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Goodwill

     Goodwill represents the excess of purchase price over net assets of businesses acquired. We adopted the provisions of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” or SFAS No. 142, effective April 1, 2001. Upon the adoption of SFAS No. 142, goodwill is no longer subject to amortization. Rather, goodwill will be subject to at least an annual assessment for impairment, at the reporting unit level, by applying a fair value-based test. If the carrying amount exceeds the fair value, an impairment would occur. We continually evaluate whether events and circumstances have occurred that indicate the remaining balance of goodwill may not be recoverable. Fair value is estimated using a discounted cash flow or market valuation approach. Such evaluations for impairment are significantly impacted by estimates of future revenues, costs and expenses and other factors. If the goodwill is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the goodwill exceeds the fair value of the future cash flows. We had no impairment of goodwill in fiscal 2003.

Insurance Accruals

     We have certain deductible limits under our workers’ compensation, automobile and general liability insurance policies for which reserves are actuarially determined based on claims filed and an estimate of claims incurred but not yet reported. Projection of losses concerning these liabilities is subject to a high degree of variability due to factors such as claim settlement patterns, litigation trends and legal interpretations, among others.

Valuation of Residential Mortgage Loans Held for Investment

     Home Equity originates and purchases loans in accordance with standard underwriting criteria. The underwriting standards are primarily intended to assess the creditworthiness of the mortgagee and the value of the mortgaged property and to evaluate the adequacy of the property as collateral for the home equity loan.

     Home Equity establishes an allowance for losses by charging the provision for losses in the statement of consolidated earnings when it believes the event causing the loss has occurred. When Home Equity determines that a residential mortgage loan held for investment is partially or fully uncollectible, the estimated loss is charged against the allowance for losses. Recoveries on losses previously charged to the allowance are credited to the allowance at the time the recovery is collected.

     We believe that the allowance for losses is sufficient to provide for credit losses in the existing residential mortgage loans held for investment, which include real estate owned. We evaluate the allowance on an aggregate basis considering, among other things, the relationship of the allowance to residential mortgage loans held for investment and historical credit losses. The allowance reflects our judgment of the present loss exposure at the end of the reporting period. A range of expected credit losses is estimated using historical losses, static pool loss curves and delinquency modeling. These tools take into consideration historical information regarding delinquency and loss severity experience and apply that information to the portfolio at each reporting date.

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     Although we consider the allowance for losses on residential mortgage loans held for investment reflected in our consolidated balance sheet to be adequate, there can be no assurance that this allowance will prove to be adequate over time to cover ultimate losses. This allowance may prove to be inadequate due to unanticipated adverse changes in the economy or discrete events adversely affecting specific customers or industries.

Mortgage Securitization Residual Interest

     Home Equity uses mortgage securitizations to finance its mortgage loan portfolio. For securitizations prior to April 2000, which Home Equity accounted for as sales, Home Equity retained a mortgage securitization residual interest, or MSRI. The MSRI represents the present value of Home Equity’s right to receive, over the life of the securitization, the excess of the weighted-average coupon on the loans securitized over the interest rates on the securities sold, a normal servicing fee, a trustee fee and an insurance fee, where applicable, net of the credit losses relating to the loans securitized. Home Equity estimates the fair value of MSRI through the application of discounted cash flow analysis. Such analysis requires the use of various assumptions, the most significant of which are anticipated prepayments (principal reductions in excess of contractually scheduled reductions), estimated future credit losses and the discount rate applied to future cash flows. See Note (A), “Significant Accounting Policies,” of the Notes to Consolidated Financial Statements of Centex Corporation and subsidiaries for a discussion of the sensitivity of the MSRI to changes in the assumptions.

Loan Origination Reserve

     CTX Mortgage has established a liability for anticipated losses associated with loans originated and sold to HSF-I or other unaffiliated third parties. This liability includes losses associated with certain borrower payment defaults, credit quality issues or misrepresentation. CTX Mortgage estimates the losses that may be incurred for certain loan originations based on, among other factors, historical loss rates and current trends in loan originations. This liability reflects management’s judgment of the loss exposure at the end of the reporting period.

     Although we consider the loan origination reserve reflected in our consolidated balance sheet at March 31, 2003 to be adequate, there can be no assurance that this reserve will prove to be adequate over time to cover ultimate losses in connection with our loan originations. This reserve may prove to be inadequate due to unanticipated adverse changes in the economy or discrete events adversely affecting specific customers.

RECENT ACCOUNTING PRONOUNCEMENTS

     In August 2001, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” or SFAS No. 144. The statement is effective for financial statements issued for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years. The implementation of SFAS No. 144 on April 1, 2002 did not have a material impact on our results of operations or financial position.

     In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” or FIN 45, which requires certain guarantees to be recorded at fair value. FIN 45 also requires a guarantor to make certain disclosures about guarantees, including product warranties, even when the likelihood of making any payments under the guarantee is remote. The disclosure requirements of FIN 45 are effective for financial statements of interim or annual periods ending after December 15, 2002. The initial recognition and measurement provisions are applicable only for guarantees issued or modified after December 31, 2002.

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The implementation of FIN 45 did not have a material impact on our results of operations or financial position.

     In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities,” or FIN 46, which clarifies the accounting for certain entities in which equity investors do not have a controlling financial interest or the entity is unable to finance its activities without additional subordinated financial support from other parties. Certain disclosure requirements of FIN 46 are effective for financial statements of interim or annual periods issued after January 31, 2003. FIN 46 applies immediately to variable interest entities created, or in which an enterprise obtains an interest, after January 31, 2003. For variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003, FIN 46 applies to interim or annual periods beginning after June 15, 2003. At March 31, 2003, we have interests in the Partnership, HSF-I and certain joint ventures that may be affected by this interpretation. The nature of these entities’ operations and our potential maximum exposure related to these entities are discussed in the financial statements of the Partnership, filed in tandem with this Report, and in Note (F), “Indebtedness,” Note (G), “Centex Development Company, L.P.,” and Note (H), “Commitments and Contingencies” of Notes to Consolidated Financial Statements of Centex Corporation and subsidiaries. Management is in the process of evaluating the applicability of FIN 46 and the related accounting for our interests in the Partnership, HSF-I and our non-consolidated joint ventures.

     We have historically accounted for stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” or APB No. 25, and related interpretations, as permitted by Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation,” or SFAS No. 123. On April 1, 2003, we adopted the fair value measurement provisions of SFAS No. 123 under which we will recognize compensation expense of a stock-based award to an employee over the vesting period based on the fair value of the award on the grant date. In accordance with SFAS No. 123, the fair value method will be applied only to awards granted or modified after April 1, 2003, whereas awards granted prior to such date will continue to be accounted for under APB No. 25.

     In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148, “Accounting for Stock Based Compensation—Transition and Disclosure,” or SFAS No. 148, which provides for expanded disclosure concerning stock-based compensation, including disclosures in interim financial statements, and amends SFAS No. 123. SFAS No. 148’s transition guidance and provisions for annual disclosures are effective for fiscal years ending after December 15, 2002. As noted above, we will adopt the fair value measurement provisions of SFAS No. 123 effective April 1, 2003.

STOCK REPURCHASE PROGRAM

     During fiscal 2003, we repurchased a total of 874,700 shares of common stock under our stock option-related repurchase program, which we retained as treasury stock. At March 31, 2003, we had repurchased a total of 2.5 million shares out of 3.5 million shares authorized for repurchase by our Board of Directors and retired approximately 1.4 million shares.

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FORWARD-LOOKING STATEMENTS

     Various sections of this Report, including Business, Management’s Discussion and Analysis of Financial Condition and Results of Operations, Other Developments and Outlook sections, contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Act of 1934 and the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the context of the statement and generally arise when we are discussing our beliefs, estimates or expectations. These statements are not guarantees of future performance and involve a number of risks and uncertainties. Actual results and outcomes may differ materially from what we express or forecast in these forward-looking statements. In addition to the specific uncertainties discussed elsewhere in this Report, the following risks and uncertainties may affect our actual performance and results of operations:

•   Our residential Home Building operations are somewhat cyclical and sensitive to changes in economic conditions, including levels of employment, consumer confidence and income, availability of financing, interest rate levels and changes in the economic condition of the local markets in which we operate.
 
•   Our residential Home Building operations are also subject to other risks and uncertainties, including seasonal variations, adverse weather conditions, the availability of adequate land in desirable locations, the cost and availability of labor and construction materials, labor disputes, the general demand for housing and new construction and the resale market for existing homes.
 
•   Our Construction Services operations are also somewhat cyclical and sensitive to changes in economic conditions, including overall capital spending trends in the economy, changes in federal and state appropriations for construction projects and competitive pressures on the availability and pricing of construction projects.
 
•   Our Construction Services operations are also subject to other risks and uncertainties, including the timing of new awards and the funding of such awards; adverse weather conditions; cancellations of, or changes in the scope to, existing contracts; the cost and availability of labor and construction materials; labor disputes; the ability to meet performance or schedule guarantees and cost overruns.
 
•   Virtually all of our homebuyers finance their home acquisitions through our Financial Services operations or third party lenders. In general, our Home Building operations can be adversely affected by increases in interest rates.
 
•   The results of operations of CTX Mortgage depend to a significant extent on the level of interest rates. Any significant increases in mortgage rates above currently prevailing levels could adversely affect the volume of loan originations. There can be no assurance that mortgage rates will remain at the current level in the future. Our mortgage loan operations are also dependent upon the securitization market for mortgage-backed securities and the availability of mortgage warehouse financing.
 
•   Our Home Equity operations involve holding residential mortgage loans for investment and establishing an allowance for credit losses on these loans. Although the amount of this allowance reflects our

    judgment as to our present loss exposure on these loans, there can be no assurance that it will be sufficient to cover any losses that may ultimately be incurred.
 
•   Demand for the products that our Construction Products operations produce is directly related to activity in the homebuilding and construction industries and to general economic conditions. Our Construction Products operations are also concentrated in particular regional and local markets that may experience

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  cyclical downturns at different times than the national economy. The price at which we sell our construction products, particularly gypsum wallboard, is highly sensitive to changes in supply and demand for such products, energy costs, raw material prices and competition from other domestic and foreign producers.
 
•   All of our businesses operate in very competitive environments, which are characterized by competition from a number of other homebuilders, mortgage lenders, construction products producers and contractors in each of the markets in which we operate.
 
•   We are subject to various federal, state and local statutes, rules and regulations that could affect our businesses, including those concerning zoning, construction, protecting the environment and health. In addition, our businesses could be affected by changes in federal income tax policy, federal mortgage loan financing programs and by other changes in regulation or policy.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We are exposed to market risks related to fluctuations in interest rates on our direct debt obligations, mortgage loans receivable and residual interest in mortgage securitizations. The following analysis provides a framework to understand our sensitivity to hypothetical changes in interest rates as of March 31, 2003.

     We have utilized derivative instruments, including interest rate swaps and interest rate caps, in conjunction with our overall strategy to manage the amount of debt outstanding that is subject to changes in interest rates. We recognize amounts paid or received under interest rate swap or cap agreements as adjustments to interest expense. As of March 31, 2003, we had interest rate swap agreements that converted $1.26 billion of our variable-rate debt outstanding into fixed-rate debt.

     Financial Services originates, sells and securitizes conforming and nonconforming “A” mortgages, sub-prime first and second mortgages and home equity loans. Since December 1999 substantially all conforming, Jumbo “A” and GNMA-eligible mortgages have been sold to HSF-I at or near the date on which the loans were funded. As a result of the Harwood Swap and related swap agreements, as previously described in “Certain Off-Balance Sheet and Other Obligations,” we effectively bear all interest rate risks, non-credit related market risks and prepayment risks related to the Harwood Swap. Financial Services executes the forward sales of CTX Mortgage’s loans to hedge the risk of reductions in value of mortgages sold to HSF-I or maintained under secured financing agreements. This offsets most of our risk as the counterparty to the swap supporting the payment requirements of HSF-I. CTX Mortgage, acting as manager of HSF-I, delivers mortgages held by HSF-I to third party purchasers generally within 60 days of origination. Due to the high degree of liquidity in the “A” mortgage market and the frequency of loan sales and securitizations, the use of forward sales is an effective hedge against changes in market value that result from changes in interest rates.

     Home Equity uses interest rate swaps to hedge the market risk associated with the carrying of mortgages in anticipation of issuance of securitization debt to finance sub-prime mortgages. Home Equity will generally hold mortgages in anticipation of securitization for up to 120 days. Home Equity also uses interest rate swaps, included in the balance above, that, in effect, fix the interest rate on its variable interest rate debt.

     Prior to fiscal 2001, Home Equity retained the MSRI from its securitized pools of mortgages. As of March 31, 2003, our total MSRI was $108.1 million, comprised of $106.4 million related to Home Equity and $1.7 million related to CTX Mortgage. CTX Mortgage’s MSRI resulted from an acquisition in fiscal 2002. We continually monitor the fair value of the MSRI and review the factors expected to influence the future constant prepayment rate, or CPR, discount rates and credit losses. In developing assumptions

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regarding expected future CPR, we consider a variety of factors, many of which are interrelated. These factors include historical performance, origination channels, characteristics of borrowers, such as credit quality and loan-to-value relationships, and market factors that influence competition. If changes in assumptions regarding future CPR, discount rates or credit losses are necessary, the MSRI fair value is adjusted accordingly.

     We utilize both short-term and long-term debt in our financing strategy. For fixed-rate debt, changes in interest rates generally affect the fair market value of the debt instrument but not our earnings or cash flows. Conversely, for variable-rate debt, changes in interest rates generally do not impact the fair market value of the debt instrument but do affect our future earnings and cash flows. We do not have an obligation to prepay any of our fixed-rate debt prior to maturity, and as a result, interest rate risk and changes in fair market value should not have a significant impact on the fixed-rate debt until we are required to refinance such debt.

     As of March 31, 2003, short-term debt was $867.5 million, approximately $842.2 million of which was applicable to Financial Services and $25.3 million of which was applicable to Construction Products. The majority of Financial Services’ debt is collateralized by residential mortgage loans. We borrow on a short-term basis in the commercial paper market under a $600 million program size supported by a $700 million revolving credit facility due in 2005 and from banks under uncommitted lines that bear interest at prevailing market rates. The weighted-average interest rate on short-term borrowings outstanding at March 31, 2003 was 1.6%.

     The maturities of Centex’s long-term debt outstanding at March 31, 2003 were as follows. We define Centex as a supplemental presentation that reflects the Financial Services segment as it accounted for under the equity method.

                                                                     
        Maturities through March 31,                          
       
                         
(in 000’s) 2004     2005     2006     2007     2008     Thereafter     Total     Fair Value  
       
   
   
   
   
   
   
   
 
Centex
                                                                
 
Fixed Rate Debt
   $ 13,571     $ 2,444     $ 300,124     $ 202,414     $ 335,022     $ 973,629     $ 1,827,204     $ 2,038,693  
   
Average Interest Rate
     7.88 %     5.07 %     8.96 %     8.01 %     4.82 %     7.26 %     7.18 %        
 
 
Variable Rated Hedged Debt (1)
   $ 55,000     $ —     $ 25,000     $ —     $ —     $ —     $ 80,000     $ 80,030  
   
Average Interest Rate
     5.49 %     — %     7.99 %     — %     — %     — %     6.27 %        
 
 
Variable Rate Debt
   $ 14,000     $ 30,000     $ 15,000     $ 88,000     $ 24,319     $ 2,100     $ 173,419     $ 176,380  
   
Average Interest Rate
     2.37 %     3.34 %     3.10 %     3.32 %     2.49 %     2.75 %     3.10 %        

(1)   These variable rate notes are fixed rate instruments as a result of a hedge using interest rate swaps.

     The maturities of Centex’s long-term debt outstanding at March 31, 2002 were as follows:

                                                                     
        Maturities through March 31,                          
       
                         
(in 000’s) 2003     2004     2005     2006     2007     Thereafter     Total     Fair Value  
       
   
   
   
   
   
   
   
 
Centex
                                                                
 
Fixed Rate Debt
   $ 27,716     $ 16,480     $ 339     $ 300,099     $ 202,376     $ 748,437     $ 1,295,447     $ 1,335,275  
   
Average Interest Rate
     6.13 %     7.03 %     5.86 %     8.96 %     8.01 %     7.70 %     8.00 %        
 
 
Variable Rated Hedged Debt (1)
   $ 35,000     $ 100,000     $ —     $ 25,000     $ —     $ —     $ 160,000     $ 157,667  
   
Average Interest Rate
     7.60 %     5.24 %     — %     7.99 %     — %     — %     6.19 %        
 
 
Variable Rate Debt
   $ 117,115     $ 77,125     $ 30,135     $ 150     $ 88,165     $ 4,985     $ 317,675     $ 317,177  
   
Average Interest Rate
     3.45 %     3.56 %     3.89 %     1.49 %     4.60 %     1.49 %     3.80 %        

(1)   These variable rate notes are fixed rate instruments as a result of a hedge using interest rate swaps.

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     The following table sets forth the estimated maturity or repricing of borrowings collateralized by securitized residential mortgage loans structured as borrowings outstanding at March 31, 2003. The principal and interest on this debt is paid using the cash flows from the underlying mortgage receivables, which serve as collateral for this debt. Accordingly, the timing of the principal payments on this debt is dependent on the payments received on the underlying mortgage receivables. The amounts shown within a particular period were determined in accordance with the contractual terms of the debt, except (1) fixed-rate mortgage securities reflect estimated prepayments, which were estimated based on the results of a prepayment model we utilize, and empirical data, and (2) adjustable-rate debt is included in the period in which it is first scheduled to adjust and not in the period in which it matures. We believe that these assumptions approximate actual experience and consider them reasonable. However, the interest rate sensitivity could vary substantially if different assumptions were used or actual experience differs from the historical experience on which we base the assumptions.

                                                                   
        Maturities through March 31,                          
       
                         
(in 000’s) 2004     2005     2006     2007     2008     Thereafter     Total     Fair Value  
       
   
   
   
   
   
   
   
 
Financial Services
                                                                
 
Fixed Rate Debt
   $ 584,776     $ 452,417     $ 353,367     $ 459,027     $ 497,246     $ 71,177     $ 2,418,010     $ 2,501,771  
   
Average Interest Rate
     5.46 %     5.62 %     5.75 %     5.61 %     4.87 %     4.01 %     5.55 %        
 
 
Variable Rate Debt
   $ 500,621     $ 424,838     $ 313,308     $ 173,214     $ 274,094     $ 52,505     $ 1,738,580     $ 1,732,822  
   
Average Interest Rate
     1.99 %     2.15 %     2.37 %     2.43 %     2.62 %     2.77 %     2.17 %        

     The following table sets forth the estimated maturity or repricing of borrowings collateralized by securitized residual mortgage loans structured as borrowings outstanding at March 31, 2002.

                                                                   
        Maturities through March 31,                          
       
                         
(in 000’s) 2003     2004     2005     2006     2007     Thereafter     Total     Fair Value  
       
   
   
   
   
   
   
   
 
Financial Services
                                                                
 
Fixed Rate Debt
   $ 489,230     $ 408,526     $ 307,484     $ 281,425     $ 292,611     $ 438,505     $ 2,217,781     $ 2,246,446  
   
Average Interest Rate
     4.41 %     5.29 %     5.99 %     6.70 %     6.85 %     6.34 %     5.67 %        
 
 
Variable Rate Debt
   $ 258,131     $ 227,946     $ 145,261     $ 126,292     $ 87,011     $ 107,980     $ 952,621     $ 952,704  
   
Average Interest Rate
     2.39 %     2.49 %     2.63 %     2.54 %     2.42 %     2.42 %     2.47 %        

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial Information

         
Centex Corporation and Subsidiaries
        
         
Consolidated Revenues and Operating Earnings by Line of Business
     60  
         
Statements of Consolidated Earnings
     61  
         
Consolidated Balance Sheets with Consolidating Details
     62  
         
Statements of Consolidated Cash Flows with Consolidating Details
     64  
         
Statements of Consolidated Stockholders’ Equity
     66  
         
Notes to Consolidated Financial Statements
     68  
         
Report of Independent Auditors
     99  
         
Quarterly Results
     100  

59

Table of Contents

Centex Corporation and Subsidiaries
Consolidated Revenues and Operating Earnings by Line of Business
(Dollars in thousands)

                                             
        For the Years Ended March 31,  
       
 
        2003     2002     2001     2000     1999  
       
   
   
   
   
 
Revenues
                                        
 
Home Building
   $ 5,934,510     $ 4,984,817     $ 4,356,172     $ 3,686,844     $ 2,819,442  
 
     65 %     64 %     65 %     61 %     54 %
 
Financial Services
     855,015       699,760       463,646       430,611       436,299  
 
     9 %     9 %     7 %     7 %     8 %
 
Construction Products
     501,257       471,083       441,127       470,465       381,899  
 
     5 %     6 %     7 %     8 %     7 %
 
Construction Services
     1,517,851       1,296,024       1,290,382       1,205,762       1,350,776  
 
     17 %     17 %     19 %     20 %     26 %
 
Investment Real Estate
     66,862       72,416       33,042       30,928       33,694  
 
     1 %     1 %     — %     1 %     1 %
 
Other
     241,746       224,330       126,366       183,526       178,556  
 
     3 %     3 %     2 %     3 %     4 %
 
  
   
   
   
   
 
 
   $ 9,117,241     $ 7,748,430     $ 6,710,735     $ 6,008,136     $ 5,200,666  
 
  
   
   
   
   
 
 
     100 %     100 %     100 %     100 %     100 %
Business Segment Operating Earnings (1)
                                        
 
Home Building
   $ 680,777     $ 527,462     $ 425,450     $ 323,220     $ 242,223  
 
     68 %     66 %     70 %     56 %     49 %
 
Financial Services
     161,825       114,733       19,667       32,474       92,309  
 
     16 %     14 %     3 %     6 %     19 %
 
Construction Products
     96,268       75,868       99,441       168,611       120,310  
 
     10 %     9 %     17 %     29 %     24 %
 
Construction Services
     30,718       36,225       30,886       23,471       15,209  
 
     3 %     5 %     5 %     4 %     3 %
 
Investment Real Estate
     54,334       48,068       50,908       30,122       29,420  
 
     5 %     6 %     8 %     5 %     6 %
 
Other
     (18,849 )     3,140       (21,613 )     2,580       (5,371 )
 
     (2 %)     — %     (3 %)     — %     (1 %)
 
  
   
   
   
   
 
 
     1,005,073       805,496       604,739       580,478       494,100  
 
     100 %     100 %     100 %     100 %     100 %
 
Corporate General and Administrative
     60,289       50,189       36,924       33,015       28,104  
 
Interest
     119,560       115,766       99,069       66,844       41,581  
 
Minority Interest in Construction Products
     30,373       20,776       32,415       63,758       51,121  
 
  
   
   
   
   
 
   
Earnings Before Income Taxes
   $ 794,851     $ 618,765     $ 436,331     $ 416,861     $ 373,294  
 
  
   
   
   
   
 

     Applicable segment operating expenses have been deducted from business segment operating earnings.

     (1)   Business Segment Operating Earnings excludes corporate general and administrative expense.

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Centex Corporation and Subsidiaries
Statements of Consolidated Earnings
(Dollars in thousands, except per share data)

                             
        For the Years Ended March 31,  
       
 
        2003     2002     2001  
       
   
   
 
Revenues
                        
 
Home Building
   $ 5,934,510     $ 4,984,817     $ 4,356,172  
 
Financial Services
     855,015       699,760       463,646  
 
Construction Products
     501,257       471,083       441,127  
 
Construction Services
     1,517,851       1,296,024       1,290,382  
 
Investment Real Estate
     66,862       72,416       33,042  
 
Other
     241,746       224,330       126,366  
 
  
   
   
 
 
     9,117,241       7,748,430       6,710,735  
 
  
   
   
 
Costs and Expenses
                        
 
Home Building
     5,253,733       4,457,355       3,930,722  
 
Financial Services
     693,190       585,027       443,979  
 
Construction Products
     404,989       395,215       341,686  
 
Construction Services
     1,487,133       1,259,799       1,259,496  
 
Investment Real Estate
     12,528       24,348       (17,866 )
 
Other
     260,595       221,190       147,979  
 
Corporate General and Administrative
     60,289       50,189       36,924  
 
Interest
     119,560       115,766       99,069  
 
Minority Interest
     30,373       20,776       32,415  
 
  
   
   
 
 
     8,322,390       7,129,665       6,274,404  
 
  
   
   
 
Earnings Before Income Tax
     794,851       618,765       436,331  
 
Income Taxes
     238,932       236,539       154,354  
 
  
   
   
 
Net Earnings
   $ 555,919     $ 382,226     $ 281,977  
 
  
   
   
 
Earnings Per Share
                        
 
Basic
   $ 9.15     $ 6.31     $ 4.77  
 
  
   
   
 
 
Diluted
   $ 8.83     $ 6.11     $ 4.65  
 
  
   
   
 
Average Shares Outstanding
                        
 
Basic
     60,782,042       60,560,788       59,095,403  
 
Dilutive Securities:
                        
   
Options
     1,732,308       1,554,501       1,165,482  
   
Convertible Debenture and Other
     543,806       413,858       400,000  
 
  
   
   
 
 
Diluted
     63,058,156       62,529,147       60,660,885  
 
  
   
   
 
Cash Dividends Per Share
   $ 0.16     $ 0.16     $ 0.16  
 
  
   
   
 

    See Notes to Consolidated Financial Statements.

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Centex Corporation and Subsidiaries
Consolidated Balance Sheets with Consolidating Details
(Dollars in thousands)

                     
        Centex Corporation and Subsidiaries  
       
 
        March 31,  
       
 
        2003     2002  
       
   
 
Assets
                
 
Cash and Cash Equivalents
   $ 472,053     $ 219,716  
 
Restricted Cash
     172,321       106,270  
 
Receivables —
                
   
Residential Mortgage Loans Held for Investment, net
     4,642,826       3,279,450  
   
Residential Mortgage Loans Held for Sale
     303,328       241,793  
   
Construction Contracts
     251,024       221,705  
   
Trade, including Notes of $32,119 and $30,908
     412,311       345,311  
 
Inventories —
                
   
Housing Projects
     3,315,947       2,513,168  
   
Land Held for Development and Sale
     106,057       85,997  
   
Construction Products
     58,254       54,220  
   
Other
     25,125       25,626  
 
Investments —
                
   
Centex Development Company, L.P.
     281,100       269,178  
   
Joint Ventures and Other
     102,277       94,609  
   
Unconsolidated Subsidiaries
     —       —  
 
Property and Equipment, net
     696,148       720,285  
 
Other Assets —
                
   
Deferred Income Taxes
     52,929       76,167  
   
Goodwill
     372,125       349,712  
   
Mortgage Securitization Residual Interest
     108,102       125,272  
   
Deferred Charges and Other, net
     238,609       256,976  
 
  
   
 
 
   $ 11,610,536     $ 8,985,455  
 
  
   
 
Liabilities and Stockholders’ Equity
                
 
Accounts Payable and Accrued Liabilities
   $ 1,677,764     $ 1,438,613  
 
Debt —
                
   
Centex
     2,105,880       1,791,752  
   
Financial Services
     4,998,819       3,485,027  
 
Payables to Affiliates
     —       —  
 
Minority Stockholders’ Interest
     170,227       153,290  
 
Stockholders’ Equity —
                
   
Preferred Stock, Authorized 5,000,000 Shares, None Issued
     —       —  
   
Common Stock, $.25 Par Value; Authorized 100,000,000 Shares; Outstanding 60,836,091 and 61,171,149 Shares, Respectively
     15,483       15,348  
   
Capital in Excess of Par Value
     98,711       72,446  
   
Unamortized Value of Restricted Stock
     (2,398 )     (2,408 )
   
Retained Earnings
     2,597,078       2,050,902  
   
Treasury Stock, at cost; 1,096,844 and 221,854 Shares, Respectively
     (45,037 )     (6,559 )
   
Accumulated Other Comprehensive Loss
     (5,991 )     (12,956 )
 
  
   
 
 
Total Stockholders’ Equity
     2,657,846       2,116,773  
 
  
   
 
 
   $ 11,610,536     $ 8,985,455  
 
  
   
 

    See Notes to Consolidated Financial Statements.

62

Table of Contents

Centex Corporation and Subsidiaries
Consolidated Balance Sheets with Consolidating Details
(Dollars in thousands)

                             
Centex*     Financial Services  
   
 
March 31,     March 31,  
   
 
2003     2002     2003     2002  
   
   
   
 
     
$ 456,971     $ 192,591     $ 15,082     $ 27,125  
  8,349       4,760       163,972       101,510  
     
  —       —       4,642,826       3,279,450  
  —       —       303,328       241,793  
  251,024       221,705       —       —  
  214,007       197,613       198,304       147,698  
     
  3,315,947       2,513,168       —       —  
  106,057       85,997       —       —  
  58,254       54,220       —       —  
  16,679       22,186       8,446       3,440  
     
  281,100       269,178       —       —  
  102,277       94,609       —       —  
  405,407       498,117       —       —  
  654,052       672,165       42,096       48,120  
     
  (36,534 )     (3,456 )     89,463       79,623  
  355,070       332,897       17,055       16,815  
  —       —       108,102       125,272  
  156,969       179,810       81,640       77,166  
   
   
   
 
$ 6,345,629     $ 5,335,560     $ 5,670,314     $ 4,148,012  
   
   
   
 
     
$ 1,413,412     $ 1,275,720     $ 264,352     $ 162,893  
     
  2,105,880       1,791,752       —       —  
  —       —       4,998,819       3,485,027  
  —       —       25,736       187,764  
  168,491       151,315       1,736       1,975  
     
  —       —       —       —  
     
  15,483       15,348       1       1  
  98,711       72,446       200,467       202,671  
  (2,398 )     (2,408 )     —       —  
  2,597,078       2,050,902       198,145       116,748  
  (45,037 )     (6,559 )     —       —  
  (5,991 )     (12,956 )     (18,942 )     (9,067 )
   
   
   
 
  2,657,846       2,116,773       379,671       310,353  
   
   
   
 
$ 6,345,629     $ 5,335,560     $ 5,670,314     $ 4,148,012  
   
   
   
 

*   In the supplemental data presented above, “Centex” represents the consolidation of all subsidiaries other than those included in Financial Services as described in Note (A), “Significant Accounting Policies.” Transactions between Centex and Financial Services have been eliminated from the Centex Corporation and Subsidiaries balance sheets.

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Centex Corporation and Subsidiaries
Statements of Consolidated Cash Flows with Consolidating Details
(Dollars in thousands)

                             
        Centex Corporation and Subsidiaries  
       
 
        For the Years Ended March 31,  
       
 
        2003     2002     2001  
       
   
   
 
Cash Flows — Operating Activities
                        
 
Net Earnings
   $ 555,919     $ 382,226     $ 281,977  
 
Adjustments
                        
   
Depreciation, Depletion and Amortization
     113,213       90,659       40,509  
   
Provision for Losses on Residential Mortgage Loans Held for Investment
     34,859       17,415       4,453  
   
Deferred Income Taxes Provision (Benefit)
     23,687       (16,307 )     8,019  
   
Equity in Earnings of Centex Development Company, L.P. and Joint Ventures
     (42,672 )     (29,918 )     (4,958 )
   
Equity in Earnings of Unconsolidated Subsidiaries
     —       —       —  
   
Asset Impairments
     11,487       —       —  
   
Minority Interest, net of Taxes
     20,201       13,818       20,881  
 
Changes in Assets and Liabilities, Excluding Effect of Acquisitions
                        
   
(Increase) Decrease in Restricted Cash
     (66,051 )     (44,618 )     (53,718 )
   
(Increase) Decrease in Receivables
     (90,071 )     39,561       (61,116 )
   
(Increase) Decrease in Residential Mortgage Loans Held for Sale
     (61,535 )     40,197       184,782  
   
Increase in Housing Projects and Land Held for Development and Sale Inventories
     (734,666 )     (484,157 )     (159,858 )
   
(Increase) Decrease in Construction Products and Other Inventories
     (2,164 )     (23,213 )     (978 )
   
Increase in Accounts Payable and Accrued Liabilities
     210,162       138,577       110,149  
   
Decrease (Increase) in Other Assets, net
     19,867       (52,202 )     (151,490 )
   
(Decrease) Increase in Payables to Affiliates
     —       —       —  
   
Other
     2,255       (4,152 )     (4,109 )
 
  
   
   
 
 
     (5,509 )     67,886       214,543  
 
  
   
   
 
Cash Flows — Investing Activities
                        
 
Increase in Residential Mortgage Loans Held for Investment
     (1,398,235 )     (1,499,601 )     (1,776,284 )
 
Decrease (Increase) in Investment and Advances to Centex Development Company, L.P. and Joint Ventures
     52,792       (37,327 )     (153,846 )
 
Decrease (Increase) in Investment and Advances to Unconsolidated Subsidiaries
     —       —       —  
 
Acquisitions, net of Cash Acquired
                        
   
Construction Products Operations
     —       —       (342,200 )
   
Home Building Operations
     (137,733 )     —       (100,097 )
   
Other
     —       (39,411 )     —  
 
Purchases of Property and Equipment, net
     (62,701 )     (60,380 )     (52,442 )
 
  
   
   
 
 
     (1,545,877 )     (1,636,719 )     (2,424,869 )
 
  
   
   
 
Cash Flows — Financing Activities
                        
 
Increase (Decrease) in Short-Term Debt, net
     534,231       (213,308 )     (83,205 )
 
Centex
                        
   
Issuance of Long-Term Debt
     605,992       1,007,699       943,491  
   
Repayment of Long-Term Debt
     (298,491 )     (699,570 )     (329,658 )
 
Financial Services
                        
   
Issuance of Long-Term Debt
     1,999,374       2,053,238       1,652,500  
   
Repayment of Long-Term Debt
     (1,013,186 )     (458,704 )     (76,632 )
 
Retirement of Common Stock
     —       —       (784 )
 
Proceeds from Stock Option Exercises
     24,024       57,725       35,985  
 
Purchase of Treasury Stock
     (38,478 )     (6,559 )     —  
 
Dividends Paid
     (9,743 )     (9,724 )     (9,472 )
 
  
   
   
 
 
     1,803,723       1,730,797       2,132,225  
 
  
   
   
 
Net Increase (Decrease) in Cash and Cash Equivalents
     252,337       161,964       (78,101 )
Cash and Cash Equivalents at Beginning of Year
     219,716       57,752       135,853  
 
  
   
   
 
Cash and Cash Equivalents at End of Year
   $ 472,053     $ 219,716     $ 57,752  
 
  
   
   
 

See Notes to Consolidated Financial Statements.

64

Table of Contents

Centex Corporation and Subsidiaries
Statements of Consolidated Cash Flows with Consolidating Details
(Dollars in thousands)

                                             
Centex*     Financial Services  
   
 
For Years Ended March 31,     For Years Ended March 31,  
   
 
2003     2002     2001     2003     2002     2001  
   
   
   
   
   
 
 
                        
$ 555,919     $ 382,226     $ 281,977     $ 152,970     $ 80,512     $ 11,865  
 
                        
  96,214       74,816       25,220       16,999       15,843       15,289  
  —       —       —       34,859       17,415       4,453  
  23,687       (16,307 )     8,019       (2,430 )     (41,293 )     (3,858 )
 
                        
  (42,672 )     (29,918 )     (4,958 )     —       —       —  
  (152,970 )     (80,512 )     (11,865 )     —       —       —  
  11,487       —       —       —       —       —  
  20,201       13,818       20,881       —       —       —  
 
                        
  (3,589 )     682       (1,732 )     (62,462 )     (45,300 )     (51,986 )
  (39,465 )     67,482       (6,434 )     (50,606 )     (27,921 )     (54,114 )
  —       —       —       (61,535 )     40,197       184,782  
 
                        
  (734,666 )     (484,157 )     (159,858 )     —       —       —  
  2,842       (2,797 )     (659 )     (5,006 )     (20,416 )     (319 )
  108,703       98,412       79,597       91,584       30,968       36,319  
  18,931       (8,861 )     (132,719 )     3,397       139       (31,876 )
  —       —       —       (155,879 )     135,692       (3,546 )
  2,494       (3,994 )     (4,420 )     (239 )     (158 )     311  
   
   
   
   
   
 
  (132,884 )     10,890       93,049       (38,348 )     185,678       107,320  
   
   
   
   
   
 
 
                        
  —       —       —       (1,398,235 )     (1,499,601 )     (1,776,284 )
 
                        
  52,761       (37,327 )     (153,846 )     —       —       —  
 
                        
  239,531       (102,762 )     (35,826 )     —       —       —  
 
                        
  —       —       (342,200 )     —       —       —  
  (137,733 )     —       (100,097 )     —       —       —  
  —       (38,904 )     —       —       (507 )     —  
  (47,226 )     (53,494 )     (27,448 )     (15,475 )     (6,886 )     (24,994 )
   
   
   
   
   
 
  107,333       (232,487 )     (659,417 )     (1,413,710 )     (1,506,994 )     (1,801,278 )
   
   
   
   
   
 
 
                        
  6,627       18,630       (146,908 )     527,604       (231,938 )     63,703  
 
                        
  605,992       1,007,699       943,491       —       —       —  
  (298,491 )     (699,570 )     (329,658 )     —       —       —  
 
                        
  —       —       —       1,999,374       2,053,238       1,652,500  
  —       —       —       (1,013,186 )     (458,704 )     (76,632 )
  —       —       (784 )     —       —       —  
  24,024       57,725       35,985       1,223       2,080       50,000  
  (38,478 )     (6,559 )     —       —       —       —  
  (9,743 )     (9,724 )     (9,472 )     (75,000 )     (28,000 )     —  
   
   
   
   
   
 
  289,931       368,201       492,654       1,440,015       1,336,676       1,689,571  
   
   
   
   
   
 
  264,380       146,604       (73,714 )     (12,043 )     15,360       (4,387 )
  192,591       45,987       119,701       27,125       11,765       16,152  
   
   
   
   
   
 
$ 456,971     $ 192,591     $ 45,987     $ 15,082     $ 27,125     $ 11,765  
   
   
   
   
   
 

*   In the supplemental data presented above, “Centex” represents the consolidation of all subsidiaries other than those included in Financial Services as described in Note (A), “Significant Accounting Policies.” Transactions between Centex and Financial Services have been eliminated from the Centex Corporation and Subsidiaries statements of cash flows.

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Centex Corporation and Subsidiaries
Statements of Consolidated Stockholders’ Equity
(in thousands)

                                     
                                Unamortized  
                        Capital in     Value of  
        Common Stock     Excess of     Restricted  
        Shares     Amount     Par Value     Stock  
       
   
   
   
 
Balance, March 31, 2000
     58,806     $ 14,702     $ —     $ —  
 
Exercise of Stock Options, Including Tax Benefit
     1,158       289       26,554       —  
 
Retirement of Shares
     (35 )     (9 )     (775 )     —  
 
Cash Dividends
     —       —       —       —  
 
Net Earnings
     —       —       —       —  
   
Unrealized Gain on Investments
     —       —       —       —  
   
Foreign Currency Translation Adjustments
     —       —       —       —  
                             
 
Comprehensive Income
                                
       
   
   
   
 
Balance, March 31, 2001
     59,929       14,982       25,779       —  
 
Issuance of Restricted Stock
     78       19       3,133       (3,152 )
 
Amortization of Restricted Stock
     —       —       —       744  
 
Exercise of Stock Options, Including Tax Benefit
     1,386       347       43,534       —  
 
Cash Dividends
     —       —       —       —  
 
Purchases of Common Stock for Treasury
     (222 )     —       —       —  
 
Net Earnings
     —       —       —       —  
   
Unrealized Loss on Hedging Instruments
     —       —       —       —  
   
Foreign Currency Translation Adjustments
     —       —       —       —  
   
Unrealized Gain on Investments
     —       —       —       —  
                             
 
Comprehensive Income
                                
       
   
   
   
 
Balance, March 31, 2002
     61,171       15,348       72,446       (2,408 )
 
Issuance of Restricted Stock
     20       5       995       (1,000 )
 
Amortization of Restricted Stock
     —       —       —       1,010  
 
Exercise of Stock Options, Including Tax Benefit
     520       130       19,751       —  
 
Cash Dividends
     —       —       —       —  
 
Purchases of Common Stock for Treasury
     (875 )     —       —       —  
 
Other
     —       —       5,519       —  
 
Net Earnings
     —       —       —       —  
   
Unrealized Loss on Hedging Instruments
     —       —       —       —  
   
Foreign Currency Translation Adjustments
     —       —       —       —  
   
Other Comprehensive Income Items
     —       —       —       —  
                             
 
Comprehensive Income
                                
       
   
   
   
 
Balance, March 31, 2003
     60,836     $ 15,483     $ 98,711     $ (2,398 )
 
  
   
   
   
 

See Notes to Consolidated Financial Statements.

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Centex Corporation and Subsidiaries
Statements of Consolidated Stockholders’ Equity
( in thousands)

                             
                Accumulated          
        Treasury     Other          
Retained     Stock     Comprehensive          
Earnings     at Cost     Income (Loss)     Total  
   
   
   
 
$ 1,405,895     $ —     $ (1,248 )   $ 1,419,349  
  —       —       —       26,843  
  —       —       —       (784 )
  (9,472 )     —       —       (9,472 )
  281,977       —       —       281,977  
  —       —       1,152       1,152  
  —       —       (5,001 )     (5,001 )
                       
 
                          278,128  
   
   
   
 
  1,678,400       —       (5,097 )     1,714,064  
  —       —       —       —  
  —       —       —       744  
  —       —       —       43,881  
  (9,724 )     —       —       (9,724 )
  —       (6,559 )     —       (6,559 )
  382,226       —       —       382,226  
  —       —       (11,033 )     (11,033 )
  —       —       2,622       2,622  
  —       —       552       552  
                       
 
                          374,367  
   
   
   
 
  2,050,902       (6,559 )     (12,956 )     2,116,773  
  —       —       —       —  
  —       —       —       1,010  
  —       —       —       19,881  
  (9,743 )     —       —       (9,743 )
  —       (38,478 )     —       (38,478 )
  —       —       —       5,519  
  555,919       —       —       555,919  
  —       —       (10,849 )     (10,849 )
  —       —       19,330       19,330  
  —       —       (1,516 )     (1,516 )
                       
 
                          562,884  
   
   
   
 
$ 2,597,078     $ (45,037 )   $ (5,991 )   $ 2,657,846  
   
   
   
 

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Centex Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)

(A) SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

     The consolidated financial statements include the accounts of Centex Corporation and subsidiaries (the “Company”) after the elimination of all significant intercompany balances and transactions.

Balance sheet and cash flows data is presented in the following categories:

  •   Centex Corporation and Subsidiaries. This represents the consolidation of Centex, Financial Services and all of their consolidated subsidiaries. The effects of transactions among related companies within the consolidated group have been eliminated.
 
  •   Centex. This information is presented as supplemental information and represents the consolidation of all subsidiaries other than those included in Financial Services, which are presented on an equity basis of accounting.
 
  •   Financial Services. This information is presented as supplemental information and represents Centex Financial Services and its subsidiaries.

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Revenue Recognition

     Revenues from Home Building projects and Investment Real Estate are recognized when homes and properties are sold and title passes.

     Revenues from the sale of mortgage loans, mortgage servicing rights and loan origination fees are recognized when the related loan is sold to a third-party purchaser.

     Interest revenues on residential mortgage loans receivable are recognized as revenue using the interest (actuarial) method. Revenue accruals are suspended, except for revenue accruals related to insured mortgage loans, when the residential mortgage loan becomes contractually delinquent for 90 days or more. The accrual is resumed when the residential mortgage loan becomes less than 90 days contractually delinquent. At March 31, 2003 and 2002, residential mortgage loans, on which revenue was not being accrued, were approximately $167.1 million and $83.5 million, respectively.

     Revenue from the sale of cement, wallboard, paperboard and concrete and aggregates is recognized when goods are shipped.

     Long-term construction contract revenues are recognized on the percentage-of-completion method based on the costs incurred relative to total estimated costs. Full provision is made for any anticipated losses. Billings for long-term construction contracts are rendered monthly, including the amount of

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retainage withheld by the customer until contract completion. As a general contractor, the Company withholds similar retainages from each subcontractor. Retainages of $87.5 million and $72.9 million included in construction contracts receivable and $99.9 million and $76.1 million included in accounts payable at March 31, 2003 and 2002, respectively, are generally receivable and payable within one year.

     Claims related to long-term construction contracts are recognized as revenue only after management has determined that the collection is probable and the amount can be reliably estimated. Claims of $0, $1.8 million and $0 are included in revenues for the fiscal years ended March 31, 2003, 2002 and 2001 (“fiscal 2003,” “fiscal 2002” and “fiscal 2001”), respectively.

     Revenue for manufactured homes is recognized at the time of shipment, which is when title passes, for the manufacturing company and when homes are sold and shipped and title passes for home sales by the retail operations. For the Company’s home services operations, revenue is recognized at the time the services are rendered.

Earnings Per Share

     Basic earnings per share are computed based on the weighted-average number of shares of common stock, par value $.25 per share (“Common Stock”), outstanding. Diluted earnings per share are computed based upon the basic weighted-average number of shares plus the dilution of the stock options and a convertible debenture.

     The computation of diluted earnings per share excludes anti-dilutive options to purchase 852,000 shares of Common Stock at an average price of $50.43 for the year ended March 31, 2003. The computation of diluted earnings per share excludes anti-dilutive options to purchase 1,700 shares of Common Stock at an average price of $46.07 for the year ended March 31, 2002. The computation of diluted earnings per share excludes anti-dilutive options to purchase 3,312,000 shares of Common Stock at an average price of $35.24 for the year ended March 31, 2001. Anti-dilutive options at March 31, 2003, have expiration dates ranging from July 2008 to December 2009.

Cash and Cash Equivalents

     Cash equivalents represent highly liquid investments with an original maturity of three months or less.

Restricted Cash

     Restricted cash primarily represents cash in principal and interest accounts pending remittance into the securitization trusts related to securitizations by Centex Home Equity Company, L.L.C. (“Home Equity”).

Residential Mortgage Loans

     Residential mortgage loans held for investment represent mortgage loans originated by Home Equity, which are securitized and recorded as secured borrowings in the financial statements using the portfolio method. These mortgage loans are stated at cost less an allowance for losses. Residential mortgage loans held for sale represent mortgage loans originated by CTX Mortgage Company, L.L.C. (“CTX Mortgage”), which will be sold to third parties and recorded as sales. These mortgage loans are stated at the lower of cost or market. Market is determined by forward sale commitments, current investor yield requirements and current market conditions. Substantially all of the mortgage loans are delivered to third-party purchasers and/or subjected to securitization within three months after origination. These loans

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are subject to hedge instruments during the time they are held in inventory. Substantially all of the mortgage loans are pledged as collateral for secured financings.

     Home Equity establishes an allowance for losses by charging the provision for losses in the statements of consolidated earnings when it believes the event causing the loss has occurred. When Home Equity determines that a residential mortgage loan held for investment is partially or fully uncollectible, the estimated loss is charged to the allowance for losses. Recoveries on losses previously charged to the allowance are credited to the allowance at the time the recovery is collected.

     Home Equity believes that the allowance for losses is sufficient to provide for credit losses in the existing residential mortgage loans held for investment, which include real estate owned. Home Equity evaluates the allowance on an aggregate basis considering, among other things, the relationship of the allowance to residential mortgage loans held for investment and historical credit losses. The allowance reflects Home Equity's judgment of the present loss exposure at the end of the reporting period. A range of expected credit losses is estimated using historical losses, static pool loss curves and delinquency modeling. These tools take into consideration historical information regarding delinquency and loss severity experience and apply that information to the portfolio at each reporting date.

     CTX Mortgage has established a liability for anticipated losses associated with loans originated and sold to HSF-I or other unaffiliated third parties. This liability includes losses associated with certain borrower payment defaults, credit quality issues or misrepresentation.

     CTX Mortgage estimates the losses that may be incurred for certain loan originations based on, among other factors, historical loss rates and current trends in loan originations. This liability reflects management’s judgment of the loss exposure at the end of the reporting period.

     Although Home Equity and CTX Mortgage consider the allowance for losses on residential mortgage loans held for investment and the loan origination reserve reflected in the consolidated balance sheet at March 31, 2003 to be adequate, there can be no assurance that this allowance or reserve will prove to be adequate over time to cover ultimate losses. This allowance and reserve may prove to be inadequate due to unanticipated adverse changes in the economy or discrete events adversely affecting specific customers or industries.

Trade Accounts and Notes Receivable

     Trade accounts receivable primarily consist of accrued interest, amounts related to securitizations, sale of servicing rights, closed unfunded home sales receivables and trade sales related to the Company’s Financial Services, Home Building and Construction Products segments and are net of an allowance for doubtful accounts. Notes receivable at March 31, 2003 are collectible primarily over four years with $18.4 million being due within one year. The weighted-average interest rate on notes receivable at March 31, 2003 was 4.5%.

Inventory, Capitalization and Segment Expenses

     Housing projects and land held for development and sale are stated at the lower of cost (including direct construction costs, capitalized interest and real estate taxes) or fair value less cost to sell. The capitalized costs, other than interest, are included in the Home Building and Investment Real Estate costs and expenses in the Statement of Consolidated Earnings when related revenues are recognized. Interest costs relieved from inventories are included as interest expense.

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     Construction Products inventories are stated at the lower of average cost (including applicable material, labor and plant overhead) or market.

     General operating expenses associated with each segment of business are expensed when incurred and are included in the appropriate business segment.

Investments

     The Company maintains an investment in Centex Development Company, L.P. and subsidiaries (the “Partnership”). The investment is not consolidated and is accounted for on the equity method of accounting. See Note (G), “Centex Development Company, L.P.,” for additional information regarding the Partnership.

     The Company is a participant in certain joint ventures with interests ranging from 20% to 50%. The investments in these joint ventures are carried on the equity method in the consolidated financial statements, except for Construction Products’ 50% joint venture interests in its cement operations in Illinois and Texas. Construction Products has proportionately consolidated its pro rata interest in the revenues, expenses, assets and liabilities of those extractive industry ventures.

     The earnings or losses of the Company’s investment in the Partnership and joint ventures are included in the appropriate business segment.

Property and Equipment, net

     Property and equipment is carried at cost less accumulated depreciation. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets. Depreciable lives for Buildings and Improvements typically range from 7 to 40 years; depreciable lives for Machinery, Equipment and Other typically range from 2 to 10 years and depreciable lives for Plants typically range from 20 to 30 years. Major renewals and improvements are capitalized and depreciated. Repairs and maintenance are expensed as incurred. Costs and accumulated depreciation applicable to assets retired or sold are eliminated from the accounts and any resulting gains or losses are recognized at such time.

Impairment of Long-Lived Assets

     The Company assesses housing projects, land held for development and sale and property and equipment for recoverability in accordance with the provisions of Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”). SFAS No. 144 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets is measured by comparing the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. These evaluations for impairment are significantly impacted by estimates of revenues, costs and expenses and other factors. If these assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

     In fiscal 2003 the Company recorded impairments of $11.5 million, comprised of $4.9 million related to Manufactured Homes and $2.4 million related to Construction Services, both for the impairment of property and equipment, $2.2 million related to the write-down of inventory to market by Manufactured Homes and $2.0 million related to the impairment of property held for sale by Investment Real Estate.

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Goodwill

     Goodwill represents the excess of purchase price over net assets of businesses acquired. The Company adopted the provisions of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”), effective April 1, 2001. Upon the adoption of SFAS No. 142, goodwill is no longer subject to amortization. Rather, goodwill is subject to at least an annual assessment for impairment, at the reporting unit level, by applying a fair value-based test. If the carrying amount exceeds the fair value, an impairment would occur. The Company continually evaluates whether events and circumstances have occurred that indicate the remaining balance of goodwill may not be recoverable. Fair value is estimated using a discounted cash flow or market valuation approach. Such evaluations for impairment are significantly impacted by estimates of future revenues, costs and expenses and other factors. If the goodwill is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the goodwill exceeds the fair value of the future cash flows. The Company had no impairment of goodwill in fiscal 2003. See further discussion of goodwill at Note (E), “Goodwill.”

     Negative goodwill arose in conjunction with the combination of Centex Real Estate Corporation with Vista Properties, Inc. (“Vista”) in the fiscal year ended March 31, 1997. The book value of the Vista portfolio of properties was reduced after recording certain deferred tax benefits related to the combination. Negative goodwill was accreted to earnings as a reduction of costs and expenses over the estimated period during which Vista’s tax benefits were realized and the land was developed and/or sold. During fiscal 2001, negative goodwill was fully accreted.

Mortgage Securitization Residual Interest

     Home Equity uses mortgage securitizations to finance its mortgage loan portfolio. Securitizations entered into prior to March 31, 2000 were accounted for as sales, and the resulting gains on such sales were reported in operating results during the period in which the securitizations closed. Home Equity changed the legal and economic structure of securitizations subsequent to March 31, 2000, causing securitizations after that date to be accounted for as secured borrowings.

     For securitizations accounted for as sales, Home Equity retained a residual interest (the “Mortgage Securitization Residual Interest” or “MSRI”). The MSRI represents the present value of Home Equity’s right to receive, over the life of the securitization, the excess of the weighted-average coupon on the loans securitized over the interest rates on the securities sold, a normal servicing fee, a trustee fee and an insurance fee, where applicable, net of the credit losses relating to the loans securitized.

     Changes in Home Equity’s MSRI were as follows:

                         
    For the Years Ended March 31,  
   
 
    2003     2002     2001  
   
   
   
 
Beginning Balance
  $ 122,316     $ 146,394     $ 160,999  
Cash Received
     (17,193 )     (32,281 )     (24,937 )
Accretion and Other
     1,250       8,203       10,332  
 
  
   
   
 
Ending Balance
   $ 106,373     $ 122,316     $ 146,394  
 
  
   
   
 

     The Company classifies MSRI as trading securities in accordance with SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” and accordingly, carries MSRI at fair value on the Company’s balance sheet.

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     Home Equity estimates the fair value of MSRI through the application of discounted cash flow analysis. Such analysis requires the use of various assumptions, the most significant of which are anticipated prepayments (principal reductions in excess of contractually scheduled reductions), estimated future credit losses and the discount rate applied to future cash flows. Home Equity continuously monitors the fair value of MSRI and the reasonableness of the underlying assumptions in light of current market conditions.

     At March 31, 2003, Home Equity used the following assumptions in monitoring the fair value of the MSRI: cumulative credit losses of 3.98% to 5.24%; Constant Prepayment Rate (“CPR”) for fixed rate loans of 22% to 25% per annum (life to date); a CPR of 25% to 30% per annum (life to date) for variable rate loans; and a discount rate of 15% simple interest. At March 31, 2003, the expected weighted-average life of Home Equity’s MSRI balance was 2.8 years, with individual transactions ranging from 1.4 years to 3.3 years.

     Home Equity had MSRI of $106.4 million and $122.3 million at March 31, 2003 and 2002, respectively. The outstanding principal amount of the related securitized loans was $785.8 million and $1.09 billion at March 31, 2003 and 2002, respectively. Delinquencies related to MSRI were $51.0 million and $61.2 million at March 31, 2003 and 2002, respectively. Net credit losses for fiscal 2003, 2002 and 2001 were $22.4 million, $17.3 million and $13.2 million, respectively.

     At March 31, 2003, the sensitivity of the current fair value of the MSRI to an immediate 10 percent and 20 percent unfavorable change in assumptions is presented in the table below. These sensitivities are based on assumptions used to value our MSRI at March 31, 2003.

                 
    Impact on fair value of an adverse change  
   
 
Assumption   10%     20%  
 
   
 
Credit Losses
   $ 2,404     $ 4,812  
Constant Prepayment Rate
   $ 3,342     $ 6,298  
Discount Rate
   $ 4,034     $ 7,873  

     These sensitivities are hypothetical and should not be considered to be predictive of future performance. As the figures indicate, the change in fair value based on a 10 percent variation in assumptions cannot necessarily be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this table, the effect of a variation in a particular assumption on the fair value of the residual cash flow is calculated independently from any change in another assumption. In reality, changes in one factor may contribute to changes in another (for example, increases in market interest rates may result in lower prepayments), which might magnify or counteract the sensitivities. Furthermore, the estimated fair values as disclosed should not be considered indicative of future earnings on these assets.

     In addition to Home Equity’s MSRI, CTX Mortgage also had MSRI of $1.7 million and $3.0 million at March 31, 2003 and 2002, respectively. CTX Mortgage’s MSRI resulted from an acquisition in fiscal 2002.

Deferred Charges and Other

     Deferred charges and other are primarily composed of deferred home security system installation costs, loan fees, deposits, investments, prepaid expenses, securitization costs and other financing costs.

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Advertising Costs

     Advertising costs are expensed as incurred. The advertising costs for fiscal 2003, 2002 and 2001 were $78.6 million, $78.9 million and $67.0 million, respectively.

Off-Balance-Sheet Obligations

     The Company enters into various “off-balance-sheet” transactions in the normal course of business in order to reduce financing costs and improve access to liquidity, facilitate homebuilding activities and manage exposure to changing interest rates. Further discussion regarding these transactions can be found in Note (F), “Indebtedness,” and (M), “Derivatives and Hedging.”

Insurance Accruals

     The Company has certain deductible limits under its workers’ compensation, automobile and general liability insurance policies for which reserves are actuarially determined based on claims filed and an estimate of claims incurred but not yet reported. Projection of losses concerning these liabilities is subject to a high degree of variability due to factors such as claim settlement patterns, litigation trends and legal interpretations. Expenses associated with insurance claims up to our deductible limits were $21.0 million, $24.8 million and $11.4 million for fiscal 2003, 2002, and 2001, respectively.

Stock-Based Employee Compensation Arrangements

     The Company has historically accounted for stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”), and related interpretations, as permitted by Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”). On April 1, 2003, the Company will adopt the fair value measurement provisions of SFAS No. 123 under which the Company will recognize compensation expense of a stock option award to an employee over the vesting period based on the fair value of the award on the grant date. In accordance with SFAS No. 123, the fair value method will be applied only to awards granted or modified after April 1, 2003 (the prospective method), whereas awards granted prior to such date will continue to be accounted for under APB No. 25.

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     The following pro forma information reflects the Company’s net earnings and earnings per share had compensation cost for stock option plans been determined based upon the fair value at the date of grant for awards in fiscal 2003, 2002 and 2001 consistent with the provisions of SFAS No. 123.

                           
      For the Years Ended March 31,  
     
 
      2003     2002     2001  
     
   
   
 
Net Income — as Reported
   $ 555,919     $ 382,226     $ 281,977  
Stock-Based Employee Compensation Expense Included in Reported Net
       Income, net of Related Tax Effects
   4,244     484     —  
Total Stock-Based Employee Compensation Expense Determined Under
       Fair Value Based Method, net of Related Tax Effects
   (24,512 )   (24,957 )   (24,473 )
     
   
   
 
Pro Forma Net Income
   $ 535,651     $ 357,753     $ 257,504  
     
   
   
 
Earnings Per Share:
                        
 
Basic — as Reported
   $ 9.15     $ 6.31     $ 4.77  
 
Basic — Pro Forma
   $ 8.81     $ 5.91     $ 4.36  
 
Diluted — as Reported
   $ 8.83     $ 6.11     $ 4.65  
 
Diluted — Pro Forma
   $ 8.49     $ 5.72     $ 4.24  

Income Taxes

     The Company accounts for income taxes on the deferral method whereby deferred tax assets and liabilities are recognized for the consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.

Interest Expense

     Interest expense relating to the Financial Services segment is included in its costs and expenses. Interest expense related to segments other than Financial Services is included as a separate line item on the Statements of Consolidated Earnings.

                         
    For the Years Ended March 31,  
   
 
    2003     2002     2001  
   
   
   
 
Total Interest Incurred
   $ 328,133     $ 287,628     $ 197,679  
Interest Capitalized
     (73,572 )     (53,568 )     (41,153 )
Capitalized Interest Relieved to Expense
     49,450       40,851       35,115  
Less — Financial Services
     (184,451 )     (159,145 )     (92,572 )
 
  
   
   
 
Interest Expense, net
   $ 119,560     $ 115,766     $ 99,069  
 
  
   
   
 

Statements of Consolidated Cash Flows – Supplemental Disclosures

     The following table provides supplemental disclosures related to the Statements of Consolidated Cash Flows:

                         
    For the Years Ended March 31,  
   
 
    2003     2002     2001  
   
   
   
 
Cash Paid for Interest
   $ 318,607     $ 262,488     $ 193,088  
 
  
   
   
 
Net Cash Paid for Taxes
   $ 204,368     $ 199,366     $ 172,130  
 
  
   
   
 

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Recent Accounting Pronouncements

     In August 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 144. The statement is effective for financial statements issued for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years. The implementation of SFAS No. 144 on April 1, 2002 did not have a material impact on the Company’s results of operations or financial position.

     In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”), which requires certain guarantees to be recorded at fair value. FIN 45 also requires a guarantor to make certain disclosures about guarantees, including product warranties, even when the likelihood of making any payments under the guarantee is remote. The disclosure requirements of FIN 45 are effective for financial statements of interim or annual periods ending after December 15, 2002. The initial recognition and measurement provisions are applicable only for guarantees issued or modified after December 31, 2002. The implementation of FIN 45 did not have a material impact on the Company’s results of operations or financial position.

     In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”), which clarifies the accounting for certain entities in which equity investors do not have a controlling financial interest or the entity is unable to finance its activities without additional subordinated financial support from other parties. Certain disclosure requirements of FIN 46 are effective for financial statements of interim or annual periods issued after January 31, 2003. FIN 46 applies immediately to variable interest entities created, or in which an enterprise obtains an interest, after January 31, 2003. For variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003, FIN 46 applies to interim or annual periods beginning after June 15, 2003. At March 31, 2003, the Company has interests in the Partnership, Harwood Street Funding I, L.L.C. (“HSF-I”) and certain joint ventures that may be affected by this interpretation. In accordance with FIN 46, the nature of these entities’ operations and the Company’s potential maximum exposure related to these entities are discussed in the financial statements of the Partnership, filed in tandem with this Report, and in Note (F), “Indebtedness,” Note (G), “Centex Development Company, L.P.,” and Note (H), “Commitments and Contingencies.”

     In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148, “Accounting for Stock Based Compensation—Transition and Disclosure” (“SFAS No. 148”), which provides for expanded disclosure concerning stock-based compensation, including disclosures in interim financial statements, and amends SFAS No. 123. SFAS No. 148’s transition guidance and provisions for annual disclosures are effective for fiscal years ending after December 15, 2002. As noted above, the Company will adopt the fair value measurement provisions of SFAS No. 123 effective April 1, 2003.

Reclassifications

     Certain prior year balances have been reclassified to conform to the fiscal 2003 presentation.

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(B)  RESIDENTIAL MORTGAGE LOANS HELD FOR INVESTMENT

     Residential mortgage loans held for investment, including real estate owned, consisted of the following:

                 
    March 31,  
   
 
    2003     2002  
   
   
 
Residential Mortgage Loans Held for Investment
   $ 4,671,210     $ 3,293,556  
Allowance for Losses on Residential Mortgage Loans Held for Investment
     (28,384 )     (14,106 )
 
  
   
 
Residential Mortgage Loans Held for Investment, net of Allowance for Losses
   $ 4,642,826     $ 3,279,450  
 
  
   
 

     At March 31, 2003, contractual maturities of residential mortgage loans held for investment were as follows:

         
2004
   $ 50,169  
2005
     54,233  
2006
     58,904  
2007
     63,996  
2008 and thereafter
   4,443,908  
 
  
 
 
   $ 4,671,210  
 
  
 

     It is the Company’s experience that a substantial portion of the loan portfolio generally is renewed or repaid prior to contractual maturity dates. The above maturity schedule should not be regarded as a forecast of future cash collections.

(C) ALLOWANCE FOR LOSSES ON RESIDENTIAL MORTGAGE LOANS HELD FOR INVESTMENT

     Changes in the allowance for losses on residential mortgage loans held for investment were as follows:

                           
      For the Years Ended March 31,  
     
 
      2003     2002     2001  
     
   
   
 
Balance at Beginning of Period
   $ 14,106     $ 2,814     $ —  
 
Provision for Losses
     34,859       17,415       4,453  
 
Recoveries on Loans Charged Off
     160       259       11  
 
Losses Sustained
     (20,741 )     (6,382 )     (1,650 )
 
  
   
   
 
Balance at End of Period
   $ 28,384     $ 14,106     $ 2,814  
 
  
   
   
 
Allowance as a Percentage of Gross Loans Held for Investment
     0.6 %     0.4 %     0.2 %
Allowance as a Percentage of 90+ Days Contractual Delinquency
     23.2 %     16.9 %     10.0 %
90+ Days Contractual Delinquency
                       
 
Total Dollars Delinquent
   $ 122,479     $ 83,490     $ 28,013  
 
% Delinquent
     2.6 %     2.6 %     1.6 %

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(D) PROPERTY AND EQUIPMENT

     Property and equipment cost by major category and accumulated depreciation are summarized below:

                 
    March 31,  
   
 
    2003     2002  
   
   
 
Land, Buildings and Improvements
   $ 146,818     $ 144,515  
Machinery, Equipment and Other
     268,972       239,064  
Plants
     693,157       701,514  
 
  
   
 
 
     1,108,947       1,085,093  
Accumulated Depreciation
     (412,799 )     (364,808 )
 
  
   
 
 
   $ 696,148     $ 720,285  
 
  
   
 

     The Company had depreciation expense related to property and equipment of $73.1 million, $69.4 million and $53.4 million for fiscal 2003, 2002 and 2001, respectively.

(E) GOODWILL

     A summary of changes in goodwill by segment for the year ended March 31, 2003 is presented below:

                                                 
    Home     Financial     Construction     Construction                  
    Building     Services     Products     Services     Other     Total  
   
   
   
   
   
   
 
Balance as of March 31, 2002
   $ 84,151     $ 16,815     $ 41,088     $ 1,007     $ 206,651     $ 349,712  
Goodwill Acquired
     38,860       240       —       —       3,466       42,566  
Sale of Chemical Lawn Care Operations
     —       —       —       —       (17,393 )     (17,393 )
Other
     —       —       (798 )     —       (1,962 )     (2,760 )
 
  
   
   
   
   
   
 
Balance as of March 31, 2003
   $ 123,011     $ 17,055     $ 40,290     $ 1,007     $ 190,762     $ 372,125  
 
  
   
   
   
   
   
 

     Goodwill for the Other segment at March 31, 2003 includes $67.7 million related to the Company’s manufactured housing operations, $71.5 million related to the Company’s home services operations and $51.6 million related to the Company’s investment in Construction Products.

     The Company made several acquisitions during fiscal 2003 that resulted in an increase to goodwill. The largest fiscal 2003 acquisition was Centex Homes’ acquisition of substantially all of the St. Louis and Indianapolis home building operations of The Jones Company on January 2, 2003 for a total purchase price of $141.3 million. Operations of The Jones Company are included in our results of operations for the three months ended March 31, 2003, contributing revenues of $47.7 million and an operating loss of $0.4 million. However, Centex pro forma financial information is not presented as the pro forma impact of the fiscal 2003 acquisitions on the results of operations was not significant.

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     The Company adopted SFAS No. 142 effective April 1, 2001. SFAS No. 142 eliminated the amortization of goodwill. Net income and basic and diluted earnings per share excluding goodwill amortization for the year ended March 31, 2001 are as follows:

         
    For the Year Ended  
   
 
    March 31, 2001  
   
 
Reported Net Earnings
   $ 281,977  
Goodwill Amortization
     26,799  
Negative Goodwill Accretion
     (50,837 )
 
  
 
Adjusted Net Earnings
   $ 257,939  
 
  
 
                 
    Basic Earnings
Per Share		     Diluted Earnings
Per Share		  
   
   
 
Reported Net Earnings
   $ 4.77     $ 4.65  
Net Goodwill Accretion
     (0.41 )     (0.40 )
 
  
   
 
Adjusted Net Earnings
   $ 4.36     $ 4.25  
 
  
   
 

(F) INDEBTEDNESS

Short-term Debt

     Balances of short-term debt at March 31 were:

                                                 
    March 31,  
   
 
    2003     2002  
   
   
 
                    Financial                     Financial  
    Centex             Services     Centex             Services  
   
           
   
           
 
Financial Institutions
   $ 25,257 *           $ 283,146     $ 18,630 *           $ 212,042  
Commercial Paper
     —               —       —               —  
Secured Liquidity Notes
     —               559,083 **     —               102,583 **
 
  
           
   
           
 
 
   $ 25,257             $ 842,229     $ 18,630             $ 314,625  
 
  
           
   
           
 
Consolidated Short-term Debt
           $ 867,486                     $ 333,255          
 
          
                   
             

*   Debt relates entirely to Construction Products.
 
**   Debt relates entirely to Harwood Street Funding II, L.L.C.

     The Company borrows on a short-term basis from banks under uncommitted lines that bear interest at prevailing market rates. The weighted-average interest rates of balances outstanding at March 31, 2003 and 2002 were 1.6% and 2.4%, respectively.

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Long-term Debt

     Balances of long-term debt and weighted-average interest rates at March 31 were:

                                     
        March 31,  
       
 
        2003     2002  
       
   
 
Centex
                                
 
Medium-Term Note Programs, due through 2007
   $ 281,000       4.79 %   $ 418,000       4.47 %
 
Long-Term Notes, due through 2012
     1,508,116       7.05 %     962,892       8.11 %
 
Other Indebtedness, due through 2010
     91,919       2.81 %     192,753       3.98 %
 
Subordinated Debt:
                                
   
Subordinated Debentures, due in 2006
     99,894       7.38 %     99,845       7.38 %
   
Subordinated Debentures, due in 2007
     99,694       8.75 %     99,632       8.75 %
 
  
           
         
 
     2,080,623               1,773,122          
 
  
           
         
Financial Services
                                
 
Home Equity Loans Asset-Backed Certificates, due through 2033
     4,081,590       4.52 %     3,120,402       5.51 %
 
Harwood Street Funding II, L.L.C. Variable Rate Subordinated Notes, due through 2008
     75,000       3.38 %     50,000       5.53 %
 
  
           
         
 
     4,156,590               3,170,402          
 
  
           
         
Total
   $ 6,237,213             $ 4,943,524          
 
  
           
         

     The weighted-average interest rates for Centex long-term debt during the years ended March 31, 2003, 2002 and 2001 were the following, respectively. Medium-term note programs’ weighted-average interest rates were 5.31%, 6.56% and 7.27%. Long-term notes’ weighted-average interest rates were 7.72%, 8.48% and 9.43%. Other indebtedness’ weighted-average interest rates were 3.15%, 5.19% and 7.41%. Subordinated debentures’ weighted-average interest rates were 8.09%, 8.07% and 8.06%.

     The weighted-average interest rates for Financial Services long-term debt during the years ended March 31, 2003, 2002 and 2001 were 4.50%, 5.49% and 6.76%, respectively.

     Maturities of Centex and Financial Services long-term debt during the next five years ending March 31 are:

                           
              Financial          
      Centex     Services     Total  
     
   
   
 
2004   $ 27,571     $ 1,085,397     $ 1,112,968  
2005     32,444       877,255       909,699  
2006     395,124       666,675       1,061,799  
2007     290,414       632,240       922,654  
2008     359,341       771,340       1,130,681  
Thereafter
     975,729       123,683       1,099,412  
 
  
   
   
 
 
   $ 2,080,623     $ 4,156,590     $ 6,237,213  
 
  
   
   
 

     Financial Services debt related to securitized residential mortgage loans structured as collateralized borrowings (Home Equity Loans Asset-Backed Certificates) was $4.08 billion at March 31, 2003 and has no recourse to Home Equity or Centex Corporation. The principal and interest on these notes are paid using the cash flow from the underlying residential mortgage loans, which serve as collateral for the debt. Accordingly, the timing of the principal payments on these notes is dependent upon the payment received on the underlying residential mortgage loans. The expected maturities of this component of long-term debt are based on contractual maturities adjusted for projected repayments and prepayments of principal. As is common in these structures, Home Equity remains liable for customary loan representations.

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     Included in other long-term debt is a $2.1 million convertible subordinated debenture sold at par in 1985 to a corporate officer. The indebtedness, which matures in 2010, bears interest at LIBOR plus 1.5% and is convertible into 400,000 shares of the Company’s common stock. In connection with this transaction, the Company has guaranteed the payment of a $2.1 million note payable to a bank by the officer. For further discussion of this debenture, see Note (P), “Subsequent Events.”

     Under the Company’s debt covenants, the Company is required to maintain certain leverage and interest coverage ratios and a minimum tangible net worth. At March 31, 2003, the Company was in compliance with all of these covenants.

Credit Facilities

     The Company’s existing credit facilities and available capacity as of March 31, 2003 are summarized below:

                   
      Existing Credit     Available  
      Facilities     Capacity  
     
   
 
Centex
                
 
Centex Corporation
                
 
Multi-Bank Revolving Credit Facility
   $ 700,000     $ 700,000 (1)
 
Uncommitted Bank Lines
     60,000       60,000  
 
 
                
 
Construction Products
                
 
Senior Revolving Credit Facility
     155,000       91,200 (2)
 
Annually Renewable Commercial Paper Conduit
     50,000       24,743 (2)
 
  
   
 
 
     965,000       875,943  
 
  
   
 
Financial Services
                
 
Unsecured Credit Facilities
     125,000       53,500 (3)
 
Secured Credit Facilities
     415,000       202,806 (4)
 
Harwood Street Funding II, L.L.C. Facility
     1,500,000       865,917  
 
  
   
 
 
     2,040,000       1,122,223  
 
  
   
 
 
   $ 3,005,000     $ 1,998,166 (5)
 
  
   
 

(1)   This is a committed, multi-bank revolving credit facility, maturing in August 2005, which serves as backup for commercial paper borrowings. As of March 31, 2003, there were no borrowings under this backup facility, and the Company’s $600 million commercial paper program had no issuance outstanding. There have been no borrowings under this facility since its inception.
 
(2)   These committed facilities were entered into by Construction Products and have no recourse to Centex Corporation. The Senior Revolving Credit Facility matures in March 2006 and the Annually Renewable Commercial Paper Conduit matures in June 2004.
 
(3)   Centex Corporation, CTX Mortgage and Home Equity, on a joint and several basis, share in a $125 million uncommitted, unsecured credit facility.
 
(4)   CTX Mortgage and Home Equity share in a $250 million committed secured credit facility to finance mortgage inventory. CTX Mortgage also maintains $155 million of committed secured mortgage warehouse facilities to finance mortgages not sold to HSF-I. Home Equity also maintains a $10 million committed secured mortgage warehouse facility to finance mortgages.
(5)   The amount of available capacity consists of $1.88 billion of committed borrowings and $113.5 million of uncommitted borrowings as of March 31, 2003. Although the Company believes that the uncommitted capacity is currently available, there can be no assurance that the lenders under the applicable facilities would elect to make advances to the Company or its subsidiaries if and when requested to do so.

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     Home Equity finances its inventory of mortgage loans held for investment through Harwood Street Funding II, L.L.C. (“HSF-II”), a wholly-owned, consolidated entity, under a revolving sales agreement that expires upon final payment of the senior and subordinated debt issued by HSF-II. This arrangement, where HSF-II has committed to finance all eligible loans, gives Home Equity daily access to HSF-II’s capacity of $1.50 billion. HSF-II obtains funds through the sale of subordinated notes that are rated BBB by Standard & Poor’s (“S&P”), Baa2 by Moody’s Investors Service (“Moody’s”) and BBB by Fitch Ratings (“Fitch”) and short-term secured liquidity notes that are rated A1+ by S&P’s, P1 by Moody’s and F1+ by Fitch. Because HSF-II is a consolidated entity, the debt, interest income and interest expense of HSF-II are reflected in the financial statements of Financial Services.

     Harwood Street Funding I, L.L.C.

     CTX Mortgage finances its inventory of mortgage loans held for sale principally through sales of Jumbo “A” and conforming loans to HSF-I, an unaffiliated entity established in 1999 that is not consolidated with Financial Services or Centex at March 31, 2003, pursuant to a mortgage loan purchase agreement (the “HSF-I Purchase Agreement”). Since 1999, CTX Mortgage has sold substantially all of the Jumbo “A” and conforming mortgage loans that it originates to HSF-I in accordance with the HSF-I Purchase Agreement. When HSF-I acquires these loans, it typically holds them for a period averaging between 45 and 60 days and then resells them into the secondary market. HSF-I obtains the funds needed to purchase eligible mortgage loans from CTX Mortgage by issuing (1) securitized medium-term debt that is currently rated AAA by S&P and Aaa by Moody’s, (2) short-term secured liquidity notes that are currently rated A1+ by S&P and P1 by Moody’s and (3) subordinated certificates maturing in September 2004 and November 2005, extendable for up to five years, that are rated BBB by S&P and Baa2 by Moody’s. This arrangement provides CTX Mortgage with reduced financing cost for eligible mortgage loans it originates and improves its liquidity.

     Under the terms of the HSF-I Purchase Agreement, CTX Mortgage may elect to sell to HSF-I, and HSF-I is obligated to purchase from CTX Mortgage, mortgage loans that satisfy certain eligibility criteria and portfolio requirements. At March 31, 2003, the maximum amount of mortgage loans that HSF-I is allowed to carry in its inventory under the HSF-I Purchase Agreement is limited to $2.50 billion.

     HSF-I’s commitment to purchase eligible mortgage loans continues in effect until the occurrence of certain termination events described in the HSF-I Purchase Agreement. These termination events primarily relate to events of default under, or other failure to comply with, the provisions, including loan portfolio limitations, of the agreements that govern the mortgage loan warehouse program but also include a downgrade in Centex Corporation’s credit ratings below BB+ by S&P or Ba1 by Moody’s. In the event CTX Mortgage was unable to sell loans to HSF-I, it would draw on existing credit facilities currently held in addition to HSF-I. In addition, it might need to make other customary financing arrangements to fund its mortgage loan origination activities. Although the Company believes that CTX Mortgage could arrange for alternative financing that is common for non-investment grade mortgage companies, there can be no assurance that such financing would be available on satisfactory terms, and any delay in obtaining such financing could adversely affect the results of operations of CTX Mortgage.

     In accordance with the HSF-I Purchase Agreement, CTX Mortgage acts as servicer of the loans owned by HSF-I and arranges for the sale of the eligible mortgage loans into the secondary market. In its capacity as servicer, CTX Mortgage must act in the best interest of HSF-I so as to maximize the proceeds of sales of eligible mortgage loans. The performance of obligations of CTX Mortgage, in its capacity as servicer, is guaranteed by Centex. CTX Mortgage received $13.3 million, $9.8 million and $5.0 million in fees for servicing loans owned by HSF-I in fiscal 2003, 2002 and 2001, respectively. These servicer obligations include repurchasing a mortgage loan from HSF-I in the event of a breach of the servicer’s

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representations and warranties, which materially and adversely affects the value of the mortgage loan and is not cured within 60 days.

     HSF-I has entered into a swap arrangement with a bank (the “Harwood Swap”) under which the bank has agreed to make certain payments to HSF-I, and HSF-I has agreed to make certain payments to the bank, the net effect of which is that the bank has agreed to bear certain interest rate risks, non-credit related market risks and prepayment risks related to the mortgage loans held by HSF-I. The purpose of this arrangement is to provide credit enhancement to HSF-I by permitting it to hedge these risks with a counterparty having a short-term credit rating of A1+ from S&P and P1 from Moody’s. Additionally, the Company has entered into a separate swap arrangement with the bank pursuant to which the Company has agreed to pay to the bank all amounts that the bank is required to pay to HSF-I pursuant to the Harwood Swap plus a monthly fee equal to a percentage of the notional amount of the Harwood Swap, and the bank is required to pay to the Company all amounts that the bank receives from HSF-I pursuant to the Harwood Swap. Accordingly, the Company effectively bears all interest rate risks, non-credit related market risks and prepayment risks that are the subject of the Harwood Swap. Financial Services executes the forward sales of CTX Mortgage’s loans to hedge the risk of reductions in value of mortgages sold to HSF-I or maintained under secured financing agreements. This offsets most of the Company’s risk as the counterparty to the swap supporting the payment requirements of HSF-I. The Company is also required to reimburse the bank for certain expenses, costs and damages that it may incur.

     As of March 31, 2003, HSF-I owned $2.27 billion in securitized residential mortgage loans sold to it by CTX Mortgage and had $2.16 billion of outstanding securitized term debt and $0.11 billion of outstanding subordinated certificates. The Company does not guarantee the payment of any debt or subordinated certificates of HSF-I and is not liable for credit losses relating to securitized residential mortgage loans sold to HSF-I. However, the Company retains certain risks related to the portfolio of mortgage loans held by HSF-I. In particular, CTX Mortgage makes representations and warranties to HSF-I to the effect that each mortgage loan sold to HSF-I satisfies the eligibility criteria and portfolio requirements discussed above. CTX Mortgage may be required to repurchase mortgage loans sold to HSF-I if such mortgage loans are determined to be ineligible loans or there occur certain other breaches of representations and warranties of CTX Mortgage, as seller or servicer. CTX Mortgage’s obligation to repurchase such loans is guaranteed by Centex Corporation. CTX Mortgage records a liability for its estimated losses for these obligations and such amount is included in its loan origination reserve. CTX Mortgage sold $10.55 billion, $10.20 billion and $6.69 billion of mortgage loans to HSF-I and repurchased $6.9 million, $1.1 million and $0.3 million of delinquent or foreclosed mortgage loans from HSF-I during the years ended March 31, 2003, 2002 and 2001, respectively. CTX Mortgage recognized gains on the sale of mortgage loans of $254.6 million, $188.9 million and $153.6 million for the years ended March 31, 2003, 2002 and 2001, respectively.

     In January 2003, the FASB issued FIN 46, which clarifies accounting for certain entities in which equity investors do not have a controlling financial interest or the entity is unable to finance its activities without additional subordinated financial support from other parties. The Company believes it is probable that its interest in HSF-I will qualify as a variable interest under FIN 46, resulting in the consolidation of HSF-I in its financial statements beginning July 1, 2003. The consolidation of HSF-I will increase the Company’s residential mortgage loans held for sale, with a corresponding increase to the Company’s financial services debt. The impact on the Company’s financial position and results will be dependent upon the amount of residential mortgage loans and debt held by HSF-I upon adoption of FIN 46.

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(G) CENTEX DEVELOPMENT COMPANY, L.P.

     Centex Development Company, L.P. (the “Partnership”) is a master limited partnership formed by the Company in March 1987 to broaden the range of business activities that may be conducted for the benefit of the Company’s stockholders to include general real estate development. The Company believed that this expansion would improve stockholder value through longer-term real estate investments, real estate developments and the benefits of the partnership form of business.

     The Partnership is authorized to issue three classes of limited partnership interest. The Company indirectly holds 100% of the Partnership’s Class A and Class C limited partnership units (“Class A Units” and “Class C Units,” respectively), which are collectively convertible into 20% of the Partnership’s Class B limited partnership units (“Class B Units”). The Partnership may issue additional Class C Units in connection with the acquisition of real property and other assets. No Class B Units have been issued. However, the stockholders of the Company hold warrants to purchase approximately 80% of the Class B Units. The warrants are held through a nominee arrangement and trade in tandem with the common stock of Centex Corporation.

     As holder of the Class A and Class C Units, the Company is entitled to a cumulative preferred return of 9% per annum on the average outstanding balance of its capital contributions to the Partnership, adjusted for cash and other distributions representing return of capital. As of March 31, 2003, these adjusted capital contributions, or Unrecovered Capital, were $241.1 million. Preference payments in arrears totaled $42.0 million after a preference payment of $21.1 million on March 31, 2003.

     The Partnership is managed by its general partner, 3333 Development Corporation, a wholly-owned subsidiary of 3333 Holding Corporation (“Holding”). The common stock of Holding is held by the stockholders of the Company through a nominee arrangement and trades in tandem with the common stock of Centex Corporation. The stockholders of the Company elect the four-person board of directors of Holding, three of whom are independent outside directors who are not directors, affiliates or employees of the Company. Thus, through Holding, the stockholders of the Company control the general partner of the Partnership. The general partner, through its independent board and the independent board of Holding, including its non-executive Chairman, oversees the Partnership’s activities, including the acquisition, development, maintenance, operation and sale of properties. Consent of the limited partners for the activities of the Partnership is not required, and the limited partners cannot remove the general partner. As a result, at March 31, 2003, the Company accounts for its limited partnership interest in the Partnership using the equity method of accounting for investments. The Company’s accounting for its investment in the Partnership may be impacted by FIN 46. Management is in the process of evaluating the applicability of FIN 46 and the related accounting for this investment.

     Supplementary condensed combined financial statements for Centex Corporation and subsidiaries, Holding and subsidiary and the Partnership and subsidiaries are set forth below. For additional information on Holding and subsidiary and the Partnership and subsidiaries, see their separate financial statements and related footnotes included elsewhere in this Report.

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Supplementary Condensed Combined Balance Sheets of Centex Corporation and Subsidiaries, Holding and Subsidiary and Partnership and Subsidiaries

                   
      March 31,  
     
 
      2003     2002  
     
   
 
Assets
                
 
Cash and Cash Equivalents
   $ 477,166     $ 242,254  
 
Restricted Cash
     172,321       106,270  
 
Receivables
     5,640,302       4,066,133  
 
Inventories
     4,052,597       3,221,931  
 
Investments in Joint Ventures and Other
     106,250       99,962  
 
Assets Held for Sale
     —       65,111  
 
Property and Equipment, net
     698,456       723,497  
 
Other Assets
     823,073       859,525  
 
  
   
 
 
   $ 11,970,165     $ 9,384,683  
 
  
   
 
Liabilities and Stockholders’ Equity
                
 
Accounts Payable and Accrued Liabilities
   $ 1,814,744     $ 1,544,004  
 
Liabilities Related to Assets Held for Sale
     —       51,527  
 
Short-term Debt
     1,042,825       525,800  
 
Long-term Debt
     6,283,366       4,990,908  
 
Minority Stockholders’ Interest
     171,384       155,671  
 
Stockholders’ Equity
     2,657,846       2,116,773  
 
  
   
 
 
   $ 11,970,165     $ 9,384,683  
 
  
   
 

Supplementary Condensed Combined Statements of Earnings of Centex Corporation and Subsidiaries, Holding and Subsidiary and Partnership and Subsidiaries

                         
    For the Years Ended March 31,  
   
 
    2003     2002     2001  
   
   
   
 
Revenues
   $ 9,499,365     $ 8,109,124     $ 7,045,133  
Cost and Expenses
     8,712,256       7,489,159       6,608,946  
 
  
   
   
 
Earnings Before Income Taxes
     787,109       619,965       436,187  
Income Taxes
     243,124       238,296       154,112  
 
  
   
   
 
Earnings From Continuing Operations
     543,985       381,669       282,075  
Earnings (Loss) From Discontinued Operations
     11,934       557       (98 )
 
  
   
   
 
Net Earnings
     555,919       382,226       281,977  
Other Comprehensive Income (Loss)
     6,965       (7,859 )     (3,849 )
 
  
   
   
 
Comprehensive Income
   $ 562,884     $ 374,367     $ 278,128  
 
  
   
   
 

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(H) COMMITMENTS AND CONTINGENCIES

     The Company conducts a portion of its land acquisition, development and other activities through its participation in joint ventures in which the Company holds less than a majority interest. These joint ventures are typically large in nature, and partnering with other developers allows Centex Homes to share the risks and rewards of ownership while providing for efficient asset utilization. The Company’s investment in these non-consolidated joint ventures was $102.3 million and $94.6 million at March 31, 2003 and 2002, respectively. These joint ventures had total outstanding secured construction debt of approximately $232.5 million and $144.6 million at March 31, 2003 and 2002, respectively. The Company’s liability with respect to this debt, based on its ownership percentage of the related joint ventures, is limited to approximately $56.4 million and $27.9 million at March 31, 2003 and 2002, respectively. Under the structure of this debt, the Company becomes liable up to these amounts only to the extent that the construction debt exceeds a certain percentage of the value of the project. At March 31, 2003 and 2002, the Company was not liable for any of this debt. The Company’s accounting for its investment in non-consolidated joint ventures may be impacted by FIN 46. Management is in the process of evaluating the applicability of FIN 46 and the related accounting for these investments.

     In order to ensure the future availability of land for homebuilding, the Company has deposited or invested with third parties $82.2 million, as of March 31, 2003, as options toward the purchase of undeveloped land and developed lots having a total purchase price of approximately $2.03 billion. These options include amounts related to agreements with the Partnership, as discussed in Note (N), “Related Party Transactions,” below. These options, which do not contain performance requirements from the Company, expire at various dates through the year 2010.

     In the normal course of its business, the Company issues certain representations, warranties and guarantees related to its home sales, land sales, building sales, commercial construction and mortgage loan originations that may be affected by the Financial Accounting Standards Board’s recent issuance of Interpretation No. 45. Based on historical evidence, the Company does not believe that any of these representations, warranties or guarantees would result in a material effect on our consolidated financial condition or operations. See further discussion on our warranty liability below. See further discussion of Interpretation No. 45 in Note (A), “Significant Accounting Policies.”

     Centex Homes offers a ten-year limited warranty for most homes constructed and sold in the United States. The warranty covers defects in materials or workmanship in the first year of the home and certain designated components or structural elements of the home in the second through tenth years. In California, effective January 1, 2003, Centex Homes began following the statutory provisions of Senate Bill 800 rather than issuing a specific warranty. Centex Homes estimates the costs that may be incurred under its warranty program for which it will be responsible and records a liability at the time each home is closed. Factors that affect Centex Homes’ warranty liability include the number of homes closed, historical and anticipated rates of warranty claims and cost per claim. Centex Homes periodically assesses the adequacy of its recorded warranty liability and adjusts the amounts as necessary.

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     Changes in Centex Homes’ contractual warranty liability during the three months and fiscal year ended March 31, 2003 are as follows:

                 
    For the Three Months Ended     For the Year Ended  
    March 31, 2003     March 31, 2003  
   
   
 
Balance at Beginning of Period
   $ 13,216     $ 15,097  
Warranties Issued
     7,587       20,377  
Settlements Made
     (4,123 )     (18,307 )
Changes in Liability of Pre-Existing Warranties, Including Expirations
     (555 )     (1,042 )
 
  
   
 
Balance at End of Period
   $ 16,125     $ 16,125  
 
  
   
 

     CTX Mortgage has established a liability for anticipated losses associated with loans originated and sold to HSF-I or other unaffiliated third parties, as further discussed above in Note (F), “Indebtedness.”

     Changes in CTX Mortgage’s mortgage loan origination reserve for the three months and fiscal periods ended March 31, 2003 are as follows:

                 
    For the Three Months Ended     For the Year Ended March  
    March 31, 2003     31, 2003  
   
   
 
Balance at Beginning of Period
   $ 23,286     $ 21,693  
Provision for Losses
     5,700       8,401  
Settlements
     (392 )     (1,500 )
 
  
   
 
Balance at End of Period
   $ 28,594     $ 28,594  
 
  
   
 

     In the normal course of its business, the Company and/or its subsidiaries are named as defendants in certain suits filed in various state and federal courts. Management believes that none of the litigation matters in which the Company or any subsidiary is involved would have a material adverse effect on the consolidated financial condition or operations of the Company.

     The Company leases certain office facilities and other equipment under operating leases. Future minimum payments under the noncancelable leases are as follows: 2004 — $47.7 million; 2005 — $39.9 million; 2006 — $31.3 million; 2007 — $25.0 million; 2008 — $25.1 million and thereafter — $49.5 million.

     Rental expense for the years ended March 31, 2003, 2002 and 2001 was $43.6 million, $49.7 million and $38.5 million, respectively.

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(I) COMPREHENSIVE INCOME

     Comprehensive income is summarized below:

                           
      For the Years Ended March 31,  
     
 
      2003     2002     2001  
     
   
   
 
Net Earnings
   $ 555,919     $ 382,226     $ 281,977  
Other Comprehensive Income (Loss), Net of Tax:
                        
 
Unrealized Loss on Hedging Instruments
     (10,849 )     (11,033 )     —  
 
Foreign Currency Translation Adjustments
     19,330       2,622       (5,001 )
 
Other
     (1,516 )     552       1,152  
 
  
   
   
 
Comprehensive Income
   $ 562,884     $ 374,367     $ 278,128  
 
  
   
   
 

     The foreign currency translation adjustments are primarily the result of the Company’s investment in Centex Development Company, L.P. and its subsidiaries, which have separate financial statements included elsewhere in this Report. The unrealized loss on hedging instruments represents the deferral in other comprehensive income of the unrealized loss on swap agreements designated as cash flow hedges. The accounting for interest rate swaps and other derivative financial instruments is discussed in detail in Note (M), “Derivatives and Hedging.” The Unrealized Gain (Loss) on Investments represents mark to market adjustments to securities available for sale by the Company.

     The components of accumulated other comprehensive loss are as follows:

                         
    As of March 31, 2003  
   
 
    Before Tax
Amount		     Tax (Expense)
Benefit		     Net-of-Tax
Amount		  
   
   
   
 
Unrealized Loss on Hedging Instruments
   $ (33,665 )   $ 11,783     $ (21,882 )
Foreign Currency Translation Adjustments
     25,931       (9,076 )     16,855  
Other
     (1,483 )     519       (964 )
 
  
   
   
 
Accumulated Other Comprehensive Loss
   $ (9,217 )   $ 3,226     $ (5,991 )
 
  
   
   
 

(J) BUSINESS SEGMENTS

     The Company operates in five principal business segments: Home Building, Financial Services, Construction Products, Construction Services and Investment Real Estate. These segments operate primarily in the United States, and their markets are nationwide. Revenues from any one customer are not significant to the Company.

     Intersegment revenues and investments in joint ventures are not material and are not shown in the following tables. The investment in the Partnership (approximately $281.1 million as of March 31, 2003) is included in the Investment Real Estate segment.

Home Building

     Home Building’s operations involve the purchase and development of land or lots and the construction and sale of single-family and multi-family homes.

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Financial Services

     Financial Services’ mortgage operations consist primarily of home financing, sub-prime home equity lending and the sale of title insurance and other various insurance coverages. These activities include mortgage origination, servicing and other related services for homes sold by the Company’s subsidiaries and others. Financial Services’ revenues include interest income of $356.8 million, $266.9 million and $123.8 million in fiscal 2003, 2002 and 2001, respectively. Substantially all of the Company’s interest income in each year is earned by the Financial Services segment. Financial Services’ cost of sales is comprised of interest expense related to debt issued to fund its home financing and sub-prime home equity lending activities.

Construction Products

     Construction Products’ operations involve the manufacture, production, distribution and sale of cement, gypsum wallboard, recycled paperboard, aggregates and readymix concrete. The Company owned 65.1%, 65.2% and 65.2% of Centex Construction Products, Inc. at March 31, 2003, 2002 and 2001, respectively. Construction Products’ results are shown before minority interest in the tables presented below.

Construction Services

     Construction Services’ operations involve the construction of buildings for both private and government interests including office, commercial and industrial buildings, hospitals, hotels, correctional facilities, educational institutions, museums, libraries, airport facilities and sports facilities. As this segment generates positive cash flow, intercompany interest income (credited at the prime rate in effect) of $6.2 million, $7.1 million and $9.1 million for fiscal 2003, 2002 and 2001, respectively, is included in management’s evaluation of this segment. However, the intercompany interest income is eliminated in consolidation and excluded from the tables presented below.

Investment Real Estate

     Investment Real Estate’s operations involve the acquisition, development and sale of land, primarily for industrial, office, multi-family, retail, residential and mixed-use projects. Under the equity method of accounting for investments, Investment Real Estate also records as revenues any income or loss from its investment in the Partnership, including the International Home Building business located in the United Kingdom.

Other

     The Company's Other segment includes Corporate general and administrative expenses, interest expense and minority interest. Also included in the Other segment are the Company's manufactured housing and home services operations, which are not material for purposes of segment reporting. See Note (P), “Subsequent Events.”

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     The following are included in Other in the tables below (dollars in millions):

                         
    For the Years Ended March 31,  
   
 
    2003     2002     2001  
   
   
   
 
Operating Loss from Manufactured Housing
   $ (9.2 )   $ (0.9 )   $ (26.1 )
Operating (Loss) Earnings from Home Services
     (9.6 )     4.0       1.1  
Operating Earnings from Other, net
     —       —       3.4  
Corporate General & Administrative Expense
     (60.3 )     (50.2 )     (36.9 )
Interest Expense
     (119.6 )     (115.7 )     (99.1 )
Minority Interest
     (30.3 )     (20.8 )     (32.4 )
 
  
   
   
 
 
   $ (229.0 )   $ (183.6 )   $ (190.0 )
 
  
   
   
 
                                                         
    For the Year Ended March 31, 2003  
    (Dollars in millions)  
   
 
    Home     Financial     Construction     Construction     Investment                  
    Building     Services     Products     Services     Real Estate     Other     Total  
   
   
   
   
   
   
   
 
Revenues
   $ 5,934.5     $ 855.0     $ 501.3     $ 1,517.8     $ 66.9     $ 241.7     $ 9,117.2  
Cost of Sales
     (4,388.5 )     (184.5 )     (399.3 )     (1,413.6 )     (3.0 )     (159.0 )     (6,547.9 )
Selling, General & Administrative Expenses
     (865.2 )     (508.7 )     (5.7 )+     (73.5 )     (9.6 )     (311.7 )     (1,774.4 )
 
  
   
   
   
   
   
   
 
Earnings (Loss) Before Income Tax
   $ 680.8     $ 161.8     $ 96.3 *   $ 30.7     $ 54.3     $ (229.0 )   $ 794.9  
 
  
   
   
   
   
   
   
 
Total Assets
   $ 3,984.1     $ 5,670.3     $ 630.5     $ 292.8     $ 309.5     $ 723.3     $ 11,610.5  
Capital Expenditures
   $ 28.4     $ 16.6     $ 14.3     $ 2.0     $ 0.0     $ 28.3     $ 89.6  
Depreciation and Amortization
   $ 18.7     $ 17.0     $ 36.8     $ 2.5     $ 0.4     $ 37.8     $ 113.2  

There was no goodwill amortization or negative goodwill accretion in fiscal 2003.

+   Represents Construction Products' Corporate general and administrative expenses. General and administrative expenses related to Construction Products' operating units of $23.4 million are classified as cost of sales.
 
*   Before Minority Interest

                                                         
    For the Year Ended March 31, 2002  
    (Dollars in millions)  
   
 
    Home     Financial     Construction     Construction     Investment                  
    Building     Services     Products     Services     Real Estate     Other     Total  
   
   
   
   
   
   
   
 
Revenues
   $ 4,984.8     $ 699.8     $ 471.1     $ 1,296.0     $ 72.4     $ 224.3     $ 7,748.4  
Cost of Sales
     (3,713.4 )     (159.1 )     (389.7 )     (1,196.1 )     (12.1 )     (139.5 )     (5,609.9 )
Selling, General & Administrative Expenses
     (743.9 )     (426.0 )     (5.5 )+     (63.7 )     (12.2 )     (268.4 )     (1,519.7 )
 
  
   
   
   
   
   
   
 
Earnings (Loss) Before Income Tax
   $ 527.5     $ 114.7     $ 75.9 *   $ 36.2     $ 48.1     $ (183.6 )   $ 618.8  
 
  
   
   
   
   
   
   
 
Total Assets
   $ 3,020.0     $ 4,148.0     $ 689.6     $ 260.2     $ 309.7     $ 558.0     $ 8,985.5  
Capital Expenditures
   $ 20.9     $ 10.7     $ 19.0     $ 3.9     $ 0.1     $ 17.7     $ 72.3  
Depreciation and Amortization
   $ 16.2     $ 15.8     $ 35.8     $ 2.6     $ 0.4     $ 19.8     $ 90.6  

There was no goodwill amortization or negative goodwill accretion in fiscal 2002.

+   Represents Construction Products' Corporate general and administrative expenses. General and administrative expenses related to Construction Products' operating units of $23.6 million are classified as cost of sales.
 
*   Before Minority Interest

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    For the Year Ended March 31, 2001  
    (Dollars in millions)  
   
 
    Home     Financial     Construction     Construction     Investment                  
    Building     Services     Products     Services     Real Estate     Other     Total  
   
   
   
   
   
   
   
 
Revenues
   $ 4,356.2     $ 463.6     $ 441.1     $ 1,290.4     $ 33.0     $ 126.4     $ 6,710.7  
Cost of Sales
     (3,304.9 )     (92.6 )     (335.1 )     (1,199.9 )     (11.0 )     (113.0 )     (5,056.5 )
Selling, General & Administrative Expenses
     (625.9 )     (351.3 )     (6.6 )+     (59.6 )     (21.9 )     (203.4 )     (1,268.7 )
Negative Goodwill
     —       —       —       —       50.8       —       50.8  
 
  
   
   
   
   
   
   
 
Earnings (Loss) Before Income Tax
   $ 425.4     $ 19.7     $ 99.4 *   $ 30.9     $ 50.9     $ (190.0 )   $ 436.3  
 
  
   
   
   
   
   
   
 
Total Assets
   $ 2,510.5     $ 2,490.1     $ 761.1     $ 248.2     $ 270.2     $ 368.9     $ 6,649.0  
Capital Expenditures
   $ 18.4     $ 12.2     $ 16.3     $ 6.3     $ 0.6     $ 15.1     $ 68.9  
Depreciation and Amortization
   $ 16.6     $ 15.3     $ 24.9     $ 3.0     $ 0.1     $ 31.5     $ 91.4  
Goodwill and Negative Goodwill Accretion
   $ 5.8     $ 2.5     $ 1.0     $ 0.1     $ (50.8 )   $ 17.4     $ (24.0 )

+   Represents Construction Products' Corporate general and administrative expenses. General and administrative expenses related to Construction Products' operating units of $19.2 million are classified as cost of sales.
 
*   Before Minority Interest

(K) INCOME TAXES

     The provision for income taxes includes the following components:

                           
      For the Years Ended March 31,  
     
 
      2003     2002     2001  
     
   
   
 
Current Provision
                        
 
Federal
   $ 166,726     $ 219,160     $ 121,083  
 
State
     48,519       33,686       25,252  
 
  
   
   
 
 
     215,245       252,846       146,335  
 
  
   
   
 
Deferred Provision (Benefit)
                        
 
Federal
     24,549       (19,260 )     15,313  
 
State
     (862 )     2,953       (7,294 )
 
  
   
   
 
 
     23,687       (16,307 )     8,019  
 
  
   
   
 
Provision for Income Taxes
   $ 238,932     $ 236,539     $ 154,354  
 
  
   
   
 

     The difference between income taxes computed at the federal statutory rate of 35% and the actual amounts were as follows:

                           
      For the Years Ended March 31,  
     
 
      2003     2002     2001  
     
   
   
 
Financial Income Before Taxes
   $ 794,851     $ 618,765     $ 436,331  
Income Taxes at Statutory Rate
   $ 278,198     $ 216,568     $ 152,716  
Increases (Decreases) in Tax Resulting from —
                        
 
State Income Taxes, net
     29,738       23,388       10,909  
 
Change in Valuation Allowance
     (88,843 )     (8,235 )     —  
 
Negative Goodwill Accretion
     —       —       (17,013 )
 
Other
     19,839       4,818       7,742  
 
  
   
   
 
Provision for Income Taxes
   $ 238,932     $ 236,539     $ 154,354  
 
  
   
   
 
Effective Tax Rate
     30 %     38 %     35 %

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     The deferred income tax provision (benefit) results from the following temporary differences in the recognition of revenues and expenses for tax and financial reporting purposes:

                         
    For the Years Ended March 31,  
   
 
    2003     2002     2001  
   
   
   
 
Basis in Long-Lived Assets
   $ 3,773     $ 2,935     $ 7,240  
Uniform Capitalization for Tax Reporting
     (10,250 )     (3,384 )     (14,502 )
Excess Tax Depreciation and Amortization
     15,480       32,383       21,242  
Securitization Reporting Differences
     9,554       (25,663 )     (12,196 )
Net Operating Loss Carryforwards
     90,008       7,191       —  
Change in Valuation Allowance
     (88,843 )     (8,235 )     —  
Financial Accrual Changes and Other
     3,965       (21,534 )     6,235  
 
  
   
   
 
Deferred Income Tax Provision (Benefit)
   $ 23,687     $ (16,307 )   $ 8,019  
 
  
   
   
 

     Components of deferred income taxes are as follows:

                   
      March 31,  
     
 
      2003     2002  
     
   
 
Deferred Tax Assets
                
 
Basis in Long-Lived Assets
   $ 5,098     $ 8,871  
 
Net Operating Loss Carryforwards
     106,171       195,968  
 
Uniform Capitalization for Tax Reporting
     60,440       50,053  
 
Financial Accruals
     121,741       134,204  
 
State Income Taxes
     15,553       10,228  
 
Securitization Reporting Differences
     36,792       46,346  
 
All Other
     15,768       13,299  
 
  
   
 
Total Deferred Tax Assets
     361,563       458,969  
 
Valuation Allowance for Deferred Tax Assets
     (93,004 )     (181,847 )
 
  
   
 
Net Deferred Tax Assets
     268,559       277,122  
 
  
   
 
Deferred Tax Liabilities
                
 
Deferred Income and Expenses
     2,965       16,792  
 
Excess Tax Depreciation and Amortization
     127,129       104,189  
 
Interest and Real Estate Taxes Expensed as Incurred
     28,323       21,895  
 
Investment in Construction Products
     38,850       36,398  
 
Consolidated Return Regulation Deferrals
     7,174       6,872  
 
All Other
     11,189       14,809  
 
  
   
 
Total Deferred Tax Liabilities
     215,630       200,955  
 
  
   
 
Net Deferred Tax Assets
   $ 52,929     $ 76,167  
 
  
   
 

     At March 31, 2003, the Company had $303.3 million of net operating loss carryforwards available to reduce future federal taxable income that, if unused, expire in fiscal years 2006 to 2023. In connection with the Company’s 2002 acquisition of NAB Asset Corporation (“NAB”), a valuation allowance of $68.0 million was established to offset the deferred tax assets of NAB at the time of acquisition. This valuation allowance was reduced by $16.4 million during fiscal 2002, of which $8.2 million was applied to goodwill and an additional $8.2 million reduced the Company’s income tax provision as a portion of those deferred tax assets was utilized. The remainder of the NAB related valuation allowance of $51.6 million was reduced to $0 in fiscal 2003 as the deferred tax assets were utilized. In addition, in fiscal 2003 the

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Company utilized approximately $37.2 million of other net operating loss carryforwards for which a valuation allowance had previously been established.

(L) CAPITAL STOCK AND EMPLOYEE BENEFIT PLANS

Stockholder Rights Plan

     On October 2, 1996, the Board of Directors of the Company (the “Board”) adopted a new stockholder rights plan (“Plan”) to replace the original rights plan, which expired on October 1, 1996. In connection with the Plan, the Board authorized and declared a dividend of one right (“Right”) for each share of Common Stock of the Company to all stockholders of record at the close of business on October 15, 1996. After giving effect to the Company’s two-for-one stock split effective March 2, 1998, and the April 2002 amendment to the Plan increasing the exercise price, each Right entitles its holder to purchase one two-hundredths of a share of a new series of preferred stock designated Junior Participating Preferred Stock, Series D, at an exercise price of $210.00. The Rights will become exercisable upon the earlier of ten days after the first public announcement that a person or group has acquired beneficial ownership of 15% or more of the Common Stock or ten business days after a person or group announces an offer, the consummation of which would result in such person or group beneficially owning 15% or more of the Common Stock (even if no purchases actually occur), unless such time periods are deferred by appropriate Board action. The Plan excludes FMR Corp. from causing the rights to become exercisable until such time as FMR Corp., together with certain affiliated and associated persons, collectively own 20% or more of the Common Stock.

     If any person or group acquires beneficial ownership of 15% or more (or 20% or more in the case of FMR Corp.) of the Common Stock, the Rights will entitle a holder (other than such person or any member of such group) to buy, at the exercise price, a number of additional shares of Common Stock having a market value of twice the exercise price of each Right. Alternatively, if a person or group has acquired 15% or more (or 20% or more in the case of FMR Corp.) of the Common Stock, but less than 50% of the Common Stock, the Company may at its option exchange each Right of a holder (other than such person or any member of such group) for one share of Common Stock. If the Company is involved in a merger or other business combination at any time after a person or group has acquired beneficial ownership of 15% or more (or 20% or more in the case of FMR Corp.) of the Common Stock or if, after reaching such 15% threshold, the Company were to sell 50% or more of its assets or earning power, the Rights will entitle a holder to buy, at the exercise price, a number of shares of common stock of the acquiring Company having a market value of twice the exercise price of each Right. In general, the Rights are redeemable at $.01 per Right until 15 days after the Rights become exercisable as described above. Unless earlier redeemed, the Rights will expire on October 12, 2006.

Stock Options

     Stock options granted under the Centex 2001 Director and Officer Stock Option Plan (the “2001 Plan”) and the Seventh Amended and Restated 1998 Centex Corporation Employee Non-Qualified Stock Option Plan (the “1998 Plan”) may not be granted at less than fair market value. Although the Centex Corporation Amended and Restated 1987 Stock Option Plan (the “1987 Plan”) provides that stock options may be granted at less than fair market value, the Company has consistently followed the practice of issuing options at or above fair market value. The 1987 Plan expired in fiscal 2002. Under all three plans, the option periods and the dates that the shares covered by the options may first become exercisable may vary within a maximum period of ten years at which time these options expire.

     The Company records proceeds from the exercise of stock options as additions to common stock and capital in excess of par value. The federal tax benefit, if any, is considered additional capital in excess of par value. The Company has historically accounted for stock options using the intrinsic value method of

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accounting as prescribed by APB Opinion No. 25, “Accounting for Stock Issued to Employees.” In general, no expense is recognized related to the Company’s stock options because the stock options are granted at or above fair market value. On April 1, 2003, the Company adopted the fair value measurement provisions of SFAS No. 123 under which the Company will recognize compensation expense of a stock-based award to an employee over the vesting period based on the fair value of the award on the grant date. In accordance with SFAS No. 123, the fair value method will be applied only to awards granted or modified after April 1, 2003, whereas awards granted prior to such date will continue to be accounted for under APB No. 25.

     A summary of the activity of the stock option plans is presented below:

                                                   
      For the Years Ended March 31,  
     
 
      2003     2002     2001  
     
   
   
 
              Weighted-             Weighted-             Weighted-  
              Average             Average             Average  
      Number     Exercise     Number     Exercise     Number     Exercise  
      of Shares     Price     of Shares     Price     of Shares     Price  
     
   
   
   
   
   
 
Options Outstanding, Beginning of Year
     7,138,905     $ 31.36       6,872,169     $ 27.52       7,370,571     $ 28.23  
Options Granted
                                                
 
At Fair Market Value
     1,725,490     $ 50.42       1,702,710     $ 39.42       2,108,300     $ 24.01  
Options Exercised
     (520,082 )   $ 30.09       (1,385,659 )   $ 22.19       (1,159,166 )   $ 15.30  
Options Cancelled
     (239,220 )   $ 37.33       (50,315 )   $ 32.12       (1,447,536 )   $ 35.82  
 
  
           
           
         
Options Outstanding, End of Year
     8,105,093     $ 35.32       7,138,905     $ 31.36       6,872,169     $ 27.52  
 
  
           
           
         
Options Exercisable, End of Year
     5,051,046               3,776,873               3,418,766          
 
  
           
           
         
Shares Available for Future Stock Option Grants, End of Year
     2,388,743               2,467,738               2,461,813          
 
  
           
           
         
Weighted-Average Fair Value of Options Granted During the Year
   $ 20.24             $ 21.32             $ 13.14          

     Using the treasury stock method, which assumes that any proceeds together with the related tax benefits from the exercise of options would be used to purchase Common Stock at current prices, the dilutive effect of the options on outstanding shares as of March 31, 2003 would have been 3.0%. This is significantly less than appears on a gross basis when compared to the 60,836,091 shares of Common Stock outstanding as of March 31, 2003.

     The following table summarizes information about stock options outstanding at March 31, 2003:

                                         
    Options Outstanding     Options Exercisable  
   
   
 
            Weighted-                          
            Average     Weighted-             Weighted-  
    Number     Remaining     Average     Number     Average  
    of Shares     Contractual     Exercise     of Shares     Exercise  
Range of Exercise Prices   Outstanding     Life (Years)     Price     Outstanding     Price  
 
   
   
   
   
 
$ 12.56 - - $ 23.81
     2,504,785       5.82     $ 21.20       1,749,345     $ 20.18  
$ 25.06 - $ 38.69
     2,403,686       5.45     $ 37.04       2,112,546     $ 37.29  
$ 39.36 - - $ 50.40
     3,170,922       5.55     $ 45.03       1,186,305     $ 43.28  
$ 50.99 - $ 54.75
     25,700       6.50     $ 52.63       2,850     $ 54.75  
 
  
                   
         
 
     8,105,093       5.60     $ 35.32       5,051,046     $ 32.78  
 
  
                   
         

     At March 31, 2003, the Company was following the disclosure-only provisions of SFAS No. 123. Accordingly, no compensation cost had been recognized for the stock options. Had compensation cost for the Company’s stock option plans been determined based on the fair value at the grant date for awards in

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fiscal 2003, 2002 and 2001 consistent with the fair value measurement provisions of SFAS No. 123, the Company’s net earnings and earnings per share would have been reduced to the pro forma amounts detailed in Note (A), “Significant Accounting Policies.”

     The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

                         
    For the Years Ended March 31,  
   
 
    2003     2002     2001  
   
   
   
 
Expected Volatility
     38.6 %     47.0 %     43.5 %
Risk-Free Interest Rate
     4.7 %     5.4 %     6.3 %
Dividend Yield
     0.3 %     0.4 %     0.7 %
Expected Life (Years)
     5       7       8  

     The following table summarizes information about equity compensation plans as of March 31, 2003:

                                   
              (a)                  
              Number of             (c)  
              securities to be     (b)     Number of securities  
              issued upon     Weighted-average     remaining available for  
              exercise of     exercise price of     future issuance under  
              outstanding     outstanding     equity compensation plans  
              options, warrants     options, warrants     [excluding securities  
Plan Category   Plan   and rights     and rights     reflected in column (a)]  
 
 
   
   
 
Equity Compensation Plans
     1987       3,789,435     $ 30.21       —  
 
Approved by Stockholders
     2001       590,040     $ 50.05       1,130,610  
Equity Compensation Plans
     1998       3,725,618     $ 38.18       1,258,133  
 
not Approved by
   Long-Term                        
 
Stockholders
   Incentive Plan     109,602     $ —       390,398  
 
   Convertible                        
 
   Debenture     400,000     $ 5.25       —  
 
          
           
 
Total
             8,614,695     $ 33.90 (1)     2,779,141  
 
          
           
 

(1) Weighted-average exercise price excludes any items with an exercise price of $0.

     See the discussion of the 1987 Plan, 1998 Plan and 2001 Plan above. The Company grants stock units, which are converted into shares of Centex Common Stock at payout, to employees under its Long-Term Incentive Plan. Awards vest over a three-year period or upon a change in control, as defined in such Plan, and are generally paid upon the earlier of seven years or retirement, although the Compensation Committee is permitted to make an early payout at its discretion. For more information on the convertible debenture held by a corporate officer, see Note (F), “Indebtedness” and Note (P), “Subsequent Events.” The Company also issues Restricted Stock under the 2001 Plan. At March 31, 2003 there were 96,850 shares of Restricted Stock outstanding.

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Employee Benefit Plans

     Benefits are provided to eligible employees of the Company and certain subsidiaries under the Company’s profit sharing plans. The plans operate on a calendar year. The aggregate cost of these plans to the Company was $28.7 million in fiscal 2003, $25.2 million in fiscal 2002 and $21.6 million in fiscal 2001.

(M) DERIVATIVES AND HEDGING

     The Company is exposed to the risk of interest rate fluctuations on its debt and other obligations. As part of its strategy to manage the obligations that are subject to changes in interest rates, the Company has entered into various interest rate swap agreements, designated as cash flow hedges as described below. The swap agreements are recorded at their fair value in Other Assets or Accrued Liabilities in the consolidated balance sheets. To the extent the hedging relationship is effective, gains or losses in the fair value of the derivative are deferred as a component of Stockholders’ Equity through Other Comprehensive (Loss) Income. Fluctuations in the fair value of the ineffective portion of the derivative are reflected in the current period earnings, although such amounts are insignificant.

     Centex Corporation and Construction Products each have interest rate swap agreements that, in effect, fix the variable interest rate at a weighted-average rate of 5.2% on $80.0 million of their outstanding debt at March 31, 2003. During the year ended March 31, 2003, there was no hedge ineffectiveness related to these derivatives. These swaps expire at varying times through October 2005. Amounts to be received or paid under the swap agreements are recognized as a change in interest incurred on the related debt instrument. Based on the balance in Accumulated Other Comprehensive Loss at March 31, 2003 related to these derivatives, the Company would estimate increases in interest incurred over the next 12 months to be approximately $1.9 million. As of March 31, 2003, the balance in Accumulated Other Comprehensive Loss related to these derivatives was $3.8 million ($2.5 million net of tax).

     Financial Services, through Home Equity, uses interest rate swaps to hedge the market risk associated with the anticipated issuance of fixed rate securitization debt used to finance sub-prime mortgages. Changes in fair value of these derivatives are deferred in Accumulated Other Comprehensive Loss and recorded through current earnings as an adjustment of the interest incurred over the life of the securitization debt. Home Equity also uses interest rate swaps that, in effect, fix the interest rate on its variable interest rate debt. Amounts to be received or paid as a result of these swap agreements are recognized as adjustments to interest incurred on the related debt instrument. During the year ended March 31, 2003, there was no hedge ineffectiveness related to these interest rate swaps. At March 31, 2003, Home Equity was hedging $1.18 billion of its outstanding debt with these interest rate swaps at a weighted-average interest rate of 2.6%. These swaps expire at varying times through March 2006. Based on the balance in Accumulated Other Comprehensive Loss at March 31, 2003 related to these derivatives, the Company estimates increases in interest incurred over the next 12 months to be approximately $8.8 million. As of March 31, 2003, the balance in Accumulated Other Comprehensive Loss related to these derivatives was $11.1 million ($7.2 million net of tax).

     Financial Services, through CTX Mortgage, enters into interest rate lock commitments (“IRLCs”) with its customers under which CTX Mortgage agrees to make mortgage loans at agreed upon rates within a period of time, generally from 1 to 30 days, if certain conditions are met within the terms of the IRLCs. In order to hedge the risk of fluctuations in the value of these IRLCs and mortgage loans held by it, CTX Mortgage executes mandatory forward trades of mortgage loans and mortgage-backed securities. CTX Mortgage also uses mandatory forward trades to hedge the Company’s obligation, created through the Harwood Swap, to protect against certain interest rate risk and non-credit related market risk related to mortgage loans held by HSF-I, an unaffiliated entity that is not consolidated with Financial Services or the Company. The Company has elected not to utilize hedge accounting treatment under SFAS 133 for these

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derivatives. Initially, the fair value of the IRLCs is recorded on the balance sheet as a deferred item. Subsequent changes in the fair value of the IRLCs, mandatory forward trades and swaps are recorded as an adjustment to earnings. The net change in the estimated fair value of these derivative positions resulted in a loss of $11.9 million for the year ended March 31, 2003.

(N) RELATED PARTY TRANSACTIONS

     Centex Homes purchased land from the Partnership during fiscal 2003 and 2002 totaling $34.5 million and $1.7 million, respectively.

     At March 31, 2003 and 2002, Centex Homes had $7.2 million and $9.1 million, respectively, deposited with the Partnership as option deposits for the purchase of land. Centex Homes also entered into agreements to reimburse the Partnership for certain costs and fees incurred by the Partnership in the purchase and ownership of these tracts of land. During the years ended March 31, 2003 and 2002, Centex Homes paid $3.5 million and $1.4 million, respectively, to the Partnership in fees and reimbursements pursuant to these agreements. Centex Homes expects to pay an additional $31.6 million to the Partnership to complete the purchase of these tracts of land over the next three years.

     In the last two years, Construction Services has executed contracts with the Partnership for the construction of two industrial facilities. At March 31, 2003, all contracts were completed. At March 31, 2002, the total value of such contracts was $15.0 million, of which $5.3 million was unpaid. During the years ended March 31, 2003 and 2002, the Partnership paid $5.3 million and $10.0 million, respectively, to Construction Services pursuant to these contracts.

(O) FAIR VALUE OF FINANCIAL INSTRUMENTS

     Statement of Financial Accounting Standards No. 107, “Disclosures about Fair Value of Financial Instruments,” requires companies to disclose the estimated fair value of their financial instrument assets and liabilities. The estimated fair values shown below have been determined using current quoted market prices where available and, where necessary, estimates based on present value methodology suitable for each category of financial instruments. Considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. All assets and liabilities that are not considered financial instruments have been valued using historical cost accounting.

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     The consolidated carrying values of Cash and Cash Equivalents, Restricted Cash, Mortgage Securitization Residual Interest, Other Receivables, Accounts Payable and Accrued Liabilities and Short-term Debt approximate their fair values. The carrying values and estimated fair values of other financial assets and liabilities were as follows:

                                   
      March 31,  
     
 
      2003     2002  
     
   
 
      Carrying     Fair     Carrying     Fair  
      Value     Value     Value     Value  
     
   
   
   
 
Financial Assets
                                
 
Residential Mortgage Loans Held for Investment
   $ 4,642,826     $ 4,713,045 (1)   $ 3,279,450     $ 3,293,504 (1)
 
Residential Mortgage Loans Held for Sale
   $ 303,328     $ 306,765 (1)   $ 241,793     $ 242,562 (1)
Financial Liabilities
                                
 
Centex Long-term Debt
   $ 2,080,623     $ 2,295,103 (2)   $ 1,773,122     $ 1,810,119 (2)
 
Financial Services Long-term Debt
   $ 4,156,590     $ 4,234,593 (2)   $ 3,170,402     $ 3,199,150 (2)

(1)   Fair values are based on quoted market prices for similar instruments.
 
(2)   Fair values are based on a present value discounted cash flow with the discount rate approximating current market for similar instruments.

(P) SUBSEQUENT EVENTS

     On April 22, 2003, the Company announced the tax-free spin-off of the significant part of its manufactured homes operations to its shareholders. The spin-off will not have a material impact on the Company’s future earnings or debt coverage ratios.

     Subsequent to year end, the corporate officer holding the convertible subordinated debenture decided to exercise his conversion right effective May 29, 2003. On the date of conversion, 400,000 shares of the Company’s common stock were issued to the corporate officer and the $2.1 million debenture was terminated.

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Report of Independent Auditors

TO THE BOARD OF DIRECTORS OF CENTEX CORPORATION AND SUBSIDIARIES:

     We have audited the accompanying consolidated balance sheets of Centex Corporation and subsidiaries as of March 31, 2003 and 2002, and the related statements of consolidated earnings, consolidated stockholders’ equity and consolidated cash flows for each of the three years in the period ended March 31, 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

     We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Centex Corporation and subsidiaries at March 31, 2003 and 2002, and the consolidated results of their operations and their cash flows for each of the three years in the period ended March 31, 2003, in conformity with accounting principles generally accepted in the United States.

     Our audits were conducted for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The supplemental balance sheet and cash flow data of Centex Corporation and Financial Services and the supplemental revenue and earnings data by line of business are presented for purposes of additional analysis and are not a required part of the basic consolidated financial statements. Such information has been subjected to the auditing procedures applied in our audits of the basic consolidated financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic consolidated financial statements taken as a whole.

(Ernst & Young LLP)

Dallas, Texas
May 14, 2003

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Quarterly Results (Unaudited)
(Dollars in thousands, except per share data)

                     
        For the Years Ended March 31,  
       
 
        2003     2002  
       
   
 
First Quarter
                
 
Revenues
   $ 1,843,855     $ 1,709,145  
 
Earnings Before Income Taxes
   $ 125,472     $ 117,986  
 
Net Earnings
   $ 87,755     $ 75,216  
 
Earnings Per Share
                
   
Basic
   $ 1.43     $ 1.25  
   
Diluted
   $ 1.38     $ 1.22  
 
Average Shares Outstanding
                
   
Basic
     61,168,177       60,174,973  
   
Diluted
     63,597,116       61,910,092  
Second Quarter
                
 
Revenues
   $ 2,083,769     $ 1,883,633  
 
Earnings Before Income Taxes
   $ 165,297     $ 152,314  
 
Net Earnings
   $ 115,609     $ 93,389  
 
Earnings Per Share
                
   
Basic
   $ 1.90     $ 1.54  
   
Diluted
   $ 1.83     $ 1.50  
 
Average Shares Outstanding
                
   
Basic
     60,875,672       60,568,258  
   
Diluted
     63,036,290       62,289,902  
Third Quarter
                
 
Revenues
   $ 2,304,872     $ 1,894,484  
 
Earnings Before Income Taxes
   $ 222,883     $ 157,935  
 
Net Earnings
   $ 155,884     $ 96,145  
 
Earnings Per Share
                
   
Basic
   $ 2.58     $ 1.59  
   
Diluted
   $ 2.50     $ 1.54  
 
Average Shares Outstanding
                
   
Basic
     60,447,468       60,554,328  
   
Diluted
     62,467,665       62,429,572  
Fourth Quarter
                
 
Revenues
   $ 2,884,745     $ 2,261,168  
 
Earnings Before Income Taxes
   $ 281,199     $ 190,530  
 
Net Earnings
   $ 196,671     $ 117,476  
 
Earnings Per Share
                
   
Basic
   $ 3.24     $ 1.93  
   
Diluted
   $ 3.12     $ 1.85  
 
Average Shares Outstanding
                
   
Basic
     60,637,309       60,949,857  
   
Diluted
     63,024,136       63,486,498  

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

     On March 23, 2002, the Audit Committee of Centex Corporation’s Board of Directors approved the engagement of Ernst & Young LLP as our independent auditors for the fiscal year ending March 31, 2002, to replace Arthur Andersen LLP, who was dismissed as our auditors effective as of that date. This action followed the Audit Committee’s decision to seek proposals from independent accountants to audit our financial statements.

     Arthur Andersen’s audit report on our financial statements as of and for the fiscal years that ended March 31, 2000 and 2001 did not contain an adverse opinion or a disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles.

     During the fiscal years that ended March 31, 2000 and 2001 and the subsequent interim period through March 23, 2002:

     
     (i)   there were no disagreements between Arthur Andersen and us on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to Arthur Andersen’s satisfaction, would have caused Arthur Andersen to make reference to the subject matter of the disagreement in connection with its reports;
   
     (ii)   none of the reportable events described under Item 304(a)(1)(v) of Regulation S-K occurred; and
   
     (iii)   we did not consult with Ernst & Young regarding any of the matters or events described in item 304(a)(2)(i) and (ii) of Regulation S-K.

     We provided Arthur Andersen with a copy of the foregoing statements. A letter from Arthur Andersen, dated March 27, 2002, stating its agreement with such statements as filed with the SEC, is attached to this Report as Exhibit 16.1.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Except for the information relating to the executive officers of the Company that follows Item 4 of Part I of Part A of this Report and is incorporated herein by reference, the information called for by Items 10, 11, 12 and 13 is incorporated herein by reference to the information included and referenced under the following captions in the Company’s Proxy Statement for the July 17, 2003 Annual Meeting of Stockholders:

     
Item   Caption in the 2003 Proxy Statement
10   Election of Directors
10   Section 16(a) Beneficial Ownership Reporting Compliance
11   Executive Compensation
12   Security Ownership of Management and Certain Beneficial Owners
13   Certain Transactions

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ITEM 11. EXECUTIVE COMPENSATION

     See Item 10 above.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     See Item 10 above.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     See Item 10 above for information respecting indebtedness to Centex of certain officers and directors.

ITEM 14. CONTROLS AND PROCEDURES

     An evaluation has been performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2003. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of March 31, 2003, for the purpose of ensuring that information required to be disclosed in this Report has been processed, summarized and reported in a timely manner. There have been no significant changes in our internal controls or in other factors that could significantly affect internal controls subsequent to March 31, 2003.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

a)   The following documents are filed as part of this Report:

  (1)   Financial Statements
 
      The consolidated balance sheets of Centex Corporation and subsidiaries as of March 31, 2003 and 2002, and the related consolidated statements of earnings, stockholders’ equity and cash flows for each of the three years in the period ended March 31, 2003, together with the accompanying Notes to Consolidated Financial Statements and the Report of Independent Auditors on pages 60-99 of this Report.
 
  (2)   Schedules
 
      Schedules are omitted because they are not applicable or not required or the information required to be set forth therein is included in the consolidated financial statements referenced above in section (a) (1) of this Item 14.
 
  (3)   Exhibits
 
      The information on exhibits required by this Item 14 is set forth in the Centex Index to Exhibits appearing on pages 175-178 of this Report.

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b)   Reports on Form 8-K:
 
    Current Report on Form 8-K of Centex Corporation dated January 22, 2003 announcing the Company’s third quarter net earnings for the quarter ended December 31, 2002.
 
    Current Report on Form 8-K of Centex Corporation dated January 28, 2003 filing certain exhibits in connection with the public offering of $300,000,000 aggregate principal amount of the Company’s 4.75% Senior Notes due 2008.
 
    Current Report on Form 8-K of Centex Corporation dated March 6, 2003 announcing that Centex Homes’ unit sales for January and February 2003 were about 18% higher than sales during the same period a year ago.

ITEM 16. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     The information called for by Item 16 is incorporated herein by reference to the information included and referenced under the same caption in the Company’s Proxy Statement for the July 17, 2003 Annual Meeting of Stockholders.

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SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

         
        CENTEX CORPORATION
     
        Registrant
         
May 30, 2003   By:   /s/ LAURENCE E. HIRSCH
     
        Laurence E. Hirsch, Chairman of the Board and
        Chief Executive Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.

         
May 30, 2003   By:   /s/ LAURENCE E. HIRSCH
     
        Laurence E. Hirsch, Chairman of the Board and
        Chief Executive Officer
        (principal executive officer)
         
May 30, 2003   By:   /s/ LELDON E. ECHOLS
     
        Leldon E. Echols, Executive Vice President and
        Chief Financial Officer
        (principal financial officer)
         
May 30, 2003   By:   /s/ MARK D. KEMP
     
        Mark D. Kemp, Vice President – Controller
        (principal accounting officer)
         
  Directors:   Barbara T. Alexander, Dan W. Cook, III, Juan L. Elek,
        Timothy R. Eller, Thomas J. Falk, Laurence E. Hirsch,
        Clint W. Murchison, III, Charles H. Pistor, Jr.,
        Frederic M. Poses, David W. Quinn,
        Thomas M. Schoewe, and Paul T. Stoffel
         
May 30, 2003   By:   /s/ LAURENCE E. HIRSCH
     
        Laurence E. Hirsch,
        Individually and as
        Attorney-in-Fact*

*   Pursuant to authority granted by powers of attorney, copies of which are filed herewith.

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Certifications

I, Laurence E. Hirsch, certify that:

1.     I have reviewed this annual report on Form 10-K of Centex Corporation;

2.     Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.     Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.     The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 30, 2003

/s/ Laurence E. Hirsch

Laurence E. Hirsch
Chief Executive Officer

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Certifications

I, Leldon E. Echols, certify that:

1.     I have reviewed this annual report on Form 10-K of Centex Corporation;

2.     Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.     Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.     The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 30, 2003

/s/ Leldon E. Echols

Leldon E. Echols
Chief Financial Officer

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PART B.

3333 HOLDING CORPORATION AND SUBSIDIARY
AND CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES

PREFATORY STATEMENT

     Part B of this Report (pages 108-184) includes information relating to 3333 Holding Corporation, SEC File No. 1-9624, and Centex Development Company, L.P., SEC File No. 1-9625. In Part B of this Report, we refer to 3333 Holding Corporation and its subsidiary as Holding and to Centex Development Company, L.P. and its subsidiaries as the Partnership. Whenever we refer to Holding in this Part B, we are also referring to its subsidiary, 3333 Development Corporation, or Development, a Nevada corporation which is the sole general partner of the Partnership, unless the context otherwise requires. For more information regarding the structure and relationship of these entities, see the Joint Explanatory Statement on page 2 of this Report. Because the Partnership is a separate reporting entity under the Securities Exchange Act of 1934, or the Exchange Act, the information required by Form 10-K is separately included even though the Partnership may be deemed a subsidiary of Holding under the rules and regulations of the Securities and Exchange Commission promulgated pursuant to the Exchange Act. We have included information relating to both Holding and the Partnership in this Report as a single disclosure where applicable or appropriate. We have set forth all other information separately. You should consider information provided with respect to the Partnership as if it is also provided with respect to Holding to the extent appropriate. You should read Part A of this Report for information relating to Centex Corporation, or Centex, and its subsidiaries.

PART I

ITEM 1. BUSINESS

General Development of Business

Holding

     Holding is a Nevada corporation incorporated on May 5, 1987. Holding owns all of the outstanding common stock of Development and, as a result, has the ability to control Development. Development is the sole general partner of the Partnership. The executive offices of Holding and Development are located at 2728 N. Harwood, Dallas, Texas 75201, and their telephone number is (214) 981-6770.

     Holding is not engaged in any business other than its ownership and control of Development. The Second Amended and Restated Agreement of Limited Partnership of Centex Development Company, L.P., or the Partnership Agreement, governs the operations of the Partnership. It provides that neither Holding nor Development is permitted, prior to payout, as that term is defined in the Partnership Agreement, to own business interests or to engage in business activities other than those relating to the Partnership. The Partnership Agreement would have to be amended to permit Holding to engage in any other business activities.

The Partnership

     Centex formed the Partnership as a master limited partnership in March 1987 to broaden its business to include general real estate development. Centex believed that this expansion would improve stockholder value through longer-term real estate investments, real estate developments and the benefits of the partnership form of business.

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     The Partnership is authorized to issue three classes of limited partnership interest. Centex indirectly holds 100% of the Partnership’s Class A and Class C limited partnership units, which are collectively convertible into 20% of the Partnership’s Class B limited partnership units. The Partnership may issue additional Class C limited partnership units in connection with the acquisition of real property and other assets. No Class B limited partnership units have been issued. However, the stockholders of Centex hold warrants to purchase approximately 80% of the Class B limited partnership units, which we refer to in this Part B as Stockholder Warrants. These Stockholder Warrants are held through a nominee arrangement and trade in tandem with the common stock of Centex.

     As holder of the Class A and Class C limited partnership units, Centex is entitled to a cumulative preferred return of 9% per year on the average outstanding balance of its capital contributions to the Partnership, adjusted for cash and other distributions representing a return of capital. As of March 31, 2003, these adjusted capital contributions, or unrecovered capital, were $241.1 million and preference payments in arrears totaled $42.0 million. The Partnership made a preference payment of $21.1 million on March 31, 2003.

     The Partnership is managed by its general partner, Development, which is a wholly-owned subsidiary of Holding. The common stock of Holding is held by the stockholders of Centex through a nominee arrangement and trades in tandem with the common stock of Centex. The stockholders of Centex elect the four-person board of directors of Holding, three of whom are independent outside directors who are not directors, affiliates or employees of Centex. Thus, through Holding, the stockholders of Centex control the general partner of the Partnership. The general partner, through its independent board and the independent board of Holding, including its non-executive Chairman, oversees the Partnership’s activities, including the acquisition, development, maintenance, operation and sale of properties. Consent of the limited partners for the activities of the Partnership is not required, and the limited partners cannot remove the general partner. As a result, Centex accounts for its limited partnership interest in the Partnership using the equity method of accounting for investments.

     You should review Note (N), “Stockholders’ Equity and Partners’ Capital,” of the Notes to Combining Financial Statements of Holding and the Partnership included on pages 153-154 of this Report for more information regarding the capital structure of Holding and the Partnership.

Description of the Securities

     Note (L), “Business Segments,” of the Notes to Combining Financial Statements of 3333 Holding Corporation and Subsidiary and Centex Development Company, L.P. and Subsidiaries on pages 150-152 of this Report contains additional information about our business segments for fiscal 2003, 2002 and 2001.

     The nominee agreement among Centex, Holding, the Partnership and a nominee restricts the common stock, par value $.01 per share, of Holding and the Stockholder Warrants from being transferred separately from the common stock, par value $.25 per share, of Centex. Subject to some restrictions, Centex may, in its sole discretion, terminate the nominee agreement as to all or any portion of the Stockholder Warrants and the Holding common stock, which are referred to together as the deposited securities. Unless Centex terminates it sooner, the nominee agreement will terminate as to the Stockholder Warrants on November 30, 2007. Centex is not obligated to terminate the nominee agreement as to the Holding common stock. The termination of the nominee agreement as to any of the deposited securities will cause those securities to be detached from Centex common stock. Upon a termination of the nominee agreement, certificates evidencing the interest of each holder of Centex common stock in that stockholder’s pro rata portion of the deposited securities in respect of which the nominee agreement was terminated will be delivered to the Centex stockholders of record as of the record date set for the detachment. From and after

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that record date, certificates evidencing Centex common stock will no longer represent the beneficial interest in the detached deposited security.

Narrative Description of Business

     The Partnership is involved in all phases of acquisition, development and sale of industrial, office, multi-family, retail, mixed-use and residential properties. During the year ended March 31, 2003, or fiscal 2003, the Partnership operated in four segments: International Home Building, Commercial Development, Multi-Family Communities and Corporate-Other.

     As discussed below, the operations of the Multi-Family Communities segment have been restructured. Due to the risks associated with an extended development timeframe and significant capital requirements, these operations have been restructured to focus on leasing and disposition of current projects rather than new development. Effective April 1, 2003, future operations will be reported in the Corporate-Other segment.

     It is not currently anticipated that any significant capital will be allocated to new business development. Instead, our focus going forward will be on completing and leasing up our existing portfolio and continuing to take advantage of strong investor demand. We will continue to evaluate strategic portfolio acquisitions and strategic development opportunities. However, there are no assurances that we will be successful in locating and securing such opportunities.

     In prior years, the Partnership operated a Domestic Home Building segment, which was sold in the year ended March 31, 2001, or fiscal 2001, to Centex’s conventional homebuilding subsidiary, Centex Homes. The Domestic Home Building segment generated revenues of $30.3 million and operating earnings of $2.8 million for fiscal 2001.

INTERNATIONAL HOME BUILDING

     The Partnership entered the International Home Building business on April 15, 1999 through the acquisition by Centex Development Company UK Limited, a wholly-owned subsidiary of the Partnership, of all of the voting shares of Fairclough Homes Group Limited, or Fairclough, a British homebuilder.

     International Home Building operates in five geographical regions in the United Kingdom and develops a range of products, from small single-family units to executive houses and apartments. International Home Building currently has 98 developments located throughout England and delivered 1,492 units in fiscal 2003, with prices ranging from $59,000 to $1.13 million. The average selling price was approximately $236,000.

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     The following tables summarize, by geographic area, International Home Building’s home closings, sales backlog and sales for fiscal 2003 and fiscal 2002.

Closings (in units):
                   
      For the Years Ended March 31,  
     
 
      2003     2002  
     
   
 
 
CDC 2020 (formerly Southern Home Counties)
     124       117  
 
Northern Home Counties
     304       290  
 
North West
     441       436  
 
Yorkshire
     340       211  
 
Midlands
     283       333  
 
  
   
 
 
     1,492       1,387  
 
  
   
 
Average Sales Price (in 000’s)
   $ 236     $ 204  
 
  
   
 

Sales Backlog, at the end of the period (in units):
                 
    For the Years Ended March 31,  
   
 
    2003     2002  
   
   
 
CDC 2020 (formerly Southern Home Counties)
     103       9  
Northern Home Counties
     38       84  
North West
     155       70  
Yorkshire
     64       38  
Midlands
     65       22  
 
  
   
 
 
     425       223  
 
  
   
 

Sales (contracts exchanged, in units):
                 
    For the Years Ended March 31,  
   
 
    2003     2002  
   
   
 
CDC 2020 (formerly Southern Home Counties)
     202       100  
Northern Home Counties
     264       338  
North West
     527       485  
Yorkshire
     357       236  
Midlands
     328       333  
 
  
   
 
 
     1,678       1,492  
 
  
   
 

     We define backlog units that have been sold, as indicated by a signed contract, but not closed. Substantially all of these orders are expected to be filled during fiscal 2004.

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COMMERCIAL DEVELOPMENT

     The Commercial Development segment, on its own and in joint ventures with third parties, develops office, industrial, retail and mixed-use projects for sale and to hold for investment. Commercial Development’s operations during fiscal 2003 included:

  •   sale of five pad sites at the Vista Ridge retail project in Lewisville, Texas;
 
  •   completion of shell construction for a 228,000 square foot industrial project in Grand Prairie, Texas;
 
  •   completion of shell construction for a 58,000 square foot retail center in Lewisville, Texas;
 
  •   completion and sale of a 40,000 square foot office project in Lewisville, Texas;
 
  •   completion and sale of a 45,000 square foot industrial project in Oxnard, California;
 
  •   sale of a 40,000 square foot industrial building in Oxnard, California;
 
  •   sale of a 283,000 square foot industrial project in Tolleson, Arizona;
 
  •   sale of two office buildings totaling 219,000 square feet in Plantation, Florida;
 
  •   completion and sale of two industrial buildings totaling 93,000 square feet in Camarillo, California;
 
  •   sale of six acres of undeveloped land and three buildings with a combined 134,000 square feet of office/industrial space in Pinellas Park, Florida;
 
  •   sale of approximately 246 acres of undeveloped land in The Colony and Lewisville, Texas; and
 
  •   exchange of a majority interest in a limited liability company owning a 123,000 square foot industrial building in Charlotte, North Carolina for a joint venture partner’s minority interests in various limited liability companies owning industrial buildings in Charlotte, North Carolina and Gardener, Massachusetts.

     Through its Commercial Development segment, the Partnership has an interest in the following completed commercial properties, which are set forth by geographic location:

                     
        Size   Percent
State   Product Type   (Sq. Ft.)   by State
 
 
 
California   Industrial/Flex     113,000       5 %
Massachusetts   Industrial/Flex     68,000       3 %
Michigan   Office     55,000       3 %
Mississippi   Medical     22,000       1 %
North Carolina   Industrial/Flex     1,295,000       62 %
Texas   Industrial/Office/Medical/Retail     553,000       26 %
         
     
 
          2,106,000       100 %
         
     
 

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MULTI-FAMILY COMMUNITIES

     The Multi-Family Communities segment has developed multi-family rental projects, which it has actively marketed for sale during the development period. Multi-Family Communities’ operations during fiscal 2003 included:

  •   completion and sale of a 323-unit rental apartment community in Lewisville, Texas;
 
  •   completion of a 381-unit rental apartment community in St. Petersburg, Florida;
 
  •   completion of a 398-unit rental apartment community in Haltom City, Texas, as the developer for an unaffiliated owner;
 
  •   substantial completion of a 336-unit rental apartment community in San Antonio, Texas, as the developer for an unaffiliated owner;
 
  •   substantial completion of a 280-unit rental apartment community in San Antonio, Texas; and
 
  •   continued infrastructure development for a 21-acre mixed-use development in Saint Paul, Minnesota, and sold five acres of the site to third-party and affiliated developers for construction of “for sale” housing units.

     Effective April 1, 2003, the operations of Multi-Family Communities were restructured. The responsibilities for day-to-day operations, including the completion, leasing and sale of the projects discussed above, have been assumed by personnel within the Corporate-Other segment. The future operations of remaining projects will be reflected in the Corporate-Other segment.

CORPORATE-OTHER

     The Corporate-Other segment acquires and disposes of land and other assets of the Partnership not identified with another specific business segment. Corporate-Other’s operations during fiscal 2003 consisted of the sale of 477 residential lots to Centex Homes pursuant to various option agreements.

     You should read “Item 2. Properties” for additional information concerning material properties owned by the Partnership at March 31, 2003.

Competition and Other Factors

     The Partnership’s domestic properties are generally located in areas in which there is moderate to good demand for land suitable for development. However, the Partnership is subject to substantial competition from other owners of similarly-situated or developed properties that wish to sell or develop their properties. Many of these other owners may hold more parcels than the Partnership or be in the process of developing more projects than the Partnership, or may have greater financial resources and longer operating histories than the Partnership. The Partnership’s properties are well positioned to compete with similar properties within each of these geographic areas.

     The Partnership may also compete in the acquisition of additional desirable properties with a variety of investors, including Centex and its affiliates and institutional investors and developers, seeking similar investments.

     International Home Building’s operations account for less than 1% of the new homes market in the United Kingdom. The main competitive factors affecting International Home Building’s operations include location, price, mortgage interest rates, construction costs, design and quality of homes, marketing expertise and the availability of land.

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     In order to be able to compete successfully for the acquisition of strategic land parcels, International Home Building has put in place procedures to ensure that the company expands its strategic land portfolio. At March 31, 2003, International Home Building owned or controlled land inventory for housing starts sufficient for over three years of building volume at current sales rates.

     Ownership and development of each of the Partnership’s properties is subject to licensing and regulation by zoning, land use, environmental, health, sanitation and other agencies in the country, state, county and/or municipality in which the property is located. Difficulties or failures in obtaining the required licenses or approvals could delay or prevent the development or sale of any of these properties. In addition, some of the properties may be subject to zoning or other regulatory limitations that may not permit development of these properties for their highest and best use. The ability of the Partnership to obtain favorable zoning changes may affect the ultimate value of these properties to the Partnership or to a third-party purchaser.

     Centex and its affiliates continue to be involved in many facets of real estate development and, for this reason, may be in competition with the Partnership in certain activities and projects. The relationship between Centex and its affiliates, on the one hand, and Holding, Development and the Partnership, on the other hand, from time to time involves decisions by Centex and its affiliates, directly or indirectly, on behalf of Holding, Development and the Partnership. For this reason, the transactions and activities of Holding, Development and/or the Partnership may lack the benefit of arm’s-length bargaining and may involve conflicts of interest. Holding, Development and the Partnership believe, however, that adequate safeguards, including the fact that the Boards of Directors of Holding and Development consist of a majority of independent outside directors, sufficiently prevent any of these conflicts from adversely affecting the business of Holding, Development or the Partnership. To the extent that any conflict of interest or the lack of arm’s-length bargaining may benefit Centex or its affiliates, on the one hand, or the Partnership or Holding, on the other hand, the combined value of the tandem-traded securities beneficially owned by a Centex stockholder should not be affected one way or another.

     The Partnership is not a real estate investment trust. Therefore, the Partnership’s activities are not subject to the restrictions imposed on real estate investment trusts qualified under the Internal Revenue Code of 1986, as amended.

Management and Employees

     As of March 31, 2003, the Partnership had 605 employees, 578 of whom are employees of International Home Building, including 149 hourly-wage employees. Neither Holding nor Development have any employees. As a result, all executive management functions for Holding and Development are performed by the directors and executive officers of the Partnership. You should review the information relating to the executive officers of Holding and Development that follows Item 4 of Part B of this Report and is included in Item 10 of Part B of this Report. Some administrative and clerical services required by Holding and by the Partnership that are not provided by employees of the Partnership are provided pursuant to services agreements between the Partnership and Holding and between Holding and Centex Service Company, an affiliate of Centex. For a more complete discussion of these services agreements, you should read “Item 10. Directors and Executive Officers of the Registrants — Services Agreements” and Note (O), “Related Party Transactions,” of the Notes to the Combining Financial Statements of Holding and the Partnership included on pages 155-156 of this Report.

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AVAILABLE INFORMATION

     Shareholders, securities analysts and others seeking information about our business operations and financial performance can receive copies of the 2003 Annual Report to Shareholders, Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, all amendments to those reports and other publications filed with the Securities and Exchange Commission in Washington, D.C., without charge, by contacting our Corporate Communications office at (214) 981-6503; by writing to Centex Corporation, Investor Relations, P.O. Box 199000, Dallas, Texas 75219 or via email at ir@centex.com. In addition, all filings with the Securities and Exchange Commission can be accessed free of charge on our web site (www.centex.com). We make our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act available on our web site as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission. To retrieve any of this information, go to www.centex.com, select “Investor Relations” and select “SEC Filings.”

ITEM 2. PROPERTIES

Holding

     Due to the nature of its business, Holding does not own or hold for investment any real or personal properties other than cash, receivables and other similar assets and its stock ownership in Development.

The Partnership

     The Partnership properties, which are located in California, Florida, Hawaii, Texas, Minnesota, North Carolina, Massachusetts, Michigan, Mississippi, South Carolina and the United Kingdom, consist of:

  •   land zoned for commercial, multi-family and residential use, which is held for sale and near-term development;
 
  •   residential units under development;
 
  •   commercial buildings under development or held for sale or investment;
 
  •   multi-family projects under development; and
 
  •   office space, both owned and leased, from which the Partnership conducts its operations.

     Set forth below is a brief description of these properties.

INTERNATIONAL HOME BUILDING

United Kingdom

     International Home Building operates from six divisional offices and a corporate office. International Home Building owns a building in Tamworth, Staffordshire. International Home Building leases its remaining facilities located in Sale, Cheshire; St. Albans, Hertfordshire; Crawley, Sussex and Wakefield, Yorkshire. International Home Building also leases its corporate office at Meirion House, Woking, Surrey. As of March 31, 2003, International Home Building’s owned or controlled land inventory included 4,739 plots in 98 developments located throughout England.

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COMMERCIAL DEVELOPMENT

California

  •   Camarillo Ranch Business Park — this property is located in Camarillo, Ventura County, California and is zoned for light industrial use. The Partnership currently owns 18 acres of undeveloped land encumbered by a mortgage in favor of a third-party lender and is developing a 62,000 square foot speculative industrial building.
 
  •   Camarillo Business Center — in a joint venture arrangement with a local developer, the Partnership acquired a 113,000 square foot industrial building and 16 acres of adjacent undeveloped land in Camarillo, Ventura County, California. The building and land are encumbered by an acquisition and development loan.
 
  •   Northfield — subsequent to March 31, 2003, the Partnership began constructing two light industrial buildings totaling approximately 79,000 square feet in an industrial business park located in Oxnard, Ventura County, California.
 
  •   Rivermark — this property is located in Santa Clara, California. The Partnership, in a joint venture with two unaffiliated third parties, has substantially completed construction of a 138,000 square foot grocer-anchored community retail center. This project is encumbered by construction financing.

Massachusetts

  •   Summit I — the Partnership owns a 68,000 square foot industrial building in Gardner, Massachusetts, which is encumbered by permanent financing. The building is 100% leased to a single tenant.

Michigan

  •   State Street — in a joint venture arrangement with a Michigan-based developer, the Partnership completed construction of a 55,000 square foot office building in the State Street Business Park located in Pittsfield Township, Michigan. The project is encumbered by construction financing. The Partnership controls approximately 15 acres of additional land in the project subject to seller financing.

Mississippi

  •   Medical Office Building — the Partnership and unaffiliated entities formed a joint venture that owns a 22,000 square foot medical office building in Desoto, Mississippi, which is encumbered by permanent financing.

North Carolina

  •   Westlake — the Partnership is involved in a number of single-tenant industrial projects in the Westlake Business Park located in Charlotte, North Carolina. The Partnership owns seven buildings totaling approximately 1.3 million square feet of office/industrial space. Each of these buildings is encumbered by permanent or construction loan financing.

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Texas

  •   Citymark — the Partnership owns a 218,000 square foot multi-tenant office building located in Dallas. The building is encumbered by permanent financing.
 
  •   Hilltop — in a joint venture with a third party, the Partnership owns a 228,000 square foot industrial project located in Grand Prairie, Texas. The project is encumbered by construction financing.
 
  •   Medical Office Buildings — the Partnership and unaffiliated entities formed several joint ventures that own three medical office buildings (ranging in size from 9,000 to 20,000 square feet) in Denton, Lewisville and Palestine. Each of these projects is encumbered by permanent or construction loan financing.
 
  •   Vista Ridge — In fiscal 2002, the Partnership commenced construction of a planned 102,000 square foot, two-phase retail project in Vista Ridge, a mixed-use development located in the cities of Lewisville and Coppell. In fiscal 2003, the Partnership substantially completed construction of the 58,000 square foot first phase of the project. The project is encumbered by construction financing. The Partnership also owns one acre of retail land adjacent to its retail project.

MULTI-FAMILY COMMUNITIES

Florida

  •   Brighton Bay — this property is located in St. Petersburg, Pinellas County, Florida. The Partnership completed construction of a 382-unit apartment complex during fiscal 2001, which it sold during fiscal 2002. In fiscal 2002, the Partnership commenced construction on a second phase of apartments totaling 381 units. This complex is substantially complete and has been pre-sold to the buyer of the first phase. The apartment complex is encumbered by construction financing.

Minnesota

  •   Upper Landing — this property is located in Saint Paul, Ramsey County, Minnesota. The Partnership acquired this 21-acre property to develop a mixed-use project containing “for sale” and “for rent” housing units and related retail space. The Partnership has utilized approximately ten acres for project infrastructure, has sold approximately five acres as of March 31, 2003 and an additional one acre subsequent to year-end, and is actively marketing the remaining five acres for sale.

Texas

  •   Dominion Park — the Partnership commenced construction on this 280-unit apartment complex in San Antonio, Texas during fiscal 2002. The apartment complex is substantially complete and is encumbered by construction financing.

CORPORATE-OTHER

Florida

  •   Cinnamon Beach — during fiscal 2002, the Partnership purchased approximately 51 acres of land in Palm Coast, Florida. The seller of the property financed the purchase. Centex Homes has agreements to purchase the remaining 32 lots in the project.

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Hawaii

  •   Waikoloa — during fiscal 2002, the Partnership purchased approximately 43 acres of land in Waikoloa, Hawaii. The seller of the property financed the purchase. Centex Homes has agreements to purchase the remaining 107 lots in the project.

South Carolina

  •   Barefoot — during fiscal 2002, the Partnership purchased approximately 245 acres of land in Myrtle Beach, South Carolina. The seller of the property financed the purchase. Centex Homes has agreements to purchase the remaining 1,060 lots in the project.

ITEM 3. LEGAL PROCEEDINGS

     Holding is not a party to, and its assets are not the subject of, any material pending legal proceedings. In the normal course of its business, the Partnership and/or its subsidiaries are named as defendants in litigation matters. Management believes that such litigation, if determined unfavorably to the Partnership, would not have a material adverse effect on the financial condition or operations of the Partnership.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     Not applicable.

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EXECUTIVE OFFICERS OF HOLDING AND DEVELOPMENT

     The following is an alphabetical listing of the present executive officers of Holding and/or Development. The Partnership has no executive officers, since it is managed by its general partner, Development.

             
Name   Age     Position
 
   
Richard C. Decker     50     President, Centex Commercial Development (a division of Development)(1)
Todd D. Newman     46     Senior Vice President, Chief Financial Officer and Treasurer (2)
Stephen M. Weinberg     55     President and Chief Executive Officer(3)

(1)   Mr. Decker is an employee of the Partnership and, since April 1, 2001, has served as the President of the Centex Commercial Development division of Development. Mr. Decker is also concurrently employed by Centex Service Company under a dual employment arrangement. Mr. Decker was President and Chief Executive Officer of Holding and Development, from April 1, 1998 until his resignation on March 31, 2000. Mr. Decker also served as Director of both Holding and Development from June 10, 1998 to March 31, 2000. Mr. Decker has also been a director and an officer of various Centex subsidiaries engaged in real estate development since July 1996. From 1995 until July 1996, Mr. Decker operated Decker & Company, a Phoenix, Arizona-based real estate development company. Prior to that, Mr. Decker was a partner with Dallas-based Trammell Crow Company, a commercial real estate development firm, for 15 years and served as Principal from 1990 until 1995.
 
(2)   Mr. Newman is an employee of the Partnership and serves as Senior Vice President, Chief Financial Officer and Treasurer of Holding and Development. Mr. Newman is also concurrently employed by Centex Service Company under a dual employment arrangement. Mr. Newman joined the Partnership in July 2000. From 1999 until joining the Partnership, Mr. Newman was Chief Financial Officer for Internet Sportstations, Inc. From 1996 to 1999, Mr. Newman was a financial consultant. Mr. Newman was President of Consolidated Capital Equities Corporation from 1991 through 1996.
 
(3)   Mr. Weinberg is an employee of the Partnership and has been President and a director of Holding and Development since April 1, 2000. He has also served as Chief Executive Officer of Holding and Development since April 1, 2001. Mr. Weinberg is also concurrently employed by Centex Service Company under a dual employment arrangement. Mr. Weinberg joined Centex in 1978 and held the positions of Centex Homes Division President from 1984 to 1988 and Centex Homes Executive Vice President from 1988 until 1995. In 1995, Mr. Weinberg was appointed Chairman and Chief Executive Officer for Centex Home Services, a Centex subsidiary, where he served until his appointment as President of both Holding and Development.

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     The Board of Directors of Holding and Development elect all of their respective executive officers annually to serve until the next annual meeting of the Board of Directors or until their successors have been duly elected. The directors and executive officers perform all executive management functions. All other services necessary to conduct Holding’s business are performed by employees of the Partnership or by Centex Service under a services agreement. See “Item 10. Directors and Executive Officers of the Registrants,” and Note (O), “Related Party Transactions,” of the Notes to the Combining Financial Statements of Holding and the Partnership included on pages 155-156 of this Report. There are no family relationships among or between the executive officers or the directors.

PART II

ITEM 5. MARKET FOR REGISTRANTS’ COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     We have set forth below information called for by this Item 5 with respect to Holding and the Partnership. We are also incorporating into this Item 5: (1) the Joint Explanatory Statement on page 2 of this Report, (2) the information included and referenced under the caption “Stock Prices and Dividends” on page 26 of this Report and (3) the information included in Note (N), “Stockholders’ Equity and Partners’ Capital,” of the Notes to the Combining Financial Statements of Holding and the Partnership on pages 153-154 of this Report.

Holding

     Prior to the November 30, 1987 distribution of Holding common stock to Centex stockholders, Centex owned all of the issued and outstanding shares of Holding common stock. Accordingly, there was no public market for these shares. Following the distribution, shares of Holding common stock have been tradable only in tandem with, and as a part of, shares of Centex common stock and may not be separately sold or otherwise transferred. Therefore, except with respect to the trading market established for the tandem traded securities, there is no separate market for shares of Holding common stock. Because of the tandem trading arrangement, we cannot identify precisely the portion of the market price of the tandem-traded securities allocable to shares of Holding common stock.

     Holding has not paid any dividends on shares of its common stock. Whether Holding pays future cash dividends will depend on the earnings, financial condition, capital requirements and other factors affecting Holding and Development.

The Partnership

     The Stockholder Warrants were issued to Centex immediately prior to the distribution. Accordingly, there was no public market for the Stockholder Warrants. Following the distribution, the Stockholder Warrants have been tradable only in tandem with, and as part of, shares of Centex common stock and may not be separately sold or otherwise transferred. Therefore, except with respect to the trading market established for the tandem-traded securities, there is no separate market for the Stockholder Warrants. Because of the tandem-trading arrangement, we cannot identify precisely the portion of the market price of the tandem-traded securities allocable to the Stockholder Warrants. No dividends or distributions have been made on the Stockholder Warrants.

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     Centex Homes is the current holder of all of the Class A limited partnership units and Class C limited partnership units. Accordingly, at this time, there is no public market for these securities. At March 31, 2003, there were 32,260 Class A limited partnership units and 208,330 Class C limited partnership units outstanding. See “Item 1. Business-General Development of Business.” As of March 31, 2003, the partners’ unrecovered capital totaled $241.1 million, and preference payments in arrears amounted to $42.0 million. The Partnership made a preference payment of $21.1 million on March 31, 2003.

Restrictions on Transfer

     The nominee agreement restricts the Stockholder Warrants from being transferred separately from the Centex common stock. Centex common stock certificates issued after the date of the nominee agreement bear a legend referring to the restrictions on transfer imposed by that agreement.

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ITEM 6. SELECTED FINANCIAL DATA

Financial Highlights (Unaudited)
(Dollars in thousands, except per share/unit data)

                                           
      For the Years Ended March 31,  
     
 
      2003     2002     2001     2000     1999  
     
   
   
   
   
 
Revenues from Continuing Operations
                                        
 
3333 Holding Corporation and Subsidiary
   $ 350     $ 1,611     $ 1,001     $ 607     $ 1,103  
 
Centex Development Company, L.P. and Subsidiaries
   $ 449,434     $ 379,378     $ 335,876     $ 378,048     $ 28,225  
 
Combined Revenues from Continuing Operations
   $ 449,559     $ 380,863     $ 335,877     $ 378,048     $ 28,615  
Net Earnings (Loss) from Continuing Operations
                                        
 
3333 Holding Corporation and Subsidiary
   $ 99     $ 1,337     $ (746 )   $ (1,127 )   $ (1,385 )
 
Centex Development Company, L.P. and Subsidiaries
   $ 17,329     $ 15,088     $ 5,460     $ 1,583     $ 1,815  
 
Combined Net Earnings
   $ 17,428     $ 16,425     $ 4,714     $ 456     $ 430  
Net Earnings (Loss)
                                        
 
3333 Holding Corporation and Subsidiary
   $ 99     $ 1,337     $ (746 )   $ (1,127 )   $ (1,385 )
 
Centex Development Company, L.P. and Subsidiaries
   $ 29,263     $ 15,645     $ 5,362     $ 1,583     $ 1,815  
 
Combined Net Earnings
   $ 29,362     $ 16,982     $ 4,616     $ 456     $ 430  
Total Assets
                                        
 
3333 Holding Corporation and Subsidiary
   $ 3,231     $ 3,042     $ 3,253     $ 3,023     $ 2,522  
 
Centex Development Company, L.P. and Subsidiaries
   $ 642,933     $ 670,953     $ 488,281     $ 515,188     $ 113,233  
 
Combined Assets
   $ 640,684     $ 668,436     $ 484,650     $ 511,618     $ 112,176  
Total Debt
                                        
 
3333 Holding Corporation and Subsidiary
   $ —     $ —     $ —     $ —     $ 582  
 
Centex Development Company, L.P. and Subsidiaries
   $ 221,492     $ 289,126     $ 187,301     $ 323,740     $ 41,896  
 
Combined Debt
   $ 221,492     $ 289,126     $ 187,301     $ 323,740     $ 42,478  
Net Earnings (Loss) from Continuing Operations Per Share/Unit
                                        
 
3333 Holding Corporation and Subsidiary
   $ 99     $ 1,337     $ (746 )   $ (1,127 )   $ (1,385 )
 
Centex Development Company, L.P. and Subsidiaries
   $ 72.03     $ 67.42     $ 77.74     $ 25.08     $ 33.38  
Net Earnings (Loss) Per Share/Unit
                                        
 
3333 Holding Corporation and Subsidiary
   $ 99     $ 1,337     $ (746 )   $ (1,127 )   $ (1,385 )
 
Centex Development Company, L.P. and Subsidiaries
   $ 121.63     $ 69.91     $ 76.34     $ 25.08     $ 33.38  
Average Shares/Units Outstanding
                                        
 
3333 Holding Corporation and Subsidiary (shares)
     1,000       1,000       1,000       1,000       1,000  
 
Centex Development Company, L.P. and Subsidiaries (units)
     240,591       223,788       70,235       63,116       54,377  

Note that prior period amounts have been restated, where appropriate, to reflect the impact of reclassification of operating components currently classified as discontinued operations.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

FISCAL YEAR 2003 COMPARED TO FISCAL YEAR 2002

     On a combined basis, our revenues from continuing operations were $449.6 million for the year ended March 31, 2003, an 18.0% increase over our revenues from continuing operations of $380.9 million for the same period last year. The revenue increase is primarily related to Corporate-Other’s sale of residential lots to Centex Homes and an increase in International Home Building’s unit closings, average unit sales price and revenues from the sale of certain land positions. However, the revenue increase was offset by a decline in Commercial Development’s and Multi-Family Communities’ sales revenues, although the decline was attributable to an accounting change as discussed below. Revenues from residential lot sales and land sales can vary significantly from period to period.

     Our operating earnings from continuing operations for the year ended March 31, 2003 were $21.6 million compared to $18.2 million for the same period last year. Our net earnings from continuing operations for the year ended March 31, 2003 were $17.4 million compared to $16.4 million for the same period last year. The increase in operating earnings and net earnings from continuing operations for the year ended March 31, 2003 is primarily related to an increase in International Home Building’s unit closings, average unit sales price and earnings from the sale of certain land positions, offset by a decline in Multi-Family Communities’ earnings from property sales.

     Our net earnings from discontinued operations for the year ended March 31, 2003 were $11.9 million. In accordance with Statement of Financial Accounting Standards No. 144, or SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” effective for us beginning April 1, 2002, we now report assets as discontinued operations if such assets are held for sale (as defined by SFAS 144) or if such assets are sold in the current period. We sold ten such properties during the year ended March 31, 2003. Land assets, and any other assets sold prior to adoption of SFAS 144, are reported in continuing operations.

     We continued to take advantage of the strong investor demand for quality properties, selling a number of matured assets and land positions during the year. It is not currently anticipated that any significant capital will be allocated to new business development. Instead, our focus going forward will be on completing and leasing up our existing portfolio and continuing to take advantage of strong investor demand. The International Home Building segment will remain a focus as we continue to build on momentum in this segment. We will continue to evaluate strategic portfolio acquisitions and strategic development opportunities.

     Any reference herein to we, us or our includes 3333 Holding Corporation and subsidiary and Centex Development Company, L.P. and subsidiaries.

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INTERNATIONAL HOME BUILDING

     The following summarizes International Home Building’s results for the year ended March 31, 2003 compared to the same period last year (dollars in thousands, except per unit data):

                                 
    For the Years Ended March 31,  
   
 
    2003     2002  
   
   
 
            % of Revenues           % of Revenues
Revenues — Home Building
   $ 352,007       93.7 %   $ 283,295       97.6 %
Revenues — Land Sales & Other
     23,618       6.3 %     7,111       2.4 %
Cost of Sales — Home Building
     (303,063 )     (80.7 %)     (245,065 )     (84.4 %)
Cost of Sales — Land Sales
     (16,258 )     (4.3 %)     (5,945 )     (2.0 %)
General and Administrative Expenses
     (33,374 )     (8.9 %)     (25,135 )     (8.7 %)
 
  
   
   
   
 
Operating Earnings
     22,930       6.1 %     14,261       4.9 %
Interest
     (2,538 )     (0.7 %)     (1,947 )     (0.7 %)
 
  
   
   
   
 
Earnings Before Income Taxes
   $ 20,392       5.4 %   $ 12,314       4.2 %
 
  
   
   
   
 
 
           % Change           % Change
Units Closed
     1,492       7.6 %     1,387       11.6 %
Unit Sales Price
   $ 235,930       15.5 %   $ 204,251       0.3 %
Operating Earnings Per Unit
   $ 15,369       4.8 %   $ 10,358       65.8 %
Backlog Units
     425       90.6 %     223       65.2 %

     International Home Building’s revenues for the year ended March 31, 2003 increased by $85.2 million from revenues for the same period last year. This increase is comprised of $43.9 million from an increase in the average unit sales price, $24.8 million from an increase in the number of units closed and $16.5 million from increased sales of certain land positions. Home sales totaled 1,492 units during the year ended March 31, 2003 compared to 1,387 units during the same period in the preceding year, representing a 7.6% increase.

     International Home Building’s gross homebuilding margins increased for the year ended March 31, 2003 to 13.9% from 13.5% in the same period last year. This improvement in gross margins was primarily due to sales price increases, offset by increases in labor costs resulting from a shortage of skilled labor.

     International Home Building’s general and administrative expenses, as a percentage of revenues, increased to 8.9% for the year ended March 31, 2003 compared to 8.7% for the same period last year, primarily due to personnel additions and an increase in incentive compensation resulting from improved performance.

     International Home Building’s financial statements are affected by fluctuations in exchange rates. International Home Building, whose functional currency is the British pound sterling, translates its financial statements into U.S. dollars. Income statement accounts are translated using the average exchange rate for the period, except for significant, non-recurring transactions that are translated at the rate in effect as of the date of the transaction. For the years ended March 31, 2003 and 2002, respectively, the average exchange rate used for translation was 1.55 and 1.43, representing an increase of 7.9%.

     The backlog of homes sold but not closed at March 31, 2003 was 425 units, 90.6% more than the 223 units at the same point in the preceding year. We define backlog units as units that have been sold, as indicated by a signed contract, but not closed.

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COMMERCIAL DEVELOPMENT

     The following summarizes Commercial Development’s results for the year ended March 31, 2003 compared to the same period last year (dollars and square feet in thousands):

                 
    For the Years Ended March 31,  
   
 
    2003     2002  
   
   
 
Sales Revenues
   $ 16,439     $ 20,597  
Rental Income & Other Revenues
     14,834       13,104  
Cost of Sales
     (8,334 )     (16,750 )
Selling, General & Administrative Expense
     (9,957 )     (6,246 )
Interest
     (5,266 )     (4,718 )
 
  
   
 
Operating Earnings Before Depreciation
     7,716       5,987  
Depreciation
     (2,493 )     (2,029 )
 
  
   
 
Operating Earnings
     5,223       3,958  
Earnings from Discontinued Operations
     10,191       557  
 
  
   
 
Earnings Before Income Taxes
   $ 15,414     $ 4,515  
 
  
   
 
Operating Square Footage at March 31
     2,106       2,586  

     Commercial Development’s operations during the year ended March 31, 2003 included:

  •   sale of five pad sites at the Vista Ridge retail project in Lewisville, Texas;
 
  •   completion of shell construction for a 228,000 square foot industrial project in Grand Prairie, Texas;
 
  •   completion of shell construction for a 58,000 square foot retail center in Lewisville, Texas; and
 
  •   sale of approximately 246 acres of undeveloped land in The Colony and Lewisville, Texas.

     Commercial Development’s discontinued operations during the year ended March 31, 2003 included:

  •   sale of a 40,000 square foot industrial building in Oxnard, California;
 
  •   completion and sale of a 40,000 square foot office project in Lewisville, Texas;
 
  •   sale of a 283,000 square foot industrial project in Tolleson, Arizona;
 
  •   completion and sale of two industrial buildings totaling 93,000 square feet in Camarillo, California;
 
  •   sale of six acres of undeveloped land and three buildings with a combined 134,000 square feet of office/industrial space in Pinellas Park, Florida;
 
  •   exchange of a majority interest in a limited liability company owning a 123,000 square foot industrial building in Charlotte, North Carolina for a joint venture partner’s minority interests in various limited liability companies owning industrial buildings in Charlotte, North Carolina and Gardner, Massachusetts;
 
  •   sale of two office buildings totaling 219,000 square feet in Plantation, Florida; and
 
  •   completion and sale of a 45,000 square foot industrial project in Oxnard, California.

     Sales revenues and cost of sales for fiscal 2003 reflect the sale of the five pad sites and 246 acres of land referred to above. Sales revenues and cost of sales for fiscal 2002 reflect the sale of two industrial projects and approximately two acres of land. Rental income and other revenues; selling, general and administrative expenses; interest expense and depreciation increased compared to the same period in the preceding year as a result of the increase in the average square footage of the operating portfolio. Fiscal

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2003 results also include an impairment charge of approximately $1.0 million recorded in selling, general and administrative expense.

                                 
    For the Years Ended March 31,  
   
 
    2003     2002  
   
   
 
    (000's)     Weighted     (000's)     Weighted  
    Rentable     Average     Rentable     Average  
    Sq. Ft.     Occupancy     Sq. Ft.     Occupancy  
   
   
   
   
 
Operating Properties
                                
Industrial
     1,704       79.4 %     2,024       92.4 %
Office/Medical
     344       80.2 %     562       88.3 %
Retail
     58       83.2 %     —       —  
 
  
           
         
 
     2,106       79.6 %     2,586       91.5 %
 
  
           
         
                                 
    (000's)           (000's)        
    Rentable           Rentable        
    Sq. Ft.           Sq. Ft.        
   
         
       
Projects Under Development
                                
Industrial
     62               308          
Office/Medical
     —               40          
Retail
     138               194          
 
  
           
         
 
     200               542          
 
  
           
         

MULTI-FAMILY COMMUNITIES

     The following summarizes the results of Multi-Family Communities for the year ended March 31, 2003 compared to the same period last year (dollars in thousands):

                 
    For the Years Ended March 31,  
   
 
    2003     2002  
   
   
 
Revenues
   $ 6,171     $ 53,944  
Cost of Sales
     (4,703 )     (46,866 )
Selling, General & Administrative Expenses
     (2,982 )     (3,923 )
 
  
   
 
Operating Earnings (Loss)
     (1,514 )     3,155  
Earnings from Discontinued Operations
     1,743       —  
 
  
   
 
Earnings Before Income Taxes
   $ 229     $ 3,155  
 
  
   
 

     During the year ended March 31, 2003, Multi-Family Communities’ revenues from continuing operations consisted of development and related fees on various development projects, an earn-out payment related to the prior sale of a 382-unit rental apartment complex in St. Petersburg, Florida and revenues from the sale of five acres of the Upper Landing project in Saint Paul, Minnesota. During the year ended March 31, 2002, Multi-Family Communities closed on the sale of a 400-unit apartment complex in Grand Prairie, Texas, a 382-unit apartment complex in St. Petersburg, Florida and the sale of 12 acres of land in Lewisville, Texas to Centex Homes.

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     Multi-Family Communities’ discontinued operations during the year ended March 31, 2003 consisted of the sale of a 323-unit rental apartment project in Lewisville, Texas.

     As of March 31, 2003, Multi-Family Communities owns 661 rental apartment units under construction in Florida and Texas and is developing an additional 734 rental apartment units in Texas for unaffiliated owners. Multi-Family Communities is also redeveloping a 21-acre site in downtown Saint Paul, Minnesota into a mixed-use project containing “for sale” and “for rent” housing units and related retail. As of March 31, 2003, ten acres has been utilized for project infrastructure and five acres had been sold to Centex Homes and third-party developers.

     Effective April 1, 2003, the operations of Multi-Family Communities were restructured. The responsibilities for day-to-day operations, including the completion, leasing and sale of the projects discussed above, have been assumed by personnel within the Corporate-Other segment. The future operations of remaining projects will be reflected in the Corporate-Other segment. Fiscal year 2003 results include a $574 thousand restructuring charge.

CORPORATE-OTHER

     The following summarizes the results of Corporate-Other for the year ended March 31, 2003, compared to the same period last year (dollars in thousands):

                 
    For the Years Ended March 31,  
   
 
    2003     2002  
   
   
 
Revenues
   $ 36,491     $ 2,812  
Cost of Sales
     (32,882 )     (1,209 )
Selling, General & Administrative Expenses
     (3,726 )     (2,013 )
Interest Expense
     (2,364 )     (835 )
 
  
   
 
Operating Loss
   $ (2,481 )   $ (1,245 )
 
  
   
 

     Our Corporate-Other segment acquires and disposes of land and other assets that are not identified with another specific business segment. Fiscal 2003 revenues consist primarily of sales revenues, fees and other revenues derived from sales of residential lots to Centex Homes. Fiscal 2002 revenues included $1.8 million from sales of residential lots to Centex Homes and fees related to agreements to sell residential lots to Centex Homes, $0.5 million from the sale of commercial land in Allen, Texas, $0.4 million from the sale of a residential lot in Dallas, Texas and $0.1 million from miscellaneous sources.

     Selling, general and administrative expenses increased compared to the same period in the preceding year due to the addition of internal legal and marketing personnel and increased real estate taxes related to residential lots. Interest expense increased primarily as a result of debt incurred to finance the purchase of these residential lots.

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FISCAL YEAR 2002 COMPARED TO FISCAL YEAR 2001

     On a combined basis, revenues from continuing operations for the Partnership and Holding for fiscal year 2002 totaled $380.9 million compared to $335.9 million for the prior fiscal year. The Partnership and Holding had combined net earnings for fiscal 2002 of $17.0 million compared to combined net earnings of $4.6 million in fiscal 2001.

INTERNATIONAL HOME BUILDING

     The following summarizes International Home Building’s results for the two-year period ended March 31, 2002 (dollars in thousands):

                 
    For the Years Ended March 31,  
   
 
    2002     2001  
   
   
 
Revenues
   $ 290,406     $ 252,487  
Cost of Sales
     (251,010 )     (222,634 )
General & Administrative Expenses
     (25,135 )     (22,085 )
Interest Expense
     (1,947 )     (7,802 )
 
  
   
 
Operating Earnings (Loss)
   $ 12,314     $ (34 )
 
  
   
 
Units Closed
     1,387       1,243  

     In connection with the purchase of this segment by the Partnership, the seller received $219 million in non-interest-bearing promissory notes due April 1, 2001 and retained preferred non-voting shares in Fairclough that entitled the seller to receive the net after-tax earnings of Fairclough until March 31, 2001. During fiscal 2001, Fairclough generated after-tax earnings totaling $7.8 million. The Partnership has accounted for the non-interest-bearing debt and nominal residual value preferred shares as if they were a single debt instrument. Accordingly, the Partnership recorded distributions attributable to the preferred shares as interest expense in the accompanying financial statements. After taxes, International Homebuilding generated earnings of $10.5 million and $0.2 million for fiscal 2002 and 2001, respectively.

     International Home Building’s revenues for the fiscal year ended March 31, 2002 increased by $37.9 million from revenues for the same period last year. The increase is primarily attributable to an increase in unit completions.

     Home sales totaled 1,387 units during the fiscal year ended March 31, 2002 compared to 1,243 units during the same period in the preceding year, representing a 12% increase. The backlog of homes sold but not closed at March 31, 2002 was 223 units, 65% more than the 135 units at the same point in the preceding year. We define backlog units as units that have been sold, as indicated by a signed contract, but not closed.

     The events of September 11, 2001 had an adverse impact on Fairclough’s operations, particularly in its Southern Home Counties division, a high-end home market around London that has a significant expatriate community. Fairclough responded to a decline in sales rates by increasing marketing efforts, purchase incentives and price discounting.

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COMMERCIAL DEVELOPMENT

     The following summarizes Commercial Development’s results for the two-year period ended March 31, 2002 (dollars and square footage in thousands):

                 
    For the Years Ended March 31,  
   
 
    2002     2001  
   
   
 
Sales Revenues
   $ 20,597     $ 22,144  
Rental and Other Income
     13,104       7,504  
Cost of Sales
     (16,750 )     (18,398 )
Selling, General & Administrative Expenses
     (6,246 )     (4,773 )
Interest Expense
     (4,718 )     (3,067 )
 
  
   
 
Operating Earnings before Depreciation
     5,987       3,410  
Depreciation
     (2,029 )     (1,159 )
 
  
   
 
Operating Earnings
     3,958       2,251  
Earnings (Loss) from Discontinued Operations
     557       (98 )
 
  
   
 
Earnings Before Income Taxes
   $ 4,515     $ 2,153  
 
  
   
 
Operating Square Footage at March 31
     2,586       1,541  

     Commercial Development’s operations during fiscal 2002 included:

  •   completion of six projects totaling 1,037,000 square feet of industrial, medical and office space located in Arizona, California, Michigan, Mississippi and North Carolina;
 
  •   initiation of construction on six projects totaling 542,000 square feet of industrial, office and retail space located in California and Texas;
 
  •   acquisition of a 113,000 square foot existing industrial project in Ventura County, California, together with 16 acres of adjacent undeveloped land;
 
  •   sale of a 132,500 square foot industrial project and an 86,000 square foot industrial project in Ventura County, California;
 
  •   sale of a partnership interest in a partnership owning 0.6 acres of land in Dallas, Texas;
 
  •   sale of approximately 1.8 acres of land in Ventura County, California and
 
  •   sale of a joint venture interest in a medical office building in Rowlett, Texas.

     Commercial Development’s operations during fiscal 2001 included:

  •   completion of eight buildings totaling 856,000 square feet of office and industrial space located in Florida, California, Texas and North Carolina;
 
  •   initiation of construction on six new projects totaling 929,000 square feet of office and industrial space in Michigan, California and North Carolina;
 
  •   acquisition of a 134,500 square foot existing industrial building in Charlotte, North Carolina;
 
  •   sale of five industrial buildings totaling 485,000 square feet in Ventura County, California and
 
  •   sale of five acres of land in Lewisville, Texas.

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     Sales Revenues and Cost of Sales for fiscal 2002 reflect the sale of two industrial projects and the sale of approximately two acres of land. Sales Revenues and Cost of Sales for fiscal 2001 reflect the sale of an industrial project in California and the sale of land in Texas and California. Rental and Other Income increased in fiscal 2002 as a result of an increase in the number of operating properties. Selling, general and administrative expenses, interest expense and depreciation also increased for fiscal 2002 as a result of an increase in the number of operating properties.

                                 
    For the Years Ended March 31,  
   
 
    2002     2001  
   
   
 
    (000’s)     Weighted     (000’s)     Weighted  
    Rentable     Average     Rentable     Average  
    Sq. Ft.     Occupancy     Sq. Ft.     Occupancy  
   
   
   
   
 
Operating Properties
                                
Industrial
     2,024       92.4 %     1,046       94.3 %
Office/Medical
     562       88.3 %     495       95.7 %
 
  
           
         
 
     2,586       91.5 %     1,541       94.7 %
 
  
           
         
 
    (000’s)           (000’s)        
    Rentable           Rentable        
    Sq. Ft.           Sq. Ft.        
   
         
       
Projects Under Development
                                
Industrial
     308               677          
Office/Medical
     40               55          
Retail
     194               —          
 
  
           
         
 
     542               732          
 
  
           
         

MULTI-FAMILY COMMUNITIES

     The following summarizes the results of Multi-Family Communities, which was formerly known as Multi-Family Development, for the two-year period ended March 31, 2002 (dollars in thousands):

                 
    For the Years Ended March 31,  
   
 
    2002     2001  
   
   
 
Revenues
   $ 53,944     $ 1,664  
Cost of Sales
     (46,866 )     —  
Selling, General & Administrative Expenses
     (3,923 )     (2,399 )
 
  
   
 
Operating Earnings (Loss)
   $ 3,155     $ (735 )
 
  
   
 

     During fiscal 2002, Multi-Family Communities closed on the sale of a 400-unit apartment complex located in Grand Prairie, Texas, a 382-unit apartment complex in St. Petersburg, Florida and the sale of 12 acres of land in Lewisville, Texas to Centex Homes.

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     Revenues for fiscal 2001 resulted from the sale of a 172-apartment community in College Station, Texas, that Multi-Family Communities owned in a joint venture with an unaffiliated developer, and the receipt of an earn-out payment related to the fiscal 2000 sale of a 304-unit apartment community in The Colony, Texas.

CORPORATE-OTHER

     The following summarizes the results of Corporate-Other, which was formerly known as Land Sales and Other, for the two-year period ended March 31, 2002 (dollars in thousands):

                 
    For the Years Ended March 31,  
   
 
    2002     2001  
   
   
 
Revenues
   $ 2,812     $ 21,774  
Cost of Sales
     (1,209 )     (20,578 )
General & Administrative Expenses
     (2,013 )     (1,047 )
Interest Expense
     (835 )     —  
 
  
   
 
Operating (Loss) Earnings
   $ (1,245 )   $ 149  
 
  
   
 

     The Partnership’s Corporate-Other segment acquires and disposes of land and other assets of the Partnership not identified with another specific business segment. Fiscal 2002 revenues included $1.8 million from sales of residential lots to Centex Homes and fees related to agreements to sell residential lots to Centex Homes, $0.5 million from the sale of commercial land in Allen, Texas, $0.4 million from the sale of a residential lot in Dallas, Texas and $0.1 million from miscellaneous sources. Fiscal 2001 revenues from the sale of real estate totaled $21.1 million, which resulted from the sale of the Domestic Homebuilding operations to Centex Homes at book value, which approximated market value.

LIQUIDITY AND CAPITAL RESOURCES

     We finance land acquisition and development activities primarily from financial institution borrowings, equity contributions from third-party investors in project-specific joint ventures, seller financing, issuance of Class C limited partnership units to Centex affiliates and cash flow from operations, which is comprised largely of proceeds from the sale of real estate and operating projects.

     We typically finance properties under development through short-term variable and fixed-rate secured construction loans, and to a limited extent depending on the timing of the project construction, cash flow from operations. Construction loans totaled $74.0 million at March 31, 2003. Under the terms of various construction loan agreements, we are required to maintain certain minimum liquidity and net worth levels. At March 31, 2003, we were in compliance with these covenants.

     Permanent commercial project loans outstanding at March 31, 2003 totaled $46.2 million compared to $76.6 million at March 31, 2002. The project loans are collateralized by completed commercial properties and have original terms ranging from ten to twenty-two years with fixed interest rates ranging from 7.20% to 8.72%. These loans are non-recourse to the Partnership and its subsidiaries.

     Seller-financed land loans of $57.1 million were obtained during fiscal 2002. Outstanding balances on seller-financed loans at March 31, 2003 totaled $32.1 million, with terms of up to three years and fixed interest rates ranging from 8.00% to 9.50%. These loans are non-recourse to the Partnership and its subsidiaries.

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     The International Home Building segment has secured a revolving bank credit facility of 100 million in British pounds sterling. This facility expires in April 2006, and may be extended for up to two years with lender approval. Advances under this facility totaled £44.0 million, or $69.3 million, at March 31, 2003. Under the terms of this facility, the International Home Building segment is required to maintain certain leverage and interest coverage ratios and a minimum tangible net worth. At March 31, 2003, the International Home Building segment was in compliance with all of these covenants.

     We believe that the revenues, earnings and liquidity from the sale of single-family homes, land sales, the sale and permanent financing of development projects and issuance of Class C units will be sufficient to provide the necessary funding for our current and future needs.

CERTAIN OFF-BALANCE-SHEET AND OTHER OBLIGATIONS

     The following is a summary of certain off-balance-sheet arrangements and other obligations and their possible effects on our liquidity and capital resources.

Joint Ventures

     We conduct certain operations through our participation in joint ventures in which we hold less than a majority interest. These non-consolidated joint ventures had total debt outstanding of approximately $35.8 million as of March 31, 2003 and $16.1 million as of March 31, 2002. Our liability for the obligations of these non-consolidated joint ventures is limited to approximately $7.5 million as of March 31, 2003.

Letters of Credit, Guarantees and Leases

     At March 31, 2003, we had outstanding performance bonds and bank guarantees of $28.0 million that relate to projects undertaken by International Home Building and development obligations of International Home Building.

     To obtain construction financing for commercial and multi-family projects being developed by our subsidiaries, we are often required to guarantee, for the benefit of the construction lender, the completion of the project. In some instances, we have also executed recourse payment guarantees. At March 31, 2003, our subsidiaries had outstanding letters of credit of $3.9 million that primarily relate to development obligations of Multi-Family Communities.

     We expect that our subsidiaries will satisfy their loan and other contractual obligations in the ordinary course of business and in accordance with applicable contractual terms. As that occurs, our liability exposure will be decreased and, eventually, we will not have any continuing obligations with respect to these projects.

     We have no material capital or operating leases.

CRITICAL ACCOUNTING POLICIES

     Some of our critical accounting policies require the use of judgment in their application or require estimates of inherently uncertain matters. Although our accounting policies are in compliance with generally accepted accounting principles, a change in the facts and circumstances of the underlying transactions could significantly change the application of the accounting policies and the resulting financial statement impact. Listed below are those policies that we believe are critical and require the use of complex judgment in their application.

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Goodwill

     We adopted the provisions of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” or SFAS No. 142, effective April 1, 2001. Upon the adoption of SFAS No. 142, goodwill is no longer subject to amortization. Rather, goodwill is subject to an assessment, at least annually, for impairment by applying a fair value based test. If the carrying amount exceeds the fair value, an impairment exists. We continually evaluate whether events and circumstances have occurred that indicate that the remaining balance of goodwill may not be recoverable. In evaluating impairment, we estimate the sum of the expected future cash flows derived from such goodwill. Such evaluations for impairment are significantly impacted by estimates of future revenues, costs and expenses and other factors. If the goodwill is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the goodwill exceeds the fair value of the future cash flows.

Impairment of Long-Lived Assets

     We account for long-lived assets in accordance with the provisions of Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” or SFAS No. 144. SFAS No. 144 requires that long-lived assets and certain identifiable intangibles, which includes our inventories, real estate investments and property and equipment, be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets is measured by comparing the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. These evaluations for impairment are significantly impacted by estimates of revenues, costs and expenses and other factors. If these assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

RECENT ACCOUNTING PRONOUNCEMENTS

     In August 2001, the Financial Accounting Standards Board issued SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The statement was effective for us beginning April 1, 2002.

     Due to the adoption of SFAS 144, we now report assets identified subsequent to March 31, 2002 as held for sale (as defined by SFAS 144), if any, and any such assets sold in the current period, as discontinued operations. All results of these discontinued operations, less applicable income taxes, are included as discontinued operations in the statements of operations. Prior periods are restated for comparative purposes. Land assets, and any other assets sold prior to adoption of SFAS 144, are reported in continuing operations.

     In November 2002, the Financial Accounting Standards Board issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” or FIN 45, which requires certain guarantees to be recorded at fair value. FIN 45 also requires a guarantor to make certain disclosures about guarantees, including product warranties, even when the likelihood of making any payments under the guarantee is remote. The disclosure requirements of FIN 45 are effective for financial statements of interim or annual periods ending after December 15, 2002. The initial recognition and measurement provisions are applicable only for guarantees issued or modified after December 31, 2002. The implementation of FIN 45 did not have a material impact on our results of operations or financial position.

     In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46, “Consolidation of Variable Interest Entities,” or FIN 46, which clarifies the application of Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” to certain entities in which equity investors

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do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. Certain disclosure requirements of FIN 46 are effective for financial statements of interim or annual periods issued after January 31, 2003. FIN 46 applies immediately to variable interest entities created, or in which an enterprise obtains an interest, after January 31, 2003. For variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003, FIN 46 applies to interim or annual periods beginning after June 15, 2003. As discussed in Note (B), “Organization,” of our Notes to Condensed Combining Financial Statements, Centex indirectly holds 100% of the Partnership’s Class A and Class C Units. The manner in which Centex reports its interest in the Partnership may be affected by this interpretation. Centex and the Companies are in the process of assessing the impact FIN 46 will have on their respective financial statements. See Note (P), “Recent Accounting Pronouncements,” to the consolidated financial statements of Centex included elsewhere in this Report for further discussion regarding this interpretation.

FORWARD-LOOKING STATEMENTS

     The Business, Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the context of the statement and generally arise when we are discussing our beliefs, estimates or expectations. These statements are not guarantees of future performance and involve a number of risks and uncertainties. Actual results and outcomes may differ materially from what is expressed or forecasted in these forward-looking statements. In addition to the specific uncertainties discussed elsewhere in this Report, the following risks and uncertainties may affect the actual performance and results of operations of the Companies:

•   Our homebuilding, commercial, multi-family and land sales operations are somewhat cyclical and sensitive to changes in economic conditions, including levels of employment, consumer confidence and income, availability of financing, interest rate levels and changes in the economic condition of the local markets in which we operate.
 
•   Our homebuilding, commercial, multi-family and land sales operations are also subject to other risks and uncertainties, including seasonal variations, adverse weather conditions, the availability of adequate land in desirable locations, the cost and availability of labor and construction materials, labor disputes, the general demand for housing and new construction and the resale market for existing homes.
 
•   All of our businesses operate in very competitive environments, which are characterized by competition from a number of other homebuilders, developers and landowners in each of the markets in which we operate.
 
•   We are subject to various federal, state and local statutes, rules and regulations that could affect our businesses, including those concerning zoning, construction, protecting the environment and health. In addition, our businesses could be affected by changes in federal income tax policy, federal mortgage loan financing programs and by other changes in regulation or policy.

     Other risks and uncertainties may also affect the outcome of the actual performance and results of operations of the Partnership and Holding.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Partnership has utilized both short-term and long-term debt in its financing strategy. The Partnership’s financial position is exposed to fluctuations in variable interest rates for loans obtained by its subsidiaries and joint ventures.

     For fixed-rate debt, changes in interest rates do not affect the Partnership’s earnings or cash flows. Conversely, for variable-rate debt, changes in interest rates do affect the Partnership’s future earnings and cash flows. At March 31, 2003, the Partnership, through its subsidiaries and joint ventures, had $46.2 million in fixed-rate permanent debt with a weighted-average interest rate of 8.10%. The permanent debt has monthly principal and interest debt service and has maturities ranging from 2009 to 2023. In addition, the Partnership, through its subsidiaries and joint ventures, had $47.8 million in other fixed-rate debt at March 31, 2003 with maturities ranging from fiscal 2004 to fiscal 2006. Also at March 31, 2003, the Partnership, through its subsidiaries and joint ventures, had $127.5 million in variable-rate loans. If interest rates increased 100 basis points, the annual effect to the Partnership’s financial position and cash flows would be less than $1.0 million based on the balances outstanding at March 31, 2003. We cannot determine future fluctuations in interest rates. Accordingly, actual results from interest rate fluctuation could differ from the estimate presented above.

     Fairclough has entered into an interest rate swap agreement on a portion of its variable rate debt, which, in effect, fixes the interest rate on approximately 80% of its debt outstanding at March 31, 2003. In addition, Fairclough has issued promissory notes and incurred bank debt payable in British pounds sterling. As of March 31, 2003, the Partnership had not utilized any forward or option contracts on foreign currencies or commodities, or other types of derivative financial instruments, to mitigate any of the associated foreign currency exchange rate risk.

     Pursuant to leases signed over the last several years, a single tenant leases 1,029,000 square feet, or approximately 49%, of the Partnership’s current commercial projects. Fiscal 2003 revenues from this tenant were approximately 30% of total rental revenues from commercial projects and approximately 41% of total rental revenues from continuing operations.

     Various Centex affiliates lease, pursuant to leases signed over the last several years, an aggregate of 157,000 square feet, or approximately 7%, of the Partnership’s current commercial projects. Various Centex affiliates also leased space in two commercial projects that were sold during fiscal 2003. Fiscal 2003 revenues from these Centex affiliates were approximately 24% of total rental revenues from commercial projects, and approximately 27% of total rental revenues from continuing operations.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

3333 Holding Corporation and Subsidiary and Centex Development
Company, L.P. and Subsidiaries

         
Combining Balance Sheets
     136  
 
        
Combining Statements of Operations
     137  
 
        
Combining Statements of Cash Flows
     138  
 
        
Combining Statements of Stockholders’ Equity and Partners’ Capital
     140  
 
        
Notes to Combining Financial Statements
     141  
 
        
Report of Independent Auditors
     159  
 
        
Quarterly Results
     160  

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3333 Holding Corporation and Subsidiary
and Centex Development Company, L.P. and Subsidiaries
Combining Balance Sheets
(Dollars in thousands)

                                                               
          March 31,  
         
 
          2003     2002             2003     2002     2003     2002  
         
   
           
   
   
   
 
                                  Centex Development     3333 Holding  
                                  Company, L.P. and     Corporation and  
          Combined            Subsidiaries     Subsidiary  
         
          
   
 
Assets
                                                        
 
Cash and Cash Equivalents
   $ 5,113     $ 22,538             $ 5,105     $ 22,529     $ 8     $ 9  
 
Receivables—
                                                        
     
Affiliates
   —       —               4,289       4,368       —       —  
     
Centex Corporation and Subsidiaries
   7,793       —               7,793       —       —       —  
     
Notes
   5,885       —               5,885       —       —       —  
     
Other
   17,135       7,213               16,874       7,142       261       71  
 
Inventories—
                                                        
     
Housing Projects
     349,489       317,186               349,489       317,186       —       —  
     
Land Held for Development and Sale
     47,319       88,138               47,319       88,138       —       —  
     
Commercial and Multi-Family Projects Under Development
     51,752       28,751               51,752       28,751       —       —  
 
Investments—
                                                        
     
Commercial Properties, net
     98,609       83,442               98,609       83,442       —       —  
     
Real Estate Joint Ventures
     3,973       5,353               3,973       5,353       —       —  
     
Affiliate
     —       —               —       —       1,191       1,191  
 
Assets Held for Sale
     —       65,111               —       65,111       —       —  
 
Property and Equipment, net
     2,308       3,212               2,308       3,212       —       —  
 
Other Assets—
                                                        
     
Goodwill, net
     30,698       27,799               30,698       27,799       —       —  
     
Deferred Charges and Other
     20,610       19,693               18,839       17,922       1,771       1,771  
 
  
   
           
   
   
   
 
 
   $ 640,684     $ 668,436             $ 642,933     $ 670,953     $ 3,231     $ 3,042  
 
  
   
           
   
   
   
 
 
Liabilities, Stockholders’ Equity and Partners’ Capital
                                                        
 
Accounts Payable and Accrued Liabilities—
                                                        
     
Affiliates
   $ —     $ —             $ —     $ —     $ 4,289     $ 4,368  
     
Centex Corporation and Subsidiaries
     —       7,061               —       7,061       —       —  
     
Other
     130,344       107,772               130,182       107,779       211       42  
 
Liabilities Related to Assets Held for Sale
     —       51,527               —       51,527       —       —  
 
Notes Payable
     221,492       239,929               221,492       239,929       —       —  
 
Stockholders’ Equity and Partners’ Capital—
                                                        
     
Stock and Stock/Class B Unit Warrants
     501       501               500       500       1       1  
     
Capital in Excess of Par Value
     800       800               —       —       800       800  
     
Retained Earnings (Deficit)
     (2,070 )     (2,169 )             —       —       (2,070 )     (2,169 )
     
Partners’ Capital
     273,180       264,994               274,322       266,136       —       —  
     
Accumulated Other Comprehensive Income (Loss):
                                        
     
Foreign Currency Translation Adjustments
 16,903       (2,367 )             17,291       (2,367 )     —       —  
     
Unrealized Gain (Loss) on Hedging Instruments
 (466 )     388               (854 )     388       —       —  
 
  
   
           
   
   
   
 
 
Total Stockholders’ Equity and Partners’ Capital
     288,848       262,147               291,259       264,657       (1,269 )     (1,368 )
 
  
   
           
   
   
   
 
 
   $ 640,684     $ 668,436             $ 642,933     $ 670,953     $ 3,231     $ 3,042  
 
  
   
           
   
   
   
 


See Notes to Combining Financial Statements.

Transactions between Centex Development Company, L.P. and Subsidiaries and 3333 Holding Corporation and Subsidiary have been eliminated.

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3333 Holding Corporation and Subsidiary
and Centex Development Company, L.P. and Subsidiaries
Combining Statements of Operations
(Dollars in thousands, except per share/unit data)

                                                                           
      For the Years Ended March 31,  
     
 
      2003     2002     2001     2003     2002     2001     2003     2002     2001  
     
   
   
   
   
   
   
   
   
 
                                                      3333 Holding  
                            Centex Development Company   Corporation and  
      Combined   L.P. and Subsidiaries   Subsidiary  
     
   
   
 
Revenues
                                                                        
 
   Real Estate Sales
   $ 427,964     $ 364,162     $ 328,362     $ 427,964     $ 364,162     $ 328,362     $ —     $ —     $ —  
 
   Interest and Other Income
     21,595       16,701       7,515       21,470       15,216       7,514       350       1,611       1,001  
 
  
   
   
   
   
   
   
   
   
 
 
     449,559       380,863       335,877       449,434       379,378       335,876       350       1,611       1,001  
 
  
   
   
   
   
   
   
   
   
 
Costs and Expenses
                                                                        
 
   Cost of Real Estate Sold
     365,241       315,835       285,612       365,241       315,835       285,612       —       —       —  
 
   Selling, General and Administrative Expenses
     49,204       36,741       31,001       49,178       36,593       30,292       251       274       1,709  
 
   Interest
     10,168       7,506       10,869       10,168       7,506       10,869       —       —       —  
 
   Depreciation and Amortization
     3,326       2,599       3,923       3,326       2,599       3,885       —       —       38  
 
  
   
   
   
   
   
   
   
   
 
 
     427,939       362,681       331,405       427,913       362,533       330,658       251       274       1,747  
 
  
   
   
   
   
   
   
   
   
 
Earnings (Loss) from Continuing Operations Before Income Taxes
     21,620       18,182       4,472       21,521       16,845       5,218       99       1,337       (746 )
 
  Income Taxes
     4,192       1,757       (242 )     4,192       1,757       (242 )     —       —       —  
 
  
   
   
   
   
   
   
   
   
 
Net Earnings (Loss) from Continuing Operations
     17,428       16,425       4,714       17,329       15,088       5,460       99       1,337       (746 )
Discontinued Operations:
                                                                        
Earnings (Loss) from Discontinued Operations (Including Gain on Sale of $11,754 for the year ended March 31, 2003)
     11,934       557       (98 )     11,934       557       (98 )     —       —       —  
 
  
   
   
   
   
   
   
   
   
 
Net Earnings
   $ 29,362     $ 16,982     $ 4,616     $ 29,263     $ 15,645     $ 5,362     $ 99     $ 1,337     $ (746 )
 
  
   
   
   
   
   
   
   
   
 
Net Earnings Allocable to Limited Partner
                           $ 29,263     $ 15,645     $ 5,362                          
 
                          
   
   
                         
Earnings from Continuing
Operations Per Unit/Share
                           $ 72.03     $ 67.42     $ 77.74     $ 99     $ 1,337     $ (746 )
Earnings (Loss) From Discontinued
Operations Per Unit/Share
                             49.60       2.49       (1.40 )     —       —       —  
 
                          
   
   
   
   
   
 
Net Earnings (Loss) Per Unit/Share
                           $ 121.63     $ 69.91     $ 76.34     $ 99     $ 1,337     $ (746 )
 
                          
   
   
   
   
   
 
Weighted-Average Units/Shares Outstanding
                             240,591       223,788       70,235       1,000       1,000       1,000  
 
                          
   
   
   
   
   
 

See Notes to Combining Financial Statements.

Transactions between Centex Development Company, L.P. and Subsidiaries and 3333 Holding Corporation and Subsidiary have been eliminated.

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3333 Holding Corporation and Subsidiary
and Centex Development Company, L.P. and Subsidiaries
Combining Statements of Cash Flows
(Dollars in thousands)

                             
        March 31  
       
 
        2003     2002     2001  
       
   
   
 
       

Combined		  
       
 
Cash Flows — Operating Activities
                        
 
Net Earnings (Loss)
   $ 29,362     $ 16,982     $ 4,616  
 
Adjustments—
                        
   
Depreciation
     4,531       3,414       4,089  
   
Amortization
     932       691       751  
   
Deferred Tax Provision (Benefit)
     1,257       (1,262 )     —  
   
Equity in Earnings from Joint Ventures
     (539 )     (161 )     (394 )
 
Decrease in Restricted Cash
     —       —       1,915  
 
(Increase) Decrease in Receivables
     (16,893 )     2,716       133  
 
(Increase) Decrease in Notes Receivable
     (5,885 )     14       3,117  
 
Decrease (Increase) in Inventories
     31,345       (103,403 )     (36,126 )
 
Decrease (Increase) in Commercial Properties
     29,892       (51,780 )     (24,143 )
 
(Increase) Decrease in Other Assets
     (7 )     (8,108 )     (7,895 )
 
Increase (Decrease) in Payables and Accruals
     2,960     35,483       (25,571 )
 
  
   
   
 
 
     76,955       (105,414 )     (79,508 )
 
  
   
   
 
Cash Flows — Investing Activities
                        
 
Decrease (Increase) in Advances to Joint Ventures and Investment in Affiliate
     1,919       (2,493 )     290  
 
Disposals (Additions) of Property and Equipment, net
     525       (236 )     (633 )
 
  
   
   
 
 
     2,444       (2,729 )     (343 )
 
  
   
   
 
Cash Flows — Financing Activities
                        
 
(Decrease) Increase in Notes Payable—
 Centex Corporation and Subsidiaries
     —       —       —  
   
Other
     (76,840 )     101,676       (114,318 )
 
Issuance of Class C Units
     —       26,378       142,268  
 
Preference Payments
     (21,077 )     —       —  
 
  
   
   
 
 
     (97,917 )     128,054       27,950  
 
  
   
   
 
 
Effect of Exchange Rate Changes on Cash
     1,093       (407 )     (1,464 )
 
  
   
   
 
Net (Decrease) Increase in Cash
     (17,425 )     19,504       (53,365 )
Cash and Cash Equivalents at Beginning of Year
     22,538       3,034       56,399  
 
  
   
   
 
Cash and Cash Equivalents at End of Year
   $ 5,113     $ 22,538     $ 3,034  
 
  
   
   
 

See Notes to Combining Financial Statements.

Transactions between Centex Development Company, L.P. and Subsidiaries and 3333 Holding Corporation and Subsidiary have been eliminated.

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3333 Holding Corporation and Subsidiary
and Development Company, L.P. and Subsidiaries
Combining Statements of Cash Flows
(Dollars in thousands)

                                             
    March 31,     March 31,  
   
   
 
    2003     2002     2001     2003     2002     2001  
   
   
   
   
   
   
 
    Centex Development     3333 Holding  
    Company, L.P. and     Corporation and  
    Subsidiaries     Subsidiary  
   
   
 
   
 
   $ 29,263     $ 15,645     $ 5,362     $ 99     $ 1,337     $ (746 )
   
 
     4,531       3,414       4,051       —       —       38  
 
     932       691       751       —       —       —  
 
     1,257       (1,262 )     —       —       —       —  
 
     (539 )     (161 )     (394 )     —       —       —  
 
     —       —       1,915       —       —       —  
 
     16,703     2,787       128       (190 )     (71 )     5  
 
     (5,885 )     14       3,117       —       —       —  
 
     31,345       (105,299 )     (35,767 )     —       1,896       (359 )
 
     29,892       (51,780 )     (24,143 )     —       —       —  
 
     (7 )     (6,437 )     (7,970 )     —       (1,671 )     75  
 
     2,870     37,031       (26,547 )     90       (1,548 )     976  
 
  
   
   
   
   
   
 
 
     76,956       (105,357 )     (79,497 )     (1 )     (57 )     (11 )
 
  
   
   
   
   
   
 
   
 
     1,919       (2,493 )     290       —       —       —  
 
     525       (297 )     (633 )     —       61       —  
 
  
   
   
   
   
   
 
 
     2,444       (2,790 )     (343 )     —       61       —  
 
  
   
   
   
   
   
 
   
 
   —     —     —     —     —     —  
 
     (76,840 )     101,676       (114,318 )     —       —       —  
 
     —       26,378       142,268       —       —       —  
 
     (21,077 )     —       —       —       —       —  
 
  
   
   
   
   
   
 
 
     (97,917 )     128,054       27,950       —       —       —  
 
  
   
   
   
   
   
 
 
     1,093       (407 )     (1,464 )     —       —       —  
 
  
   
   
   
   
   
 
 
     (17,424 )     19,500       (53,354 )     (1 )     4       (11 )
 
     22,529       3,029       56,383       9       5       16  
 
  
   
   
   
   
   
 
 
   $ 5,105     $ 22,529     $ 3,029     $ 8     $ 9     $ 5  
 
  
   
   
   
   
   
 

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3333 Holding Corporation and Subsidiary
and Centex Development Company, L.P. and Subsidiaries
Combining Statements of Stockholders’ Equity and Partners’ Capital
(Dollars in thousands)

                                                             
        Centex Development Company, L.P.     3333 Holding  
        and Subsidiaries     Corporation and Subsidiary  
       
   
 
                Class B     General     Limited             Capital In     Retained  
                Unit     Partners’     Partners’     Stock     Excess of     Earnings  
        Combined             Warrants             Capital             Capital             Warrants             Par Value             (Deficit)  
       
   
   
   
   
   
   
 
Balance at March 31, 2000
   $ 69,185     $ 500     $ 1,142     $ 70,644     $ 1     $ 800     $ (2,760 )
 
Issuance of Class C Units
     146,112       —       —       146,112       —       —       —  
 
Net Earnings
     4,616       —       —       5,362       —       —       (746 )
 
Other Comprehensive Loss
     (4,100 )     —       —       (4,100 )     —       —       —  
 
  
                                                 
 
Comprehensive Income
     516                                                  
 
  
   
   
   
   
   
   
 
Balance at March 31, 2001
     215,813       500       1,142       218,018       1       800       (3,506 )
 
Issuance of Class C Units
     27,135       —       —       27,135       —       —       —  
 
Net Earnings
     16,982       —       —       15,645       —       —       1,337  
 
Other Comprehensive Income
     2,217       —       —       2,217       —       —       —  
 
  
                                                 
 
Comprehensive Income
       19,199                                                  
 
  
   
   
   
   
   
   
 
Balance at March 31, 2002
     262,147       500       1,142       263,015       1       800       (2,169 )
 
Preference Payments
     (21,077 )     —       —       (21,077 )     —       —       —  
 
Net Earnings
     29,362       —       —       29,263       —       —       99  
 
Other Comprehensive Income
     18,416       —       —       18,416       —       —       —  
 
  
                                                 
 
Comprehensive Income
     47,778                                                  
 
  
   
   
   
   
   
   
 
Balance at March 31, 2003
   $ 288,848     $ 500     $ 1,142     $ 289,617     $ 1     $ 800     $ (2,070 )
 
  
   
   
   
   
   
   
 

See Notes to Combining Financial Statements.

Transactions between Centex Development Company, L.P. and Subsidiaries and 3333 Holding Corporation and Subsidiary have been eliminated.

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3333 Holding Corporation and Subsidiary
and Centex Development Company, L.P. and Subsidiaries
Notes to Combining Financial Statements
(Dollars in thousands, except per share/unit data)

(A) BASIS OF PRESENTATION

     The accompanying combining financial statements include the accounts of 3333 Holding Corporation (“Holding”) and subsidiary and Centex Development Company, L.P. (the “Partnership”) and subsidiaries (collectively, the “Companies”) as of March 31, 2003 and 2002 and results of operations for each of fiscal 2003, 2002 and 2001 after elimination of all significant intercompany balances and transactions. The financial statements of the Partnership and subsidiaries are included in the combined statements since Development, as general partner of the Partnership, is able to exercise effective control over the Partnership.

(B) ORGANIZATION

     The Partnership is a master limited partnership formed by Centex Corporation and subsidiaries (“Centex”) in March 1987 to broaden the range of business activities that may be conducted for the benefit of Centex’s stockholders to include general real estate development. Centex believed that this expansion would improve stockholder value through longer-term real estate investments, real estate developments and the benefits of the partnership form of business.

     The Partnership is authorized to issue three classes of limited partnership interest. Centex Corporation indirectly holds 100% of the Partnership’s Class A and Class C limited partnership units (“Class A Units” and “Class C Units,” respectively), which are collectively convertible into 20% of the Partnership’s Class B limited partnership units (“Class B Units”). The Partnership may issue additional Class C Units in connection with the acquisition of real property and other assets. No Class B Units have been issued. However, the stockholders of Centex hold warrants to purchase approximately 80% of the Class B Units. The warrants are held through a nominee arrangement and trade in tandem with the common stock of Centex.

     As holder of the Class A and Class C Units, Centex is entitled to a cumulative preferred return of 9% per annum on the average outstanding balance of its capital contributions to the Partnership, adjusted for cash and other distributions representing a return of capital. As of March 31, 2003, these adjusted capital contributions, or Unrecovered Capital, were $241.1 million. Preference payments in arrears totaled $42.0 million after a preference payment of $21.1 million on March 31, 2003.

     The Partnership is managed by its general partner, 3333 Development Corporation, a wholly-owned subsidiary of Holding. The common stock of Holding is held by the stockholders of Centex through a nominee arrangement and trades in tandem with the common stock of Centex. The stockholders of Centex elect the four-person board of directors of Holding, three of whom are independent outside directors who are not directors, affiliates or employees of Centex. Thus, through Holding, the stockholders of Centex control the general partner of the Partnership. The general partner, through its independent board and the independent board of Holding, including its non-executive Chairman, oversees the Partnership’s activities, including the acquisition, development, maintenance, operation and sale of properties. Consent of the limited partners for the activities of the Partnership is not required, and the limited partners cannot remove the general partner. As a result, Centex accounts for its limited partnership interest in the Partnership using the equity method of accounting for investments.

     Supplementary condensed combined financial statements of Centex and subsidiaries, Holding and subsidiary, and the Partnership and subsidiaries are set forth below. For additional information on Centex

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and subsidiaries, you should refer to the separate financial statements and related footnotes included elsewhere in this Report.

Supplementary Condensed Combined Balance Sheets of Centex and Subsidiaries, Holding and Subsidiary and Partnership and Subsidiaries

                   
     
 
      March 31,  
     
 
      2003     2002  
     
   
 
Assets
                
 
Cash and Cash Equivalents
   $ 477,166     $ 242,254  
 
Restricted Cash
     172,321       106,270  
 
Receivables
     5,640,302       4,066,133  
 
Inventories
     4,052,597       3,221,931  
 
Investments in Joint Ventures and Other
     106,250       99,962  
 
Assets Held for Sale
     —       65,111  
 
Property and Equipment, net
     698,456       723,497  
 
Other Assets
     823,073       859,525  
 
  
   
 
 
   $ 11,970,165     $ 9,384,683  
 
 
  
   
 
Liabilities and Stockholders’ Equity
                
 
Accounts Payable and Accrued Liabilities
   $ 1,814,744     $ 1,544,004  
 
Liabilities Related to Assets Held for Sale
     —       51,527  
 
Short-term Debt
     1,042,825       525,800  
 
Long-term Debt
     6,283,366       4,990,908  
 
Minority Stockholders’ Interest
     171,384       155,671  
 
Stockholders’ Equity
     2,657,846       2,116,773  
 
  
   
 
 
   $ 11,970,165     $ 9,384,683  
 
 
  
   
 

Supplementary Condensed Combined Statements of Earnings of Centex and Subsidiaries, Holding and Subsidiary and Partnership and Subsidiaries

                         
   
 
    For the Years Ended March 31,  
   
 
    2003     2002     2001  
   
   
   
 
Revenues
   $ 9,499,365     $ 8,109,124     $ 7,045,133  
Cost of Sales
     8,712,256       7,489,159       6,608,946  
 
  
   
   
 
Earnings Before Income Taxes
     787,109       619,965       436,187  
Income Taxes
     243,124       238,296       154,112  
 
  
   
   
 
Net Earnings From Continuing Operations
     543,985       381,669       282,075  
Earnings (Loss) From Discontinued Operations
     11,934       557       (98 )
 
  
   
   
 
Net Earnings
     555,919       382,226       281,977  
Other Comprehensive Income (Loss)
     6,965       (7,859 )     (3,849 )
 
  
   
   
 
Comprehensive Income
   $ 562,884     $ 374,367     $ 278,128  
 
  
   
   
 

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(C) SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

     Revenues from homebuilding projects are recognized as homes are sold and title passes. Real estate sales are recognized when a buyer has made an adequate cash down payment, all significant risks and rewards of ownership have been relinquished and title has transferred to the buyer. Sales revenues related to contractually obligated improvements are deferred until such improvements have been completed. The Partnership recognizes revenues from rentals to tenants under operating leases ratably over the lease terms. Rental revenues are included in Interest and Other Income in the Combining Statements of Operations.

Earnings (Loss) Per Share/Unit

     Earnings (loss) per share/unit is based on the weighted-average number of outstanding shares of Holding common stock of 1,000 and on the weighted-average number of outstanding Class A and Class C Units of 240,591; 223,788 and 70,235 for fiscal 2003, 2002, and 2001 respectively.

Cash and Cash Equivalents

     The Partnership considers all highly liquid investments purchased with an original maturity of three months or less to be cash and cash equivalents.

Accounts and Notes Receivable

     Accounts receivable primarily consist of accrued rents due from tenants, closed unfunded home sales receivables and accrued reimbursements for costs incurred at a multi-family project. See Note (K), “Commitments and Contingencies,” for further discussion of this project. Non-cancelable minimum rentals (in thousands) from operating leases during the next five fiscal years are: 2004, $12,082; 2005, $12,034; 2006, $11,449; 2007, $11,258; 2008, $11,105; and $61,020 thereafter.

     Notes receivable at March 31, 2003 are due within one year. The weighted-average interest rate at March 31, 2003 was 5.25%.

Inventory Capitalization and Cost Allocation

     Projects under development and held for sale are stated at the lower of cost (including development costs and, where appropriate, capitalized interest and real estate taxes) or fair value less costs to sell. Capitalized costs are included in cost of sales in the combining statements of operations as related revenues are recognized. Interest costs relieved from inventories are included in cost of sales. The Companies review recoverability of their inventories on an individual basis in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” An impairment charge of approximately $1.0 million is included in Selling, General and Administrative Expenses in fiscal year 2003 to reflect the difference between cost and fair value for a commercial project.

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Commercial Properties, net

     Commercial real estate properties are carried at cost, net of accumulated depreciation. Betterments, major renovations and certain costs directly related to the acquisition, improvement and leasing of real estate are capitalized. Expenditures for maintenance and repairs are charged to operations as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, as follows:

     
Buildings and Improvements   5 to 39 years
Tenant Improvements   Terms of leases

     The cost of commercial real estate properties and accumulated depreciation are summarized below:

                 
   
 
    March 31,  
   
 
    2003     2002  
   
   
 
Commercial Properties
   $ 103,251     $ 86,137  
Accumulated Depreciation
     (4,642 )     (2,695 )
 
  
   
 
 
   $ 98,609     $ 83,442  
 
  
   
 

Deferred Charges and Other

     Deferred charges and other are primarily composed of loan fees, lease commissions, prepaid expenses, deposits and investments.

Property and Equipment, net

     Property and equipment are stated at cost. Major renewals and improvements are capitalized and depreciated. Repairs and maintenance are expensed as incurred. Depreciation is provided on a straight-line basis over the estimated useful lives of depreciable assets ranging from three to ten years. Costs and accumulated depreciation applicable to assets retired or sold are eliminated from the accounts and any resulting gains or losses are recognized at such time.

Goodwill

     Goodwill represents the excess of purchase price over the net assets of businesses acquired. In accordance with Statement of Financial Accounting Standards No. 142 (“SFAS No. 142”), goodwill and certain identifiable intangible assets are no longer amortized over their expected lives. Instead, these assets are tested for impairment annually at the reporting unit level using a two-step impairment assessment. See further discussion of goodwill at Note (J), “Goodwill.”

Advertising Costs

     Advertising costs are expensed as incurred. The advertising costs for fiscal 2003, 2002 and 2001 were $5.4 million, $4.3 million and $3.7 million, respectively.

Foreign Currency Exchange Gains or Losses

     The Partnership’s International Home Building operation, whose functional currency is not the U.S. dollar, translates its financial statements into U.S. dollars. Assets and liabilities are translated at the exchange rate in effect as of the financial statement date. Income statement accounts are translated using

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the average exchange rate for the period. Income statement accounts that represent significant, non-recurring transactions are translated at the rate in effect as of the date of the transaction. Gains and losses resulting from the translation are included in accumulated other comprehensive income as a separate component of partners’ capital.

Use of Estimates

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Reclassifications

     Certain prior year balances have been reclassified to be consistent with the fiscal 2003 presentation.

Combining Statements of Cash Flows — Supplemental Disclosures

                 
    For the Years Ended March 31,  
   
 
    2003     2002  
   
   
 
Cash Paid for Interest
   $ 18,518     $ 14,605  
 
  
   
 
Net Cash Paid for Taxes
   $ 2,657     $ 5,591  
 
  
   
 
Issuance of Class C Units in Exchange for Assets
   $ —     $ 27,135  
 
  
   
 
                 
    For the Years Ended March 31,  
   
 
    2003     2002  
   
   
 
Total Interest Incurred
   $ 19,256     $ 14,855  
Interest Capitalized
     6,711       5,312  
 
  
   
 
Interest Expense
   $ 12,545     $ 9,543  
 
  
   
 

Recent Accounting Pronouncements

     In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144 (“SFAS 144”), “Accounting for the Impairment or Disposal of Long-Lived Assets,” which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The statement was effective for the Companies beginning April 1, 2002.

     Due to the adoption of SFAS 144, the Companies now report assets identified subsequent to March 31, 2002 as held for sale (as defined by SFAS 144), if any, and any such assets sold in the current period, as discontinued operations. All results of these discontinued operations, less applicable income taxes, are included as discontinued operations in the statements of operations. Prior periods are restated for comparative purposes. Land assets, and any other assets sold prior to adoption of SFAS 144, are reported in continuing operations.

     In November 2002, the Financial Accounting Standards Board issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of

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Indebtedness of Others” (“FIN 45”), which requires certain guarantees to be recorded at fair value. FIN 45 also requires a guarantor to make certain disclosures about guarantees, including product warranties, even when the likelihood of making any payments under the guarantee is remote. The disclosure requirements of FIN 45 are effective for financial statements of interim or annual periods ending after December 15, 2002. The initial recognition and measurement provisions are applicable only for guarantees issued or modified after December 31, 2002. The implementation of FIN 45 did not have a material impact on our results of operations or financial position.

     In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”), which clarifies the application of Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. Certain disclosure requirements of FIN 46 are effective for financial statements of interim or annual periods issued after January 31, 2003. FIN 46 applies immediately to variable interest entities created, or in which an enterprise obtains an interest, after January 31, 2003. For variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003, FIN 46 applies to interim or annual periods beginning after June 15, 2003. As discussed above in Note (B), “Organization,” Centex indirectly holds 100% of the Partnership’s Class A and Class C Units. The manner in which Centex reports its interest in the Partnership may be affected by this interpretation. Centex and the Companies are in the process of assessing the impact FIN 46 will have on their respective financial statements. See Note (N) to the consolidated financial statements of Centex included elsewhere in this Report for further discussion regarding this interpretation.

(D) ACQUISITION OF FAIRCLOUGH HOMES GROUP LIMITED

     On April 15, 1999, Centex Development Company UK Limited (“CDCUK”), a company incorporated in England and Wales and a wholly-owned subsidiary of the Partnership, closed its acquisition of all of the voting shares of Fairclough Homes Group Limited, a British home builder (“Fairclough”). The purchase price at closing (approximately $219 million) was paid by the delivery of two-year non-interest-bearing promissory notes. A major portion of the promissory notes was secured by a letter of credit obtained by the Partnership from a United Kingdom bank. Additionally, the seller of the voting shares retained non-voting preference shares in Fairclough that entitled it to receive substantially all of the net after-tax earnings of Fairclough until March 31, 2001. During that time period CDCUK also retained the rights to participate in Fairclough’s earnings in excess of certain specified levels. During the period between April 15, 1999 and March 31, 2001, Fairclough’s operations were carried out subject to certain guidelines that were negotiated with the seller in connection with its ownership of the preference shares.

     Because the non-voting preference shares retained by the seller had the characteristics of debt, the preference obligation was reported as interest expense in the financial statements. Subsequent to March 31, 2001, CDCUK redeemed the preference shares for nominal value.

     As of March 31, 2001, the non-interest-bearing promissory notes were repaid in full (less the holdback described below) from a combination of bank borrowings, equity contributions to CDCUK from the Partnership, and a loan to CDCUK from the Partnership. CDCUK retained a $6.9 million holdback relative to CDCUK exercising its right of offset for asserted breaches of representations and warranties by the seller under the share purchase agreement. In fiscal 2002, $1.2 million of this holdback was paid to the seller and $5.7 million was dedicated to fund repair costs and claims arising out of a project completed prior to CDCUK’s acquisition of Fairclough.

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     The purchase of Fairclough has been accounted for using the purchase method of accounting, pursuant to which the total cost of the acquisition has been allocated to the tangible and intangible assets acquired and liabilities assumed based upon their estimated fair values.

(E) PROPERTY AND EQUIPMENT

     Property and equipment cost by major category and accumulated depreciation are summarized below:

                 
   
 
    March 31,  
   
 
    2003     2002  
   
   
 
Land, Buildings & Improvements
   $ 1,531     $ 2,004  
Machinery, Equipment & Other
     1,874       1,659  
 
  
   
 
 
     3,405       3,663  
Accumulated Depreciation
     (1,097 )     (451 )
 
  
   
 
 
   $ 2,308     $ 3,212  
 
  
   
 

(F) INVESTMENTS IN CERTAIN JOINT VENTURES

     The Partnership conducts certain operations through its participation in joint ventures in which the Partnership holds less than a majority interest. These non-consolidated joint ventures had total debt outstanding of approximately $35.8 million as of March 31, 2003 and $16.1 million as of March 31, 2002. The Partnership’s liability for the obligations of these non-consolidated joint ventures is limited to approximately $7.5 million as of March 31, 2003.

(G) NOTES PAYABLE

     Non-recourse debt totaled $78.2 million at March 31, 2003. As projects are sold, a portion of the proceeds is restricted for repayment of the note that was secured by the project sold. In addition, the Partnership, through wholly-owned single asset entities, had construction debt outstanding at March 31, 2003 totaling $74.0 million. The Partnership itself has also issued completion and payment guarantees for up to 100% of the construction loan amounts. The note balances and rates in effect were as follows:

                           
             
 
              March 31,  
             
 
              2003     2002  
             
   
 
Non-Recourse Debt
                        
 
Mortgage Notes(2)
   7.20% to 8.72%   $ 46,153     $ 76,592  
 
Land Notes(3)
   8.00% to 9.50%     32,076       62,370  
 
          
   
 
 
             78,229       138,962  
 
          
   
 
Limited-Recourse
                        
 
Construction Notes(5)
   LIBOR(1) + 2.00% - 2.35% to 7.08%     50,506       40,868  
 
          
   
 
Full-Recourse Debt
                        
 
Construction Notes(6)
   LIBOR(1) + 1.75% - 2.00%     23,461       15,167  
 
Other(4)
   LIBOR(1) + 1.00%     69,296       94,129  
 
          
   
 
 
             92,757       109,296  
 
          
   
 
 
           $ 221,492     $ 289,126  
 
          
   
 

(1)   The 30-day LIBOR rate at March 31, 2003 and 2002 was 1.31% and 1.88%, respectively.
 
(2)   Secured by assets with an aggregate book value of $53.8 million at March 31, 2003.
 

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(3)   Secured by assets with an aggregate book value of $35.3 million at March 31, 2003.
 
(4)   As of March 31, 2003, the Partnership has drawn £44.0 million of the £100.0 million availability.
 
(5)   Secured by assets with an aggregate book value of $63.6 million at March 31, 2003.
 
(6)   Secured by assets with an aggregate book value of $33.7 million at March 31, 2003.

     Maturities of debt (in thousands) during the next five fiscal years are: 2004, $29,929; 2005, $35,193; 2006, $25,175; 2007, $69,296; 2008, $—; and $61,899 thereafter.

(H) COMPREHENSIVE INCOME

     A summary of comprehensive income for the three-year period ended March 31, 2003 is presented below:

                           
     
 
      For the Years Ended March 31,  
     
 
      2003     2002     2001  
     
   
   
 
Net Earnings
   $ 29,362     $ 16,982     $ 4,616  
Other Comprehensive Income (Loss), Net of Tax:
                        
 
Foreign Currency Translation Adjustments
     19,270       1,829       (4,100 )
 
Unrealized Gain (Loss) on Hedging Instruments
     (854 )     388       —  
 
  
   
   
 
Comprehensive Income
   $ 47,778     $ 19,199     $ 516  
 
  
   
   
 

(I) DERIVATIVES AND HEDGING

     The Partnership is exposed to the risk of interest rate fluctuations on its debt obligations. As part of its strategy to manage the obligations that are subject to changes in interest rates, the Partnership has entered into an interest rate swap agreement, designated as a cash flow hedge, on a portion of its debt. The swap agreement is recorded at its fair value in Other Assets or Accrued Liabilities in the condensed combining balance sheets. To the extent the hedging relationship is effective, fluctuations in the fair value of the derivative are deferred as a component of Accumulated Other Comprehensive Income. Fluctuations in the fair value of the ineffective portion of the derivative would be reflected in the current period earnings. During fiscal 2003, there was no hedge ineffectiveness related to this derivative.

     This swap expires in March 2004. Amounts to be received or paid as a result of the swap agreement are recognized as adjustments to interest incurred on the related debt instrument. As of March 31, 2003, the Accumulated Other Comprehensive Loss was $666 thousand ($466 thousand net of tax). If the cash flow hedge is terminated, the net gain or loss remains in Accumulated Other Comprehensive Income, and is reclassified into earnings in the same periods during which the cash flows on the hedged item affect earnings.

(J) GOODWILL

     Holding and the Partnership adopted Statement of Financial Accounting Standards No. 142 “Goodwill and Other Intangible Assets” (“SFAS No. 142”) effective April 1, 2001. SFAS No. 142 provides guidance on accounting for intangible assets and eliminates the amortization of goodwill and certain identifiable intangible assets. Under the provisions of SFAS No. 142, intangible assets, including goodwill, that are not subject to amortization will be tested for impairment annually at the reporting unit level using a two-step impairment assessment. Impairment testing must be performed more frequently if events or changes in circumstances indicate that the asset might be impaired. Holding and the Partnership tested for potential impairment, both upon adoption of SFAS No. 142 and annually as of January 1, 2002, by determining whether the carrying amount of a reporting unit exceeds its fair value. Holding and the

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Partnership had no impairment of goodwill in fiscal 2003. Identifiable intangible assets, other than goodwill, are immaterial. The Partnership’s International Home Building segment carries all of the Partnership’s goodwill, which arose from the April 15, 1999 acquisition of all of the voting shares of Fairclough. The carrying amount of goodwill was $30.7 million and $27.8 million at March 31, 2003 and 2002, respectively. The increase in fiscal 2003 reflects the impact of foreign currency translation adjustments.

     For fiscal 2001, net earnings excluding goodwill amortization and earnings per unit excluding such amortization expense are as follows:

           
      March 31,  
     
 
      2001  
     
 
Reported Net Earnings Allocable to Limited Partner
   $ 5,362  
Goodwill Amortization
     1,750  
 
  
 
Adjusted Net Earnings
   $ 7,112  
 
  
 
Net Earnings (Loss) Per Unit:
        
 
Reported Net Earnings
   $ 76.34  
 
Goodwill Amortization
     24.92  
 
  
 
 
Adjusted Net Earnings
   $ 101.26  
 
  
 

(K) COMMITMENTS AND CONTINGENCIES

     As of March 31, 2003, the Partnership had remaining commitments of approximately $10.2 million on construction contracts.

     To obtain construction financing for projects being developed by its subsidiaries, the Partnership is often required to guarantee, for the benefit of the construction lender, the completion of the project. In some instances, the Partnership has also executed recourse payment guarantees. At March 31, 2003, our subsidiaries had outstanding letters of credit of $3.9 million that primarily relate to development obligations of Multi-Family Communities.

     Subsidiaries of the Partnership have also obtained demand notes or letters of credit from Centex for up to 10% of the construction loan commitment amount. These demand notes or letters of credit have been pledged or endorsed to the lenders as additional collateral on the construction loans and may be called only in the event of an uncured default by the Partnership. This additional collateral totals approximately $1.1 million as of March 31, 2003.

     A subsidiary of the Partnership has agreed to develop a mixed-use project in Saint Paul, Minnesota consisting of various types of residential housing and ancillary retail space. The subsidiary has performed a significant portion of the infrastructure work and has sold several of the development sites to reputable home builders (including a 1.5 acre site to Centex Homes) pursuant to contracts that obligate the purchasers to fulfill certain of the seller’s development obligations at the project. The subsidiary of the Partnership (as the seller) retains the right to repurchase the site if the purchaser fails to commence the performance of such obligations. Ultimately, the Partnership’s subsidiary remains responsible for the development of the project.

     The subsidiary anticipates that the costs expended for infrastructure work will be reimbursed from the proceeds of a bond offering by a special taxing district established to aid in the development of the project. These costs will be reimbursed over time as improvements at the project generate property taxes

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sufficient to fund debt service on the bonds. A receivable of approximately $13.9 million is included in Other Receivables in the accompanying Combining Balance Sheets. The subsidiary has deferred recognition of this income as of March 31, 2003 as improvements to the project that will generate property taxes have begun.

     In the normal course of its business, the Partnership issues certain representations, warranties and guarantees related to its home sales, land sales and building sales that may be affected by the Financial

Accounting Standards Board’s recent issuance of FIN 45. Based on historical evidence, the Partnership does not believe that any of these representations, warranties or guarantees would result in a material effect on our consolidated financial condition or operations. See further discussion on our warranty liability below. See further discussion of FIN 45 in Note (C), “Significant Accounting Policies.”

     International Home Building offers a ten-year limited warranty for most homes constructed and sold in the United Kingdom. The warranty covers defects in materials or workmanship in various components of the home for the first two years and designated structural elements of the home in the third through tenth years. International Home Building estimates the costs that may be incurred under its warranty program for which it will be responsible and records a liability at the time each home is closed. Factors that affect International Home Building’s warranty liability include the number of homes closed, historical and anticipated rates of warranty claims and cost per claim. International Home Building periodically assesses the adequacy of its recorded warranty liability and adjusts the amounts as necessary.

     Changes in International Home Building’s contractual warranty liability during the period are as follows:

           
Balance as of March 31, 2002
   $ 2,279  
Warranties Issued
     5,323  
Settlements Made
     (4,212 )
 
  
 
Balance as of March 31, 2003
   $ 3,390  
 
  
 

     Benefits are provided to eligible employees of the Partnership and certain subsidiaries under various profit sharing plans. The aggregate cost of these plans to the Partnership was $1.2 million in fiscal 2003, $1.0 million in fiscal 2002 and $0.8 million in fiscal 2001. The employees’ rights to employer contributions to these plans vest over a period of up to seven years.

(L) BUSINESS SEGMENTS

     The Companies operate in four principal business segments: International Home Building, Commercial Development, Multi-Family Communities and Corporate-Other. All of the segments, except for International Home Building, operate in the United States. International Home Building’s accounting policies are the same as those described in the summary of significant accounting policies. Segment information is presented after the elimination of all inter-segment transactions and balances.

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     International Home Building acquires and develops residential properties and constructs single and multi-family housing units in the United Kingdom. Commercial Development develops office, industrial, retail and mixed-use projects, for sale and for investment. Multi-Family Communities develops multi-family projects, which it markets for sale during the development period. Corporate-Other is involved in the acquisition and disposition of land and other assets of the Partnership not identified with another specific business segment.

                                         
    For the Year Ended March 31, 2003  
    (Dollars in thousands)  
   
    Int’l Home     Commercial     Multi-Family     Corporate-          
    Building     Development     Communities     Other     Total  
   
   
   
   
   
 
Revenues
   $ 375,624     $ 31,273     $ 6,171     $ 36,491     $ 449,559  
Cost of Sales
     (319,322 )     (8,334 )     (4,703 )     (32,882 )     (365,241 )
Selling, General & Administrative Expenses
     (33,372 )     (12,450 )     (2,982 )     (3,726 )     (52,530 )
Interest Expense
     (2,538 )     (5,266 )     —       (2,364 )     (10,168 )
 
  
   
   
   
   
 
Earnings (Loss) from Continuing Operations Before Income Taxes
     20,392       5,223       (1,514 )     (2,481 )     21,620  
Earnings from Discontinued Operations Before Income Tax
     —       10,191       1,743       —       11,934  
 
  
   
   
   
   
 
Earnings (Loss) Before Income Tax
   $ 20,392     $ 15,414     $ 229     $ (2,481 )   $ 33,554  
 
  
   
   
   
   
 
Identifiable Assets
   $ 396,428     $ 126,855     $ 65,389     $ 52,012     $ 640,684  
Capital Expenditures
   $ 295     $ —     $ —     $ —     $ 295  
Depreciation and Amortization
   $ 782     $ 2,493     $ 28     $ 23     $ 3,326  
Revenues from Discontinued Operations
   $ —     $ 79,903     $ 25,200     $ —     $ 105,103  

     Effective April 1, 2003, the operations of Multi-Family Communities were restructured. Due to the risks associated with an extended development time frame and significant capital requirements, these operations have been restructured to focus on leasing and disposition of current projects rather than new development.

     The responsibilities for day-to-day operations, including the completion, leasing and sale of remaining projects have been assumed by personnel within the Corporate-Other segment. The future operations of remaining projects will be reflected in the Corporate-Other segment. A restructuring charge of approximately $0.6 million is included in Multi-Family Communities’ selling, general and administrative expenses for the year ended March 21, 2003.

     Pursuant to leases signed over the last several years, a single tenant leases 1,029,000 square feet, or approximately 49%, of the Partnership’s current commercial projects. Fiscal 2003 revenues from this tenant were approximately 30% of total rental revenues from commercial project and approximately 41% of total rental revenues from continuing operations.

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     Various Centex affiliates lease, pursuant to leases signed over the last several years, an aggregate of 157,000 square feet, or approximately 7%, of the Partnership’s current commercial projects. Various Centex affiliates also leased space in two commercial projects that were sold during fiscal 2003. Fiscal 2003 revenues from these Centex affiliates were approximately 24% of total rental revenues from commercial projects, and approximately 27% of total rental revenues from continuing operations.

                                         
    For the Year Ended March 31, 2002  
    (Dollars in thousands)  
   
    Int’l Home     Commercial     Multi-Family     Corporate-          
    Building     Development     Communities     Other     Total  
   
   
   
   
   
 
Revenues
   $ 290,406     $ 33,701     $ 53,944     $ 2,812     $ 380,863  
Cost of Sales
     (251,010 )     (16,750 )     (46,866 )     (1,209 )     (315,835 )
Selling, General & Administrative Expenses
     (25,135 )     (8,275 )     (3,917 )     (2,013 )     (39,340 )
Interest Expense
     (1,947 )     (4,718 )     (6 )     (835 )     (7,506 )
 
  
   
   
   
   
 
Earnings (Loss) from Discontinued Operations Before Income Tax
     12,314       3,958       3,155       (1,245 )     18,182  
Earnings from Discontinued Operations Before Income Tax
     —       557       —       —       557  
 
  
   
   
   
   
 
Earnings (Loss) Before Income Tax
   $ 12,314     $ 4,515     $ 3,155     $ (1,245 )   $ 18,739  
 
  
   
   
   
   
 
Identifiable Assets
   $ 382,903     $ 179,270     $ 28,725     $ 77,538     $ 668,436  
Capital Expenditures
   $ 185     $ —     $ 24     $ 27     $ 236  
Depreciation & Amortization
   $ 540     $ 1,398     $ 28     $ 2     $ 1,968  
Revenues from Discontinued Operations
   $ —     $ 5,767     $ —     $ —     $ 5,767  

                                                 
    For the Year Ended March 31, 2001  
    (Dollars in thousands)  
   
            Domestic                                  
    Int’l Home     Home     Commercial     Multi-Family     Corporate-          
    Building     Building     Development     Communities     Other     Total  
   
   
   
   
   
   
 
Revenues
   $ 252,487     $ 30,304     $ 29,648     $ 1,664     $ 21,774     $ 335,877  
Cost of Sales
     (222,634 )     (24,002 )     (18,398 )     —       (20,578 )     (285,612 )
Selling, General & Administrative Expenses
     (22,085 )     (3,461 )     (5,932 )     (2,399 )     (1,047 )     (34,924 )
Interest Expense
     (7,802 )     —       (3,067 )     —       —       (10,869 )
 
  
   
   
   
   
   
 
Earnings (Loss) from Discontinued Operations Before Income Tax
     (34 )     2,841       2,251       (735 )     149       4,472  
Loss from Discontinued Operations Before Income Tax
     —       —       (98 )     —       —       (98 )
 
  
   
   
   
   
   
 
Earnings (Loss) Before Income Tax
   $ (34 )   $ 2,841     $ 2,153     $ (735 )   $ 149     $ 4,374  
 
  
   
   
   
   
   
 
Identifiable Assets
   $ 295,885     $ —     $ 127,109     $ 50,783     $ 10,873     $ 484,650  
Capital Expenditures
   $ 629     $ 4     $ —     $ —     $ —     $ 633  
Depreciation & Amortization
   $ 2,678     $ 45     $ 1,159     $ 41     $ —     $ 3,923  
Revenues from Discontinued Operations
   $ —     $ —     $ 3,440     $ —     $ —     $ 3,440  

     In March 2001, the Partnership sold its Domestic Home Building segment to Centex Homes for total consideration of $21.1 million representing book value, which also approximated market value. The financial results from the sale of this segment are included in Corporate-Other. Domestic Home Building accounted for 8.9% of revenues and 65.0% of operating earnings in fiscal 2001.

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(M) FAIR VALUE OF FINANCIAL INSTRUMENTS

     Statement of Financial Accounting Standards No. 107, “Disclosures about Fair Value of Financial Instruments,” requires companies to disclose the estimated fair value of their financial instrument assets and liabilities. The estimated fair values shown below have been determined using current quoted market prices where available and, where necessary, estimates based on present value methodology suitable for each category of financial instruments. Considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. All assets and liabilities that are not considered financial instruments have been valued using historical cost accounting.

     The consolidated carrying values of Cash and Cash Equivalents, Other Receivables, Accounts Payable and Accrued Liabilities and other variable-rate debt approximate their fair values. The carrying values and estimated fair values of other financial liabilities were as follows:

                                 
    March 31,  
   
 
    2003     2002  
   
   
 
    Carrying     Fair     Carrying     Fair  
    Value     Value     Value     Value  
   
   
   
   
 
Financial Liabilities Fixed-Rate Debt
   $ 93,975     $ 99,793 (1)   $ 152,616     $ 153,815 (1)

  (1)   Fair values are based on a present value discounted cash flow with the discount rate approximating current market for similar instruments.

(N) STOCKHOLDERS’ EQUITY AND PARTNERS’ CAPITAL

Equity Securities

     The partnership agreement governing the Partnership (the “Partnership Agreement”) contemplates the issuance of three classes of limited partnership units: Class A Units, Class B Units and Class C Units. Under the Partnership Agreement, holders of Class C Units are entitled to substantially the same rights as holders of Class A Units in connection with matters in common, such as voting, allocations and distributions. During fiscal 2002, 27,135 Class C Units were issued in exchange for cash and other assets with a fair market value of $27.1 million. At March 31, 2003, there were 32,260 Class A Units and 208,330 Class C Units outstanding.

     No Class B Units are issued and outstanding. However, warrants to purchase approximately 80% of the Class B Units were issued to Centex stockholders and are held by a nominee on their behalf. These warrants will detach and trade separately from Centex common stock on the earlier of Payout (as defined below) or November 30, 2007, the scheduled detachment date.

Preferred Return

     The Partnership Agreement provides that the holders of the Class A Units and Class C Units are entitled to a cumulative preferred return of 9% per annum on the average outstanding balance of their Unrecovered Capital. Preference payments in arrears at March 31, 2003 amounted to $42.0 million, and Unrecovered Capital for the holders of Class A Units and Class C Units at March 31, 2003 totaled $32.8 million, and $208.3 million, respectively.

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Allocation of Profits and Losses

     As provided in the Partnership Agreement, prior to Payout (as defined below), net income of the Partnership is to be allocated to the partners in the following order of priority:

  [i]   To the holders of Class A Units and Class C Units to the extent of the cumulative preferred return.
 
  [ii]   To the partners to the extent and in the same ratio that cumulative net losses were allocated.
 
  [iii]    To the partners in accordance with their percentage interests. Currently, this would be a combined 20% to the holders of Class A Units and Class C Units and 80% to the general partner.

     After Payout, the percentage interests will change to a combined 99% to the limited partners and 1% to the general partner. Thereafter, all loss allocations and allocations of net income will be made to the partners in accordance with their modified percentage interests.

Distributions

     Distributions of cash or other property are to be made at the discretion of the general partner and are to be distributed in the following order of priority:

  [i]   Prior to the time at which the Class A and Class C limited partners have received aggregate distributions equal to their original capital contribution (“Payout”), distributions of cash or other property shall be made as follows:

  [a]   To the Class A and Class C limited partners with respect to their cumulative preferred return, then
 
  [b]   To the partners in an amount equal to the maximum marginal corporate tax rate times the amount of taxable income allocated to the partners then
 
  [c]   To the Class A and Class C limited partners until their Unrecovered Capital is reduced to zero.

  [ii]   After Payout, distributions of cash will be made to the partners in accordance with their modified percentage interests.

Warrants

     In November 1987, Centex acquired from the Partnership 100 warrants to purchase Class B Units in the Partnership at an exercise price of $500 per Class B Unit, and Centex acquired from Holding 100 warrants to purchase shares of Holding common stock at an exercise price of $800 per share. These warrants are subject to future adjustment to provide the holders of options to purchase Centex common stock with the opportunity to acquire Class B Units and shares of Holding. These warrants will generally become exercisable upon the detachment of the tandem-traded securities from Centex common stock.

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(O) RELATED PARTY TRANSACTIONS

Services Agreements

     The Partnership has a services agreement with Holding whereby Holding provides certain executive and managerial services and tax, accounting and other similar services to the Partnership. The agreement was amended and restated effective April 1, 2001 to decrease the quarterly fee to $50 thousand. Effective October 1, 2001, the quarterly fee was further decreased to $12.5 thousand. In addition to the $50 thousand in service fees paid during fiscal 2003, the Partnership paid $.1 million and $1.0 million to Holding during fiscal 2003 and 2001, respectively.

     Holding has a services agreement with Centex Service Company (“Centex Service”), a wholly-owned subsidiary of Centex, whereby Centex Service provides certain tax, accounting, administrative and other similar services for Holding. In conjunction with the employment by the Partnership of employees previously employed by Centex Service, the agreement was amended and restated effective April 1, 2001 to decrease the quarterly fee to $50 thousand. Effective October 1, 2001, the quarterly fee was further decreased to $12.5 thousand to reflect employment by the Partnership of certain additional employees previously employed by Centex Service. Fees of $50 thousand, $125 thousand and $1.0 million in fiscal 2003, 2002 and 2001 paid by Holding to Centex Service under this agreement are reflected as administrative expenses in the accompanying combining financial statements.

Sales and Purchases

     Partnership revenues include sales to Centex Homes of $34.5 million, $1.7 million and $21.1 million (from the sale of the Partnership’s Domestic Home Building operation) during fiscal 2003, 2002 and 2001, respectively.

     During fiscal 2003, Centex Homes purchased a 1.5 acre site in Saint Paul, Minnesota from a subsidiary of the Partnership for cash consideration of $1.6 million. During fiscal 2002, Centex Homes purchased a 12-acre site in Lewisville, Texas, from subsidiaries of Holding and the Partnership for cash consideration of $1.25 million. Centex Homes will pay additional consideration to the subsidiaries in the form of a participation in profits above certain gross margin threshold levels on townhome sales.

     At March 31, 2003 and March 31, 2002, Centex Homes had $7.2 million and $9.1 million deposited with the Partnership as option deposits for the purchase of land. Centex Homes also entered into agreements to reimburse the Partnership for certain costs and fees incurred by the Partnership in the purchase and ownership of these tracts of land. During the year ended March 31, 2003, Centex Homes paid $3.5 million to the Partnership in fees and reimbursements pursuant to these agreements and $32.9 million for the purchase of residential lots. Centex Homes expects to pay an additional $31.6 million to the Partnership to complete the purchase of these tracts of land over the next three years.

Other

     The Partnership has entered into a management agreement with Centex Homes whereby the Partnership provides certain services to Centex Homes for the operation, management, development and sale of its commercial real estate portfolio. The management agreement, which was entered into effective April 1, 2001, provides for the reimbursement of a portion of the expenditures incurred by the Partnership (including overhead expenses) with respect to the properties. The management agreement further provides for the payment of additional amounts to the Partnership based upon its performance of services under the management agreement. Collectively, such payments amounted to approximately $3.5 million and $4.2 million during fiscal 2003 and 2002, respectively.

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     The Partnership has entered into a management agreement with Centex Homes whereby Centex Homes provides management and oversight services for the Partnership’s investment in Fairclough. The Partnership pays Centex Homes an annual fee of $10 thousand and reimburses Centex Homes for its direct expenses associated with its management and oversight.

     Centex performs cash management services for the Partnership. Excess funds generated by the Partnership are transferred to Centex on a daily basis, and funds required by the Partnership are advanced by Centex to the Partnership as necessary. Advances to or from Centex bear interest at the one-month LIBOR rate plus 25 basis points, computed on the daily outstanding borrowings or advances.

     During fiscal 2003 and 2002, in connection with third-party construction and permanent loans made to the Partnership’s operating subsidiaries and in connection with the acquisition and sale of properties, the Partnership paid an aggregate of $244 thousand and $412 thousand, respectively, in title insurance premiums and escrow fees to Centex title insurance subsidiaries.

     In the last two years, Construction Services has executed contracts with the Partnership for the construction of two industrial facilities. At March 31, 2003, all contracts were completed. At March 31, 2002, the total value of such contracts was $15.0 million, of which $5.3 million was unpaid. During the year ended March 31, 2003, the Partnership paid $5.3 million to Construction Services pursuant to these contracts.

     During fiscal 2003, the Partnership paid $65 thousand to a Centex affiliate for marketing services provided to the Partnership by an employee of such affiliate.

     A subsidiary of the Partnership has leased approximately 157,450 square feet, or 72% of leasable space, in the Citymark office building in Dallas, Texas to Centex Service and other Centex affiliates.

     Under the Partnership Agreement, Class C Units may be issued in exchange for assets acquired and capital received from a limited partner or from an entity that is to be admitted as a limited partner. Centex Homes is currently the sole limited partner of the Partnership.

     The Partnership Agreement provides that the holders of Class A Units and Class C Units are entitled to a cumulative preferred return of 9% per annum on the average outstanding balance of their Unrecovered Capital. As noted above, Centex Homes is currently the sole limited partner of the Partnership and the sole holder of all outstanding Class A Units and Class C Units. At March 31, 2003, unpaid preference accruals totaled $42.0 million, and Unrecovered Capital for Class A Units and Class C Units totaled $32.8 million and $208.3 million, respectively. The Partnership made a preference payment of $21.1 million on March 31, 2003.

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(P) INCOME TAXES

     The components of the total provision (benefit) for income taxes at March 31 are as follows:

                           
      For the Years Ended March 31,  
     
 
      2003     2002     2001  
     
   
   
 
Current Provision (Benefit):
                        
 
Federal
   $ —     $ —     $ (3,600 )
 
State
     —       —       —  
 
Foreign
     2,935       3,019       3,358  
 
  
   
   
 
Total Current Provision (Benefit):
     2,935       3,019       (242 )
 
  
   
   
 
Deferred Provision (Benefit):
                        
 
Federal
     —       —       —  
 
State
     —       —       —  
 
Foreign
     1,257       (1,262 )     —  
 
  
   
   
 
Total Deferred Provision (Benefit)
     1,257       (1,262 )     —  
 
  
   
   
 
Total Income Tax Provision (Benefit)
   $ 4,192     $ 1,757     $ (242 )
 
  
   
   
 

     The effective tax rate differs from the federal statutory rate of 35% in fiscal 2003, 2002 and 2001 due to the following items:

                           
      For the Years Ended March 31,  
     
 
      2003     2002     2001  
     
   
   
 
Financial Income Before Taxes
   $ 33,554     $ 18,739     $ 4,374  
 
  
   
   
 
Income Taxes at Statutory Rate
   $ 11,744     $ 6,559     $ 1,531  
(Decreases) Increases in Tax Resulting from -
         Benefit of Pass-through Status of Partnership
     (6,820 )     (5,918 )     (1,765 )
 
Preferred Share Distributions
     —       1,609       2,731  
 
Goodwill Amortization
     —       —       613  
 
Tax Allocation Agreement Payments
     —       —       (3,600 )
 
Other
     (732 )     (493 )     248  
 
  
   
   
 
Provision (Benefit) for Income Taxes
   $ 4,192     $ 1,757     $ (242 )
 
  
   
   
 
Effective Tax Rate
     12.49 %     9.38 %     (5.53 %)

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     The Company’s deferred tax assets and liabilities as of March 31 are as follows:

                   
      March 31,  
     
 
      2003     2002  
     
   
 
Deferred Tax Assets
                
 
Accrued Interest
   $ 1,738     $ 1,738  
 
Other
     —       215  
 
Swap Agreement Market Adjustments
     200       —  
 
Net Operating Loss Carryforwards
     682       717  
 
  
   
 
Total Deferred Tax Assets
     2,620       2,670  
 
Valuation Allowance
     (682 )     (717 )
 
  
   
 
Net Deferred Tax Assets
     1,938       1,953  
 
  
   
 
Deferred Tax Liabilities
                
 
Other
     (664 )     —  
 
Interest Expensed as Incurred
     (1,069 )     (691 )
 
Swap Agreement Market Adjustments
     —       (166 )
 
  
   
 
Total Deferred Tax Liabilities
     (1,733 )     (857 )
 
  
   
 
Net Deferred Tax Assets
   $ 205     $ 1,096  
 
  
   
 

     Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

     At March 31, 2003, Holding had net operating loss carryforwards of $1.9 million. If unused, the loss carryforwards will expire in fiscal years 2019 through 2020. Holding has recorded a valuation allowance, valuing the deferred tax asset at zero.

     Holding joins with its subsidiaries in filing consolidated income tax returns. The taxable income of the Partnership has been allocated to the holders of the Class A and Class C Units. Accordingly, no tax provision for the Partnership earnings is shown in the combining financial statements other than a payment of $3.6 million from Centex in fiscal 2001 under the terms of a Tax Liability Allocation Agreement.

     As of March 31, 2003, the Partnership has not provided for withholding or U.S. Federal Income Taxes on the accumulated undistributed earnings of its foreign subsidiaries as they are considered by management to be permanently reinvested. Determination of the deferred income tax liability on these unremitted earnings is not practicable as such liability, if any, may be allocated to the holders of the Class A and Class C Units, and is dependent on circumstances existing when remittance occurs.

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Report of Independent Auditors

TO THE BOARD OF DIRECTORS OF 3333 HOLDING CORPORATION:

     We have audited the accompanying combining balance sheets of 3333 Holding Corporation and subsidiary and Centex Development Company, L.P. and subsidiaries as of March 31, 2003 and 2002, and the related combining statements of operations, cash flows, and stockholders’ equity and partners’ capital for each of the three years in the period ended March 31, 2003. Our audits also included the financial statement schedules listed in the index at Item 15 (a). These financial statements and the schedule are the responsibility of the Companies’ management. Our responsibility is to express an opinion on these financial statements and the schedule based on our audits.

     We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used, and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly, in all material respects, the individual and combined financial positions of 3333 Holding Corporation and subsidiary and Centex Development Company, L.P. and subsidiaries as of March 31, 2003 and 2002, and the individual and combined results of their operations and their cash flows for each of the three years in the period ended March 31, 2003, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

     
    (-s- ERNST & YOUNG LLP)
     
Dallas, Texas    
May 14, 2003    

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Quarterly Results (Unaudited)
(Dollars in thousands, except per share/unit data)

                                                   
      For the Years Ended March 31,  
     
 
      2003     2002     2003     2002     2003     2002  
     
   
   
   
   
   
 
                      Centex Development     3333 Holding  
                      Company, L.P. and     Corporation and  
      Combined     Subsidiaries     Subsidiary  
     
   
   
 
First Quarter
                                                
 
Revenues from Continuing Operations
   $ 87,393     $ 82,707     $ 87,368     $ 82,097     $ 88     $ 660  
 
Earnings (Loss) Before Taxes
   $ (773 )   $ 3,366     $ (785 )   $ 2,790     $ 12     $ 576  
 
Net Earnings (Loss)
   $ (303 )   $ 3,075     $ (315 )   $ 2,499     $ 12     $ 576  
 
Earnings (Loss) Per Unit/Share
                   $ (1.31 )   $ 11.70     $ 12     $ 576  
 
Average Units Outstanding
                     240,591       213,504       —       —  
 
Average Shares Outstanding
                     —       —       1,000       1,000  
Second Quarter
                                                
 
Revenues from Continuing Operations
   $ 103,502     $ 84,941     $ 103,477     $ 84,941     $ 87     $ 50  
 
Earnings (Loss) Before Taxes
   $ 4,386     $ 3,800     $ 4,354     $ 3,837     $ 32     $ (37 )
 
Net Earnings (Loss)
   $ 3,607     $ 3,382     $ 3,575     $ 3,419     $ 32     $ (37 )
 
Earnings (Loss) Per Unit/Share
                   $ 14.86     $ 15.63     $ 32     $ (37 )
 
Average Units Outstanding
                     240,591       218,785       —       —  
 
Average Shares Outstanding
                     —       —       1,000       1,000  
Third Quarter
                                                
 
Revenues from Continuing Operations
   $ 105,614     $ 94,498     $ 105,589     $ 93,673     $ 87     $ 838  
 
Earnings Before Taxes
   $ 14,303     $ 5,774     $ 14,288     $ 4,988     $ 15     $ 786  
 
Net Earnings
   $ 13,116     $ 5,538     $ 13,101     $ 4,778     $ 15     $ 760  
 
Earnings Per Unit/Share
                   $ 54.45     $ 20.84     $ 15     $ 760  
 
Average Units Outstanding
                     240,591       229,277       —       —  
 
Average Shares Outstanding
                     —       —       1,000       1,000  
Fourth Quarter
                                                
 
Revenues from Continuing Operations
   $ 153,050     $ 118,717     $ 153,000     $ 118,667     $ 88     $ 63  
 
Earnings Before Taxes
   $ 15,638     $ 5,799     $ 15,598     $ 5,787     $ 40     $ 12  
 
Net Earnings
   $ 12,942     $ 4,987     $ 12,902     $ 4,949     $ 40     $ 38  
 
Earnings Per Unit/Share
                   $ 53.63     $ 21.18     $ 40     $ 38  
 
Average Units Outstanding
                     240,591       233,689       —       —  
 
Average Shares Outstanding
                     —       —       1,000       1,000  

     Note that prior period amounts have been restated, where appropriate, to reflect the impact of reclassification of operating components currently classified as discontinued operations.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

     On March 23, 2002, the audit committees of the boards of directors of Holding and Development, approved, for itself and on behalf of its subsidiaries, including the Partnership, the engagement of Ernst & Young LLP as the independent auditors for the Partnership and Holding for the fiscal year ending March 31, 2002, to replace Arthur Andersen LLP, who was dismissed as auditors for these entities effective as of that date. This action followed the audit committees’ decision to seek proposals from independent accountants to audit the financial statements of the Partnership and Holding.

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     Arthur Andersen’s audit reports on the financial statements for Holding and the Partnership as of and for the fiscal years that ended March 31, 2001 and 2000 did not contain an adverse opinion or a disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles.

     During the fiscal years that ended March 31, 2001 and 2000, and the subsequent interim period through March 23, 2002:

  •   there were no disagreements between the Partnership and Holding, on the one hand, and Arthur Andersen on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to Arthur Andersen’s satisfaction, would have caused Arthur Andersen to make reference to the subject matter of the disagreement in connection with its reports;
 
  •   none of the reportable events described under Item 304(a)(1)(v) of Regulation S-K occurred; and
 
  •   the Partnership and Holding did not consult with Ernst & Young regarding any of the matters or events described in item 304(a)(2)(i) and (ii) of Regulation S-K.

     The Partnership and Holding provided Arthur Andersen with a copy of the foregoing statements. A letter from Arthur Andersen, dated March 27, 2002, stating its agreement with such statements as filed with the SEC, is attached to this Report as Exhibit 16.1.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS

Holding

     We have included the information with respect to Holding called for by this Item 10 by incorporating into this Item 10 the information regarding the executive officers of Holding, which follows Item 4 of Part I of Part B of this report, and the information included under the captions “Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” in Holding’s Proxy Statement for its July 17, 2003 Annual Meeting of Stockholders.

The Partnership

     We have included the information with respect to the Partnership and directors and officers of the Partnership’s general partner, Development, called for by this Item 10 by incorporating into this Item 10 the information relating to the executive officers of Development, which follows Item 4 of Part I of Part B of this Report, information included under the captions “Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” in Holding’s 2003 Proxy Statement and the additional information regarding the Partnership set forth below.

     The Partnership has no directors or officers and, instead, is managed by Development, its sole general partner. Directors and officers of Holding hold the same positions with Development and, together with the other officers of Development, perform all executive management functions required for the Partnership. The limited partners of the Partnership have no power to direct or participate in the control of the Partnership or to remove the general partner. Through its Board of Directors, a majority of whom are independent outside directors, Development manages how the Partnership conducts its activities, including the acquisition, development, maintenance and sales of properties belonging to the Partnership and all other decisions regarding the Partnership’s business or operations. See “Item 1. Business.”

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Services Agreements

     The Partnership has entered into a services agreement pursuant to which Holding provides executive oversight and various administrative and clerical services required by the Partnership that are not performed by the employees of the Partnership. From time to time, Holding delegates the performance of some responsibilities to Centex Service under the terms of a services agreement between Holding and Centex Service.

     Holding is entitled to reimbursement from the Partnership for all reasonable costs and expenses incurred and paid by Holding in connection with the performance of its duties and obligations under the services agreement. In addition, the Partnership paid Holding a quarterly managerial fee equal to $12,500 per quarter from April 1, 2002, through March 31, 2003. During fiscal 2003, Holding received $150 thousand from the Partnership for its services.

     The term of the services agreement between Holding and the Partnership is subject to automatic renewal for successive one-year terms unless either party elects to terminate the agreement prior to March 1 of any year. However, the Partnership may not terminate the agreement prior to the later of date of the detachment of the Stockholder Warrants from Centex’s common stock or payout, which is defined in the partnership agreement. Nevertheless, the Partnership may terminate the agreement if Holding breaches the agreement.

ITEM 11. EXECUTIVE COMPENSATION

Holding

     We have included the information with respect to Holding called for by this Item 11 by incorporating into this Report the information included under the caption “Executive Compensation” in Holding’s 2003 Proxy Statement.

The Partnership

     We have included the information with respect to the Partnership and the directors and officers of the Partnership’s general partner, Development, by incorporating into this Item 11 the information included under the captions “Board Meetings, Fees, Committees and Attendance Records” and “Executive Compensation” in Holding’s 2003 Proxy Statement.

     As noted above, the Partnership does not have any directors or officers and, instead, is managed by its sole general partner, Development. See “Item 10. Directors and Executive Officers of the Registrants.” Under the terms of the Partnership Agreement, Development, as general partner, is entitled to be allocated particular items of income and loss of the Partnership and to receive certain distributions of cash from the Partnership depending upon the level of income and cash available for distribution and whether payout has occurred. For a summary of these rights and benefits, see Note (N), “Stockholders’ Equity and Partners’ Capital,” of the Notes to the Combining Financial Statements of Holding and the Partnership included on pages 153-154 of this Report. Except as described above, and except for the right to be reimbursed for some expenses, Development does not receive any compensation from the Partnership with respect to its duties and obligations as general partner of the Partnership.

     The executive officers of Development did not receive any remuneration from Development for fiscal 2003. Directors of Development who are neither officers nor employees of Development, the Partnership, Centex or Centex’s subsidiaries received compensation from Development in the form of directors’ and committee members’ fees. During fiscal 2003, each executive officer of Development

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received remuneration from the Partnership or from Centex or one of its subsidiaries in his capacity as an employee or officer of that entity.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Holding

     We have included the information with respect to Holding called for by this Item 12 by incorporating into this Item 12 the information included and referenced under the caption “Security Ownership of Management and Certain Beneficial Owners” in Holding’s 2003 Proxy Statement.

The Partnership

     The following table sets forth information with respect to the beneficial ownership of the equity securities of the Partnership as of May 29, 2003 (except as otherwise specified in the footnotes to the table) by Development, the directors and executive officers of Development, individually itemized, all directors and executive officers of Development as a group, and any person known to the Partnership to be the beneficial owner of more than 5% of any class of the Partnership’s equity securities. Except as otherwise indicated, all securities are owned directly, and the beneficial owner of these securities has the sole voting and investment power with respect thereto.

                         
            Number of        
            Units or        
    Name of   Warrants   Percent of
Title of Class*   Beneficial Owner**   Owned   Class
 
 
 
General Partner Interest (1)
   3333 Development Corporation     A11       100 %
 
   2728 N. Harwood                
 
   Dallas, Texas 75201                
Class A Units (2)
   Centex Homes     32,260.085       100 %
 
   2728 N. Harwood                
 
   Dallas, Texas 75201                
Stockholder Warrants (3)
   3333 Development Corporation     —       ***  
 
   Richard C. Decker (4)     0.307       ***  
 
   Josiah O. Low, III     0.064       ***  
 
   Todd D. Newman (4)     0.047       ***  
 
   David M. Sherer     —       ***  
 
   Stephen M. Weinberg (4)     0.428       ***  
 
   Roger O. West     —       ***  
 
   All directors and executive officers of     0.846       ***  
 
   Development as a group (6 persons) (4)                
 
   AXA Assurances I.A.R.D. (5)     94       9.4 %
 
   370 Rue Saint Honore                
 
   Paris, France 75001                

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            Number of        
            Units or        
    Name of   Warrants   Percent of
Title of Class*   Beneficial Owner**   Owned   Class
 
 
 
 
   Greenhaven Associates, Inc. (6)     69       7.0 %
 
   Three Manhattanville Road                
 
   Purchase, NY 10577                
Centex Class B Unit Warrants (7)
   Centex Corporation     100       100 %
 
   2728 N. Harwood                
 
   Dallas, Texas 75201                
Class B Units (8)
   Centex Corporation     350       28 %
 
   2728 N. Harwood                
 
   Dallas, Texas 75201                
Class C Units (9)
   Centex Homes     208,330.422       100 %
 
   2728 N. Harwood                
 
   Dallas, Texas 75201                

*   Under the terms of the Partnership Agreement, the Partnership is managed by a sole corporate general partner and none of the present classes of the Partnership’s securities are “voting securities” within the meaning of the rules and regulations of the Securities and Exchange Commission promulgated pursuant to the Exchange Act. Nonetheless, information with respect to each class of the Partnership’s equity securities has been set forth in accordance with those rules and regulations.
 
**   The address of any person who is the beneficial owner of more than 5% of a class of the Partnership’s securities is also included.
 
***   Less than 1%.
 
(1)   In connection with the formation of the Partnership, Development made a capital contribution to the Partnership of $767,182 in exchange for Development’s general partner interest in the Partnership. As general partner, Development is entitled to receive allocations of income and loss and distributions of property from the Partnership.
 
(2)   The Class A units were issued to wholly-owned subsidiaries of Centex in exchange for the Original Properties, which is defined in the Partnership Agreement. Centex Homes presently holds record title to the Class A units. See “Item 1. Business — General Development of Business.” As of the date or dates when the Stockholder Warrants are deemed to have been exercised, the Class A units and Class C units will be automatically converted collectively into (1) a number of Class B units equal to 20% of the total number of Class B units that would be outstanding after conversion based on the actual exercise of the Stockholder Warrants and the assumed exercise of all the then exercisable Centex Class B Unit Warrants, which are described in footnote (8), and (2) a like number of Class A units and Class C units. The Class A units and Class C units will be automatically canceled upon payout and the exercise and/or expiration of all of the Stockholder Warrants and the Centex Class B Unit Warrants.
 
(3)   The nominee holds record title to the Stockholder Warrants, which are exercisable for Class B units, for the benefit of Centex stockholders pursuant to the nominee agreement. See “Item 5. Market for

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  Registrant’s Common Equity and Related Stockholder Matters.” However, the nominee has no power to vote the Class B units issuable upon exercise of the Stockholder Warrants or to direct the investment of the Stockholder Warrants or the Class B units. Beneficial ownership of the Stockholder Warrants is, by virtue of the nominee arrangement, indirect and undivided.
 
(4)   Shares of Centex common stock (and therefore a beneficial interest in Stockholder Warrants) covered by stock options that are outstanding under the Centex Corporation Amended and Restated 1987 Stock Option Plan, the Sixth Amended and Restated 1998 Centex Corporation Employee Non-qualified Stock Option Plan and the Centex Corporation 2001 Stock Plan and exercisable on May 29, 2003 or within 60 days of that date, are included as “beneficially owned” pursuant to the rules and regulations of the Commission. Amounts include the following shares of Centex common stock and therefore a beneficial interest in the following Stockholder Warrants, that may be acquired upon exercise of such stock options: Mr. Decker — 19,125 shares, and therefore a beneficial interest in 0.307 Stockholder Warrants; Mr. Newman — 2,125 shares, and therefore a beneficial interest in 0.034 Stockholder Warrants; Mr. Weinberg — 17,825 shares, and therefore a beneficial interest in 0.286 Stockholder Warrants and all directors and executive officers of Development as a group, which totals six persons, — 40,250 shares, and therefore a beneficial interest in 0.646 Stockholder Warrants. In addition, this table includes shares of Centex common stock and therefore a beneficial interest in Stockholder Warrants that may be beneficially owned as of May 29, 2003 pursuant to the Centex Common Stock Fund of the Profit Sharing and Retirement Plan of Centex Corporation, a defined contribution plan, as follows: Mr. Weinberg — 2,820 shares, and therefore a beneficial interest in 0.045 Stockholder Warrants, and all directors and executive officers of Development as a group, which totals six persons, — 43,075 shares, and therefore a beneficial interest in 0.691 Stockholder Warrants). Does not include awards of 6,000 units for Mr. Weinberg and 800 units for Mr. Newman under the Centex Long-Term Incentive Plan (“LTIP”). Each unit represents the right to receive one share of Centex Common Stock at the time the award is paid out. The award shown vests at the rate of 8.25% per quarter in fiscal 2004, 8.25% in fiscal 2005 and 8.50% in fiscal 2006. The payout date is May 14, 2010. LTIP units do not entitle the recipient to any rights as a shareholder, including dividend and voting rights and are subject to forfeiture prior to vesting.
 
(5)   Based solely upon information contained in the Schedule 13G of AXA Assurances filed with the Commission on February 12, 2003 with respect to shares of Centex common stock owned as of December 31, 2002, but calculating the percentage shown by dividing the number of Stockholder Warrants represented by those shares of Centex Common Stock by the total number of Stockholder Warrants issued and outstanding on the record date. According to AXA Assurances, that number includes 5,882,758 shares of Centex common stock, and therefore a beneficial interest in 94 Stockholder Warrants.
 
(6)   Based solely upon information contained in the Schedule 13G of Greenhaven Associates, Inc. filed with the Commission on January 21, 2003 with respect to shares of Centex common stock owned as of December 31, 2002, but calculating the percentage shown by dividing the number of Stockholder Warrants represented by those shares of Centex common stock by the total number of Stockholder Warrants issued and outstanding on the record date. According to Greenhaven, that number includes 4,330,300 shares of Centex common stock, and therefore a beneficial interest in 69 Stockholder Warrants.
 
(7)   On November 30, 1987, Centex acquired from the Partnership 100 warrants, or Centex Class B Unit Warrants, to purchase a like number of Class B units, subject to adjustment, pursuant to an agreement for purchase of warrants. The Centex Class B Unit Warrants are generally in the same form as, and contain the same terms as, the Stockholder Warrants, except for the manners in which they may be subdivided, and the corresponding exercise price, and the applicable exercise period.

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  See Note (N), “Stockholders” Equity and Partners’ Capital,” of the Notes the Combining Financial Statements of Holding and the Partnership included on pages 153-154 of this Report.
 
(8)   Presently, there are no Class B units issued or outstanding. The Class B units issuable upon exercise of the Stockholder Warrants have not been shown as “beneficially owned” under the rules and regulations of the Commission promulgated pursuant to the Exchange Act because the beneficial owners of the Stockholder Warrants have no present right to exercise the Stockholder Warrants and acquire Class B units. For the purpose of calculating Centex’s beneficial interest in Class B units, Class B units that may be acquired upon the exercise of the Centex Class B Unit Warrants, which is 100 in total, and the Class B units that may be acquired upon conversion of outstanding Class A units and Class C units held by Centex Homes as of the date of the exercise of the Stockholder Warrants, which is 250 in total, which date Centex may indirectly determine by virtue of its ability, in its sole and absolute discretion, to determine the date of detachment of the Stockholder Warrants from Centex common stock, are included as “beneficially owned” pursuant to the rules and regulations of the Commission promulgated pursuant to the Exchange Act. See footnotes (2), (3) and (10). The number of Class B units and the percentage of class listed assume that the Stockholder Warrants and the Centex Class B Unit Warrants have been exercised in full for Class B units but that no subdivision of any of the warrants has occurred. However, both the Stockholder Warrants and the Centex Class B Unit Warrants may be subdivided or combined and any subdivision or combination would necessarily change the number of Class B units beneficially owned and the percentage of class represented.
 
(9)   The Class C units were issued in exchange for assets acquired by the Partnership from Centex Homes. See “Item 1. Business-General Development of Business.” As of the dates when the Stockholder Warrants are deemed to have been exercised, the Class A units and Class C units will be automatically converted collectively into (1) a number of Class B units equal to 20% of the total number of Class B units that would be outstanding after conversion based on the actual exercise of the Stockholder Warrants and the assumed exercise of all the then exercisable Centex Class B Unit Warrants, which are described in footnote (8) and (2) a like number of Class A units and Class C units. The Class A units and Class C units will be automatically canceled upon payout and the exercise and/or expiration of all of the Stockholder Warrants and the Centex Class B Unit Warrants.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     We have included the information with respect to Holding and the Partnership called for by this Item 13 by incorporating into this Item 13 the information included under the caption “Certain Transactions” in Holding’s 2003 Proxy Statement.

ITEM 14. CONTROLS AND PROCEDURES

     An evaluation has been performed under the supervision and with the participation of the management of 3333 Holding Corporation and of Centex Development Company, L.P. (through its general partner, 3333 Holding Corporation), including the Chief Executive Officer and Chief Financial Officer of both 3333 Holding Corporation and 3333 Development Corporation, of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2003. Based on that evaluation, the management of 3333 Holding Corporation and of Centex Development Company, L.P. (through its general partner, 3333 Holding Corporation), including the Chief Executive Officer and Chief Financial Officer of both 3333 Holding Corporation and 3333 Development Corporation, concluded that our disclosure controls and procedures were effective as of March 31, 2003. There have been no significant changes in our internal controls or in other factors that could significantly affect internal controls subsequent to March 31, 2003.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

  (a)   The following documents are filed as part of this Report:

  (1)   Financial Statements
 
      The combining balance sheets of Holding and subsidiary and the Partnership and subsidiaries as of March 31, 2003 and 2002, and the related combining statements of operations, cash flows and stockholders’ equity and partners’ capital for each of the three years in the period ended March 31, 2003, together with the accompanying Notes to Combining Financial Statements and the Report of Independent Auditors on pages 136 - 159 of this Report.
 
  (2)   Schedules
 
      Schedules are omitted because they are not applicable or not required or the information required to be set forth therein is included in the consolidated financial statements referenced above in section (a)(1) of this Item 15.
 
  (3)   Exhibits

  (A)   Holding

      The information on exhibits required by this Item 15 with respect to Holding is set forth in the index to Exhibits-3333 Holding Corporation and Subsidiary appearing on pages 179 - 180 of this Report.
 
  (B)   The Partnership
 
      Real Estate and Accumulated Depreciation — Schedule III, filed as Exhibit 99.1 to this Report.
 
      The information on exhibits required by this Item 15 is set forth in the Index to Exhibits-Centex Development Company, L.P. and Subsidiaries appearing on pages 181 - 184 of this Report.

  (b)   Reports on Form 8-K:
 
      Current Joint Report on Form 8-K of Centex Corporation, 3333 Holding Corporation and Centex Development Company, L.P. dated November 12, 2002, furnishing the certification of the Chief Executive Officer and the Chief Financial Officer of 3333 Holding Corporation and the certification of the Chief Executive Officer and the Chief Financial Officer of 3333 Development Corporation, as the general partner of Centex Development Company, L.P., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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ITEM 16. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     The information called for by Item 16 is incorporated herein by reference to the information included and referenced under the same caption in Holding’s 2003 Proxy Statement.

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SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

         
      3333 HOLDING CORPORATION
Registrant
         
May 30, 2003   By: /s/ STEPHEN M. WEINBERG
     
        Stephen M. Weinberg,
Director, President and Chief Executive Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.

         
May 30, 2003     /s/ STEPHEN M. WEINBERG
Stephen M. Weinberg,
Director, President and Chief Executive Officer
(principal executive officer)
         
May 30, 2003     /s/ TODD D. NEWMAN
     
      Todd D. Newman,
Senior Vice President, Chief
Financial Officer and Treasurer
(principal financial officer
and principal accounting officer)
         
    Directors: Josiah O. Low, III, David M. Sherer,
Stephen M. Weinberg and Roger O. West
         
May 30, 2003   By: /s/ STEPHEN M. WEINBERG
     
      Stephen M. Weinberg,
Individually and as
Attorney-in-Fact*

*   Pursuant to authority granted by powers of attorney, copies of which are filed herewith.

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SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, 3333 Development Corporation, as general partner of, and on behalf of, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

         
      CENTEX DEVELOPMENT COMPANY, L.P.
Registrant
         
    By: 3333 Development Corporation, General Partner
         
May 30, 2003   By: /s/ STEPHEN M. WEINBERG
     
      Stephen M. Weinberg,
Director, President and Chief Executive Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of 3333 Development Corporation, as general partner of, and on behalf of, the registrant in the capacities and on the dates indicated.

         
May 30, 2003     /s/ STEPHEN M. WEINBERG
Stephen M. Weinberg,
Director, President and Chief Executive Officer
(principal executive officer)
         
May 30, 2003     /s/ TODD D. NEWMAN
     
      Todd D. Newman,
Senior Vice President, Chief
Financial Officer and Treasurer
(principal financial officer
and principal accounting officer)
         
    Directors: Josiah O. Low, III, David M. Sherer,
Stephen M. Weinberg and Roger O. West
         
May 30, 2003   By: /s/ STEPHEN M. WEINBERG
     
      Stephen M. Weinberg,
Individually and as
Attorney-in-Fact*

*   Pursuant to authority granted by powers of attorney, copies of which are filed herewith.

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Certifications

I, Stephen M. Weinberg, certify that:

1.     I have reviewed this annual report on Form 10-K of 3333 Holding Corporation;

2.     Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.     Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)      designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)      evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c)      presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a)      all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls and

b)      any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls and

6.     The registrant’s other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 30, 2003

/s/ Stephen M. Weinberg

Stephen M. Weinberg
Chief Executive Officer

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Certifications

I, Todd D. Newman, certify that:

1.     I have reviewed this annual report on Form 10-K of 3333 Holding Corporation;

2.     Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.     Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)      designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)      evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c)      presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a)      all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls and

b)      any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls and

6.     The registrant’s other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 30, 2003

/s/ Todd D. Newman

Todd D. Newman
Chief Financial Officer

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Certifications

I, Stephen M. Weinberg, certify that:

1.     I have reviewed this annual report on Form 10-K of Centex Development Company, L.P.;

2.     Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.     Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)      designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)      evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c)      presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a)      all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls and

b)      any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls and

6.     The registrant’s other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 30, 2003

/s/ Stephen M. Weinberg

Stephen M. Weinberg
Chief Executive Officer of 3333 Development Corporation,
General Partner of Centex Development Company, L.P.

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Certifications

I, Todd D. Newman, certify that:

1.     I have reviewed this annual report on Form 10-K of Centex Development Company, L.P.;

2.     Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.     Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)      designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)      evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c)      presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a)      all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls and

b)      any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls and

6.     The registrant’s other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 30, 2003

/s/ Todd D. Newman

Todd D. Newman
Chief Financial Officer of 3333 Development Corporation,
General Partner of Centex Development Company, L.P.

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INDEX TO EXHIBITS

CENTEX CORPORATION
AND SUBSIDIARIES

         
Exhibit       Filed Herewith or
Number   Exhibit   Incorporated by Reference
 
 
3.1   Restated Articles of Incorporation of Centex Corporation (“Centex”)   Exhibit 4.1 to Joint Registration Statement of Centex, 3333 Holding Corporation (“Holding”) and Centex Development Company, L.P. (the “Partnership”) on Form S-8 (File Nos. 333-55717, 333-55717-01, and 333-55717-02, respectively) filed with the Securities and Exchange Commission (the “Commission”) on June 1, 1998 (the “1998 Form S-8”)
3.2   Amended and Restated By-laws of Centex   Exhibit 3.2 to the amended Joint Annual Report on Form 10-K/A of Centex, Holding and the Partnership for the fiscal year ended March 31, 1999 (the “1999 Form 10-K/A”)
4.1   Specimen Centex common stock certificate (with tandem trading legend and Rights Agreement legend)   Exhibit 4.3 to Joint Registration Statement of Centex, Holding and the Partnership, on Form S-8 (File Nos. 333-28229, 333-28229-01, and 333-28229-02, respectively) filed with the Commission on June 2, 1997 (the “1997 Form S-8”)
4.2   Nominee Agreement, dated November 30, 1987, by and between Centex, Holding and the Partnership, and First RepublicBank Dallas, National Association, as nominee   Exhibit 4.2 of Centex to the Joint Annual Report on Form 10-K of Centex, Holding and the Partnership for the fiscal year ended March 31, 1993 (the “1993 Form 10-K”)
4.3   Supplement to Nominee Agreement, dated as of July 27, 2000, by and between Centex, Holding, the Partnership, The Chase Manhattan Bank, as successor nominee, and ChaseMellon Shareholder Services L.L.C., as successor transfer agent   Exhibit 4.15 to the Joint Registration Statement of Centex, Holding and the Partnership on Form S-3 (File Nos. 333-54722, 333-54722-01, and 333-54722-02, respectively) filed with the Commission on January 31, 2001 (the “2001 Form S-3”)
4.4   Agreement for Purchase of Warrants, dated as of November 30, 1987, by and between Holding and Centex   Exhibit 4.3 to Centex 1993 Form 10-K

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Exhibit       Filed Herewith or
Number   Exhibit   Incorporated by Reference
 
 
4.5   Rights Agreement, dated as of October 2, 1996, between Centex and ChaseMellon Shareholder Services, L.L.C., as rights agent   Exhibit 4 to the Registration Statement of Centex on Form 8-A (File No. 1-6776) filed with the Commission on October 8, 1996 (the “1996 Form 8-A”)
4.6   Amendment No. 1 to Rights Agreement, dated as of February 18, 1999, between Centex and ChaseMellon Shareholder Services, L.L.C., as rights agent   Exhibit 4.2 to Amendment No. 1, filed with the Commission on February 22, 1999, to the 1996 Form 8-A
4.7   Amendment No. 2 to Rights Agreement, dated as of April 29, 2002, between Centex and Mellon Investor Services L.L.C. (f/k/a ChaseMellon Shareholder Services, L.L.C.), as rights agent   Exhibit 4.3 to Amendment No. 2, filed with the Commission on May 2, 2002, to the 1996 Form 8-A
4.8   Instruments with respect to long-term debt, which do not exceed 10% of the total assets of Centex and its subsidiaries, have not been filed; Centex agrees to furnish a copy of such instruments to the Commission upon request   Not Applicable
10.1   Centex Corporation Amended and Restated 1987 Stock Option Plan*   Exhibit 10.1 of Centex to the Joint Quarterly Report on Form 10-Q of Centex, Holding and the Partnership for the fiscal quarter ended September 30, 2000
10.2   Sixth Amended and Restated 1998 Centex Corporation Employee Non-Qualified Stock Option Plan*   Filed herewith
10.3   Amended and Restated Centex Corporation 2001 Stock Plan*   Filed herewith
10.4   Executive Employment Agreement, dated as of September 17, 1990, between Centex and Laurence E. Hirsch*   Exhibit 10.6 to the 1993 Form 10-K
10.5   Executive Employment Agreement, dated as of January 18, 1991, between Centex and David W. Quinn*   Exhibit 10.7 to the 1993 Form 10-K

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Exhibit       Filed Herewith or
Number   Exhibit   Incorporated by Reference
 
 
10.6   Executive Employment Agreement, dated as of June 1, 2000, between Centex and Leldon E. Echols*   Exhibit 10.5a of Centex to the Joint Annual Report on Form 10-K of Centex, Holding, and the Partnership for the fiscal year ended March 31, 2001 (the “2001 Form 10-K”)
10.7   Centex Corporation $2,100,000 Convertible Subordinated Note issued to Laurence E. Hirsch on May 28, 1999*   Exhibit 10.8 of Centex to the Joint Annual Report on Form 10-K of Centex, Holding, and the Partnership for the fiscal year ended March 31, 2000 (the “2000 Form 10-K”)
10.8   Amended and Restated Supplemental Executive Retirement Plan of Centex Corporation*   Filed herewith
10.9   Centex Corporation Deferred
Compensation Plan* 		  Exhibit 4 to the Registration Statement of Centex on Form S-8 (File No. 333-37956) filed with the Commission on May 26, 2000
10.10   Amended and Restated Centex Corporation Long Term Incentive Plan*   Filed herewith
10.11   Credit Agreement dated as of August 9, 2000, among Centex, Bank of America, N.A., as Administrative Agent, The Chase Manhattan Bank, as Syndication Agent, Citibank, N.A., as Documentation Agent, and the lenders named therein   Exhibit 10.9 of Centex to the 2001 Form 10-K
10.12   First Amendment of Credit Agreement, dated as of May 9, 2002, among Centex, Bank of America, as Administrative Agent, and the lenders named therein   Exhibit 10.12 of Centex to the Joint Annual Report on Form 10-K of Centex, Holding and the Partnership for the fiscal year ended March 31, 2002
16.1   Letter re Change in Certifying
Accountant 		  Exhibit 16.1 to the Amended Current Report (Amendment No. 1) of Form 8-K/A of Centex filed with the Commission on April 2, 2002
21   List of Subsidiaries of Centex, Holding and the Partnership   Filed herewith

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Exhibit       Filed Herewith or
Number   Exhibit   Incorporated by Reference
 
 
23A   Consent of Independent Auditors   Filed herewith
24.1   Powers of Attorney   Filed herewith

*   Management contract or compensatory plan or arrangement

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INDEX TO EXHIBITS

3333 HOLDING CORPORATION
AND SUBSIDIARY

         
Exhibit       Filed Herewith or
Number   Exhibit   Incorporated by Reference
 
 
3.1   Articles of Incorporation of Holding   Exhibit 3.2a to Amendment No. 1, filed with the Commission on October 15, 1987 (“Amendment No. 1”), to the Registration Statement of Holding on Form 10 (File No. 1-9624), filed with the Commission on July 13, 1987 (the “Holding Registration Statement”)
3.2   By-laws of Holding, as amended   Exhibit 3.1 of Holding to the Joint Quarterly Report on Form 10-Q of Centex, Holding and the Partnership for the fiscal quarter ended December 31, 2001
4.1   Specimen Holding common stock certificate   Exhibit 4.1 to Amendment No. 1
4.2   Specimen Centex common stock certificate (with tandem trading legend and Rights Agreement legend)   Exhibit 4.3 to 1997 Form S-8
4.3   Nominee Agreement, dated as of November 30, 1987, by and between Centex, Holding and the Partnership, and First RepublicBank Dallas, National Association, as nominee   Exhibit 4.3 of Holding to the 1993 Form 10-K
4.4   Supplement to Nominee Agreement, dated as of July 27, 2000, by and between Centex, Holding, the Partnership, The Chase Manhattan Bank, as successor nominee, and ChaseMellon Shareholder Services L.L.C., as successor transfer agent   Exhibit 4.15 to the 2001 Form S-3
4.5   Agreement for Purchase of Warrants, dated as of November 30, 1987, by and between Holding and Centex   Exhibit 4.4 of Holding to the 1993 Form 10-K

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Exhibit       Filed Herewith or
Number   Exhibit   Incorporated by Reference
 
 
10.1   Amended and Restated Services Agreement, dated as of April 1, 2001, by and between Holding and Centex Service Company (“Centex Service”)   Exhibit 10.1 of Holding to the 2002 Form 10-K
10.2   Amended and Restated Services Agreement, dated as of April 1, 2001, by and between the Partnership and Holding   Exhibit 10.2 of Holding to the 2002 Form 10-K
16.1   Letter re Change in Certifying Accountant   Exhibit 16.1 to the Amended Current Report (Amendment No. 1) of Form 8-K/A of Centex filed with the Commission on April 2, 2002
21   Subsidiaries of Holding   Exhibit 21 of Centex Exhibits filed herewith
23B   Consent of Independent Auditors   Filed herewith
24.2   Powers of Attorney   Filed herewith

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INDEX TO EXHIBITS

CENTEX DEVELOPMENT COMPANY, L.P.
AND SUBSIDIARIES

         
Exhibit       Filed Herewith or
Number   Exhibit   Incorporated by Reference
 
 
3.1   Articles of Incorporation of Development, as amended   Exhibit 3.2a to Amendment No. 1, filed with the Commission on October 15, 1987 (the “Partnership Amendment No. 1”), to the Registration Statement of the Partnership on Form 10 (File No. 1-9625), filed with the Commission on July 13, 1987 (the “Partnership Registration Statement”)
3.2   By-laws of Development, as amended   Exhibit 3.2 of the Partnership to 2002 Form 10-K
4.1   Certificate of Limited Partnership of the Partnership   Exhibit 4.1 to the Partnership Registration Statement
4.2   Second Amended and Restated Agreement of Limited Partnership of the Partnership   Exhibit 4.4 to 1998 Form S-8
4.3   Amendment No. 1 to Second Amended and Restated Agreement of Limited Partnership of the Partnership   Exhibit 4.6 to the 1999 Form 10-K/A
4.4   Specimen certificate for Class A limited partnership units   Exhibit 4.3 to the Partnership Registration Statement
4.5   Specimen certificate for Class B limited partnership units   Exhibit 4.4 to the Partnership Registration Statement
4.6   Specimen certificate for Class C limited partnership units   Exhibit 4.7 to the 1998 Form S-8
4.7   Warrant Agreement, dated as of November 30, 1987, by and between the Partnership and Centex   Exhibit 4.5 of the Partnership to the 1993 Form 10-K
4.8   Agreement for Purchase of Warrants, dated as of November 30, 1987, by and between the Partnership and Centex   Exhibit 4.9 of the Partnership to the 1993 Form 10-K

181

Table of Contents

         
Exhibit       Filed Herewith or
Number   Exhibit   Incorporated by Reference
 
 
4.9   Specimen warrant certificate   Exhibit 4.6 to Amendment No. 3, filed with the Commission on November 24, 1987, to the Partnership Registration Statement
4.10   Specimen Centex common stock certificate (with tandem trading legend and Rights Agreement legend)   Exhibit 4.3 to 1997 Form S-8
4.11   Nominee Agreement, dated as of November 30, 1987, by and between Centex, Holding and the Partnership, and First RepublicBank Dallas, National Association, as nominee   Exhibit 4.8 of the Partnership to the 1993 Form 10-K
4.12   Supplement to Nominee Agreement, dated as of July 27, 2000, by and between Centex, Holding, the Partnership, The Chase Manhattan Bank, as successor nominee, and ChaseMellon Shareholder Services L.L.C., as successor transfer agent   Exhibit 4.15 to the 2001 Form S-3
4.13   Form of Operating Partnership Agreement   Exhibit 4.9 to the Partnership Registration Statement
4.14   Instruments with respect to long-term debt, which do not exceed 10% of the total assets of the Partnership and its subsidiaries, have not been filed; the Partnership agrees to furnish a copy of such instruments to the Commission upon request   Not applicable
10.1   Amended and Restated Services Agreement, dated as of April 1, 2001, by and between the Partnership and Holding   Exhibit 10.1 of Holding to the 2002 Form 10-K
10.2   Management Agreement, dated as of April 1, 2001, by and between Centex Homes and the Partnership   Exhibit 10.2 of Holding to the 2002 Form 10-K
10.3   Employment Agreement, dated as of April 1, 2001, by and between the Partnership and Richard C. Decker   Exhibit 10.2 of the Partnership to the Joint Quarterly Report on Form 10-Q of Centex, Holding and the Partnership for the fiscal quarter ended June 30, 2001

182

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Exhibit       Filed Herewith or
Number   Exhibit   Incorporated by Reference
 
 
10.3A   First Amendment to Employment Agreement, dated as of December 19, 2002, by and between the Partnership and Richard C. Decker   Filed herewith
10.3B   Profits Agreement, dated as of April 1, 2003, by and between the Partnership and Richard C. Decker   Filed herewith
10.4   Instrument constituting Guaranteed Unsecured Set Off Loan Notes 2001 dated April 15, 1999 made by Centex Development Company UK Limited (“CDCUK”)   Exhibit 4.13 of the Partnership to the Joint Quarterly Report on Form 10-Q of Centex, Holding, and the Partnership for the fiscal quarter ended September 30, 1999
10.5   Share Purchase Agreement dated April 15, 1999 by and among AMEC Plc, as Guarantor, AMEC Finance Limited, as Seller, and Centex Development Company UK Limited, as Purchaser   Exhibit 10.18 to the Current Report on Form 8-K of the Partnership filed with the Commission on April 29, 1999
10.6   Agreement dated March 30, 2001 – £100,000,000 Credit Facility for Fairclough Homes Group Limited (“Fairclough”) arranged by The Royal Bank of Scotland PLC   Exhibit 10.5b of the Partnership to the 2001 Form 10-K
10.6A   Supplemental Agreement dated March 21, 2003 – £100,000,000 Credit Facility for Fairclough and other related entities arranged by The Royal Bank of Scotland PLC   Filed herewith
10.7   Facility Agreement dated March 28, 2001, by and between the Partnership, as lender, and CDCUK, as borrower   Exhibit 10.6 of the Partnership to the 2001 Form 10-K
10.8   Facility Agreement dated March 28, 2001, by and between Fairclough, as lender, and CDCUK, as borrower   Exhibit 10.9 of the Partnership to the 2001 Form 10-K
16.1   Letter re Change in Certifying Accountant   Exhibit 16.1 to the Amended Current Report (Amendment No. 1) of Form 8-K/A of Centex filed with the Commission on April 2, 2002
21   Subsidiaries of the Partnership   Exhibit 21 of Centex Exhibits filed herewith

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Exhibit       Filed Herewith or
Number   Exhibit   Incorporated by Reference
 
 
23   Consent of Independent Auditors   Exhibit 23B of Holding Exhibits filed herewith
24.3   Powers of Attorney   Filed herewith
99.1   Real Estate and Accumulated Depreciation — Schedule III   Filed herewith

184 EX-10.2 3 d05408exv10w2.txt EX-10.2 6TH AMENDED/RESTATED ENQ STOCK OPTION PLAN EXHIBIT 10.2 021303 SIXTH AMENDED AND RESTATED 1998 CENTEX CORPORATION EMPLOYEE NON-QUALIFIED STOCK OPTION PLAN 1. PURPOSE OF THE PLAN. This 1998 Centex Corporation Employee Non-Qualified Stock Option Plan (the "PLAN") is intended as an employment incentive to retain in the employ of Centex Corporation (the "COMPANY"), and any Affiliate (including any entity that becomes an Affiliate), persons of training, experience and ability, to attract new employees whose services are considered valuable, to encourage the sense of proprietorship of such persons, and to stimulate the active interest of such persons in the development and financial success of the Company. For purposes of the Plan, "AFFILIATE" shall mean any direct or indirect subsidiary or parent of the Company and any partnership, joint venture, limited liability company or other business venture or entity in which the Company owns at least 50% of the ownership interest in such entity, as determined by the Committee in its sole and absolute discretion (such determination by the Committee to be conclusively established by the grant of options by the Committee to an officer or employee of such an entity). It is further intended each option granted pursuant to the Plan (herein, an "OPTION") shall constitute non-qualified stock options within the meaning of Section 83 of the Code. 2. ADMINISTRATION OF THE PLAN. The Board of Directors shall appoint and maintain a Compensation and Stock Option Committee (hereinafter called the "COMMITTEE") of the Board of Directors to administer the Plan. Subject to the terms and conditions of the Plan, the Committee shall have full power and authority to designate persons to whom Options will be granted, to determine the terms and provisions of respective option agreements (which need not be identical), and to interpret the provisions and supervise the administration of the Plan. The Committee shall have the authority, exercisable in its sole discretion, to grant Options containing such terms and conditions, consistent with the provisions of the Plan, as the Committee shall determine. 3. DESIGNATION OF PARTICIPANTS. The persons eligible for participation in the Plan as recipients of Options shall include all employees of the Company or of any Affiliate, including employees of any entity that becomes an Affiliate after the date that the Plan is adopted, other than any of the following persons (herein, an "INELIGIBLE PERSON"): (a) any person who is an executive officer, as defined by Rule 3b-7 promulgated under the Securities Exchange Act of 1934, as amended, or director of the Company; (b) any "officer" of the Company as defined by Rule 16a-1(f) promulgated under the Securities Exchange Act of 1934, as amended; or 1 (c) any "covered employee" of the Company as defined by Section 162(m)(3) of the Internal Revenue Code. Each Option granted hereunder shall be evidenced by an agreement between the Company and the Optionee, which shall contain such terms and conditions as the Committee shall determine in its sole and absolute discretion. Any person who has been granted an Option hereunder (herein, an "OPTIONEE") may be granted an additional Option or Options, if the Committee shall so determine. Participation in the Plan shall not preclude an Optionee from participating in any other stock option, benefit, bonus, or other compensation plan which the Company or any Affiliate has adopted, or may, from time to time, adopt for the benefit of its employees. 4. STOCK RESERVED FOR THE PLAN. Subject to any adjustment provided in Paragraph 9 hereof, a total of 5,500,000 shares of common stock, $0.25 par value, of the Company (the "STOCK") shall be subject to the Plan. The shares of Stock subject to the Plan shall consist of unissued shares or previously issued shares reacquired and held by the Company, or any Affiliate, and such amount of shares shall be and hereby is reserved for delivery under the Plan. Any of such shares which may remain unsold and which are not subject to outstanding Options at the termination of the Plan shall cease to be reserved for the purpose of the Plan, but until termination of the Plan the Company shall at all times reserve a sufficient number of shares of Stock to meet the requirements of the Plan. Should any Option expire or be canceled prior to its exercise or relinquishment in full, the shares theretofore subject to such Option may again be subjected to an Option under the Plan. If the purchase price or tax withholding is permitted to be satisfied by the tender or withholding of shares of Stock to the Company (by either actual delivery or attestation), the number of shares of Stock tendered or withheld shall be eligible for reissuance under the Plan. 5. PURCHASE PRICE. (a) The purchase price of each share placed under option pursuant to the Plan (a "Share") shall be determined by the Committee, but in no event shall be less than 100% of the Fair Market Value of such Share on the date the Option is granted. If an Option is granted as part of an Optionee's compensation package at the commencement of an Optionee's employment by the Company or an Affiliate, the Option shall be deemed to have been granted on the date of commencement of such Optionee's employment by the Company or any Affiliate (the "Commencement Date") and the purchase price of a Share shall be equal to the Fair Market Value of such Share on the Commencement Date, so long as such Option is not granted more than ninety (90) days following the Commencement Date. (b) "FAIR MARKET VALUE" of a share of Stock means, as of a particular date, the closing price per share of Stock reported on the consolidated transaction reporting system for the New York Stock Exchange, or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported. 2 6. OPTION PERIOD. The Options granted under the Plan shall be for any term set by the Committee, but not more than ten (10) years from the date of granting of each Option. All rights to exercise an Option shall terminate within three (3) months after the date the Optionee ceases to be an employee of the Company or any Affiliate, except that (a) the Committee, in its discretion, may provide in new option grants or amend outstanding Options to provide an extended period of time during which an Optionee can exercise an Option up to the maximum permissible period which such Optionee's Option would have been exercisable in the absence of the Optionee ceasing to be an employee of the Company or an Affiliate; (b) if an Optionee ceases to be employed by the Company or an Affiliate by reason of such Optionee's death, all rights to exercise such Option shall terminate fifteen (15) months after such death; and (c) if the Optionee is terminated for cause, as determined by the Committee in its sole and absolute discretion, any Option granted to such Optionee hereunder shall terminate on the date of such termination. 7. EXERCISE OF OPTIONS. (a) Any Option granted hereunder shall be exercisable from time to time under the terms specified in the Plan, by the Committee, or in the agreement relating to the grant of such Option. (b) Each exercise of an Option or a portion of an Option shall be evidenced by a notice in writing by or on behalf of the Optionee to the Company, stating the number of shares with respect to which the Option is being exercised. (c) Options may be exercised solely by the Optionee or a Permitted Transferee (hereafter defined). (d) The purchase price of the Shares for which an Option is exercised must be paid prior to issuance of the Shares. Such purchase price shall be payable (i) in cash, certified or cashiers' check, or wire transfer, (ii) at the option of the holder of such Option, in Stock theretofore owned by such holder for at least six (6) months by either actual delivery of shares or by attestation, (iii) by a combination of cash and such Stock; or (iv) by delivery of a properly executed exercise notice together with irrevocable instructions to a broker satisfactory to the Company to promptly deliver to the Company the amount of sale or loan proceeds required to pay the exercise price and applicable withholding taxes. For purposes of determining the amount, if any, of the purchase price satisfied by payment in Stock, such Stock shall be valued at its Fair Market Value on the date of exercise. Any Stock delivered in satisfaction of all or a portion of the purchase price shall be appropriately endorsed for transfer and assignment to the Company. No holder of an Option shall be, or have any of the rights or privileges of, a shareholder of the Company in respect of any Shares unless and until certificates representing such Shares shall have been delivered by the Company to such holder or such holder's interest in such shares shall have been evidenced by an entry on the Company's books and records. 3 (e) If any law or regulation requires the Company to take any action with respect to the Shares specified in such notice, the time for delivery thereof, which would otherwise be as promptly as possible, shall be postponed for the period of time necessary to take such action. 8. ASSIGNABILITY. Unless otherwise permitted by the Committee, no Option or interest therein shall be transferable by the Optionee otherwise than by will or by the applicable laws of descent and distribution. Any person to whom an Option is transferred in accordance with this Section 8 is referred to herein as a "PERMITTED TRANSFEREE". 9. CAPITAL CHANGE OF THE COMPANY. (a) If at any time while the Plan is in effect there shall be an increase or decrease in the number of issued and outstanding shares of Stock of the Company effected without receipt of consideration therefor by the Company, through the declaration of a stock dividend or stock split, or through any recapitalization, merger or other transaction in which the Company is the surviving corporation, then and in each such event: (i) An appropriate adjustment shall be made in the maximum number of Shares then subject to being optioned under the Plan, to the end that the same proportion of the Company's issued and outstanding Stock shall continue to be subject to being so optioned and awarded; and (ii) An appropriate adjustment shall be made in the number of Shares and the purchase price per Share thereof then subject to purchase pursuant to each Option previously granted, to the end that the same proportion of the Company's issued and outstanding Stock in each such instance shall remain subject to purchase at the same aggregate purchase price. (b) Except as is otherwise expressly provided herein, the issue by the Company of shares of its capital stock of any class, or securities convertible into shares of capital stock of any class, either in connection with a direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of or purchase price of Shares. Furthermore, the presence of outstanding Options granted under the Plan shall not affect in any manner the right or power of the Company to make, authorize or consummate (i) any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business; (ii) any merger or consolidation of the Company; (iii) any issue by the Company of debt securities or preferred or preference stock (whether or not such issue is prior to, on a party with or junior to the Stock); (iv) the dissolution or liquidation of the Company; (v) any sale, transfer or assignment of all or any part of the assets or business of the Company; or (vi) any other corporate act or proceeding, whether of a similar character or otherwise. (c) Notwithstanding anything to the contrary above, a dissolution or liquidation of the Company, a merger (other than a merger effecting a reincorporation of the Company in another state) or consolidation in which the Company is not the surviving corporation (or survives only as a 4 subsidiary of another corporation in a transaction in which the stockholders of the parent of the Company and their proportionate interests therein immediately after the transaction are not substantially identical to the stockholders of the Company and their proportionate interests therein immediately prior to the transaction), a transaction in which another corporation becomes the owner of 50% or more of the total combined voting power of all classes of stock of the Company, or a change in control (as specified below), shall cause every Option then outstanding to become exercisable in full immediately prior to such dissolution, liquidation, merger, consolidation, transaction, or change in control, to the extent not theretofore exercised, without regard to the determination as to the periods and installments of exercisability contained in the Agreements if (and only if) such Options have not at that time expired or been terminated. For purposes of this paragraph, a change in control shall be deemed to have taken place if: a third person, including a "group" as defined in Section 13(d)(3) of the Act, becomes the beneficial owner of shares of the Company having fifty percent (50%) or more of the total number of votes that may be cast for the election of directors of the Company; or as a result of, or in connection with, a contested election for directors, the persons who were directors of the Company immediately before such election shall cease to constitute a majority of the Board. Notwithstanding the foregoing provisions of this paragraph: (i) an event, transaction, or corporate action shall not have the effect of accelerating the exercisability of Options if: (A) persons who were the directors of the Company and persons who were the executive officers of the Company as of six months prior to such event immediately after such event constitute a majority of the directors and constitute a majority of executive officers, respectively, for, and own in the aggregate at least ten percent of the voting securities or equity interests of, the Company or the surviving or resulting corporation or the parent of such surviving or resulting corporation; and (B) if the Company is not the surviving or resulting corporation, such surviving or resulting corporation or parent of such surviving or resulting corporation substitutes substantially identical options for any outstanding Options; and (ii) in the event of any dissolution, merger, consolidation, transaction, or change in control, the Board may completely satisfy and extinguish all obligations of the Company and its Affiliates with respect to any Option outstanding on the date of such event by delivering to the Optionee cash in an amount equal to the difference between the aggregate purchase price for Shares under the Option and the Fair Market Value of such Shares on the date of such event, such payment to be made within a reasonable time after such event. 10. TAX WITHHOLDING. The Company shall have the right to deduct applicable taxes from any Option and withhold, at the time of delivery of Shares under the Plan, an appropriate number of Shares for payment of taxes required by law or to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for withholding of such taxes. The Committee may also permit withholding to be satisfied by the transfer to the Company of Stock theretofore owned by the holder of the Option with respect to which withholding is required. If Shares or Stock are used to satisfy tax withholding, such Shares or Stock shall be valued based on the Fair Market Value when the tax withholding is required to be made. 5 11. EFFECTIVE DATE OF PLAN. The effective date of the Plan shall be February 19, 1998. No Option shall be granted pursuant to the Plan after February 19, 2005. 12. AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION. The Board may amend, modify, suspend or terminate the Plan at any time for the purpose of meeting or addressing any changes in legal requirements or for any other purpose permitted by law, except that no amendment, modification, suspension or termination shall be made (i) that would impair the rights of any Optionee under any Option previously granted to such Optionee without such Optionee's written consent, (ii) prior to approval by the Company's shareholders if such approval is then required thereby, or (iii) that would reduce the purchase price of any outstanding Option, other than as provided by Section 9(a)(ii). 13. REQUIREMENTS OF LAW. (a) The Plan, and the granting and exercise of Options hereunder, and the obligation of the Company to sell and deliver shares under such Options, shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. (b) Nothing herein or in any Agreement executed or Option granted hereunder shall require the Company to deliver any Shares upon exercise of an Option if such delivery would, in the opinion of counsel for the Company, constitute a violation of the Securities Act of 1933, as amended, or any similar or superseding statute or statutes, or any other applicable statute or regulation, as then in effect. Upon the exercise of an Option or portion or part thereof, the Optionee may be required to give to the Company satisfactory evidence that he is acquiring such Shares for the purpose of investment only and not with a view to their distribution; provided, however, if or to the extent that the Shares subject to the Option shall be included in a registration statement filed by the Company, or one of its Affiliates, such investment representation shall be abrogated. 14. MISCELLANEOUS. (a) Nothing contained in the Plan shall confer upon any Optionee the right to continue in the employ of the Company or any Affiliate, or interfere in any way with the rights of the Company or any Affiliate to terminate his employment at any time. (b) Any payment of cash or any delivery of Shares to the Optionee, or to an Optionee's Permitted Transferee, in accordance with the provisions hereof, shall, to the extent thereof, be in full satisfaction of all claims of such person with respect to the Option being exercised (or portion thereof). The Committee may require any Optionee, or Permitted Transferee, as a condition precedent to such payment or delivery, to execute a release and receipt therefor in such form as it shall determine. (c) Neither the Committee nor the Company guarantees the Shares from loss or depreciation. 6 (d) Records of the Company and its Affiliates regarding an individual's period of employment, termination of employment and the reason therefor, leaves of absence, re-employment and other matters shall be conclusive for all purposes hereunder, unless determined by the Committee to be incorrect in its sole and absolute discretion. (e) The Company assumes no obligation or responsibility to an Optionee or any Permitted Transferee for any act of, or failure to act on the part of, the Committee. (f) If any provision of the Plan is held to be illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions of the Plan, but such provision shall be fully severable and the Plan shall be construed and enforced as if the illegal or invalid provision had never been included herein. (g) The titles and headings of Sections are included for convenience of reference only and are not to be considered in construction of the provisions hereof. (h) All questions arising with respect to the provisions of the Plan shall be determined by application of the laws of the State of Nevada except to the extent Nevada law is preempted by federal law. The obligation of the Company to sell and deliver Shares hereunder is subject to applicable laws and to the approval of any governmental authority required in connection with the authorization, issuance, sale, or delivery of such Shares. Words used in the masculine shall apply to the feminine where applicable, and wherever the context of the Plan dictates, the plural shall be read as the singular and the singular as the plural. 7 EX-10.3 4 d05408exv10w3.txt EX-10.3 AMENDED CENTEX CORP 2001 STOCK PLAN EXHIBIT 10.3 021303 AMENDED AND RESTATED CENTEX CORPORATION 2001 STOCK PLAN 1. PURPOSE The purpose of the Plan is to assist the Company in attracting and retaining as officers and key employees of the Company and its Affiliates, and as Directors of the Company, individuals of training, experience and ability, and to furnish additional incentive to such individuals by encouraging them to become owners of Shares, by granting to such individuals Options or Restricted Stock. 2. DEFINITIONS Unless the context otherwise requires, the following words as used herein shall have the following meanings: "Affiliate" -- Any corporation or other entity that is a direct or indirect parent or subsidiary (including, without limitation, partnerships and limited liability companies) of the Company. "Agreement" -- The written agreement, whether delivered on paper or by electronic medium, between the Company and the Optionee or holder of Restricted Stock evidencing the Option or Restricted Stock granted by the Company, which shall be in such form and contain such provisions as the Committee may prescribe. "Board" -- The Board of Directors of the Company, as the same may be constituted from time to time. "Code" -- The Internal Revenue Code of 1986, as amended from time to time. "Committee" -- The Compensation and Stock Option Committee of the Board, composed solely of two or more Directors who are appointed by the Board from time to time and who satisfy the requirements of Rule 16b-3(b)(3) promulgated under the Securities Exchange Act of 1934, or any successor provision. "Company" -- Centex Corporation, a Nevada corporation. "Director" -- An individual who is a member of the Board. "Disability" -- Total and permanent disability as set forth in Section 22(e)(3) of the Code, or any successor provision. "Fair Market Value" -- The closing price per Share reported on the consolidated transaction reporting system for the New York Stock Exchange as of a particular date or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was reported. 1 "Option" -- A nonqualified option to purchase one or more Shares granted under and pursuant to the Plan. A nonqualified option does not satisfy the requirements of Section 422 of the Code, or any successor provision. "Optionee" -- An individual who has been granted an Option under the Plan. "Plan" -- This Centex Corporation 2001 Stock Plan. "Restricted Stock" -- Shares issued pursuant to Section 17 of the Plan. "Share" -- A share of the Company's present twenty-five cents ($0.25) par value common stock and any share or shares of capital stock or other securities of the Company hereafter issued or issuable upon, in respect of or in substitution or in exchange for each present share. Such Shares may be unissued or reacquired Shares, as the Board, in its sole and absolute discretion, shall from time to time determine. 3. ADMINISTRATION Subject to the provisions hereof, the Committee shall have full and exclusive power and authority to administer this Plan and to take all actions that are specifically contemplated hereby or are necessary or appropriate in connection with the administration hereof. The Committee shall also have full and exclusive power to interpret this Plan and to adopt such rules, regulations and guidelines for carrying out this Plan as it may deem necessary or proper, all of which powers shall be exercised in the best interests of the Company and in keeping with the objectives of this Plan. The Committee may, in its discretion, provide for the extension of the exercisability of an Option, accelerate the vesting or exercisability of an Option or Restricted Stock award, eliminate or make less restrictive any restrictions applicable to an Option or Restricted Stock award, waive any restriction or other provision of this Plan or an Option or Restricted Stock award or otherwise amend or modify an Option or Restricted Stock award in any manner that is either (i) not adverse to the Optionee or holder of Restricted Stock to whom such Option or Restricted Stock was granted or (ii) consented to by the Optionee or holder of Restricted Stock. The Committee may correct any defect or supply any omission or reconcile any inconsistency in this Plan or in any award in the manner and to the extent the Committee deems necessary or desirable to further the Plan purposes. Any decision of the Committee in the interpretation and administration of this Plan shall lie within its sole and absolute discretion and shall be final, conclusive and binding on all parties concerned. 4. SHARES SUBJECT TO PLAN (a) A maximum of 1,750,000 Shares shall be subject to grants of Options or awards of Restricted Stock under the Plan; provided, however, that of such number of Shares, no more than 175,000 Shares shall be subject to awards of Restricted Stock; and provided further, that such maximum shall be increased or decreased as provided in Section 12 hereof. The Shares subject to the Plan shall consist of unissued Shares or previously issued Shares reacquired and held by the Company or any Affiliate. (b) At any time and from time to time after the Plan takes effect, the Committee, pursuant to the provisions herein set forth, may grant Options and award Restricted Stock until the maximum number of Shares shall be exhausted or the Plan shall be sooner terminated. 2 (c) If any Option expires or is canceled without being fully exercised or is settled in cash, or if any Restricted Stock previously awarded is reacquired by the Company, the number of Shares with respect to which such Option shall not have been exercised prior to its expiration or cancellation and the number of Shares of such Restricted Stock so reacquired may again be optioned or awarded pursuant to the provisions hereof. (d) If the option price or any applicable tax withholding obligation payable upon exercise of an Option is satisfied by the tender or withholding of Shares to or by the Company (by either actual delivery or attestation), the number of Shares so tendered or withheld shall be eligible for reissuance under the Plan. 5. ELIGIBILITY Eligibility for receipt of a grant of Options under the Plan shall be confined to (a) a limited number of persons who are employed by the Company or an Affiliate and hold key positions in and for the Company or an Affiliate and (b) Directors. 6. GRANTING OF OPTIONS (a) From time to time while the Plan is in effect, the Committee may in its absolute discretion select from among the persons eligible to receive a grant of Options under the Plan (including persons who have already received such grants of Options) such one or more of them as in the opinion of the Committee should be granted Options. The Committee shall thereupon, likewise in its absolute discretion, determine the number of Shares to be allotted for option to each person so selected. (b) Each person so selected shall be granted an Option to purchase the number of Shares so allotted to him, upon such terms and conditions, consistent with the provisions of the Plan, as the Committee may specify. (c) Each Option granted under the Plan shall be evidenced by an Agreement setting forth the terms and conditions of the Option. The date that the Committee specifies to be the grant date of an Option to an individual shall constitute the date on which the Option covered by such Agreement is granted. In no event, however, shall an Optionee gain any rights in addition to those specified by the Committee in its grant, regardless of the time that may pass between the grant of the Option and the actual execution of the Agreement by the Company and the Optionee. (d) No person may be granted Options under this Plan for more than 250,000 Shares in any one-year period. 7. OPTION PRICE The option price for each Share covered by each Option shall not be less than 100% of the Fair Market Value of the Share at the time the Option is granted. Notwithstanding the foregoing, if there occurs any transaction of a type described in Section 12(a), (b) or (c) hereof, the option price of the Shares subject to each existing Option adjusted pursuant to such provisions or any new Option or assumed option issued pursuant to such provisions may be different than the Fair 3 Market Value of the Shares at the time the Option is granted; provided, however, in no event shall - (a) the excess of the aggregate Fair Market Value of the Shares subject to the Option immediately after the transaction over the aggregate option price of such Shares be more than the excess of the aggregate Fair Market Value of all shares subject to the other option immediately prior to the transaction over the aggregate option price of shares subject to the other option; and (b) the ratio of the option price to the Fair Market Value of the Shares subject to the Option immediately after the transaction be more favorable to the Optionee than the ratio of the option price to the Fair Market Value of the shares subject to the other option immediately prior to such transaction, determined on a share-by-share basis. 8. OPTION PERIOD Each Option shall run for such period of time as the Committee may specify, but in no event for longer than seven (7) years from the date when the Option is granted, including the period of time provided in the subsections of this Section 8; and subject to the following limits: (a) Except as provided below in this subsection (a), all rights to exercise an Option shall terminate within four (4) months after the date the Optionee ceases to be an employee of the Company or an Affiliate, or after the date the Optionee ceases to be a Director, whichever may occur later, for any reason other than death or Disability (but in no event later than the end of the original period of the Option); except that (i) in the case of an Optionee who is a Director and, on the date the Optionee ceases to be a Director (and if also an employee ceases to be an employee), has (A) at least ten (10) years of service as a Director, all Shares subject to such Option will vest on such date and all rights to exercise such Option shall terminate three (3) years after the date the Optionee ceases to be a Director (but in no event later than the end of the original period of the Option), or (B) less than ten (10) years of service as a Director, all Shares subject to such Option will continue to vest in accordance with its terms for a period of three (3) years following such date, and all rights to exercise such Option shall terminate three (3) years after such date; and (ii) if the Optionee's employment or service as a Director is terminated for cause, the entire Option, including both exercisable and unexercisable Shares, shall immediately terminate and thereafter be null and void for all purposes. (b) If the Optionee ceases to be employed by the Company and its Affiliates, or ceases to be a Director, whichever may occur later, by reason of his death, all rights to exercise any Option held by such Optionee shall terminate fifteen (15) months after his death (but in no event later than the end of the original period of the Option). (c) If the employment of the Optionee with the Company or any of its Affiliates shall terminate as a result of a Disability, he may, within six (6) months following such date (but in no event later than the end of the original period of the Option), exercise any Option held by such Optionee, in each case, to the extent he was entitled to exercise such Option on the date of termination of employment. To the extent that the Shares covered by his Option were unexercisable as of such termination of employment, the Option shall terminate. If the Optionee does not exercise such Option (which he was entitled to 4 exercise as of such termination) within the time specified herein, the Option shall thereupon terminate. (d) If an Option is granted with a term shorter than seven (7) years, the Committee may extend the term of the Option, but for not more than seven (7) years from the date when the Option was originally granted. 9. OPTIONS NOT TRANSFERABLE Unless otherwise determined by the Committee and provided in the Agreement, no Option or interest therein shall be transferable by an Optionee otherwise than by will or by the applicable laws of descent and distribution. The Committee may prescribe and include in an Agreement any applicable restrictions or conditions on transfer of Options. Any attempted assignment in violation of this Section 9 shall be null and void. 10. EXERCISE OF OPTIONS (a) During the lifetime of an Optionee, only he or his guardian or legal representative or transferee may exercise an Option granted to him. In the event of his death, any then exercisable portion of his Option may, within fifteen (15) months thereafter or earlier date of termination of the original period of Option, be exercised in whole or in part by any person empowered to do so under the deceased Optionee's will or under the applicable laws of descent and distribution. (b) At any time, and from time to time, during the period when any Option, or a portion thereof, is exercisable, such Option, or portion thereof, may be exercised in whole or in part; provided, however, that the Committee may require in the Agreement that any Option which is partially exercised be so exercised with respect to at least a stated minimum number of Shares. (c) Each exercise of an Option or portion or part thereof shall be evidenced by a notice in writing by or on behalf of the Optionee to the Company. The purchase price of the Shares for which an option is exercised must be paid prior to issuance of the Shares. The Exercise price of an Option must be paid by cash, certified or cashiers' check, wire transfer, delivery (either actually or by attestation) of whole Shares that have been acquired or held by the Optionee for at least six months prior to the date the option is exercised, or any combination of the aforementioned methods of payment, prior to issuance of the Shares. For purposes of determining the amount, if any, of the option price satisfied by in Shares, such Shares shall be valued at their Fair Market Value on the date of exercise. Any Shares actually delivered in satisfaction of all or a portion of the option price shall be appropriately endorsed for transfer and assignment to the Company. (d) No Shares shall be issued until full payment therefor has been made, and an Optionee shall have none of the rights of a stockholder until Shares are issued to him. (e) Nothing herein or in any Agreement evidencing an Option granted hereunder shall require the Company to issue any Shares upon exercise of an Option if such issuance would, in the opinion of counsel for the Company, constitute a violation of the Securities Act of 1933, as amended, or any similar or superseding statute or statutes, or any other applicable statute or regulation, as then in effect. Upon the exercise of an Option or 5 portion or part thereof, the Optionee shall give to the Company satisfactory evidence that he is acquiring such Shares for the purpose of investment only and not with a view to their distribution; provided, however, if or to the extent that the Shares subject to the Option shall be included in a registration statement filed by the Company or an Affiliate, such investment representation shall not be required. 11. DELIVERY OF SHARES UPON EXERCISE As promptly as may be practicable after an Option, or a portion or part thereof, has been exercised as hereinabove provided, the Company shall make delivery of the Shares acquired upon exercise of such Option to the Optionee or shall cause such Optionee's interest in such Shares to be evidenced by an entry on the Company's books and records. 12. CHANGES IN COMPANY'S SHARES AND CERTAIN CORPORATE TRANSACTIONS (a) If at any time while the Plan is in effect there shall occur any subdivision or consolidation of outstanding Shares, declaration of a dividend payable in Shares or other stock split, then, and in each such event, the Committee shall make proportionate adjustments to: (i) the maximum number of Shares then subject to being optioned or awarded as Restricted Stock under the Plan, to the end that the same proportion of the Company's issued and outstanding Shares shall continue to be subject to being so optioned and awarded; (ii) the number of Shares and the option price per Share thereof then subject to purchase pursuant to each Option previously granted, to the end that the same proportion of the Company's issued and outstanding Shares shall remain subject to purchase at the same aggregate option price; (iii) the number of Shares of Restricted Stock previously awarded under the Plan, to the end that each award represents the same proportion of the Company's issued and outstanding Shares; and (iv) the number of Shares subject to Options that may be granted to any person in any one-year period pursuant to the limitation set forth in Section 6(d), to the end that each such limitation represents the same proportion of the Company's issued and outstanding Shares. (b) If at any time while the Plan is in effect there shall occur any other recapitalization or capital reorganization of the Company, any consolidation or merger of the Company with another corporation or entity, the adoption by the Company of any plan of exchange affecting the Shares or any distribution to holders of Shares of securities or property (other than normal cash dividends or dividends payable in Shares), the Committee may make proportionate adjustments to: (i) the number of Shares and the option price per Share thereof then subject to purchase pursuant to each Option previously granted; (ii) the number of Shares of Restricted Stock previously awarded under the Plan; and 6 (iii) the number of Shares subject to Options that may be granted to any person in any one-year period pursuant to the limitation set forth in Section 6(d); in each case, in order to reflect the transaction and (in the case of clauses (i) and (ii) above) to the end of maintaining the proportionate interest of the holders of Options and Shares of Restricted Stock; provided, however, that such adjustments shall only be made to the extent necessary to preserve, without exceeding, the value of such Options and Shares of Restricted Stock. (c) In the event of a merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation, the Committee shall be authorized to issue or assume new Options or Shares of Restricted Stock as it determines is appropriate in substitution for, or to reflect the assumption of, any other option, restricted stock grant or other award, whether or not awarded under this Plan. (d) Except as is otherwise expressly provided herein, the issuance by the Company of shares of its capital stock of any class or securities convertible into shares of capital stock of any class, either in connection with a direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of or option price of Shares then subject to outstanding Options granted under the Plan. Furthermore, the presence of outstanding Options granted under the Plan shall not affect in any manner the right or power of the Company to make, authorize or consummate (i) any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business; (ii) any merger or consolidation of the Company; (iii) any issuance by the Company of debt securities or preferred or preference stock that would rank above the Shares subject to outstanding Options or Shares of Restricted Stock granted under the Plan; (iv) the dissolution or liquidation of the Company; (v) any sale, transfer or assignment of all or any part of the assets or business of the Company; or (vi) any other corporate act or proceeding, whether of a similar character or otherwise. (e) Notwithstanding anything to the contrary above, a dissolution or liquidation of the Company, a merger (other than a merger effecting a reincorporation of the Company in another state) or consolidation in which the Company is not the surviving corporation (or survives only as a subsidiary of another corporation in a transaction in which the stockholders of the parent of the Company and their proportionate interests therein immediately after the transaction are not substantially identical to the stockholders of the Company and their proportionate interests therein immediately prior to the transaction) or a change in control (as specified below) shall cause every Option then outstanding to become exercisable in full and shall cause every restriction with respect to any Shares of Restricted Stock to terminate immediately prior to such dissolution, liquidation, merger, consolidation or change in control, to the extent not theretofore exercisable or free of restrictions, without regard to the determination as to the periods and installments of exercisability or termination of restrictions contained in the Agreements if, and only if, such Options have not at that time theretofore expired or been terminated or such Shares of Restricted Stock have not at that time theretofore been cancelled or forfeited. For purposes of this Section 12(c), a change in control shall be deemed to have taken place if (i) a third person, including a "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, becomes the beneficial owner of Shares of the Company having 7 50% or more of the total number of votes that may be cast for the election of directors of the Company or (ii) as a result of, or in connection with, a contested election for directors, the persons who were directors of the Company immediately before such election shall cease to constitute a majority of the Board. Notwithstanding the foregoing provisions of this paragraph, in the event of any such dissolution, merger, consolidation or change in control, the Board may completely satisfy all obligations of the Company and its Affiliates with respect to any Options or Shares of Restricted Stock outstanding on the date of such event and cancel such Options or Shares of Restricted Stock by (A) in the case of Options, delivering to the Optionee cash in an amount equal to the difference between the aggregate option price for Shares under the Options and the Fair Market Value of such Shares on the date of such event and (B) in the case of Shares of Restricted Stock, delivering to the holder of such Shares cash in an amount equal to the Fair Market Value of such Shares on the date of such event, which payment shall in either case be made within a reasonable time after such event. 13. EFFECTIVE DATE The Plan shall be effective on May 17, 2001, the date of its adoption by the Board, but shall be submitted to the stockholders of the Company for approval at the next regular or special meeting thereof to be held within twelve (12) months after the Board shall have adopted the Plan. If, at such a meeting of the stockholders of the Company, the Plan is not approved by the affirmative vote of a majority of the $0.25 par value common stock of the Company present and entitled to vote at such meeting, then, and in such event, the Plan and all Options granted under the Plan and all awards of Restricted Stock under the Plan shall become null and void and of no further force or effect. 14. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN The Board may amend, suspend or terminate this Plan for the purpose of meeting or addressing any changes in legal requirements or for any other purpose permitted by law, except that (a) no amendment or alteration that would adversely affect the rights of any holder under any award previously granted to such person shall be made without the consent of such person and (b) after the stockholders of the Company have ratified the Plan, no amendment or alteration that would increase the maximum number of Shares subject to the Plan (as provided in Section 4(a)) or decrease the option price of an Option below 100% of the Fair Market Value as of the date such Option was granted (as provided in Section 7) may be made without obtaining approval of the stockholders. 15. REQUIREMENTS OF LAW Notwithstanding anything contained herein to the contrary, the Company shall not be required to sell or issue Shares under any Option if the issuance thereof would constitute a violation by the Optionee or the Company of any provisions of any law or regulation of any governmental authority or any national securities exchange. As a condition of any sale or issuance of Shares under an Option, the Company may require such agreements or undertakings, if any, as the Company may deem necessary or advisable to ensure compliance with any such law or regulation. 8 16. MODIFICATION OF OPTIONS Except as provided in Section 12, notwithstanding any other provision of this Plan to the contrary, (i) after an Option has been awarded, the price at which Shares may be purchased upon exercise of such Option shall not be amended and (ii) no Option shall be granted in exchange for a previously granted Option if the option price of such previously granted Option is greater than the option price of such replacement Option. Notwithstanding the foregoing provisions of this Section 16, no modification or cancellation of an Option granted hereunder shall, without the consent of the Optionee, alter or impair any rights or obligations under any Option theretofore granted hereunder to such Optionee under the Plan. 17. RESTRICTED STOCK (a) Subject to the terms and conditions of, and within the limitations of, the Plan, Shares of Restricted Stock may be awarded by the Committee to such individuals as are eligible for grants of Options, as the Committee may determine at any time and from time to time before the termination of the Plan. Each award of Restricted Stock shall be evidenced by an Agreement setting forth the terms and conditions of the award. (b) A Share of Restricted Stock is a Share that does not irrevocably vest in the holder or that may not be sold, exchanged, pledged, transferred, assigned or otherwise encumbered or disposed of until the terms and conditions set by the Committee at the time of the award of the Restricted Stock have been satisfied. A Share of Restricted Stock shall be subject to such other restrictions, terms and conditions as the Committee may establish, which may include, without limitation, the rendition of services to the Company or its Affiliates for a specified time or the achievement of specific goals. (c) If an individual receives Shares of Restricted Stock, whether or not escrowed as provided below, the individual shall be the record owner of such Shares and shall have all the rights of a stockholder with respect to such Shares (unless the escrow agreement, if any, specifically provides otherwise), including the right to vote and the right to receive dividends or other distributions made or paid with respect to such Shares. Any certificate or certificates representing Shares of Restricted Stock may bear a legend similar to the following: The shares represented by this certificate have been issued pursuant to the terms of the Centex Corporation 2001 Stock Plan and may not be sold, pledged, transferred, assigned or otherwise encumbered in any manner except as set forth in the terms of such award dated ________________, 20___. (d) In order to enforce the restrictions, terms and conditions that may be applicable to an individual's Shares of Restricted Stock, the Committee may require the individual, upon the receipt of a certificate or certificates representing such Shares, or at any time thereafter, to deposit such certificate or certificates, together with stock powers and other instruments of transfer, appropriately endorsed in blank, with the Company or an escrow agent designated by the Company under an escrow agreement in such form as shall be determined by the Committee. (e) After the satisfaction of the terms and conditions set by the Committee at the time of an award of Restricted Stock to an individual, if the original certificate was legended, a new certificate, without the legend set forth above, for the number of Shares that are no 9 longer subject to such restrictions, terms and conditions shall be delivered to the individual, either by delivery of a physical certificate or an electronic transfer to a broker. (f) The Committee may cancel all or any portion of any outstanding restrictions prior to the expiration of such restrictions with respect to any or all of the Shares of Restricted Stock awarded to an individual hereunder on such terms as the Committee may deem appropriate. (g) Subject to the other provisions of this Section 17 and unless otherwise determined by the Committee, if an individual to whom Restricted Stock has been awarded ceases to be employed by the Company or an Affiliate, or ceases to be a director of the Company, whichever may occur later, for any reason prior to the satisfaction of any terms and conditions of an award, any Restricted Stock remaining subject to restrictions shall thereupon be forfeited by the individual and transferred to, and reacquired by, the Company or an Affiliate at no cost to the Company or the Affiliate. In such event, the individual, or in the event of his death, his personal representative, shall forthwith deliver to the Secretary of the Company the certificates for the Shares of Restricted Stock remaining subject to such restrictions, accompanied by such instruments of transfer, if any, as may reasonably be required by the Secretary of the Company. (h) The Committee may determine that an award of Restricted Stock will be subject to restriction until one or more performance goals established by the Committee have been achieved. With respect to such an award, the restrictions shall lapse and the award shall vest only upon achievement of the attainment of one or more pre-established, objective performance goals established by the Committee prior to the earlier to occur of (x) 90 days after the commencement of the period of service to which the performance goal relates and (y) the lapse of 25% of the period of service (as established in good faith at the time the goal is established), and in any event while the outcome is substantially uncertain. A performance goal is objective if a third party having knowledge of the relevant facts could determine whether the goal is met. Such a performance goal may be based on one or more business criteria that apply to the individual, one or more business units of the Company, or the Company as a whole, and may include one or more of the following: operating income, operating margin, earnings before interest, taxes, depreciation and amortization (EBITDA), pre-tax income, net income, net earnings per share, net earnings per share growth, return on beginning stockholder's equity, return on average net assets, total shareholder return relative to other companies in Centex Corporation's industry group, debt/capitalization ratio and customer satisfaction. Unless otherwise stated, such a performance goal need not be based upon an increase or positive result under a particular business criterion and could include, for example, maintaining the status quo or limiting economic losses (measured, in each case, by reference to specific business criteria). In interpreting Plan provisions applicable to performance goals, it is the intent of the Plan to conform with the standards of Section 162(m) of the Code and Treasury Regulation Section 1.162-27(e)(2)(i), and the Committee in establishing such goals and interpreting the Plan shall be guided by such provisions. Prior to the payment of any compensation based on the achievement of performance goals, the Committee must certify in writing that applicable performance goals and any of the material terms thereof were, in fact, satisfied. No individual may be granted Restricted Stock awards subject to performance goals designed to comply with Section 162(m) of the Code having a value of more than $6,000,000 in any given one-year period. 10 18. TAX WITHHOLDING The Company shall have the right to take whatever affirmative actions are required, in the opinion of the Committee, to enable the Company or appropriate Affiliate to satisfy any applicable payroll tax withholding requirements in connection with the exercise of Options granted or Restricted Stock awarded under the Plan. Without limiting the generality of the foregoing provision, the Company shall have the right to (a) withhold cash from a same-day-sale exercise of an Option, (b) deduct applicable taxes from any Option or Restricted Stock award by withholding, at the time of delivery and/or vesting of Shares under the Plan, an appropriate number of Shares for payment of taxes required by law, (c) permit its withholding obligations to be satisfied by the transfer to the Company of Shares theretofore owned by the holder of the Option or recipient of Restricted Stock with respect to which withholding is required, in which case such Shares shall be valued based on the Fair Market Value thereof when the tax withholding is required to be made, or (d) take such other action as may be necessary in the opinion of the Company to satisfy all applicable tax withholding obligations. 19. GENERAL (a) The proceeds received by the Company from the sale of Shares pursuant to Options shall be used for general corporate purposes. (b) Nothing contained in the Plan or in any Agreement shall confer upon any Optionee or recipient of Restricted Stock the right to continue in the employ of the Company or any Affiliate or interfere in any way with the rights of the Company or any Affiliate to terminate such Optionee's or recipient's employment at any time. (c) Neither the members of the Board nor any member of the Committee shall be liable for any act, omission or determination taken or made in good faith with respect to the Plan or any Option or award of Restricted Stock granted under it, and the members of the Board and the Committee shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including counsel fees) arising therefrom to the full extent permitted by law and under any directors and officers liability or similar insurance coverage that may be in effect from time to time. (d) As partial consideration for the granting of each Option or award of Restricted Stock hereunder, the Optionee or recipient shall agree with the Company that he will keep confidential all information and knowledge that he has relating to the manner and amount of his participation in the Plan; provided, however, that such information may be disclosed as required by law or given in confidence to the individual's spouse, tax or financial advisors or to a financial institution to the extent that such information is necessary to secure a loan. (e) Participation in the Plan shall not preclude an individual from eligibility in any other stock option plan of the Company or any Affiliate or any old-age benefit, insurance, pension, profit sharing, retirement, bonus or other extra compensation plans that the Company or any Affiliate has adopted or may, at any time, adopt for the benefit of its employees or directors. (f) Any payment of cash or any issuance or transfer of Shares to the Optionee or to his legal representative, heir, legatee or distributee in accordance with the provisions hereof shall, 11 to the extent thereof, be in full satisfaction of all claims of such persons hereunder. The Board or Committee may require any Optionee or recipient of an award of Restricted Stock, legal representative, heir, legatee or distributee, as a condition precedent to such payment, to execute a release and receipt therefor in such form as it shall determine. (g) Neither the Committee, the Board nor the Company guarantees the Shares from loss or depreciation. (h) All expenses incident to the administration of the Plan, including, but not limited to, legal and accounting fees, shall be paid by the Company or its Affiliates. (i) Records of the Company and its Affiliates regarding an individual's period of employment, termination of employment and the reason therefor, leaves of absence, reemployment, tenure as a Director and other matters shall be conclusive for all purposes hereunder, unless determined by the Board or Committee to be incorrect. (j) The Company and its Affiliates shall, upon request or as may be specifically required hereunder, furnish or cause to be furnished all of the information or documentation that is necessary or required by the Board or Committee to perform their duties and functions under the Plan. (k) The Company assumes no obligation or responsibility to an Optionee or recipient of Restricted Stock, or to such Optionee's or recipient's personal representatives, heirs, legatees or distributees, for any act of, or failure to act on the part of, the Board or Committee. (l) Any action required of the Company shall be by resolution of the Board or by a person authorized to act by resolution of the Board. Any action required of the Committee shall be by resolution of the Committee or by a person authorized to act by resolution of the Committee. (m) If any provision of the Plan or any Agreement is held to be illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions of the Plan or the Agreement, as the case may be, but such provision shall be fully severable and the Plan or the Agreement, as the case may be, shall be construed and enforced as if the illegal or invalid provision had never been included herein or therein. (n) Whenever any notice is required or permitted hereunder, such notice must be in writing and personally delivered or sent by mail. Any notice required or permitted to be delivered hereunder shall be deemed to be delivered on the date on which it is personally delivered or, whether actually received or not, on the third business day after it is deposited in the United States mail, certified or registered, postage prepaid, addressed to the person who is to receive it at the address that such person has theretofore specified by written notice delivered in accordance herewith. The Company, an Optionee or a recipient of Restricted Stock may change, at any time and from time to time, by written notice to the other, the address that it, he or she had theretofore specified for receiving notices. Until changed in accordance herewith, the Company and each Optionee and recipient of Restricted Stock shall specify as its and his address for receiving notices the address set forth in the Agreement pertaining to the shares of Stock to which such notice 12 relates or otherwise provided to the other in accordance with the Company's policies for maintaining such information. (o) Any person entitled to notice hereunder may waive such notice. (p) The Plan shall be binding upon the Optionee or recipient of Restricted Stock, his heirs, legatees and legal representatives, upon the Company, its successors and assigns, and upon the Board and Committee and their successors. (q) The titles and headings of Sections and paragraphs are included for convenience of reference only and are not to be considered in construction of the provisions hereof. (r) All questions arising with respect to the provisions of the Plan shall be determined by application of the laws of the State of Nevada, except to the extent Nevada law is preempted by federal law. The obligation of the Company to sell and deliver Shares hereunder is subject to applicable laws and to the approval of any governmental authority required in connection with the authorization, issuance, sale or delivery of such Shares. (s) Words used in the masculine shall apply to the feminine where applicable, and wherever the context of the Plan dictates, the plural shall be read as the singular and the singular as the plural. (t) Transactions related to the Plan, including but not limited to the delivery and acceptance of any Agreement and the exercise of any Option, whether in whole or in part, may be evidenced by either signed documentation or on-line transactions through the Corporate Stock Benefit Services web site of the Company's designated broker, UBS PaineWebber Inc., or the successor thereof. 13 EX-10.3A 5 d05408exv10w3a.txt EX-10.A 1ST AMENDMENT TO EMPLOYMENT AGREEMENT EXHIBIT 10.3A FIRST AMENDMENT TO EMPLOYMENT AGREEMENT THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT ("Amendment") is made and entered into as of December 19, 2002, by and between CENTEX DEVELOPMENT COMPANY, L.P., a Delaware limited partnership ("CDCLP"), and RICHARD C. DECKER ("Executive"), an individual resident of Coppell, Texas. RECITALS A. CDCLP and Executive entered into an Employment Agreement dated as of April 1, 2001 (the "2001 Agreement"). B. Since the signing of the 2001 Agreement, a number of strategic and organizational changes have occurred within CDCLP. C. CDCLP and Executive have agreed to modify the terms of 2001 Agreement, as set forth in this Amendment, and to provide for the termination and replacement of the 2001 Agreement with a new agreement effective April 1, 2003. AGREEMENT NOW, THEREFORE, CDCLP and Executive mutually undertake and agree as follows: 1. Defined Terms. Capitalized terms used, but not defined, in this Amendment will have the meanings given to such terms in the 2001 Agreement. 2. Amendment. Section 4.C.(2) of the 2001 Agreement is hereby deleted in its entirety and replaced with the following: (2) If CDCLP terminates Executive's employment under Sections 4.B.(3) or (4) above (relating to termination with or without cause or termination for breach of this Agreement), then CDCLP will be obligated to pay to Executive the following: (i) all salary accrued through the effective date of the termination; (ii) a lump sum payment equal to the lesser of (A) one year of the annual salary that was in effect on the effective date of the termination, as described in Section 3.A. above, or (B) the annual salary amount that would have been paid through December 31, 2003, had Executive remained employed with CDCLP; (iii) reimbursement for all expenses incurred by Executive through the effective date of the termination; (iv) within 45 days after the end of the fiscal year, any Annual Bonus accrued through the effective date of termination; and (v) the Post-Employment Bonus. 3. Termination of 2001 Agreement. A. The 2001 Agreement will continue in effect and govern the terms of the employment relationship between CDCLP and Executive through March 31, 2003. Effective at the close of business on March 31, 2003, however, the 2001 Agreement will terminate and no longer have any force or effect. Other than as outlined in this Section 3, neither Executive nor CDCLP will be bound by any of the terms and provisions of the 2001 Agreement after March 31, 2003. From and after April 1, 2003, Executive will be deemed an "employee at will", who may be terminated at any time, with or without cause. -1- B. Notwithstanding the termination of the 2001 Agreement under Section 3.A., the following provisions of the 2001 Agreement will continue to apply after March 31, 2003, for the time periods stated below: (1) CDCLP will continue to be obligated to pay to Executive the Annual Bonus for fiscal year 2003 in accordance with the terms of the 2001 Agreement. (2) If CDCLP terminates Decker from his employment with CDCLP or any other Centex-related entity after March 31, 2003, but before December 31, 2003, with or without cause (other than for acts of theft, embezzlement, fraud, dishonesty or other illegal acts), CDCLP will pay to Executive the annual salary amount that would have been paid to Executive through December 31, 2003, had Executive remained employed with CDCLP through that date. 4. Profits Interest Agreement. As an inducement to Executive, CDCLP and Executive will enter into a Profits Interest Agreement (herein so called) concurrently with the signing of this Amendment. Pursuant to the Profits Interest Agreement, CDCLP will pay to Executive a percentage of the profits generated by projects in which Executive had involvement while employed by CDCLP. The Profits Interest Agreement will supersede and replace any agreements previously entered into between CDCLP and Decker (including the 2001 Agreement) regarding the manner in which Executive is entitled to be compensated for profits generated by the projects. 5. Miscellaneous. The 2001 Agreement, as modified by this Amendment, and the Profits Interest Agreement together express the entire agreement between Executive and CDCLP with reference to the subject matter of the 2001 Agreement and supersede all prior written or oral and all contemporaneous oral discussions, arrangements, negotiations, and agreements with respect to the subject matter of the 2001 Agreement. No waiver, modification, or amendment of the 2001 Agreement or of any covenant, condition or limitation in the 2001 Agreement will be valid, unless it is in a written document signed by the party most detrimentally affected by the waiver or modification. The parties further agree that the provisions of this paragraph may not be waived except as in the manner described in this paragraph. IN WITNESS WHEREOF, the parties to this Amendment have executed and delivered this Amendment in Dallas, Texas as of the day and year first above written. EXECUTIVE: CDCLP: CENTEX DEVELOPMENT COMPANY, L.P., a Delaware limited partnership - ----------------------------- Richard C. Decker By: 3333 Development Corporation, a Nevada corporation By: ---------------------------------- Stephen M. Weinberg President and Chief Executive Officer 12656 -2- EX-10.3B 6 d05408exv10w3b.txt EX-10.3B PROFITS AGREEMENT WITH RICHARD C. DECKER EXHIBIT 10.3B PROFITS INTEREST AGREEMENT THIS PROFITS INTEREST AGREEMENT ("Agreement") is made and entered into effective as of April 1, 2003, by and between CENTEX DEVELOPMENT COMPANY, L.P., a Delaware limited partnership ("CDCLP"), whose address is 2728 North Harwood, Dallas, Texas 75201, Attn: Stephen M. Weinberg, and RICHARD C. DECKER ("Executive"), an individual whose address is 477 Wales Court, Coppell, Texas 75019. RECITALS A. Vista Properties Company (now known as Centex-Vista Properties), a division of Centex Homes, a Nevada general partnership ("Centex-Vista"), and Executive entered into an Employment Agreement dated as of July 26, 1996 (the "1996 Agreement"). Executive and David Quinn, acting on behalf of Centex-Vista and CDCLP, executed a Memorandum dated July 31, 1998 (the "Memorandum"), to clarify that the terms of the 1996 Agreement apply to all activities of Executive performed on behalf of Centex-Vista and CDCLP. B. Effective as of April 1, 2001, CDCLP and Executive entered into a new Employment Agreement (the "Original 2001 Agreement"), which replaced, in its entirety, the 1996 Agreement and the Memorandum. The Original 2001 Agreement was modified by a First Amendment to Employment Agreement dated December 19, 2002 (the "First Amendment"), which, among other things, provided for the termination of the Original 2001 Agreement as of close of business on March 31, 2003. (The Original 2001 Agreement, as modified by the First Amendment, is referred to as the "2001 Agreement".) C. CDCLP and Executive have agreed to enter into this Agreement to reflect the terms of certain compensation to be paid to Executive beginning with fiscal year 2004 with respect to the commercial real estate projects developed or purchased by CDCLP and Centex-Vista during Executive's employment with CDCLP or Centex-Vista. This compensation, which is in addition to Executive's salary and bonus, will be referred to as a "carried" or "profits" interest in the earnings generated by those projects. AGREEMENT NOW, THEREFORE, CDCLP and Executive mutually undertake and agree as follows: 1. Profits Interest. A. Within 60 days after the end of each fiscal year, beginning with fiscal year 2004, CDCLP will pay to Executive a Profits Interest (herein so called) in an amount equal to the sum of the following: (1) 6% of the Net Operating Earnings generated by the operation of the Existing Projects; plus (2) 6% of the Net Sales Earnings generated by the sale of the Existing Projects; plus (3) 5% of the Net Operating Earnings generated by the operation of the the New Projects; plus (4) 5% of the Net Sales Earnings generated by the sale of the New Projects. -1- B. For purposes of calculating the Profits Interest to be paid to Executive, the following defined terms apply: (1) "Net Operating Earnings" means rental income, minus operating expenses (including maintenance, property taxes and insurance), depreciation and interest expenses. For purposes of calculating "Net Operating Earnings", there will be no charge for income taxes or overhead. (2) "Net Sales Earnings" means gross sales proceeds, plus Deferred Earnings realized upon the sale to a third party, minus project development and construction costs, other capitalized items (e.g. tenant improvements), sales costs (including commissions and other closing expenses), depreciation and amortization. (3) "Deferred Earnings" means the difference between the value at which land is transferred from Centex-Vista to CDCLP and the basis at which the land is carried on the books of Centex-Vista. (4) "Existing Projects" means the real estate projects listed on Exhibit A attached to this Agreement. (5) "New Projects" means (i) the real estate projects listed on Exhibit B attached to this Agreement, and (ii) new real estate development projects that (A) have been approved by the Chief Executive Officer of CDCLP by March 31, 2003, as evidenced by the signing of a financial package (e.g. a Board approval package) by the Chief Executive Officer, and (B) are ultimately completed by CDCLP. "New Projects" specifically excludes undeveloped land and any Existing Projects. C. No overhead charge, capital charge or credit will be applied to the calculation of Net Operating Earnings or Net Sale Earnings. D. Executive is not entitled to a Profits Interest with respect to Desert Sky Festival Shopping Center (Westfest LLC), since Executive already owns a direct ownership interest in that project. E. Other than as set forth in a separate letter agreement between CDCLP and Executive, Executive is not entitled to a Profits Interest on any earnings generated by the sale of undeveloped land after March 31, 2003. F. This Profits Interest is paid to Executive separate and apart from Executive's other compensation as an employee of CDCLP: (1) an annual salary; and (2) an annual bonus ("Bonus") based on a percentage of the "bonus pool" established for senior employees of CDCLP. The "bonus pool" is calculated as a percentage of the net operating earnings of CDCLP and Centex-Vista. Because the Profits Interest is also based on the operating earnings from certain Existing Projects and New Projects within CDCLP and Centex-Vista, the Net Sale Earnings and Net Operating Earnings used for calculating the Profits Interest will be excluded for purposes of calculating Executive's Bonus. If Executive resigns from employment with CDCLP or is terminated by CDCLP (other than for acts of theft, embezzlement, fraud, dishonesty or other illegal acts), CDCLP will pay to Executive the Bonus accrued through the date of termination. -2- 2. Payment of Profits Interest After Employment. A. If Executive resigns from employment with CDCLP or is terminated by CDCLP (other than for acts of theft, embezzlement, fraud, dishonesty or other illegal acts), CDCLP will continue to pay to Executive the Profits Interest each year in the manner described in Section 1, above. However, CDCLP may elect at any time to make a Lump-Sum Profits Interest Payment (as defined below) to Executive, in lieu of making annual payments to Executive under Section 1. B. For purposes of calculating the Lump-Sum Profits Interest Payment to be paid to Executive, the following defined terms apply: (1) "Lump-Sum Profits Interest Payment" means the sum of (a) any Profits Interest accrued through the date of termination, (b) the Lump-Sum Profits Interest Payment (Existing Projects), and (c) the Lump-Sum Profits Interest Payment (New Projects). (2) "Lump-Sum Profits Interest Payment (Existing Projects)" is equal to 6% of the sum of: (a) the difference between: (i) the Aggregate Fair Market Value of all of the Existing Projects, and (ii) the cost book basis of CDCLP or Centex, as the case may be, in all of such Existing Projects; plus (b) the Deferred Earnings relating to Existing Projects. (3) Lump-Sum Profits Interest Payment (New Projects)" is equal to 5% of the sum of: (a) the difference between: (i) the Aggregate Fair Market Value of all of the New Projects, and (ii) the cost book basis of CDCLP or Centex, as the case may be, in all of such New Projects; plus (b) the Deferred Earnings relating to New Projects. (4) "Aggregate Fair Market Value" means the total fair market value of the Existing Projects and the New Projects, as mutually agreed upon by CDCLP and Executive at the time that CDCLP elects to make a Lump-Sum Profits Interest Payment. If CDCLP and Executive are unable to reach an agreement, the Aggregate Fair Market Value will be determined by an appraiser mutually acceptable to CDCLP and Executive. -3- 3. Term. This Agreement will continue in full force and effect until all of the Existing Projects and the New Projects have been sold and CDCLP has paid to Executive the last component of the Profits Interest. 4. Miscellaneous. A. This Agreement will be governed by, and construed and interpreted in accordance with, the substantive laws of the State of Texas without giving effect to any conflict-of-laws rule or principle that would result in the application of the laws of another jurisdiction. B. For fiscal year 2003, Executive's salary, bonus and other compensation will be determined under the 2001 Agreement. The terms of this Profits Interest Agreement become effective for compensation earned during fiscal year 2004 (after March 31, 2003). C. This Agreement expresses the entire agreement between Executive and CDCLP with reference to the subject matter of this Agreement and supersedes all prior written or oral and all contemporaneous oral discussions, arrangements, negotiations, and agreements with respect to the subject matter of this Agreement. No waiver, modification, or amendment of this Agreement or of any covenant, condition or limitation in this Agreement will be valid, unless it is in a written document signed by the party most detrimentally affected by the waiver or modification. The parties further agree that the provisions of this paragraph may not be waived except as in the manner described in this paragraph. D. If attorneys' fees or other costs and expenses are incurred to secure performance of any of the obligations described in this Agreement, or to establish damages for the breach or default under this Agreement or to obtain any other appropriate relief, whether by way of prosecution or defense, the prevailing party (which will be the party who receives the substance of the relief sought) will be entitled to recover reasonable attorneys' fees and costs incurred in such action. IN WITNESS WHEREOF, the parties to this Agreement have executed and delivered this Agreement in Dallas, Texas as of the day and year first above written. EXECUTIVE: CDCLP: CENTEX DEVELOPMENT COMPANY, L.P., a Delaware limited partnership By: 3333 Development Corporation, - ------------------------ a Nevada corporation Richard C. Decker By: ------------------------------------- Stephen M. Weinberg President and Chief Executive Officer 12803 -4- Exhibit A Existing Projects -5- Exhibit B New Projects Northfield B, F & G Camarillo Ranch VI Camarillo Business Center (existing building occupied by G&H only) Hilltop Business Center CC Desoto -6- EX-10.6A 7 d05408exv10w6a.txt EX-10.6A SUPPLEMENTAL AGREEMENT EXHIBIT 10.6A (ALLEN AND OVERY LETTERHEAD) SUPPLEMENTAL AGREEMENT DATED 21ST MARCH, 2003 BETWEEN FAIRCLOUGH HOMES GROUP LIMITED FAIRCLOUGH HOMES LIMITED VIEWTON PROPERTIES LIMITED AND THE COMPANIES LISTED IN SCHEDULE 1 HERETO AS SUPPLEMENTAL BORROWERS AND THE COMPANIES LISTED IN SCHEDULE 1 HERETO AS SUPPLEMENTAL GUARANTORS AND THE ROYAL BANK OF SCOTLAND PLC AS FACILITY AGENT RELATING TO A POUND STERLING 100,000,000 CREDIT AGREEMENT DATED 30TH MARCH, 2001 (AS AMENDED BY A SUPPLEMENTAL AGREEMENT DATED 4TH SEPTEMBER, 2002) CONTENTS
CLAUSE PAGE 1. Interpretation .................................................. 1 2. Amendments ...................................................... 2 3. Representations ................................................. 2 4. Guarantee and Indemnity ......................................... 3 5. The Credit Agreement ............................................ 3 6. Amendment Fee ................................................... 3 7. Lenders and commitments ......................................... 3 8. Miscellaneous ................................................... 3 9. Governing Law ................................................... 4 SCHEDULES 1. Parties ......................................................... 5 2. Amended Credit Agreement ........................................ 6 3. 4. Conditions Precedent Documents .................................. 117 Signatories to the Supplemental Agreement ................................ 118
THIS AGREEMENT is dated 21st March, 2003 BETWEEN: (1) FAIRCLOUGH HOMES GROUP LIMITED (Registered No. 2804113) (the COMPANY); (2) FAIRCLOUGH HOMES LIMITED (Registered No. 1987689) (the ORIGINAL BORROWER); (3) THE SUBSIDIARIES OF THE COMPANY listed in Schedule 1 (Parties) as original guarantors (in this capacity the ORIGINAL GUARANTORS); (4) THE COMPANIES listed in Schedule 1 (Parties) as additional borrowers (in this capacity the SUPPLEMENTAL BORROWERS); (5) THE COMPANIES listed in Schedule 1 (Parties) as additional guarantors (in this capacity the SUPPLEMENTAL GUARANTORS); and (6) THE FINANCIAL INSTITUTIONS listed in Schedule 1 (Parties) as lenders (the LENDERS); (7) THE ROYAL BANK OF SCOTLAND PLC as agent (in this capacity the FACILITY AGENT). BACKGROUND (A) This Agreement is supplemental to and amends a credit agreement dated 30th March, 2001 between, among others, the Company and the Facility Agent as amended by a supplemental agreement dated 4th September, 2002 (the CREDIT AGREEMENT). (B) The Lenders have consented to the amendments to the Credit Agreement contemplated by this Agreement. (C) The Lenders have consented to an increase to the Bonding Facility from Pound Sterling 5,000,000 to Pound Sterling 10,000,000. IT IS AGREED as follows: 1. INTERPRETATION 1.1 DEFINITIONS (a) Capitalised terms defined in the Credit Agreement have, unless expressly defined in this Agreement, the same meaning in this Agreement. (b) EFFECTIVE DATE means 31st March, 2003 or such other date as CDFCUK and the Facility Agent may agree. 1.2 CONSTRUCTION The provisions of Clause 1.2 (Construction) of the Credit Agreement apply to this Agreement as though they were set out in full in this Agreement except that references to the Credit Agreement are to be construed as references to this Agreement. 1 2. AMENDMENTS (a) Subject as set out below, the Credit Agreement will be amended from the Effective Date so that it is in the form set out in Schedule 2 (Amended Credit Agreement). (b) The Credit Agreement will not be amended by this Agreement unless the Facility Agent notifies the Company and the Lenders that it has received all of the documents set out in Schedule 3 (Conditions precedent documents) in form and substance satisfactory to the Facility Agent on or prior to the Effective Date. The Facility Agent must give this notification as soon as reasonably practicable. (c) If the Facility Agent fails to give the notification under paragraph (a) above by the Effective Date, the Credit Agreement will not be amended in the manner contemplated by this Agreement. 3. REPRESENTATIONS 3.1 REPRESENTATIONS The representations set out in this Clause are made by each Obligor on the date of this Agreement to each Finance Party. 3.2 POWERS AND AUTHORITY It has the power to enter into and perform, and has taken all necessary action to authorise the entry into and performance of this Agreement and the transactions contemplated by this Agreement. 3.3 LEGAL VALIDITY Subject to any general principles of law limiting its obligations and specifically referred to in any legal opinion delivered under Schedule 3 (Conditions precedent documents), this Agreement constitutes its legally binding, valid and enforceable obligation. 3.4 NON-CONFLICT The entry into and performance by it of, and the transactions contemplated by, this Agreement do not and will not conflict with: (a) any law or regulation applicable to it; or (b) conflict with its or any of its Subsidiaries' constitutional documents; or (c) conflict with any document which is binding on it or any of its Subsidiaries or any of its or its Subsidiaries' assets. 3.5 AUTHORISATIONS All authorisations required by it in connection with the entry into, performance, validity and enforceability of, and the transactions contemplated by, this Agreement have been obtained or effected (as appropriate) and are in full force and effect. 2 3.6 CREDIT AGREEMENT Each Obligor confirms to each Finance Party that on the date of this Agreement the Repeating Representations: (a) are true; and (b) would also be true if references to the Credit Agreement are construed as references to the Credit Agreement as amended by this Agreement. In each case, each Repeating Representation is applied to the circumstances existing at the date of this Agreement. 4. GUARANTEE AND INDEMNITY Each Guarantor confirms that the guarantee and indemnity contained in Clause 16 (Guarantee and Indemnity) of the Credit Agreement is a continuing guarantee and will continue in full force and effect notwithstanding this Agreement or the amendments to the Credit Agreement contemplated by it. 5. THE CREDIT AGREEMENT Save to the extent specifically referred to in this Agreement, nothing contained in this Agreement shall be construed as a waiver, variation or amendment of the provisions of the Credit Agreement or all or any of the Finance Documents. For the avoidance of doubt, each Obligor hereby confirms to each of the Finance Parties, without reservation, that its obligations under the Finance Documents are and will remain in full force and effect both before and after the execution of this Agreement. 6. AMENDMENT FEE The Company must pay to the Arranger an amendment fee in the manner agreed in the Fee Letter dated on or about the date of this Agreement between the Arranger and CDFCUK. 7. LENDERS AND COMMITMENTS On the Effective Date (regardless of whether a Default is outstanding) the Commitments of each Lender will be amended to the amount set opposite its name in Schedule 1 (Original Parties) of the Credit Agreement. 8. MISCELLANEOUS (a) This Agreement is a Finance Document. (b) Subject to the terms of this Agreement, the Credit Agreement will remain in full force and effect and the Credit Agreement and this Agreement will be read and construed as one document. (c) Any Loans which would otherwise be outstanding on the Effective Date must be prepaid on or before the Effective Date. (d) From the date of this Agreement up to and including the Effective Date, the Company shall not submit any Requests for Loans with a Maturity Date after the Effective Date or otherwise 3 extend the Interest Period of any Loan so that the Maturity Date of such Loan is after the Effective Date. 9. GOVERNING LAW This Agreement is governed by English law. This Agreement has been entered into on the date stated at the beginning of this Agreement. 4 SCHEDULE 1 PARTIES
ORIGINAL GUARANTORS REGISTERED NUMBER (OR EQUIVALENT, IF ANY) Fairclough Homes Limited 1987689 Viewton Properties Limited 2436950 SUPPLEMENTAL BORROWERS CDC2020 plc 4321699 Centex UK Limited 3720262 SUPPLEMENTAL GUARANTORS CDC2020 plc 4321699 Centex Development Funding Company UK Limited 4167358 Centex Management Services Limited 4375040 Centex Strategic Land Limited 4466958 Centex UK Limited 3720262 LENDERS COMMITMENTS POUND STERLING National Westminster Bank Plc 28,000,000 HSBC Bank plc 16,000,000 Lloyds TSB Bank plc 16,000,000 Yorkshire Bank PLC 16,000,000 Allied Irish Banks, p.l.c. 8,000,000 Girobank plc 8,000,000 The Governor and Company of the Bank of Ireland 8,000,000 ----------- Total Commitments Pound Sterling 100,000,000 -----------
5 (ALLEN & OVERY LETTERHEAD) SCHEDULE 2 AMENDED CREDIT AGREEMENT AGREEMENT DATED 30TH MARCH, 2001 POUND STERLING 100,000,000 CREDIT FACILITY FOR FAIRCLOUGH HOMES GROUP LIMITED ARRANGED BY THE ROYAL BANK OF SCOTLAND PLC 6 INDEX
CLAUSE PAGE 1. Interpretation ............................................. 9 2. Facility ................................................... 20 3. Purpose .................................................... 21 4. Conditions precedent ....................................... 21 5. Utilisation ................................................ 21 6. Extension of final maturity date ........................... 22 7. Repayment .................................................. 23 8. Prepayment and cancellation ................................ 23 9. Interest ................................................... 25 10. Terms ...................................................... 27 11. Market disruption .......................................... 27 12. Taxes ...................................................... 28 13. Increased costs ............................................ 31 14. Mitigation ................................................. 31 15. Payments ................................................... 32 16. Guarantee and indemnity .................................... 34 17. Representations ............................................ 36 18. Information covenants ...................................... 39 19. Financial covenants ........................................ 41 20. General covenants .......................................... 45 21. Default .................................................... 48 22. Security ................................................... 52 23. The Administrative Parties ................................. 53 24. Evidence and calculations .................................. 58 25. Fees ....................................................... 58 26. Indemnities and break costs ................................ 59 27. Expenses ................................................... 60 28. Amendments and waivers ..................................... 60 29. Changes to the parties ..................................... 61 30. Disclosure of information .................................. 65 31. Set-off .................................................... 65 32. Pro rata sharing ........................................... 66 33. Severability ............................................... 67 34. Counterparts ............................................... 67 35. Notices .................................................... 67 36. Language ................................................... 69 37. Governing law .............................................. 69 38. Enforcement ................................................ 69
7 SCHEDULES 1. Original Parties ........................................... 70 2. Conditions Precedent Documents ............................. 72 Part 1 To be Delivered before the First Request .......... 72 Part 2 For an Additional Obligor ......................... 74 3. Form of Request ............................................ 76 4. Calculation of the Mandatory Cost .......................... 77 5. Form of Transfer Certificate ............................... 80 6. Existing Security .......................................... 81 7. Form of Compliance Certificate ............................. 83 8. Form of Accession Agreement ................................ 85 9. Form of Resignation Request ................................ 86 10. Form of Security Agreement ................................. 87 11. Form of Legal Opinion of Allen & Overy ..................... 109 Signatories ......................................................... 114
8 THIS AGREEMENT is dated 30th March, 2001 BETWEEN: (1) FAIRCLOUGH HOMES GROUP LIMITED (registered number 2804113) (the COMPANY); (2) THE SUBSIDIARIES OF THE COMPANY listed in Schedule 1 (Original Parties) as original borrowers (in this capacity the ORIGINAL BORROWERS); (3) THE COMPANIES listed in Schedule 1 (Original Parties) as supplemental borrowers, which became Borrowers pursuant to the supplemental agreement to this Agreement dated 4th September, 2002 (in this capacity the SUPPLEMENTAL BORROWERS); (4) THE SUBSIDIARIES OF THE COMPANY listed in Schedule 1 (Original Parties) as original guarantors (in this capacity the ORIGINAL GUARANTORS); (5) THE COMPANIES listed in Schedule 1 (Original Parties) as supplemental guarantors, which became Guarantors pursuant to the supplemental agreement to this Agreement dated 4th September, 2002 or, in the case of Centex Strategic Land Limited only, pursuant to an Accession Agreement dated 20th November, 2002 (in this capacity the SUPPLEMENTAL GUARANTORS); (6) THE ROYAL BANK OF SCOTLAND PLC as arranger (in this capacity the ARRANGER); (7) NATIONAL WESTMINSTER BANK PLC as original lender (the ORIGINAL LENDER); (8) THE LENDERS listed in Schedule 1 (Original Parties) as syndication lenders, which became Lenders pursuant to the Syndication Agreement dated 22nd June, 2001 (in this capacity the SYNDICATION LENDERS); and (9) THE ROYAL BANK OF SCOTLAND PLC as facility agent (in this capacity the FACILITY AGENT). IT IS AGREED as follows: 1. INTERPRETATION 1.1 DEFINITIONS In this Agreement: ACCESSION AGREEMENT means a letter, substantially in the form of Schedule 8 (Form of Accession Agreement), with such amendments as the Facility Agent may approve or reasonably require. ADDITIONAL BORROWER means a member of the Group which becomes a Borrower after the date of this Agreement. ADDITIONAL GUARANTOR means a member of the Group which becomes a Guarantor after the date of this Agreement. ADDITIONAL OBLIGOR means an Additional Borrower or an Additional Guarantor. 9 ADJUSTED SECURITY ASSET VALUE means, at any time (without double counting), the aggregate of: (a) 50 per cent. of the Value (after deducting, in the case of any Category 1 Land or Category 2 Land which is subject to a Security Interest (other than a Security Interest created by a Security Document), the principal amount secured by that Security Interest) of Category 1 Land and Category 2 Land of the Obligors; (b) 60 per cent. of the Value of Work in Progress of the Obligors; (c) 75 per cent. of the Value of Finished Housing Stock of the Obligors, after deducting 100 per cent. of the Value of Finished Housing Stock which is held by an Obligor under a part-exchange scheme; (d) (i) 75% of the Value of Finished Housing Stock held by an Obligor under a part-exchange scheme for less than 180 days; and (ii) 50% of the Value of Finished Housing Stock held by an Obligor under a part-exchange scheme for 180 days or more and less than 270 days, less the amount (if any) by which the Adjusted Security Asset Value ascribed to the Value of Finished Housing Stock under a part-exchange scheme in paragraphs (d)(i) and (ii) above exceeds 10 per cent. of the Adjusted Security Asset Value; as stated in the most recent certificate provided to the Facility Agent under Clause 4.1 (Conditions precedent documents) in the case of the first such certificate or under Clause 18.2 (Compliance certificate) in the case of each subsequent certificate. ADMINISTRATIVE PARTY means the Arranger or the Facility Agent. AFFILIATE means a Subsidiary or a Holding Company of a person or any other Subsidiary of that Holding Company. APPLICABLE PRINCIPLES means the accounting principles applied in connection with the Original Financial Statements. AVAILABILITY PERIOD means the period from and including the date of this Agreement to and including the date which is one month before the Final Maturity Date. BONDING FACILITY has the meaning given to it in the Security Agreement. BORROWER means the Company, an Original Borrower, a Supplemental Borrower or an Additional Borrower. BREAK COSTS means the amount (if any) which a Lender is entitled to receive under this Agreement as compensation if any part of a Loan or overdue amount is prepaid. BUSINESS DAY means a day (other than a Saturday or a Sunday) on which banks are open for general business in London. CATEGORY 1 LAND means land in the U.K. which is: (a) secured under a Security Document; 10 (b) legally and beneficially owned by an Obligor for the purposes of development; and (c) in respect of which full, implementable planning permission for the relevant development has been obtained, which planning permission has not lapsed. CATEGORY 2 LAND means land in the U.K. which is: (a) secured under a Security Document; (b) legally and beneficially owned by an Obligor for the purposes of development; and (c) in respect of which outline planning permission for the relevant development has been obtained, which planning permission has not lapsed or which has been acquired subject to entering into an agreement under Section 106 of the Town and Country Planning Act 1990. CDFCUK means Centex Development Funding Company UK Limited, a company incorporated in England and Wales with registered number 4167358. CENTEX CORPORATION means Centex Corporation, a company incorporated in Nevada, U.S.A. COMMITMENT means: (a) for the Original Lender, the amount set opposite its name in Schedule 1 (Original Parties) under the heading COMMITMENTS and the amount of any other Commitment it acquires; and (b) for any other Lender, the amount of any Commitment it acquires, to the extent not cancelled, transferred or reduced under this Agreement. DANGEROUS SUBSTANCE means any radioactive emissions and any natural or artificial substance (whether in the form of a solid, liquid, gas or vapour) the generation, transportation, storage, treatment, use or disposal of which (whether alone or in combination with any other substance) and including (without limitation) any controlled, special, hazardous, toxic, radioactive or dangerous waste, is capable of causing harm to any living organism or damaging the Environment or public health. DEED OF PARTIAL RELEASE means a document substantially in the form of Part 2 of Schedule 2 to the Security Agreement. DEFAULT means: (a) an Event of Default; or (b) an event which would be (with the expiry of a grace period, the giving of notice or the making of any determination under the Finance Documents or any combination of them) an Event of Default. DEFERRED PURCHASE AGREEMENT means an agreement for the purchase of freehold or leasehold land in the U.K. by a member of the Group under which payment of the purchase price is deferred for a period of time after legal and beneficial title to that land has been transferred to the relevant member of the Group. 11 ENVIRONMENT means all, or any of, the following media: the air (including, without limitation, the air within buildings and the air within other natural or man-made structures above or below ground), water (including, without limitation, ground and surface water) and land (including, without limitation, surface and sub-surface soil). ENVIRONMENTAL CLAIM means any claim by any person: (a) in respect of any loss or liability suffered or incurred by that person as a result of or in connection with any violation of Environmental Law; or (b) that arises as a result of or in connection with Environmental Contamination and that is capable of giving rise to any remedy or penalty (whether interim or final) that may be enforced or assessed by private or public legal action or administrative order or proceedings including, without limitation, any such claim that arises from injury to persons or property. ENVIRONMENTAL CONTAMINATION means each of the following and their consequences: (a) any release, emission, leakage or spillage of any Dangerous Substance at or from any site owned or occupied by an Obligor or any Subsidiary of an Obligor into any part of the Environment; (b) any accident, fire, explosion or sudden event at any site owned or occupied by an Obligor or any Subsidiary of an Obligor which is directly caused by or attributable to any Dangerous Substance; or (c) any other pollution of the Environment arising at or from any site owned or occupied by an Obligor or any Subsidiary of an Obligor. ENVIRONMENTAL LAW means all laws and regulations concerning pollution, the Environment or Dangerous Substances. ENVIRONMENTAL APPROVAL means any authorisation required by any Environmental Law. EVENT OF DEFAULT means an event specified as such in this Agreement. FACILITY means the credit facility made available under this Agreement. FACILITY OFFICE means the office(s) notified by a Lender to the Facility Agent: (a) on or before the date it becomes a Lender; or (b) by not less than five Business Days' notice, as the office(s) through which it will perform its obligations under this Agreement. FEE LETTER means any letter entered into by reference to this Agreement between one or more Administrative Parties and the Company or CDFCUK setting out the amount of certain fees referred to in this Agreement. FINAL MATURITY DATE means 1st April, 2006, unless extended in accordance with the terms of Clause 6 (Extension of Final Maturity Date). FINANCE DOCUMENT means: 12 (a) this Agreement; (b) a Security Document; (c) a Fee Letter; (d) a Transfer Certificate; (e) an Accession Agreement; or (f) any other document designated as such by the Facility Agent and CDFCUK. FINANCE PARTY means a Lender or an Administrative Party. FINANCIAL INDEBTEDNESS means any indebtedness for or in respect of: (a) moneys borrowed; (b) any acceptance credit; (c) any bond, note, debenture, loan stock or other similar instrument; (d) any finance or capital lease; (e) receivables sold or discounted (otherwise than on a non-recourse basis); (f) the acquisition cost of any asset to the extent payable after its acquisition or possession by the party liable where the deferred payment is arranged primarily as a method of raising finance or financing the acquisition of that asset and includes, for the avoidance of doubt, the acquisition cost of land under a Deferred Purchase Agreement; (g) any derivative transaction protecting against or benefiting from fluctuations in any rate or price (and, except for non-payment of an amount, the then mark to market value of the derivative transaction will be used to calculate its amount); (h) any other transaction (including any forward sale or purchase agreement) which has the commercial effect of a borrowing; (i) any counter-indemnity obligation in respect of any guarantee, indemnity, bond, letter of credit or any other instrument issued by a bank or financial institution; or (j) any guarantee, indemnity or similar assurance against financial loss of any person in respect of any item referred to in paragraphs (a) to (i) above. FINISHED HOUSING STOCK means housing stock in the U.K. which is: (a) legally and beneficially owned by an Obligor; (b) secured under a Security Document; and: (i) in the case of housing stock constructed by or on behalf of a member of the Group, which is covered by a warranty from the NHBC, The Zurich Insurance Company or any other insurance provider approved by the Facility Agent (acting reasonably); or 13 (ii) in the case of housing stock acquired by an Obligor under a part-exchange scheme, which is fit for human habitation as a residential property. GROUP means CDFCUK and its Subsidiaries. GUARANTOR means the Company, an Original Guarantor, a Supplemental Guarantor or an Additional Guarantor. HOLDING COMPANY means a holding company within the meaning of section 736 of the Companies Act 1985. INCREASED COST means: (a) an additional or increased cost; (b) a reduction in the rate of return under a Finance Document or on its overall capital; or (c) a reduction of an amount due and payable under any Finance Document, which is incurred or suffered by a Finance Party or any of its Affiliates but only to the extent attributable to that Finance Party having entered into any Finance Document or funding or performing its obligations under any Finance Document. INTEREST PERIOD means each period determined under this Agreement by reference to which interest on a Loan or an overdue amount is calculated. LENDER means: (a) the Original Lender; or (b) any person which becomes a Lender after the date of this Agreement. LETTER OF NON-CRYSTALLISATION means a letter substantially in the form of Part 1 of Schedule 2 to the Security Agreement. LIBOR means for an Interest Period of any Loan or overdue amount: (a) the applicable Screen Rate; or (b) if no Screen Rate is available for the relevant currency or Interest Period of that Loan or overdue amount, the arithmetic mean (rounded upward to four decimal places) of the rates, as supplied to the Facility Agent at its request, quoted by the Reference Banks to leading banks in the London interbank market, as of 11.00 a.m. on the Rate Fixing Day for the offering of deposits in the currency of that Loan or overdue amount for a period comparable to that Interest Period. LOAN means, unless otherwise stated in this Agreement, the principal amount of each borrowing under this Agreement or the principal amount outstanding of that borrowing. 14 MAJORITY LENDERS means, at any time, Lenders: (a) whose share in the outstanding Loans and whose undrawn Commitments then aggregate more than 50 per cent. of the aggregate of all the outstanding Loans and the undrawn Commitments of all the Lenders; (b) if there is no Loan then outstanding, whose undrawn Commitments then aggregate more than 50 per cent. of the Total Commitments; or (c) if there is no Loan then outstanding and the Total Commitments have been reduced to zero, whose Commitments then aggregate more than 50 per cent. of the Total Commitments immediately before the reduction. MANDATORY COST means the cost of complying with certain regulatory requirements, expressed as a percentage rate per annum and calculated by the Facility Agent under Schedule 4 (Calculation of the Mandatory Cost). MARGIN means 1 per cent. per annum, subject to Clause 9.3 (Margin adjustments). MATERIAL ADVERSE EFFECT means a material adverse effect on: (a) the business or financial condition of the Group as a whole; (b) the ability of any Obligor to perform its payment obligations under any Finance Document or the ability of CDFCUK to comply with its obligations under Clause 18 (Financial covenants); or (c) the validity or enforceability of any material provision of any Finance Document. MATERIAL SUBSIDIARY means, at any time, a Subsidiary of CDFCUK whose gross assets, profits or net worth (excluding intra-Group items) then equal or exceed 5 per cent. of the gross assets, profits or net worth of the Group. For this purpose: (a) the gross assets, profits or net worth of a Subsidiary of CDFCUK will be determined from its financial statements (unconsolidated if it has Subsidiaries) upon which the latest audited financial statements of the Group have been based; (b) if a Subsidiary of CDFCUK becomes a member of the Group after the date on which the latest audited financial statements of the Group have been prepared, the gross assets, profits or net worth of that Subsidiary will be determined from its latest financial statements; (c) the gross assets, profits or net worth of the Group will be determined from its latest audited financial statements, adjusted (where appropriate) to reflect the gross assets, profits or net worth of any company or business subsequently acquired or disposed of; and (d) if a Material Subsidiary disposes of all or substantially all of its assets to another Subsidiary of CDFCUK, it will immediately cease to be a Material Subsidiary and the other Subsidiary (if it is not already) will immediately become a Material Subsidiary; the subsequent financial statements of those Subsidiaries and the Group will be used to determine whether those Subsidiaries are Material Subsidiaries or not. 15 If there is a dispute as to whether or not a company is a Material Subsidiary, a certificate of the auditors of CDFCUK will be, in the absence of manifest error, conclusive. MATURITY DATE means the last day of the Interest Period of a Loan. NHBC means the National House-Building Council. NHBC STANDARDS means the house-building standards published from time to time by the NHBC. OBLIGOR means a Borrower or a Guarantor. ORIGINAL FINANCIAL STATEMENTS means the audited consolidated financial statements of the Company for the year ended 31st March, 2000. ORIGINAL OBLIGOR means the Company, an Original Borrower or an Original Guarantor. OVERDRAFT FACILITY has the meaning given to it in the Security Agreement. PARTY means a party to this Agreement. PRO RATA SHARE means: (a) for the purpose of determining a Lender's share in a Loan, the proportion which its Commitment bears to the Total Commitments; and (b) for any other purpose on a particular date: (i) the proportion which a Lender's share of the Loans (if any) bears to all the Loans; (ii) if there is no Loan outstanding on that date, the proportion which its Commitment bears to the Total Commitments on that date; or (iii) if the Total Commitments have been cancelled, the proportion which its Commitments bore to the Total Commitments immediately before being cancelled. RATE FIXING DAY means the first day of an Interest Period or such other day as the Facility Agent determines is generally treated as the rate fixing day by market practice in the relevant interbank market. REFERENCE BANKS means: (a) until completion of Syndication, the Facility Agent; and (b) subsequently, the Facility Agent and any other bank or financial institution appointed as such by the Facility Agent under this Agreement after consultation with CDFCUK. REPEATING REPRESENTATIONS means the representations which are deemed to be repeated under this Agreement. REQUEST means a request for a Loan, substantially in the form of Schedule 3 (Form of Request). 16 RESERVATIONS means the time barring of claims under the Limitation Acts (or any other applicable laws or regulations having a similar effect), the possibility that an undertaking to assume liability for or to indemnify against non-payment of stamp duty may be void, the possibility that a provision relating to capitalisation of interest may be void under the laws of some jurisdictions and defences of set-off, counterclaim or similar principles. ROLLOVER LOAN means one or more Loans: (a) to be made on the same day that a maturing Loan is due to be repaid; (b) the aggregate amount of which is equal to or less than the maturing Loan; and (c) to be made to the same Borrower for the purpose of refinancing a maturing Loan. SCREEN RATE means the British Bankers Association Interest Settlement Rate (if any) for the relevant currency and Interest Period displayed on the appropriate page of the Telerate screen selected by the Facility Agent. If the relevant page is replaced or the service ceases to be available, the Facility Agent (after consultation with CDFCUK and the Lenders) may specify another page or service displaying the appropriate rate. SECURITY AGREEMENT means a security agreement in the form of Schedule 10 (Form of Security Agreement) with such amendments as may be agreed between CDFCUK and the Facility Agent or, in the case of an Obligor incorporated in, or assets located in, a jurisdiction other than England and Wales, as the Facility Agent may reasonably require. SECURITY DOCUMENT means: (a) each Security Agreement; and (b) any other document evidencing or creating security over any asset of an Obligor to secure any obligation of any Obligor to a Finance Party under the Finance Documents. SECURITY INTEREST means any mortgage, pledge, lien, charge, assignment, hypothecation or security interest or any other agreement or arrangement having a similar effect. SUBORDINATED DEBT means any Financial Indebtedness incurred by any member of the Group where such Financial Indebtedness is owing to an Affiliate or Holding Company of CDFCUK (or Centex Corporation or its Affiliates) which is subordinated to the rights of the Finance Parties under the Finance Documents on terms satisfactory to the Majority Lenders. SUBSIDIARY means: (a) a subsidiary within the meaning of section 736 of the Companies Act 1985; and (b) unless the context otherwise requires, a subsidiary undertaking within the meaning of section 258 of the Companies Act 1985, and shall exclude for all purposes hereunder, FHL Nominees Limited and Fairpine Limited. SYNDICATION means general syndication of the Facility by the Arranger. SYNDICATION AGREEMENT means the agreement to be entered into by the Parties and the banks from Syndication under which those banks will become Parties. 17 TAX means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any related penalty or interest). TAX DEDUCTION means a deduction or withholding for or on account of Tax from a payment under a Finance Document. TAX PAYMENT means a payment made by an Obligor to a Finance Party in any way relating to a Tax Deduction or under any indemnity given by that Obligor in respect of Tax under any Finance Document. TOTAL COMMITMENTS means the Commitments of all the Lenders. TRANSFER CERTIFICATE means a certificate, substantially in the form of Schedule 5 (Form of Transfer Certificate), with such amendments (provided they are not prejudicial to any Obligor) as the Facility Agent may approve or reasonably require or any other form agreed between the Facility Agent and CDFCUK. U.K. means the United Kingdom. U.S.A. means the United States of America. UTILISATION DATE means each date on which the Facility is utilised. VALUE means, in respect of an asset for the purposes of calculating the Adjusted Security Asset Value at any time, the lower of: (a) the cost of the relevant asset; and (b) the relevant asset's net realisable value at that time. WORK IN PROGRESS means, at any time, normal expenditure incurred by an Obligor in the construction of housing and supporting site infrastructure which is capitalised within work in progress in accordance with the Applicable Principles. 3333 HOLDING CORPORATION means 3333 Holding Corporation, a company incorporated in Nevada, U.S.A. 1.2 CONSTRUCTION (a) In this Agreement, unless the contrary intention appears, a reference to: (i) an AMENDMENT includes a supplement, novation, restatement or re-enactment and AMENDED will be construed accordingly; ASSETS includes present and future properties, revenues and rights of every description; an AUTHORISATION includes an authorisation, consent, approval, resolution, licence, exemption, filing, registration or notarisation; DISPOSAL means a sale, transfer, grant, lease or other disposal, whether voluntary or involuntary, and DISPOSE will be construed accordingly; 18 INDEBTEDNESS includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money; a PERSON includes any individual, company, corporation, unincorporated association or body (including a partnership, trust, joint venture or consortium), government, state, agency, organisation or other entity whether or not having separate legal personality; a REGULATION includes any regulation, rule, official directive, request or guideline (whether or not having the force of law but, if not having the force of law, being of a type with which any person to which it applies is accustomed to comply) of any governmental, inter-governmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation; (ii) a currency is a reference to the lawful currency for the time being of the relevant country; (iii) a Default being OUTSTANDING means that it has not been remedied or waived; (iv) a provision of law is a reference to that provision as extended, applied, amended or re-enacted and includes any subordinate legislation; (v) a Clause, a Subclause or a Schedule is a reference to a clause or subclause of, or a schedule to, this Agreement; (vi) a person includes its successors in title, permitted assigns and permitted transferees; (vii) a Finance Document or another document is a reference to that Finance Document or other document as amended; and (viii) a time of day is a reference to London time. (b) Unless the contrary intention appears, a reference to a MONTH or MONTHS is a reference to a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month or the calendar month in which it is to end, except that: (i) if the numerically corresponding day is not a Business Day, the period will end on the next Business Day in that month (if there is one) or the preceding Business Day (if there is not); (ii) if there is no numerically corresponding day in that month, that period will end on the last Business Day in that month; and (iii) notwithstanding sub-paragraph (i) above, a period which commences on the last Business Day of a month will end on the last Business Day in the next month or the calendar month in which it is to end, as appropriate. (c) (i) Unless expressly provided to the contrary in a Finance Document, a person who is not a party to a Finance Document may not enforce any of its terms under the Contracts (Rights of Third Parties) Act 1999. (ii) Notwithstanding any term of any Finance Document, the consent of any third party is not required for any variation (including any release or compromise of any liability under) or termination of that Finance Document. 19 (d) Unless the contrary intention appears: (i) a reference to a Party will not include that Party if it has ceased to be a Party under this Agreement; (ii) a term used in any other Finance Document or in any notice given in connection with any Finance Document has the same meaning in that Finance Document or notice as in this Agreement; (iii) if there is an inconsistency between this Agreement and any other Finance Document, this Agreement will prevail; (iv) any obligation of an Obligor under the Finance Documents which is not a payment obligation remains in force for so long as any payment obligation is or may be outstanding under the Finance Documents; and the headings in this Agreement do not affect its interpretation. 2. FACILITY 2.1 FACILITY Subject to the terms of this Agreement, the Lenders make available to the Borrowers a Sterling revolving credit facility in an aggregate amount equal to the Total Commitments. 2.2 NATURE OF A FINANCE PARTY'S RIGHTS AND OBLIGATIONS Unless otherwise agreed by all the Finance Parties: (a) the obligations of a Finance Party under the Finance Documents are several; (b) failure by a Finance Party to perform its obligations does not affect the obligations of any other Party under the Finance Documents; (c) no Finance Party is responsible for the obligations of any other Finance Party under the Finance Documents; (d) the rights of a Finance Party under the Finance Documents are separate and independent rights; (e) a debt arising under the Finance Documents to a Finance Party is a separate and independent debt; and (f) a Finance Party may, except as otherwise stated in the Finance Documents, separately enforce those rights. 3. PURPOSE 3.1 LOANS Each Loan may only be used for general corporate and/or working capital purposes of the Group or any purpose specifically permitted under this Agreement. 20 3.2 NO OBLIGATION TO MONITOR No Finance Party is bound to monitor or verify the utilisation of the Facility. 4. CONDITIONS PRECEDENT 4.1 CONDITIONS PRECEDENT DOCUMENTS A Request may not be given until the Facility Agent has notified CDFCUK and the Lenders that it has received all of the documents and evidence set out in Part 1 of Schedule 2 (Conditions precedent documents) in form and substance satisfactory to the Facility Agent. The Facility Agent must give this notification as soon as reasonably practicable. 4.2 FURTHER CONDITIONS PRECEDENT The obligations of each Lender to participate in any Loan are subject to the further conditions precedent that: (a) on both the date of the Request and the Utilisation Date for that Loan: (i) the Repeating Representations are correct in all material respects; (ii) no Default or, in the case of a Rollover Loan, no Event of Default is outstanding or would result from the Loan; and (b) the aggregate principal amount of: (i) outstanding Loans; (ii) the net amount outstanding under the Overdraft Facility; and (iii) amounts outstanding under the Bonding Facility, immediately after that Loan is made will not exceed the then current Adjusted Security Asset Value. 4.3 MAXIMUM NUMBER Unless the Facility Agent agrees, a Request may not be given if, as a result, there would be more than 15 Loans outstanding. 5. UTILISATION 5.1 GIVING OF REQUESTS (a) A Borrower may borrow a Loan by giving to the Facility Agent a duly completed Request. (b) Unless the Facility Agent otherwise agrees, the latest time for receipt by the Facility Agent of a duly completed Request is 11.00 a.m. one Business Day before the Rate Fixing Day for the proposed borrowing. (c) Each Request is irrevocable. 21 5.2 COMPLETION OF REQUESTS A Request will not be regarded as having been duly completed unless: (a) it identifies the Borrower; (b) the Utilisation Date is a Business Day falling within the Availability Period; and (c) the proposed, amount and Interest Period comply with this Agreement. Only one Loan may be requested in a Request. 5.3 AMOUNT OF LOAN (a) Except as provided below, the amount of the Loan must be a minimum of Pound Sterling 2,000,000 and an integral multiple of Pound Sterling 1,000,000. (b) The amount of the Loan may also be the balance of the undrawn Total Commitments or such other amount as the Facility Agent and the Lenders may agree. (c) The amount of each Lender's share of the Loan will be its Pro Rata Share on the proposed Utilisation Date. 5.4 ADVANCE OF LOAN (a) The Facility Agent must promptly notify each Lender of the details of the requested Loan and the amount of its share in that Loan. (b) No Lender is obliged to participate in a Loan if, as a result, the Loans would exceed the Total Commitments. (c) If the conditions set out in this Agreement have been met, each Lender must make its share in the Loan available to the Facility Agent for the relevant Borrower on the Utilisation Date. 6. EXTENSION OF FINAL MATURITY DATE (a) CDFCUK may, by giving notice to the Facility Agent not more than 60 days, and not less than 30 days, (i) before the first anniversary of this Agreement, request that the Final Maturity Date be extended for a further period of one year to 1st April 2007 (the FIRST REQUEST); and (ii) (if the First Request has been agreed to by any Lender) before the second anniversary of the date of this Agreement, request that the Final Maturity Date be extended to April 1st 2008 (the SECOND REQUEST). (b) On receipt of such request, the Facility Agent will promptly notify the Lenders. Each Lender which is prepared to agree to the request must notify the Facility Agent to that effect not later than 20 days before the first anniversary or second anniversary of the date of this Agreement, as applicable, (each a RESPONSE DATE). Any Lender which does not notify the Facility Agent of its decision by the applicable Response Date will be deemed to have refused the request. (c) The Final Maturity Date will be extended only in relation to the aggregate Commitments of those Lenders (if any) who agreed to the relevant request (the EXTENDED COMMITMENTS). 22 Following a Response Date, the Facility Agent will promptly notify CDFCUK of the extent to which its request has been successful. (d) If CDFCUK has made the First Request, then only those Lenders who agreed to it may receive notice of the Second Request. (e) Any request under this Clause is irrevocable. (f) CDFCUK must pay to the Lenders an extension fee of 0.1 per cent. of the Extended Commitments on the first anniversary of the date of this Agreement, with respect to the First Request, and on the second anniversary of the date of this Agreement, with respect to the Second Request. 7. REPAYMENT (a) Each Borrower must repay each Loan made to it in full on its Maturity Date. (b) Subject to the other terms of this Agreement, any amounts repaid under paragraph (a) above may be re-borrowed. 8. PREPAYMENT AND CANCELLATION 8.1 MANDATORY PREPAYMENT - ILLEGALITY (a) A Lender must notify CDFCUK promptly if it becomes aware that it is unlawful in any jurisdiction for that Lender to perform any of its obligations under a Finance Document or to fund or maintain its share in any Loan. (b) After notification under paragraph (a) above: (i) each Borrower must repay or prepay the share of that Lender in each Loan made to it on the date specified in paragraph (c) below; and (ii) the Commitment of that Lender will be immediately cancelled. (c) The date for repayment or prepayment of a Lender's share in a Loan will be: (i) the third Business Day following receipt by CDFCUK of notice from the Lender under paragraph (a) above; or (ii) if later, the latest date allowed by the relevant law which shall be notified to CDFCUK by the relevant Lender as soon as reasonably practicable. 8.2 MANDATORY PREPAYMENT - BREACH OF ADJUSTED SECURITY ASSET VALUE (a) CDFCUK must promptly notify the Facility Agent if, at any time, the aggregate principal amount of: (i) outstanding Loans; (ii) the net amount outstanding under the Overdraft Facility; and (iii) amounts outstanding under the Bonding Facility, exceeds the Adjusted Security Asset Value at that time. 23 (b) After notification under paragraph (a) above, the Borrowers must either: (i) prepay the amount of the Loans necessary to ensure that the aggregate outstanding principal amount of the items referred to in sub-paragraphs (a)(i) to (iii) above no longer exceeds the Adjusted Security Asset Value; or (ii) provide cash cover to the Facility Agent in the relevant amount. (c) The date for prepayment under paragraph (b) above will be the date which is 3 Business Days after receipt by the Facility Agent of the notice from CDFCUK under paragraph (a) above, or such later date as is agreed to by the Lenders. 8.3 VOLUNTARY PREPAYMENT (a) CDFCUK may, by giving not less than 5 Business Days' prior notice to the Facility Agent, prepay (or ensure that a Borrower prepays) any Loan at any time in whole or in part. (b) A prepayment of part of a Loan must be in a minimum amount of Pound Sterling 1,000,000 and an integral multiple of Pound Sterling 1,000,000. 8.4 AUTOMATIC CANCELLATION The Commitment of each Lender will be automatically cancelled at the close of business on the last day of the Availability Period. 8.5 VOLUNTARY CANCELLATION (a) CDFCUK may, by giving not less than 5 Business Days' prior notice to the Facility Agent, cancel the unutilised amount of the Total Commitments in whole or in part. (b) Partial cancellation of the Total Commitments must be in a minimum amount of Pound Sterling 1,000,000 and an integral multiple of Pound Sterling 1,000,000. (c) Any cancellation in part will be applied against the Commitment of each Lender pro rata. 8.6 INVOLUNTARY PREPAYMENT AND CANCELLATION (a) If an Obligor is, or will be, required to pay to a Lender a Tax Payment or an Increased Cost, CDFCUK may, while the requirement continues, give notice to the Facility Agent requesting prepayment and cancellation in respect of that Lender. (b) After notification under paragraph (a) above: (i) each Borrower must repay or prepay that Lender's share in each Loan made to it on the date specified in paragraph (c) below; and (ii) the Commitment of that Lender will be immediately cancelled. (c) The date for repayment or prepayment of a Lender's share in a Loan will be the last day of the Interest Period for that Loan or, if earlier, the date specified by CDFCUK in its notification. 8.7 RE-BORROWING OF LOANS (a) Any: 24 (i) voluntary prepayment of a Loan; or (ii) involuntary prepayment of a Loan under Clause 8.2 (Mandatory Prepayment - breach of Adjusted Security Asset Value), may be re-borrowed on the terms of this Agreement. (b) Subject to paragraph (a)(ii) above, any mandatory or involuntary prepayment of a Loan may not be re-borrowed. 8.8 MISCELLANEOUS PROVISIONS (a) Any notice of prepayment and/or cancellation under this Agreement is irrevocable and must specify the relevant date(s) and the affected Loans and Commitments. The Facility Agent must notify the Lenders promptly of receipt of any such notice. (b) All prepayments under this Agreement must be made with accrued interest on the amount prepaid. No premium or penalty is payable in respect of any prepayment except for Break Costs. (c) The Majority Lenders may agree a shorter notice period for a voluntary prepayment or a voluntary cancellation. (d) No prepayment or cancellation is allowed except in accordance with the express terms of this Agreement. (e) No amount of the Total Commitments cancelled under this Agreement may subsequently be reinstated. 9. INTEREST 9.1 CALCULATION OF INTEREST The rate of interest on each Loan for each Interest Period is the percentage rate per annum equal to the aggregate of the applicable: (a) Margin; (b) LIBOR; and (c) Mandatory Cost. 9.2 PAYMENT OF INTEREST Except where it is provided to the contrary in this Agreement, each Borrower must pay accrued interest on each Loan made to it on the last day of each Interest Period and also, if the Interest Period is longer than six months, on the dates falling at six-monthly intervals after the first day of that Interest Period. 9.3 MARGIN ADJUSTMENTS (a) In this Subclause CONSOLIDATED EBIT and CONSOLIDATED NET INTEREST PAYABLE have the meanings given to them in Clause 19 (Financial covenants). 25 (b) Subject to paragraph (c) below and beginning with the financial quarter ending on 31st December, 2002, the Margin will be calculated by reference to the table below and the information set out in the latest Compliance Certificate and relevant financial statements delivered pursuant to Clause 18.2(b) and Clause 18.1(a) respectively:
COLUMN 1 COLUMN 2 RATIO OF CONSOLIDATED EBIT TO MARGIN CONSOLIDATED NET INTEREST PAYABLE (PER CENT. PER ANNUM) --------------------------------- --------------------- Greater than or equal to 2.50 to 1 1.00 Greater than or equal to 2.25 but less than 2.50 to 1 1.10 Greater than or equal to 2.00 but less than 2.25 to 1 1.25
(c) Any change in the Margin will, subject to paragraph (d) below, apply to each Loan made (or if it is still outstanding) from the start of its next Interest Period, after the date of receipt by the Facility Agent of the relevant Compliance Certificate and financial statements. (d) For so long as: (i) CDFCUK is in default of its obligation under this Agreement to provide a Compliance Certificate or relevant financial statements, unless such default: (A) is capable of remedy; and (B) is remedied within 21 days of the earlier of the Facility Agent giving notice and CDFCUK becoming aware of the default; or (ii) an Event of Default is outstanding, the Margin will be 1.25 per cent. per annum. 9.4 INTEREST ON OVERDUE AMOUNTS (a) If an Obligor fails to pay any amount payable by it under the Finance Documents, it must immediately on demand by the Facility Agent pay interest on the overdue amount from its due date up to the date of actual payment, both before, on and after judgment. (b) Interest on an overdue amount is payable at a rate determined by the Facility Agent to be one per cent. per annum above the rate which would have been payable if the overdue amount had, during the period of non-payment, constituted a Loan in the currency of the overdue amount. For this purpose, the Facility Agent may (acting reasonably): (i) select successive Interest Periods of any duration of up to three months; and (ii) determine the appropriate Rate Fixing Day for that Interest Period. (c) Notwithstanding paragraph (b) above, if the overdue amount is a principal amount of a Loan and becomes due and payable prior to the last day of its current Interest Period, then: (i) the first Interest Period for that overdue amount will be the unexpired portion of that Interest Period; and (ii) the rate of interest on the overdue amount for that first Interest Period will be one per cent. per annum above the rate then payable on that Loan. 26 After the expiry of the first Interest Period for that overdue amount, the rate on the overdue amount will be calculated in accordance with paragraph (b) above. (d) Interest (if unpaid) on an overdue amount will be compounded with that overdue amount at the end of each of its Interest Periods but will remain immediately due and payable. 9.5 NOTIFICATION OF RATES OF INTEREST The Facility Agent must promptly notify each relevant Party of the determination of a rate of interest under this Agreement. 10. TERMS 10.1 SELECTION (a) Each Loan has one Interest Period only. (b) A Borrower must select the Interest Period for a Loan in the relevant Request. (c) Subject to the following provisions of this Clause, each Interest Period for a Loan will be one, two, three or six months or any other period agreed by the relevant Borrower and the Lenders. (d) Until completion of Syndication, each Interest Period must be a period of one month or any other period agreed by the Facility Agent. 10.2 NO OVERRUNNING THE FINAL MATURITY DATE If any Interest Period would otherwise overrun the Final Maturity Date, it will be shortened so that it ends on the Final Maturity Date. 10.3 NOTIFICATION The Facility Agent must notify the Borrower and the Lenders of the duration of each Interest Period promptly after ascertaining its duration. 11. MARKET DISRUPTION 11.1 FAILURE OF A REFERENCE BANK TO SUPPLY A RATE If LIBOR is to be calculated by reference to the Reference Banks but a Reference Bank does not supply a rate by 12.00 noon on a Rate Fixing Day, the applicable LIBOR will, subject as provided below, be calculated on the basis of the rates of the remaining Reference Banks. 11.2 MARKET DISRUPTION (a) In this Clause, each of the following events is a MARKET DISRUPTION EVENT: (i) LIBOR is to be calculated by reference to the Reference Banks but no, or, after completion of Syndication, only one, Reference Bank supplies a rate by 12.00 noon on the Rate Fixing Day; or (ii) the Facility Agent receives by close of business on the Rate Fixing Day notification from Lenders whose shares in the relevant Loan exceed 30 per cent. of that Loan that 27 the cost to them of obtaining matching deposits in the relevant interbank market is in excess of LIBOR for the relevant Interest Period. (b) The Facility Agent must promptly notify CDFCUK and the Lenders of a market disruption event. (c) After notification under paragraph (b) above, the rate of interest on each Lender's share in the affected Loan for the relevant Interest Period will be the aggregate of the applicable: (i) Margin; (ii) rate notified to the Facility Agent by that Lender as soon as practicable to be that which expresses as a percentage rate per annum the cost to that Lender of funding its share in that Loan from whatever source it may reasonably select; and (iii) Mandatory Cost. 11.3 ALTERNATIVE BASIS OF INTEREST OR FUNDING (a) If a market disruption event occurs and the Facility Agent or CDFCUK so requires, CDFCUK and the Facility Agent must enter into negotiations for a period of not more than 30 days with a view to agreeing an alternative basis for determining the rate of interest and/or funding for the affected Loan and any future Loan. (b) Any alternative basis agreed will be, with the prior consent of all the Lenders, binding on all the Parties. 12. TAXES 12.1 GENERAL In this Clause: QUALIFYING LENDER means a Lender which is: (a) a U.K. Lender; or (b) a Treaty Lender. TAX CREDIT means a credit against any Tax or any relief or remission for Tax (or its repayment). TREATY LENDER means a Lender which is, on the date a payment of interest falls due under this Agreement: (a) resident (as defined in the appropriate double taxation agreement) in a country with which the U.K. has a double taxation agreement giving residents of that country exemption from U.K. taxation on interest; and (b) does not carry on a business in the U.K. through a permanent establishment with which the payment is effectively connected. U.K. LENDER means a Lender which is within the charge to U.K. corporation tax in respect of, and beneficially entitled to, a payment of interest on a Loan made by a person that was a bank 28 for the purposes of section 349 of the Income and Corporation Taxes Act 1988 (as currently defined in section 840A of the Income and Corporation Taxes Act) at the time the Loan was made. 12.2 TAX GROSS-UP (a) Each Obligor must make all payments to be made by it under the Finance Documents without any Tax Deduction, unless a Tax Deduction is required by law. (b) If: (i) a Lender is not, or ceases to be, a Qualifying Lender; or (ii) an Obligor or a Lender is aware that an Obligor must make a Tax Deduction (or that there is a change in the rate or the basis of a Tax Deduction), it must promptly notify the Facility Agent. The Facility Agent must then promptly notify the affected Parties. (c) Except as provided below, if a Tax Deduction is required by law to be made by an Obligor or the Facility Agent, the amount of the payment due from the Obligor will be increased to an amount which (after making the Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required. (d) (i) Except as provided below, an Obligor resident for tax purposes in the U.K. is not required to make an increased payment under paragraph (c) above to a Lender that is not, or has ceased to be, a Qualifying Lender in excess of the amount that the Obligor would have had to pay had the Lender been, or not ceased to be, a Qualifying Lender. (ii) Sub-paragraph (i) above will not apply if the Lender has ceased to be a Qualifying Lender by reason of any change after the date it became a Lender under this Agreement in (or in the interpretation, administration, or application of) any law or double taxation agreement or any published practice or concession of any relevant taxing authority. (e) An Obligor resident for tax purposes in the U.K. is not required to make an increased payment to a Lender under paragraph (c) above if that Lender is a Treaty Lender and the Obligor making the payment is able to demonstrate that the Tax Deduction would not have been required if the Lender had complied with its obligations under paragraph (h) below. (f) If an Obligor is required to make a Tax Deduction, that Obligor must make the minimum Tax Deduction and must make any payment required in connection with that Tax Deduction within the time allowed by law. (g) Within 30 days of making either a Tax Deduction or a payment required in connection with a Tax Deduction, the Obligor making that Tax Deduction or payment must deliver to the Facility Agent for the relevant Finance Party evidence satisfactory to that Finance Party (acting reasonably) that the Tax Deduction has been made or (as applicable) the appropriate payment has been paid to the relevant taxing authority. (h) A Treaty Lender must co-operate with each Obligor by using its reasonable endeavours to complete any procedural formalities necessary for that Obligor to obtain authorisation to make that payment without a Tax Deduction. 29 12.3 TAX INDEMNITY (a) Except as provided below, CDFCUK must indemnify a Finance Party against any loss or liability which that Finance Party (in its absolute discretion) determines will be or has been suffered (directly or indirectly) by that Finance Party for or on account of Tax in relation to a payment received or receivable (or any payment deemed to be received or receivable) under a Finance Document. (b) Paragraph (a) above does not apply to any Tax assessed on a Finance Party under the laws of the jurisdiction in which: (i) that Finance Party is incorporated or, if different, the jurisdiction (or jurisdictions) in which that Finance Party is treated as resident for tax purposes; or (ii) that Finance Party's Facility Office is located in respect of amounts received or receivable in that jurisdiction, if that Tax is imposed on or calculated by reference to the net income received or receivable by that Finance Party. However, any payment deemed to be received or receivable, including any amount treated as income but not actually received by the Finance Party, such as a Tax Deduction, will not be treated as net income received or receivable for this purpose. (c) A Finance Party making, or intending to make, a claim under paragraph (a) above must promptly notify CDFCUK of the event which will give, or has given, rise to the claim. 12.4 TAX CREDIT If an Obligor makes a Tax Payment and the relevant Finance Party (in its absolute discretion) determines that: (a) a Tax Credit is attributable to that Tax Payment; and (b) it has used that Tax Credit, the Finance Party must pay an amount to the Obligor which that Finance Party determines (in its absolute discretion) will leave it (after that payment) in the same after-tax position as it would have been in if the Tax Payment had not been made by the Obligor. 12.5 STAMP TAXES CDFCUK must pay and indemnify each Finance Party against any stamp duty, registration or other similar Tax payable in connection with the entry into, performance or enforcement of any Finance Document, except for any such Tax payable in connection with the entry into of a Transfer Certificate. 12.6 VALUE ADDED TAXES (a) Any amount (including costs and expenses) payable under a Finance Document by an Obligor is exclusive of any value added tax which might be chargeable in connection with that amount. If any such value added tax is chargeable, the Obligor must pay to the Finance Party (in addition to and at the same time as paying that amount) an amount equal to the amount of that value added tax. 30 (b) The obligation of any Obligor under paragraph (a) above will be reduced to the extent that the Finance Party is entitled to repayment or a credit in respect of the relevant Tax. 13. INCREASED COSTS 13.1 INCREASED COSTS Except as provided below in this Clause, CDFCUK must pay to a Finance Party the amount of any Increased Cost incurred by that Finance Party or any of its Affiliates as a result of: (a) the introduction of, or any change in, or any change in the interpretation or application of, any law or regulation; or (b) compliance with any law or regulation, made after the date of this Agreement. 13.2 EXCEPTIONS The Company need not make any payment for an Increased Cost to the extent that the Increased Cost is: (a) compensated for under another Clause or would have been but for an exception to that Clause; (b) a tax on the overall net income of a Finance Party or any of its Affiliates; or (c) attributable to a Finance Party or its Affiliate wilfully, negligently or recklessly failing to comply with any law or regulation. 13.3 CLAIMS A Finance Party intending to make a claim for an Increased Cost must notify CDFCUK promptly of the circumstances giving rise to, and the amount of, the claim. 14. MITIGATION 14.1 MITIGATION (a) Each Finance Party must, in consultation with CDFCUK, take all reasonable steps to mitigate any circumstances which arise and which result or would result in: (i) any Tax Payment or Increased Cost being payable to that Finance Party; or (ii) that Finance Party being able to exercise any right of prepayment and/or cancellation under this Agreement by reason of any illegality, including transferring its rights and obligations under the Finance Documents to an Affiliate or changing its Facility Office. (b) CDFCUK must indemnify each Finance Party for all costs and expenses reasonably incurred by that Finance Party as a result of any step taken by it under this Subclause. (c) A Finance Party is not obliged to take any step under this Subclause if, in the opinion of that Finance Party (acting reasonably), to do so might be prejudicial to it. 31 14.2 CONDUCT OF BUSINESS BY A FINANCE PARTY No term of this Agreement will: (a) interfere with the right of any Finance Party to arrange its affairs (Tax or otherwise) in whatever manner it thinks fit; (b) oblige any Finance Party to investigate or claim any credit, relief, remission or repayment available to it in respect of Tax or the extent, order and manner of any claim; or (c) oblige any Finance Party to disclose any information relating to its affairs (Tax or otherwise) or any computation in respect of Tax. 15. PAYMENTS 15.1 PLACE Unless a Finance Document specifies that payments under it are to be made in another manner, all payments by a Party (other than the Facility Agent) under the Finance Documents must be made to the Facility Agent to its account at such office or bank in the principal financial centre of the country of the relevant currency as it may notify to that Party for this purpose by not less than five Business Days' prior notice. 15.2 FUNDS Payments under the Finance Documents to the Facility Agent must be made for value on the due date at such times and in such funds as the Facility Agent may specify to the Party concerned as being customary at the time for the settlement of transactions in the relevant currency in the place for payment. 15.3 DISTRIBUTION (a) Each payment received by the Facility Agent under the Finance Documents for another Party must, except as provided below, be made available by the Facility Agent to that Party by payment (as soon as practicable after receipt) to its account with such office or bank in the principal financial centre of the country of the relevant currency as it may notify to the Facility Agent for this purpose by not less than five Business Days' prior notice. (b) The Facility Agent may apply any amount received by it for an Obligor in or towards payment (as soon as practicable after receipt) of any amount due from that Obligor under the Finance Documents or in or towards the purchase of any amount of any currency to be so applied. (c) Where a sum is paid to the Facility Agent under this Agreement for another Party, the Facility Agent is not obliged to pay that sum to that Party until it has established that it has actually received it. However, the Facility Agent may assume that the sum has been paid to it, and, in reliance on that assumption, make available to that Party a corresponding amount. If it transpires that the sum has not been received by the Facility Agent, that Party must immediately on demand by the Facility Agent refund any corresponding amount made available to it together with interest on that amount from the date of payment to the date of receipt by the Facility Agent at a rate calculated by the Facility Agent to reflect its cost of funds. 32 15.4 CURRENCY (a) Unless a Finance Document specifies that payments under it are to be made in a different manner, the currency of each amount payable under the Finance Documents is determined under this Clause. (b) Interest is payable in the currency in which the relevant amount in respect of which it is payable is denominated. (c) A repayment or prepayment of any principal amount is payable in the currency in which that principal amount is denominated on its due date. (d) Amounts payable in respect of costs and expenses are payable in the currency in which they are incurred. (e) Each other amount payable under the Finance Documents is payable in Sterling. 15.5 NO SET-OFF OR COUNTERCLAIM All payments made by an Obligor under the Finance Documents must be made without set-off or counterclaim. 15.6 BUSINESS DAYS (a) If a payment under the Finance Documents is due on a day which is not a Business Day, the due date for that payment will instead be the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not) or whatever day the Facility Agent determines is market practice. (b) During any extension of the due date for payment of any principal under this Agreement interest is payable on that principal at the rate payable on the original due date. 15.7 PARTIAL PAYMENTS (a) If the Facility Agent receives a payment insufficient to discharge all the amounts then due and payable by the Obligors under the Finance Documents, the Facility Agent must apply that payment towards the obligations of the Obligors under the Finance Documents in the following order: (i) first, in or towards payment pro rata of any due but unpaid fees, costs and expenses of the Facility Agent under the Finance Documents; (ii) secondly, in or towards payment pro rata of any accrued interest or fee due but unpaid under this Agreement; (iii) thirdly, in or towards payment pro rata of any principal amount due but unpaid under this Agreement; and (iv) fourthly, in or towards payment pro rata of any other sum due but unpaid under the Finance Documents. (b) The Facility Agent must, if so directed by all the Lenders, vary the order set out in sub-paragraphs (a)(ii) to (iv) above. 33 (c) This Subclause will override any appropriation made by an Obligor. 15.8 TIMING OF PAYMENTS If a Finance Document does not provide for when a particular payment is due, that payment will be due within three Business Days of demand by the relevant Finance Party. 16. GUARANTEE AND INDEMNITY 16.1 GUARANTEE AND INDEMNITY Each Guarantor jointly and severally and irrevocably and unconditionally: (a) guarantees to each Finance Party punctual performance by each Borrower of all its payment obligations under the Finance Documents; (b) undertakes with each Finance Party that, whenever a Borrower does not pay any amount when due under any Finance Document, it must immediately on demand by the Facility Agent pay that amount as if it were the principal obligor; and (c) indemnifies each Finance Party immediately on demand against any loss or liability suffered by that Finance Party if any obligation guaranteed by it is or becomes unenforceable, invalid or illegal; the amount of the loss or liability under this indemnity will be equal to the amount the Finance Party would otherwise have been entitled to recover. 16.2 CONTINUING GUARANTEE This guarantee is a continuing guarantee and will extend to the ultimate balance of all sums payable by any Obligor under the Finance Documents, regardless of any intermediate payment or discharge in whole or in part. 16.3 REINSTATEMENT (a) If any discharge (whether in respect of the obligations of any Obligor or any security for those obligations or otherwise) or arrangement is made in whole or in part on the faith of any payment, security or other disposition which is avoided or must be restored on insolvency, liquidation or otherwise without limitation, the liability of each Guarantor under this Clause will continue as if the discharge or arrangement had not occurred. (b) Each Finance Party may concede or compromise any claim that any payment, security or other disposition is liable to avoidance or restoration. 16.4 WAIVER OF DEFENCES The obligations of each Guarantor under this Clause will not be affected by any act, omission or thing which, but for this provision, would reduce, release or prejudice any of its obligations under this Clause (whether or not known to it or any Finance Party). This includes: (a) any time or waiver granted to, or composition with, any person; (b) any release of any person under the terms of any composition or arrangement; 34 (c) the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, any person; (d) any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security; (e) any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of any person; (f) any amendment (however fundamental) of a Finance Document or any other document or security; or (g) any unenforceability, illegality, invalidity or non-provability of any obligation of any person under any Finance Document or any other document or security. 16.5 IMMEDIATE RECOURSE Each Guarantor waives any right it may have of first requiring any Finance Party (or any trustee or agent on its behalf) to proceed against or enforce any other right or security or claim payment from any person before claiming from that Guarantor under this Clause. 16.6 APPROPRIATIONS Until all amounts which may be or become payable by the Obligors under the Finance Documents have been irrevocably paid in full, each Finance Party (or any trustee or agent on its behalf) may: (a) without affecting the liability of any Guarantor under this Clause: (i) refrain from applying or enforcing any other moneys, security or rights held or received by that Finance Party (or any trustee or agent on its behalf) in respect of those amounts; or (ii) apply and enforce them in such manner and order as it sees fit (whether against those amounts or otherwise); and (b) hold in an interest-bearing suspense account any moneys received from any Guarantor or on account of that Guarantor's liability under this Clause. 16.7 NON-COMPETITION Unless: (a) all amounts which may be or become payable by the Obligors under the Finance Documents have been irrevocably paid in full; or (b) the Facility Agent otherwise directs, no Guarantor will, after a claim has been made or by virtue of any payment or performance by it under this Clause: (i) be subrogated to any rights, security or moneys held, received or receivable by any Finance Party (or any trustee or agent on its behalf); 35 (ii) be entitled to any right of contribution or indemnity in respect of any payment made or moneys received on account of that Guarantor's liability under this Clause; (iii) claim, rank, prove or vote as a creditor of any Obligor or its estate in competition with any Finance Party (or any trustee or agent on its behalf); or (iv) receive, claim or have the benefit of any payment, distribution or security from or on account of any Obligor, or exercise any right of set-off as against any Obligor. Each Guarantor must hold in trust for and immediately pay or transfer to the Facility Agent for the Finance Parties any payment or distribution or benefit of security received by it contrary to paragraph (a) above or in accordance with any directions given by the Facility Agent under paragraph (b) above. 16.8 ADDITIONAL SECURITY This guarantee is in addition to and is not in any way prejudiced by any other security now or subsequently held by any Finance Party. 17. REPRESENTATIONS 17.1 REPRESENTATIONS The representations set out in this Clause are made by each Obligor or (if it so states) CDFCUK or the Company (as appropriate) to each Finance Party. 17.2 STATUS (a) It is a limited liability company, duly incorporated and validly existing under the laws of its jurisdiction of incorporation. (b) It and each of its Subsidiaries has the power to own its assets and carry on its business as it is being conducted. 17.3 POWERS AND AUTHORITY It has the power to enter into and perform, and has taken all necessary action to authorise the entry into and performance of, the Finance Documents to which it is or will be a party and the transactions contemplated by those Finance Documents. 17.4 LEGAL VALIDITY Subject to the Reservations and to any other general principles of law limiting its obligations and referred to in any legal opinion required under this Agreement, each Finance Document to which it is a party is its legally binding, valid and enforceable obligation. 17.5 NON-CONFLICT The entry into and performance by it of, and the transactions contemplated by, the Finance Documents do not conflict with: (a) any law or regulation applicable to it; (b) its or any of its Subsidiaries' constitutional documents; or 36 (c) any document which is binding upon it or any of its Subsidiaries or any of its or its Subsidiaries' assets. 17.6 NO DEFAULT (a) No Default is outstanding or will result from the execution of, or the performance of any transaction contemplated by, any Finance Document; and (b) no other event is outstanding which constitutes a default under any document which is binding on it or any of its Subsidiaries or any of its or its Subsidiaries' assets to an extent or in a manner which is reasonably likely to have a Material Adverse Effect. 17.7 AUTHORISATIONS Except for registration of the Security Agreement under the Companies Act 1985, all authorisations required by it in connection with the entry into, performance, validity and enforceability of, and the transactions contemplated by, the Finance Documents have been obtained or effected (as appropriate) and are in full force and effect. 17.8 FINANCIAL STATEMENTS Its audited financial statements most recently delivered to the Facility Agent (which, in the case of the Company at the date of this Agreement, are the Original Financial Statements): (a) have been prepared in accordance with accounting principles and practices generally accepted in its jurisdiction of incorporation, consistently applied; and (b) fairly represent its financial condition (consolidated, if applicable) as at the date to which they were drawn up, except, in each case, as disclosed to the contrary in those financial statements. 17.9 NO MATERIAL ADVERSE CHANGE In the case of CDFCUK only, there has been no material adverse change in the consolidated financial condition of CDFCUK since the date that its consolidated audited financial statements for the financial year ending on 31st March, 2002 were delivered to the Facility Agent. 17.10 LITIGATION No litigation, arbitration or administrative proceedings are current or, to its knowledge, pending or threatened, which, if adversely determined, are reasonably likely to have a Material Adverse Effect. 17.11 INFORMATION MEMORANDUM (a) In this Subclause, INFORMATION MEMORANDUM means the information memorandum prepared on behalf of, and approved by, the Company in connection with this Agreement. (b) In the case of the Company only: (i) the factual information provided by the Company or any member of the Group contained in the Information Memorandum was true and accurate in all material 37 respects as at its date or (if appropriate) as at the date (if any) at which it is stated to be given; (ii) the financial projections provided by the Company or any member of the Group contained in the Information Memorandum have been prepared as at its date, on the basis of recent historical information and assumptions believed by the Company to be reasonable; (iii) to the best of its knowledge and belief, after due enquiry, the Information Memorandum did not omit as at its date any information relating to the Group which, if disclosed, would make the Information Memorandum as at its date untrue or misleading in any material respect and which might reasonably be expected materially and adversely to have affected the decision of a Lender when considering whether to provide finance to the Borrowers on the basis of the Finance Documents; and (iv) to the best of its knowledge and belief, after due enquiry, as at the date on which this representation is given, nothing has occurred in relation to the Group since the date of the Information Memorandum which, if disclosed, would make the Information Memorandum untrue or misleading in any material respect and which might reasonably be expected materially and adversely to have affected the decision of a Lender when considering whether to provide finance to the Borrowers on the basis of the Finance Documents. 17.12 ENVIRONMENTAL COMPLIANCE (a) It and each of its Subsidiaries: (i) has obtained all requisite Environmental Approvals required for the carrying on of its business as currently conducted; (ii) has at all times complied with the terms and conditions of such Environmental Approvals; and (iii) has at all times complied with all other applicable Environmental Law, the failure to obtain or comply with which, in each case, is reasonably likely to have a Material Adverse Effect; (b) there is no Environmental Claim pending or, to its knowledge, threatened against it or any of its Subsidiaries which, if adversely determined, is reasonably likely to have a Material Adverse Effect; and (c) so far as it is aware, no Dangerous Substance has been used, disposed of, generated, stored, transported, dumped, released, deposited, buried or emitted at, on, from or under any premises (whether or not owned, leased, occupied or controlled by it or any of its Subsidiaries and including any off-site waste management or disposal location utilised by it or any of its Subsidiaries) in such manner or circumstances as are reasonably likely to have a Material Adverse Effect. 38 17.13 TIMES FOR MAKING REPRESENTATIONS (a) The representations set out in this Clause (other than the representations in Clause 17.11 (Information Memorandum) are made, unless otherwise stated, by each Original Obligor on the date of this Agreement. (b) The representations in Clause 17.11 (Information Memorandum) are made by the Company only on the date of the Syndication Agreement. (c) Unless a representation is expressed to be given at a specific date, each representation is deemed to be repeated by: (i) each Additional Obligor and the Company on the date that Additional Obligor becomes an Obligor; and (ii) each Obligor on the date of each Request and the first day of each Interest Period. (d) When a representation is repeated, it is applied to the circumstances existing at the time of repetition. 18. INFORMATION COVENANTS 18.1 FINANCIAL STATEMENTS (a) CDFCUK must supply to the Facility Agent in sufficient copies for all the Lenders: (i) its audited consolidated financial statements for each of its financial years ending after the date of this Agreement; (ii) the audited financial statements of each Obligor for each of its financial years ending after the date of this Agreement; (iii) the interim management financial statements of the Group for each quarter of each of its financial years ending after the date of this Agreement; and (iv) a budget for the Group for each of its financial years beginning after the date of this Agreement. (b) All financial statements must be supplied as soon as they are available and: (i) in the case of CDFCUK's audited consolidated financial statements, within 150 days (or such longer period as the Majority Lenders may agree); (ii) in the case of each Obligor's audited financial statements, within 150 days (or such longer period as the Majority Lenders may agree); and (iii) in the case of the Group's interim management financial statements, within 45 days (or such longer period as the Majority Lenders may agree), of the end of the relevant financial period; and (iv) in the case of the annual Group budget, not later than 30 days (or such longer period as the Majority Lenders may agree) after the start of the relevant financial year. 39 18.2 COMPLIANCE CERTIFICATE (a) A COMPLIANCE CERTIFICATE is a certificate, substantially in the form of Schedule 7 (Form of Compliance Certificate) setting out, among other things, calculations of the financial covenants. (b) CDFCUK must supply to the Facility Agent a Compliance Certificate: (i) within 45 days after the end of each financial quarter; (ii) within 21 days after the end of each other month; and (iii) with each set of financial statements sent to the Facility Agent under Clause 18.1(a)(i) (Financial Statements). (c) A Compliance Certificate must be signed by two authorised signatories of CDFCUK. 18.3 FORM OF FINANCIAL STATEMENTS (a) CDFCUK must ensure that each set of financial statements supplied under this Agreement gives (if audited) a true and fair view of, or (if unaudited) fairly represents, the financial condition (consolidated or otherwise) of the relevant person as at the date to which those financial statements were drawn up. (b) CDFCUK must notify the Facility Agent of any change to the basis on which its audited consolidated financial statements are prepared if that change is either material or might affect the calculation of the financial covenants set out in Clause 19 (Financial covenants) and of any change to its financial year end. (c) If requested by the Facility Agent, CDFCUK must supply to the Facility Agent: (i) a full description of any change notified under paragraph (b) above; and (ii) sufficient information to enable the Finance Parties to make a proper comparison between the financial position shown by the set of financial statements prepared on the changed basis and its most recent audited consolidated financial statements delivered to the Facility Agent under this Agreement. (d) If requested by the Facility Agent, CDFCUK must enter into discussions for a period of more than 30 days with a view to agreeing any amendments required to be made to the financial covenants set out in Clause 19 (Financial covenants) to place CDFCUK and the Lenders in the same position as they would have been in if the change had not happened. Any agreement between CDFCUK and the Facility Agent will be, with the prior consent of the Majority Lenders, binding on all the Parties. (e) If no agreement is reached under paragraph (d) above on the required amendments to this Agreement, CDFCUK must ensure that its auditors confirm the appropriateness of those amendments; the confirmation of the auditors will be, in the absence of manifest error, binding on all the Parties. 18.4 INFORMATION - MISCELLANEOUS The Company must supply to the Facility Agent: 40 (a) copies of all documents despatched by the Company to its creditors generally at the same time as they are despatched; (b) promptly upon becoming aware of them, details of any litigation, arbitration or administrative proceedings which are current, threatened or pending and which might, if adversely determined, have a Material Adverse Effect; (c) promptly on request, a list of the then current Material Subsidiaries; and (d) promptly on request, such further information regarding the financial condition and operations of the Group as any Finance Party through the Facility Agent may reasonably request. 18.5 NOTIFICATION OF DEFAULT (a) Unless the Facility Agent has already been so notified by another Obligor, each Obligor must notify the Facility Agent of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence. (b) Promptly on request by the Facility Agent at any time when the Facility Agent reasonably believes a Default is outstanding, CDFCUK must supply to the Facility Agent a certificate, signed by two of its authorised signatories on its behalf, certifying that no Default is outstanding or, if a Default is outstanding, specifying the Default and the steps, if any, being taken to remedy it. The request from the Facility Agent must include reasonable details of why the Facility Agent believes a Default is outstanding. 19. FINANCIAL COVENANTS 19.1 DEFINITIONS In this Clause: CONSOLIDATED CASH AND CASH EQUIVALENTS means, at any time: (a) cash in hand or on deposit with any acceptable bank, which, in either case, is remittable to the U.K.; (b) certificates of deposit, maturing within one year after the relevant date of calculation, issued by an acceptable bank; (c) any investment in marketable obligations issued or guaranteed by the government of the U.S.A. or the U.K. or by an instrumentality or agency of the government of the U.S.A. or the U.K. having an equivalent credit rating; or (d) any other instrument, security or investment approved by the Majority Lenders, in each case, to which any member of the Group is beneficially entitled at that time and which is capable of being applied against Consolidated Total Borrowings. An ACCEPTABLE BANK for this purpose is a commercial bank or trust company which has a rating of A or higher by Standard & Poor's or FitchIBCA or A2 or higher by Moody's or a comparable rating from a nationally recognised credit rating agency for its long-term debt obligations. CONSOLIDATED EBIT means the consolidated net pre-taxation profits of the Group for a Measurement Period, adjusted by: 41 (a) adding back Consolidated Interest Payable; (b) taking no account of any exceptional or extraordinary item; and (c) deducting any amount attributable to minority interests. CONSOLIDATED INTEREST PAYABLE means all interest and periodic financing charges including arrangement fees, acceptance commission, commitment fee and the interest element of rental payments or finance or capital leases (whether, in each case, paid, payable or capitalised) incurred by the Group in effecting, servicing or maintaining Consolidated Total Borrowings (which, for the purposes of this definition, shall include any Subordinated Debt) during a Measurement Period. CONSOLIDATED NET INTEREST PAYABLE means Consolidated Interest Payable less all financing charges received or receivable by the Group during the relevant Measurement Period. CONSOLIDATED TANGIBLE NET WORTH means at any time the aggregate of: (a) the amount paid up or credited as paid up on the issued share capital of CDFCUK; and (b) the amount standing to the credit of the consolidated capital and revenue reserves (including, without limitation, retained earnings and, subject to sub-paragraph (v) below, revaluation reserves) of the Group, based on the latest published audited consolidated balance sheet of CDFCUK (the LATEST BALANCE SHEET) but adjusted by: (i) adding any amount standing to the credit of the profit and loss account of the Group for the period ending on: (A) the date of the latest balance sheet; and (B) to the extent not included in sub-paragraph (A) above, the date to which the financial statements most recently provided to the Facility Agent under Clause 18.1 (Financial Statements) were made up; (ii) adding the outstanding principal amount of any Subordinated Debt at that time; (iii) deducting: (A) any dividend or other distribution declared, recommended or made by any member of the Group (other than to an Obligor); and (B) the amount of any: (I) loans or other forms of credit made by CDFCUK to; or (II) guarantees by CDFCUK of the obligations of, its Holding Company or any Affiliate of its Holding Company (other than the Obligors), which, in aggregate, exceed Pound Sterling 1,000,000; 42 (iv) deducting any amount standing to the debit of the profit and loss account of the Group for the period ending on: (A) the date of the latest balance sheet; and (B) to the extent not included in sub-paragraph (A) above, the date to which the financial statements most recently provided to the Facility Agent under Clause 18.1 (Financial Statements) were made up. (v) deducting any amount attributable to goodwill or any other intangible asset; (vi) deducting any amount attributable to an upward revaluation of assets after 31st March, 2000 or, in the case of assets of a company which becomes a member of the Group after that date, the date on which that company becomes a member of the Group other than, in each case, an upward revaluation which is supported by an independent professional valuation; (vii) reflecting any variation in the amount of the issued share capital of CDFCUK and the consolidated capital and revenue reserves of the Group after the date of the latest balance sheet; (viii) reflecting any variation in the interest of CDFCUK in any other member of the Group since the date of the latest balance sheet; (ix) excluding any amount attributable to deferred taxation; and (x) excluding any amount attributable to minority interests. CONSOLIDATED TOTAL BORROWINGS means, in respect of the Group, at any time the aggregate of the following: (a) the outstanding principal amount of any moneys borrowed; (b) the outstanding principal amount of any acceptance under any acceptance credit; (c) the outstanding principal amount of any bond (other than performance bonds), note, debenture, loan stock or other similar instrument; (d) the capitalised element of indebtedness under a finance or capital lease; (e) the outstanding principal amount of all moneys owing in connection with the sale or discounting of receivables (otherwise than on a non-recourse basis); (f) the outstanding principal amount of any indebtedness arising from any deferred payment agreements (other than Deferred Purchase Agreements entered into in the ordinary course of trading which are not arranged primarily as a method of raising finance or financing the acquisition of land) arranged primarily as a method of raising finance or financing the acquisition of an asset; (g) any fixed or minimum premium payable on the repayment or redemption of any instrument referred to in paragraph (c) above; 43 (h) the outstanding principal amount of any indebtedness arising in connection with any other transaction (including any forward sale or purchase agreement) which has the commercial effect of a borrowing; and (i) the outstanding principal amount of any indebtedness of any person of a type referred to in paragraphs (a) - (h) above which is the subject of a guarantee, indemnity or similar assurance against financial loss given by a member of the Group. LESS any indebtedness which would otherwise be included above and which is Subordinated Debt. Any amount outstanding in a currency other than Sterling is to be taken into account at its Sterling equivalent calculated on the basis of: (i) the Facility Agent's spot rate of exchange for the purchase of the relevant currency in the London foreign exchange market with Sterling at or about 11.00 a.m. on the day the relevant amount falls to be calculated; or (ii) if the amount is to be calculated on the last day of a financial period of CDFCUK, the rate of exchange used by CDFCUK in its financial statements for that period. CONSOLIDATED TOTAL NET BORROWINGS means at any time Consolidated Total Borrowings less Consolidated Cash and Cash Equivalents. MEASUREMENT PERIOD means a period of 12 months ending on the last day of a financial quarter of CDFCUK. 19.2 INTERPRETATION (a) Except as provided to the contrary in this Agreement, an accounting term used in this Clause is to be construed in accordance with the Applicable Principles. (b) No item must be credited or deducted more than once in any calculation under this Clause. 19.3 CONSOLIDATED TANGIBLE NET WORTH CDFCUK must ensure that Consolidated Tangible Net Worth is not at any time less than Pound Sterling 110,000,000. 19.4 GEARING CDFCUK must ensure that Consolidated Total Net Borrowings do not at any time exceed 100 per cent. of Consolidated Tangible Net Worth at that time. 19.5 INTEREST COVER/CASHFLOW CDFCUK must ensure that the ratio of Consolidated EBIT for a Measurement Period to Consolidated Net Interest Payable for that Measurement Period is not, at the end of that Measurement Period, less than 2.00 to 1. 19.6 RESTRICTION ON DIVIDEND CDFCUK must ensure that the aggregate amount of dividends or other distributions paid by it to its immediate Holding Company in any financial year does not exceed the aggregate of: 44 (a) CDFCUK's net post-taxation profits for that financial year; and (b) to the extent those profits have not previously been distributed and form part of CDFCUK's retained earnings reserve, CDFCUK's net post-taxation profits from previous financial years. 20. GENERAL COVENANTS 20.1 GENERAL Each Obligor agrees to be bound by the covenants set out in this Clause relating to it and, where the covenant is expressed to apply to each member of the Group, each Obligor must ensure that each of its Subsidiaries performs that covenant. 20.2 AUTHORISATIONS Each Obligor must promptly obtain, maintain and comply with the terms of any authorisation required under any law or regulation to enable it to perform its obligations under, or for the validity or enforceability of, any Finance Document. 20.3 COMPLIANCE WITH LAWS Each member of the Group must comply in all respects with all laws to which it is subject where failure to do so is reasonably likely to have a Material Adverse Effect. 20.4 PARI PASSU RANKING Each Obligor must ensure that its payment obligations under the Finance Documents rank at least pari passu with all its other present and future unsecured payment obligations, except for obligations mandatorily preferred by law applying to companies generally. 20.5 NEGATIVE PLEDGE (a) Except as provided below, no member of the Group may create or allow to exist any Security Interest on any of its assets. (b) Paragraph (a) does not apply to: (i) any Security Interest created by a Security Document; (ii) any Security Interest listed in Schedule 6 (Existing Security) except to the extent the principal amount secured by that Security Interest exceeds the amount stated in that Schedule; (iii) any Security Interest arising out of retention of title provisions in a supplier's standard conditions of supply of goods; (iv) any Security Interest comprising a netting or set-off arrangement entered into by a member of the Group in the ordinary course of its banking arrangements for the purpose of netting debit and credit balances; (v) any lien arising by operation of law and in the ordinary course of trading; 45 (vi) any Security Interest on an asset, or an asset of any person, acquired by a member of the Group after the date of this Agreement but only for the period of six months from the date of acquisition and to the extent that the principal amount secured by that Security Interest has not been incurred or increased in contemplation of, or since, the acquisition; and (vii) any Security Interest securing consideration payable by a member of the Group under a Deferred Purchase Agreement (where such Security Interest relates only to a fixed charge over the land the subject of that Deferred Purchase Agreement) the amount of which (when aggregated with the amount of any other consideration which has the benefit of a Security Interest allowed under this sub-paragraph (vii)) does not exceed 20 per cent. of Consolidated Tangible Net Worth or its equivalent in any other currency at any time. (c) No member of the Group may: (i) sell, transfer or otherwise dispose of any of its assets on terms where it is or may be leased to or re-acquired or acquired by a member of the Group or any of its related entities; or (ii) sell, transfer or otherwise dispose of any of its receivables on recourse terms, in circumstances where the transaction is entered into primarily as a method of raising Financial Indebtedness or of financing the acquisition of an asset. 20.6 DISPOSALS (a) Except as provided below, no member of the Group may, either in a single transaction or in a series of transactions and whether related or not, dispose of all or any part of its assets. (b) Paragraph (a) does not apply to any disposal: (i) made in the ordinary course of trading of the disposing entity; (ii) of assets in exchange for other assets comparable or superior as to type, value and quality; (iii) where the higher of the market value or consideration receivable (when aggregated with the higher of the market value or consideration for any other disposal not allowed under the preceding sub-paragraphs) in any financial year of CDFCUK does not exceed five per cent. of Consolidated Tangible Net Worth as at the end of the preceding financial year or its equivalent in any other currency; or (iv) made to an Obligor. 20.7 FINANCIAL INDEBTEDNESS (a) Except as provided below, no member of the Group may incur or allow to exist any Financial Indebtedness. (b) Paragraph (a) does not apply to: (i) Financial Indebtedness incurred under Deferred Purchase Agreements; 46 (ii) Financial Indebtedness incurred under the Finance Documents; (iii) any Subordinated Debt; (iv) Financial Indebtedness owed to Affiliates, other than Subordinated Debt, provided that any amount of such Financial Indebtedness which exceeds Pound Sterling 1,000,000 in aggregate matures after the Final Maturity Date; (v) any Financial Indebtedness of any person acquired by a member of the Group which is incurred under arrangements in existence at the date of acquisition, but only for a period of six months from the date of acquisition; (vi) any derivative transaction protecting against or benefiting from fluctuations in any rate or price entered into in the ordinary course of business of the Group; (vii) an overdraft facility not exceeding Pound Sterling 5,000,000 on a net basis provided by National Westminster Bank Plc; (viii) Financial Indebtedness relating to the issue of performance bonds, guarantees and similar instruments under a bonding line made available by National Westminster Bank Plc, up to an aggregate amount not exceeding Pound Sterling 10,000,000; or (ix) Financial Indebtedness which in aggregate does not exceed Pound Sterling 1,000,000 or its equivalent at any time. 20.8 LENDING AND GUARANTEES No member of the Group may make any loans or any form of credit or give any guarantee or indemnity to or for the benefit of any person in respect of any obligation for Financial Indebtedness of any person other than: (a) to another member of the Group; (b) in respect of Financial Indebtedness of a member of the Group; or (c) provided that no Default is then outstanding or would result and that no breach of Clause 19.3 (Consolidated Tangible Net Worth) is then outstanding or would result, loans from CDFCUK to its Holding Company or any Affiliate of its Holding Company, which in each case is permitted under Clause 20.7(b) (Financial Indebtedness) and in respect of which all relevant legislation relating to financial assistance has been complied with. 20.9 REPAYMENT OF FINANCIAL INDEBTEDNESS No member of the Group may repay any Financial Indebtedness (or pay any interest thereon), including for the avoidance of doubt any Subordinated Debt, owed to any Affiliate unless: (a) no Default is then outstanding or would result; and (b) for the avoidance of doubt no breach of Clause 19.3 (Consolidated Tangible Net Worth) is then outstanding or would result, from the repayment of that Financial Indebtedness (or interest thereon). 47 20.10 CHANGE OF BUSINESS CDFCUK must ensure that no substantial change is made to the general nature of the business of CDFCUK or the Group from that carried on at the date of this Agreement. 20.11 MERGERS No Obligor may enter into any amalgamation, demerger, merger or reconstruction otherwise than under an intra-Group re-organisation on a solvent basis or other transaction agreed by the Majority Lenders. 20.12 ACQUISITIONS (a) Except as provided below, no member of the Group may make any acquisition or investment. (b) Paragraph (a) does not apply to: (i) acquisitions or investments made in the ordinary course of trade or which are ancillary to the trading operations of the Group; or (ii) acquisitions where the consideration (when aggregated with the consideration of any other acquisition not allowed under the preceding sub-paragraphs) in any financial year of CDFCUK does not exceed 20 per cent. of Consolidated Tangible Net Worth as at the end of the preceding financial year or its equivalent in any other currency. 20.13 ENVIRONMENTAL MATTERS (a) Each member of the Group must ensure that it is, and has been, in compliance with all Environmental Law and Environmental Approvals applicable to it, where failure to do so is reasonably likely to have a Material Adverse Effect. (b) Each member of the Group must promptly upon becoming aware notify the Facility Agent of: (i) any Environmental Claim current, or to its knowledge, pending or threatened; or (ii) any circumstances reasonably likely to result in an Environmental Claim, which, if substantiated, is reasonably likely either to have a Material Adverse Effect or result in any liability for a Finance Party. 20.14 INSURANCE Each member of the Group must insure its business and assets with insurance companies to such an extent and against such risks as companies engaged in a similar business normally insure. 21. DEFAULT 21.1 EVENTS OF DEFAULT (a) Each of the events set out in this Clause is an Event of Default. (b) In this Clause: PERMITTED TRANSACTION means: 48 (i) an intra-Group re-organisation of a member of the Group which is not an Obligor on a solvent basis; or (ii) any other transaction agreed to by the Majority Lenders. 21.2 NON-PAYMENT An Obligor does not pay on the due date any amount payable by it under the Finance Documents in the manner required under the Finance Documents, unless the non-payment: (a) is caused by technical or administrative error; and (b) is remedied within three Business Days of the due date. 21.3 BREACH OF OTHER OBLIGATIONS (a) An Obligor does not comply with any term of Clause 19 (Financial covenants), Clause 20.5 (Negative Pledge), Clause 20.6 (Disposals), Clause 20.7 (Financial Indebtedness) or Clause 20.8 (Lending and guarantees); or (b) an Obligor does not comply with any other term of the Finance Documents not already referred to in this Clause or in Clause 21.2 (Non-payment), unless the non-compliance: (i) is capable of remedy; and (ii) is remedied within 21 days of the earlier of the Facility Agent giving notice and the Obligor becoming aware of the non-compliance. 21.4 MISREPRESENTATION A representation made or repeated by an Obligor in any Finance Document or in any document delivered by or on behalf of any Obligor under any Finance Document is incorrect in any material respect when made or deemed to be repeated unless the misrepresentation: (a) is capable of remedy; and (b) is remedied within 21 days of the earlier of the Facility Agent giving notice and the Obligor becoming aware of the misrepresentation. 21.5 CROSS-DEFAULT Any of the following occurs in respect of a member of the Group: (a) any of its Financial Indebtedness is not paid when due (after the expiry of any originally applicable grace period); (b) any of its Financial Indebtedness: (i) becomes prematurely due and payable; (ii) is placed on demand; or (iii) is capable of being declared by a creditor to be prematurely due and payable or being placed on demand, 49 in each case, as a result of an event of default (howsoever described); or (c) any commitment for its Financial Indebtedness is cancelled or suspended as a result of an event of default (howsoever described), unless the aggregate amount of Financial Indebtedness falling within paragraphs (a)-(c) above is less than Pound Sterling 1,000,000 or its equivalent. 21.6 INSOLVENCY Any of the following occurs in respect of a member of the Group: (a) it is, or is deemed for the purposes of any law to be, unable to pay its debts as they fall due or insolvent; (b) it admits its inability to pay its debts as they fall due; (c) it suspends making payments on any of its debts or announces an intention to do so; (d) by reason of actual or anticipated financial difficulties, it begins negotiations with any creditor for the rescheduling of any of its indebtedness; or (e) a moratorium is declared in respect of any of its indebtedness. If a moratorium occurs in respect of any member of the Group the ending of the moratorium will not remedy any Event of Default caused by the moratorium. 21.7 INSOLVENCY PROCEEDINGS (a) Except as provided below, any of the following occurs in respect of a member of the Group: (i) any step is taken with a view to a moratorium or a composition, assignment or similar arrangement with any of its creditors generally or any class of its creditors; (ii) a meeting of its shareholders, directors or other officers is convened for the purpose of considering any resolution for, to petition for or to file documents with a court or any registrar for, its winding-up, administration or dissolution or any such resolution is passed; (iii) any person presents a petition or files documents with a court or any registrar, for its winding-up, administration or dissolution; (iv) an order for its winding-up, administration or dissolution is made; (v) any liquidator, trustee in bankruptcy, judicial custodian, compulsory manager, receiver, administrative receiver, administrator or similar officer is appointed in respect of it or any of its assets; (vi) its shareholders, directors or other officers request the appointment of, or give notice of their intention to appoint, a liquidator, trustee in bankruptcy, judicial custodian, compulsory manager, receiver, administrative receiver, administrator or similar officer; or (vii) any other analogous step or procedure is taken in any jurisdiction. 50 (b) Paragraph (a) does not apply to: (i) any step or procedure which is part of a Permitted Transaction; or (ii) a petition for winding-up presented by a creditor which is being contested in good faith and with due diligence and is discharged or struck out within 28 days. 21.8 CREDITORS' PROCESS Any attachment, sequestration, distress, execution or analogous event affects any asset(s) of a member of the Group, having an aggregate value of Pound Sterling 1,000,000, and is not discharged within 28 days. 21.9 CESSATION OF BUSINESS A member of the Group ceases, or threatens to cease, to carry on business except: (a) as part of a Permitted Transaction; or (b) as a result of any disposal allowed under this Agreement. 21.10 EFFECTIVENESS OF FINANCE DOCUMENTS (a) It is or becomes unlawful for any Obligor to perform any of its obligations under the Finance Documents. (b) Any Finance Document is not effective for any reason arising after the date of this Agreement which is not remediable by an Obligor complying with its obligations under Clause 20.2 (Authorisations), 20.3 (Compliance with laws) or 20.4 (Pari passu ranking) or clause 13 (Further assurances) of the Security Agreement or is alleged by an Obligor to be ineffective for any reason. (c) An Obligor repudiates a Finance Document or evidences an intention to repudiate a Finance Document. 21.11 OWNERSHIP OF THE OBLIGORS (a) An Obligor (other than CDFCUK) is not or ceases to be a wholly-owned Subsidiary of CDFCUK. (b) CDFCUK ceases to be at least 90 per cent. owned (directly or indirectly) by Centex Development Company, L.P. or the warrants to purchase the equity interests in Centex Development Company, L.P. cease to be traded in tandem with those of the equity interests in Centex Corporation. 21.12 MATERIAL ADVERSE CHANGE Any event or series of events occurs which is reasonably likely to have a Material Adverse Effect. 21.13 ACCELERATION If an Event of Default is outstanding, the Facility Agent may, by notice to CDFCUK: 51 (a) cancel the Total Commitments; and/or (b) declare that all or part of any amounts outstanding under the Finance Documents are: (i) immediately due and payable; and/or (ii) payable on demand by the Facility Agent acting on the instructions of the Majority Lenders. Any notice given under this Subclause will take effect in accordance with its terms. 22. SECURITY 22.1 FACILITY AGENT AS TRUSTEE Unless expressly provided to the contrary, the Facility Agent holds any security created by a Security Document on trust for the Finance Parties. 22.2 RESPONSIBILITY The Facility Agent is not responsible to any other Finance Party for any failure in perfecting or protecting the security created by any Security Document unless directly caused by its gross negligence or wilful misconduct. 22.3 TITLE The Facility Agent may accept, without enquiry, the title (if any) an Obligor may have to any asset over which security is intended to be created by any Security Document. 22.4 POSSESSION OF DOCUMENTS The Facility Agent is not obliged to hold in its own possession any Security Document, title deed or other document in connection with any asset over which security is intended to be created by a Security Document. 22.5 INVESTMENTS Except as otherwise provided in any Security Document, all moneys received by the Facility Agent under a Security Document may be invested in the name of, or under the control of, the Facility Agent in any investments selected by the Facility Agent. Additionally, those moneys may be placed on deposit in the name of, or under the control of, the Facility Agent at any bank or institution (including itself) and upon such terms as it may think fit. 22.6 APPROVAL Each Finance Party confirms its approval of each Security Document. 22.7 RELEASE OF SECURITY (a) If: (i) a Guarantor ceases to be a member of the Group; or (ii) a Guarantor is released from all its obligations under the Finance Documents, 52 in a manner allowed by this Agreement, any security created by that Guarantor over its assets under the Security Documents will be released. (b) If a disposal of any asset subject to security created by a Security Document is made to a person (which is and will remain) outside the Group in the following circumstances: (i) the Majority Lenders agree to the disposal; (ii) the disposal is allowed by the terms of the Finance Documents and will not result or could not reasonably be expected to result in any breach of any term of any Finance Document; (iii) the disposal is being made at the request of the Facility Agent in circumstances where any security created by the Security Documents has become enforceable; or (iv) the disposal is being effected by enforcement of a Security Document, the asset being disposed of will be released from any security over it created by a Security Document. However, the proceeds of any disposal (or an amount corresponding to them) must be applied in accordance with the requirements of the Finance Documents (if any). (c) If the Facility Agent is satisfied that a release is allowed under this Subclause, the Facility Agent must execute (at the request and expense of the relevant Obligor) any document which is reasonably required to achieve that release. Each other Finance Party irrevocably authorises the Facility Agent to execute any such document. 22.8 LETTERS OF NON-CRYSTALLISATION If a disposal of any asset subject to a floating charge created by a Security Document is made to a person which is (and will remain) outside the Group in the following circumstances: (a) the disposal is allowed by the terms of the Finance Documents and will not result or could not reasonably be expected to result in any breach of any term of the Finance Documents; (b) the floating charge to which the asset is subject has not crystallised; and (c) the Majority Lenders have not instructed the Facility Agent otherwise, the Facility Agent must provide (at the request and expense of CDFCUK) to CDFCUK a Letter of Non-Crystallisation and/or a Deed of Partial Release. Each other Finance Party irrevocably authorises the Facility Agent to execute those documents. 23. THE ADMINISTRATIVE PARTIES 23.1 APPOINTMENT AND DUTIES OF THE FACILITY AGENT (a) Each Finance Party (other than the Facility Agent) irrevocably appoints the Facility Agent to act as its agent under the Finance Documents. (b) Each Finance Party irrevocably authorises the Facility Agent to: 53 (i) perform the duties and to exercise the rights, powers and discretions that are specifically given to it under the Finance Documents, together with any other incidental rights, powers and discretions; and (ii) execute each Finance Document expressed to be executed by the Facility Agent. (c) The Facility Agent has only those duties which are expressly specified in the Finance Documents. Those duties are solely of a mechanical and administrative nature. 23.2 ROLE OF THE ARRANGER Except as specifically provided in the Finance Documents, the Arranger has no obligations of any kind to any other Party in connection with any Finance Document. 23.3 NO FIDUCIARY DUTIES Except as specifically provided in a Finance Document, nothing in the Finance Documents makes an Administrative Party a trustee or fiduciary for any other Party or any other person. No Administrative Party need hold in trust any moneys paid to it for a Party or be liable to account for interest on those moneys. 23.4 INDIVIDUAL POSITION OF AN ADMINISTRATIVE PARTY (a) If it is also a Lender, each Administrative Party has the same rights and powers under the Finance Documents as any other Lender and may exercise those rights and powers as though it were not an Administrative Party. (b) Each Administrative Party may: (i) carry on any business with any Obligor or its related entities (including acting as an agent or a trustee for any other financing); and (ii) retain any profits or remuneration it receives under the Finance Documents or in relation to any other business it carries on with any Obligor or its related entities. 23.5 RELIANCE The Facility Agent may: (a) rely on any notice or document believed by it to be genuine and correct and to have been signed by, or with the authority of, the proper person; (b) rely on any statement made by any person regarding any matters which may reasonably be assumed to be within his knowledge or within his power to verify; (c) engage, pay for and rely on professional advisers selected by it (including those representing a Party other than the Facility Agent); and (d) act under the Finance Documents through its personnel and agents. 23.6 MAJORITY LENDERS' INSTRUCTIONS (a) The Facility Agent is fully protected if it acts on the instructions of the Majority Lenders in the exercise of any right, power or discretion or any matter not expressly provided for in the 54 Finance Documents. Any such instructions given by the Majority Lenders will be binding on all the Lenders. In the absence of instructions, the Facility Agent may act as it considers to be in the best interests of all the Lenders. (b) The Facility Agent is not authorised to act on behalf of a Lender (without first obtaining that Lender's consent) in any legal or arbitration proceedings in connection with any Finance Document. (c) The Facility Agent may require the receipt of security satisfactory to it, whether by way of payment in advance or otherwise, against any liability or loss which it may incur in complying with the instructions of the Majority Lenders. 23.7 RESPONSIBILITY (a) No Administrative Party is responsible to any other Finance Party for the adequacy, accuracy or completeness of: (i) any Finance Document or any other document; or (ii) any statement or information (whether written or oral) made in or supplied in connection with any Finance Document. (b) Without affecting the responsibility of any Obligor for information supplied by it or on its behalf in connection with any Finance Document, each Lender confirms that it: (i) has made, and will continue to make, its own independent appraisal of all risks arising under or in connection with the Finance Documents (including the financial condition and affairs of each Obligor and its related entities and the nature and extent of any recourse against any Party or its assets); and (ii) has not relied exclusively on any information provided to it by any Administrative Party in connection with any Finance Document. 23.8 EXCLUSION OF LIABILITY (a) The Facility Agent is not liable to any other Finance Party for any action taken or not taken by it in connection with any Finance Document, unless directly caused by its gross negligence or wilful misconduct. (b) No Party may take any proceedings against any officer, employee or agent of the Facility Agent in respect of any claim it might have against the Facility Agent or in respect of any act or omission of any kind by that officer, employee or agent in connection with any Finance Document. Any officer, employee or agent of the Facility Agent may rely on this Subclause and enforce its terms under the Contracts (Rights of Third Parties) Act 1999. 23.9 DEFAULT (a) The Facility Agent is not obliged to monitor or enquire whether a Default has occurred. The Facility Agent is not deemed to have knowledge of the occurrence of a Default. (b) If the Facility Agent: (i) receives notice from a Party referring to this Agreement, describing a Default and stating that the event is a Default; or 55 (ii) is aware of the non-payment of any principal or interest or any fee payable to a Lender under this Agreement, it must promptly notify the Lenders. 23.10 INFORMATION (a) The Facility Agent must promptly forward to the person concerned the original or a copy of any document which is delivered to the Facility Agent by a Party for that person. (b) Except where a Finance Document specifically provides otherwise, the Facility Agent is not obliged to review or check the adequacy, accuracy or completeness of any document it forwards to another Party. (c) Except as provided above, the Facility Agent has no duty: (i) either initially or on a continuing basis to provide any Lender with any credit or other information concerning the risks arising under or in connection with the Finance Documents (including any information relating to the financial condition or affairs of any Obligor or its related entities or the nature or extent of recourse against any Party or its assets) whether coming into its possession before, on or after the date of this Agreement; or (ii) unless specifically requested to do so by a Lender in accordance with a Finance Document, to request any certificate or other document from any Obligor. (d) In acting as the Facility Agent, the agency division of the Facility Agent is treated as a separate entity from its other divisions and departments. Any information acquired by the Facility Agent which, in its opinion, is acquired by it otherwise than in its capacity as the Facility Agent may be treated as confidential by the Facility Agent and will not be treated as information possessed by the Facility Agent in its capacity as such. (e) Each Obligor irrevocably authorises the Facility Agent to disclose to the other Finance Parties any information which, in its opinion, is received by it in its capacity as the Facility Agent. 23.11 INDEMNITIES (a) Without limiting the liability of any Obligor under the Finance Documents, each Lender must indemnify the Facility Agent for that Lender's Pro Rata Share of any loss or liability incurred by the Facility Agent in acting as the Facility Agent, except to the extent that the loss or liability is caused by the Facility Agent's gross negligence or wilful misconduct. (b) The Facility Agent may deduct from any amount received by it for a Lender any amount due to the Facility Agent from that Lender under a Finance Document but unpaid. 23.12 COMPLIANCE The Facility Agent may refrain from doing anything (including disclosing any information) which might, in its opinion, constitute a breach of any law or regulation or be otherwise actionable at the suit of any person, and may do anything which, in its opinion, is necessary or desirable to comply with any law or regulation. 56 23.13 RESIGNATION OF THE FACILITY AGENT (a) The Facility Agent may resign and appoint any of its Affiliates as successor Facility Agent by giving notice to the Lenders and CDFCUK. (b) Alternatively, the Facility Agent may resign by giving notice to the Lenders and CDFCUK, in which case the Majority Lenders may with the prior consent of CDFCUK (not to be unreasonably withheld or delayed and, if not expressly refused within 10 Business Days of request, deemed to be given) appoint a successor Facility Agent. (c) If no successor Facility Agent has been appointed under paragraph (b) above within 30 days after notice of resignation was given, the Facility Agent may appoint a successor Facility Agent. (d) The person(s) appointing a successor Facility Agent must, if practicable, consult with CDFCUK prior to the appointment. Any successor Facility Agent must have an office in the U.K. (e) The resignation of the Facility Agent and the appointment of any successor Facility Agent will both become effective only when the successor Facility Agent notifies all the Parties that it accepts its appointment. On giving the notification, the successor Facility Agent will succeed to the position of the Facility Agent and the term FACILITY AGENT will mean the successor Facility Agent. (f) The retiring Facility Agent must, at its own cost, make available to the successor Facility Agent such documents and records and provide such assistance as the successor Facility Agent may reasonably request for the purposes of performing its functions as the Facility Agent under the Finance Documents. (g) Upon its resignation becoming effective, this Clause will continue to benefit the retiring Facility Agent in respect of any action taken or not taken by it in connection with the Finance Documents while it was the Facility Agent, and, subject to paragraph (f) above, it will have no further obligations under any Finance Document. (h) The Majority Lenders may, by notice to the Facility Agent after consultation with the Facility Agent and CDFCUK, require it to resign under paragraph (b) above. 23.14 RELATIONSHIP WITH LENDERS (a) The Facility Agent may treat each Lender as a Lender, entitled to payments under this Agreement and as acting through its Facility Office(s) until it has received not less than five Business Days' prior notice from that Lender to the contrary. (b) The Facility Agent may at any time, and must if requested to do so by the Majority Lenders, convene a meeting of the Lenders. (c) The Facility Agent must keep a register of all the Parties and supply any other Party with a copy of the register on request. The register will include each Lender's Facility Office(s) and contact details for the purposes of this Agreement. 23.15 FACILITY AGENT'S MANAGEMENT TIME If the Facility Agent requires, any amount payable to the Facility Agent by any Party under any indemnity or in respect of any costs or expenses incurred by the Facility Agent under the 57 Finance Documents after the date of this Agreement may include the cost of using its management time or other resources and will be calculated on the basis of such reasonable daily or hourly rates as the Facility Agent may notify to the relevant Party. This is in addition to any amount in respect of fees or expenses paid or payable to the Facility Agent under any other term of the Finance Documents. 23.16 NOTICE PERIOD Where this Agreement specifies a minimum period of notice to be given to the Facility Agent, the Facility Agent may, at its discretion, accept a shorter notice period. 24. EVIDENCE AND CALCULATIONS 24.1 ACCOUNTS Accounts maintained by a Finance Party in connection with this Agreement are prima facie evidence of the matters to which they relate for the purpose of any litigation or arbitration proceedings. 24.2 CERTIFICATES AND DETERMINATIONS Any certification or determination by a Finance Party of a rate or amount under the Finance Documents will be, in the absence of manifest error, prima facie evidence of the matters to which it relates. 24.3 CALCULATIONS Any interest or fee accruing under this Agreement accrues from day to day and is calculated on the basis of the actual number of days elapsed and a year of 365 days or otherwise, depending on what the Facility Agent determines is market practice. 25. FEES 25.1 FACILITY AGENT'S FEE The Company must pay to the Facility Agent for its own account an agency fee in the manner agreed in the Fee Letter between the Facility Agent and the Company. 25.2 ARRANGEMENT FEE The Company must pay to the Arranger for its own account an arrangement fee in the manner agreed in the Fee Letter between the Arranger and the Company. 25.3 COMMITMENT FEE (a) CDFCUK must pay a commitment fee computed at the rate of 0.5 per cent. per annum on the undrawn, uncancelled amount of each Lender's Commitment. (b) Accrued commitment fee is payable quarterly in arrear. Accrued commitment fee is also payable to the Facility Agent for a Lender on the date its Commitment is cancelled in full. 58 26. INDEMNITIES AND BREAK COSTS 26.1 CURRENCY INDEMNITY (a) CDFCUK must, as an independent obligation, indemnify each Finance Party against any loss or liability which that Finance Party incurs as a consequence of: (i) that Finance Party receiving an amount in respect of an Obligor's liability under the Finance Documents; or (ii) that liability being converted into a claim, proof, judgment or order, in a currency other than the currency in which the amount is expressed to be payable under the relevant Finance Document. (b) Unless otherwise required by law, each Obligor waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency other than that in which it is expressed to be payable. 26.2 OTHER INDEMNITIES (a) CDFCUK must indemnify each Finance Party against any loss or liability which that Finance Party incurs as a consequence of: (i) the occurrence of any Event of Default; (ii) any failure by an Obligor to pay any amount due under a Finance Document on its due date, including any resulting from any distribution or redistribution of any amount among the Banks under and as provided for in this Agreement; (iii) (other than by reason of negligence or default by that Finance Party) a Loan not being made after a Request has been delivered for that Loan; or (iv) a Loan (or part of a Loan) not being prepaid in accordance with a notice of prepayment. CDFCUK's liability in each case includes any loss (other than loss of margin) or expense on account of funds borrowed, contracted for or utilised to fund any amount payable under any Finance Document, any amount repaid or prepaid or any Loan. (b) CDFCUK must indemnify the Facility Agent against any loss or liability reasonably incurred by the Facility Agent as a result of: (i) investigating any event which the Facility Agent reasonably believes to be a Default; or (ii) acting or relying on any notice which the Facility Agent reasonably believes to be genuine, correct and appropriately authorised. 26.3 BREAK COSTS (a) Each Borrower must pay to each Lender its Break Costs. (b) Break Costs are the amount (if any) determined by the relevant Lender by which: 59 (i) the interest which that Lender would have received for the period from the date of receipt of any part of its share in a Loan or an overdue amount to the last day of the current Interest Period for that Loan or overdue amount if the principal or overdue amount received had been paid on the last day of that Interest Period; exceeds (ii) the amount which that Lender would be able to obtain by placing an amount equal to the amount received by it on deposit with a leading bank in the London interbank market for a period starting on the Business Day following receipt and ending on the last day of the relevant Interest Period. (c) Each Lender must supply to the Facility Agent for the relevant Borrower details of the amount of any Break Costs claimed by it under this Subclause. 27. EXPENSES 27.1 INITIAL COSTS CDFCUK must pay to each Administrative Party the amount of all costs and expenses (including legal fees) reasonably incurred by it in connection with the negotiation, preparation, printing, execution and syndication of the Finance Documents. 27.2 SUBSEQUENT COSTS CDFCUK must pay to the Facility Agent the amount of all costs and expenses (including legal fees) reasonably incurred by it in connection with: (a) the negotiation, preparation, printing and execution of any Finance Document (other than a Transfer Certificate) executed after the date of this Agreement; and (b) any amendment, waiver or consent requested by or on behalf of an Obligor or specifically allowed by this Agreement. 27.3 ENFORCEMENT COSTS CDFCUK must pay to each Finance Party the amount of all costs and expenses (including legal fees) incurred by it in connection with the enforcement of, or the preservation of any rights under, any Finance Document. 28. AMENDMENTS AND WAIVERS 28.1 PROCEDURE (a) Except as provided in this Clause, any term of the Finance Documents may be amended or waived with the agreement of CDFCUK and the Majority Lenders. The Facility Agent may effect, on behalf of any Finance Party, an amendment or waiver allowed under this Clause. (b) The Facility Agent must promptly notify the other Parties of any amendment or waiver effected by it under paragraph (a) above. Any such amendment or waiver is binding on all the Parties. 60 28.2 EXCEPTIONS (a) An amendment or waiver which relates to: (i) the definition of MAJORITY LENDERS in Clause 1.1 (Definitions); (ii) an extension of the date of payment of any amount to a Lender under the Finance Documents; (iii) a reduction in the Margin or a reduction in the amount of any payment of principal, interest, fee or other amount payable to a Lender under the Finance Documents; (iv) an increase in, or an extension of, a Commitment; (v) a release of an Obligor; (vi) a term of a Finance Document which expressly requires the consent of each Lender; (vii) the right of a Lender to assign or transfer its rights or obligations under the Finance Documents; or (viii) this Clause, may only be made with the consent of all the Lenders. (b) An amendment or waiver which relates to the rights or obligations of an Administrative Party may only be made with the consent of that Administrative Party. 28.3 CHANGE OF CURRENCY If a change in any currency of a country occurs (including where there is more than one currency or currency unit recognised at the same time as the lawful currency of a country), the Finance Documents will be amended to the extent the Facility Agent (acting reasonably and after consultation with CDFCUK) determines is necessary to reflect the change. 28.4 WAIVERS AND REMEDIES CUMULATIVE The rights of each Finance Party under the Finance Documents: (a) may be exercised as often as necessary; (b) are cumulative and not exclusive of its rights under the general law; and (c) may be waived only in writing and specifically. Delay in exercising or non-exercise of any right is not a waiver of that right. 29. CHANGES TO THE PARTIES 29.1 ASSIGNMENTS AND TRANSFERS BY OBLIGORS No Obligor may assign or transfer any of its rights and obligations under the Finance Documents without the prior consent of all the Lenders. 61 29.2 ASSIGNMENTS AND TRANSFERS BY LENDERS (a) A Lender (the EXISTING LENDER) may, subject to the following provisions of this Subclause, at any time assign or transfer (including by way of novation) any of its rights and obligations under this Agreement to another person (the NEW LENDER). (b) The consent of CDFCUK is required for any assignment or transfer unless the New Lender is another Lender or an Affiliate of a Lender. The consent of CDFCUK must not be unreasonably withheld or delayed. CDFCUK will be deemed to have given its consent ten Business Days after CDFCUK is given notice of the request unless it is expressly refused by the Company within that time. (c) A transfer of obligations will be effective only if either: (i) the obligations are novated in accordance with the following provisions of this Clause; or (ii) the New Lender confirms to the Facility Agent and CDFCUK in form and substance satisfactory to the Facility Agent that it is bound by the terms of this Agreement as a Lender. On the transfer becoming effective in this manner the Existing Lender will be released from its obligations under this Agreement to the extent that they are transferred to the New Lender. (d) Unless the Facility Agent otherwise agrees, the New Lender must pay to the Facility Agent for its own account, on or before the date any assignment or transfer occurs, a fee of Pound Sterling 1,000. (e) Any reference in this Agreement to a Lender includes a New Lender but excludes a Lender if no amount is or may be owed to or by it under this Agreement. 29.3 PROCEDURE FOR TRANSFER BY WAY OF NOVATIONS (a) In this Subclause: TRANSFER DATE means, for a Transfer Certificate, the later of: (i) the proposed Transfer Date specified in that Transfer Certificate; (ii) the date on which the Facility Agent executes that Transfer Certificate; and (iii) 5 Business Days after the date on which the completed Transfer Certificate is received by the Facility Agent, or such earlier date as is agreed by the Facility Agent. (b) A novation is effected if: (i) the Existing Lender and the New Lender deliver to the Facility Agent a duly completed Transfer Certificate; and (ii) the Facility Agent executes it. The Facility Agent must execute as soon as reasonably practicable a Transfer Certificate delivered to it and which appears on its face to be in order. (c) Each Party (other than the Existing Lender and the New Lender) irrevocably authorises the Facility Agent to execute any duly completed Transfer Certificate on its behalf. 62 (d) On the Transfer Date: (i) the New Lender will assume the rights and obligations of the Existing Lender expressed to be the subject of the novation in the Transfer Certificate in substitution for the Existing Lender; and (ii) the Existing Lender will be released from those obligations and cease to have those rights. 29.4 LIMITATION OF RESPONSIBILITY OF EXISTING LENDER (a) Unless expressly agreed to the contrary, an Existing Lender is not responsible to a New Lender for the legality, validity, adequacy, accuracy, completeness or performance of: (i) any Finance Document or any other document; or (ii) any statement or information (whether written or oral) made in or supplied in connection with any Finance Document, and any representations or warranties implied by law are excluded. (b) Each New Lender confirms to the Existing Lender and the other Finance Parties that it: (i) has made, and will continue to make, its own independent appraisal of all risks arising under or in connection with the Finance Documents (including the financial condition and affairs of each Obligor and its related entities and the nature and extent of any recourse against any Party or its assets) in connection with its participation in this Agreement; and (ii) has not relied exclusively on any information supplied to it by the Existing Lender in connection with any Finance Document. (c) Nothing in any Finance Document requires an Existing Lender to: (i) accept a re-transfer from a New Lender of any of the rights and obligations assigned or transferred under this Clause; or (ii) support any losses incurred by the New Lender by reason of the non-performance by any Obligor of its obligations under any Finance Document or otherwise. 29.5 COSTS RESULTING FROM CHANGE OF LENDER OR FACILITY OFFICE If: (a) a Lender assigns or transfers any of its rights and obligations under the Finance Documents or changes its Facility Office; and (b) as a result of circumstances existing at the date the assignment, transfer or change occurs, an Obligor would be obliged to pay a Tax Payment or an Increased Cost, then, unless the assignment, transfer or change is made by a Lender to mitigate any circumstances giving rise to the Tax Payment, Increased Cost or a right to be prepaid and/or cancelled by reason of illegality, the Obligor need only pay that Tax Payment or Increased 63 Cost to the same extent that it would have been obliged to if no assignment, transfer or change had occurred. 29.6 ADDITIONAL OBLIGORS (a) CDFCUK must, within 30 days of the date on which any member of the Group becomes a Material Subsidiary after the date of this Agreement, ensure that the relevant Material Subsidiary (if it is not already) becomes a Guarantor by delivering to the Facility Agent the documents listed in Part 2 of Schedule 2 in relation to that Subsidiary, in each case in form and substance satisfactory to the Facility Agent. (b) (i) If CDFCUK wishes one of its wholly-owned Subsidiaries to become an Additional Obligor other than when required to do so under paragraph (a) above, then it may (following consultation with the Facility Agent) deliver to the Facility Agent the relevant documents and evidence listed in Part 2 of Schedule 2 (Conditions precedent documents). (ii) The prior consent of all the Lenders is required if the Additional Obligor is incorporated in a jurisdiction outside the U.K. (iii) The relevant Subsidiary will become an Additional Obligor when the Facility Agent notifies the other Finance Parties and CDFCUK that it has received all of the documents and evidence referred to in sub-paragraph (i) above in form and substance satisfactory to it. The Facility Agent must give this notification as soon as reasonably practicable. (c) Delivery of an Accession Agreement, executed by the relevant Subsidiary and CDFCUK, to the Facility Agent constitutes confirmation by that Subsidiary and CDFCUK that the relevant Repeating Representations are then correct. 29.7 RESIGNATION OF AN OBLIGOR (OTHER THAN THE COMPANY OR CDFCUK) (a) In this Subclause, RESIGNATION REQUEST means a letter in the form of Schedule 9 (Form of Resignation Request), with such amendments as the Facility Agent may approve or reasonably require. (b) CDFCUK may request that an Obligor (other than the Company or CDFCUK) ceases to be an Obligor by giving to the Facility Agent a duly completed Resignation Request. (c) The Facility Agent must accept a Resignation Request and notify CDFCUK and the Lenders of its acceptance if: (i) in the case of a Guarantor, the Majority Lenders have consented to the Resignation Request; (ii) it is not aware that a Default is outstanding or would result from the acceptance of the Resignation Request; and (iii) no amount owed by that Obligor under this Agreement is still outstanding. (d) The Obligor will cease to be a Borrower and/or a Guarantor, as appropriate, when the Facility Agent gives the notification referred to in paragraph (c) above. 64 (e) An Obligor (other than the Company or CDFCUK) may also cease to be an Obligor in any other manner approved by the Majority Lenders. 29.8 CHANGES TO THE REFERENCE BANKS If a Reference Bank (or, if a Reference Bank is not a Lender, the Lender of which it is an Affiliate) ceases to be a Lender, the Facility Agent must (in consultation with CDFCUK) appoint another Lender or an Affiliate of a Lender to replace that Reference Bank. 30. DISCLOSURE OF INFORMATION (a) Each Finance Party must keep confidential any information supplied to it by or on behalf of any Obligor in connection with the Finance Documents. However, a Finance Party is entitled to disclose information: (i) which is publicly available, other than as a result of a breach by that Finance Party of this Clause; (ii) in connection with any legal or arbitration proceedings; (iii) if required to do so under any law or regulation; (iv) if it is required to do so, or if that authority has requested the disclosure, to a governmental, banking, taxation or other regulatory authority with whose requirements that Finance Party is required to comply or customarily complies; (v) to its professional advisers; (vi) to the extent allowed under paragraph (b) below; or (vii) with the agreement of the relevant Obligor. (b) A Finance Party may disclose to an Affiliate or any person with whom it may enter, or has entered into, any kind of transfer, participation or other agreement in relation to this Agreement (a PARTICIPANT): (i) a copy of any Finance Document; and (ii) any information which that Finance Party has acquired under or in connection with any Finance Document. However, before a participant may receive any confidential information, it must agree with the relevant Finance Party for itself and on behalf of CDFCUK to keep that information confidential on the terms of paragraph (a) above. (c) This Clause supersedes any previous confidentiality undertaking given by a Finance Party in connection with this Agreement prior to it becoming a Party. 31. SET-OFF While an Event of Default is outstanding, a Finance Party may set off any matured obligation owed to it by an Obligor under the Finance Documents (to the extent beneficially owned by that Finance Party) against any obligation (whether or not matured) owed by that Finance Party to that Obligor, regardless of the place of payment, booking branch or currency of either 65 obligation. If the obligations are in different currencies, the Finance Party may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off. 32. PRO RATA SHARING 32.1 REDISTRIBUTION If any amount owing by an Obligor under this Agreement to a Lender (the RECOVERING LENDER) is discharged by payment, set-off or any other manner other than through the Facility Agent under this Agreement (a RECOVERY), then: (a) the recovering Lender must, within three Business Days, supply details of the recovery to the Facility Agent; (b) the Facility Agent must calculate whether the recovery is in excess of the amount which the recovering Lender would have received if the recovery had been received by the Facility Agent under this Agreement; and (c) the recovering Lender must pay to the Facility Agent an amount equal to the excess (the REDISTRIBUTION). 32.2 EFFECT OF REDISTRIBUTION (a) The Facility Agent must treat a redistribution as if it were a payment by the relevant Obligor under this Agreement and distribute it among the Lenders (other than the recovering Lender) accordingly. (b) When the Facility Agent makes a distribution under paragraph (a) above, the recovering Lender will be subrogated to the rights of the Finance Parties which have shared in that redistribution. (c) If and to the extent that the recovering Lender is not able to rely on any rights of subrogation under paragraph (b) above, the relevant Obligor will owe the recovering Lender a debt which is equal to the redistribution, immediately payable and of the type originally discharged. If: (i) a recovering Lender must subsequently return a recovery, or an amount measured by reference to a recovery, to an Obligor; and (ii) the recovering Lender has paid a redistribution in relation to that recovery, each Finance Party must reimburse the recovering Lender all or the appropriate portion of the redistribution paid to that Finance Party, together with interest for the period while it held the re-distribution. In this event, the subrogation in paragraph (b) above will operate in reverse to the extent of the reimbursement. 32.3 EXCEPTIONS Notwithstanding any other term of this Clause, a recovering Lender need not pay a redistribution to the extent that: 66 (a) it would not, after the payment, have a valid claim against the relevant Obligor in the amount of the redistribution; or (b) it would be sharing with another Finance Party any amount which the recovering Lender has received or recovered as a result of legal or arbitration proceedings, where: (i) the recovering Lender notified the Facility Agent of those proceedings; and (ii) the other Finance Party had an opportunity to participate in those proceedings but did not do so or did not take separate legal or arbitration proceedings as soon as reasonably practicable after receiving notice of them. 33. SEVERABILITY If a term of a Finance Document is or becomes illegal, invalid or unenforceable in any jurisdiction, that shall not affect: (a) the legality, validity or enforceability in that jurisdiction of any other term of the Finance Documents; or (b) the legality, validity or enforceability in other jurisdictions of that or any other term of the Finance Documents. 34. COUNTERPARTS Each Finance Document may be executed in any number of counterparts. This has the same effect as if the signatures on the counterparts were on a single copy of the Finance Document. 35. NOTICES 35.1 IN WRITING (a) Any communication in connection with a Finance Document must be in writing and, unless otherwise stated, may be given in person, by post or fax. (b) Unless it is agreed to the contrary, any consent or agreement required under a Finance Document must be given in writing. 35.2 CONTACT DETAILS (a) Except as provided below, the contact details of each Party for all communications in connection with the Finance Documents are those notified by that Party for this purpose to the Facility Agent on or before the date it becomes a Party. (b) The contact details of CDFCUK for this purpose are: Address: 3rd Floor, Meirion House 18-28 Guildford Road Woking, Surrey GU22 7QF Fax number: 01483 778599 Attention: The Group Finance Director 67 (c) The contact details of the Facility Agent for this purpose are: Address: Corporate Banking Office 3rd Floor 2.5 Devonshire Square London EC2M 4BB Fax number: 020 7615 7673 Attention: CBO Loans Agency Operations. (d) Any Party may change its contact details by giving five Business Days' notice to the Facility Agent or (in the case of the Facility Agent) to the other Parties. (e) Where a Party nominates a particular department or officer to receive a communication, a communication will not be effective if it fails to specify that department or officer. 35.3 EFFECTIVENESS (a) Except as provided below, any communication in connection with a Finance Document will be deemed to be given as follows: (i) if delivered in person, at the time of delivery; (ii) if posted, five days after being deposited in the post, postage prepaid, in a correctly addressed envelope; and (iii) if by fax, when received in legible form. (b) A communication given under paragraph (a) above but received on a non-working day or after business hours in the place of receipt will only be deemed to be given on the next working day in that place. (c) A communication to the Facility Agent will only be effective on actual receipt by it. 35.4 OBLIGORS (a) All communications under the Finance Documents to or from an Obligor must be sent through the Facility Agent. (b) All communications under the Finance Documents to or from an Obligor (other than CDFCUK) must be sent through CDFCUK. (c) Each Obligor (other than CDFCUK) irrevocably appoints CDFCUK to act as its agent: (i) to give and receive all communications under the Finance Documents; and (ii) to sign all documents under or in connection with the Finance Documents. (d) Any communication given to CDFCUK in connection with a Finance Document will be deemed to have been given also to the other Obligors. (e) The Facility Agent may assume that any communication made by CDFCUK is made with the consent of each other Obligor. 68 36. LANGUAGE (a) Any notice given in connection with a Finance Document must be in English. (b) Any other document provided in connection with a Finance Document must be: (i) in English; or (ii) (unless the Facility Agent otherwise agrees) accompanied by a certified English translation. In this case, the English translation prevails unless the document is a statutory or other official document. 37. GOVERNING LAW This Agreement is governed by English law. 38. ENFORCEMENT 38.1 JURISDICTION (a) The English courts have exclusive jurisdiction to settle any dispute in connection with any Finance Document. (b) The English courts are the most appropriate and convenient courts to settle any such dispute and each Obligor waives objection to those courts on the grounds of inconvenient forum or otherwise in relation to proceedings in connection with any Finance Document. (c) This Clause is for the benefit of the Finance Parties only. To the extent allowed by law, a Finance Party may take: (i) proceedings in any other court; and (ii) concurrent proceedings in any number of jurisdictions. 38.2 SERVICE OF PROCESS (a) Each Obligor not incorporated in England and Wales irrevocably appoints CDFCUK as its agent under the Finance Documents for service of process in any proceedings before the English courts. (b) If any person appointed as process agent is unable for any reason to act as agent for service of process, CDFCUK (on behalf of all the Obligors) must immediately appoint another agent on terms acceptable to the Facility Agent. Failing this, the Facility Agent may appoint another agent for this purpose. (c) Each Obligor agrees that failure by a process agent to notify it of any process will not invalidate the relevant proceedings. (d) This Clause does not affect any other method of service allowed by law. This Agreement has been entered into on the date stated at the beginning of this Agreement. 69 SCHEDULE 1 ORIGINAL PARTIES NAME OF ORIGINAL BORROWER REGISTRATION NUMBER OR EQUIVALENT, IF ANY) Fairclough Homes Limited 1987689 NAME OF SUPPLEMENTAL BORROWER REGISTRATION NUMBER OR EQUIVALENT, IF ANY) CDC2020 plc 4321699 Centex UK Limited 3720262 NAME OF ORIGINAL GUARANTOR REGISTRATION NUMBER OR EQUIVALENT, IF ANY) Fairclough Homes Limited 1987689 Viewton Properties Limited 2436950 NAME OF SUPPLEMENTAL GUARANTOR REGISTRATION NUMBER OR EQUIVALENT, IF ANY) CDC2020 plc 4321699 Centex Development Funding Company UK Limited 4167358 Centex Management Services Limited 4375040 Centex Strategic Land Limited 4466958 Centex UK Limited 3720262
70 NAME OF ORIGINAL LENDER COMMITMENTS POUND STERLING National Westminster Bank Plc 28,000,000 NAME OF SYNDICATION LENDER HSBC Bank plc 18,000,000 Lloyds TSB Bank plc 18,000,000 Yorkshire Bank PLC 18,000,000 Allied Irish Banks, p.l.c. 9,000,000 Girobank plc 9,000,000 -------------------------- TOTAL COMMITMENTS Pound Sterling 100,000,000 --------------------------
71 SCHEDULE 2 CONDITIONS PRECEDENT DOCUMENTS PART 1 TO BE DELIVERED BEFORE THE FIRST REQUEST ORIGINAL OBLIGORS 1. A copy of the constitutional documents of each Original Obligor. 2. A copy of a resolution of the board of directors of each Original Obligor approving the terms of, and the transactions contemplated by, this Agreement. 3. A specimen of the signature of each person authorised on behalf of an Original Obligor to execute or witness the execution of any Finance Document or to sign or send any document or notice in connection with any Finance Document. 4. A copy of a resolution signed by all (or any lower percentage agreed by the Facility Agent) of the holders of the issued or allotted shares in each Original Guarantor approving the terms of, and the transactions contemplated by, this Agreement. 5. If applicable, a copy of a resolution of the board of directors of each corporate shareholder in each Original Guarantor approving the terms of the resolution referred to in paragraph 4 above. 6. A certificate of an authorised signatory of the Company: (a) confirming that utilising the Total Commitments in full would not breach any limit binding on any Original Obligor; and (b) certifying that each copy document specified in Part 1 of this Schedule is correct, complete and in full force and effect as at a date no earlier than the date of this Agreement. SECURITY DOCUMENT(s) 1. A Security Agreement duly executed by each Original Obligor. 2. Share certificates and duly executed stock transfer forms in blank for any shares owned by an Original Obligor. LEGAL OPINIONS A legal opinion of Allen & Overy, legal advisers to the Arranger and the Facility Agent, substantially in the form of Schedule 11 (Form of legal opinion of Allen & Overy), addressed to the Finance Parties. 72 OTHER DOCUMENTS AND EVIDENCE 1. Evidence that all fees and expenses then due and payable from the Company under this Agreement have been or will be paid by the first Utilisation Date. 2. Copies of notices of prepayment and cancellation evidencing that all existing facilities (other than the Pound Sterling 5,000,000 net overdraft facility and Pound Sterling 5,000,000 bonding line with National Westminster Bank Plc and the RBS Promissory Note) will be prepaid and cancelled in full on or by the first Utilisation Date. 3. A Compliance Certificate setting out the Adjusted Security Asset Value as at 28th February, 2001. 4. A copy of all board resolutions, shareholder written resolutions, declarations, auditors reports and other documents required to ensure compliance with Sections 151-158 of the Companies Act 1985, together with a letter addressed to the Finance Parties and each relevant Obligor from the auditors in the agreed form. 73 PART 2 FOR AN ADDITIONAL OBLIGOR ADDITIONAL OBLIGORS 1. An Accession Agreement, duly executed by CDFCUK and the Additional Obligor. 2. A copy of the constitutional documents of the Additional Obligor. 3. A copy of a resolution of the board of directors of the Additional Obligor approving the terms of, and the transactions contemplated by, the Accession Agreement. 4. A specimen of the signature of each person authorised on behalf of the Additional Obligor to execute or witness the execution of any Finance Document or to sign or send any document or notice in connection with any Finance Document. 5. In the case of an Additional Guarantor incorporated in the U.K., a copy of a resolution, signed by all (or any lower percentage agreed by the Facility Agent) of the holders of its issued or allotted shares, approving the terms of, and the transactions contemplated by, the Accession Agreement. 6. If applicable, a copy of a resolution of the board of directors of each corporate shareholder in the Additional Guarantor approving the resolution referred to in paragraph 5 above. 7. A certificate of an authorised signatory of the Additional Obligor: (a) confirming that utilising the Total Commitments in full would not breach any limit binding on it; and (b) certifying that each copy document specified in Part 2 of this Schedule is correct, complete and in full force and effect as at a date no earlier than the date of the Accession Agreement. 8. If available, a copy of the latest audited accounts of the Additional Obligor. SECURITY DOCUMENT(s) 1. A Security Agreement over its assets, duly executed by the Additional Obligor. 2. A copy of any notices required to be sent under that Agreement. 3. Share certificates and duly executed stock transfer forms in blank for any shares owned by the Additional Obligors. LEGAL OPINIONS 1. A legal opinion of Allen & Overy, legal advisers to the Facility Agent, addressed to the Finance Parties. 2. If the Additional Obligor is incorporated in a jurisdiction other than England, a legal opinion from legal advisers in that jurisdiction, addressed to the Finance Parties. 74 OTHER DOCUMENTS AND EVIDENCE 1. Evidence that all expenses due and payable from the Company under this Agreement in respect of the Accession Agreement have been paid. 2. A copy of any other authorisation or other document, opinion or assurance which the Facility Agent has notified the Company is necessary or desirable in connection with the entry into and performance of, and the transactions contemplated by, the Accession Agreement or for the validity and enforceability of any Finance Document. 75 SCHEDULE 3 FORM OF REQUEST To: THE ROYAL BANK OF SCOTLAND PLC as Facility Agent From: [ ] Date: [ ] FAIRCLOUGH HOMES GROUP LIMITED-POUND STERLING 100,000,000 CREDIT AGREEMENT DATED [ ], 2001 (AS AMENDED FROM TIME TO TIME) (the AGREEMENT) 1. We refer to the Agreement. This is a Request. 2. We wish to borrow a Loan on the following terms: (a) Utilisation Date: [ ] (b) Amount: [ ] (c) Interest Period: [ ]. 3. Our payment instructions are: [ ]. 4. We confirm that each condition precedent under the Agreement which must be satisfied on the date of this Request is so satisfied. 5. This Request is irrevocable. By: [ ] 76 SCHEDULE 4 CALCULATION OF THE MANDATORY COST 1. GENERAL The Mandatory Cost is an addition to the interest rate to compensate Lenders for the cost of compliance with: (a) the requirements of the Bank of England and/or the Financial Services Authority (or, in either case, any other authority which replaces all or any of its functions); or (b) the requirements of the European Central Bank. 2. CALCULATION - GENERAL On the first day of each Interest Period (or as soon as possible thereafter) the Facility Agent shall calculate, as a percentage rate, a rate (the ADDITIONAL COST RATE) for each Lender, in accordance with the paragraphs set out below. The Mandatory Cost will be calculated by the Facility Agent as a weighted average of the Lenders' Additional Cost Rates (weighted in proportion to the percentage participation of each Lender in the relevant Loan) and will be expressed as a percentage rate per annum. 3. FOR A LENDER LENDING FROM A FACILITY OFFICE IN THE U.K. (a) The Additional Cost Rate for a Lender lending from a Facility Office in the U.K. will be calculated by the Facility Agent as follows: AB + C(B - D) + E x 0.01 ------------------------ per cent. annum 100 - (A + C) where on the day of application of the formula: A is the percentage of eligible liabilities (in excess of any stated minimum) which the Bank of England requires that Lender to maintain as an interest free cash ratio deposit with the Bank of England to comply with cash ratio requirements; B is LIBOR for that Interest Period; C is the percentage (if any) of eligible liabilities which the Bank of England requires that Lender to place as an interest bearing special deposit with the Bank of England; D is the interest rate per annum payable by the Bank of England to the Agent on interest bearing special deposits; and E is the rate of charge payable by that Lender to the Financial Services Authority under the fees rules and calculated as being the average of the most recent rates of charge supplied by that Lender to the Agent pursuant to paragraph (d) below and expressed in pounds per Pound Sterling 1 million. 77 (b) For the purposes of this paragraph 2: (i) ELIGIBLE LIABILITIES and SPECIAL DEPOSIT have the meanings given to them from time to time under or pursuant to the Bank of England Act 1998 or (as may be appropriate) by the Bank of England; (ii) FEE RULES means the rules on periodic fees contained in the FSA Supervision Manual or such other law or regulation as may be in force from time to time in respect of the payment of fees for the acceptance of deposits; (iii) FEE TARIFFS means the fee tariffs specified in the fees rules under the activity group A.1 Deposit acceptors (ignoring any minimum fee or zero rated fee required pursuant to the fees rules but taking into account any applicable discount rate); and (iv) TARIFF BASE has the meaning given to it in, and will be calculated in accordance with, the fees rules. (c) (i) In the application of the formula, A, B, C and D are included as figures and not as percentages, e.g. if A = 0.5% and B = 15%, AB is calculated as 0.5 x 15. A negative result obtained by subtracting D from B is taken as zero. (ii) Each rate calculated in accordance with the formula is, if necessary, rounded to four decimal places. (d) If requested by the Agent, each Lender shall, as soon as practicable after publication by the Financial Services Authority, supply to the Agent, the rate of charge payable by that Lender to the Financial Services Authority pursuant to the fees rules in respect of the relevant financial year of the Financial Services Authority (calculated for this purpose by that Lender as being the average of the fee tariffs applicable to that Lender for that financial year) and expressed in pounds per Pound Sterling 1,000,000 of the tariff base of that Lender. (e) (i) Each Lender must supply to the Facility Agent the information required by it to make a calculation of the Additional Cost Rate for that Lender. In particular, but without limitation, each Lender shall supply the following information in writing on or prior to the date on which it becomes a Lender: (A) its jurisdiction of incorporation and the jurisdiction of its Facility Office; and (B) any other information that the Facility Agent may reasonably require for such purpose. Each Lender shall promptly notify the Facility Agent in writing of any change to the information provided by it pursuant to this paragraph. The Facility Agent may assume that this information is correct in all respects. (ii) The percentages or rates of charge of each Lender for the purpose of A, C and E above shall be determined by the Facility Agent based upon the information supplied to it pursuant to paragraphs (d) and (e) above and on the assumption that, unless a Lender notifies the Facility Agent to the contrary, each Lender's obligations in respect of cash ratio deposits and special deposits are the same as those of a typical bank from its jurisdiction of incorporation with a Facility Office in the same jurisdiction as its Facility Office. 78 (iii) The Facility Agent has no liability to any person if such determination results in an Additional Cost Rate which over or under compensates any Lender and shall be entitled to assume that the information provided by any Lender pursuant to sub-paragraphs 3(d) and 3(e) and paragraph 4 below is true and correct in all respects. (iv) The Facility Agent shall distribute the additional amounts received as a result of the Mandatory Cost to the Lenders on the basis of the Additional Cost Rate for each Lender based on the information provided by each Lender under sub-paragraphs 3(d) and 3(e) and paragraph 4 below . (v) Any determination by the Facility Agent pursuant to this schedule in relation to a formula, the Mandatory Cost, an Additional Cost Rate or any amount payable to a Lender shall, in the absence of manifest error, be conclusive and binding on all Parties. 4. FOR A LENDER LENDING FROM A FACILITY OFFICE IN A PARTICIPATING MEMBER STATE (a) The Additional Cost Rate for a Lender lending from a Facility Office in a Participating Member State will be the percentage notified by that Lender to the Facility Agent. This percentage will be certified by that Lender in its notice to the Agent to be its reasonable determination of the cost (expressed as a percentage of that Lender's participation in all Loans made from that Facility Office) of complying with the minimum reserve requirements of the European Central Bank in respect of Loans made from that Facility Office. (b) If a Lender fails to specify a rate under paragraph (a) above, the Facility Agent will assume that the Lender has not incurred any such cost. 5. CHANGES The Facility Agent may from time to time, after consultation with the Company and the Lenders, determine and notify all the Parties of any amendment to this Schedule which is required to comply with: (a) any change in law or regulation; or (b) any requirement from time to time imposed by the Bank of England, the Financial Services Authority or the European Central Bank (or, in any case, any other authority which replaces all or any of its functions). Any such determination will be, in the absence of manifest error, conclusive and binding on all the Parties. 79 SCHEDULE 5 FORM OF TRANSFER CERTIFICATE To: THE ROYAL BANK OF SCOTLAND PLC as Facility Agent From: [THE EXISTING LENDER] (the EXISTING LENDER) and [THE NEW LENDER] (the NEW LENDER) Date: [ ] FAIRCLOUGH HOMES GROUP LIMITED - POUND STERLING 100,000,000 CREDIT AGREEMENT DATED 29TH MARCH, 2001 (AS AMENDED FROM TIME TO TIME) (the AGREEMENT) We refer to the Agreement. This is a Transfer Certificate. 1. The Existing Lender transfers by novation to the New Lender the Existing Lender's rights and obligations referred to in the Schedule below in accordance with the terms of the Agreement. 2. The proposed Transfer Date is [ ]. 3. The administrative details of the New Lender for the purposes of the Agreement are set out in the Schedule. 4. This Transfer Certificate is governed by English law. THE SCHEDULE RIGHTS AND OBLIGATIONS TO BE TRANSFERRED BY NOVATION [insert relevant details, including applicable Commitment (or part)] ADMINISTRATIVE DETAILS OF THE NEW LENDER [insert details of Facility Office, address for notices and payment details etc.] [EXISTING LENDER] [NEW LENDER] By: By: The Transfer Date is confirmed by the Facility Agent as [ ]. THE ROYAL BANK OF SCOTLAND PLC By: 80 SCHEDULE 6 EXISTING SECURITY
MAXIMUM PRINCIPAL MEMBER OF THE GROUP AMOUNT SECURED CREATING SECURITY DETAILS OF SECURITY POUND STERLING Fairclough Homes Limited Legal Charge to Tokentriumph Nil Limited dated 20/05/1988 Fairclough Homes Limited Charge to National Power PLC 1,923,566.65 dated 03/02/2000 Fairclough Homes Limited Legal Charge to David Wood 247,000.00 and Julia Margaret Wood dated 17/03/2000 Fairclough Homes Limited Legal Charge to Kilnhurst Nil Limited dated 17/05/2000 Fairclough Homes Limited Third Party Legal Charge to Nil Girobank Plc dated 01/06/2000 (registered 09/06/2000) Fairclough Homes Limited Third Party Legal Charge to Nil Girobank Plc dated 01/06/2000 (registered 09/06/2000) Fairclough Homes Limited Third Party Legal Charge to Nil Girobank Plc dated 01/06/2000 (registered 14/06/2000) Fairclough Homes Limited Third Party Legal Charge to Nil Girobank Plc dated 01/06/2000 (registered 14/06/2000) Fairclough Homes Limited Third Party Legal Charge to Nil Girobank Plc dated 01/06/2000 (registered 15/06/000) Fairclough Homes Limited Third Party Legal Charge to Nil Girobank Plc dated 01/06/2000 (registered 15/06/2000) Fairclough Homes Limited Third Party Legal Charge to Nil Girobank Plc dated 01/06/2000 (registered 15/06/2000)
81
MAXIMUM PRINCIPAL MEMBER OF THE GROUP AMOUNT SECURED CREATING SECURITY DETAILS OF SECURITY POUND STERLING Fairclough Homes Limited Third Party Legal Charge to Nil Girobank Plc dated 01/06/2000 (registered 15/06/2000) Fairclough Homes Limited Third Party Legal Charge to Nil Girobank Plc dated 01/06/2000 (registered 15/06/2000) Fairclough Homes Limited Third Party Legal Charge to Nil Girobank Plc dated 01/06/2000 (registered 15/06/2000) Fairclough Homes Limited Legal Charge to McLean Nil Homes South West Limited dated 30/06/2000 Fairclough Homes Limited Legal Charge to Renishaw 5,551,875.00 Properties Limited dated 25/10/2000 Fairclough Homes Limited Legal Charge to Cathelco 906,806.25 Limited dated 08/11/2000 Fairclough Homes Limited Legal Charge to Megahart 1,360,000.00 Limited dated 26/02/2001
82 SCHEDULE 7 FORM OF COMPLIANCE CERTIFICATE To: THE ROYAL BANK OF SCOTLAND PLC as Facility Agent From: CENTEX DEVELOPMENT FUNDING COMPANY UK LIMITED Date: [ ] FAIRCLOUGH HOMES GROUP LIMITED - POUND STERLING 100,000,000 CREDIT AGREEMENT DATED 29TH MARCH, 2001 (AS AMENDED FROM TIME TO TIME) (the AGREEMENT) 1. We refer to the Agreement. This is a Compliance Certificate. 2. We confirm that as at [relevant testing date]: (a) Adjusted Security Asset Value is [ ];* (b) the aggregate principal amount of: (i) outstanding Loans; (ii) the net amount outstanding under the Overdraft Facility; and (iii) the amount outstanding under the Bonding Facility, is Pound Sterling [ ]; therefore, the Adjusted Security Asset Value is [ ] per cent. ([ ]%) of that amount;* (c) Consolidated Tangible Net Worth is [ ];** (d) Consolidated Total Net Borrowings are [ ]; therefore, Consolidated Total Net Borrowings are [ ] per cent. ([ ]%) of Consolidated Tangible Net Worth; and** (e) Consolidated EBIT was [ ] and Consolidated Net Interest Payable was [ ]; therefore, the ratio of Consolidated EBIT to Consolidated Net Interest Payable was [ ] to 1. ** 3. We set out below calculations establishing the figures in paragraph 2 above based on [describe accounts]: [ ]. 4. We confirm that the following companies were Material Subsidiaries at [relevant testing date]: ** [ ]. - ---------- * Monthly. ** Only at the end of each financial quarter and when audited consolidated accounts of the Company provided. 83 5. [We confirm that no Default is outstanding as at [relevant testing date].* CENTEX DEVELOPMENT FUNDING COMPANY UK LIMITED By: 84 SCHEDULE 8 FORM OF ACCESSION AGREEMENT To: THE ROYAL BANK OF SCOTLAND PLC as Facility Agent From: CENTEX DEVELOPMENT FUNDING COMPANY UK LIMITED and [Proposed Borrower/Proposed Guarantor] Date: [ ] FAIRCLOUGH HOMES GROUP LIMITED - POUND STERLING 100,000,000 CREDIT AGREEMENT DATED 29TH MARCH, 2001 (AS AMENDED FROM TIME TO TIME) (the AGREEMENT) We refer to the Agreement. This is an Accession Agreement. [Name of company] of [address/registered office] agrees to become an Additional Borrower/Guarantor* and to be bound by the terms of the Agreement as an Additional Borrower/Guarantor*. This Accession Agreement is governed by English law. CENTEX DEVELOPMENT FUNDING COMPANY UK LIMITED By: [PROPOSED BORROWER/GUARANTOR]* By: - ----------- * Delete as applicable. 85 SCHEDULE 9 FORM OF RESIGNATION REQUEST To: THE ROYAL BANK OF SCOTLAND PLC as Facility Agent From: CENTEX DEVELOPMENT FUNDING COMPANY UK LIMITED and [relevant Obligor] Date: [ ] FAIRCLOUGH HOMES GROUP LIMITED - POUND STERLING 100,000,000 CREDIT AGREEMENT DATED 29TH MARCH, 2001 (AS AMENDED FROM TIME TO TIME) (the AGREEMENT) 1. We refer to the Agreement. This is a Resignation Request. 2. We request that [resigning Obligor] be released from its obligations as [a/an] [Obligor/Borrower/Guarantor]* under the Agreement. 3. We confirm that no Default is outstanding or would result from the acceptance of this Resignation Request. 4. We confirm that as at the date of this Resignation Request no amount owed by [resigning Obligor] under the Agreement is outstanding. 5. This Resignation Request is governed by English law. CENTEX DEVELOPMENT FUNDING COMPANY UK LIMITED [Relevant Obligor] By: By: The Facility Agent confirms that this resignation takes effect on [ ]. THE ROYAL BANK OF SCOTLAND PLC By: - ----------- * Delete as applicable. 86 (ALLEN & OVERY LETTERHEAD) SCHEDULE 10 FORM OF SECURITY AGREEMENT SECURITY AGREEMENT DATED [ ] MARCH, 2001 BETWEEN FAIRCLOUGH HOMES GROUP LIMITED FAIRCLOUGH HOMES LIMITED VIEWTON PROPERTIES LIMITED - AND - THE ROYAL BANK OF SCOTLAND PLC 87 INDEX
CLAUSE PAGE 1. Interpretation ................................................ 89 2. Creation of security .......................................... 91 3. Representations - general ..................................... 92 4. Restrictions on dealings ...................................... 92 5. Investments ................................................... 92 6. When security becomes enforceable ............................. 94 7. Enforcement of security ....................................... 94 8. Receiver ..................................................... 96 9. Powers of receiver ........................................... 96 10. Application of proceeds ...................................... 98 11. Expenses and indemnity ....................................... 99 12. Delegation ................................................... 99 13. Further assurances ........................................... 99 14. Power of attorney ............................................ 100 15. Miscellaneous ................................................ 100 16. Release ...................................................... 101 17. Governing law ................................................ 101 SCHEDULES 1. Chargors ..................................................... 102 2. [ ] ........................................... 103 Part 1 Form of Letter of Non-Crystallisation ........................ 103 Part 2 Form of Deed of Partial Release .............................. 105 Signatories ........................................................... 107
88 THIS DEED is dated [ ] March, 2001 between: (1) THE COMPANIES listed in Schedule 1 as chargors (each a CHARGOR); (2) THE ROYAL BANK OF SCOTLAND PLC (the FACILITY AGENT) as agent and trustee for the Senior Lenders (as defined below). BACKGROUND: (A) Each Chargor enters into this Deed in connection with the Credit Agreement (as defined below). (B) It is intended that this document takes effect as a deed notwithstanding the fact that a party may only execute this document under hand. IT IS AGREED as follows: 1. INTERPRETATION 1.1 DEFINITIONS In this Deed: ACT means the Law of Property Act 1925. BONDING FACILITY means a bonding facility of up to Pound Sterling 5,000,000 (or its equivalent in other currencies) in aggregate made available, or to be made available, to the Group by the Overdraft Bank on the terms of the Bonding Facility Agreement. BONDING FACILITY AGREEMENT means any agreement between a member of the Group and the Overdraft Bank relating to the Bonding Facility and any guarantee, performance bond or other similar document issued to a third party under the Bonding Facility. CREDIT AGREEMENT means the Pound Sterling 100,000,000 credit agreement dated on or about the date of this Deed between (among others) the Chargors and the Facility Agent. INVESTMENTS means: (a) any shares in any member of the Group other than CDFCUK; (b) any dividend or interest paid or payable in relation to any such shares; and (c) any right, money or property accruing or offered at any time in relation to any such shares by way of redemption, substitution, exchange, bonus or preference under option rights or otherwise. OVERDRAFT BANK means National Westminster Bank Plc in its capacity as provider of the Overdraft Facility and Bonding Facility. OVERDRAFT FACILITY means an overdraft facility in a net amount of up to Pound Sterling 5,000,000 (or its equivalent in other currencies), or, subject to clause 20.7 (Financial Indebtedness) of the Credit Agreement, such other amount as the Overdraft Bank and the Company may agree, 89 made available, or to be made available, to the Group by the Overdraft Bank on the terms of the Overdraft Facility Agreement. OVERDRAFT FACILITY AGREEMENT means any agreement between a member of the Group and the Overdraft Bank relating to the Overdraft Facility. PARTY means a party to this Deed. RBS BONDS means the bonds issued by The Royal Bank of Scotland plc under the RBS Facility which are outstanding on the date of this Deed. RBS FACILITY means the bonding facility previously made available to the Group by The Royal Bank of Scotland plc. RECEIVER means a receiver and manager or (if the Facility Agent so specifies in the relevant appointment) a receiver, in either case, appointed under this Deed. SECURED LIABILITIES means all present and future obligations and liabilities (whether actual or contingent and whether owed jointly or severally or in any other capacity whatsoever) of each Chargor to any Senior Lender under or in respect of each Senior Document to which a Chargor is a party, except for any obligation which, if it were so included, would result in this Deed contravening Section 151 of the Companies Act 1985. SECURITY ASSETS means all assets of each Chargor the subject of any security created by this Deed. SECURITY PERIOD means the period beginning on the date of this Deed and ending on the date on which all the Secured Liabilities have been unconditionally and irrevocably paid and discharged in full. SENIOR DOCUMENTS means the Finance Documents, the Overdraft Facility Agreement, the Bonding Facility Agreement and the RBS Bonds. SENIOR LENDERS means the Finance Parties and the Overdraft Bank. 1.2 CONSTRUCTION (a) Capitalised terms defined in the Credit Agreement have, unless expressly defined in this Deed, the same meaning in this Deed. (b) The provisions of Clause 1.2 (Construction) of the Credit Agreement apply to this Deed as though they were set out in full in this Deed, except that references to the Credit Agreement will be construed as references to this Deed. (c) (i) The term SENIOR DOCUMENT includes all amendments and supplements including supplements providing for further advances; and (Ii) the term THIS SECURITY means any security created by this Deed. (d) Any covenant of a Chargor under this Deed (other than a payment obligation) remains in force during the Security Period. (e) The terms of the other Senior Documents and of any side letters between any Parties in relation to any Senior Document are incorporated in this Deed to the extent required to ensure 90 that any purported disposition of any freehold or leasehold property contained in this Deed is a valid disposition in accordance with Section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989. (f) If the Facility Agent considers that an amount paid to a Senior Lender under a Senior Document is capable of being avoided or otherwise set aside on the liquidation or administration of the payer or otherwise, then that amount will not be considered to have been irrevocably paid for the purposes of this Deed. (g) Unless the context otherwise requires, a reference to a Security Asset includes the proceeds of sale of that Security Asset. 2. CREATION OF SECURITY 2.1 GENERAL (a) All the security created under this Deed: (i) is created in favour of the Facility Agent; (ii) is security for the payment of all the Secured Liabilities; and (iii) is made with full title guarantee in accordance with the Law of Property (Miscellaneous Provisions) Act 1994. (b) If the rights of a Chargor under a document cannot be secured without the consent of a party to that document: (i) that Chargor must notify the Facility Agent promptly; (ii) this Security will secure all amounts which that Chargor may receive, or has received, under that document but exclude the document itself; and (iii) unless the Facility Agent otherwise requires, that Chargor must use reasonable endeavours to obtain the consent of the relevant party to that document being secured under this Deed. (c) The Facility Agent holds the benefit of this Deed on trust for the Senior Lenders. 2.2 INVESTMENTS Each Chargor secures by way of a first legal mortgage all Investments owned by it or held by any nominee on its behalf. 2.3 FLOATING CHARGE (a) Subject to any right of set-off of the Overdraft Bank in connection with the Overdraft Facility, each Chargor secures by way of a first floating charge all its assets (other than the Investments). (b) The Facility Agent may by notice to a Chargor convert the floating charge created by that Chargor under this Subclause into a fixed charge as regards any of that Chargor's assets specified in that notice, if: 91 (i) an Event of Default is outstanding; or (ii) the Facility Agent reasonably considers those assets to be in danger of being seized or sold under any form of distress, attachment, execution or other legal process or to be otherwise in jeopardy. 3. REPRESENTATIONS - GENERAL 3.1 NATURE OF SECURITY Each Chargor represents to each Senior Lender that this Deed creates those Security Interests it purports to create and is not liable to be amended or otherwise set aside on its liquidation or administration or otherwise. 3.2 TIMES FOR MAKING REPRESENTATIONS (a) The representations set out in this Deed (including in this Clause) are made on the date of this Deed. (b) Unless a representation is expressed to be given at a specific date, each representation under this Deed is deemed to be repeated by each Chargor on each date during the Security Period. (c) When a representation is repeated, it is applied to the circumstances existing at the time of repetition. 4. RESTRICTIONS ON DEALINGS No Chargor may: (a) create or permit to subsist any Security Interest on any Security Asset; or (b) sell, transfer, licence, lease or otherwise dispose of any Security Asset, except as expressly allowed under the Credit Agreement. 5. INVESTMENTS 5.1 INVESTMENTS Each Chargor represents to each Senior Lender that: (a) its Shares and, to the extent applicable, its other Investments, are fully paid; (b) its Shares represent the whole of the issued share capital of: (i) in the case of Fairclough Homes Group Limited, Fairclough Homes Limited; and (ii) in the case of Fairclough Homes Limited, Viewton Properties Limited; (c) it is the sole legal and beneficial owner of its Investments. 5.2 DEPOSIT Each Chargor must: 92 (a) immediately deposit with the Facility Agent, or as the Facility Agent may direct, all certificates and other documents of title or evidence of ownership in relation to any of its Investments; and (b) promptly execute and deliver to the Facility Agent all share transfers and other documents which may be requested by the Facility Agent in order to enable the Facility Agent or its nominees to be registered as the owner or otherwise obtain a legal title to any of its Investments. 5.3 CHANGES TO RIGHTS No Chargor may take or allow the taking of any action on its behalf which may result in the rights attaching to any of its Investments being altered or further shares in any Chargor other than Fairclough Homes Group Limited being issued. 5.4 CALLS (a) Each Chargor must pay all calls or other payments due and payable in respect of any of its Investments. (b) If a Chargor fails to do so, the Facility Agent may pay the calls or other payments on behalf of that Chargor. That Chargor must immediately on request reimburse the Facility Agent for any payment made by the Facility Agent under this Subclause. 5.5 OTHER OBLIGATIONS IN RESPECT OF INVESTMENTS (a) Each Chargor must promptly copy to the Facility Agent and comply with all requests for information which is within its knowledge and which are made under section 212 of the Companies Act 1985 or any similar provision contained in any articles of association or other constitutional document relating to any of its Investments. If it fails to do so, the Facility Agent may elect to provide such information as it may have on behalf of that Chargor. (b) Each Chargor must comply with all other conditions and obligations assumed by it in respect of any of its Investments. (c) The Facility Agent is not obliged to: (i) perform any obligation of a Chargor; (ii) make any payment, or to make any enquiry as to the nature or sufficiency of any payment received by it or a Chargor; or (iii) present or file any claim or take any other action to collect or enforce the payment of any amount to which it may be entitled under this Deed, in respect of any Investment. 5.6 VOTING RIGHTS (a) Before this Security becomes enforceable: (i) the voting rights, powers and other rights in respect of the Investments must (if exercisable by the Facility Agent) be exercised in any manner which the relevant Chargor may direct in writing; and 93 (ii) all dividends or other income paid or payable in relation to any Investments must be paid directly to the relevant Chargor. (b) After this Security has become enforceable, the Facility Agent may: (i) require that it or its nominee be registered as the owner of the shares; and (ii) exercise (in the name of the relevant Chargor and without any further consent or authority on the part of the relevant Chargor) any voting rights and any powers or rights which may be exercised by the person or persons in whose name any Investment is registered or who is the holder of any Investment or otherwise. This includes all the powers given to trustees by Section 10(3) and (4) of the Trustee Act, 1925, as amended by Section 9 of the Trustee Investment Act, 1961, in respect of securities or property subject to a trust. 6. WHEN SECURITY BECOMES ENFORCEABLE 6.1 EVENT OF DEFAULT This Security will become immediately enforceable if an Event of Default is outstanding. 6.2 DISCRETION After this Security has become enforceable, the Facility Agent may in its absolute discretion enforce all or any part of this Security in any manner it sees fit or as the Majority Lenders direct. 6.3 POWER OF SALE The power of sale and other powers conferred by Section 101 of the Act, as amended by this Deed, will be immediately exercisable at any time after this Security has become enforceable. 7. ENFORCEMENT OF SECURITY 7.1 GENERAL (a) For the purposes of all powers implied by statute, the Secured Liabilities are deemed to have become due and payable on the date of this Deed. (b) Section 103 of the Act (restricting the power of sale) and Section 93 of the Act (restricting the right of consolidation) do not apply to this Security. (c) The statutory powers of leasing conferred on the Facility Agent are extended so as to authorise the Facility Agent to lease, make agreements for leases, accept surrenders of leases and grant options as the Facility Agent may think fit and without the need to comply with any provision of section 99 or 100 of the Act. 7.2 NO LIABILITY AS MORTGAGEE IN POSSESSION Neither the Facility Agent nor any Receiver will be liable, by reason of entering into possession of a Security Asset, to account as mortgagee in possession or for any loss on realisation or for any default or omission for which a mortgagee in possession might be liable. 94 7.3 PRIVILEGES Each Receiver and the Facility Agent is entitled to all the rights, powers, privileges and immunities conferred by the Act on mortgagees and receivers duly appointed under the Act, except that Section 103 of the Act does not apply. 7.4 PROTECTION OF THIRD PARTIES No person (including a purchaser) dealing with the Facility Agent or a Receiver or its or his agents will be concerned to enquire: (a) whether the Secured Liabilities have become payable; (b) whether any power which the Facility Agent or a Receiver is purporting to exercise has become exercisable or is being properly exercised; (c) whether any money remains due under the Senior Documents; or (d) how any money paid to the Facility Agent or to that Receiver is to be applied. 7.5 REDEMPTION OF PRIOR MORTGAGES (a) At any time after this Security has become enforceable, the Facility Agent may: (i) redeem any prior Security Interest against any Security Asset; and/or (ii) procure the transfer of that Security Interest to itself; and/or (iii) settle and pass the accounts of the prior mortgagee, chargee or encumbrancer; any accounts so settled and passed will be, in the absence of manifest error, conclusive and binding on each Chargor. (b) Each Chargor must pay to the Facility Agent, immediately on demand, the costs and expenses incurred by the Facility Agent in connection with any such redemption and/or transfer, including the payment of any principal or interest. 7.6 CONTINGENCIES If this Security is enforced at a time when no amount is due under the Senior Documents but at a time when amounts may or will become due, the Facility Agent (or the Receiver) may pay the proceeds of any recoveries effected by it into a suspense account. 8. RECEIVER 8.1 APPOINTMENT OF RECEIVER (a) The Facility Agent may appoint any one or more persons to be a Receiver of all or any part of the Security Assets if: (i) this Security has become enforceable; or (ii) a Chargor so requests the Facility Agent in writing at any time. (b) Any appointment under paragraph (a) above may be by deed, under seal or in writing under its hand. 95 (c) Section 109(1) of the Act does not apply to this Deed. 8.2 REMOVAL The Facility Agent may by writing under its hand (subject to any requirement for an order of the court in the case of an administrative receiver) remove any Receiver appointed by it and may, whenever it thinks fit, appoint a new Receiver in the place of any Receiver whose appointment may for any reason have terminated. 8.3 REMUNERATION The Facility Agent may fix the remuneration of any Receiver appointed by it and the maximum rate specified in Section 109(b) of the Act will not apply. 8.4 AGENT OF EACH CHARGOR (a) A Receiver will be deemed to be the agent of each Chargor for all purposes and accordingly will be deemed to be in the same position as a Receiver duly appointed by a mortgagee under the Act. Each Chargor alone is responsible for the contracts, engagements, acts, omissions, defaults and losses of a Receiver and for liabilities incurred by a Receiver. (b) No Senior Lender will incur any liability (either to a Chargor or to any other person) by reason of the appointment of a Receiver or for any other reason. 8.5 RELATIONSHIP WITH FACILITY AGENT To the fullest extent allowed by law, any right, power or discretion conferred by this Deed (either expressly or impliedly) or by law on a Receiver may after this Security becomes enforceable be exercised by the Facility Agent in relation to any Security Asset without first appointing a Receiver and notwithstanding the appointment of a Receiver. 9. POWERS OF RECEIVER 9.1 GENERAL (a) A Receiver has all of the rights, powers and discretions set out below in this Clause in addition to those conferred on it by any law, including all the rights, powers and discretions conferred on a receiver under the Act and a receiver or an administrative receiver under the Insolvency Act, 1986. (b) If there is more than one Receiver holding office at the same time, each Receiver may (unless the document appointing him states otherwise) exercise all of the powers conferred on a Receiver under this Deed individually and to the exclusion of any other Receiver. 9.2 POSSESSION A Receiver may take immediate possession of, get in and collect any Security Asset. 9.3 CARRY ON BUSINESS A Receiver may carry on the business of any Chargor in any manner he thinks fit. 96 9.4 EMPLOYEES (a) A Receiver may appoint and discharge managers, officers, agents, accountants, servants, workmen and others for the purposes of this Deed upon such terms as to remuneration or otherwise as he thinks fit. (b) A Receiver may discharge any person appointed by any Chargor. 9.5 BORROW MONEY A Receiver may raise and borrow money either unsecured or on the security of any Security Asset either in priority to this Security or otherwise and generally on any terms and for whatever purpose which he thinks fit. 9.6 SALE OF ASSETS (a) A Receiver may sell, exchange, convert into money and realise any Security Asset by public auction or private contract and generally in any manner and on any terms which he thinks fit. (b) The consideration for any such transaction may consist of cash, debentures or other obligations, shares, stock or other valuable consideration and any such consideration may be payable in a lump sum or by instalments spread over any period which he thinks fit. (c) Fixtures, other than landlord's fixtures, may be severed and sold separately from the property containing them without the consent of the relevant Chargor. 9.7 LEASES A Receiver may let any Security Asset for any term and at any rent (with or without a premium) which he thinks fit and may accept a surrender of any lease or tenancy of any Security Asset on any terms which he thinks fit (including the payment of money to a lessee or tenant on a surrender). 9.8 COMPROMISE A Receiver may settle, adjust, refer to arbitration, compromise and arrange any claim, account, dispute, question or demand with or by any person who is or claims to be a creditor of any Chargor or relating in any way to any Security Asset. 9.9 LEGAL ACTIONS A Receiver may bring, prosecute, enforce, defend and abandon any action, suit or proceedings in relation to any Security Asset which he thinks fit. 9.10 RECEIPTS A Receiver may give a valid receipt for any moneys and execute any assurance or thing which may be proper or desirable for realising any Security Asset. 9.11 SUBSIDIARIES A Receiver may form a Subsidiary of any Chargor and transfer to that Subsidiary any Security Asset. 97 9.12 DELEGATION A Receiver may delegate his powers in accordance with this Deed. 9.13 LENDING A Receiver may lend money or advance credit to any customer of any Chargor. 9.14 PROTECTION OF ASSETS A Receiver may: (a) effect any repair or insurance and do any other act which any Chargor might do in the ordinary conduct of its business to protect or improve any Security Asset; (b) commence and/or complete any building operation; and (c) apply for and maintain any planning permission, building regulation approval or any other authorisation, in each case as he thinks fit. 9.15 OTHER POWERS A Receiver may: (a) do all other acts and things which he may consider desirable or necessary for realising any Security Asset or incidental or conducive to any of the rights, powers or discretions conferred on a Receiver under or by virtue of this Deed or law; (b) exercise in relation to any Security Asset all the powers, authorities and things which he would be capable of exercising if he were the absolute beneficial owner of that Security Asset; and (c) use the name of any Chargor for any of the above purposes. 10. APPLICATION OF PROCEEDS Any moneys received by the Facility Agent or any Receiver after this Security has become enforceable must be applied in the following order of priority: (a) in or towards payment of or provision for all costs and expenses incurred by the Facility Agent or any Receiver under or in connection with this Deed and of all remuneration due to any Receiver under or in connection with this Deed; (b) in or towards payment of or provision for the Secured Liabilities; and (c) in payment of the surplus (if any) to any Chargor or other person entitled to it. This Clause is subject to the payment of any claims having priority over this Security. This Clause does not prejudice the right of any Senior Lender to recover any shortfall from the Chargor. 98 11. EXPENSES AND INDEMNITY Each Chargor must: (a) to the extent not recovered by the relevant person under Clause 26 (Indemnities and Break Costs) or Clause 27 (Expenses) of the Credit Agreement, immediately on demand pay all costs and expenses (including legal fees) incurred in connection with this Deed by any Senior Lender, Receiver, attorney, manager, agent or other person appointed by the Facility Agent under this Deed; and (b) keep each of them indemnified against any failure or delay in paying those costs or expenses; this includes any arising from any actual or alleged breach by any person of any law or regulation, whether relating to the environment or otherwise. 12. DELEGATION 12.1 POWER OF ATTORNEY The Facility Agent or any Receiver may delegate by power of attorney or in any other manner to any person any right, power or discretion exercisable by it under this Deed. 12.2 INTEREST PERIODS Any such delegation may be made upon any terms (including power to sub-delegate) which the Facility Agent or any Receiver may think fit. 12.3 LIABILITY Neither the Facility Agent nor any Receiver will be in any way liable or responsible to any Chargor for any loss or liability arising from any act, default, omission or misconduct on the part of any delegate or sub-delegate. 13. FURTHER ASSURANCES Each Chargor must, at its own expense, take whatever action the Facility Agent or a Receiver may require for: (a) creating, perfecting or protecting any security intended to be created by this Deed; or (b) after the Security has become enforceable facilitating the realisation of any Security Asset, or the exercise of any right, power or discretion exercisable, by the Facility Agent or any Receiver or any of its delegates or sub-delegates in respect of any Security Asset. This includes: (i) the execution of any transfer, conveyance, assignment or assurance of any property, whether to the Facility Agent or to its nominee; or (ii) the giving of any notice, order or direction and the making of any registration, which, in any such case, the Facility Agent may think expedient. 99 14. POWER OF ATTORNEY Each Chargor, by way of security, irrevocably and severally appoints the Facility Agent, each Receiver and any of its delegates or sub-delegates to be its attorney to take any action which that Chargor is obliged to take under this Deed. Each Chargor ratifies and confirms whatever any attorney does or purports to do under its appointment under this Clause. 15. MISCELLANEOUS 15.1 COVENANT TO PAY Each Chargor must pay or discharge the Secured Liabilities in the manner provided for in the Senior Documents. 15.2 TACKING Each Senior Lender must perform its obligations under the Senior Documents (including any obligation to make available further advances). 15.3 NEW ACCOUNTS (a) If any subsequent charge or other interest affects any Security Asset, a Senior Lender may open a new account with a Chargor. (b) If a Senior Lender does not open a new account, it will nevertheless be treated as if it had done so at the time when it received or was deemed to have received notice of that charge or other account. (c) As from that time all payments made to a Senior Lender will be credited or be treated as having been credited to the new account and will not operate to reduce any Secured Liability. 15.4 TIME DEPOSITS Without prejudice to any right of set-off any Senior Lender may have under any other Senior Document or otherwise, if any time deposit matures on any account a Chargor has with any Senior Lender within the Security Period when: (a) this Security has become enforceable; and (b) no Secured Liability is due and payable, that time deposit will automatically be renewed for any further maturity which that Senior Lender considers appropriate. 15.5 NOTICE OF ASSIGNMENT This Deed constitutes notice in writing to each Chargor of any charge or assignment of a debt owed by that Chargor to any other member of the Group and contained in any other Security Document. 100 16. RELEASE At the end of the Security Period, the Senior Lenders must, at the request and cost of a Chargor, promptly take whatever action is necessary to release its Security Assets from this Security. 17. GOVERNING LAW This Deed is governed by English law. This Deed has been entered into as a deed on the date stated at the beginning of this Deed. 101 SCHEDULE 1 CHARGORS
NAME OF CHARGOR REGISTRATION NUMBER Fairclough Homes Group Limited 2804113 Fairclough Homes Limited 1987689 Viewton Properties Limited 2436950
102 SCHEDULE 2 [ ] PART 1 FORM OF LETTER OF NON-CRYSTALLISATION To: [RELEVANT CHARGOR] (the COMPANY) For the attention of: [DATE] Dear Sirs, SECURITY AGREEMENT (the SECURITY AGREEMENT) DATED [ ] MARCH, 2001 (AS AMENDED FROM TIME TO TIME) BETWEEN THE COMPANY AND THE ROYAL BANK OF SCOTLAND PLC (the FACILITY AGENT). We the Facility Agent, confirm that the floating charge created by the Company under Clause 2.3 (Floating Charge) of the Security Agreement, has not been converted into a fixed charge. Yours faithfully, For ----------------------------- THE ROYAL BANK OF SCOTLAND PLC 103 (ALLEN & OVERY LETTERHEAD) PART 2 FORM OF DEED OF PARTIAL RELEASE DEED OF PARTIAL RELEASE DATED [DATE] BETWEEN [COMPANY] AND THE ROYAL BANK OF SCOTLAND PLC 104 THIS DEED OF RELEASE is dated [DATE] between: (1) [CHARGOR] (the CHARGOR) (Registered No. [ ]); and (2) THE ROYAL BANK OF SCOTLAND PLC (the FACILITY AGENT). BACKGROUND (A) Under the Security Agreement (defined below), the Chargor, as security for the payment of the Secured Liabilities, charged all its assets in favour of the Facility Agent. (B) It is intended that this document takes effect as a deed notwithstanding the fact that a party may only execute this document under hand. IT IS AGREED as follows: 1. INTERPRETATION 1.1 DEFINITIONS In this Deed: RELEASED ASSETS means the assets detailed in Schedule 1. SECURITY AGREEMENT means the security agreement dated [ ] March, 2001, between amongst others, the Chargor and the Facility Agent. 1.2 CONSTRUCTION (a) Capitalised terms defined in the Security Agreement have, unless expressly defined in this Deed, the same meaning in this Deed. (b) The provisions of Clause 1.2 (Construction) of the Credit Agreement apply to this Deed as though they were set out in full in this Deed except that references to the Credit Agreement are to be construed as references to this Deed. 2. RELEASE Without prejudice to the other obligations of the Chargors under the Security Agreement, the Facility Agent irrevocably and unconditionally releases and discharges the Released Assets from all Security Interests created by the Chargor over the Released Assets under the Security Agreement. 3. GOVERNING LAW This Deed is governed by English law. This Deed has been entered into as a deed on the date stated at the beginning of this Deed. 105 SCHEDULE 1 RELEASED ASSETS 106 SIGNATORIES THE COMMON SEAL of ) [ ] was ) affixed to this Deed in ) the presence of: ) Director --------------------------- Director/Secretary ----------------- THE FACILITY AGENT THE ROYAL BANK OF SCOTLAND PLC By: 107 SIGNATORIES CHARGORS EXECUTED AS A DEED by ) FAIRCLOUGH HOMES GROUP ) LIMITED ) acting by ) Director Director/Secretary EXECUTED AS A DEED by ) FAIRCLOUGH HOMES ) LIMITED ) acting by ) Director Director/Secretary EXECUTED AS A DEED by ) VIEWTON PROPERTIES ) LIMITED ) acting by ) Director Director/Secretary FACILITY AGENT THE ROYAL BANK OF SCOTLAND PLC By: 108 SCHEDULE 11 FORM OF LEGAL OPINION OF ALLEN & OVERY To: The Finance Parties named as original parties to the Credit Agreement (as defined below). [ ], 2001 Dear Sirs, FAIRCLOUGH HOMES GROUP LIMITED - POUND STERLING 100,000,000 CREDIT AGREEMENT DATED 30TH MARCH, 2001 (the CREDIT AGREEMENT) We have received instructions from the Arranger in connection with the Credit Agreement. Defined terms In this opinion: AGREEMENT means the Credit Agreement or the Security Agreement; SECURITY ASSETS has, in relation to the Security Agreement, the meaning given to it in the Security Agreement; and Terms defined in the Credit Agreement have the same meaning in this opinion. DOCUMENTS AND SEARCHES For the purposes of this opinion we have examined the following documents: (a) a signed copy of the Credit Agreement; (b) a signed copy of the Security Agreement; (c) a certified copy of the memorandum and articles of association and certificate of incorporation of each Original Obligor; (d) a certified copy of the minutes of a meeting of the board of directors of each Original Obligor held on [ ]; (e) a certified copy of a resolution, signed by all the holders of the issued or allotted shares in each Original Guarantor, dated [ ]; and (f) a certificate of the Company confirming, amongst other things, that the entry into and performance of the Agreements will not contravene any borrowing or guarantee limit contained in the articles of association of any Original Obligor. On [ ] we carried out a search of each Original Obligor at the Companies Registry. On [ ] we made a telephone search of each Original Obligor at the winding-up petitions at the Companies court. 109 The above are the only documents or records we have examined and the only searches and enquiries we have carried out for the purposes of this opinion. ASSUMPTIONS We assume that: (a) each Original Obligor is not unable to pay its debts within the meaning of section 123 of the Insolvency Act, 1986 at the time it enters into an Agreement and will not as a result of any Agreement be unable to pay its debts within the meaning of that section; (b) no step has been taken to wind up or dissolve any Original Obligor, put any Original Obligor into administration or appoint a receiver, administrator, administrative receiver, trustee in bankruptcy or similar officer in respect of it or any of its assets although the searches of the Companies Registry referred to above gave no indication that any winding-up, dissolution or administration order or appointment of a receiver, administrator, administrative receiver, trustee in bankruptcy or similar officer has been made; (c) all signatures and documents are genuine; (d) all documents are and remain up-to-date; (e) the correct procedure was carried out at all the board meetings referred to above; for example, there was a valid quorum, all relevant interests of directors were declared and the resolutions were duly passed at each meeting; (f) any restrictions on the ability of an Original Obligor to borrow or guarantee contained in its Articles of Association would not be contravened by the entry into and performance by it of any Agreement to which it is a party; (g) the Agreements have been duly executed on behalf of the Original Obligors party to them by the person(s) authorised by the resolutions passed at the relevant meeting referred to above; (h) each Agreement is a legally binding, valid and enforceable obligation of each party to it other than the Original Obligor; (i) the guarantee contained in the Credit Agreement was given for the legitimate purposes of each Original Guarantor and the giving of the guarantee may reasonably be regarded as having been in its interests; and (j) no foreign law affects the conclusions stated below. OPINION Subject to the qualifications set out below and to any matters not disclosed to us, it is our opinion that, so far as the present laws of England are concerned: 1. STATUS: Each Original Obligor is a company incorporated with limited liability under the laws of England and is not in liquidation. 2. POWERS AND AUTHORITY: Each Original Obligor has the corporate power to enter into and perform the Agreements to which it is a party and has taken all necessary corporate action to authorise the execution, delivery and performance of those Agreements. 110 3. LEGAL VALIDITY: Each Agreement to which any Original Obligor is a party constitutes its legally binding, valid and enforceable obligation. 4. NON-conflict: The entry into and performance by each Original Obligor of each Agreement to which it is a party will not violate any provision of (i) any existing English law applicable to companies generally, or (ii) its memorandum or articles of association. 5. CONSENTS: No authorisations of governmental, judicial or public bodies or authorities in England are required by any Original Obligor in connection with the performance, validity or enforceability of its payment obligations under each Agreement to which it is a party. 6. TAXES: All payments due from any Original Obligor under the Credit Agreement may be made without deduction of any U.K. Taxes, if, in the case of interest: (a) (i) the person that advanced the participation in the Loan to which the interest relates was a bank for the purpose of Section 349 of the Income and Corporation Taxes Act 1988 (as currently defined in section 840A of the Income and Corporation Taxes Act 1988) at the time the Loan was made; and (ii) the person beneficially entitled to that interest is within the charge to U.K. corporation tax as regards that interest at the time the interest is paid; or (b) the interest is payable to a Treaty Lender and the Financial Intermediaries and Claims Office has given the necessary authorisation. 7. REGISTRATION REQUIREMENTS: Except for registration of the Security Agreement at the appropriate registries, it is not necessary or advisable to file, register or record any Agreement in any public place or elsewhere in England. 8. STAMP DUTIES: Except for any registration fees payable at the Companies Registry in respect of the Security Agreement, no stamp, registration or similar tax or charge is payable in England in respect of any Agreement. 9. SECURITY: Subject to due registration where required, the Security Agreement creates security interests in the Security Assets concerned. QUALIFICATIONS This opinion is subject to the following qualifications: (a) This opinion is subject to all insolvency and other laws affecting the rights of creditors generally. (b) No opinion is expressed on matters of fact. (c) It is arguable that any provisions contained in the Agreements requiring a person to issue certain directions to a receiver appointed by him, or requiring him to ensure that such a receiver acts in a specified manner, or otherwise intended to restrict the freedom of a receiver to act at his discretion in the exercise of powers conferred upon him, may have the effect of rendering such a receiver the agent of the person appointing him (rather than of the company over whose assets he is appointed). Such person would thereby become liable for liabilities incurred by the receiver. 111 (d) Clause 1.2(f) (Construction) of the Security Agreement and other provisions of the Agreements relating to or having the effect of permitting retention of security after payment in full may not be effective for that purpose. (e) This opinion, in so far as it relates to the obligations of and security given by the Obligors (in the case of the Borrower, other than in their capacity as Borrowers) under the Agreements, is given on the assumption that any security given by them under the Agreements has been given in good faith and for the purpose of carrying on the Obligors' business and that there are reasonable grounds for believing that the giving of such guarantees and security will benefit the relevant Obligor. (f) We express no opinion in respect of the relevant priority rules for any security created by the Agreements. In so far as English laws apply with regard to this matter, such matters are complex and depend partly upon the type of asset and the type of charge. A lengthy dissertation on this subject is not considered appropriate for an opinion of this kind. However, without being comprehensive, we would particularly draw your attention to the following points arising under English law (so far as applicable): (i) a Security Interest (if any) created on Security Assets prior to the security created thereover by the relevant Agreements may rank prior to the security created over such Security Assets by such Agreements in favour of the Facility Agent; (ii) certain statutory preferences, fixed charges, possessory liens, preferred creditors and other priorities arising by law may have a prior ranking; (iii) any security created under the relevant Agreements may be defeated by interests acquired by third parties without notice of the charges created thereby. To the extent that the Security Assets include property acquired after the date of the relevant Agreements, the charges created thereunder may be subject to any security interests and other rights affecting such property on the acquisition thereof. To the extent that any Security Assets are subject to a floating charge, such charge will take effect subject to any charges or other rights (including creditors' processes) validly created or arising prior to the crystallisation of such floating charge; (iv) insofar as the Security Assets constitute debts due from and other rights arising against third parties any charges created by the Agreements may be subject to rights (e.g. of set-off) of such third parties and may be invalid to the extent that charges or assignments of those debts or other rights are prohibited. Furthermore, a subsequent mortgagee or assignee may acquire priority over the charges created by the Agreements if the subsequent mortgagee or assignee gives prior notice to the third party; (v) any fixed charges over book debts and bank accounts contained in the Agreements may, depending upon the degree of control exercised by the Facility Agent over the chargors' powers to deal with such book debts and the proceeds thereof and/or such bank accounts, be construed instead as a floating charge; (vi) there have been a number of cases where fixed charges over book debts have been upheld or apparently accepted by the courts. However, these cases mostly involve charges in favour of clearing banks whose de facto control for these purposes may more easily be accepted or assumed by a court. Whilst we consider that there is a reasonable prospect that any fixed charges will not be challenged, if they were to be challenged there is a risk of those cases being distinguished on control grounds and of any fixed charges over book debts being held to take effect only as floating charges; 112 (vii) the judgment in the Court of Appeal case Re New Bullas Trading Ltd does however provide grounds for optimism that any purported fixed charges over book debts and bank accounts contained in the Agreements would be given effect as such. However, in view of the unusual factual situation in that case and the unusual drafting of the relevant security documents, that case might be distinguished; (viii) insofar as the Security Assets constitute shares in companies incorporated in the United Kingdom, any security created by the Agreements will only constitute an equitable charge, until such shares are registered in the name of the Facility Agent or its nominee; and (ix) insofar as the Security Assets constitute interests in real property situated in England, no priority as against third parties will generally be obtained pursuant to the Agreements unless and until due registration is effected at H.M. Land Charges Registry or H.M. Land Registry. (g) We express no opinion as to the title of any Obligor to any of the Security Assets, as to the nature of the security created by the Agreements over particular assets (whether fixed or floating), as to registration requirements or as to the marketability of or rights of enforcement over the Security Assets. We have conducted no due diligence in relation to the title of any Obligor to any Security Asset for the purposes of the Agreements. (h) No opinion is expressed as to any other restriction affecting any Security Asset or the security created by the Security Agreement. (i) The term ENFORCEABLE means that a document is of a type and form enforced by the English courts. It does not mean that each obligation will be enforced in accordance with its terms. Certain rights and obligations may be qualified by the non-conclusivity of certificates, doctrines of good faith and fair conduct, the availability of equitable remedies and other matters, but in our view these qualifications would not defeat your legitimate expectations in any material respect. This opinion is given for your sole benefit and may not be relied upon by or disclosed to any other person. Yours faithfully 113 SIGNATORIES COMPANY FAIRCLOUGH HOMES GROUP LIMITED By: ORIGINAL BORROWER FAIRCLOUGH HOMES LIMITED By: SUPPLEMENTAL BORROWERS CDC2020 PLC By: CENTEX UK LIMITED By: ORIGINAL GUARANTORS FAIRCLOUGH HOMES GROUP LIMITED By: FAIRCLOUGH HOMES LIMITED By: 114 VIEWTON PROPERTIES LIMITED By: SUPPLEMENTAL GUARANTORS CDC2020 PLC By: CENTEX DEVELOPMENT FUNDING COMPANY UK LIMITED By: CENTEX MANAGEMENT SERVICES LIMITED By: CENTEX STRATEGIC LAND LIMITED By: CENTEX UK LIMITED By: ARRANGER THE ROYAL BANK OF SCOTLAND PLC By: 115 ORIGINAL LENDER NATIONAL WESTMINSTER BANK PLC By: FACILITY AGENT THE ROYAL BANK OF SCOTLAND PLC By: 116 SCHEDULE 3 CONDITIONS PRECEDENT DOCUMENTS 1. A copy of the constitutional documents of each Obligor or, if the Facility Agent already has a copy, a certificate of an authorised signatory of CDFCUK confirming that the copy in the Facility Agent's possession is still correct, complete and in full force and effect as at a date no earlier than the date of this Agreement. 2. A copy of a resolution of the board of directors of each Obligor approving the terms of, and the transactions contemplated by, this Agreement. 3. A certificate of an authorised signatory of CDFCUK confirming that there has been no change to the list of authorised signatories of each Obligor since they were last delivered to the Facility Agent, or if there has been a change, a specimen of the signature of each additional person authorised on behalf of each Obligor to sign this Agreement. 4. A certificate of an authorised signatory of CDFCUK certifying that each copy document specified in this Schedule is correct, complete and in full force and effect as at a date no earlier than the date of this Agreement. 5. In the case of a Guarantor incorporated in the U.K., a copy of a resolution, signed by all (or any lower percentage agreed by the Facility Agent) of the holders of its issued or allotted shares, approving the terms of, and the transactions contemplated by, this Agreement. 6. If applicable, a copy of a resolution of the board of directors of each corporate shareholder in the relevant Guarantor approving the resolution referred to in paragraph 5 above. 7. A certificate of an authorised signatory of each Obligor: (a) confirming that utilising the Total Commitments in full would not breach any limit binding on it; and (b) certifying that each copy document specified in this Schedule is correct, complete and in full force and effect as at a date no earlier than the date of this Agreement. 8. A supplemental Security Agreement duly executed by each Obligor increasing the Bonding Facility from up to Pound Sterling 5,000,000 to up to Pound Sterling 10,000,000. 9. A legal opinion of Allen & Overy, English legal advisers to the Facility Agent, addressed to the Finance Parties. 10. Evidence (in the form of a confirmation addressed to the Company from the Facility Agent) that all expenses due and payable by the Company or CDFCUK under this Agreement have been paid or will be paid by the Effective Date. 117 SIGNATORIES TO THE SUPPLEMENTAL AGREEMENT COMPANY FAIRCLOUGH HOMES GROUP LIMITED By: ORIGINAL BORROWER FAIRCLOUGH HOMES LIMITED By: ORIGINAL GUARANTORS FAIRCLOUGH HOMES LIMITED By: VIEWTON PROPERTIES LIMITED By: SUPPLEMENTAL BORROWERS CDC2020 PLC By: CENTEX UK LIMITED By: 118 SUPPLEMENTAL GUARANTORS CDC2020 PLC By: CENTEX DEVELOPMENT FUNDING COMPANY UK LIMITED By: CENTEX MANAGEMENT SERVICES LIMITED By: CENTEX STRATEGIC LAND LIMITED By: CENTEX UK LIMITED By: FACILITY AGENT THE ROYAL BANK OF SCOTLAND PLC By: LENDERS NATIONAL WESTMINSTER BANK PLC By: HSBC BANK PLC By: 119 LLOYDS TSB BANK PLC By: YORKSHIRE BANK PLC By: ALLIED IRISH BANKS, p.l.c. By: GIROBANK PLC By: THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND By: 120
--------------------------- --------------------------- Previous Amended --------------------------- --------------------------- (POUND STERLING) (POUND STERLING) RBS (NatWest) 28,000,000 28.0% 28,000,000 28.0% HSBC 16,000,000 16.0% 18,000,000 18.0% Lloyds 16,000,000 16.0% 18,000,000 18.0% Yorkshire 16,000,000 16.0% 18,000,000 18.0% Girobank 8,000,000 8.0% 9,000,000 9.0% Allied Irish 8,000,000 8.0% 9,000,000 9.0% Bank of Ireland 8,000,000 8.0% 0.0% ----------- ----------- Total 100,000,000 100.0% 100,000,000 100.0% ----------- -----------
EX-10.8 8 d05408exv10w8.txt EX-10.8 AMENDED AND RESTATED SERP EXHIBIT 10.8 1 November 2002 SERP CENTEX CORPORATION AMENDED AND RESTATED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN PURPOSE Under the Internal Revenue Code (the "Code") the federal government sets a limit on the amount of annual compensation which may be considered in determining, for the account of an eligible participant, a company's contribution to a tax-qualified defined contribution plan, including the Profit Sharing and Retirement Plan of Centex Corporation (the "Plan"), and does not permit certain employees to participate in the Plan. The purpose of this non-qualified Supplemental Executive Retirement Plan ("SERP") is to establish balances for each participant in this SERP in an amount substantially equal to the contribution or additional contribution which he or she would have received under the Plan had 100% of his or her annual salary been eligible for a profit sharing contribution. The first SERP contribution was for the Plan year ended March 31, 1995. The Plan year was changed to a calendar year basis in 1999. ELIGIBILITY All current participants in the Plan whose employer's contribution, other than a 401(k) contribution, is reduced either by the compensation limit under Section 401(k)(17) of the Code or in order to satisfy any of the non-discrimination tests applicable to the Plan, such as Section 410(b)(2) of the Code, which is commonly referred to as the "average benefits test". Those provisions of the Code which so limit the employer's contribution are herein called the "Limitations". New employees paid annual compensation in excess of the Limitations (including an employee who does not yet qualify for participation in the Plan, provided that he or she does subscribe to the Plan when he or she becomes eligible to do so), and participants in the Plan who first meet the eligibility standards after subscribing to the Plan, may be added to this SERP at the sole discretion of either the Chairman and Chief Executive Officer or the President and Chief Operating Officer of Centex Corporation (the "Company"). In addition, employees (whether full time or part time) who are ineligible to participate in the Plan, but to whom the Company desires to extend benefits equivalent to those available to eligible employees under the Plan, may be added to this SERP at the sole discretion of either the Chairman and Chief Executive Officer or the President and Chief Operating Officer of the Company. FUNDING This is an unfunded, non-qualified plan. The amounts to be allocated to each participant for both contributions and earnings will be reflected only as accrued liabilities on the books and records of the Company. The participants will thus be unsecured creditors of the Company. From time to time the Company may, in its sole and absolute discretion, create and administer separate accounts for one or more participants which the Company may fund, from time to time, in amounts which are equivalent to the total account of the participant. CONTRIBUTIONS The annual SERP accrual for the account of each participant will be calculated using the total compensation which, but for the Limitations or an employee's ineligibility to participate in the Plan, would be eligible for a profit sharing contribution under the Plan ("Total Compensation") less the amount, if any, which has been considered for the Plan contribution. The difference between Total Compensation and the amount, if any, considered in the Plan is herein called "Excess Salary". The accrual contribution to be allocated to the account of a participant in the SERP will be the product of his or her Excess Salary times the percent of salary used by his or her employer in calculating the Plan contribution. Should the Plan formula be changed in future years such that the contribution is not calculated exclusively as a percentage of compensation, then the percentage to be used for the SERP shall represent the percentage derived by dividing the total profit sharing contribution for the applicable employer by the sum of all of Total Compensation for all of that employer's Plan participants. EARNINGS Each participant may designate how his or her SERP account balance is to be invested by the Company and will have a "phantom" account whose results will match the result of the investments made by the Company. Each participant may so designate how his or her SERP balance is to be invested by the Company by selecting among the various investment options available to him or her as a participant in the Plan. If a participant does not notify Fidelity, the offeror of such various investment options, as to which investment options he or she selects, then such account balance will be invested in the Fidelity Freedom 2000 Fund, which is heavily invested in fixed income securities, or its successor. PAYOUT Upon termination of employment, including retirement from the Company and all its subsidiaries and affiliates (including Centex Construction Products, Inc. and its subsidiaries) the Company will become obligated to pay to an employee the entire vested balance in his or her account in the SERP. Payout will be made on the same basis as payout to the employee under the Plan, subject to the following: 1. The Company may, in its sole and absolute discretion, pay out the entire SERP balance to such participant, regardless of whether or not such participant has elected -2- to maintain his or her balance in the Plan, at any time upon 90 days prior written notice. 2. If the balance of the SERP account at the time of termination of employment is less than $5,000, then within thirty (30) days following termination of employment the vested portion of his or her account balance will be disbursed to such participant, and thereafter he or she will have no further interest in the SERP. 3. Following termination of employment for any reason, if the participant is entitled to and, with the consent of the Company, does leave his or her SERP account balance in place, then the account will be credited with earnings at the same rate as active participants, depending upon the investment selections made by the participant. 4. Vesting of SERP balances will be identical to vesting of employer contributions to the Plan. Thus, if a terminated employee is only 60% vested in the Plan, the vesting in the SERP balance and accumulated earnings will also be 60%. No participant will be entitled to borrow or withdraw early any part of his or her vested balance. MODIFICATION, SUSPENSION OR TERMINATION OF SERP The Company may at any time amend, suspend or terminate the SERP. However, the amount accrued in the account of a participant in the SERP will not be reduced. If the SERP is suspended or terminated, the amount accrued in each account but not paid to the participant will continue to accrue interest at a rate equal to 80% of the prime rate charged from time to time by Bank of America until payout of such sum to the participant. -3- EX-10.10 9 d05408exv10w10.txt EX-10.10 AMENDED/RESTATED LONG TERM INCENTIVE PLAN EXHIBIT 10.10 021303 AMENDED AND RESTATED CENTEX CORPORATION LONG TERM INCENTIVE PLAN EFFECTIVE OCTOBER 1, 2001 1. OBJECTIVES. The Centex Corporation Long Term Incentive Plan (the "Plan") is designed to retain selected employees of Centex Corporation and all subsidiaries, partnerships and affiliates of Centex Corporation with regard to which Centex Corporation owns, directly or indirectly, at least 80% of the ownership interest therein, and reward them for making significant contributions to the success of Centex Corporation. These objectives are to be accomplished by making awards under the Plan and thereby providing Participants with a financial interest in the growth and performance of Centex Corporation. The Plan shall not constitute a "qualified plan" subject to the limitations of Section 401(a) of the Code, nor shall it constitute a "funded plan" for purposes of such requirements. This Plan shall be exempt from the participation and vesting requirements of Part 2 of Title I of ERISA, the funding requirements of Part 3 of Title I of ERISA, and the fiduciary requirements of Part 4 of Title I of ERISA by reason of the exclusions afforded to plans which are unfunded and maintained by an employer primarily for the purpose of providing deferred compensation for a select group of highly compensated employees. 2. DEFINITIONS. As used herein, the terms set forth below shall have the following respective meanings: "ACT" means the Securities Exchange Act of 1934, as amended. "ADMINISTRATOR" means the Compensation and Stock Option Committee of the Board. "AFFILIATE" means any direct or indirect subsidiary or parent of Centex Corporation and any partnership, joint venture, limited liability company or other business venture or entity in which Centex Corporation owns directly or indirectly at least 80% of the ownership interest in such entity, as determined by the Administrator in its sole and absolute discretion (such determination by the Administrator to be conclusively established by the grant of an Award by the Administrator to an officer or employee of such an entity). "AWARD" means an award of Deferred Stock granted to a Participant pursuant to any applicable terms, conditions and limitations as the Administrator may establish in order to fulfill the objectives of the Plan. "AWARD AGREEMENT" means a written agreement between Centex Corporation and a Participant that sets forth the terms, conditions and limitations applicable to an Award. Page 1 "BENEFICIARY" means such person or persons, or the trustee of an inter vivos trust for the benefit of natural persons, designated by the Participant in a written election filed with the Administrator as entitled to receive the Participant's Award(s) in the event of the Participant's death, or if no such election shall have been so filed, or if no designated Beneficiary survives the Participant or can be located by the Administrator, the person or persons entitled thereto under the last will of such deceased Participant, or if such decedent left no will, to the legal heirs of such decedent determined in accordance with the laws of intestate succession of the state of the decedent's domicile. "BOARD" means the Board of Directors of Centex Corporation as the same may be constituted from time to time. "CENTEX CORPORATION" means Centex Corporation, a Nevada corporation, or any successor thereto. "CODE" means the Internal Revenue Code of 1986, as amended. "COMPANY" means each of Centex Corporation and every Affiliate. "DEFERRED STOCK" means a right to receive at Payout the number of Shares covered by an Award, subject to the terms of this Plan and the Award Agreement. Deferred Stock does not represent any actual legal or beneficial interest in Centex Corporation. "DISABILITY" means a disability that entitles the Participant to benefits under the long-term disability plan sponsored by Centex Corporation which covers the Participant. "EMPLOYMENT" means employment with a Company. "EXPIRATION DATE" means, as to an Award, that date which is seven years past the Grant Date of such Award or such other period (not beyond ten years) as the Administrator may determine. "FAIR MARKET VALUE" means the closing price per Share as of a particular date reported on the consolidated transaction reporting system for the New York Stock Exchange or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was reported. "GRANT DATE" means the date an Award is made to a Participant hereunder, which will be April 1 of the year in which such Award is made, or any other date selected by the Administrator. Page 2 "PARTICIPANT" means an employee of a Company to whom an Award has been made under this Plan. "PAYOUT" means the distribution of vested Deferred Stock under the Plan. "PAYOUT DATE" means the date an Award becomes payable pursuant to Section 8. "PLAN" means this Centex Corporation Long Term Incentive Plan, as set forth herein and as may be amended from time to time. "RETIREMENT" means the termination of a Participant's Employment due to retirement on or after age 62 provided that the Participant has at least ten years of service with one or more Companies. "SHARE" means a share of Centex Corporation's present twenty-five cents ($0.25) par value common stock and any share or shares of capital stock or other securities of Centex Corporation hereafter issued or issuable upon, in respect of or in substitution or in exchange for each present share. Such Shares may be unissued or reacquired Shares, as the Board, in its sole and absolute discretion, shall from time to time determine. "TERMINATION DATE" means the last date on which the Participant is carried on a Company's payroll as an employee. 3. ELIGIBILITY. Only highly compensated employees of a Company are eligible for Awards under this Plan, as determined in the sole discretion of the Administrator. The Administrator shall select the Participants in the Plan from time to time as evidenced by the grant of Awards under the Plan. 4. PLAN ADMINISTRATION. The Plan shall be administered by the Administrator, which shall have full and exclusive power to interpret this Plan and to adopt such rules, regulations and guidelines for carrying out this Plan as it may deem necessary or appropriate in its sole discretion. The Administrator shall determine all terms and conditions of the Awards. The Administrator may, in its discretion, accelerate the vesting or Payout of an Award, eliminate or make less restrictive any restrictions contained in an Award Agreement, waive any restriction or other provision of this Plan or an Award Agreement or otherwise amend or modify an Award in any manner that is either (i) not materially adverse to the Participant holding the Award or (ii) consented to by such Participant. The Administrator may delegate to one or more employees of Centex Corporation the performance of non-discretionary functions under this Plan, including distributions of Payouts. Page 3 5. AWARDS. (a) The granting of Awards under this Plan shall be entirely discretionary, and nothing in this Plan shall be deemed to give any employee of a Company any right to participate in this Plan or to be granted an Award. (b) Awards shall be granted to Participants at such times, and subject to paragraph 5.(d) below, in such amounts as the Administrator, in its sole and absolute discretion, shall determine. No credit for cash dividends on Deferred Stock will be allowed (or accrued) prior to Payout. (c) The term of an Award shall run from the Grant Date to the Expiration Date, subject to early Payout as described in Section 8 below or forfeiture as described in Section 7 below. (d) The maximum number of Shares that may be awarded under this Plan, subject to Section 13 below, is 500,000. (e) If an Award is forfeited, the number of Shares with respect to which such Award shall not have been exercised prior to its forfeiture may again be awarded pursuant to the provisions hereof. 6. VESTING OF AWARDS. (a) Unless different terms are set by the Administrator, an Award shall be immediately 25% vested on its Grant Date and shall become vested in cumulative 25% increments on each of the first through third anniversaries of such Grant Date, so that on the third anniversary of the Grant Date the Award will be 100% vested; provided, however, that the Participant must be in continuous Employment from the Grant Date through the date of the applicable anniversary in order for the Award to vest. (b) A Participant's Award shall be fully vested, irrespective of the limitations set forth in subparagraph (a) above, in the event of (i) a change in control, as provided for in Section 13 below, provided that the Participant has been in continuous Employment from the Grant Date until the date of such change in control or (ii) Retirement of the Participant. 7. FORFEITURE OF AWARDS. If a Participant's Employment is terminated, the Participant shall forfeit his or her Award(s) with respect to any portion that is not vested as of such Participant's Termination Date. 8. PAYOUTS OF AWARDS. Payouts will occur as follows: (a) Automatic Payout on Expiration Date. To the extent that a Participant's Award has vested, such Award shall have an automatic Payout on the Expiration Date of such Award. Page 4 (b) Early Payouts. In addition to automatic Payout on the Expiration Date, there may be an early Payout of the vested portion of an Award as follows: (i) Termination of Employment (whether voluntary or involuntary). The vested portion of each Award shall have an automatic Payout on the Participant's Termination Date. (ii) Death. If a Participant dies prior to the Expiration Date, such Participant's Award, to the extent vested, shall have an automatic Payout as of the date of the Participant's death and be made to the Participant's Beneficiary. (iii) Disability. Prior to the Expiration Date, an Award, with the approval of the Administrator, shall both be fully vested and have an automatic Payout on the date the Participant satisfies the definition of Disability. (iv) Early Payout Request. A Participant may request that the Administrator consider an early Payout to him or her with respect to any vested portion of an Award. Such a request will be considered at the next semi-annual meeting of the Administrator (held in May and October of each calendar year). Such request shall be in writing and will set forth, in sufficient detail, the reasons for such early Payout. The Administrator will consider such request during said meeting and will, within thirty (30) days following said meeting, determine in its sole and absolute discretion whether to allow such early Payout, and then notify the Participant of its decision. 9. FORM OF PAYOUT. As soon as practicable following a determination that Payout of a Participant's Award shall be made as described in Section 8, but not later than five business days after the required Payout Date, Centex Corporation shall make a Payout to the Participant. All Payouts shall be made in Shares except that no fractional shares will be issued and in lieu thereof cash will be paid to the Participant. 10. DELIVERY OF SHARE CERTIFICATES. As promptly as may be practicable following a Payout, Centex Corporation shall make delivery of one or more Share certificates, either by delivery of a physical certificate or an electronic transfer to a broker, for the appropriate number of Shares. 11. TAX WITHHOLDING. Centex Corporation shall deduct applicable taxes with respect to any Award or Payout and withhold, at the time of Award or Payout, as appropriate, a number of Shares, based on the Fair Market Value on such date, for payment of taxes required by law. 12. NON-ASSIGNABILITY. Unless otherwise determined by the Administrator, no Award or Payout or any other benefit under this Plan shall be assignable or otherwise transferable except to a Beneficiary or by will, the laws of descent and distribution or a domestic relations order. The Administrator may prescribe other restrictions on transfer. Any attempted assignment of an Page 5 Award or any other benefit under this Plan in violation of this Section 12 shall be null and void. 13. CHANGES IN SHARES AND CERTAIN CORPORATE TRANSACTIONS. (a) If at any time while the Plan is in effect there shall be an increase or decrease in the number of issued and outstanding Shares of Centex Corporation effected without receipt of consideration therefor by Centex Corporation, through the declaration of a stock dividend or through any recapitalization or merger or otherwise in which Centex Corporation is the surviving corporation, resulting in a stock split-up, combination or exchange of Shares of Centex Corporation, then and in each such event an appropriate adjustment shall be made automatically in the amount of Deferred Stock then subject to an Award, to the end that the same proportion of Centex Corporation's Shares which would have been issued and outstanding assuming full Payout of such Award as of the date of such increase or decrease shall in each such instance remain subject to such Award. Except as is otherwise expressly provided herein, the issuance by Centex Corporation of shares of its capital stock of any class, or securities convertible into shares of capital stock of any class, either in connection with a direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of Centex Corporation convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of Shares then subject to outstanding Awards granted under the Plan. Furthermore, the presence of outstanding Awards granted under the Plan shall not affect in any manner the right or power of Centex Corporation to make, authorize or consummate (i) any or all adjustments, recapitalizations, reorganizations or other changes in Centex Corporation's capital structure or its business, including the issuance of capital stock; (ii) any merger or consolidation of Centex Corporation; (iii) any issuance by Centex Corporation of debt securities or preferred or preference stock which would rank above the Shares subject to outstanding Awards granted under the Plan; (iv) the dissolution or liquidation of Centex Corporation; (v) any sale, transfer or assignment of all or any part of the assets or business of Centex Corporation; or (vi) any other corporate act or proceeding, whether of a similar character or otherwise. (b) Notwithstanding anything to the contrary above, a dissolution or liquidation of Centex Corporation, a merger (other than a merger effecting a reincorporation of Centex Corporation in another state) or consolidation in which Centex Corporation is not the surviving corporation (or survives only as a subsidiary of another corporation in a transaction in which the stockholders of the parent of Centex Corporation and their proportionate interests therein immediately after the transaction are not substantially identical to the stockholders of Centex Corporation and their proportionate interests therein immediately prior to the transaction), a transaction in which another corporation becomes the owner of 50% or more of the total combined Page 6 voting power of all classes of stock of Centex Corporation, or a change in control (as specified below), shall cause every Award then outstanding to become fully vested immediately prior to such dissolution, liquidation, merger, consolidation, transaction, or change in control, to the extent not theretofore exercised, without regard to the determination as to the periods and installments of vesting contained in the Agreements if (and only if) such Awards have not at that time expired or been terminated. For purposes of this Section 13, a change in control shall be deemed to have taken place if: (i) a third person, including a "Group" as defined in Section 13(d)(3) of the Act, becomes the beneficial owner of Shares of Centex Corporation having 50% or more of total number of votes that may be cast for the election of Directors of Centex Corporation; or (ii) as a result of, or in connection with, a contested election for Directors, persons who were Directors of Centex Corporation immediately before such election shall cease to constitute a majority of the Board. Notwithstanding the foregoing provisions of this paragraph, in the event of any such dissolution, merger, consolidation, transaction or change in control, the Board may completely satisfy all obligations of Centex Corporation and its Affiliates with respect to any Award outstanding on the date of such event by delivering to the Participant cash in an amount equal to the Fair Market Value of such Shares on the date of such event, such payment to be made within reasonable time after such event. 14. PLAN YEAR. The Plan shall be effective as of October 1, 2001 and will continue in effect until the Administrator terminates the same. The Plan year will be April 1 through March 31 while this Plan is in effect. 15. REQUIREMENTS OF LAW. Notwithstanding anything herein to the contrary, Centex Corporation shall not be required to issue Shares under any Award if the issuance thereof would constitute a violation by the Participant or Centex Corporation of any provisions of any law or regulation of any governmental authority or any national securities exchange; and as a condition of any issuance of Shares under any Award, Centex Corporation may require such agreements or undertakings, if any, as Centex Corporation may deem necessary or advisable to ensure compliance with any such law or regulation. 16. AMENDMENT, SUSPENSION OR TERMINATION. The Board may amend, suspend or terminate the Plan at any time for the purpose of meeting or addressing any changes in legal requirements or for any other purpose permitted by law, except that no amendment, suspension or termination shall be made that would impair the rights of any Participant as to a vested Award previously granted to such Participant without his or her written consent. 17. UNFUNDED PLAN. This Plan shall be unfunded. Although bookkeeping accounts may be established with respect to Participants representing Awards, any such accounts shall be used Page 7 merely as a bookkeeping convenience. Centex Corporation shall not be required to segregate any assets that may at any time be represented by Awards, nor shall this Plan be construed as providing for such segregation, nor shall Centex Corporation, the Board or the Administrator be deemed to be a trustee of any Awards to be granted under this Plan. Any liability or obligation of Centex Corporation to any Participant with respect to a grant of Awards under this Plan shall be based solely upon any contractual obligations that may be created under this Plan, and no such liability or obligation of Centex Corporation shall be deemed to be secured by any pledge or other encumbrance on any property of Centex Corporation. None of Centex Corporation or any other Company, the Board or the Administrator shall be required to give any security or bond for the performance of any obligation that may be created by this Plan. Notwithstanding the foregoing, upon the occurrence of a change in control, as described in Section 13(b), each Company whose employees are Participants shall, as soon as possible, but in no event longer than 15 days following the change in control, make an irrevocable contribution to a trust established by Centex Corporation in an amount sufficient to fully pay the entire benefit to which each Participant employed by such Company would be entitled pursuant to the terms of this Plan as of the date on which such change in control occurs. In its sole discretion, Centex Corporation may establish such a trust at any time prior to a change in control and may make contributions to such trust in Shares or in cash which would be used to acquire Shares to transfer to Participant. Any such trust shall be designed to assist Centex Corporation in satisfying its obligations under this Plan; but it shall remain subject to the claims of its creditors. 18. NO EMPLOYMENT GUARANTEED. No provision of this Plan or any Award Agreement hereunder shall confer any right upon any employee to continued employment with a Company. 19. NO STOCKHOLDER RIGHTS. A Participant shall have no rights as a holder of Shares with respect to Awards granted hereunder. 20. GOVERNING LAW. This Plan and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by mandatory provisions of the Act or other securities laws of the United States, shall be governed by and construed in accordance with the laws of the State of Texas, without reference to any conflicts of law principles thereof that would require the application of the laws of another jurisdiction. 21. INDEMNIFICATION. Neither the members of the Board nor any member of the Compensation and Stock Option Committee, acting in the capacity of Administrator, shall be liable for any act, omission or determination taken or made in good faith with respect to the Plan or any Award granted under it, and the members of the Board and the Compensation and Stock Option Committee shall be entitled to indemnification and reimbursement by Centex Corporation in respect of any claim, loss, damage or expense (including counsel fees) arising therefrom to the full extent permitted by law and under any directors and officers liability or similar insurance coverage that may be in effect from time to time. Page 8 22. RELEASE. Any issuance or transfer of Shares to a Participant or to his legal representative, heir, legatee or distributee in accordance with the provisions hereof shall, to the extent thereof, be in full satisfaction of all claims of such persons hereunder. The Board or Administrator may require any Participant or legal representative, heir, legatee or distributee, as a condition precedent to such payment, to execute a release and receipt therefor in such form as it shall determine. Page 9 EX-21 10 d05408exv21.txt EX-21 LIST OF SUBSIDIARIES CENTEX EXHIBIT 21 CENTEX CORPORATION ("Centex") 3333 HOLDING CORPORATION ("Holding") and CENTEX DEVELOPMENT COMPANY, L.P. ("CDC") Subsidiaries as of March 31, 2003
Percentage of Ownership (Aggregate, to the nearest .00%) --------------------------------------------- Grand Total Centex Holding (Centex Jurisdiction of --------- --------- & Entity Name & DBAs Organization Total Total Holding) CDC* - --------------------------------------------------------------- --------------- --------- --------- --------- -------- 21 HOUSING COMPANY, LLC Delaware 100.00 100.00 3333 DEVELOPMENT CORPORATION Nevada 100.00 100.00 AAA HOLDINGS, INC. Delaware 100.00 100.00 United 0 ABC HOMES LIMITED Kingdom 50.00 50. 0 ADFINET, INC. Nevada 100.00 100.00 ADFITECH, INC. Nevada 100.00 100.00 Affiliated Advanced Technology, Inc. Xsequor ALAMEDA POINT COMMUNITY PARTNERS, LLC Delaware 14.99 14.99 AMERICAN GYPSUM COMPANY Delaware 65.10 65.10 AMERICAN GYPSUM MARKETING COMPANY Delaware 65.10 65.10 American Gypsum Marketing Company, Inc. AMERICAN LANDMARK MORTGAGE, LTD. Florida 50.01 50.01 ARMOR INSURANCE COMPANY Vermont 100.00 100.00 ASHLEY TURNER FINANCE, L.P. Texas 50.01 50.01 AT-HOME MORTGAGE ASSOCIATES, LTD. Florida 50.01 50.01 A.W. MORTGAGE, L.P. Texas 50.01 50.01 BANYAN FINANCIAL OF CENTRAL FLORIDA, L.P. Texas 50.01 50.01 Banyan Financial, L.P. BARRINGTON CARPET, LLC Delaware 100.00 100.00 BATCHELLORS FOREST, LLC Delaware 49.98 49.98 BATESON DAILEY, A JOINT VENTURE Michigan 65.00 65.00 BENEFIT ASSET MANAGEMENT CORPORATION California 100.00 100.00 BENICIA CS DEVELOPERS, LLC Delaware 49.98 49.98 BENICIA CS LENDERS, LLC Delaware 49.98 49.98
Percentage of Ownership (Aggregate, to the nearest .00%) --------------------------------------------- Grand Total Centex Holding (Centex Jurisdiction of --------- --------- & Entity Name & DBAs Organization Total Total Holding) CDC* - --------------------------------------------------------------- --------------- --------- --------- --------- -------- BUILDER'S HOME MORTGAGE, L.P. Washington 50.01 50.01 CALIFORNIA HOME MORTGAGE, L.P. Texas 50.01 50.01 CAVCO INDUSTRIES, LLC Delaware 100.00 100.00 Cavco Texas, LLC CAVCO INDUSTRIES, INC. Delaware 100.00 100.00 CC DENTON MOB, L.P. Delaware 49.48 0.50 49.98 49.98 CC DESOTO CLINIC, LLC Tennessee 24.74 0.25 24.99 24.99 CC DESOTO, LLC Delaware 49.48 0.50 49.98 49.98 CC LEWISVILLE MOB, L.P. Delaware 24.74 0.25 24.99 24.99 CC PALESTINE MOB, LP Delaware 49.48 0.50 49.98 49.98 CCP CEMENT COMPANY Nevada 65.10 65.10 CCP CONCRETE/AGGREGATES COMPANY Nevada 65.10 65.10 CCP GYPSUM COMPANY Nevada 65.10 65.10 CCP LAND COMPANY Nevada 65.10 65.10 CDC2020 PLC United 98.95 1.00 99.95 99.95 Kingdom CDMC HOLDING, INC. Nevada 100.00 100.00 CENTEX-3D/I, A JOINT VENTURE Texas 90.00 90.00 CENTEX-AIM CONSTRUCTION, L.L.C. Michigan 80.00 80.00 CENTEX ATLANTIC, LLC Delaware 100.00 100.00 CENTEX BUILDING SERVICES, INC. Nevada 100.00 100.00 CENTEX CAMARILLO BUSINESS CENTER, LLC Delaware 84.80 0.86 85.66 85.66 CENTEX CEMENT CORPORATION Nevada 65.10 65.10 CENTEX COMMERCIAL DEVELOPMENT, LLC Delaware 98.95 1.00 99.95 99.95 Centex Commercial Development GP, LLC CENTEX COMMERCIAL DEVELOPMENT, L.P. Delaware 98.95 1.00 99.95 99.95 Centex Commercial Development, Limited Partnership Centex Commercial Development of North Carolina, Limited Partnership CENTEX CONCORD Tennessee 50.00 50.00 CENTEX CONCORD PROPERTY MANAGEMENT, L.L.C. Tennessee 50.00 50.00
Percentage of Ownership (Aggregate, to the nearest .00%) --------------------------------------------- Grand Total Centex Holding (Centex Jurisdiction of --------- --------- & Entity Name & DBAs Organization Total Total Holding) CDC* - --------------------------------------------------------------- --------------- --------- --------- --------- -------- CENTEX CONSTRUCTION COMPANY, INC. Nevada 100.00 100.00 Centex Facility Services Centex Facilities Services Centex Technology Construction Group Mid-Atlantic Division Centex Technology Construction Group Southwest Division CTX Construction Company CENTEX CONSTRUCTION GROUP, INC. Nevada 100.00 100.00 CENTEX CONSTRUCTION GROUP SERVICES, LLC Delaware 100.00 100.00 CENTEX CONSTRUCTION PRODUCTS, INC. Delaware 65.10 65.10 Texas-Lehigh Cement Company CENTEX DEVELOPMENT COMPANY, L.P. Delaware 98.95 1.00 99.95 CDC, LP Centex Development Company, Limited Partnership Centex Homes Centex Homes, New Jersey Division CENTEX DEVELOPMENT COMPANY UK LIMITED United 98.95 1.00 99.95 99.95 Kingdom CENTEX DEVELOPMENT FUNDING COMPANY UK United 98.95 1.00 99.95 99.95 LIMITED Kingdom CENTEX DEVELOPMENT/LIVING STONE Delaware 98.95 1.00 99.95 99.95 HOMEBUILDING, L.P. CENTEX DEVELOPMENT MANAGEMENT COMPANY Nevada 100.00 100.00 CENTEX DOMINION PARK, L.P. Delaware 98.85 1.00 99.85 99.85 Dominion Park CENTEX ENGINEERING & CONSTRUCTION, INC. Nevada 100.00 100.00 Centex Engineering & Construction Centex Technology Construction Group Midwest Division CENTEX ENGLE JOINT VENTURE, A FLORIDA GENERAL Florida 49.98 49.98 PARTNERSHIP CENTEX EQUITY CORPORATION Nevada 100.00 100.00 CENTEX/F&S, L.L.C. Delaware 100.00 100.00 CENTEX FINANCIAL SERVICES, INC. Nevada 100.00 100.00 CENTEX/FPC, L.L.C. Delaware 100.00 100.00 CENTEX FUNDING COMPANY, LLC Delaware 98.95 1.00 99.95 99.95 CENTEX-GILFORD, A JOINT VENTURE Virginia 79.58 79.58
Percentage of Ownership (Aggregate, to the nearest .00%) --------------------------------------------- Grand Total Centex Holding (Centex Jurisdiction of --------- --------- & Entity Name & DBAs Organization Total Total Holding) CDC* - --------------------------------------------------------------- --------------- --------- --------- --------- -------- CENTEX-GILFORD, A JOINT VENTURE II Virginia 88.00 88.00 CENTEX GOLDEN CONSTRUCTION COMPANY Nevada 100.00 100.00 CENTEX HARWOOD GENERAL PARTNER, LLC Delaware 98.95 1.00 99.95 99.95 CENTEX/HKS, CANYON, L.L.C. Delaware 100.00 100.00 CENTEX/HKS, L.L.C. Delaware 100.00 100.00 CENTEX/HKS II, L.L.C. Delaware 100.00 100.00 CENTEX HOME EQUITY COMPANY, LLC Delaware 100.00 100.00 Centex Home Equity Centex Home Equity Company CENTEX HOME SERVICES COMPANY Nevada 100.00 100.00 Centex HomeTeam Services CENTEX HOMES Nevada 99.95 99.95 Centex Destination Properties Centex Development Company Centex Pools & Spas City Homes CityHomes CTX Builders Supply Fox & Jacob Homes Fox & Jacobs Fox & Jacobs by Centex Fox & Jacobs Homes Marquis Homes Marquis Mountain Homes Marquis Resort Homes Marquis Resort Homes by Centex New Homes Research Group Real Homes Riverwood Golf Club Teal Building Corporation Teal Homes Timbercreek Forest Products Vista Homes Vista Properties Company Wayne Homes Wayne Homes, a Division of Centex Homes Wayne Homes by Centex CENTEX HOMES, INC. Texas 100.00 100.00 CENTEX HOMES, LLC Delaware 99.95 99.95 Centex Homes CENTEX HOMES INTERNATIONAL LIMITED United 100.00 100.00 Kingdom
Percentage of Ownership (Aggregate, to the nearest .00%) --------------------------------------------- Grand Total Centex Holding (Centex Jurisdiction of --------- --------- & Entity Name & DBAs Organization Total Total Holding) CDC* - --------------------------------------------------------------- --------------- --------- --------- --------- -------- CENTEX HOMES LIMITED United 98.95 1.00 99.95 99.95 Kingdom CENTEX HOMES MARKETING, INC. Georgia 100.00 100.00 CTX Realty CENTEX HOMES OF CALIFORNIA, LLC Delaware 99.73 99.73 CENTEX HOMES OF CALIFORNIA II, LLC Delaware 99.73 99.73 CENTEX HOMES REALTY COMPANY Nevada 100.00 100.00 CENTEX HOMES REALTY, INC. Michigan 100.00 100.00 CENTEX HOMES UK LIMITED United 98.95 1.00 99.95 99.95 Kingdom CENTEX HOMETEAM LAWN CARE, LLC Delaware 100.00 100.00 Certified Lawn Care HomeTeam Lawn Care King Green Turf Guard CENTEX HOMETEAM SECURITY, INC. Nevada 100.00 100.00 Apartment Protection Systems Apartment Protection Systems, Inc. Centex HomeTeam Security Centex HomeTeam Services Centex Security Centex Security, Inc. HomeTeam Alarms, Inc. HomeTeam Security HomeTeam Security, Inc. HomeTeam Services, Inc. Protection Systems, Inc. CENTEX HOUSING RELIEF FUND Texas 100.00 100.00 CENTEX INDUSTRIAL BUCKEYE I, LLC Delaware 98.95 1.00 99.95 99.95 CENTEX INDUSTRIAL CAMARILLO I, LLC Delaware 98.95 1.00 99.95 99.95 CENTEX INDUSTRIAL CAMARILLO II, LLC Delaware 98.95 1.00 99.95 99.95 CENTEX INDUSTRIAL CAMARILLO III, LLC Delaware 98.95 1.00 99.95 99.95 CENTEX INDUSTRIAL CAMARILLO IV, LLC Delaware 98.95 1.00 99.95 99.95 CENTEX INDUSTRIAL CAMARILLO V, LLC Delaware 98.95 1.00 99.95 99.95 CENTEX INDUSTRIAL CAMARILLO VI, LLC Delaware 98.95 1.00 99.95 99.95 CENTEX INDUSTRIAL GATEWAY I, L.P. Delaware 98.95 1.00 99.95 99.95 CENTEX INDUSTRIAL GENERAL PARTNER, LLC Delaware 98.95 1.00 99.95 99.95
Percentage of Ownership (Aggregate, to the nearest .00%) --------------------------------------------- Grand Total Centex Holding (Centex Jurisdiction of --------- --------- & Entity Name & DBAs Organization Total Total Holding) CDC* - --------------------------------------------------------------- --------------- --------- --------- --------- -------- CENTEX INDUSTRIAL HILLTOP, L.P. Delaware 84.11 0.85 84.96 84.96 CENTEX INDUSTRIAL NORTHFIELD I, LLC Delaware 98.95 1.00 99.95 99.95 CENTEX INDUSTRIAL WESTLAKE I, LLC Delaware 98.95 1.00 99.95 99.95 CENTEX INTERNATIONAL, INC. Nevada 100.00 100.00 CENTEX INTERNATIONAL, LLC Delaware 100.00 100.00 CENTEX INVESTMENT COMPANY, LLC Delaware 98.95 1.00 99.95 99.95 CENTEX-KIRCO INDUSTRIAL STATE STREET 11-12, LLC Delaware 75.70 0.77 76.46 76.46 CENTEX-KIRCO INDUSTRIAL STATE STREET HOLDING, Delaware 75.70 0.76 76.46 76.46 LLC CENTEX-KIRCO INDUSTRIAL SUMMIT I, LLC Delaware 98.95 1.00 99.95 99.95 CENTEX-KIRCO INDUSTRIAL WESTLAKE II, LLC Delaware 98.95 1.00 99.95 99.95 CENTEX-KIRCO INDUSTRIAL WESTLAKE III, LLC Delaware 81.39 0.82 82.21 82.21 CENTEX-KIRCO INDUSTRIAL WESTLAKE IV, LLC Delaware 81.39 0.82 82.21 82.21 CENTEX-KIRCO INDUSTRIAL WESTLAKE V, LLC Delaware 81.39 0.82 82.21 82.21 CENTEX-KIRCO INDUSTRIAL WESTLAKE VI, LLC Delaware 98.95 1.00 99.95 99.95 CENTEX-KIRCO INDUSTRIAL WESTLAKE VIII, LLC Delaware 81.39 0.82 82.21 82.21 CENTEX LAND HOLDINGS GENPAR, LLC Delaware 99.95 99.95 CENTEX LAND HOLDINGS, L.P. Delaware 99.95 99.95 CENTEX LAND INVESTMENTS, LLC Delaware 98.95 1.00 99.95 99.95 CENTEX LAND INVESTMENTS II, LLC Delaware 98.95 1.00 99.95 99.95 CENTEX LANDIS LIMITED LIABILITY COMPANY NO. 1 Louisiana 100.00 100.00 CENTEX LATIN AMERICA, INC. Nevada 100.00 100.00 CENTEX/LENNAR AT MARTIN'S CROSSING, LLC Florida 49.98 49.98 CENTEX/LENNAR AT PORTOFINO ISLES, LLC Florida 49.98 49.98 CENTEX LIFE SOLUTIONS, INC. Nevada 100.00 100.00 CENTEX LOST CREEK RANCH, LLC Delaware 99.95 99.95 CENTEX MANAGEMENT SERVICES LIMITED United 98.95 1.00 99.95 99.95 Kingdom CENTEX MANUFACTURED HOUSING GROUP, LLC Delaware 100.00 100.00
Percentage of Ownership (Aggregate, to the nearest .00%) --------------------------------------------- Grand Total Centex Holding (Centex Jurisdiction of --------- --------- & Entity Name & DBAs Organization Total Total Holding) CDC* - --------------------------------------------------------------- --------------- --------- --------- --------- -------- CENTEX/MASHBURN, A JOINT VENTURE North Carolina 65.00 65.00 CENTEX MATERIALS GP LTD, LLC Delaware 65.10 65.10 CENTEX MATERIALS, LP Texas 65.10 65.10 CENTEX MATERIALS LP LTD, LLC Delaware 65.10 65.10 Centex Materials, LLC CENTEX/MORRIS, L.L.C. Delaware 100.00 100.00 CENTEX/MORRIS II, L.L.C. Delaware 100.00 100.00 CENTEX MULTI-FAMILY COMMUNITIES, L.P. Delaware 98.95 1.00 99.95 99.95 White Rock Apartment Homes CENTEX MULTI-FAMILY COMMUNITIES, LLC Delaware 98.95 1.00 99.95 99.95 CENTEX MULTI-FAMILY COMPANY Nevada 100.00 100.00 Centex Multi-Family Development Company CENTEX MULTI-FAMILY COMPANY, L.P. Delaware 97.96 1.99 99.95 98.95 Villas of Vista Ridge CENTEX MULTI-FAMILY GENERAL PARTNER, LLC Delaware 98.95 1.00 99.95 99.95 CENTEX MULTI-FAMILY GENERAL PARTNER II, LLC Delaware 98.95 1.00 99.95 99.95 CENTEX MULTI-FAMILY II JOINT VENTURE Texas 48.98 51.00 99.98 49.48 CENTEX MULTI-FAMILY INVESTMENTS, L.P. Delaware 98.95 1.00 99.95 99.95 CENTEX MULTI-FAMILY SHEFFIELD I, L.P. Delaware 96.98 2.97 99.95 97.96 CENTEX MULTI-FAMILY ST. PETE HOLDING COMPANY, Delaware 99.45 0.50 99.95 49.98 L.L.C. CENTEX MULTI-FAMILY ST. PETE I, L.L.C. Delaware 98.95 1.00 99.95 99.95 CENTEX MULTI-FAMILY ST. PETE II, L.L.C. Delaware 98.95 1.00 99.95 99.95 Verandahs of Brighton Bay CENTEX MULTI-FAMILY UPPER LANDING, LLC Delaware 98.95 1.00 99.95 99.95 CENTEX NORTHFIELD INVESTMENT COMPANY I, L.P. Delaware 96.97 0.98 97.95 97.95 CENTEX OFFICE CITYMARK I GENERAL PARTNER, LLC Delaware 98.95 1.00 99.95 99.95 Centex Development Office Citymark I General Partner, LLC CENTEX OFFICE CITYMARK I, L.P. Delaware 98.95 1.00 99.95 99.95 Centex Development Office Citymark I, L.P. CENTEX OFFICE GENERAL PARTNER, LLC Delaware 98.95 1.00 99.95 99.95 Centex Development Office General Partner, LLC
Percentage of Ownership (Aggregate, to the nearest .00%) --------------------------------------------- Grand Total Centex Holding (Centex Jurisdiction of --------- --------- & Entity Name & DBAs Organization Total Total Holding) CDC* - --------------------------------------------------------------- --------------- --------- --------- --------- -------- CENTEX OFFICE SOUTHPOINTE I, L.P. Delaware 98.95 1.00 99.95 99.95 CENTEX OFFICE SOUTHPOINTE II, L.L.C. Delaware 99.48 0.50 99.98 49.98 CENTEX OFFICE VICEROY I, L.P. Delaware 100.00 100.00 Centex Development Office Viceroy I, L.P. CENTEX OFFICE VISTA RIDGE LEWISVILLE II, L.P. Delaware 98.95 1.00 99.95 99.95 CENTEX OFFICE VISTA RIDGE LEWISVILLE I, L.P. Delaware 98.95 1.00 99.95 99.95 Centex Development Office Vista Ridge Lewisville I, L.P. CENTEX/OMNIPLAN, L.L.C. Delaware 100.00 100.00 CENTEX/OMNIPLAN II, L.L.C. Delaware 100.00 100.00 CENTEX REAL ESTATE CONSTRUCTION COMPANY Nevada 100.00 100.00 CTX Builders Supply CENTEX REAL ESTATE CORPORATION Nevada 100.00 100.00 Centex Custom Homes Centex Homes Centex Homes, a Nevada general partnership Centex-Crosland Company Centex-Crosland Homes CTX Builders Supply Fox & Jacobs Fox & Jacobs Homes Marquis Mountain Homes Marquis Resort Homes Selective Homes The Selective Group Timbercreek Forest Products Vista Homes Wayne Homes CENTEX REALTY, INC. Florida 100.00 100.00 Riverwood Properties CENTEX RETAIL GENERAL PARTNER, LLC Delaware 98.95 1.00 99.95 99.95 CENTEX RETAIL GENERAL PARTNER II, LLC Delaware 89.06 0.90 89.96 89.96 CENTEX RETAIL RIVERMARK INVESTMENT COMPANY I, Delaware 89.06 0.90 89.96 89.96 LLC CENTEX RETAIL VISTA RIDGE I, L.P. Delaware 89.06 0.90 89.96 89.96 CENTEX RETAIL VISTA RIDGE MARKETPLACE, L.P. Delaware 89.06 0.90 89.96 89.96
Percentage of Ownership (Aggregate, to the nearest .00%) --------------------------------------------- Grand Total Centex Holding (Centex Jurisdiction of --------- --------- & Entity Name & DBAs Organization Total Total Holding) CDC* - --------------------------------------------------------------- --------------- --------- --------- --------- -------- CENTEX RODGERS, INC. Nevada 100.00 100.00 Centex Pharmaceutical/BioTech Group Centex Resource Group Centex Technology Construction Group Northeast Division Centex Technology Construction Group (West Coast Division) CENTEX-ROONEY CONSTRUCTION CO., INC. Florida 100.00 100.00 Centex Civil Construction Centex Rooney Facilities Group CENTEX-ROONEY CONSTRUCTION CO., Florida 90.00 90.00 INC./CONSTRUCT TWO CONSTRUCTION MANAGERS, INC., A JOINT VENTURE CENTEX ROONEY CONSTRUCTION CO., INC./HUBER, Florida 65.00 65.00 HUNT & NICHOLS, INC., A JOINT VENTURE CENTEX ROONEY CONSTRUCTION CO., INC./LANDIS Louisiana 70.00 70.00 COMPANY, INC., A JOINT VENTURE CENTEX ROONEY CONSTRUCTION CO., INC./RATTLER Florida 75.00 75.00 CONSTRUCTION CONTRACTORS, INC., A JOINT VENTURE CENTEX-ROONEY CONSTRUCTION CO. OF GEORGIA, Delaware 100.00 100.00 LLC CENTEX ROONEY CONSTRUCTION COMPANY/ACI, A Florida 50.00 50.00 JOINT VENTURE CENTEX ROONEY/GRAY CONSTRUCTION, A JOINT Florida 85.00 85.00 VENTURE CENTEX ROONEY/HLM CORRECTIONAL DESIGN Florida 70.00 70.00 BUILDERS, LC CENTEX ROONEY/KBJ DESIGN/BUILD, L.L.C. Delaware 90.00 90.00 CENTEX ROONEY/LLT, A JOINT VENTURE Florida 75.00 75.00 CENTEX ROONEY MARINE, INC. Florida 100.00 100.00 CENTEX ROONEY/PGAL DESIGN BUILDERS, L.C. Florida 90.00 90.00 CENTEX ROONEY/RS&H DESIGN BUILDERS, L.C. Florida 90.00 90.00 CENTEX ROONEY/SCHENKEL SHULTZ Florida 50.00 50.00 DESIGN/BUILDERS, L.C. CENTEX SCHAUMBERG INDUSTRIAL PARK, L.L.C. Illinois 20.00 20.00 CENTEX/SCHENKEL SCHULTZ, L.L.C. Delaware 100.00 100.00
Percentage of Ownership (Aggregate, to the nearest .00%) --------------------------------------------- Grand Total Centex Holding (Centex Jurisdiction of --------- --------- & Entity Name & DBAs Organization Total Total Holding) CDC* - --------------------------------------------------------------- --------------- --------- --------- --------- -------- CENTEX SEISMIC SERVICES, INC. Nevada 95.00 95.00 CENTEX SERVICE COMPANY Nevada 100.00 100.00 CENTEX/SHG, L.L.C. Delaware 100.00 100.00 CENTEX/SICNER, LLC Delaware 90.00 90.00 CENTEX/STARCENTER DEVELOPMENT COMPANY I, L.P. Delaware 98.95 1.00 99.95 99.95 CENTEX/STARCENTER GENERAL PARTNER, LLC Delaware 98.95 1.00 99.95 99.95 CENTEX STRATEGIC LAND LIMITED United 98.95 1.00 99.95 99.95 Kingdom CENTEX/TAYLOR, LLC Delaware 48.98 48.98 CENTEX TECHNOLOGY, INC. Nevada 100.00 100.00 CENTEX TITLE & ANCILLARY SERVICES, INC. Nevada 100.00 100.00 CENTEX UK LTD United 98.95 1.00 99.95 99.95 Kingdom CENTEX VICEROY GENERAL PARTNER, LLC Delaware 100.00 100.00 CENTEX/WORTHGROUP, L.L.C. Delaware 100.00 100.00 CHEC ASSET RECEIVABLE CORPORATION Nevada 100.00 100.00 CHEC CONDUIT FUNDING, LLC Delaware 100.00 100.00 CHEC FUNDING, LLC Delaware 100.00 100.00 CHEC INDUSTRIAL LOAN COMPANY Tennessee 100.00 100.00 CHEC INDUSTRIAL LOAN CORPORATION Minnesota 100.00 100.00 CHEC RESIDUAL, LLC Delaware 100.00 100.00 CHESTNUT HOUSING, L.P. Minnesota 98.95 1.00 99.95 99.95 CITY HOMEBUILDERS, INC. Texas 100.00 100.00 CityHomes CKC FACILITIES GROUP, L.C. Florida 60.00 60.00 CKC Design Builders, L.C. Miramar Town Center Group CLAREMONT HILLS LLC Delaware 49.98 49.98 COMMERCE APPRAISAL SERVICES, LLC Delaware 100.00 100.00 COMMERCE LAND TITLE AGENCY, LLC Ohio 100.00 100.00 Commerce Title Company
Percentage of Ownership (Aggregate, to the nearest .00%) --------------------------------------------- Grand Total Centex Holding (Centex Jurisdiction of --------- --------- & Entity Name & DBAs Organization Total Total Holding) CDC* - --------------------------------------------------------------- --------------- --------- --------- --------- -------- COMMERCE LAND TITLE, INC. Nevada 100.00 100.00 Commerce Company Commerce Title Agency Commerce Title Company COMMERCE TITLE COMPANY California 100.00 100.00 COMMERCE TITLE COMPANY, INC. Alabama 100.00 100.00 COMMERCE TITLE COMPANY OF NEW MEXICO, LLC Delaware 100.00 100.00 COMMERCE TITLE INSURANCE COMPANY California 100.00 100.00 COMMERCE TITLE VENTURES, LLC Delaware 100.00 100.00 CONSTRUCTION PORTFOLIO FUNDING, INC. Texas 100.00 100.00 COPPER CANYON DEVELOPMENT COMPANY LLC California 45.68 45.68 CORE MORTGAGE CONNECTION, L.P. Texas 50.01 50.01 Credit Union Mortgage Connection, L.P. COYOTE CANYON, LLC Delaware 99.95 99.95 CRG HOLDINGS, LLC Delaware 100.00 100.00 AAA Homes AAA Park Model & RV Boerne Homes Cavco Home Center Cavco Homes Cavco Homes Supercenter Cavco Supercenter Factory Liquidators CROSLAND ACCEPTANCE ASSOCIATES V North Carolina 100.00 100.00 CROSLAND BOND COMPANY North Carolina 100.00 100.00 CTX BUILDERS SUPPLY SERVICES, LLC Delaware 99.95 99.95 CTX HOLDING COMPANY Nevada 100.00 100.00 CTX MORTGAGE COMPANY, LLC Delaware 100.00 100.00 Centex Mortgage Company CTX Mortgage Company CTX MORTGAGE FUNDING, LLC Delaware 100.00 100.00 CTX MORTGAGE FUNDING III, LLC Delaware 100.00 100.00 CTX MORTGAGE VENTURES CORPORATION Nevada 100.00 100.00 CTX MORTGAGE VENTURES, LLC Delaware 100.00 100.00 CTX Mortgage Ventures I, LLC
Percentage of Ownership (Aggregate, to the nearest .00%) --------------------------------------------- Grand Total Centex Holding (Centex Jurisdiction of --------- --------- & Entity Name & DBAs Organization Total Total Holding) CDC* - --------------------------------------------------------------- --------------- --------- --------- --------- -------- CTX SWAP I, LLC Delaware 100.00 100.00 CUMMINGS-CENTEX ROONEY Florida 45.00 45.00 CXP FUNDING, LLC Delaware 65.10 65.10 DALLAS SUBURBS MORTGAGE, L..P. Texas 50.01 50.01 DARDEN FINANCIAL SERVICES, L.P. Texas 50.01 50.01 DENALI FINANCIAL SERVICES, L.P. Texas 50.01 50.01 DESARROLLOS EN LATINOAMERICA SERVICIOS Mexico 100.00 100.00 ADMINSTRATIVOS S DE RL DE CV DFW INTEGRATED PARTNERS Texas 25.00 25.00 DUNDEE INSURANCE AGENCY, INC. Texas 100.00 100.00 EMPRESAS INMOBILIARIAS DE MEXICO, S. DE R.L. DE Mexico 100.00 100.00 C.V. EXPRESS FINANCIAL SERVICES, LIMITED North Carolina 50.01 50.01 PARTNERSHIP Express Financial Services, L.P. FAGAN CANYON PARTNERS, LLC Delaware 1.00 1.00 FAIR CHASE DEVELOPMENT LLC Delaware 49.98 49.98 FAIRCLOUGH HOMES GROUP LIMITED United 98.95 1.00 99.95 99.95 Kingdom FAIRCLOUGH HOMES LIMITED United 98.95 1.00 99.95 99.95 Kingdom FAIRPINE LIMITED United 49.48 0.50 49.98 49.98 Kingdom FAIRWAY FINANCIAL GROUP, L.P. Texas 50.01 50.01 FHL NOMINEES LIMITED United 98.95 1.00 99.95 99.95 Kingdom FIRST CENTURY MORTGAGE, L.P. Texas 50.01 50.01 FLORIDA LANDMARK MORTGAGE, L.P. Texas 50.01 50.01 LandMark Mortgage of Florida, L.P. FOUR OAKS MORTGAGE COMPANY, L.P. North Carolina 50.01 50.01 FOX & JACOBS, INC. Texas 100.00 100.00 GALLERIA MORTGAGE, L.P. Texas 22.75 22.75 GENBOND TWO, INC. North Carolina 100.00 100.00
Percentage of Ownership (Aggregate, to the nearest .00%) --------------------------------------------- Grand Total Centex Holding (Centex Jurisdiction of --------- --------- & Entity Name & DBAs Organization Total Total Holding) CDC* - --------------------------------------------------------------- --------------- --------- --------- --------- -------- GHQ COMPANY, INC. Nevada 100.00 100.00 GLG MORTGAGE, L.P. Texas 50.01 50.01 GOLDEN TURNER, A JOINT VENTURE California 1.00 1.00 GREAT LAKES DEVELOPMENT CO., INC. Nevada 100.00 100.00 GV NORTHFIELD I LLC Delaware 96.97 0.98 97.95 97.95 HARWOOD INSURANCE SERVICES, LLC California 100.00 100.00 HARWOOD SERVICE COMPANY OF GEORGIA, LLC Georgia 100.00 100.00 Harwood Service Company HARWOOD SERVICE COMPANY OF NEW JERSEY, LLC New Jersey 100.00 100.00 Harwood Service Company HARWOOD SERVICE COMPANY, LLC Delaware 100.00 100.00 Harwood Insurance Service, LLC Harwood Service Company of Nebraska, LLC HARWOOD STREET FUNDING II, LLC Delaware 100.00 100.00 Main Street Funding, LLC HEARTLAND MORTGAGE, L.P. California 50.01 50.01 HOLLIS & EASTERN RAILROAD COMPANY LLC Delaware 65.10 65.10 HOMEFRONT MORTGAGE, L.P. Washington 50.01 50.01 HOMETEAM PEST DEFENSE, INC. Nevada 100.00 100.00 HOMETEAM PEST DEFENSE, LLC Delaware 100.00 100.00 Callaghan's Exterminating Integrated Pest Defense Wilson Pest Control Wilson Pest Defense ILLINOIS CEMENT COMPANY Illinois 32.55 32.55 ILLINOIS CEMENT COMPANY, JOINT VENTURE Texas 32.55 32.55 Wisconsin Cement Company INDEPENDENT GENERAL AGENCY, INC. Texas 100.00 100.00 JOHN CROSLAND COMPANY North Carolina 100.00 100.00 John Crosland Homes KIRCHMAN/CENTEX, A JOINT VENTURE Florida 75.00 75.00 LANSDOWNE COMMUNITY DEVELOPMENT LLC Virginia 24.99 24.99 LANSDOWNE TOWN CENTER LLC Delaware 33.31 33.31
Percentage of Ownership (Aggregate, to the nearest .00%) --------------------------------------------- Grand Total Centex Holding (Centex Jurisdiction of --------- --------- & Entity Name & DBAs Organization Total Total Holding) CDC* - --------------------------------------------------------------- --------------- --------- --------- --------- -------- LEWIS MORTGAGE COMPANY, L.P. Texas 50.01 50.01 Lewis Mortgage Company LMX FINANCIAL SERVICES, LTD. Florida 50.01 50.01 M & W DRYWALL SUPPLY COMPANY Nevada 65.10 65.10 M&W GENERAL CONSTRUCTION COMPANY Nevada 49.00 49.00 MATHEWS READYMIX, INC. California 65.10 65.10 MEADOW VISTA COMPANY, LLC Delaware 100.00 100.00 Ocotillo Meadows, LLC MELROSE PARK JOINT VENTURE Florida 53.31 53.31 METROPOLITAN TAX SERVICE, INC. Nevada 100.00 100.00 Metropolitan Tax & Abstract Services, Inc. METROPOLITAN TITLE & GUARANTY COMPANY Florida 100.00 100.00 Commerce Title Agency Commerce Title Company Commerce Title Company of Maryland Commerce Title Company of Virginia MH ACQUISITION COMPANY, LLC Delaware 100.00 100.00 MORTGAGE ACCEPTANCE ASSOCIATES NO. 2 North Carolina 100.00 100.00 MORTGAGE COLLATERAL ASSOCIATES NO. 1 North Carolina 100.00 100.00 MORTGAGE COLLATERAL ASSOCIATES NO. 3 North Carolina 100.00 100.00 MORTGAGE NETWORK, L.P. Texas 30.00 30.00 MORTGAGE PORTFOLIO SERVICES, INC. Delaware 91.00 91.00 MOUNTAIN CEMENT COMPANY Nevada 65.10 65.10 MPS FUNDING CORPORATION Delaware 91.00 91.00 NAB ASSET COMPANY, LLC Texas 100.00 100.00 NEVADA CEMENT COMPANY Nevada 65.10 65.10 NEW HOME MORTGAGE SPECIALISTS, L.P. Washington 50.01 50.01 NOMAS CORP. Nevada 99.73 99.73 NOVATO COMMUNITY PARTNERS, LLC California 49.98 49.98 OPTIMA INFORMATION SOLUTIONS, LLC Delaware 71.00 71.00 PACIFIC AMERICAN MORTGAGE COMPANY Texas 91.00 91.00 PAMCO
Percentage of Ownership (Aggregate, to the nearest .00%) --------------------------------------------- Grand Total Centex Holding (Centex Jurisdiction of --------- --------- & Entity Name & DBAs Organization Total Total Holding) CDC* - --------------------------------------------------------------- --------------- --------- --------- --------- -------- PALMDALE 101 VENTURE California 49.98 49.98 PDG / PRESCOTT DEVELOPMENT GROUP, L.L.C. Arizona 48.49 0.49 48.98 48.98 PENNSTAR FINANCIAL, LLC Delaware 50.01 50.01 PINE RIDGE FINANCIAL, L.P. Washington 50.01 50.01 REALTY TITLE PROFESSIONALS, LTD., LLLP Florida 32.10 32.10 REPUBLIC PAPERBOARD COMPANY LLC Delaware 65.10 65.10 Republic Paperboard Company 2000 LLC RIVERMARK PARTNERS, LLC California 33.31 33.31 RIVERMARK VILLAGE, LLC California 29.70 0.30 30.00 30.00 ROBERG FINANCIAL, L.P. Texas 50.01 50.01 SANTA CLARITA 700, LLC Delaware 49.98 49.98 SEABREEZE, LLC California 66.67 66.67 SELECTIVE - DELAWARE, L.L.C. Delaware 99.95 99.95 SILVER FALLS, LLC Delaware 49.98 49.98 ST LENDING, INC. Delaware 99.73 99.73 SUN BUILT DEVELOPMENT, LLC Delaware 48.49 0.49 48.98 48.98 SUNSET RANCHOS DEVELOPERS, LLC Delaware 99.95 99.95 SYCAMORE CREEK California 50.00 50.00 TEXAS CEMENT COMPANY Nevada 65.10 65.10 C & C Properties, Inc. C P Service Company Texas-Lehigh Cement Company TEXAS LEHIGH CEMENT COMPANY LP Texas 32.55 32.55 Texas Lehigh Cement Company THE JONES COMPANY BUILDING SERVICES, LLC Nevada 99.95 99.95 THE JONES COMPANY HOMES, LLC Nevada 99.95 99.95 The Jones Company Lexington Homes THE JONES COMPANY HOMES REALTY, LLC Nevada 99.95 99.95 THE STUDENT COMMUNITIES GROUP, L.C. Florida 50.00 50.00 TLCC GP LLC Delaware 65.10 65.10 TLCC LP LCC Delaware 65.10 65.10
Percentage of Ownership (Aggregate, to the nearest .00%) --------------------------------------------- Grand Total Centex Holding (Centex Jurisdiction of --------- --------- & Entity Name & DBAs Organization Total Total Holding) CDC* - --------------------------------------------------------------- --------------- --------- --------- --------- -------- T.W. LEWIS MORTGAGE COMPANY, L.P. Texas 50.01 50.01 VENTURE TITLE AGENCY, LTD., LLLP Florida 50.02 50.02 VIEWTON PROPERTIES LIMITED United 98.95 1.00 99.95 99.95 Kingdom VISTA REALTY DEVELOPMENT COMPANY, L.P. Delaware 98.95 1.00 99.95 99.95 VISTA REALTY GENERAL PARTNER, LLC Delaware 98.95 1.00 99.95 99.95 VISTA RIDGE BUSINESS PARK ASSOCIATION, INC. Texas 99.95 99.95 WAYNE HOMES, LLC Delaware 97.44 97.44 Wayne Homes Centex, LLC Wayne Homes Michigan, LLC WAYNE HOMES MID ATLANTIC, LLC Delaware 99.95 99.95 Wayne Homes WESTERN AGGREGATES, INC. Nevada 65.10 65.10 Centex Western Aggregates, Inc. WESTERN CEMENT COMPANY OF CALIFORNIA California 65.10 65.10 WESTFEST, LLC Arizona 49.98 49.98 WESTWOOD INSURANCE AGENCY California 100.00 100.00 HomeAdvantage Insurance Agency Services HomeAdvantage Insurance Services Westwood Agency Westwood Insurance Agency, Inc. Westwood Insurance Agency of Denver, Inc. WMC Insurance Agency WMC Insurance Agency Services WMC Insurance Services WMC Insurance Services, Inc. WESTWOOD INSURANCE AGENCY Nevada 100.00 100.00 WESTWOOD INSURANCE AGENCY OF ARIZONA, INC. Arizona 100.00 100.00 WINDEMERE BLC LAND COMPANY LLC California 33.31 33.31 WISCONSIN CEMENT COMPANY Wisconsin 32.55 32.55
* A subsidiary of Centex owns a 99% Limited Partner interest in CDC, and a subsidiary of Holding owns a 1% General Partner interest in CDC; therefore, ownership interests shown for CDC are also included in the figures for Centex and Holding. EX-23.A 11 d05408exv23wa.txt EX-23.A CONSENT OF INDEPENDENT AUDITORS EXHIBIT 23A CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the following Registration Statements on Form S-3 and the related Prospectuses and in the following Registration Statements on Form S-8 of Centex Corporation of our report dated May 14, 2003, with respect to the consolidated financial statements of Centex Corporation included in the Annual Report (Form 10-K) for the year ended March 31, 2003. Form S-3 Registration No. 33-61223 Form S-8 Registration No. 33-29174 Registration No. 333-65217 Registration No. 33-44575 Registration No. 333-72893 Registration No. 33-55083 Registration No. 333-94221 Registration No. 33-55083-01 Registration No. 333-96229 Registration No. 33-55083-02 Registration No. 333-49966 Registration No. 333-28229 Registration No. 333-49966-01 Registration No. 333-28229-01 Registration No. 333-49966-02 Registration No. 333-28229-02 Registration No. 333-54722 Registration No. 333-37956 Registration No. 333-54722-01 Registration No. 333-55717 Registration No. 333-54722-02 Registration No. 333-55717-01 Registration No. 333-83212 Registration No. 333-55717-02 Registration No. 333-83212-01 Registration No. 333-74185 Registration No. 333-83212-02 Registration No. 333-74185-01 Registration No. 333-74185-02 Registration No. 333-86041 Registration No. 333-86041-01 Registration No. 333-86041-02 Registration No. 333-68790 Registration No. 333-68790-01 Registration No. 333-68790-02 Registration No. 333-100682 Registration No. 333-100682-01 Registration No. 333-100682-02 Registration No. 333-103440 Registration No. 333-103440-01 Registration No. 333-103440-02
Dallas, Texas May 30, 2003 EX-23.B 12 d05408exv23wb.txt EX-23.B CONSENT OF INDEPENDENT AUDITORS EXHIBIT 23B CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the following Registration Statements on Form S-3 and the related Prospectuses and in the following Registration Statements on Form S-8 of 3333 Holding Corporation and subsidiary and Centex Development Company, L.P. and subsidiaries of our report dated May 14, 2003, with respect to the combining financial statements and schedule of 3333 Holding Corporation and subsidiary and Centex Development Company, L.P. and subsidiaries included in the Annual Report (Form 10-K) for the year ended March 31, 2003. Form S-3 Registration No. 333-49966 Form S-8 Registration No. 33-55083 Registration No. 333-49966-01 Registration No. 33-55083 Registration No. 333-49966-02 Registration No. 33-55083 Registration No. 333-54722 Registration No. 33-55083-01 Registration No. 333-54722-01 Registration No. 33-55083-02 Registration No. 333-54722-02 Registration No. 333-28229 Registration No. 333-83212 Registration No. 333-28229-01 Registration No. 333-83212-01 Registration No. 333-28229-02 Registration No. 333-83212-02 Registration No. 333-55717 Registration No. 333-55717-01 Registration No. 333-55717-02 Registration No. 333-74185 Registration No. 333-74185-01 Registration No. 333-74185-02 Registration No. 333-86041 Registration No. 333-86041-01 Registration No. 333-86041-02 Registration No. 333-68790 Registration No. 333-68790-01 Registration No. 333-68790-02 Registration No. 333-100682 Registration No. 333-100682-01 Registration No. 333-100682-02 Registration No. 333-103440 Registration No. 333-103440-01 Registration No. 333-103440-02 Dallas, Texas May 29, 2003 EX-24.1 13 d05408exv24w1.txt EX-24.1 POWERS OF ATTORNEY EXHIBIT 24.1 CENTEX CORPORATION POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints Lawrence E. Hirsch and Timothy R. Eller, or either of such individuals, with full power of substitution in the premises, as the undersigned's true and lawful agents and attorneys-in-fact (the "Attorneys-in-Fact"), with full power and authority in the name and on behalf of the undersigned, in her capacity as a Director of Centex Corporation (the "Company"), to execute and file with the Securities and Exchange Commission the Company's Annual Report on Form 10-K for the Company's fiscal year ended March 31, 2003, together with any and all amendments thereto. This Power of Attorney and all authority granted and conferred hereby shall continue indefinitely and, unless waived by the Attorneys-in-Fact, may not be revoked until the Attorneys-in-Fact have received five days' written notice of such revocation. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 15th day of May, 2003. /s/ BARBARA T. ALEXANDER ------------------------------------- Barbara T. Alexander Director Centex Corporation CENTEX CORPORATION POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints Lawrence E. Hirsch and Timothy R. Eller, or either of such individuals, with full power of substitution in the premises, as the undersigned's true and lawful agents and attorneys-in-fact (the "Attorneys-in-Fact"), with full power and authority in the name and on behalf of the undersigned, in his capacity as a Director of Centex Corporation (the "Company"), to execute and file with the Securities and Exchange Commission the Company's Annual Report on Form 10-K for the Company's fiscal year ended March 31, 2003, together with any and all amendments thereto. This Power of Attorney and all authority granted and conferred hereby shall continue indefinitely and, unless waived by the Attorneys-in-Fact, may not be revoked until the Attorneys-in-Fact have received five days' written notice of such revocation. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 15th day of May, 2003. /s/ DAN W. COOK III ------------------------------------- Dan W. Cook III Director Centex Corporation CENTEX CORPORATION POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints Lawrence E. Hirsch and Timothy R. Eller, or either of such individuals, with full power of substitution in the premises, as the undersigned's true and lawful agents and attorneys-in-fact (the "Attorneys-in-Fact"), with full power and authority in the name and on behalf of the undersigned, in his capacity as a Director of Centex Corporation (the "Company"), to execute and file with the Securities and Exchange Commission the Company's Annual Report on Form 10-K for the Company's fiscal year ended March 31, 2003, together with any and all amendments thereto. This Power of Attorney and all authority granted and conferred hereby shall continue indefinitely and, unless waived by the Attorneys-in-Fact, may not be revoked until the Attorneys-in-Fact have received five days' written notice of such revocation. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 15th day of May, 2003. /s/ JUAN L. ELEK ------------------------------------- Juan L. Elek Director Centex Corporation CENTEX CORPORATION POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints Lawrence E. Hirsch with full power of substitution in the premises, as the undersigned's true and lawful agent and attorney-in-fact (the "Attorney-in-Fact"), with full power and authority in the name and on behalf of the undersigned, in his capacity as a Director of Centex Corporation (the "Company"), to execute and file with the Securities and Exchange Commission the Company's Annual Report on Form 10-K for the Company's fiscal year ended March 31, 2003, together with any and all amendments thereto. This Power of Attorney and all authority granted and conferred hereby shall continue indefinitely and, unless waived by the Attorney-in-Fact, may not be revoked until the Attorney-in-Fact has received five days' written notice of such revocation. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 15th day of May, 2003. /s/ TIMOTHY R. ELLER --------------------------------- Timothy R. Eller Director Centex Corporation CENTEX CORPORATION POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints Lawrence E. Hirsch and Timothy R. Eller, or either of such individuals, with full power of substitution in the premises, as the undersigned's true and lawful agents and attorneys-in-fact (the "Attorneys-in-Fact"), with full power and authority in the name and on behalf of the undersigned, in his capacity as a Director of Centex Corporation (the "Company"), to execute and file with the Securities and Exchange Commission the Company's Annual Report on Form 10-K for the Company's fiscal year ended March 31, 2003, together with any and all amendments thereto. This Power of Attorney and all authority granted and conferred hereby shall continue indefinitely and, unless waived by the Attorneys-in-Fact, may not be revoked until the Attorneys-in-Fact have received five days' written notice of such revocation. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 15th day of May, 2003. /s/ THOMAS J. FALK ------------------------------------- Thomas J. Falk Director Centex Corporation CENTEX CORPORATION POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints Lawrence E. Hirsch and Timothy R. Eller, or either of such individuals, with full power of substitution in the premises, as the undersigned's true and lawful agents and attorneys-in-fact (the "Attorneys-in-Fact"), with full power and authority in the name and on behalf of the undersigned, in his capacity as a Director of Centex Corporation (the "Company"), to execute and file with the Securities and Exchange Commission the Company's Annual Report on Form 10-K for the Company's fiscal year ended March 31, 2003, together with any and all amendments thereto. This Power of Attorney and all authority granted and conferred hereby shall continue indefinitely and, unless waived by the Attorneys-in-Fact, may not be revoked until the Attorneys-in-Fact have received five days' written notice of such revocation. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 15th day of May, 2003. /s/ CLINT W. MURCHISON, III ------------------------------------- Clint W. Murchison, III Director Centex Corporation CENTEX CORPORATION POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints Lawrence E. Hirsch and Timothy R. Eller, or either of such individuals, with full power of substitution in the premises, as the undersigned's true and lawful agents and attorneys-in-fact (the "Attorneys-in-Fact"), with full power and authority in the name and on behalf of the undersigned, in his capacity as a Director of Centex Corporation (the "Company"), to execute and file with the Securities and Exchange Commission the Company's Annual Report on Form 10-K for the Company's fiscal year ended March 31, 2003, together with any and all amendments thereto. This Power of Attorney and all authority granted and conferred hereby shall continue indefinitely and, unless waived by the Attorneys-in-Fact, may not be revoked until the Attorneys-in-Fact have received five days' written notice of such revocation. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 15th day of May, 2003. /s/ CHARLES H. PISTOR, JR. ------------------------------------- Charles H. Pistor, Jr. Director Centex Corporation CENTEX CORPORATION POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints Lawrence E. Hirsch and Timothy R. Eller, or either of such individuals, with full power of substitution in the premises, as the undersigned's true and lawful agents and attorneys-in-fact (the "Attorneys-in-Fact"), with full power and authority in the name and on behalf of the undersigned, in his capacity as a Director of Centex Corporation (the "Company"), to execute and file with the Securities and Exchange Commission the Company's Annual Report on Form 10-K for the Company's fiscal year ended March 31, 2003, together with any and all amendments thereto. This Power of Attorney and all authority granted and conferred hereby shall continue indefinitely and, unless waived by the Attorneys-in-Fact, may not be revoked until the Attorneys-in-Fact have received five days' written notice of such revocation. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 15th day of May, 2003. /s/ FREDERIC M. POSES ------------------------------------- Frederic M. Poses Director Centex Corporation CENTEX CORPORATION POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints Lawrence E. Hirsch and Timothy R. Eller, or either of such individuals, with full power of substitution in the premises, as the undersigned's true and lawful agents and attorneys-in-fact (the "Attorneys-in-Fact"), with full power and authority in the name and on behalf of the undersigned, in his capacity as a Director of Centex Corporation (the "Company"), to execute and file with the Securities and Exchange Commission the Company's Annual Report on Form 10-K for the Company's fiscal year ended March 31, 2003, together with any and all amendments thereto. This Power of Attorney and all authority granted and conferred hereby shall continue indefinitely and, unless waived by the Attorneys-in-Fact, may not be revoked until the Attorneys-in-Fact have received five days' written notice of such revocation. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 15th day of May, 2003. /s/ DAVID W. QUINN ------------------------------------- David W. Quinn Director Centex Corporation \ CENTEX CORPORATION POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints Lawrence E. Hirsch and Timothy R. Eller, or either of such individuals, with full power of substitution in the premises, as the undersigned's true and lawful agents and attorneys-in-fact (the "Attorneys-in-Fact"), with full power and authority in the name and on behalf of the undersigned, in his capacity as a Director of Centex Corporation (the "Company"), to execute and file with the Securities and Exchange Commission the Company's Annual Report on Form 10-K for the Company's fiscal year ended March 31, 2003, together with any and all amendments thereto. This Power of Attorney and all authority granted and conferred hereby shall continue indefinitely and, unless waived by the Attorneys-in-Fact, may not be revoked until the Attorneys-in-Fact have received five days' written notice of such revocation. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 15th day of May, 2003. /s/ THOMAS M. SCHOEWE ------------------------------------- Thomas M. Schoewe Director Centex Corporation CENTEX CORPORATION POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints Lawrence E. Hirsch and Timothy R. Eller, or either of such individuals, with full power of substitution in the premises, as the undersigned's true and lawful agents and attorneys-in-fact (the "Attorneys-in-Fact"), with full power and authority in the name and on behalf of the undersigned, in his capacity as a Director of Centex Corporation (the "Company"), to execute and file with the Securities and Exchange Commission the Company's Annual Report on Form 10-K for the Company's fiscal year ended March 31, 2003, together with any and all amendments thereto. This Power of Attorney and all authority granted and conferred hereby shall continue indefinitely and, unless waived by the Attorneys-in-Fact, may not be revoked until the Attorneys-in-Fact have received five days' written notice of such revocation. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 15th day of May, 2003. /s/ PAUL T. STOFFEL ------------------------------------- Paul T. Stoffel Director Centex Corporation EX-24.2 14 d05408exv24w2.txt EX-24.2 POWERS OF ATTORNEY HOLDING EXHIBIT 24.2 3333 HOLDING CORPORATION POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints Stephen M. Weinberg, with full power of substitution in the premises, as the undersigned's true and lawful agent and attorney-in-fact (the "Attorney-in-Fact"), with full power and authority in the name and on behalf of the undersigned, in his capacity as a Director of 3333 Holding Corporation (the "Company"), to execute and file with the Securities and Exchange Commission the Company's Annual Report on Form 10-K for the Company's fiscal year ended March 31, 2003, together with any and all amendments thereto. This Power of Attorney and all authority granted and conferred hereby shall continue indefinitely and, unless waived by the Attorney-in-Fact, may not be revoked until the Attorney-in-Fact has received five days' written notice of such revocation. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney the 21st day of May, 2003. /s/ JOSIAH O. LOW, III --------------------------------------- Josiah O. Low, III Director 3333 Holding Corporation 3333 HOLDING CORPORATION POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints Stephen M. Weinberg, with full power of substitution in the premises, as the undersigned's true and lawful agent and attorney-in-fact (the "Attorney-in-Fact"), with full power and authority in the name and on behalf of the undersigned, in his capacity as a Director of 3333 Holding Corporation (the "Company"), to execute and file with the Securities and Exchange Commission the Company's Annual Report on Form 10-K for the Company's fiscal year ended March 31, 2003, together with any and all amendments thereto. This Power of Attorney and all authority granted and conferred hereby shall continue indefinitely and, unless waived by the Attorney-in-Fact, may not be revoked until the Attorney-in-Fact has received five days' written notice of such revocation. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney the 21st day of May, 2003. /s/ DAVID M. SHERER --------------------------------------- David M. Sherer Director 3333 Holding Corporation 3333 HOLDING CORPORATION POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints Stephen M. Weinberg, with full power of substitution in the premises, as the undersigned's true and lawful agent and attorney-in-fact (the "Attorney-in-Fact"), with full power and authority in the name and on behalf of the undersigned, in his capacity as a Director of 3333 Holding Corporation (the "Company"), to execute and file with the Securities and Exchange Commission the Company's Annual Report on Form 10-K for the Company's fiscal year ended March 31, 2003, together with any and all amendments thereto. This Power of Attorney and all authority granted and conferred hereby shall continue indefinitely and, unless waived by the Attorney-in-Fact, may not be revoked until the Attorney-in-Fact has received five days' written notice of such revocation. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney the 21st day of May, 2003. /s/ ROGER O. WEST --------------------------------------- Roger O. West Director 3333 Holding Corporation EX-24.3 15 d05408exv24w3.txt EX-24.3 POWERS OF ATTORNEY PARTNERSHIP EXHIBIT 24.3 CENTEX DEVELOPMENT COMPANY, L.P. POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints Stephen M. Weinberg, with full power of substitution in the premises, as the undersigned's true and lawful agent and attorney-in-fact (the "Attorney-in-Fact"), with full power and authority in the name and on behalf of the undersigned, in his capacity as a Director of 3333 Development Corporation, General Partner of Centex Development Company, L.P. (the "Company"), to execute and file with the Securities and Exchange Commission the Company's Annual Report on Form 10-K for the Company's fiscal year ended March 31, 2003, together with any and all amendments thereto. This Power of Attorney and all authority granted and conferred hereby shall continue indefinitely and, unless waived by the Attorney-in-Fact, may not be revoked until the Attorney-in-Fact has received five days' written notice of such revocation. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney the 21st day of May, 2003. /s/ JOSIAH O. LOW, III --------------------------------------- Josiah O. Low, III Director 3333 Development Corporation, General Partner of Centex Development Company, L.P. CENTEX DEVELOPMENT COMPANY, L.P. POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints Stephen M. Weinberg, with full power of substitution in the premises, as the undersigned's true and lawful agent and attorney-in-fact (the "Attorney-in-Fact"), with full power and authority in the name and on behalf of the undersigned, in his capacity as a Director of 3333 Development Corporation, General Partner of Centex Development Company, L.P. (the "Company"), to execute and file with the Securities and Exchange Commission the Company's Annual Report on Form 10-K for the Company's fiscal year ended March 31, 2003, together with any and all amendments thereto. This Power of Attorney and all authority granted and conferred hereby shall continue indefinitely and, unless waived by the Attorney-in-Fact, may not be revoked until the Attorney-in-Fact has received five days' written notice of such revocation. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney the 21st day of May, 2003. /s/ DAVID M. SHERER --------------------------------------- David M. Sherer Director 3333 Development Corporation, General Partner of Centex Development Company, L.P. CENTEX DEVELOPMENT COMPANY, L.P. POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints Stephen M. Weinberg, with full power of substitution in the premises, as the undersigned's true and lawful agent and attorney-in-fact (the "Attorney-in-Fact"), with full power and authority in the name and on behalf of the undersigned, in his capacity as a Director of 3333 Development Corporation, General Partner of Centex Development Company, L.P. (the "Company"), to execute and file with the Securities and Exchange Commission the Company's Annual Report on Form 10-K for the Company's fiscal year ended March 31, 2003, together with any and all amendments thereto. This Power of Attorney and all authority granted and conferred hereby shall continue indefinitely and, unless waived by the Attorney-in-Fact, may not be revoked until the Attorney-in-Fact has received five days' written notice of such revocation. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney the 21st day of May, 2003. /s/ ROGER O. WEST --------------------------------------- Roger O. West Director 3333 Development Corporation, General Partner of Centex Development Company, L.P. EX-99.1 16 d05408exv99w1.txt EX-99.1 SCHEDULE III EXHIBIT 99.1 3333 HOLDING CORPORATION AND CENTEX DEVELOPMENT COMPANY, L.P. REAL ESTATE AND ACCUMULATED DEPRECIATION SCHEDULE III MARCH 31, 2003 (DOLLARS IN THOUSANDS)
Column A Column B Column C Column D Column E - ------------------------------------------ ------------ -------------------------- -------------------------- ------------ Cost Capitalized Gross Amount at Subsequent to Which Carried at Initial Cost to Company Acquisition Close of Period -------------------------- ------------- -------------------------- Buildings & Land & Buildings & Description Encumbrances Land Improvements Improvements Land Improvements - ------------------------------------------ ------------ ----------- ------------ ------------ ----------- ------------ Charlotte, North Carolina Westlake I - Industrial Building $ 1,671 $ 341 $ -- $ 1,626 $ 341 $ 1,626 Westlake II - Industrial Building 4,703 486 -- 4,896 486 4,896 Westlake III - Industrial Building 3,562 439 -- 3,601 441 3,599 Westlake IV - Industrial Building 11,762 1,413 -- 12,056 1,502 11,587 Westlake V - Industrial Building 4,823 625 -- 4,704 628 4,701 Westlake VI - Industrial Building 2,847 1,252 -- 2,729 1,252 2,729 Westlake VIII - Industrial Building 12,924 3,728 -- 11,478 3,814 11,392 Camarillo, California Camarillo Business Center--Industrial Building 5,500 1,206 6,119 1 1,206 6,120 Land held for development and sale 1,500 2,398 -- 37 2,435 -- Land held for development and sale 690 4,651 -- 2,495 5,248 -- Palm Coast, Florida Land held for development and sale -- 21,095 -- -- 4,302 -- Waikoloa, Hawaii Land held for development and sale 25,175 33,029 -- -- 27,619 -- Gardner, Massachusetts Summit I - Industrial Building 1,829 205 -- 2,155 205 2,155 Ann Arbor, Michigan State Street 11-12 - Office Building 2,278 1,210 -- 2,725 1,309 2,625 Land held for development and sale 441 897 -- (56) 841 -- Myrtle Beach, South Carolina Land held for development and sale 6,460 11,550 -- -- 6,874 -- Dallas, Texas Citymark I - Office Building 17,803 5,677 18,988 278 5,677 19,266 Grand Prairie, Texas Hilltop - Industrial Building 4,289 2,013 -- 4,553 2,061 4,505 Lewisville, Texas Vista Ridge Marketplace - Retail Center 4,996 5,324 -- 3,804 5,327 3,801 ----------- ----------- ----------- ----------- ----------- ----------- $ 113,253 $ 97,539 $ 25,107 $ 57,082 $ 71,568 $ 79,002 =========== =========== =========== =========== =========== =========== Column A Column F Column G Column H Column I - ------------------------------------------ ------------ ------------ ----------- --------------- Life on Which Depreciation in Fiscal Fiscal Latest Income Accumulated Year Year Statements is Description Depreciation Constructed Acquired is Computed - ------------------------------------------ ------------ ------------ ----------- --------------- Charlotte, North Carolina Westlake I - Industrial Building $ 256 1999 (1) Westlake II - Industrial Building 487 2000 (1) Westlake III - Industrial Building 253 2001 (1) Westlake IV - Industrial Building 613 2001 (1) Westlake V - Industrial Building 340 2001 (1) Westlake VI - Industrial Building 105 2002 (1) Westlake VIII - Industrial Building 356 2002 (1) Camarillo, California Camarillo Business Center--Industrial Building 248 2002 (1) Land held for development and sale -- 2002 Land held for development and sale -- 1998 Palm Coast, Florida Land held for development and sale -- 2002 Waikoloa, Hawaii Land held for development and sale -- 2002 Gardner, Massachusetts Summit I - Industrial Building 183 2000 (1) Ann Arbor, Michigan State Street 11-12 - Office Building -- 2002 (1) Land held for development and sale -- 2000 Myrtle Beach, South Carolina Land held for development and sale -- 2002 Dallas, Texas Citymark I - Office Building 1,671 2000 (1) Grand Prairie, Texas Hilltop - Industrial Building 47 2003 Lewisville, Texas Vista Ridge Marketplace - Retail Center 83 2003 ----------- $ 4,642 ===========
(1) Depreciation of the real estate assets is calculated over the following estimated useful lives using the straight-line method: Building and improvements 39 years Tenant improvements Terms of leases
3333 HOLDING CORPORATION AND CENTEX DEVELOPMENT COMPANY, L.P. REAL ESTATE AND ACCUMULATED DEPRECIATION NOTE TO SCHEDULE III March 31, 2003 (DOLLARS IN THOUSANDS) Balance at beginning of period $ 226,080 Additions during period: Acquisitions through foreclosure -- Other acquisitions -- Improvements etc. 23,587 Other -- ------------- $ 23,587 ------------- Deductions during period: Cost of real estate sold (91,325) Other (7,772)(a) ------------- (99,097) ------------- Balance at close of period $ 150,570 =============
(a) Represents the transfer of land into Projects Under Development and the disposition of a property in an exchange. 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