10-Q

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

(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2002

OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from            N/A           to
	Commission file number 1-10959

STANDARD PACIFIC CORP.
(Exact name of registrant as specified in its charter)
Delaware	33-0475989
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
15326 Alton Parkway, Irvine, CA	92618-2338
(Address of principal executive offices)	(Zip Code)
(Registrant’s telephone number, including area code)       (949) 789-1600

Indicate by check mark whether the 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 the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

APPLICABLE ONLY TO CORPORATE ISSUERS

Registrant’s shares of common stock outstanding at November 7, 2002:  32,694,276

STANDARD PACIFIC CORP.
FORM 10-Q
INDEX

			Page No.
PART I.     Financial Information
	ITEM 1.	Financial Statements
		Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2002 and 2001	2
		Condensed Consolidated Balance Sheets as of September 30, 2002 and December 31, 2001	3
		Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2002 and 2001	4
		Notes to Unaudited Condensed Consolidated Financial Statements	5
	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	20
	ITEM 4.	Controls and Procedures	21
PART II.     Other Information			23
SIGNATURES			24
CERTIFICATIONS			24

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STANDARD PACIFIC CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share amounts)
(Unaudited)

			Three Months Ended September 30,						Nine Months Ended September 30,
			2002			2001			2002			2001
Homebuilding:
	Revenues		$	462,252		$	333,936		$	1,192,899		$	944,603
	Cost of sales			(383,714	)		(263,918	)		(983,246	)		(735,829	)
		Gross margin		78,538			70,018			209,653			208,774
	Selling, general and administrative expenses			(44,954	)		(31,269	)		(111,271	)		(87,067	)
	Income from unconsolidated joint ventures			5,835			5,833			13,341			13,738
	Interest expense			(1,472	)		(1,195	)		(4,045	)		(3,619	)
	Amortization of goodwill			—			(586	)		—			(1,757	)
	Other income (expense)			(2,775	)		29			(2,595	)		153
		Homebuilding pretax income		35,172			42,830			105,083			130,222
Financial Services:
	Revenues			3,053			2,445			9,028			5,930
	Expenses			(2,444	)		(2,096	)		(6,635	)		(4,934	)
	Income from unconsolidated joint ventures			656			510			1,482			1,151
	Other income			93			85			189			280
		Financial services pretax income		1,358			944			4,064			2,427
Income before taxes				36,530			43,774			109,147			132,649
Provision for income taxes				(13,913	)		(17,490	)		(42,753	)		(52,882	)
Net Income			$	22,617		$	26,284		$	66,394		$	79,767
Earnings Per Share:
	Basic		$	0.70		$	0.88		$	2.14		$	2.65
	Diluted		$	0.68		$	0.86		$	2.07		$	2.59
Weighted Average Common Shares Outstanding:
	Basic			32,540,965			29,969,813			31,037,223			30,118,236
	Diluted			33,409,731			30,700,482			32,013,143			30,828,929

The accompanying notes are an integral part of these condensed consolidated statements.

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STANDARD PACIFIC CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)

			September 30, 2002		December 31, 2001
				(Unaudited)
ASSETS
Homebuilding:
	Cash and equivalents		$	6,803	$	3,422
	Mortgage notes receivable and accrued interest			4,518		1,675
	Other notes and receivables			28,806		20,570
	Inventories			1,467,881		1,119,055
	Investments in and advances to unconsolidated joint ventures			95,897		70,171
	Property and equipment, net			7,381		6,471
	Deferred income taxes			19,943		23,028
	Other assets			18,931		9,074
	Goodwill, net			56,732		14,508
				1,706,892		1,267,974
Financial Services:
	Cash and equivalents			3,006		5,780
	Mortgage loans held for sale			59,724		90,548
	Other assets			3,027		1,999
				65,757		98,327
		Total Assets	$	1,772,649	$	1,366,301
LIABILITIES AND STOCKHOLDERS’ EQUITY
Homebuilding:
	Accounts payable		$	74,828	$	57,413
	Accrued liabilities			180,554		104,813
	Revolving credit facility			84,550		51,400
	Trust deed and other notes payable			15,332		20,621
	Senior notes payable			473,413		473,253
	Senior subordinated notes payable			148,835		—
				977,512		707,500
Financial Services:
	Accounts payable and other liabilities			1,422		1,497
	Mortgage credit facility			56,292		84,212
				57,714		85,709
		Total Liabilities		1,035,226		793,209
Stockholders’ Equity:
	Preferred stock, $.01 par value; 10,000,000 shares authorized; none issued			—		—
	Common stock, $.01 par value; 100,000,000 shares authorized; 32,763,276 and 29,372,832    shares outstanding, respectively			328		294
	Additional paid-in capital			383,062		277,604
	Retained earnings			354,033		295,194
	Total Stockholders’ Equity			737,423		573,092
		Total Liabilities and Stockholders’ Equity	$	1,772,649	$	1,366,301

The accompanying notes are an integral part of these condensed consolidated balance sheets.

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STANDARD PACIFIC CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)
(Unaudited)

					Nine Months Ended September 30,
						2002			2001
Cash Flows From Operating Activities:
	Net income				$	66,394		$	79,767
	Adjustments to reconcile net income to net cash provided by (used in) operating activities:
			Income from unconsolidated homebuilding joint ventures			(13,341	)		(13,738	)
			Cash distributions of income from unconsolidated homebuilding joint ventures			10,200			11,533
			Depreciation and amortization			1,808			1,491
			Amortization of goodwill			—			1,757
			Changes in cash and equivalents due to:
				Mortgages, other notes and receivables		26,509			17,753
				Inventories		(150,071	)		(283,816	)
				Deferred income taxes		3,085			(4,660	)
				Other assets		(5,861	)		5,465
				Accounts payable		389			(5,789	)
				Accrued liabilities		59,586			12,504
		Net cash provided by (used in) operating activities				(1,302	)		(177,733	)
Cash Flows From Investing Activities:
	Net cash paid for acquisitions					(183,088	)		—
	Investments in and advances to unconsolidated homebuilding joint ventures					(85,054	)		(41,683	)
	Capital distributions and repayments from unconsolidated homebuilding joint ventures					58,781			30,950
	Net additions to property and equipment					(804	)		(2,788	)
		Net cash provided by (used in) investing activities				(210,165	)		(13,521	)
Cash Flows From Financing Activities:
	Net proceeds from (payments on) revolving credit facility					33,150			132,200
	Principal payments on senior notes and trust deed notes payable					(17,751	)		(191	)
	Proceeds from the issuance of senior notes payable					—			48,615
	Proceeds from the issuance of senior subordinated notes payable					146,963			—
	Net proceeds from (payments on) mortgage credit facility					(27,920	)		(5,330	)
	Net proceeds from issuance of common stock					80,538			—
	Dividends paid					(7,555	)		(7,228	)
	Repurchase of common shares					—			(16,776	)
	Proceeds from the exercise of stock options					4,649			2,585
		Net cash provided by (used in) financing activities				212,074			153,875
Net increase (decrease) in cash and equivalents						607			(37,379	)
Cash and equivalents at beginning of period						9,202			38,443
Cash and equivalents at end of period					$	9,809		$	1,064
Supplemental Disclosures of Cash Flow Information:
	Cash paid during the period for:
		Interest			$	33,420		$	33,523
		Income taxes				39,697			62,183
Supplemental Disclosure of Noncash Activities:
	Inventory financed by trust deed and other notes payable				$	12,389		$	—
	Inventory received as distributions from unconsolidated homebuilding joint ventures					3,688			12,076
	Expenses capitalized in connection with the issuance of the 8 1/2% senior notes due 2009					—			515
	Expenses capitalized in connection with the issuance of the 9 1/4% senior subordinated notes due 2012					1,838			—
	Trust deed and other notes payable assumed in connection with acquisition					1,174			—
	Issuance of common stock in connection with acquisitions					18,908			—
	Income tax benefit credited in connection with stock option exercises					1,697			1,108

The accompanying notes are an integral part of these condensed consolidated statements.

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STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002

1.  Basis of Presentation

          The condensed consolidated financial statements included herein have been prepared by Standard Pacific Corp., without audit, pursuant to the rules and regulations of the Securities and Exchange Commission for Form 10-Q.  Certain information normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States has been omitted pursuant to applicable rules and regulations.  In the opinion of management, the unaudited financial statements included herein reflect all adjustments (which include only normal recurring adjustments) necessary to present fairly our financial position as of September 30, 2002, and the results of operations and cash flows for the periods presented.

          Certain items in the prior period financial statements have been reclassified to conform with the current period presentation.

          The financial statements included herein should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2001.  Unless the context otherwise requires, the terms “we,” “us” and “our” refer to Standard Pacific Corp. and its predecessors and consolidated subsidiaries.  The results of operations for interim periods are not necessarily indicative of results to be expected for the full year.

2.  Inventories

          Inventories consisted of the following at:

	September 30, 2002		December 31, 2001
	(Dollars in thousands)
Land and land under development	$	788,199	$	613,079
Homes completed and under construction		589,373		436,718
Model homes		90,309		69,258
	$	1,467,881	$	1,119,055

          Effective January 1, 2002, we adopted Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”).  SFAS 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets.  SFAS 144 supersedes Statement of Financial Accounting Standards No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,” and the accounting and reporting provisions of Accounting Principles Bulletin Opinion No. 30, “Reporting the Results of Operations – Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions,” for the disposal of a segment of a business (as previously defined in that Opinion).  Our adoption of SFAS 144 did not have a material impact on our financial condition or results of operations at the time of adoption.

          During the 2002 third quarter we recorded a $6.0 million noncash pretax asset impairment charge related to the write-down of certain homebuilding projects in our Colorado division to their estimated fair value in accordance with SFAS 144 due to slower than anticipated new home sales, increased sales incentives and lower new home selling prices. This charge was included in cost of sales in the accompanying condensed consolidated financial statements.

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3.  Capitalization of Interest

          The following is a summary of homebuilding interest capitalized and expensed related to inventories for the three and nine month periods ended September 30, 2002 and 2001.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2002			2001			2002			2001
	(Dollars in thousands)
Total homebuilding interest incurred	$	15,181		$	13,313		$	42,184		$	36,364
Less: Homebuilding interest capitalized    to inventories		(13,709	)		(12,118	)		(38,139	)		(32,745	)
Homebuilding interest expense	$	1,472		$	1,195		$	4,045		$	3,619
Homebuilding interest previously capitalized to    inventories, included in cost of sales	$	10,022		$	8,465		$	31,620		$	25,319
Homebuilding interest capitalized in inventories at    period end							$	35,409		$	30,987

4.  Investments in Unconsolidated Homebuilding Joint Ventures

          We enter into homebuilding and land development joint ventures from time to time as a means of accessing lot positions, expanding our market opportunities, establishing strategic alliances, managing our risk profile and leveraging our capital base.  Our homebuilding joint ventures develop land and construct homes which are sold directly to third party homebuyers.  Our land development joint ventures are typically entered into with other homebuilders and developers to develop finished lots for sale to the joint venture’s members or other third parties.

          The tables set forth below summarize the financial information related to our unconsolidated homebuilding and land development joint ventures accounted for under the equity method:

		September 30, 2002		December 31, 2001
		(Dollars in thousands)
Assets:
	Cash	$	19,936	$	27,622
	Inventories		434,448		301,626
	Other assets		35,331		34,876
		$	489,715	$	364,124
Liabilities and Equity:
	Accounts payable and accrued liabilities	$	67,161	$	51,413
	Construction loans and trust deed notes payable		257,928		194,488
	Equity		164,626		118,223
		$	489,715	$	364,124

          Our share of the equity balance shown above was approximately $87.3 million and $56.1 million at September 30, 2002 and December 31, 2001, respectively.  Additionally, as of September 30, 2002 and December 31, 2001 we had advances outstanding of approximately $8.6 million and $14.1 million to these unconsolidated joint ventures, which were included in the accounts payable and accrued liabilities balance shown above.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2002			2001			2002			2001
	(Dollars in thousands)
Revenues	$	33,052		$	46,812		$	107,066		$	96,825
Cost of sales and expenses		(26,145	)		(31,556	)		(80,172	)		(68,586	)
Net income	$	6,907		$	15,256		$	26,894		$	28,239

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          Our share of net income and losses in the joint ventures detailed above varies, but is generally less than or equal to 50 percent. All joint venture profits generated from land sales to us are deferred until the homes are sold by us.

5.  Goodwill

          Effective January 1, 2002, we adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”).  SFAS 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets.  SFAS 142 requires that goodwill not be amortized but assessed at least annually for impairment and expensed against earnings as a noncash charge if the estimated fair value of a reporting unit, including goodwill, is less than its carrying value.  During the quarter ended June 30, 2002, we completed our transitional impairment test of goodwill.  For purposes of this test, each of our homebuilding geographic operating divisions has been treated as a reporting unit.  As of June 30, 2002, we have determined there was no impairment of goodwill.  We will review and assess our goodwill for impairment in accordance with SFAS 142 during the 2002 fourth quarter. 

          As a result of the adoption of SFAS 142, we ceased recording amortization of goodwill effective January 1, 2002.  The table set forth below reflects net income and basic and diluted earnings per share for the three and nine month periods ended September 30, 2001, adjusted to add back the amortization of goodwill, net of applicable income taxes:

		Three Months Ended September 30,				Nine Months Ended September 30,
			2002		2001		2002		2001
		(Dollars in thousands, except per share amounts)
Adjusted Net Income:
	Reported net income	$	22,617	$	26,284	$	66,394	$	79,767
	Add back: Goodwill amortization, net of income taxes		—		486		—		1,458
	Adjusted net income	$	22,617	$	26,770	$	66,394	$	81,225
Adjusted Basic Earnings Per Share:
	Reported basic earnings per share	$	0.70	$	0.88	$	2.14	$	2.65
	Add back: Goodwill amortization, net of income taxes		—		0.01		—		0.05
	Adjusted basic earnings per share	$	0.70	$	0.89	$	2.14	$	2.70
Adjusted Diluted Earnings Per Share:
	Reported diluted earnings per share	$	0.68	$	0.86	$	2.07	$	2.59
	Add back: Goodwill amortization, net of income taxes		—		0.01		—		0.04
	Adjusted diluted earnings per share	$	0.68	$	0.87	$	2.07	$	2.63

6.  Acquisitions   

          On April 15, 2002, we acquired Westbrooke Homes for total consideration of approximately $39 million in cash, plus the repayment of approximately $55 million in indebtedness.  In connection with this acquisition, we recorded goodwill of approximately $12.5 million.  Westbrooke Homes is a longtime homebuilder in the Miami, Florida metropolitan area.  With this acquisition, we purchased or assumed the rights to acquire approximately 2,800 single-family lots, which included 8 active selling communities at the close of the transaction and acquired a backlog of 485 presold homes.

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          On May 14, 2002, we acquired Colony Homes for total consideration of approximately $26 million in cash (including the contingent payments described below) and stock, plus the repayment of approximately $9 million in indebtedness. In connection with this acquisition, we recorded an initial amount of goodwill of approximately $15.9 million.  The stock component consisted of the issuance of 133,333 shares of Standard Pacific common stock valued under the agreement at $30 per share.  The contingent payments are subject to an aggregate cap of $7 million and will be payable pursuant to an earnout arrangement based on pretax income of Colony Homes during the period 2003 through 2005.  Contingent payments, if any, will be recorded as goodwill as they are earned and will be payable in cash annually following the relevant year end.  Colony Homes has been in business since 1991 in the Orlando, Florida metropolitan area.  At closing, we purchased or assumed the rights to acquire over 1,600 buildable lots and acquired a backlog of 141 presold homes. 

          On August 13, 2002, we acquired Westfield Homes for total consideration of approximately $56.5 million in cash and stock, plus the repayment of approximately $46 million in indebtedness.  In connection with this acquisition, we recorded an initial amount of goodwill of approximately $13.8 million.  The cash component of the purchase price consisted of an initial payment of approximately $20 million, a deferred payment of $7 million payable in January 2003 and contingent payments estimated to equal approximately $14.5 million.  The contingent payments would be paid pursuant to an earnout arrangement based on a percentage of pretax income of Westfield Homes for the period from acquisition through December 31, 2002 and for each year thereafter through December 31, 2005.  Contingent payments, if any, will be recorded as goodwill as they are earned and will be payable in cash annually following the relevant year end.  The stock component consisted of the issuance of 459,559 shares of Standard Pacific common stock valued under the agreement at $32.64 per share.  Westfield Homes has been in business since 1980 and currently operates in Tampa Bay and Southwest Florida, and in Raleigh-Durham and Charlotte North Carolina.  Westfield owned or controlled approximately 4,800 buildable lots in these markets at the time of acquisition.  With this acquisition, we also acquired a backlog of 626 presold homes. 

          All of these acquisitions were accounted for under the purchase method of accounting in accordance with Statement of Financial Accounting Standards No. 141, “Business Combinations” (“SFAS 141”) and the results of operations of Westbrooke Homes, Colony Homes and Westfield Homes are included in the accompanying condensed consolidated financial statements beginning on their respective dates of acquisition.

7.  9¼% Senior Subordinated Notes

          On April 15, 2002, we utilized a portion of our universal shelf registration statement and issued $150 million of 9¼% Senior Subordinated Notes which mature on April 15, 2012.  These notes were issued at a discount to yield approximately 9.38 percent and are unsecured obligations that are junior to our senior unsecured indebtedness.  Net proceeds after underwriting expenses were approximately $147.0 million and were used to fund the acquisition of Westbrooke Homes and repay a portion of the balance outstanding under our revolving credit facility.  We will, under certain circumstances, be obligated to make an offer to purchase all or a portion of these notes in the event of certain asset sales.  In addition, these notes contain restrictive covenants which, among other things, impose certain limitations on our ability to (1) incur additional indebtedness, (2) create liens, (3) make restricted payments, and (4) sell assets.  Also, upon a change in control we are required to make an offer to purchase these notes.

8.  Commitments and Contingencies

          We are subject to customary obligations associated with entering into contracts for the purchase of land and improved homesites.  These purchase contracts typically require a cash deposit and the purchase of properties under these contracts is generally contingent upon satisfaction of certain requirements by the sellers, including obtaining applicable property entitlements.  As of September 30, 2002, we had deposits

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outstanding of approximately $27.2 million on land purchase contracts having a total remaining purchase price of $285.6 million.

          In addition, we utilize option contracts with land sellers and third-party financial entities as a method of acquiring land.  Option contracts generally require the payment of a non-refundable cash deposit or the issuance of a letter of credit for the right to acquire lots over a specified period of time at predetermined prices. We generally have the right at our discretion to terminate our obligations under these option agreements by forfeiting our cash deposit or repaying amounts drawn under the letter of credit with no further financial responsibility. As of September 30, 2002, we had cash deposits and letters of credit outstanding of approximately $33.2 million on option contracts having a total remaining purchase price of approximately $275.5 million, of which approximately $50.1 million is included in accrued liabilities in the accompanying condensed consolidated balance sheet at September 30, 2002 related to two of our land option contracts.

          We also enter into land development and homebuilding joint ventures. These joint ventures typically obtain secured acquisition, development and construction financing.  At September 30, 2002, our unconsolidated joint ventures had total borrowings of approximately $257.9 million which, in accordance with generally accepted accounting principles, are not recorded in our accompanying condensed consolidated balance sheet.  We and our joint venture partners generally provide credit enhancements to this financing in the form of loan-to-value maintenance agreements which require us under certain circumstances to reduce the venture’s borrowings to the extent such borrowings plus estimated construction completion costs exceed a specified percentage of the value of the property securing the loan.  Either a decrease in the value of the property securing the loan or an increase in construction completion costs could trigger this pay down obligation.  Typically, we share these obligations with our other partners and, in some instances, these obligations are subject to limitations on the amount that we could be required to pay down.  In addition, we and our joint venture partners are generally obligated to the project lenders to complete offsite improvements and the construction of planned homes if the joint venture does not perform the required construction.  Provided we and the other joint venture partners are in compliance with these completion obligations, the project lenders would be obligated to fund these improvements through any financing commitments available under the applicable joint venture development and construction loans.

9.  Issuance of Common Stock

          On May 8, 2002, we utilized a portion of our universal shelf registration statement and issued 2,500,000 shares of our common stock at a price to the public of $34.00 per share.  In addition, two of our former directors sold an aggregate of 1,000,000 shares in this offering.  Net proceeds to us after underwriting expenses were approximately $80.5 million and were used to repay the remaining balance outstanding under our revolving credit facility and for general corporate purposes, including acquisitions.  We did not receive any proceeds from the shares sold by the selling stockholders.

10.  Earnings Per Share

          We compute earnings per share in accordance with Statement of Financial Accounting Standards No. 128 “Earnings per Share.”  This statement requires the presentation of both basic and diluted earnings per share for financial statement purposes.  Basic earnings per share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding.  Diluted earnings per share includes the effect of the potential shares outstanding, including dilutive stock options using the treasury stock method.  The following table reconciles the components of the basic earnings per share calculation to diluted earnings per share:

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	Three Months Ended September 30,
	2002						2001
	Income		Shares		EPS		Income		Shares		EPS
	(Dollars in thousands, except per share amounts)
Basic earnings per share	$	22,617		32,540,965	$	0.70	$	26,284		29,969,813	$	0.88
Effect of dilutive stock   options		—		868,766				—		730,669
Diluted earnings per share	$	22,617		33,409,731	$	0.68	$	26,284		30,700,482	$	0.86

	Nine Months Ended September 30,
	2002						2001
	Income		Shares		EPS		Income		Shares		EPS
	(Dollars in thousands, except per share amounts)
Basic earnings per share	$	66,394		31,037,223	$	2.14	$	79,767		30,118,236	$	2.65
Effect of dilutive stock   options		—		975,920				—		710,693
Diluted earnings per share	$	66,394		32,013,143	$	2.07	$	79,767		30,828,929	$	2.59

11.  Houston Operations

          In August 2002, we announced our decision to close our Houston division.  In 2001, our Houston operations represented less than 2 percent of our total homebuilding revenues and did not make a significant contribution to our Texas earnings.  In connection with winding down our Houston operations, we recognized a noncash pretax charge of approximately $3.0 million during the 2002 third quarter, which was included in other expense in the accompanying condensed consolidated financial statements.

12.  Recent Accounting Pronouncements

          In April 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 145 “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No 13, and Technical Corrections”(“SFAS 145”).  SFAS 145 provides that gains or losses resulting from the extinguishment of debt not be classified as an extraordinary item unless it meets the criteria of Accounting Principles Board Opinion No. 30.  SFAS 145 is effective for fiscal years beginning after May 15, 2002.  We do not anticipate that the adoption of SFAS 145 will have a material impact on our financial position or results of operations.

          In June 2002, the FASB issued Statement of Financial Accounting Standards No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (“SFAS 146”).  SFAS 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (“EITF”) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including certain costs incurred in a restructuring)”.  SFAS 146 requires recognition of a liability for a cost associated with an exit or disposal activity when the liability is incurred as opposed to when the entity commits to an exit plan as prescribed under EITF No. 94-3.  SFAS 146 is effective for exit or disposal activities initiated after December 31, 2002.  We believe the adoption of SFAS 146 will not have a material impact on our financial position or results of operations.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

Selected Financial Information

			Three Months Ended September 30,						Nine Months Ended September 30,
			2002			2001			2002			2001
			(Dollars in thousands)
Homebuilding:
	Revenues		$	462,252		$	333,936		$	1,192,899		$	944,603
	Cost of sales			(383,714	)		(263,918	)		(983,246	)		(735,829	)
		Gross margin		78,538			70,018			209,653			208,774
		Gross margin percentage		17.0	%		21.0	%		17.6	%		22.1	%
	Selling, general and administrative expenses			(44,954	)		(31,269	)		(111,271	)		(87,067	)
	Income from unconsolidated joint ventures			5,835			5,833			13,341			13,738
	Interest expense			(1,472	)		(1,195	)		(4,045	)		(3,619	)
	Amortization of goodwill			—			(586	)		—			(1,757	)
	Other income (expense)			(2,775	)		29			(2,595	)		153
		Homebuilding pretax income		35,172			42,830			105,083			130,222
Financial Services:
	Revenues			3,053			2,445			9,028			5,930
	Expenses			(2,444	)		(2,096	)		(6,635	)		(4,934	)
	Income from unconsolidated joint ventures			656			510			1,482			1,151
	Other income			93			85			189			280
		Financial services pretax income		1,358			944			4,064			2,427
Income before taxes			$	36,530		$	43,774		$	109,147		$	132,649
Provision for income taxes				(13,913	)		(17,490	)		(42,753	)		(52,882	)
Net Income			$	22,617		$	26,284		$	66,394		$	79,767
Net cash provided by (used in) operating activities (1)			$	(35,993	)	$	(23,783	)	$	(1,302	)	$	(177,733	)
EBITDA (2)			$	52,524		$	59,061		$	152,431		$	162,630

(1)

Amounts were derived from our condensed consolidated statements of cash flows.

(2)

As used in this report, EBITDA means net income (plus cash distributions of income from unconsolidated homebuilding joint ventures) before (a) income taxes, (b) interest expense, (c) expensing of previously capitalized interest included in cost of sales, (d) noncash impairment charges, (e) depreciation and amortization, and (f) income from unconsolidated homebuilding joint ventures.  Other companies may calculate EBITDA differently.  EBITDA should not be considered in isolation or as an alternative to net income or to cash flows from operating activities (as determined in accordance with generally accepted accounting principles) and should not be construed as an indicator of operating performance or as a measure of liquidity.  The table set forth below reconciles net income to EBITDA:

		Three Months Ended September 30,						Nine Months Ended September 30,
		2002			2001			2002			2001
		(Dollars in thousands)
Net income		$	22,617		$	26,284		$	66,394		$	79,767
Add:
	Cash distributions of income from unconsolidated    homebuilding joint ventures		750			10,332			10,200			11,533
	Provision for income taxes		13,913			17,490			42,753			52,882
	Interest expense		1,472			1,195			4,045			3,619
	Expensing of previously capitalized interest    included in cost of sales		10,022			8,465			31,620			25,319
	Noncash impairment charges, including Colorado    and Texas charges		8,952			—			8,952			—
	Depreciation and amortization		633			542			1,808			1,491
	Amortization of goodwill		—			586			—			1,757
Less:
	Income from unconsolidated homebuilding joint    ventures		(5,835	)		(5,833	)		(13,341	)		(13,738	)
EBITDA		$	52,524		$	59,061		$	152,431		$	162,630

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Selected Operating Data

				Three Months Ended September 30,				Nine Months Ended September 30,
				2002		2001		2002		2001
New homes delivered:
	Southern California				401		388		1,115		839
	Northern California				137		121		403		473
		Total California			538		509		1,518		1,312
	Texas				118		158		365		479
	Arizona				385		279		1,038		783
	Colorado				74		89		211		279
	Florida				289		—		517		—
	Carolinas				99		—		99		—
		Consolidated total			1,503		1,035		3,748		2,853
	Unconsolidated joint ventures:
		Southern California			37		74		114		135
		Northern California			25		—		25		—
			Total unconsolidated joint ventures		62		74		139		135
	Total				1,565		1,109		3,887		2,988
Average selling prices of new homes delivered:
	California (excluding joint ventures)			$	500,000	$	413,000	$	474,000	$	445,000
	Texas			$	291,000	$	288,000	$	283,000	$	291,000
	Arizona			$	173,000	$	173,000	$	173,000	$	170,000
	Colorado			$	299,000	$	331,000	$	325,000	$	310,000
	Florida			$	194,000	$	—	$	205,000	$	—
	Carolinas			$	140,000	$	—	$	140,000	$	—
	Consolidated (excluding joint ventures)			$	307,000	$	322,000	$	318,000	$	331,000
	Unconsolidated joint ventures (California)			$	509,000	$	512,000	$	513,000	$	529,000
	Total (including joint ventures)			$	315,000	$	335,000	$	325,000	$	340,000
Net new orders:
	Southern California				433		363		1,605		1,162
	Northern California				126		89		558		304
		Total California			559		452		2,163		1,466
	Texas				114		122		404		451
	Arizona				317		287		1,187		911
	Colorado				63		69		225		259
	Florida				430		—		711		—
	Carolinas				71		—		71		—
		Consolidated total			1,554		930		4,761		3,087
	Unconsolidated joint ventures:
		Southern California			141		43		327		247
		Northern California			36		—		114		2
			Total unconsolidated joint ventures		177		43		441		249
	Total				1,731		973		5,202		3,336

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Selected Operating Data – (continued)

				Three Months Ended September 30,				Nine Months Ended September 30,
				2002		2001		2002		2001
Average number of selling communities during the period:
	Southern California				24		20		24		19
	Northern California				11		14		13		13
		Total California			35		34		37		32
	Texas				25		29		24		28
	Arizona				18		19		20		18
	Colorado				12		9		11		10
	Florida				19		—		9		—
	Carolinas				5		—		2		—
		Consolidated total			114		91		103		88
	Unconsolidated  joint ventures:
		Southern California			7		6		6		5
		Northern California			3		1		2		1
			Total unconsolidated joint ventures		10		7		8		6
	Total				124		98		111		94

					At September 30,
					2002		2001
Backlog (in homes):
	Southern California					1,048		737
	Northern California					230		106
			Total California			1,278		843
	Texas					186		213
	Arizona					675		545
	Colorado					92		128
	Florida					1,301		—
	Carolinas					117		—
			Consolidated total			3,649		1,729
	Unconsolidated joint ventures:
			Southern California			226		159
			Northern California			89		2
				Total unconsolidated joint ventures		315		161
	Total					3,964		1,890
Backlog (estimated dollar values in thousands):
	Consolidated total				$	1,076,819	$	583,287
	Unconsolidated joint ventures (California)					171,170		82,234
			Total		$	1,247,989	$	665,521
Building sites owned or controlled:
	Southern California					6,173		6,195
	Northern California					3,168		3,106
		Total California				9,341		9,301
	Texas					2,812		2,524
	Arizona					4,063		4,148
	Colorado					1,576		1,988
	Florida					7,838		—
	Carolinas					2,097		—
		Total				27,727		17,961
	Total building sites owned					15,692		10,902
	Total building sites optioned					9,517		4,798
	Total joint venture lots					2,518		2,261
		Total				27,727		17,961
Completed and unsold homes						227		166
Homes under construction						3,710		2,378

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          Net income for the 2002 third quarter decreased 14 percent to $22.6 million, or $0.68 per diluted share, from $26.3 million, or $0.86 per diluted share, in the year earlier period.  The 2002 third quarter results reflect a noncash after-tax charge of $1.8 million, or $0.05 per diluted share, resulting from our previously announced decision to close our Houston division and an after-tax charge of $3.7 million, or $0.11 per diluted share, resulting from a noncash asset impairment charge related to certain of our Colorado homebuilding projects.  For the nine months ended September 30, 2002, net income decreased 17 percent to $66.4 million, or $2.07 per diluted share, compared to $79.8 million, or $2.59 per diluted share, for the comparable 2001 period.

          EBITDA for the three months ended September 30, 2002 decreased 11 percent to $52.5 million compared to $59.1 million for the 2001 third quarter.  EBITDA for the nine months ended September 30, 2002 was $152.4 million compared to $162.6 million for the year earlier period.  A reconciliation of EBITDA to net income is set forth in footnote 2 to the Selected Financial Information table on page 11.

          On April 15, 2002, we acquired Westbrooke Homes for total consideration of approximately $39 million in cash, plus the repayment of approximately $55 million in indebtedness.  Westbrooke Homes is a longtime homebuilder in the Miami, Florida metropolitan area.  With this acquisition, we purchased or assumed the rights to acquire approximately 2,800 single-family lots, which included 8 active selling communities at the close of the transaction and acquired a backlog of 485 presold homes.  For the year ended December 31, 2001, Westbrooke Homes had revenues of $206 million and delivered 919 new homes. 

          On May 14, 2002, we acquired Colony Homes for total consideration of approximately $26 million in cash (including the contingent payments described below) and stock, plus the repayment of approximately $9 million in indebtedness.  The stock component consisted of the issuance of 133,333 shares of Standard Pacific common stock valued under the agreement at $30 per share.  The contingent payments are subject to an aggregate cap of $7 million and will be payable pursuant to an earnout arrangement based on pretax income of Colony Homes during the period 2003 through 2005.  Colony Homes has been in business since 1991 in the Orlando, Florida metropolitan area.  At closing, we purchased or assumed the rights to acquire over 1,600 buildable lots and acquired a backlog of 141 presold homes.  For the year ended December 31, 2001, Colony Homes had revenues of $42 million and delivered 343 new homes.

          On August 13, 2002, we acquired Westfield Homes for total consideration of approximately $56.5 million in cash and stock, plus the repayment of approximately $46 million in indebtedness.  The cash component of the purchase price consisted of an initial payment of approximately $20 million, a deferred payment of $7 million payable in January 2003 and contingent payments estimated to equal approximately $14.5 million.  The contingent payments would be paid pursuant to an earnout arrangement based on a percentage of pretax income of Westfield Homes for the period from acquisition through December 31, 2002 and for each year thereafter through December 31, 2005.  The stock component consisted of the issuance of 459,559 shares of our common stock valued under the agreement at $32.64 per share.  Westfield Homes has been in business since 1980 and currently operates in Tampa Bay and Southwest Florida, and in Raleigh-Durham and Charlotte North Carolina.  We did not acquire Westfield’s Illinois operations.  Westfield owned or controlled approximately 4,800 buildable lots in these markets at the time of acquisition.  With this acquisition, we also acquired a backlog of 626 presold homes.   For the year ended December 31, 2001, Westfield Homes had revenues of approximately $186 million and delivered 1,155 new homes (exclusive of its Illinois operations). 

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          Homebuilding

          Homebuilding pretax income was down 18 percent to $35.1 million for the three months ended September 30, 2002 compared to $42.8 million in the previous year period.  Although our homebuilding revenues were up 38 percent to $462.3 million, we saw our homebuilding gross margin percentage decline year-over-year and our SG&A rate increase as a percentage of revenues.  The decline in homebuilding pretax income also reflects the $3.0 million pretax charge related to our decision to close our Houston division and the $6.0 million pretax asset impairment charge related to certain projects in our Colorado division.

          For the nine months ended September 30, 2002, homebuilding pretax income decreased 19 percent to $105.1 million compared to $130.2 million in the year earlier period.  This decrease was primarily the result of a decline in the homebuilding gross margin percentage and the Houston closure charge and Colorado asset impairment charge noted above.  The impact of the charges and gross margin decline were partially offset by a 26 percent increase in homebuilding revenues.

          Homebuilding revenues for the third quarter increased 38 percent to $462.3 million, compared to $333.9 million in the 2001 third quarter.  The increase in revenues was attributable to a 45 percent increase in new home deliveries (exclusive of joint ventures), reflecting in large part the delivery of 388 new homes from our new Florida and Carolina operations, which was partially offset by a 5 percent decline in our consolidated average home price to $307,000.  During the quarter we delivered 538 new homes in California (exclusive of joint ventures) compared to 509 last year, a 6 percent increase. Deliveries were up 3 percent to 401 homes in Southern California and up 13 percent to 137 homes in Northern California. In Arizona, deliveries were up 38 percent to 385 new homes. New home deliveries were off 25 percent in Texas and down 17 percent in Colorado due to weaker economic conditions in these markets.

          Homebuilding revenues for the nine months ended September 30, 2002 were up 26 percent to $1.2 billion compared to $944.6 million for the year earlier period.  The higher revenue total was due to a 31 percent increase in consolidated new home deliveries, including 616 deliveries from our recently acquired Florida and Carolina operations, which was offset, in part, by a 4 percent decline in our consolidated average home price to $318,000.

          During the 2002 third quarter the average home price in California (exclusive of joint venture deliveries) was up 21 percent to $500,000.  The higher price reflects a greater distribution of deliveries from our Orange County division in Southern California where prices are generally above our statewide average. Our average home prices in Arizona and Texas were essentially flat compared to the prior year while our average price in Colorado was down 10 percent to $299,000 due to changes in delivery mix and an increase in sales incentives.  Our average home prices in Florida and the Carolinas were $194,000 and $140,000, respectively, for the quarter. The consolidated average home price for the 2002 fourth quarter is expected to be approximately $295,000 to $305,000 compared to $370,000 for the 2001 fourth quarter and our average home price for 2003 is expected to be between $280,000 and $290,000 compared to $310,000 this year.  The anticipated decline in our average home price primarily reflects a greater distribution of deliveries from our Florida and Carolina operations compared to the level of deliveries expected to be generated during 2002.

          Our homebuilding gross margin percentage for the 2002 third quarter was 17.0 percent compared to 21.0 percent in the 2001 third quarter. Excluding the impact of the Colorado asset impairment charge, our gross margin percentage would have been 18.3 percent; and, further excluding the impact of the purchase accounting adjustments related to the write-up of inventory for homes in backlog for our three acquisitions this year, our gross margin percentage would have been 19.0 percent. The 200 basis point decline in our homebuilding gross margin percentage from last year’s third quarter (excluding the impact of the Colorado impairment charge and the purchase accounting adjustments) was due primarily to strong but lower margins in Northern California year-over-year, reflecting the slowdown in demand experienced in the Bay Area last

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year. Additionally, margins continue to remain under pressure in our Colorado and Texas divisions, where we are continuing to offer sales incentives.

          For the nine months ended September 30, 2002, our homebuilding gross margin percentage was 17.6 percent compared to 22.1 percent in the year earlier period reflecting the impact of slower economic conditions in certain of our markets and, to a lesser extent, the Colorado asset impairment charge and the purchase accounting adjustments related to our three acquisitions this year. 

          Selling, general and administrative (“SG&A”) expenses for the 2002 third quarter were 9.7 percent of homebuilding revenues versus 9.4 percent in the prior year quarter. The increase in SG&A expenses as a percentage of revenues was due primarily to the increase in deliveries outside of California where G&A and sales and marketing costs are generally higher, and, to a lesser degree, an increase in insurance costs compared to the same period last year.  SG&A expenses for the nine months ended September 30, 2002 were 9.3 percent of homebuilding revenues compared to 9.2 percent in the same period last year.  The higher SG&A rate for the 2002 nine month period is due to the increased deliveries outside of California and the higher insurance costs.

          Income from our unconsolidated joint ventures for the 2002 third quarter was in line with last year’s third quarter amount and was driven by the delivery of 62 new homes and land sales from our Talega joint venture in South Orange County, California.  For the nine months ended September 30, 2002, income from unconsolidated joint ventures were also in line with the prior year period resulting from the delivery of 139 new homes and land sales from our Talega joint venture.

          Other expense for the 2002 third quarter reflects a noncash pretax charge of approximately $3.0 million recognized in connection with our previously announced decision to close our Houston division.  In 2001, our Houston operations represented less than 2 percent of our total homebuilding revenues and did not make a significant contribution to our Texas earnings.

          Net new orders for the third quarter were up 78 percent year over year to a record 1,731 homes (including 177 joint venture new home orders) on a 27 percent increase in average community count. In addition, our cancellation rate for the quarter was 21 percent versus 30 percent last year. Orders were up 41 percent in Southern California on a 19 percent higher average community count, up 82 percent in Northern California on a 7 percent lower community count, up 10 percent in Arizona on a 5 percent lower community count, down 7 percent in Texas on a 14 percent decline in community count and down 9 percent in Colorado on a 33 percent higher community count.  Orders in Texas and Colorado continue to reflect the impact of slower economic conditions on housing demand.  With respect to our recent acquisitions, we generated 430 new home orders from 19 active subdivisions in Florida and 71 new home orders in the Carolinas from 5 active communities.  The strong overall level of new home orders resulted in a record third quarter backlog of 3,964 presold homes, including 315 joint venture homes, valued at an estimated $1.2 billion, an increase of 88 percent from the September 30, 2001 backlog value.

          Financial Services

          Financial services revenues are generated from our mortgage financing subsidiary, Family Lending Services.  Revenues for the three and nine month periods ended September 30, 2002 were up 25 and 52 percent, respectively, over the previous year periods.  The higher revenue totals were driven primarily by 9 and 31 percent increases in the dollar volume of loans sold compared to the respective prior year periods, combined with improved margins generated from the sale of loans.  The increase in loan volume during the three and nine month periods ended September 30, 2002 was due to 3 and 15 percent increases, respectively, in California new home deliveries, coupled with modest increases in our capture rates to 58 percent during the 2002 periods.  For the nine months ended September 30, 2002, net interest

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income also contributed to the higher revenue total compared to the year earlier period due primarily to the increased spread between interest earned on mortgages held for sale and interest paid under our mortgage credit facility.  The rise in expenses during the three and nine month periods in 2002 compared to the year earlier periods primarily reflects the higher level of operating expenses and compensation associated with the higher loan volume and profitability.

          The financial services joint venture income reflects the operating results of SPH Mortgage, our mortgage banking joint venture in Arizona and Texas, the operations of WRT Financial, our mortgage banking joint venture in Colorado, and, from August 13, 2002, Westfield Home Mortgage, our mortgage banking joint venture in Southwest Florida and the Carolinas.  The increase in venture income was primarily attributable to higher delivery levels in Arizona and income generated from Westfield Home Mortgage, which was offset, in part, by the decline in Texas new home deliveries. 

          Other financial services income represents earnings from our title insurance operations in Texas and a title insurance joint venture in South Florida.  Other income from title services was up nominally over the prior year quarter due to the additional income generated in South Florida, which was partially offset by the decline in Texas deliveries.  For the nine months ended September 30, 2002 other income was down due to the decline in Texas new home deliveries.

Liquidity and Capital Resources

          Our principal uses of cash have been for land acquisitions, construction and development expenditures, operating expenses, market expansion (including acquisitions), investments in land development and homebuilding joint ventures, principal and interest payments on debt, share repurchases and dividends to our shareholders.  Cash requirements have been met by internally generated funds, outside borrowings, including our bank revolving credit facility and public note offerings, land option contracts, joint venture financings and through the sale of common equity through public offerings.  To a lesser extent, financing has been provided through the issuance of common stock as acquisition consideration as well as from proceeds received upon the exercise of stock options.  In addition, our mortgage financing subsidiary uses cash to finance its mortgage lending operations.  Its cash needs are funded from a mortgage credit facility, internally generated funds, and a parent line of credit.  Based on our current business plan and market conditions, and our desire to carefully manage our leverage, we believe that these sources of cash should be sufficient to finance our current working capital requirements and other needs.

          We have a $450 million unsecured revolving credit facility with our bank group which matures July 31, 2004.  The credit facility contains an option which allows us to increase the total aggregate commitment up to $475 million, subject to the approval of the agent bank and availability of additional bank lending commitments.  In addition, the facility contains certain covenants which, among other things, require us to maintain a minimum level of consolidated tangible stockholders’ equity and a minimum interest coverage ratio.  In addition, the facility limits our leverage and investments in joint ventures.  These covenants, as well as a borrowing base provision, limit the amount we may borrow under the revolving credit facility and other sources.  At September 30, 2002, we had $84.6 million of borrowings outstanding and had issued approximately $54.0 million of letters of credit under this facility.  Our ability to renew and extend the revolving credit facility is dependent upon a number of factors including the state of the commercial lending environment, the willingness of banks to lend to homebuilders and our financial condition and strength.

          To fund mortgage loans originated by our mortgage financing subsidiary, we have a $60 million mortgage credit facility which provides for increased borrowing capacity up to $90 million from October 2002 to January 2003.  Mortgage loans are typically financed under this facility for a short period of time, approximately 15 to 60 days, prior to completion of sale of such mortgage loans to third party investors.  The facility, which has LIBOR based pricing and currently matures in April 2003, also contains certain financial covenants, including leverage and net worth covenants.  At September 30, 2002, we had approximately $56.3 million advanced under this facility.

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          In January 2001, the Securities and Exchange Commission declared effective our universal shelf registration statement on Form S-3.  The universal shelf registration statement permits the issuance from time to time of common stock, preferred stock, debt securities and warrants.  We currently have approximately $95 million of securities available for future issuance under this universal shelf.  We evaluate our capital needs and the public capital market conditions on a continual basis to determine if and when it may be advantageous to issue additional securities.  There may be times when the public debt or equity markets lack sufficient liquidity or when these securities cannot be sold at attractive prices, in which case we may not be able to access capital from these sources and may need to seek additional capital from our bank group or other sources, or adjust our expenditures accordingly.  In addition, a weakening of our financial condition or strength, including in particular a material increase in our leverage or decrease in our profitability and interest coverage ratio, could result in a ratings downgrade or change in outlook or otherwise increase our cost of borrowing and adversely affect our ability to obtain necessary funds.

          In April 2002, we utilized a portion of our universal shelf registration statement and issued $150 million of 9¼% Senior Subordinated Notes which mature on April 15, 2012.  These notes were issued at a discount to yield approximately 9.38 percent and are unsecured obligations that are junior to our senior unsecured indebtedness.  Net proceeds after underwriting expenses were approximately $147.0 million and were used to fund the acquisition of Westbrooke Homes and repay a portion of the balance outstanding under our revolving credit facility.  We will, under certain circumstances, be obligated to make an offer to purchase all or a portion of these notes in the event of certain asset sales.  In addition, these notes contain restrictive covenants which, among other things, impose certain limitations on our ability to (1) incur additional indebtedness, (2) create liens, (3) make restricted payments, and (4) sell assets.  Also, upon a change in control we are required to make an offer to purchase these notes.  In addition to these notes, we have approximately $475 million of publicly issued senior notes outstanding which mature from 2007 through 2010.

          In May 2002, we utilized a portion of our universal shelf registration statement and issued 2,500,000 shares of common stock at a price to the public of $34.00 per share.  In addition, two of our former directors sold 1,000,000 shares in this offering.  Net proceeds to us after underwriting expenses were approximately $80.5 million and were used to repay the remaining balance outstanding under our revolving credit facility and for general corporate purposes, including acquisitions.  We did not receive any proceeds from the shares sold by the selling stockholders.

          From time to time, purchase money mortgage financing is used to finance land acquisitions.  At September 30, 2002, we had approximately $15.3 million outstanding in trust deed and other notes payable.

          We are subject to customary obligations associated with entering into contracts for the purchase of land and improved homesites.  These purchase contracts typically require a cash deposit and the purchase of properties under these contracts is generally contingent upon satisfaction of certain requirements by the sellers, including obtaining applicable property entitlements.  As of September 30, 2002, we had deposits outstanding of approximately $27.2 million on land purchase contracts having a total remaining purchase price of $285.6 million.

          We also utilize option contracts with land sellers and third-party financial entities as a method of acquiring land in staged takedowns and minimizing the use of funds from our revolving credit facility and other corporate financing sources.  These option contracts also help us manage the financial and market risk associated with land holdings.  Option contracts generally require the payment of a non-refundable cash deposit or the issuance of a letter of credit for the right to acquire lots over a specified period of time at predetermined prices.  We generally have the right at our discretion to terminate our obligations under these option agreements by forfeiting our cash deposit or repaying amounts drawn under the letter of credit with no further financial responsibility.  As of September 30, 2002, we had cash deposits and letters of credit outstanding of approximately $33.2 million on option contracts having a total remaining purchase price of approximately $275.5 million, of which approximately $50.1 million is included in accrued liabilities in the accompanying condensed consolidated balance sheet at September 30, 2002 related to two of our land

-18-

option contracts.  The utilization of option contracts is dependent on, among other things, the availability of capital to the option provider, general housing market conditions and geographic preferences.  Options may be more difficult to procure from land sellers in strong housing market conditions and are more prevalent in certain geographic regions.

          We also enter into land development and homebuilding joint ventures from time to time as a means of accessing lot positions, expanding our market opportunities, establishing strategic alliances, managing our risk profile and leveraging our capital base.  These joint ventures typically obtain secured acquisition, development and construction financing, which minimizes the use of funds from our revolving credit facility and other corporate financing sources.  We plan to continue using these types of arrangements to finance the development of properties as opportunities arise.  At September 30, 2002, these joint ventures had borrowings which totaled approximately $257.9 million which, in accordance with generally accepted accounting principles, are not recorded in our accompanying condensed consolidated balance sheet.  We and our joint venture partners generally provide credit enhancements to this financing in the form of loan-to-value maintenance agreements which require us under certain circumstances to reduce the venture’s borrowings to the extent such borrowings plus estimated construction completion costs exceed a specified percentage of the value of the property securing the loan.  Either a decrease in the value of the property securing the loan or an increase in construction completion costs could trigger this pay down obligation.  Typically, we share these obligations with our other partners and, in some instances, these obligations are subject to limitations on the amount that we could be required to pay down.  In addition, we and our joint venture partners are generally obligated to the project lenders to complete offsite improvements and the construction of planned homes if the joint venture does not perform the required construction.  Provided we and the other joint venture partners are in compliance with these completion obligations, the project lenders would be obligated to fund these improvements through any financing commitments available under the applicable joint venture development and construction loans.

          We paid approximately $7.6 million, or $0.24 per common share ($0.08 per common share per quarter), in dividends to our stockholders during the nine months ended September 30, 2002.  Common stock dividends are paid at the discretion of our Board of Directors and are dependent upon various factors, including earnings, cash flows, capital requirements and operating and financial conditions, including our overall leverage.  Additionally, our revolving credit facility and public notes impose restrictions on the amount of dividends we may be able to pay.  On October 22, 2002, our Board of Directors declared a quarterly cash dividend of $0.08 per share of common stock.  This dividend is to be paid on November 27, 2002 to stockholders of record on November 13, 2002.

          During the nine months ended September 30, 2002, we issued 297,559 shares of common stock pursuant to the exercise of stock options for total consideration of approximately $4.6 million.

          In April 2001, our Board of Directors authorized a $35 million stock repurchase plan.  In October 2002, our Board of Directors approved increasing to $50 million the aggregate authorized limit under our plan.  Through November 7, 2002, we have repurchased 1,132,700 shares of common stock for approximately $22.9 million under the plan, leaving a balance of approximately $27.1 million for future share repurchases.

          We have no other material commitments or off-balance sheet financing arrangements that under current market conditions are expected to materially affect our future liquidity.

-19-

Recent Accounting Pronouncements

          In April 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 145 “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No 13, and Technical Corrections” (“SFAS 145”).  SFAS 145 provides that gains or losses resulting from the extinguishment of debt not be classified as an extraordinary item unless it meets the criteria of Accounting Principles Board Opinion No. 30.  SFAS 145 is effective for fiscal years beginning after May 15, 2002.  We do not anticipate that the adoption of SFAS 145 will have a material impact on our financial position or results of operations.

          In June 2002, the FASB issued Statement of Financial Accounting Standards No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (“SFAS 146”).  SFAS 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (“EITF”) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including certain costs incurred in a restructuring)”.  SFAS 146 requires recognition of a liability for a cost associated with an exit or disposal activity when the liability is incurred as opposed to when the entity commits to an exit plan as prescribed under EITF No. 94-3.  SFAS 146 is effective for exit or disposal activities initiated after December 31, 2002.  We believe the adoption of SFAS 146 will not have a material impact on our financial position or results of operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

          We are exposed to market risks related to fluctuations in interest rates on our mortgage loans receivable, mortgage loans held for sale and outstanding debt.  SPH Mortgage, WRT Financial and Westfield Home Mortgage, our mortgage banking joint ventures, and to a lesser extent, Family Lending, our mortgage financing subsidiary,  manage interest rate risk associated with making loan commitments and holding loans for sale by preselling loans.  Preselling loans consists of obtaining commitments (subject to certain conditions) from investors to purchase the mortgage loans concurrently with extending interest rate locks to loan applicants.  In the case of SPH Mortgage, WRT Financial and Westfield Home Mortgage, these loans are presold and promptly transferred to their financial institution partners or third party investors.  In the case of Family Lending, these loans are presold to third party investors.  Before completing the sale to these investors, Family Lending finances these loans under a mortgage credit facility for a short period of time (typically for 15 to 30 days), while the investors complete their administrative review of the applicable loan documents.  Due to the frequency of these loan sales and the commitments from its third party investors, we believe the market rate risk associated with loans originated on this basis by Family Lending is minimal.

          To enhance potential returns on the sale of mortgage loans, Family Lending also originates a  substantial portion of its mortgage loans on a non-presold basis.  When originating on a non-presold basis, Family Lending locks interest rates with its customers and funds loans prior to obtaining purchase commitments from secondary market investors, thereby creating interest rate risk.  To hedge this risk Family Lending enters into forward sale commitments of mortgage-backed securities.  Loans originated in this manner are typically held by Family Lending and financed under its mortgage credit facility for 15 to 60 days before they are sold to third party investors.  Family Lending utilizes the services of a third party advisory firm to assist with the implementation and execution of its hedging strategy for loans originated on a non-presold basis.  While this hedging strategy is designed to assist Family Lending in mitigating risk associated with originating loans on a non-presold basis, these instruments involve elements of market risk which could result in losses on loans originated in this manner if not hedged properly.  As of September 30, 2002, Family Lending had approximately $85.0 million of closed mortgage loans and loans in process that were originated on a non-presold basis, of which approximately $70.9 million were hedged by forward sale commitments of mortgage-backed securities.

          Please see our Annual Report on Form 10-K for the year ended December 31, 2001 for further discussion related to our market risk exposure.

-20-

ITEM 4. CONTROLS AND PROCEDURES

(a)     Within the 90 days prior to the filing date of this quarterly report, we carried out an evaluation, 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.  Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective in timely alerting them to material information relating to Standard Pacific (including its consolidated subsidiaries) required to be included in our periodic SEC filings. 

(b)     There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of our evaluation.

-21-

FORWARD-LOOKING STATEMENTS

          This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which represent our expectations or beliefs concerning future events, including, but not limited to, statements regarding:

• our intent to review and assess goodwill for impairment during our 2002 fourth quarter;

• the expected impact of new accounting pronouncements;

• the strength of our markets;

• expected average home prices and gross margins;

• orders and our backlog of homes and their estimated sales value;

• the adequacy of our impairment charges relating to certain Colorado homebuilding projects and our exit from the Houston market;

• contingent earn-out payments in connection with acquisitions;

• the sufficiency of our capital resources;

• our planned continued use of joint ventures;

• our expectation that our material commitments and off-balance sheet financing arrangements will not materially affect our liquidity;

• our exposure to market risks, including fluctuations in interest rates; and

• the effectiveness and adequacy of our disclosure and internal controls.

          Forward-looking statements are based on current expectations or beliefs regarding future events or circumstances, and you should not place undue reliance on these statements.  Such statements involve known and unknown risks, uncertainties, assumptions and other factors—many of which are out of our control and difficult to forecast—that may cause actual results to differ materially from those that may be described or implied.  Such factors include but are not limited to:

• local and general economic and market conditions, including consumer confidence, employment rates, interest rates, the cost and availability of mortgage financing, and stock market, home and land valuations;

• the impact on economic conditions of terrorist attacks or the outbreak or escalation of armed conflict involving the United States;

• the cost and availability of suitable undeveloped land, building materials and labor;

• the cost and availability of construction financing and corporate debt and equity capital;

• the impact of the restrictive covenants in our credit agreements and public notes;

• the demand for single-family homes;

• cancellations of purchase contracts by homebuyers;

• the cyclical and competitive nature of our business;

• governmental regulation, including the impact of “slow growth,” “no growth,” or similar initiatives;

• delays in the land entitlement process, development, construction, or the opening of new home communities;

• adverse weather conditions and natural disasters;

• environmental matters;

• risks relating to our mortgage banking operations, including hedging activities;

• future business decisions and our ability to successfully implement our operational, growth and other strategies;

• risks relating to acquisitions;

• litigation and warranty claims; and

• other risks discussed in our filings with the Securities and Exchange Commission, including in our most recent Annual Report on Form 10-K.

-22-

          We assume no, and hereby disclaim any, obligation to update any of the foregoing or any other forward-looking statements. We nonetheless reserve the right to make such updates from time to time by press release, periodic report or other method of public disclosure without the need for specific reference to this report.  No such update shall be deemed to indicate that other statements not addressed by such update remain correct or create an obligation to provide any other updates.

PART II.   OTHER INFORMATION

Item 1.  Legal proceedings
		Not applicable
Item 2.  Change in Securities
	On August 13, 2002, as partial consideration for our acquisition of Westfield Homes, we issued to the stockholders of Westfield Homes an aggregate of 459,559 shares of our common stock, valued under the agreement at $14.5 million.  The securities were issued without registration under the Securities Act in reliance upon the exemption provided by Section 4 (2) thereof and Rule 506 thereunder.  We did not generate any cash proceeds from this offering.
Item 3.  Default upon Senior Securities
		Not applicable
Item 4.  Submission of Matters to a Vote of Security Holders
		Not applicable
Item 5.  Other Information
		Not applicable
Item 6.  Exhibits and Reports on Form 8-K
(a)		Exhibits
		10.1	Stock Purchase Agreement dated August 9, 2002 between the shareholders of Westfield Homes USA, Inc., WF Acquisition, Inc. and the Registrant, relating to the acquisition of Westfield Homes USA, Inc.
		10.2	Master Repurchase Agreement between Credit Suisse First Boston Mortgage Capital LLC and Family Lending Services, Inc., a wholly-owned subsidiary of the Registrant, dated October 5, 2001, and as further amended on December 28, 2001, March 31, 2002, October 4, 2002 and October 9, 2002.

-23-

(b)	Current Reports on Form 8-K
	(i)	Form 8-K dated August 14, 2002 reporting that the Chairman and Chief Executive Officer of the Registrant and the Senior Vice President – Finance and Chief Financial Officer of the Registrant filed a certification pursuant to  Section 906 of the Sarbanes – Oxley Act of 2002 related to the Registrant’s Form 10-Q for the quarterly period ended June 30, 2002.  In addition, the Form 8-K reported that Messrs. Scarborough and Parnes each submitted a sworn statement to the Commission pursuant to Commission Order No. 4-460 dated June 27, 2002, each in the form of Exhibit A to the Order.  In connection with these certifications and sworn statements, certain related exhibits were attached to the Form 8-K.

SIGNATURES

Pursuant to the requirements 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.

		STANDARD PACIFIC CORP.
		(Registrant)
Dated: November 12, 2002	By:	/s/ STEPHEN J. SCARBOROUGH
		Stephen J. Scarborough Chief Executive Officer and Chairman of the Board
Dated: November 12, 2002	By:	/s/ ANDREW H. PARNES
		Andrew H. Parnes Senior Vice President - Finance and Chief Financial Officer

CERTIFICATIONS

Certification of Chief Executive Officer

I, Stephen J. Scarborough, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Standard Pacific Corp.;
2.	Based on my knowledge, this quarterly 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 quarterly report; and
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report.

-24-

4.	The registrant’s other certifying officer 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 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 quarterly 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 quarterly report (the “Evaluation Date”); and
	c.	presented in this quarterly 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 officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	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 weakness 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 officer and I have indicated in this quarterly 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.

Dated:  November 12, 2002

/s/ STEPHEN J. SCARBOROUGH

Stephen J. Scarborough
Chief Executive Officer

-25-

Certification of Chief Financial Officer

I, Andrew H. Parnes,  certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Standard Pacific Corp.;
2.	Based on my knowledge, this quarterly 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 quarterly report; and
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report.
4.	The registrant’s other certifying officer 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 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 quarterly 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 quarterly report (the “Evaluation Date”); and
	c.	presented in this quarterly 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 officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	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 weakness 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 officer and I have indicated in this quarterly 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.

Dated:  November 12, 2002

/s/ ANDREW H. PARNES

Andrew H. Parnes
Chief Financial Officer

-26-

EX-10.1

                                                                    EXHIBIT 10.1

                                                                  EXECUTION COPY

- --------------------------------------------------------------------------------

                            WESTFIELD HOMES USA, INC.

                            STOCK PURCHASE AGREEMENT

                                      among

                               THE SHAREHOLDERS OF
                            WESTFIELD HOMES USA, INC.

                              WF ACQUISITION, INC.

                                       and

                             STANDARD PACIFIC CORP.

                           Dated as of AUGUST 8, 2002

- --------------------------------------------------------------------------------



                                TABLE OF CONTENTS



                                                                                                        PAGE
                                                                                                      
ARTICLE I DEFINITIONS..................................................................................   1

ARTICLE II STOCK PURCHASE..............................................................................  10
     2.1    Sale and Delivery..........................................................................  10
     2.2    Closing Payment............................................................................  10
     2.3    Post-Closing Adjustment to the Cash Payment................................................  11
     2.4    January 2003 Payment.......................................................................  12
     2.5    Earnout....................................................................................  12
     2.6    Dispute Resolution of Calculations of Purchase Price.......................................  15
     2.7    Closing....................................................................................  16

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLERS..............................................  17
     3.1    Ownership of the Shares....................................................................  17
     3.2    Authorization, Validity, and Effect of Agreements..........................................  17
     3.3    No Brokers.................................................................................  17
     3.4    Investment Purpose.........................................................................  18
     3.5    Access to Information......................................................................  18
     3.6    Gatewood Children Trusts...................................................................  19

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLERS  AS TO THE COMPANY AND ITS SUBSIDIARIES.......  20
     4.1    Existence; Good Standing...................................................................  20
     4.2    Capitalization.............................................................................  20
     4.3    Acquired Companies and Other Interests.....................................................  20
     4.4    Material Contracts; No Violation...........................................................  22
     4.5    Financial Statements;  No Undisclosed Liabilities; Projections.............................  25
     4.6    No Violations; Consents....................................................................  26
     4.7    Compliance; Permits; Litigation............................................................  26
     4.8    Absence of Certain Changes.................................................................  27
     4.9    Taxes......................................................................................  28
     4.10   Certain Employee Plans.....................................................................  30
     4.11   Labor Matters..............................................................................  32
     4.12   Environmental Matters......................................................................  33
     4.13   Related Party Transactions.................................................................  34
     4.14   Restrictions on Business Activities........................................................  34
     4.15   Real Property..............................................................................  35
     4.16   Intellectual Property......................................................................  39
     4.17   Other Assets...............................................................................  39
     4.18   Insurance..................................................................................  40
     4.19   Warranties.................................................................................  41
     4.20   Suppliers and Subcontractors...............................................................  41
     4.21   HSR Matters................................................................................  42
     4.22   Corporate Dividend.........................................................................  42
     4.23   Disclosure.................................................................................  42


                                        i


                                                                                                      
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER......................................................  42
     5.1    Existence; Good Standing; Corporate Authority..............................................  42
     5.2    Authorization, Validity, and Effect of Agreements..........................................  43
     5.3    No Violation...............................................................................  43
     5.4    No Brokers.................................................................................  43
     5.5    Funds......................................................................................  43
     5.6    Investment Purpose.........................................................................  43
     5.7    Access to Information......................................................................  44
     5.8    SEC Filings................................................................................  44
     5.9    Disclosure.................................................................................  44

ARTICLE VI COVENANTS...................................................................................  45
     6.1    Conduct of Business........................................................................  45
     6.2    Further Action.............................................................................  47
     6.3    Access to Information; Confidentiality.....................................................  48
     6.4    Publicity..................................................................................  49
     6.5    Expenses...................................................................................  49
     6.6    Employee Benefits..........................................................................  49
     6.7    Third Party Offers.........................................................................  50
     6.8    Restrictive Covenants......................................................................  51
     6.9    Directors..................................................................................  53
     6.10   Securities Restrictions....................................................................  53
     6.11   Warranty Indemnification...................................................................  55
     6.12   Insurance Rights and Indemnification.......................................................  56
     6.13   Sellers' Representative....................................................................  56
     6.14   Use of "Westfield Homes" Trade Mark........................................................  57\\
     6.15   Payment of Debt of Related Parties.........................................................  57
     6.16   Release....................................................................................  57
     6.17   Villa Rosa Property........................................................................  59

ARTICLE VII SURVIVAL; INDEMNIFICATION..................................................................  59
     7.1    Survival of Representations and Warranties.................................................  59
     7.2    Indemnification............................................................................  59
     7.3    Time Limitations...........................................................................  60
     7.4    Other Limitations..........................................................................  60
     7.5    Set-Off....................................................................................  62
     7.6    Procedures Relating to Indemnification Involving Third Party Claims........................  63
     7.7    Other Claims...............................................................................  64
     7.8    Sole and Exclusive Remedy..................................................................  64

ARTICLE VIII TAX MATTERS...............................................................................  65
     8.1    Section 338(h)(10) Elections...............................................................  65
     8.2    Indemnification Obligations With Respect to Taxes..........................................  66
     8.3    Tax Returns and Payment Responsibility.....................................................  68
     8.4    Contest Provisions.........................................................................  69
     8.5    Assistance and Cooperation.................................................................  69
     8.6    Retention of Records.......................................................................  70
     8.7    Other Provisions...........................................................................  70



                                       ii


                                                                                                      
ARTICLE IX CONDITIONS..................................................................................  70
     9.1    Conditions to Each Party's Obligation to Effect the Stock Purchase.........................  70
     9.2    Conditions to Obligations of Buyer and Standard Pacific....................................  70
     9.3    Conditions to Obligations of the Sellers...................................................  72

ARTICLE X TERMINATION..................................................................................  73
     10.1   Termination by Mutual Consent..............................................................  73
     10.2   Termination by Either Buyer or Sellers.....................................................  73
     10.3   Termination by Sellers.....................................................................  73
     10.4   Termination by Buyer.......................................................................  74
     10.5   Effect of Termination......................................................................  74

ARTICLE XI MISCELLANEOUS...............................................................................  74
     11.1   Entire Agreement; Assignment...............................................................  74
     11.2   Validity...................................................................................  75
     11.3   Notices....................................................................................  75
     11.4   Governing Law..............................................................................  76
     11.5   Construction...............................................................................  76
     11.6   Counterparts...............................................................................  76
     11.7   Parties In Interest........................................................................  77
     11.8   Waiver.....................................................................................  77
     11.9   Amendments.................................................................................  77
     11.10  Further Assurances.........................................................................  77
     11.11  Cumulative Remedies........................................................................  77
     11.12  Arbitration................................................................................  77



                                       iii




EXHIBITS
            
Exhibit A      Form of Investor Questionnaire
Exhibit B      Form of License Agreement
Exhibit C-1    Form of Employment Agreement of Roger Gatewood with the Company
Exhibit C-2    Form of Employment Agreement of Frank Baker with the Company
Exhibit C-3    Form of Employment Agreement of Andrew Berger, John Schlichenmaier and
               Robert Siuda with a Subsidiary of the Company
Exhibit D-1    Form of Opinion of Bricklemyer, Smolker & Bolves, P.A., Counsel to the Sellers
Exhibit D-2    Form of Opinion of Hill, Ward & Henderson, P.A., Counsel to the Sellers
Exhibit D-3    Form of Opinion of Kennedy Covington, Counsel to the Sellers
Exhibit D-4    Form of Opinion of Ungaretti & Harris, Counsel to the Sellers
Exhibit E      Form of Opinion of Counsel to Buyer


SCHEDULES
                        
Schedule 2.2(a)(i)         Estimated Balance Sheet Net Book Value
Schedule 2.2(a)(ii)        Consideration Per Seller
Schedule 2.2(a)(iii)       Company Indebtedness


SELLERS' DISCLOSURE SCHEDULE
                                 
         Section 3.1                Ownership of Shares
         Section 3.3                Sellers' Broker
         Section 4.3(a)             Subsidiaries
         Section 4.3(d)             Convertible Debt
         Section 4.4(a)             Material Contracts
         Section 4.4(b)             Contracts with Seller Affiliates
         Section 4.4(c)             Contract Defaults
         Section 4.4(e)             Consents and Approvals
         Section 4.5(a)             Financial Statements
         Section 4.5(c)             Undisclosed Liabilities
         Section 4.5(d)             Acquired Companies' Debt
         Section 4.7(b)             Acquired Companies' Permits
         Section 4.7(c)             Acquired Companies' Litigation
         Section 4.7(d)             Acquired Companies' Initiated Litigation
         Section 4.8                Absence of Certain Changes
         Section 4.9(i)             Foreign Tax Jurisdictions
         Section 4.10(a)            Company Benefit Plans
         Section 4.10(c)            Company Benefits Relating to Retired or Former Employees
         Section 4.10(f)            Change in Control Arrangements
         Section 4.11(b)(i)         Employees
         Section 4.11(b)(ii)        Independent Contractors
         Section 4.11(c)            Paychex Agreements
         Section 4.12               Environmental Matters
         Section 4.13               Related Party Contracts
         Section 4.15(a)            Real Property Owned by the Acquired Companies
         Section 4.15(e)            Real Estate Projects


                                       iv


                        
         Section 4.15(f)            Real Property Subject to Repurchase
         Section 4.15(g)            Backlog of Home Sales on Each Project
         Section 4.16               Intellectual Property
         Section 4.17               Liens Against Assets of the Acquired Companies
         Section 4.18(a)            Insurance
         Section 4.18(b)            Risk Sharing Contracts
         Section 4.18(c)            Sufficiency of Insurance Policies
         Section 4.18(d)            Material Open Insurance Claims
         Section 4.20               Suppliers/Subcontractor Terminations
         Section 8.1(b)             Allocation Agreement

         

                                        v



                            STOCK PURCHASE AGREEMENT

         This STOCK PURCHASE AGREEMENT (this "Agreement"), is dated as of August
8, 2002, by and among Standard Pacific Corp., a Delaware corporation ("Standard
Pacific"), WF Acquisition, Inc., a Delaware corporation and wholly owned
subsidiary of Standard Pacific ("Buyer"), and the shareholders of Westfield
Homes USA, Inc., a Florida corporation (the "Company") named on the signature
page hereto (collectively, the "Sellers").

         WHEREAS, the Sellers collectively own all of the issued and outstanding
shares (the "Shares") of common stock, $.01 par value per share, of the Company
("Company Common Stock").

         WHEREAS, subject to the terms and conditions of this Agreement, the
Sellers have agreed to sell the Shares to Buyer, and Buyer has agreed to
purchase the Shares from the Sellers (the "Stock Purchase"), in exchange for the
consideration set forth in this Agreement; and

         WHEREAS, the parties desire to make certain representations,
warranties, covenants and agreements in connection with the Stock Purchase, and
also to prescribe various conditions to such transaction.

         NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and for
other good and valuable consideration, intending to be legally bound, the
Sellers, Buyer and Standard Pacific hereby agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

         As used in this Agreement:

         "2001 Balance Sheet" is defined in Section 4.5(a).

         "Acquired Companies" means the Company, and each of its Subsidiaries
(other than the Excluded Company), and the predecessors of such Persons.

         "Affiliate", as applied to any Person, shall mean any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling," "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities, by
Contract or otherwise.

         "Agreement" is defined in the introductory paragraph of this Agreement.

         "Allocation Agreement" is defined in Section 8.1(b).

         "Annual Statements" is defined in Section 4.5(a).

                                        1




         "Balance Sheet Date" means July 31, 2002.

         "Balance Sheet Date Financial Statements" is defined in Section 2.3(a)
(i).

         "Balance Sheet Date Net Book Value" is defined in Section 2.3(a)(ii).

         "Business" means the business of the Acquired Companies developing
residential real estate and constructing single family homes and multi-family
residential units, and related and ancillary businesses, including mortgage
financing and title services. Without limiting the generality of the foregoing,
the definition of Business shall include, without limitation, any business of
the type or types conducted by the Acquired Companies at any time during the two
year period preceding the Closing Date or under development by the Acquired
Companies on the date hereof or the Closing Date and the Business conducted by
the Acquired Companies or their successors or assigns for the duration of the
Covenant Not to Compete.

         "Business Day" means any day other than a day on which banks in the
State of Florida are authorized or required to close or the national securities
exchanges in the United States are closed.

         "Business Plan" is defined in Section 4.5(e).

         "Buyer Gross Up Amount" is defined in Section 8.1(d).

         "Buyer Indemnified Parties" is defined in Section 7.2(a).

         "Buyer" is defined in the introductory paragraph of this Agreement.

         "Cap" shall mean $12,000,000.

         "Capital Stock" means common stock, preferred stock, partnership
interests, limited liability company interests or other equity ownership
interests entitling the holder thereof to vote with respect to matters involving
the issuer thereof or to share proportionately in its profits.

         "Cash Payment" is defined in Section 2.2(a)(i).

         "Catherine Gatewood Trust" is defined in Section 3.6(a).

         "Change in Control" shall mean the occurrence of any of the following:

                  (a)      any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) or group of persons acting in concert (other than
Standard Pacific or any Subsidiary thereof or any employee benefit plan of
Standard Pacific or any Subsidiary thereof, or any underwriter in connection
with a firm commitment public offering of Standard Pacific's Capital Stock)
becomes the "beneficial owner" (as such term is defined in Rule 13d-3 of the
Exchange Act, except that a person shall also be deemed the beneficial owner of
all securities which such person may have a right to acquire, whether or not
such right is presently exercisable), directly or indirectly, of securities of
Standard Pacific representing 50% or more of

                                        2



the combined voting power of Standard Pacific's then outstanding securities
ordinarily having the right to vote in the election of directors ("voting
stock");

                  (b)      there shall be consummated any merger, consolidation
(including a series of mergers or consolidations), or any sale, lease, exchange
or other transfer (in one transaction or a series of related transactions) of
all, or substantially all, of the consolidated assets of Standard Pacific
(meaning assets representing 50% or more of the consolidated net tangible assets
of Standard Pacific, measured over Standard Pacific's prior four full fiscal
quarters at the time of measurement), or any other similar business combination
or transaction, but excluding any business combination or transaction which
would result in the voting stock of Standard Pacific immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting stock of the surviving entity) more than 50% of the combined voting
power of the voting stock of Standard Pacific (or such surviving entity)
outstanding immediately after giving effect to such business combination or
transaction; or

                  (c)      the adoption of any plan for the liquidation or
dissolution of Standard Pacific, other than in connection with a reorganization
or similar transaction in which the holders of the voting stock of Standard
Pacific immediately prior to such transaction continue to represent more than
50% of the combined voting power of the surviving entity immediately after
giving effect to such transaction.

         "Claims" is defined in Section 6.16.

         "Closing" and "Closing Date" are defined in Section 2.7(a).

         "Closing Payment" is defined in Section 2.2(a)(ii).

         "Code" means the Internal Revenue Code of 1986, as amended (or any
successor thereto).

         "Company" is defined in the first recital of this Agreement.

         "Company Benefit Plans" means each of the following which is sponsored,
maintained or contributed to by the Acquired Companies for the benefit of the
current or former employees, officers or directors of any of the Acquired
Companies, or has been so sponsored, maintained or contributed to within six
years prior to the Closing Date: (i) each "employee benefit plan," as such term
is defined in Section 3(3) of ERISA (including, but not limited to, employee
benefit plans, such as foreign plans, which are not subject to the provisions of
ERISA), and (ii) each stock option plan, bonus plan or arrangement, incentive
award plan or arrangement, change in control or severance pay plan, policy, or
agreement, deferred compensation agreement or arrangement, or supplemental
income arrangement, and each other employee benefit plan, program or practice
which is not described in clause (i) of this sentence; provided, however, that
such term shall not include collective bargaining agreements, employment
agreements or consulting agreements.

         "Company Common Stock" is defined in the first recital of this
Agreement.

         "Company Indebtedness" is defined in Section 2.2(a)(iii).

                                        3



         "Company Permits" is defined in Section 4.7(b).

         "Company Pre-Tax Income" shall mean, with respect to any measurement
period, the consolidated net income (or loss) of the Company and its
Subsidiaries, prior to federal and state income taxes, for such measurement
period calculated in accordance with the standards, principles, practices and
policies used by Buyer in connection with financial statements and in accordance
with GAAP; provided, however, that the calculation of Company Pre-Tax Income
shall be adjusted to exclude the impact of any purchase accounting adjustments
relating to Buyer's acquisition of the Acquired Companies, including any
write-up or write-down of assets resulting from such purchase accounting.

         "Competing Business" is defined in Section 4.13(ii).

         "Confidentiality Agreement" is defined in Section 10.5.

         "Contracts" shall mean all contracts, agreements, and other instruments
and understandings of any kind, including, without limitation, change in control
or severance agreements, deferred compensation agreements and employment
agreements, and all amendments, supplements, modifications, extensions or
renewals in respect of the foregoing, in each case, whether written or oral.

         "Corporate Dividend" is defined in Section 4.22.

         "Costs" is defined in Section 11.4.

         "Covenant Not to Compete" is defined in Section 6.8(b).

         "Credit Agreement" means that certain Second Amended and Restated
Master Loan Agreement, dated as of September 28, 2001, by and among the Company,
Westfield Homes of Florida, Inc., Westfield Development Corporation, Westfield
Homes of Illinois, Inc., Westfield Homes of North Carolina, Inc., Westfield
Homes of Southwest Florida, Inc. and Bank of America, N.A.

         "Damages" is defined in Section 7.2(a).

         "Debt" means, as to any Person, (i) any indebtedness of such Person,
whether or not contingent, in respect of borrowed money or evidenced by bonds,
notes, debentures or other similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing capitalized lease obligations, (ii) any balance deferred and unpaid
of the purchase price of any property, (iii) all indebtedness of others secured
by a Lien on any asset of such Person (whether or not such indebtedness is
assumed by such Person) and, (iv) to the extent not otherwise included by
clauses (i) through (iii), any guaranty by such Person of any indebtedness of
any other Person.

         "Differing Party" is defined in Section 2.6.

         "Division Presidents" is defined in Section 6.8(g).

                                        4



         "Earnout Acceptance Notice" is defined in Section 2.5(b).

         "Earnout Objection Notice" is defined in Section 2.5(b).

         "Earnout Payment" is defined in Section 2.5(a).

         "Elizabeth Gatewood Trust" is defined in Section 3.6(a).

         "employee" means employees and other persons filling similar functions,
including leased employees of the Acquired Companies pursuant to that certain
Client Service Agreement dated August 1, 1997, between Paychex and the Company.

         "Employee Sellers" means Roger Gatewood, Frank Baker, Andrew Berger,
John Schlichenmaier and Robert Siuda.

         "Employment Agreements" is defined in Section 6.8(g).

         "Entitlements" is defined in Section 4.15(e)(iii).

         "Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. 9601 et seq., the Emergency Planning
and Community Right-to-Know Act of 1986, 42 U.S.C. 11001 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. 6901 et seq., the Toxic Substances
Control Act, 15 U.S.C. 2601 et seq., the Federal Insecticide, Fungicide, and
Rodenticide Act, 7 U.S.C. 136 et seq., the Clean Air Act, 42 U.S.C. 7401 et
seq., the Clean Water Act (Federal Water Pollution Control Act), 33 U.S.C. 1251
et seq., the Safe Drinking Water Act, 42 U.S.C. 300f et seq., the Occupational
Safety and Health Act, 29 U.S.C. 641 et seq., the Hazardous Materials
Transportation Act, 49 U.S.C. 1801 et seq., as any of the above statutes have
been or may be amended from time to time, all rules and regulations promulgated
pursuant to any of the above statutes, and any other foreign, federal, state or
local law, statute, ordinance, permit, order, decree, rule or regulation or
other directive related to or governing Environmental Matters as the same have
been or may be amended from time to time, including any common law cause of
action providing any right or remedy with respect to Environmental Matters, and
all applicable decisions, orders, and decrees of any Governmental Entity
relating to Environmental Matters.

         "Environmental Matters" means all matters involving pollution, wetlands
and other natural resources, protection of the environment, noise, human health,
and occupational health and safety.

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended (or any successor thereto).

         "Estimated Balance Sheet Date Net Book Value" is defined in Section
2.2(a)(i).

         "Exchange Act" means the Securities Exchange Act of 1934, as amended.

         "Excluded Claims " is defined in Section 7.4(c).

                                        5



         "Excluded Company" means Westfield Homes of Illinois, Inc., an Illinois
corporation (including, Westfield Development Corporation of Illinois, an
Illinois corporation, Westfield Homes of Texas, Inc., a Texas corporation and
Westfield Homes of Illinois Venture No. 1, Inc., an Illinois corporation each of
which was merged into Westfield Homes of Illinois, Inc. effective as of August
7, 2002).

         "Fill Dirt" is defined in Section 6.17.

         "Fill Dirt License Agreement" is defined in Section 6.17.

         "Financial Statements" is defined in Section 4.5(a).

         "GAAP" means United States generally accepted accounting principles as
in effect from time to time and applied on a consistent basis throughout the
periods involved.

         "Gatewood Children Sellers" means the following Sellers: Lindsey
Gatewood, the Roger B. Gatewood Irrevocable Trust for Catherine Gatewood, dated
May 16, 1988 and the Roger B. Gatewood Irrevocable Trust for Elizabeth Gatewood,
dated May 16, 1988.

         "Governmental Entity" means any foreign, domestic, federal,
territorial, state or local governmental authority, quasi-governmental
authority, instrumentality, court, government or self regulatory organization,
commission, tribunal or organization or any regulatory, administrative or other
agency, or any political or other subdivision, department or branch of any of
the foregoing which has or claims to have competent jurisdiction over the
relevant Persons or its business, property, assets or operations.

         "Gross Up Amount" is defined in Section 8.1(d).

         "Hazardous Materials" means any substance or material that is defined
under the Environmental Laws as a "hazardous substance," "regulated substance,"
"pollutant," "contaminant," "hazardous waste," "extremely hazardous substance,"
"toxic substance," or "hazardous material," or that is otherwise defined in or
regulated under the Environmental Laws, including, without limitation,
petroleum, asbestos-containing materials, lead-containing paint or plumbing,
polychlorinated biphenyls, radioactive materials, and radon.

         "Insurance Policies" is defined in Section 4.18(a).

         "Intellectual Property" is defined in Section 4.16(a).

         "Interim Statements" is defined in Section 4.5(a).

         "January 2003 Payment" is defined in Section 2.4.

         "Liability" means, with respect to any Person, any liability or
obligation of such Person of any kind, character or description, whether known
or unknown, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable or otherwise, whether or

                                        6



not the same is required to be accrued on the financial statements of such
Person and whether or not the same is disclosed on any schedule to this
Agreement.

         "License Agreement" means the agreement attached hereto as Exhibit B.

         "Lien" or "Liens" means all liens (including judgment and mechanics'
liens, regardless of whether liquidated), mortgages, assessments, security
interests, easements, claims, pledges, trusts (constructive or otherwise), deeds
of trust, option or other charges, title defects or objections, encumbrances,
restrictions or other Contracts having the same effect as any of the foregoing.

         "Material Adverse Effect" means with respect to any Person a material
adverse effect on or change in (i) the business, operations, assets,
Liabilities, condition (financial or otherwise), results of operations or
prospects of such Person, taken as a whole with its Subsidiaries, or (ii) the
ability of such Person to consummate the transactions contemplated hereby.

         "Material Contracts" is defined in Section 4.4(c).

         "Maximum Warranty Amount" is defined in Section 6.11(b).

         "Net Book Value Acceptance Notice" is defined in Section 2.3(b).

         "Net Book Value Objection Notice" is defined in Section 2.3(b).

         "Objection Notice" is defined in Section 2.6

         "Order" is defined in Section 9.1(b).

         "Paychex" means Paychex Business Solutions, Inc.

         "Paychex Agreement" means the Client Service Agreement between Paychex
and the Company, dated as of August 1, 1997.

         "Payoff Amounts" is defined in Section 2.2(a)(iii).

         "Person" shall mean any individual, corporation, limited liability
company, partnership, trust, joint venture, association, organization or other
entity or group (which term shall include a "group" as such term is defined in
Section 13(d)(3) of the Exchange Act) or Governmental Entity.

         "Projects" is defined in Section 4.15(e)(i).

         "Pro Rata Portion" for each Seller is as set forth in Schedule
2.2(a)(ii) under the heading "Pro Rata Portion".

         "Purchase Price" means the sum of (i) the Closing Payment (as adjusted
by the Post-Closing Adjustment set forth in Section 2.3), plus (ii) the January
2003 Payment, plus (iii) the Earnout.

                                        7



         "Release" means any releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing, or
dumping into the soil, surface waters, groundwaters, land, stream sediments,
surface or subsurface strata, ambient air, or any other environmental medium.

         "Released Parties" is defined in Section 6.16.

         "Reserve Amount " means $50,000.

         "Restrictive Covenants" is defined in Section 6.8(e).

         "SEC" means the United States Securities and Exchange Commission.

         "Section 338(h)(10)" is defined in Section 8.1.

         "Securities Act" means the Securities Act of 1933, as amended.

         "Seller Gross Up Amount" is defined in Section 8.1(d).

         "Sellers" is defined in the introductory paragraph of this Agreement.

         "Sellers' Disclosure Schedule" is defined in the introductory paragraph
of Article III.

         "Sellers' Representative" is defined in Section 6.13.

         "Shareholder Agreements" means collectively the Stockholder Agreement,
the Employment Agreement between the Company and Andrew Berger, dated December
31, 2001, the Employment Agreement between the Company and John Schlichenmaier,
dated January 1, 2002, the Employment Separation, General Release, and Stock
Purchase Agreement among Mark Messerly, the Company, Westfield Homes of
Southwest Florida, Inc., Westfield Homes SW Florida Venture No. 1, Inc.,
Westfield Homes of Texas, Inc. and Roger Gatewood, dated July 20, 2000, the Buy
Out Agreement among Glenn Mordini, Westfield Development Corporation of
Illinois, the Company, Roger Gatewood and Brian Harris, dated July 31, 1998 and
all amendments to such agreements .

         "Shares" is defined in the first recital of this Agreement.

         "Standard Pacific" is defined in the introductory paragraph of this
Agreement.

         "Standard Pacific Common Stock" means the common stock of Standard
Pacific, $0.01 par value per share.

         "Standard Pacific Securities" means all of the securities of Standard
Pacific to be paid to the Sellers or their transferees hereunder, including the
Standard Pacific Common Stock.

         "Stock Payment" is defined in Section 2.2(a)(ii).

         "Stock Purchase" is defined in the second recital of this Agreement.

                                        8



         "Stockholder Agreement" means the Stockholder Agreement, dated July 1,
1997, among the Company and each of the shareholders of the Company, as amended.

         "Straddle Periods" is defined in Section 8.2(a)(ii).

         "Subject Companies" means the Company and all current and former
Subsidiaries of the Company, including the Excluded Company, and the
predecessors of such Persons.

         "Subsidiary" or "Subsidiaries" means, with respect to any Person, any
corporation, limited liability company, partnership, joint venture or other
entity of which such Person (either alone or through or together with any other
subsidiary), owns, directly or indirectly, securities or other interests the
holders of which are generally entitled to at least 50% of the vote for the
election of the board of directors or other similar governing body of such
corporation or other legal entity, or otherwise having the power to direct the
business and policies of that Person.

         "Tail Policy" is defined in Section 6.11(b).

         "Tax" or "Taxes" means (A) all federal, state, local, foreign, and
other net income, gross income, gross receipts, sales, use, ad valorem,
transfer, franchise, profits, license, lease, service, service use, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property,
windfall profits, customs duties or other taxes, fees, assessments or charges of
any kind whatsoever, together with any interest and any penalties, additions to
tax or additional amounts with respect thereto, (B) any Liability for payment of
amounts described in clause (A) whether as a result of transferee Liability,
joint and several liability for being a member of an affiliated, consolidated,
combined or unitary group for any period, or otherwise through operation of law,
and (C) any Liability for the payment of amounts described in clauses (A) or (B)
as a result of any tax sharing, tax indemnity or tax allocation agreement or any
other express or implied Contract to indemnify any other Person.

         "Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.

         "Third Party Acquisition" is defined in Section 6.7(b).

         "Third Party Claim" is defined in Section 7.6(a).

         "Trade Mark" is defined in Section 6.14(a).

         "Transaction Documents" is defined in Section 3.2.

         "Trusts" is defined in Section 3.6(a).

         "Unrelated Accounting Firm" is defined in Section 2.6.

         "Villa Rosa Property" means that certain vacant land located in the
northwest corner of the Villa Rosa project, Hillsborough County, Florida.

                                        9



         "Warranty Claim" means any claim based upon any theory of product
liability, construction defect, builder's liability or express or implied
warranty which is related to the development of a Project or the development,
construction or sale of any home.

         "Warranty Threshold" is defined in Section 6.11(a).

         "Wells Fargo Agreement" means the Operating Agreement of Limited
Liability Company, dated as of February 17, 2000, between Norwest Ventures LLC
and the Company.

         "Westfield Development" means Westfield Development Corporation, a
Florida corporation and wholly owned Subsidiary of the Company.

                                   ARTICLE II
                                 STOCK PURCHASE

         2.1      Sale and Delivery. At the Closing, on the terms and subject
to the conditions set forth herein, the Sellers shall sell and deliver to Buyer
the Shares free and clear of all Liens, and Buyer shall purchase and accept the
Shares from the Sellers.

         2.2      Closing Payment.

                  (a)      At the Closing, Standard Pacific shall:

                           (i)   cause Buyer to pay by wire transfer of
         immediately available funds $21,805,000, plus (or minus if negative)
         (A) the estimated book value of the assets less liabilities of the
         Company and its Subsidiaries (other than the Excluded Company) on the
         Balance Sheet Date, as set forth on Schedule 2.2(a)(i) (the "Estimated
         Balance Sheet Date Net Book Value"), less (B) $25,000,000
         (collectively, the "Cash Payment");

                           (ii)  issue an aggregate of 459,559 shares of
         Standard Pacific Common Stock to the Sellers as set forth on Schedule
         2.2(a)(ii) (the "Stock Payment" and, collectively with the Cash
         Payment, the "Closing Payment"); and

                           (iii) cause Buyer to satisfy (or cause the Acquired
         Companies to satisfy) the Debt of the Acquired Companies set forth on
         Schedule 2.2(a)(iii) (the "Company Indebtedness") by paying the amounts
         set forth in payoff letters for the Company Indebtedness, including any
         applicable per diem amounts specified therein (the "Payoff Amounts").
         Notwithstanding anything contained in this Section 2.2(a)(iii), the
         Acquired Companies shall pay all penalty interest, prepayment
         penalties, exit fees or other penalties due as a result of the
         prepayment of the Company Indebtedness. The payment of such amount will
         be reflected in the Balance Sheet Date Financial Statements and will
         have the effect of decreasing the Estimated Balance Sheet Date Net Book
         Value and the Balance Sheet Date Net Book Value.

                  (b)      At the Closing, (i) each Seller's Pro Rata Portion of
the Cash Payment, as set forth on Schedule 2.2(a)(ii) (less such Seller's Pro
Rata Portion of the Reserve Amount), shall be delivered to such Seller by wire
transfer, and (ii) the Reserve Amount shall be delivered to the Sellers'
Representative by wire transfer. Each Seller and the Sellers' Representative
shall

                                       10



designate in writing to Buyer at least three days prior to the Closing the
account to which such wire transfer payment shall be made. Each of the Sellers
hereby authorizes the Sellers' Representative to disburse any or all of the
Reserve Amount to satisfy the costs and expenses (including fees of attorneys,
accountants and brokers or finders) of the Sellers and the Acquired Companies
incurred in connection with this Agreement, the other Transaction Documents and
the transactions contemplated hereby and thereby. Any portion of the Reserve
Amount not so disbursed by the Sellers' Representative on the first anniversary
of the Closing Date shall be promptly thereafter disbursed by the Sellers'
Representative to the Sellers in their Pro Rata Portion.

                  (c)      No fractional shares of Standard Pacific Common Stock
shall be issued. If a Seller would otherwise be entitled to a fractional share,
in lieu of the issuance of such fractional share, a cash amount equal to the
product of such fraction and $32.64 shall be added to the Cash Payment to be
made to such Seller.

         2.3      Post-Closing Adjustment to the Cash Payment.

                  (a)      Within 90 days following the Closing, Buyer shall
prepare and deliver to the Sellers' Representative:

                           (i)   a consolidated balance sheet of the Company and
         its Subsidiaries (other than the Excluded Company) as of the Balance
         Sheet Date (the "Balance Sheet Date Financial Statements"); and

                           (ii)  Buyer's calculation of the book value of the
         assets less liabilities of the Acquired Companies as shown on the
         Balance Sheet Date Financial Statements (the "Balance Sheet Date Net
         Book Value").

         The Balance Sheet Date Financial Statements, the Estimated Balance
Sheet Date Net Book Value and the Balance Sheet Date Net Book Value shall be
prepared in conformity with GAAP, and consistent with the practices and policies
of the Company in preparing its consolidated financial statements for the fiscal
year ended December 31, 2001. For purposes of calculating the Estimated Balance
Sheet Date Net Book Value and the Balance Sheet Date Net Book Value, such
calculation shall not take into account the impact of, (A) the repayment of the
Company Indebtedness by Buyer or Standard Pacific at the Closing (other than the
impact of penalty interest, prepayment penalties, exit fees or other penalties
which shall be included in such calculations as set forth in Section
2.2(a)(iii)), or (B) any purchase accounting adjustments relating to Buyer's
acquisition of the Acquired Companies, including any write-up or write-down of
assets resulting from such purchase accounting.

                  (b)      Within 30 days following Buyer's notification to the
Sellers' Representative of its calculation of the Balance Sheet Date Net Book
Value, the Sellers' Representative shall deliver to Buyer a notice of objection
signed by the Sellers' Representative (a "Net Book Value Objection Notice") or a
notice of acceptance signed by the Sellers' Representative (a "Net Book Value
Acceptance Notice") with respect to Buyer's calculation of the Balance Sheet
Date Net Book Value. Buyer shall provide the Sellers' Representative and its
accountant and other representatives, upon reasonable advance notice, access to
such books and

                                       11



records of the Acquired Companies relating to the calculation of the Balance
Sheet Date Net Book Value as may be reasonably requested by the Sellers'
Representative.

                  (c)      Buyer's calculation of the Balance Sheet Date Net
Book Value shall be final and binding on the parties if a Net Book Value
Acceptance Notice is delivered to Buyer or if no Net Book Value Objection Notice
is delivered to Buyer within the 30-day period required by Section 2.3(b). Any
Net Book Value Objection Notice shall specify the items disputed, shall describe
the reasons for the objection thereof, shall state the amount in dispute and
shall state Sellers' calculation of the Balance Sheet Date Net Book Value. If a
Net Book Value Objection Notice is delivered, the potential dispute shall be
resolved as set forth in Section 2.6.

                  (d)      If the Sellers' Representative delivers to Buyer the
Net Book Value Acceptance Notice referred to in Section 2.3(b) or the Sellers
fail to deliver a Net Book Value Objection Notice within the 30 day period
required by Section 2.3(b), an amount equal to the Balance Sheet Date Net Book
Value minus the Estimated Balance Sheet Date Net Book Value shall be paid (i) by
Buyer to the Sellers, in their Pro Rata Portion, if such amount is positive, and
(ii) by the Sellers, in their Pro Rata Portion, to Buyer, if such amount is
negative, within five Business Days after the delivery of such Net Book Value
Acceptance Notice or the expiration of such 30 day period, as the case may be.
Alternatively, if the Sellers' Representative delivers to Buyer the Net Book
Value Objection Notice, within five Business Days after such delivery, the owing
parties shall pay the undisputed portion, if any, of the amount owed and, within
five Business Days after the resolution of any dispute by the parties or the
Unrelated Accounting Firm relating to the Net Book Value Objection Notice, the
owing parties shall pay the remainder owed, if any. Any payment pursuant to this
Section 2.3 shall be made in immediately available funds.

         2.4      January 2003 Payment. On or before January 15, 2003, Standard
Pacific shall cause Buyer to pay by wire transfer of immediately available funds
an aggregate of $7,000,000, which shall be paid to the Sellers as set forth on
Schedule 2.2(a)(ii) under the heading "January 2003 Payment" (the "January 2003
Payment").

         2.5      Earnout.

                  (a)      Standard Pacific shall cause Buyer to pay to each
Seller its Pro Rata Portion of an aggregate amount equal to 15% of the positive
Company Pre-Tax Income for the period from the Balance Sheet Date through
December 31, 2002, and each of the three years ending December 31, 2003, 2004
and 2005 (each an "Earnout Payment" and collectively, the "Earnout"). If the
amount of Company Pre-Tax Income generated is negative with respect to any
period, such negative amount shall be carried forward to the following year and
such negative amount shall be deducted from the Company Pre-Tax Income for
purposes of calculating the Earnout Payment for such following year. In
addition, to the extent necessary, such negative amounts shall be carried
forward for successive periods in which the Earnout is paid until offset by
positive Company Pre-Tax Income.

                  (b)      Not later than 10 days after the audit committee of
the Board of Director's of Standard Pacific approves Standard Pacific's year-end
financial statements for the periods in respect of which Earnout Payments may be
due, Buyer shall prepare and deliver to the Sellers'

                                       12



Representative Buyer's calculation of the Earnout Payment for the immediately
preceding fiscal year. Within 20 days following Buyer's notification to the
Sellers' Representative of its calculation of the applicable Earnout Payment,
the Sellers' Representative shall deliver to Buyer a notice of objection signed
by the Sellers' Representative (an "Earnout Objection Notice") or a notice of
acceptance signed by the Sellers' Representative (an "Earnout Acceptance
Notice") with respect to the calculation of the Earnout Payment. Buyer shall
provide the Sellers' Representative and its accountant and other
representatives, upon reasonable advance notice, access to the books and records
of the Acquired Companies relating to the calculation of the Earnout Payment as
may be reasonably requested by the Sellers' Representative. Buyer's calculation
of each Earnout Payment shall be final and binding on the parties if an Earnout
Acceptance Notice is delivered to Buyer or if no Earnout Objection Notice is
delivered to Buyer within such 20 day period. Any Earnout Objection Notice shall
specify the items disputed, shall describe the reasons for the objection
thereof, shall state the amount in dispute and shall state the Sellers'
calculation of the Earnout Payment. If an Earnout Objection Notice is delivered,
the potential dispute shall be resolved as set forth in Section 2.6.

                  (c)      If the Sellers' Representative delivers to Buyer the
Earnout Acceptance Notice referred to in Section 2.5(b) or the Sellers'
Representative fails to deliver an Earnout Objection Notice within the 20 day
period required by Section 2.5(b) with respect to any Earnout Payment, Buyer
shall pay to the Sellers their Pro Rata Portion of any amounts which Buyer's
calculation shall indicate to be owed to the Sellers within five Business Days
after the delivery of such Earnout Acceptance Notice or the expiration of such
20 day period, as the case may be. Alternatively, if the Sellers' Representative
delivers to Buyer the Earnout Objection Notice referred to in Section 2.5(b),
within five Business Days after such delivery, Buyer shall pay the Sellers their
Pro Rata Portion of the undisputed portion, if any, of the amount owed and,
within five Business Days after the resolution of any dispute by the parties or
the Unrelated Accounting Firm relating to the Earnout Objection Notice, Buyer
shall pay the Sellers their Pro Rata portion of the remainder owed, if any. Any
payment pursuant to this Section 2.5 shall be considered an adjustment to the
Purchase Price, and shall be made in immediately available funds. The applicable
Pro Rata Portion of the payment shall be delivered to each Seller by wire
transfer to the account designated in writing by such Seller to Buyer at least
three days prior to such payment. If Buyer has not delivered its calculation of
the Earnout Payment for any applicable fiscal year to the Sellers'
Representative by January 31 of the following fiscal year, Buyer shall be
obligated to pay simple interest on the Earnout Payment at the rate of 8% per
annum calculated beginning on February 1 of such following fiscal year and
ending on the day Buyer's calculation is delivered.

                  (d)      From the Closing Date until January 1, 2006 (or until
the payment in full of the Earnout, if earlier), Standard Pacific:

                           (i)   shall not, without the prior written consent of
         the Sellers' Representative, commingle the business of the Company and
         its Subsidiaries with any other division of Standard Pacific; provided,
         however, that the Sellers acknowledge and agree that (A) Standard
         Pacific may in good faith (and not for the intended purpose of avoiding
         or limiting its obligations with respect to the Earnout Payments under
         this Section 2.5) elect to consolidate certain management, corporate or
         administrative functions across two or more divisions, and that if it
         does so, it will reasonably allocate

                                       13



         the overhead cost of such functions across the participating divisions;
         (B) Standard Pacific may restructure the business of the Company and
         its Subsidiaries into any number of separate entities so long as such
         restructuring does not result in the commingling of the business of the
         Company and its Subsidiaries with any other division of Standard
         Pacific (all references to the Company and its Subsidiaries in this
         Section 2.5(d) includes the business of the Company and its
         Subsidiaries restructured as described in this Section 2.5(d)(i)), and
         (C) Standard Pacific will sweep cash out of the Company and its
         Subsidiaries in the manner that Standard Pacific sweeps cash from
         Standard Pacific's other divisions (such swept cash to be treated as a
         non-interest bearing intercompany receivable of the Company and its
         Subsidiaries in the same manner as Standard Pacific's other divisions);

                           (ii)  shall not, without the prior written consent of
         the Sellers' Representative, burden the Company and its Subsidiaries
         with debt incurred on behalf of the operations of Standard Pacific,
         other than the operations of the Company and its Subsidiaries;
         provided, however, that the Sellers acknowledge and agree that (A) the
         Company and its Subsidiaries may be guarantors of various obligations
         of Standard Pacific; (B) general corporate overhead will be allocated
         to the Company and its Subsidiaries in the same manner as such overhead
         is allocated to Standard Pacific's other divisions from time to time,
         provided that such general corporate overhead allocation shall not be
         less than 1.00% nor greater than 1.30% of the aggregate revenues of the
         Company and its Subsidiaries; (C) the cost of insurance will be
         allocated to the Company and its Subsidiaries in the same manner as it
         is allocated to Standard Pacific's other divisions based on claims
         history, product type, volume and other relevant factors; and (D)
         intercompany interest will be charged on qualified assets (as described
         in SFAS 34 "Capitalization of Interest"), stale inventory, investments
         in joint ventures and on such other assets as Standard Pacific may
         charge its other divisions from time to time;

                           (iii) shall provide to the Company an amount of
         capital reasonably necessary to accomplish the Business Plan; provided,
         however, that the Sellers acknowledge and agree that the Business Plan
         may be revised in such a manner so as to result in a reduction in the
         amount of capital reasonably necessary to accomplish the revised
         Business Plan either, (A) by the mutual agreement of Standard Pacific
         and the Sellers' Representative, or (B) by Standard Pacific, acting
         alone, to reflect then current market conditions and actual operating
         results of the Company and its Subsidiaries if the Company and its
         Subsidiaries fail to meet or exceed budgeted Company Pre-Tax Income as
         set forth in the Business Plan for any particular year, provided that
         Standard Pacific will consult in good faith with the Sellers'
         Representative prior to taking any such action and in developing any
         revised Business Plan; and

                           (iv)  shall not, without the prior written consent of
         the Sellers' Representative, begin any "start-up" home building
         operations outside of the corporate structure of the Company and its
         Subsidiaries in any area located in South West Florida (i.e. the
         counties of Citrus, Hernando, Pasco, Polk, Hillsborough, Pinnellas,
         Manatee, Sarasota, Charlotte, Lee and Collier), North Carolina or South
         Carolina; provided however, that Standard Pacific and its Affiliates
         may acquire additional homebuilding businesses (by purchase of assets
         or stock, by merger or otherwise) which operate in the

                                       14



         foregoing markets; but in such event, Standard Pacific shall
         not, without the consent of the Sellers' Representative, (A) commingle
         any assets, liabilities or operations of the acquired businesses with
         that of the Company and its Subsidiaries, (B) permit any such
         acquisitions to diminish the capital available to the Company and its
         Subsidiaries pursuant to subsection (iii) above, or (C) permit any such
         acquired businesses to use the same trade name as then used by the
         Company or its Subsidiaries in such overlapping market.

                  (e)      In the event of a Change of Control of Standard
Pacific, payment of the Earnout Payment for each period that has not been
completed shall be accelerated and the discounted amount shall be paid in full
to the Sellers, as set forth in this Section 2.5(e), upon consummation of the
Change of Control transaction. For purposes of calculating the Earnout Payments
to be paid upon a Change in Control, the Earnout Payment for each period which
has not been completed on the date of consummation of the Change in Control
transaction shall equal 15% of the projected Company Pre-Tax Income for each
such period, as set forth in Standard Pacific's then current business plan of
the Company and its Subsidiaries for such periods (less any negative amounts
carried forward to such periods pursuant to Section 2.5(a)). Such amount shall
be discounted to its present value on the date of the consummation of the Change
of Control payment based on a discount rate of 8%, and assuming each Earnout
Payment for each such period would be made on January 31 of the next succeeding
year.

                  (f)      In the event that the employment of Roger Gatewood is
terminated by Buyer or the Acquired Companies without Cause or by Roger Gatewood
for Good Reason (each, as defined in the Employment Agreement of Roger Gatewood
attached hereto as Exhibit C-1), the aggregate Earnout Payment to be paid to the
Sellers for each period that has not yet been completed as of the date of such
termination shall equal (regardless of the actual results of operations of the
Company and its Subsidiaries) 15% of the positive budgeted Company Pre-Tax
Income for each such period, as set forth in the Business Plan for such period
(less any negative amounts carried forward to such period pursuant to Section
2.5(a)). Each such Earnout Payment shall be paid by Buyer to the Sellers not
later than January 31 of the year following the period with respect to which
such Earnout Payment is due.

                  (g)      Neither the Earnout nor any interest therein shall be
transferable by any Seller in any manner other than by will or the laws of
descent or distribution, provided however, it shall not be a violation of this
Section 2.5(g) if the Gatewood Children Sellers transfer their interests in the
Earnout to Roger Gatewood pursuant to the so-called Section 4(1 1/2) exemption
or other exemption from federal securities law, provided that the transfer is in
compliance with all requirements of such exemption and other applicable
securities laws, and written notice of any such transfer is delivered to
Standard Pacific no later than December 31, 2002. The Earnout will be payable
even if the Employee Sellers are not employed by the Company or its
Subsidiaries.

         2.6      Dispute Resolution of Calculations of Purchase Price. If a Net
Book Value Objection Notice or an Earnout Objection Notice (each, an "Objection
Notice") is given, the Sellers' Representative and Buyer shall consult with each
other with respect to the objection. If Buyer and the Sellers' Representative
are unable to reach agreement within 15 days after an Objection Notice has been
given, any unresolved disputed items shall be promptly referred to KPMG LLP,
provided however, if such firm is unavailable or if either of the parties has
used the

                                       15



services of KPMG LLP at any time in the six month period prior to the date the
Objection Notice is given, then the unresolved items shall be promptly referred
to such other nationally recognized accounting firm mutually agreed to by Buyer
and the Sellers' Representative (KPMG LLP, or such other firm, the "Unrelated
Accounting Firm"). The Unrelated Accounting Firm shall be directed to render a
written report on the unresolved disputed issues as promptly as practicable (but
in no event later than 45 days following submission of the matter to the
Unrelated Accounting Firm) and to resolve only those issues of dispute set forth
in the Objection Notice. The resolution of the dispute by the Unrelated
Accounting Firm shall be final and binding on the parties for purposes of
determining the amounts owed by the parties hereunder with respect to such
dispute. The fees and expenses of the Unrelated Accounting Firm shall be borne
equally between the Sellers on the one hand, and Buyer on the other hand;
provided, however, that if the Balance Sheet Date Net Book Value or Earnout
Payment, as applicable, calculated by one of the parties (the "Differing Party")
differs from the final determination of the Unrelated Accounting Firm by more
than 20% to the detriment of such Differing Party, then such Differing Party
shall be responsible for the payment of all of the fees and expenses of the
Unrelated Accounting Firm.

         2.7      Closing.

                  (a)      The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place at the offices of Gibson, Dunn &
Crutcher LLP, 4 Park Plaza, Irvine, California 92614 at 10:00 a.m. (local time)
on the second Business Day after the last of the conditions to Closing set forth
in Sections 9.2 and 9.3 have been satisfied or waived by the party or parties
entitled to waive the same or such other date and time as to which Buyer and the
Sellers' Representative may agree in writing (the "Closing Date").

                  (b)      At the Closing:

                           (i)   each Seller shall deliver, or cause to be
         delivered, to Buyer, against payment by Buyer to each Seller of such
         Seller's Pro Rata Portion of the Closing Payment:

                                 (A) the stock certificate or certificates
                  representing the Shares owned by the Seller set forth on
                  Schedule 2.2(a)(ii), duly endorsed for transfer, or
                  accompanied by duly executed assignments separate from the
                  certificate, and any other documentation reasonably requested
                  by Buyer to transfer the Shares in the stock records of the
                  Company, transferring to Buyer full and exclusive ownership of
                  the Shares, free and clear of all Liens; and

                                 (B) all other documents, certificates and
                  other instruments required to be delivered, or caused to be
                  delivered, by each Seller pursuant hereto.

                           (ii)  Buyer shall deliver, or cause to be delivered,
         to each Seller, against delivery of the certificate or certificates
         representing the Shares of such Seller (properly endorsed for transfer
         or accompanied by proper assignments):

                                 (A) the Seller's Pro Rata Portion of the Cash
                  Payment, as set forth in Schedule 2.2(a)(ii);

                                       16



                                 (B) a stock certificate issued in the name
                  of such Seller representing such Seller's Pro Rata Portion of
                  the Stock Payment, as set forth on Schedule 2.2(a)(ii), and
                  cash in lieu of any fractional shares; and

                                 (C) all of the documents, certificates and
                  other instruments required to be delivered, or caused to be
                  delivered, by Buyer pursuant hereto.

                                   ARTICLE III
                  REPRESENTATIONS AND WARRANTIES OF THE SELLERS

         Except as set forth in the disclosure schedule delivered by the Sellers
to Buyer at or prior to the execution hereof that is arranged in Sections
corresponding to the numbered and lettered Sections contained in this Agreement
(the "Sellers' Disclosure Schedule"), the Sellers (other than the Gatewood
Children Sellers), jointly and severally, and each of the Gatewood Children
Sellers, severally but not jointly, represent and warrant to Standard Pacific
and Buyer, as of the date of this Agreement and as of the Closing Date, as
follows:

         3.1      Ownership of the Shares. Each Seller is the sole record and
beneficial owner of the shares of Company Common Stock set forth next to such
Seller's name in Section 3.1 of the Sellers' Disclosure Schedule, free and clear
of all Liens. Such shares of Company Common Stock are duly registered in the
name of such Seller on the stock register records of the Company. The Sellers
have been the only shareholders of the Company since January 1, 2001. Upon
delivery to Buyer at the Closing of the certificates representing the Shares,
Buyer will own the Shares, free and clear of any Liens, and will receive good
and marketable title to the Shares. The stock certificates evidencing the Shares
were not issued directly or indirectly in respect of any stock certificates
issued in replacement of any lost, damaged, mutilated or destroyed stock
certificates evidencing any shares of Capital Stock of the Company or any of its
predecessors. The Shares represent all of the issued and outstanding Capital
Stock of the Company. The Pro Rata Portion set forth next to each Seller's name
in Section 3.1 of the Sellers' Disclosure Schedule represents each Seller's sole
interest in the Capital Stock of the Company. Except for the Stockholder
Agreement and this Agreement, the Shares are not subject to any voting trust or
stockholder agreement or other similar Contract, including any such Contract
restricting or otherwise relating to the voting, dividend rights or disposition
of the Shares.

         3.2      Authorization, Validity, and Effect of Agreements. Each of the
Sellers has all requisite power and authority to execute and deliver this
Agreement and all agreements and documents contemplated herein (collectively,
the "Transaction Documents") to be executed and delivered by such Seller and to
consummate the transactions contemplated hereby and thereby. This Agreement has
been duly executed and delivered by each Seller and constitutes, and the
Transaction Documents to be executed by each Seller (when executed and delivered
pursuant hereto) will constitute, the valid and legally binding obligations of
each of the Sellers, enforceable in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, moratorium, or other similar laws
relating to creditors' rights and general principles of equity, whether at
equity or law.

         3.3      No Brokers. Except as disclosed in Section 3.3 of the Sellers'
Disclosure Schedule, no broker, finder or similar agent has been employed by or
acted on behalf of, directly

                                       17



or indirectly, any of the Sellers, or any of their Affiliates (including the
Acquired Companies) in connection with this Agreement or the other Transaction
Documents or the transactions contemplated hereby or thereby. None of the
Sellers nor any of their Affiliates (including the Acquired Companies) has
entered into any arrangement or other Contract of any kind with any Person, or
taken any other actions, which would obligate Standard Pacific, Buyer, the
Company or any of their respective Subsidiaries to pay any brokerage commission,
finder's fee or any similar compensation in connection with this Agreement, the
other Transaction Documents or the transactions contemplated hereby or thereby.

         3.4      Investment Purpose.

                  (a)      Each Seller (other than the Gatewood Children
Sellers) is an "accredited investor," as such term is defined in Regulation D of
the Securities Act. Each Seller will acquire the Standard Pacific Securities for
its own account and not with a view to a sale or distribution thereof in
violation of any securities laws, and has completed, executed and delivered to
Buyer an Investor Questionnaire substantially in the form of Exhibit A.

                  (b)      Each Seller acknowledges and agrees:

                           (i)   that the offer and sale of the Standard Pacific
         Securities has not been registered under applicable securities laws,
         the Standard Pacific Securities will be subject to restrictions on
         transfer under such securities laws and such Seller will not sell or
         distribute any of the Standard Pacific Securities in violation of any
         securities laws;

                           (ii)  the Sellers will be contractually prohibited
         from transferring any of the Standard Pacific Common Stock for a period
         of one year following the Closing Date in accordance with Section 6.10;
         and

                           (iii) that such Seller has the present intention of
         holding the Standard Pacific Securities for investment purposes.

                  (c)      Standard Pacific and Buyer acknowledge and agree that
nothing in this Section 3.4 is intended to prohibit or limit the Sellers'
ability to transfer shares of Standard Pacific Common Stock in compliance with
Section 6.10 of this Agreement and Rule 144 promulgated under the Securities
Act.

         3.5      Access to Information.

                  (a)      Each Seller acknowledges and agrees that:

                           (i)   during the course of the negotiation of this
         Agreement, such Seller reviewed or has been afforded the opportunity to
         review all information provided to it by Standard Pacific, Buyer and
         their representatives, and has had the opportunity to ask questions of
         and receive answers to its satisfaction from representatives of
         Standard Pacific and Buyer concerning Standard Pacific, Buyer and the
         Standard Pacific Common Stock, and to obtain certain additional
         information reasonably requested by such Seller;

                                       18



                           (ii)  it has relied solely on the representations of
         Standard Pacific and Buyer made in Article V of this Agreement and the
         Transaction Documents and not on any other representations made by or
         on behalf of Standard Pacific or Buyer; and

                           (iii) either personally or with his or her purchaser
         representative (as defined in Rule 501(h) promulgated under the
         Securities Act) such Seller has expertise in evaluating and investing
         in private placement transactions of securities of companies similar to
         Standard Pacific and has such knowledge and experience in financial and
         business matters that he or she is capable of evaluating the merits and
         risks of the prospective investment in the Standard Pacific Common
         Stock.

                  (b)      The foregoing shall not be deemed to affect the
representations and warranties and indemnities made by Standard Pacific and
Buyer hereunder. Notwithstanding any "due diligence" investigations made by the
Sellers, no information shall be deemed to have been disclosed for purposes of
the representations and warranties made in Article V by Standard Pacific and
Buyer unless contained in the Disclosure Schedule of Buyer and Standard Pacific.

         3.6      Gatewood Children Trusts.

                  (a)      The Roger B. Gatewood Irrevocable Trust for Catherine
Gatewood under Declaration of Trust dated May 16, 1988 (the "Catherine Gatewood
Trust"), is presently in full force and effect and has not been amended. The
Roger B. Gatewood Irrevocable Trust for Elizabeth Gatewood under Declaration of
Trust dated May 16, 1988 (the "Elizabeth Gatewood Trust"), is presently in full
force and effect and has not been amended. A true, correct and complete copy of
each of the Catherine Gatewood Trust and the Elizabeth Gatewood Trust
(collectively, the "Trusts") has been previously provided to Standard Pacific.

                  (b)      Arthur Gatewood is the duly appointed and presently
acting sole Trustee of each of the Trusts. Arthur Gatewood, as Trustee, is
qualified and has the power to act and is properly exercising his powers under
each of the Trusts in connection with the following matters: (i) the sale of the
Shares owned by each of the Trusts to Buyer as contemplated by this Agreement
(all pursuant to the general power of the Trustee to sell property held in each
of the Trusts); and (ii) the execution and delivery of this Agreement and
consummation of the transactions contemplated hereby.

                  (c)      Neither of the Trusts has been revoked, modified, or
amended in any manner, and neither Trust will be revoked modified or amended in
any manner on or prior to the Closing Date.

                  (d)      This Agreement has been duly executed and delivered
by Arthur Gatewood, as sole trustee of each of the Trusts.

                  (e)      The sale of the Shares pursuant to the terms of this
Agreement, the compliance by the Trustee, on behalf of each of the Trusts, with
the other provisions of this Agreement and the other Transaction Documents and
the consummation of the other transactions contemplated by this Agreement and
the other Transaction Documents do not conflict with, result in a breach or
violation of any terms and provisions of or constitute a default under either

                                       19



Trust or any indenture, mortgage, deed of trust, lease, agreement, instrument or
other Contract to which either Trust is a party or by which either Trust or any
of its property is bound, or any statute or any judgment, decree, order, rule or
regulation of any court or other governmental authority or any arbitrator having
jurisdiction over either Trust.

                                   ARTICLE IV
                  REPRESENTATIONS AND WARRANTIES OF THE SELLERS
                     AS TO THE COMPANY AND ITS SUBSIDIARIES

         Except as set forth in the Sellers' Disclosure Schedule, the Sellers
(other than the Gatewood Children Sellers), jointly and severally, and each of
the Gatewood Children Sellers, severally, but not jointly, represent and warrant
to Standard Pacific and Buyer, as of the date of this Agreement and as of the
Closing Date, as follows:

         4.1      Existence; Good Standing. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of Florida.
The Company is not, and is not required to be, licensed or qualified to do
business as a foreign corporation under the laws of any other state of the
United States. The Company has all requisite corporate power and authority to
own, operate and lease its properties and assets and carry on its business as
now conducted. The copies of the Company's articles of incorporation and by-laws
previously delivered to or made available to Buyer are true, correct and
complete.

         4.2      Capitalization.

                  (a)      The authorized Capital Stock of the Company consists
of, and at all times since inception has consisted solely of 20,000,000 shares
of Company Common Stock. There are 7,040.1471 shares of Company Common Stock
issued and outstanding. Except for the Shares, there are no outstanding shares
of Company Common Stock or other Capital Stock, or securities or other interests
exercisable or exchangeable for or convertible into Capital Stock.

                  (b)      All issued and outstanding Capital Stock of the
Company is duly authorized, validly issued, fully paid and nonassessable, and
none of such Capital Stock has been issued in violation of or is subject to any
option, call, right of first refusal, preemptive, subscription or similar right.
Except as set forth in Section 4.3(d) of the Sellers' Disclosure Schedule, there
are no, and there have never been any, options, warrants, calls, subscriptions,
convertible securities, convertible debt or other rights or other Contracts
which obligate the Company to issue, or the Company or any of the Sellers to
transfer or sell, any Capital Stock of the Company or any securities exercisable
or exchangeable for, or convertible into, such Capital Stock.

         4.3      Acquired Companies and Other Interests.

                  (a)      Section 4.3(a) of the Sellers' Disclosure Schedule
sets forth a list of all of the Company's directly and indirectly owned
Subsidiaries together with (i) the jurisdiction of organization, (ii) for each
Acquired Company, (A) that is a corporation, the amount of its authorized
Capital Stock, the amount of its outstanding Capital Stock and the record and
beneficial owners of its outstanding Capital Stock, and (B) that is a limited
liability company, the names and interests of the members thereof. Except as set
forth in Section 4.3(a) of the Sellers'

                                       20



Disclosure Schedule, the Company owns directly or indirectly all of the
outstanding Capital Stock of each of the other Acquired Companies, and such
interests are held free and clear of all Liens. Except for the Persons listed in
Section 4.3(a) of the Sellers' Disclosure Schedule, the Company does not hold
and has never held directly or indirectly any Capital Stock of any other Person.

                  (b)      Each of the Acquired Companies is a corporation duly
incorporated, or a limited liability company duly formed, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or
formation. Each of the Acquired Companies is duly licensed or qualified to do
business and is in good standing under the laws of each other state in the
United States in which the character of the properties owned or leased by it
therein or in which the transaction of its business makes such qualification or
licensing necessary, except in such jurisdictions where the failure to be so
duly qualified or licensed or in good standing would not have a Material Adverse
Effect on such Acquired Company. Each of the Acquired Companies has all
requisite power and authority to own, operate and lease its properties and
assets and carry on its business as now conducted. The copies of the articles of
incorporation and by-laws or other governing documents of the Acquired Companies
previously delivered to or made available to Buyer are true, correct and
complete.

                  (c)      All of the outstanding Capital Stock of each Acquired
Company is duly authorized, validly issued, fully paid and nonassessable, and
none of such Capital Stock has been issued in violation of or is subject to any
option, call, right of first refusal, preemptive, subscription or similar right.
The outstanding Capital Stock of each of the Acquired Companies has been issued
in compliance with all applicable securities laws.

                  (d)      Except as set forth in Section 4.3(d) of the Sellers'
Disclosure Schedule, there are no, and there have never been any, options,
warrants, calls, subscriptions, convertible securities, convertible debt or
other rights or other Contracts which obligate any Acquired Company to issue,
transfer or sell any Capital Stock of such Acquired Company or any securities
exercisable or exchangeable for, or convertible into, such Capital Stock.

                  (e)      None of the Acquired Companies has, and none of the
Acquired Companies has ever had, any outstanding bonds, debentures, notes or
other obligations the holders of which have the right to vote (or which are
convertible into or exercisable or exchangeable for securities having the right
to vote) with its shareholders or members on any matter and there are no, and
have never been any, equity equivalent interests in the ownership or earnings of
any of the Acquired Companies. There are no obligations, contingent or
otherwise, of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any of the Capital Stock of the Acquired Companies or to make
any investment (in the form of a loan, capital contribution or otherwise) in any
Person.

                  (f)      None of the Acquired Companies is in default or
breach (and no event has occurred which with notice or lapse of time or both,
would constitute a breach or default) of any terms or provision of its articles
of incorporation or by-laws (or other similar constituent documents).

                                       21



         4.4      Material Contracts; No Violation.

                  (a)      Except as set forth in Section 4.4(a) of the Sellers'
Disclosure Schedule, none of the Acquired Companies is a party to nor are any of
their respective assets or businesses bound by any:

                           (i)    real property purchase, sale or option
         Contract, other than Contracts for sales of completed homes to
         individual homebuyers in the ordinary course of business;

                           (ii)   Contract with any Governmental Entity,
         including development agreements, that have aggregate future Liability
         or anticipated receipts in excess of $250,000 (other than Contracts for
         the payment of impact fees pursuant to impact fee schedules);

                           (iii)  performance bond in an amount in excess of
         $250,000;

                           (iv)   Contract relating to community development
         districts;

                           (v)    Contract not entered into in the ordinary
         course of business;

                           (vi)   employment Contract (including any severance
         pay or change in control agreement);

                           (vii)  employee collective bargaining agreement or
         other Contract with any labor union;

                           (viii) covenant not to compete or other Contract
         restricting the conduct of business of any of the Acquired Companies;

                           (ix)   Contract with any Seller or any Affiliate of
         any Seller or any current or former officer or director thereof or any
         immediate family member of any of the foregoing;

                           (x)    any Contract with any former shareholder, or
         any current or former officer, director or employee of any Acquired
         Company (other than advances to employees not in excess of $10,000 and
         employment Contracts covered by clause (vi) above), or any immediate
         family member of any of the foregoing;

                           (xi)   lease, sublease or similar Contract with any
         Person under which (A) any Acquired Company is a lessor or sublessor
         of, or makes available for use to any Person (other than the Acquired
         Companies), (1) any real property of the Acquired Companies, or (2) any
         portion of any premises otherwise occupied by any Acquired Company, or
         (B) any Acquired Company is a lessee or sublessee of, or holds or uses
         any real property owned by any other Person (other than the Acquired
         Companies);

                           (xii)  lease, sublease or similar Contract with any
         Person under which (A) any Acquired Company is a lessee or sublessee
         of, or holds or uses, any machinery,

                                       22



         equipment, vehicle or other tangible personal property owned by any
         Person (other than the Acquired Companies and except personal property
         leases and installment and conditional sales agreements having annual
         payments of less than $100,000), or (B) any Acquired Company is a
         lessor or sublessor of, or makes available for use by any Person (other
         than the Acquired Companies), any tangible personal property owned or
         leased by any Acquired Company, in any such case which has a future
         Liability or receivable, as the case may be, in excess of $100,000;

                           (xiii) Contract (A) for the future purchase of
         materials, supplies or equipment for the construction of homes (1) with
         a future Liability in excess of $1,000,000, or (2) which obligates any
         Acquired Company to use the services of the supplier of such materials,
         supplies or equipment for future projects that have not yet been bid,
         or (B) with a subcontractor with a Liability in excess of $1,000,000;

                           (xiv)  management, consulting, financial advisory or
         other similar type of Contract with Liability in excess of $25,000
         (other than Contracts for architectural, geotechnical, land planners,
         design and engineering and other similar services, in each case
         relating to a single project);

                           (xv)   license, option or other Contract relating in
         whole or in part to the Intellectual Property set forth in Section 4.16
         of the Sellers' Disclosure Schedule;

                           (xvi)  Contract under which any Acquired Company has
         borrowed any money from, or issued any note, bond, debenture or other
         evidence of Debt or reimbursement obligation to, any Person or any
         other note, bond, debenture or other evidence of Debt issued to any
         Person, in any such case which individually is in excess of $50,000;

                           (xvii) Contract (including so-called take-or-pay or
         keep-well agreements) under which (A) any Person has directly or
         indirectly guaranteed Debt or other obligations of any Acquired
         Company, or (B) any Acquired Company has directly or indirectly
         guaranteed or directly or indirectly assumed Debt or other obligations
         of any Person (in each case other than endorsements for the purpose of
         collection in the ordinary course of business), in any such case which
         individually is in excess of $50,000;

                           (xviii) Contract under which any Acquired Company
         has, directly or indirectly, made any advance, loan or extension of
         credit, in any such case which individually is in excess of $50,000;

                           (xix)  Contract which contemplates the granting of a
         security interest in any property of any Acquired Company, which
         security interest (A) secures any Debt for borrowed money in excess of
         $50,000, (B) secures any obligation in excess of $50,000 to pay the
         deferred purchase price of stock or assets acquired by any Acquired
         Company, or (C) secures any obligation of, or is held by, any Seller or
         any Affiliate of any Seller;

                           (xx)   Contract providing for indemnification of any
         Person with respect to Liabilities relating to any current or former
         business of any Acquired Company or any of their respective Affiliates
         or any predecessor of such Persons;

                                       23



                           (xxi)  power of attorney (other than powers of
         attorney entered into in the ordinary course of business);

                           (xxii) tax sharing or tax allocation agreement;

                           (xxiii)joint venture or partnership agreement or
         similar Contract; or

                           (xxiv) any other Contract that is material to the
         Acquired Companies, taken as a whole, not otherwise listed in Section
         4.4(a) of the Sellers' Disclosure Schedule.

                  (b)      Section 4.4(b) of the Sellers' Disclosure Schedule
sets forth a list of each Contract between (i) any of the Sellers, the Excluded
Company or their respective Affiliates (other than the Acquired Companies) on
the one hand, and (ii) any officer, director or employee of the Acquired
Companies on the other hand.

                  (c)      Except as set forth in Section 4.4(c) of the Sellers'
Disclosure Schedule, (i) all Contracts listed in Section 4.4(a) to the Sellers'
Disclosure (collectively, the "Material Contracts") are valid, binding and in
full force and effect and are enforceable by the Company, or the other Acquired
Company party to the Contract, in accordance with their terms, subject to
applicable bankruptcy, insolvency, moratorium, fraudulent conveyance,
reorganization or other similar laws relating to creditors' rights and general
principles of equity, whether at equity or at law, (ii) each Seller and the
Acquired Companies have performed all material obligations required to be
performed by them to date under the Material Contracts and they are not (with or
without the lapse of time or the giving of notice, or both) in breach or default
in any material respect thereunder, and (iii) to the knowledge of the Sellers
and the Acquired Companies, no other party to any of the Material Contracts is
(with or without the lapse of time or the giving of notice, or both) in breach
or default in any material respect thereunder. A copy of each Material Contract
has been made available to Buyer, and such copies are true, complete and
correct.

                  (d)      Neither the execution and delivery by the Sellers of
this Agreement and the other Transaction Documents, nor the consummation by
Sellers of the transactions contemplated herein or therein in accordance with
the terms hereof or thereof, will violate, or conflict with, or result in a
breach of any provision of, or constitute a material default (or an event which,
with notice or lapse of time or both, would constitute a breach or default)
under, or result in the termination or in a right of termination or cancellation
of, or accelerate the performance required by, or result in the triggering of
any payment obligations under, or result in the creation of any Lien upon any of
the material properties of any Seller (including the Shares), the Company or any
Subsidiary of the Company, or result in being declared void, voidable, or
without further binding effect, any of the terms, conditions or provisions of
any Material Contract.

                  (e)      Except as set forth on Section 4.4(e) of the Sellers'
Disclosure Schedule, no notice to or consent or approval of any party to a
Material Contract is required in connection with the execution, delivery and
performance of this Agreement, the other Transaction Documents or the
consummation of the transactions contemplated hereby and thereby.

                                       24



                  (f)      The Sellers have provided Buyer with true, complete
and accurate copies of the standard form home sales contracts and master
subcontractor contracts currently used by the Acquired Companies. The foregoing
standard form contracts are generally used by the Acquired Companies in the
ordinary course of their respective businesses to sell homes and secure
subcontractor services. There have not been any material deviations from such
standard form contracts, and none of the Acquired Companies, nor any of their
respective salespersons, employees and agents is authorized to make such
deviations.

         4.5      Financial Statements; No Undisclosed Liabilities; Projections.

                  (a)      Section 4.5(a) of the Sellers' Disclosure Schedule
sets forth true and complete copies of the consolidated and consolidating
balance sheets and related consolidated and consolidating statements of
operations, retained earnings and cash flows for the Company and its
Subsidiaries for the years ended December 31, 2000 and 2001, in each case
audited by the independent public accountants of the Company whose reports are
attached thereto (the "Annual Statements") and the balance sheets and related
statements of operations for the six month period ended June 30, 2001 and 2002
and any financial statements delivered pursuant to Section 6.2(c) (collectively,
the "Interim Statements" and, together with the Annual Statements, the
"Financial Statements"). The December 31, 2001 balance sheet is referred to
herein as the "2001 Balance Sheet."

                  (b)      Each of the Financial Statements (i) has been
prepared based on the books and records of the Company and its Subsidiaries in
accordance with GAAP, subject in the case of the Interim Statements to normal,
recurring year-end adjustments (which will not, individually or in the aggregate
be material), and the Company's normal accounting practices, consistent with
past practice and with each other, and present fairly the consolidated financial
condition, consolidated results of operations and consolidated statements of
cash flow of the Company and its Subsidiaries as of the dates or for the periods
indicated; (ii) contains and reflects all necessary adjustments, accruals,
provisions and allowances for a fair presentation of the financial condition and
the results of operations of the Company and its Subsidiaries for the periods
covered by the Financial Statements, subject in the case of the Interim
Statements to normal, recurring year-end adjustments (which will not,
individually or in the aggregate be material); and (iii) contain and reflect
adequate reserves for all reasonably anticipated losses and costs and expenses.
No financial statements of any Person other than the Company and its
Subsidiaries are required by GAAP to be included in the Financial Statements.
The Financial Statements do not contain any material items of a special or
nonrecurring nature, except as expressly stated therein.

                  (c)      Except as set forth in Section 4.5(c) of the Sellers'
Disclosure Schedule, there are no Liabilities of the Company and its
Subsidiaries other than: (i) Liabilities accrued on the 2001 Balance Sheet; (ii)
Liabilities specifically disclosed and identified as such in the schedules of
this Agreement; and (iii) Liabilities incurred since the date of the 2001
Balance Sheet that have been incurred in the ordinary course of business of the
Company and its Subsidiaries and that do not, and will not, individually or in
the aggregate, have a Material Adverse Effect on the Acquired Companies.

                  (d)      The Debt as disclosed in Section 4.5(d) of the
Sellers' Disclosure Schedule represents all of the Debt of the Acquired
Companies that will be outstanding as of the Closing

                                       25



Date. None of the Acquired Companies has any Liabilities to any Seller or any of
their respective Affiliates (including the Excluded Company) other than
obligations arising under Contracts disclosed in Section 4.4(a)(ix) of the
Sellers' Disclosure Schedule.

                  (e)      The business plan of the Acquired Companies (covering
actual and projected financial results, as applicable, for calendar years 2001
through 2005) provided by the Sellers to Buyer (the "Business Plan"), is a true,
accurate and complete copy of the five-year business plan for the Acquired
Companies. The Business Plan was prepared consistent with the accounting
principles and practices used in preparing the Financial Statements and prior
business plans (if any). The Business Plan was prepared in good faith and using
reasonable assumptions based on the knowledge of the Sellers and the Acquired
Companies at the time of preparation. Nothing has come to the attention of any
of the Sellers or the Acquired Companies that would cause such assumptions or
the projections to differ materially. It as acknowledged by Buyer and Standard
Pacific that actual results may differ materially from the projections.

         4.6      No Violations; Consents.

                  (a)      The execution and delivery by the Sellers of this
Agreement, and the other Transaction Documents and the consummation of the
transactions contemplated herein or therein in accordance with the terms hereof
or thereof will not:

                           (i)    conflict with or result in a breach of any
         provisions of the articles of incorporation or by-laws (or other
         similar constituent documents) of any of the Acquired Companies; or

                           (ii)   violate any judgment, order or decree, or
         statute, law, ordinance, rule or regulation applicable to any of the
         Sellers or the Acquired Companies, or their respective properties or
         assets.

                  (b)      No consent, approval or authorization of, or
declaration, filing, notice or registration with, any Governmental Entity or any
other Person is required to be made by or with respect to any Seller or the
Acquired Companies in connection with the execution, delivery and performance of
this Agreement and the other Transaction Documents or the consummation of the
transactions contemplated hereby or thereby, or conduct by the Acquired
Companies of their respective businesses following the Closing as conducted on
the date hereof, other than those that may be required solely by reason of
Buyer's participation in the transactions contemplated hereby.

         4.7      Compliance; Permits; Litigation.

                  (a)      Each of the Acquired Companies is and at all times
has been in material compliance with, all laws, ordinances, governmental rules
and regulations to which they or any of their respective properties or assets is
subject and all non-governmental restrictions as to property or asset use. None
of the Acquired Companies is party or subject to or in default under any
judgment, order, injunction or decree of any Governmental Entity or arbitration
tribunal applicable to it or any of its respective properties, assets,
operations or business.

                                       26



                  (b)      Each of the Acquired Companies has obtained all
licenses, permits, easements, variances, exemptions, consents, certificates,
orders, approvals and other authorizations (collectively, the "Company Permits")
and have taken all actions required by applicable law or regulations of any
Governmental Entity in connection with its respective business as now conducted
(or to the extent such actions are currently required, in connection with the
business reasonably anticipated to be conducted over the next six months),
except where the failure to obtain any such Company Permit or to take any such
action, individually or in the aggregate, does not and would not reasonably be
expected to have a Material Adverse Effect on the Acquired Companies. Each
Acquired Company is in material compliance with the terms of the Company
Permits. Section 4.7(b) of the Sellers' Disclosure Schedule sets forth a list of
the material Company Permits (other than permits relating to individual homes).
No material Company Permit will be subject to suspension, modification,
revocation or nonrenewal as a result of the execution and delivery of this
Agreement, the other Transaction Documents or the consummation of the
transactions contemplated hereby or thereby.

                  (c)      Section 4.7(c) of the Sellers' Disclosure Schedule
sets forth a list and description of all pending or, to the knowledge of the
Sellers and the Acquired Companies threatened, lawsuits, arbitrations,
proceedings, investigations or other claims against the Acquired Companies or
any of their respective properties, assets, operations or businesses. To the
knowledge of the Sellers and the Acquired Companies, no event has occurred or
circumstance exists that may give rise to or serve as the basis for the
commencement of any such lawsuit, arbitration, proceeding, investigation or
other claim.

                  (d)      Except as set forth in Section 4.7(d) of the Sellers'
Disclosure Schedule, there is no lawsuit, arbitration, proceedings,
investigations or other claim by any Acquired Company pending against any other
Person.

         4.8      Absence of Certain Changes. Except as disclosed in Section 4.8
of the Sellers' Disclosure Schedule, since December 31, 2001 each Acquired
Company has conducted its business only in the ordinary course of such business
consistent with past practice and there has not been:

                           (i)    any event or events which, individually or in
         the aggregate, have or would reasonably be expected to have a Material
         Adverse Effect on the Acquired Companies;

                           (ii)   any declaration, setting aside or payment of
         any dividend (other than the Corporate Dividend and cash distributions
         in the amount of $3,390,000 which were necessary to fund Tax
         Liabilities of the Sellers as a result of ownership of the Shares) or
         other distribution with respect to the Capital Stock of any Acquired
         Company or any redemption or repurchase of any such Capital Stock, or
         any other payment of any kind to any Seller or any Affiliate of any
         Seller (other than to other Acquired Companies), except for payments of
         salary and bonus to the Employee Sellers in the ordinary course of
         business consistent with past practice in their capacity as employees
         of the Acquired Companies;

                                       27



                           (iii)  any material change in the accounting
         principles, practices or methods of any Acquired Company;

                           (iv)   any increase in the salaries or other
         compensation payable to any officer, director or employee of any
         Acquired Company (except for normal increases for employees in the
         ordinary course of business consistent with past practice) or any
         increase in, or addition to, other benefits to which such officer,
         director or employee may be entitled (except as required by the terms
         of plans as in effect on the date of this Agreement and which are
         listed on Section 4.10(a) of the Sellers' Disclosure Schedule or as
         required by law);

                           (v)    any incurrence or assumption by any Acquired
         Company of Debt, other than borrowings prior to the date of this
         Agreement incurred in the ordinary course of business and consistent
         with past practice under the Credit Agreement, and related guarantees,
         with total outstanding amounts as of the date of this Agreement of not
         more than $46,500,000;

                           (vi)   any material adverse change, or to the
         knowledge of the Sellers and the Acquired Companies any threat of a
         material adverse change, in the relations of any Acquired Company with,
         or any loss or threat of loss, of any of the important suppliers or
         customers or key employees of the Acquired Companies;

                           (vii)  any termination, cancellation, amendment or
         waiver of any material Contract or other right material to any Acquired
         Company; or

                           (viii) any material damage, destruction or loss,
         whether or not covered by insurance, adversely affecting the
         properties, assets, business or prospects, or any deterioration in the
         operating condition or other impairment in the value of the assets of
         any Acquired Company which would, individually or in the aggregate, be
         material to the Acquired Companies.

         4.9      Taxes.

                  (a)      All Tax Returns that were required to be filed with
respect to any of the Acquired Companies have been accurately prepared and
timely filed. All such Tax Returns are true, correct, and complete in all
material respects and such Tax Returns contain all disclosures and other items
required to avoid additional Taxes or other adverse Tax consequences. The
Acquired Companies have at all times complied with applicable laws pertaining to
Taxes, including, without limitation, all applicable laws relating to record
retention.

                  (b)      Each of the Acquired Companies has timely paid all
Taxes that have become due or payable (without regard to whether or not such
Taxes are shown on any Tax Return) and has adequately provided in the Financial
Statements (in accordance with GAAP) for all Taxes that have accrued but are not
yet due or payable.

                  (c)      No claim has been made by any taxing authority in any
jurisdiction where any Acquired Company does not file Tax Returns that such
Acquired Company is or may be

                                       28



subject to Tax by that jurisdiction. No extensions or waivers of statutes of
limitations with respect to any Tax Returns have been given by or requested from
any Acquired Company.

                  (d)      No Acquired Company is a party to any action,
proceeding or audit relating to Taxes by any taxing authority for which any
Acquired Company or Buyer could be held liable, there is no pending and, to the
knowledge of the Sellers, the Company and its Subsidiaries, threatened, action,
proceeding or audit by any taxing authority. All deficiencies asserted or
assessments made against any Acquired Company as a result of any examinations by
any taxing authority have been fully paid. No issue has been raised in any such
examination, audit, or other proceeding which by application of the same or
similar principles, reasonably could be expected to result in a proposed
deficiency in Taxes of any other Acquired Company or for the Acquired Companies
for any other period.

                  (e)      There are no Liens for Taxes (other than for current
Taxes not yet due and payable) upon the assets of the Acquired Companies. None
of the assets of the Acquired Companies (i) is property that is required to be
treated as being owned by any other Person pursuant to the so-called "safe
harbor lease" provisions of former Section 168(f)(8) of the Code; (ii) directly
or indirectly secures any debt the interest on which is tax exempt under Section
103(a) of the Code; or (iii) is "tax-exempt use property" within the meaning of
Section 168(h) of the Code.

                  (f)      No Acquired Company is a party to or bound by any
closing agreement, offer in compromise, or other agreement with any taxing
authority that could affect Taxes for which the Acquired Companies or Buyer may
be liable.

                  (g)      No Acquired Company has been a member of an
affiliated group of corporations, within the meaning of Section 1504 of the
Code, or a member of a combined, consolidated or unitary group for state, local
or foreign Tax purposes.

                  (h)      No Acquired Company is a party to any plan or other
Contract that has resulted or would result, separately or in the aggregate, in
connection with this Agreement, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code.

                  (i)      Section 4.9(i) of the Sellers' Disclosure Schedule
sets forth (i) all foreign jurisdictions in which any Acquired Company is
subject to Tax, is engaged in business or has a permanent establishment, and
(ii) all elections pursuant to Treas. Reg. Section 301.7701-3 that have been
made by business entities in which any Acquired Company owns an equity interest.

                  (j)      No Acquired Company has been a "distributing
corporation" or a "controlled corporation" in connection with a distribution
described in Section 355 of the Code.

                  (k)      No Acquired Company has filed a consent under Section
341 of the Code.

                  (l)      Each Acquired Company, other than Westfield Home
Mortgage LLC, filed a timely and complete election to be taxed as an "S"
corporation pursuant to Sections 1361, et seq., of the Code commencing with its
first taxable year. At all times since such date, and through the Closing Date,
each Acquired Company, other than Westfield Home Mortgage LLC, has continued to
qualify as an "S" corporation for federal and state income tax purposes. No

                                       29



Acquired Company has ever been a "C" corporation and has never engaged in the
acquisition of any assets from a "C" corporation in a carryover basis
transaction. No Acquired Company has paid compensation to any shareholder which
may be deemed to be "excessive" compensation for income tax purposes. The
Shareholder Agreements were not entered into by the relevant parties to such
agreements for the purpose of circumventing the one class of stock requirement
of an "S" corporation. Since the date of the election by the Company to be taxed
as an "S" corporation, all shareholders of the Company have been valid "S"
corporation shareholders as described in Section 1361 of the Code.

         4.10     Certain Employee Plans.

                  (a)      (i) Each Company Benefit Plan complies, and has been
administered, in all material respects in accordance with its governing
documents and all applicable requirements of law, and (ii) no "prohibited
transaction" (as such term is defined in Section 406 of ERISA and Section 4975
of the Code) or termination has occurred with respect to any Company Benefit
Plan which under either circumstance presents a risk of material Liability by
the Acquired Companies to any Governmental Entity or other Person, including a
Company Benefit Plan. The Company Benefit Plans are listed on Section 4.10(a) of
the Sellers' Disclosure Schedule and copies or descriptions of all material
Company Benefit Plans have previously been provided to Buyer. There has also
been furnished to Buyer, with respect to each Company Benefit Plan required to
file such report and description, the most recent three annual Form 5500
filings, including attachments, and the summary plan description.

                  (b)      Each Company Benefit Plan intended to qualify under
Section 401(a) of the Code is so qualified and a determination letter has been
issued by the IRS with respect to the qualification of such Company Benefit Plan
and no circumstances exist which would adversely affect such qualification. A
copy of each determination letter referred to in the preceding sentence has
previously been furnished to Buyer. As to any Company Benefit Plan intended to
be qualified under Section 401(a) of the Code, there has been no termination or
partial termination of the Company Benefit Plan within the meaning of Section
411(d)(3) of the Code. There is no trust funding a Company Benefit Plan which is
intended to be exempt from federal income taxation pursuant to Section 501(c)(9)
of the Code. No Company Benefit Plan is subject to Title IV of ERISA or is
subject to Part 3 of Subtitle B of Title I of ERISA or Section 412 of the Code.

                  (c)      Except as required by applicable law or as set forth
on Section 4.10(c) of the Sellers' Disclosure Schedule, none of the Acquired
Companies provides any health, welfare or life insurance benefits to any of its
former or retired employees.

                  (d)      (i)    Each Acquired Company has in all material
         aspects performed all obligations, whether arising by operation of law
         or by Contract, required to be performed by it in connection with the
         Company Benefit Plans;

                           (ii)   there have been no defaults or violations by
         any other party to the Company Benefit Plans; and

                                       30



                           (iii)  there are no actions, suits, or claims pending
         (other than routine claims for benefits) or threatened against, or with
         respect to, any of the Company Benefit Plans or their assets, which
         under any of the circumstances present a risk of material Liability to
         any Acquired Company to any Governmental Entity or other Person,
         including a Company Benefit Plan. There is no matter pending (other
         than routine qualification determination filings) with respect to any
         of the Company Benefit Plans before any Governmental Entity. All
         contributions required to be made to the Company Benefit Plans pursuant
         to their terms and the provisions of ERISA, the Code, or any other
         applicable law have been timely made.

                  (e)      No act, omission or transaction has occurred which
would result in imposition on any Acquired Company of (i) breach of fiduciary
duty liability damages under Sectiwon 409 of ERISA, (ii) a civil penalty
assessed pursuant to subsections (c), (i) or (l) of Section 502 of ERISA, or
(iii) a tax imposed pursuant to Chapter 43 of Subtitle D of the Code. With
respect to any employee benefit plan, within the meaning of Section 3(3) of
ERISA, which is not listed on Section 4.10(a) of the Sellers' Disclosure
Schedule but which is sponsored, maintained, or contributed to, or has been
sponsored, maintained, or contributed to within six years prior to the Closing
Date, by any corporation, trade, business, or other Person under common control
with any of the Acquired Companies, within the meaning of Section 414(b), (c),
(m) or (o) of the Code or Section 4001 of ERISA, (A) no withdrawal liability,
within the meaning of Section 4201 of ERISA, has been incurred, which withdrawal
liability has not been satisfied, (B) no Liability to the Pension Benefit
Guaranty Corporation has been incurred by any such Person, which Liability has
not been satisfied, (C) no accumulated funding deficiency, whether or not
waived, within the meaning of Section 302 of ERISA or Section 412 of the Code
has been incurred, and (D) all contributions (including installments) to such
plan required by Section 302 of ERISA and Section 412 of the Code have been
timely made.

                  (f)      Except as disclosed in Section 4.10(f) of the
Sellers' Disclosure Schedule, the execution and delivery of this Agreement and
the other Transaction Documents and the consummation of the transactions
contemplated hereby and thereby will not (i) require any Acquired Company to
make a larger contribution to, or pay greater benefits or provide other rights
under, any Contract or Company Benefit Plan than it otherwise would, whether or
not some other subsequent action or event would be required to cause such
payment or provision to be triggered, or (ii) create or give rise to any
additional vested rights or service credits under any Contract or Company
Benefit Plan. Except as otherwise set forth on Section 4.10(f) of the Sellers'
Disclosure Schedule, no Acquired Company is a party to any Contract, nor has any
Acquired Company established any other policy or practice, requiring it to make
a payment or provide any other form of compensation or benefit to any person
performing services for any Acquired Company upon termination of such services
which would not be payable or provided in the absence of the consummation of the
transactions contemplated by this Agreement.

                  (g)      In connection with the consummation of the
transactions contemplated by this Agreement, no payments of money or other
property, acceleration of benefits, or provisions of other rights have or will
be made under any Company Benefit Plan, agreement or under any other Contract
that would result in imposition of the sanctions imposed under Sections 280G and
4999 of the Code, whether or not some other subsequent action or event would be
required to cause such payment, acceleration, or provision to be triggered.

                                       31



                  (h)      Each employee has been correctly classified for
purposes of each Company Benefit Plan as an eligible or ineligible employee and
any retroactive re-classification will not affect any employee's benefit under
any Company Benefit Plan.

         4.11     Labor Matters.

                  (a)      No Acquired Company is a party to, or bound by, any
collective bargaining agreement or Contract with a labor union or labor
organization. There is no unfair labor practice or labor arbitration proceeding
pending or, to the knowledge of the Sellers and the Acquired Companies,
threatened against any Acquired Company or relating to its business. To the
knowledge of the Sellers and the Acquired Companies, there are no organizational
efforts with respect to the formation of a collective bargaining unit presently
being made or threatened involving employees of any Acquired Company. There are
no controversies pending or, to the knowledge of the Sellers and the Acquired
Companies, threatened between any Acquired Company and any of its employees,
which, individually or in the aggregate, would have a Material Adverse Effect on
the Acquired Companies. None of the Sellers, nor the Acquired Companies has
received notice of any strikes, slowdowns, work stoppages, lockouts, or threats
thereof, by or with respect to any employees of the Acquired Companies.

                  (b)      Section 4.11(b)(i) of the Sellers' Disclosure
Schedule sets forth a complete and accurate list of all employees of the
Acquired Companies, including, the Person employing such employee, and whether
or not such employee is exempt or non-exempt. Section 4.11(b)(ii) of the
Sellers' Disclosure Schedule sets forth a complete and accurate list of all
independent contractors of the Acquired Companies that work at any office of the
Acquired Companies (other than construction sites), including the Acquired
Entity retaining such independent contractor.

                  (c)      Except for agreements with Paychex listed on Section
4.11(c) of the Sellers' Disclosure Schedule, to the knowledge of the Acquired
Companies and the Sellers, no employee or director of any Acquired Company is a
party to, or is otherwise bound by, any Contract, including any confidentiality,
noncompetition, or proprietary rights agreement, between such employee or
director and any other Person that in any way adversely affects or will affect
(i) the performance of his or her duties as an employee or director of such
Acquired Company, or (ii) the ability of any Acquired Company to conduct its
business, including any such Contract with any Seller or their Affiliates (other
than the Acquired Companies). No key employee of any Acquired Company has
threatened to terminate his or her employment with such Acquired Company, as a
result of the transaction contemplated hereby or otherwise.

                  (d)      Each Acquired Company has in place all material
employee policies required by applicable law, and there have been no material
violations of any such employee policies. No charges have been filed claiming
employment discrimination or unfair labor practices against or involving any
Acquired Company or against Paychex by any employee or former employee of the
Acquired Companies, and to the knowledge of the Sellers and the Acquired
Companies, no such charges are threatened. To the knowledge of the Sellers and
the Acquired Companies, Paychex has at all times been in material compliance
with all laws, ordinances, governmental rules and regulations to which it is
subject in connection with the employment and leasing of the employees of the
Acquired Companies.

                                       32



         4.12     Environmental Matters. The Sellers have made available to
Buyer all environmental assessments and reports relating to environmental
conditions with respect to all real property owned, leased or under Contract to
purchase by the Subject Companies which are in the possession of any Seller, or
the Subject Companies or any of their agents. Except as set forth on Section
4.12 of the Sellers' Disclosure Schedule:

                           (i)    each Subject Company has been and currently is
         in material compliance with all applicable Environmental Laws;

                           (ii)   with regard to the properties currently or
         formerly owned or operated by any of the Subject Companies (including
         soils, groundwater, surface water, buildings, or other structures),
         during the period of ownership or operation by such Subject Company, or
         any Affiliate of any Seller or any of the Subject Companies there was
         and has been no Release of any Hazardous Materials, in any amount or
         concentration (x) that could threaten human health or welfare, (y) that
         exceeds any applicable standard promulgated, enacted, or issued by any
         Governmental Entity, or (z) that could result in any Liability under
         the Environmental Laws;

                           (iii)  with regard to the properties currently or
         formerly owned or operated by any of the Subject Companies (including
         soils, groundwater, surface water, buildings, or other structures),
         prior to the period of ownership or operation by the Subject Company,
         or any Affiliate of any Seller or any of the Subject Companies, to the
         knowledge of the Sellers and the Subject Companies, there was no
         Release of any Hazardous Materials, in any amount or concentration (x)
         that could threaten human health or welfare, (y) that exceeds any
         applicable standard promulgated, enacted or issued by any Governmental
         Entity, or (z) that could result in any Liability under the
         Environmental Laws;

                           (iv)   no Subject Company has disposed or arranged to
         dispose of any Hazardous Materials on any third party property which
         could result in any Liability under the Environmental Laws;

                           (v)    none of the Subject Companies or the Sellers
         has received any notices, demand letters, complaints, claims or
         requests for information from any Governmental Entity or any other
         Person indicating that a Subject Company may be in violation of, or
         liable under, any Environmental Law;

                           (vi)   none of the Subject Companies or their
         respective properties are subject to any order or decree of any
         Governmental Entity or any Contract with any Government Entity arising
         under any Environmental Law, or is a party to any indemnity or other
         Contract with any third party which could result in any Liability under
         any Environmental Law;

                           (vii)  to the knowledge of the Sellers and the
         Subject Companies, there are no circumstances, conditions, or
         activities involving any Subject Company that could result in any
         Liability under any Environmental Law or in any restriction pursuant to
         any

                                       33



         Environmental Law on the ownership, use, or transfer of any property
         now owned by the Subject Companies;

                           (viii) to the knowledge of Sellers and the Subject
         Companies, no properties currently owned by any Subject Company contain
         any underground storage tank, asbestos containing material, lead based
         products (including paint), or polychlorinated biphenyls; and

                           (ix)   none of the properties currently owned or
         operated by the Subject Companies are subject to any Liens imposed by
         any Governmental Entity in connection with the presence on or off such
         property of any Hazardous Materials.

         4.13     Related Party Transactions.  Except as set forth in Section
4.13 of the Sellers' Disclosure Schedule, none of the Sellers, any Excluded
Company, any officer or director of the Subject Companies, or any Affiliate or
any immediate family member of any of the foregoing Persons:

                           (i)    has, or at any time since the first day of the
         next to last completed fiscal year of the Company has had, any interest
         in any property (whether real, personal, or mixed and whether tangible
         or intangible), used in or pertaining to the businesses of the Acquired
         Companies;

                           (ii)   is, or at any time since the first day of the
         next to last completed fiscal year of the Company has owned (of record
         or as a beneficial owner), an equity interest or any other financial or
         profit interest in, a Person that has (A) had business dealings or a
         material financial interest in any transaction with any Acquired
         Company, or (B) engaged in competition with any Acquired Company with
         respect to any line of the products or services of any Acquired Company
         (a "Competing Business") in any market presently served by any Acquired
         Company, except for ownership (of record or as a beneficial owner) of
         less than one percent of the outstanding capital stock of any Competing
         Business that is publicly traded on any national or foreign stock
         exchange, the Nasdaq Stock Market or the over-the-counter market; or

                           (iii)  is a party to any Contract with, or has any
         claim or right against, any Acquired Company.

         4.14     Restrictions on Business Activities.

                  (a)      There is no judgment, injunction, order, decree,
statute, ordinance, rule, regulation, moratorium, or other action by a
Governmental Entity, pending before a Governmental Entity or, to the knowledge
of the Sellers and the Acquired Companies, being considered by a Governmental
Entity, which has or would have the effect of restricting the conduct of
business of any of the Acquired Companies.

                  (b)      None of the Sellers, the Acquired Companies, any
Affiliate of the Sellers, nor any director, officer, agent, employee, consultant
or contractor of any of such Persons, has directly or indirectly: (i) made any
contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other
payment to any Person, private or public, regardless of form, whether in

                                       34



money, property, or services that is illegal or violates any policy of the
Acquired Companies, including any policy established by Paychex applicable to
the employees of the Acquired Companies as set forth in the Employee Manual of
the Acquired Companies (A) to obtain favorable treatment in securing business,
(B) to pay for favorable treatment for business secured, (C) to obtain special
concessions or for special concessions already obtained, for or in respect of
any Subject Company or any Affiliate of the Subject Companies, or (D) in
violation of any applicable law; or (ii) established or maintained any fund or
asset that has not been recorded in the books and records of the Acquired
Companies.

         4.15     Real Property.

                  (a)      Section 4.15(a) of the Sellers' Disclosure Schedule
lists all real property owned or leased by any of the Acquired Companies, the
locations of real property leased by any of the Acquired Companies, and all real
property that the Acquired Companies have the right or obligation to purchase.
Each of the Acquired Companies has good, marketable and indefeasible title in
fee simple, or as to optioned property or property subject to a purchase
contract, has the right to acquire good, marketable and indefeasible title in
fee simple (or as to leased property, has good and valid title to the leasehold
estate), to the real property purported to be owned, optioned, under contract or
leased by it in Section 4.15(a) of the Sellers' Disclosure Schedule, free and
clear of all Liens, except Liens for Taxes and assessments not yet due and
payable, Liens relating to the indebtedness described in Section 4.5(d) of the
Sellers' Disclosure Schedule, and such Liens or other imperfections of title as
do not or will not, individually or in the aggregate, materially interfere with
the present use or intended use by the Acquired Company or materially affect the
value or marketability of the property affected thereby.

                  (b)      None of the Acquired Companies has been given, nor
have any of them received, any notice that a breach or an event of default
exists, and no condition or event has occurred that with the giving of notice,
the lapse of time, or both would constitute a breach or event of default, by any
of the Acquired Companies, or, to the knowledge of the Sellers and the Acquired
Companies, any other Person, with respect to any covenants, conditions, deeds,
deeds of trust, rights-of-way, easements, mortgages, restrictions, surveys,
title insurance policies, or other Contracts granting, constituting or
evidencing a conveyance by or to any of the Acquired Companies of title to or an
interest in or otherwise affecting the real property or the ownership thereof
which, individually or in the aggregate, is material to the ownership, use or
development of such parcel of real property by the Acquired Companies. No
condemnation, eminent domain, or similar proceeding exists, is pending, or to
the knowledge of the Sellers and the Acquired Companies is threatened, with
respect to, or that could affect, any real property owned, leased, optioned, or
under contract by the Acquired Companies. No developer-related charges or
assessments by proffers to any Government Entity or any other Person for public
improvements or otherwise made against any of the real property that is
developed by the Acquired Companies are unpaid or incomplete (other than those
reflected on the Interim Financial Statements or incurred since the date of such
statements in the ordinary course of business consistent with past practices,
and other than standard development agreements such as impact fee and water and
sewer connection fee agreements paid on a per unit basis at the time of applying
for a building permit or certificate of occupancy), except for charges or
assessments that would not, individually or in the aggregate, materially
interfere with the present use or intended use by the

                                       35



Acquired Company or materially affect the value or marketability of the property
affected thereby.

                  (c)      Except to the extent that any of the following
matters would not have a material adverse effect on any Project considered
individually, or all of the Projects considered in the aggregate: (i) the real
property of the Acquired Companies to be used for homebuilding and any
improvements located thereon conform in all respects to the appropriate
Governmental Entity's standards; (ii) there is no impediment to the development
of (or to approval for the development of) undeveloped real property in the
manner in which the Company currently anticipates building thereon, nor are
there any moratoriums on such development; (iii) the developed real property of
the Acquired Companies has access to streets, and is serviced, in all respects,
by all utilities, water and other services, as is necessary to construct homes
on such property, and such utilities, water and other services are adequate for
the current and intended use of such property; and (iv) the undeveloped real
property of the Acquired Companies has access to streets, and such real property
is serviced, in all respects, by all utilities, water and other services, as is
necessary for the development thereof or such utilities, water and other
services are or will, upon completion of agreements currently in effect with
respect thereto, be available, in all respects, to such property.

                  (d)      There are no material encroachments on the real
property owned, leased, under contract or optioned by the Acquired Companies,
nor any material encroachments by improvements on such real property onto any
easements or any adjoining property or which would otherwise conflict with the
property rights of any other Person.

                  (e)      Except as set forth in Section 4.15(e) of the
Sellers' Disclosure Schedule:

                           (i)    No Acquired Company has developed, constructed
         or otherwise participated and does not currently have a Contract to
         purchase to develop, construct or otherwise participate in any real
         estate projects other than the projects identified in Section 4.15(a)
         or (e) of the Sellers' Disclosure Schedule (collectively, the
         "Projects"). Section 4.15(e) of the Sellers' Disclosure Schedule
         includes as of the most recent practicable date the total number of
         units developed and under development, and the total units remaining
         unsold.

                           (ii)   All work performed by the Acquired Companies
         or by subcontractors on behalf of the Acquired Companies on or in any
         of the properties involved in the Projects has been or shall be
         performed in substantial accordance with the plans and specifications
         approved by all Governmental Entities (including VA and FHA, as
         applicable), in compliance with all applicable laws, ordinances, and
         regulations, and in a good and workmanlike manner, free from any defect
         or Lien, other than inchoate mechanics' liens for amounts not yet due.
         Each property involved in the Projects complies in all material
         respects with all laws, including, without limitation, applicable
         zoning, land use, subdivision, parking, traffic and fire safety laws
         and building codes, and none of the Acquired Companies has received any
         notice from any Governmental Entity as to any violation of any law. The
         Acquired Companies have complied with all such laws in all material
         respects.

                                       36



                           (iii)  All approvals, consents, licenses, permits,
         waivers or other authorizations of any Governmental Entity necessary or
         appropriate for the development and construction of the Projects
         (collectively, the "Entitlements"), except for those Entitlements
         which, if not obtained, would not have a material adverse effect on any
         Project considered individually, or all of the Projects considered in
         the aggregate, and any Contracts (for example, and not in limitation,
         proffers and subdivision improvement agreements) executed in connection
         therewith, are in full force and effect, are enforceable in accordance
         with applicable law and no party thereto is in default thereunder. None
         of the Acquired Companies, nor to the knowledge of the Sellers and the
         Acquired Companies, the fee owner, if the Acquired Companies are not
         the fee owner of any property involved in any of the Projects, is in
         default under, and none of the Sellers or the Acquired Companies has
         received any notice that any event has occurred which with the giving
         of notice or the passage of time, or both, would constitute a default
         under any Entitlements, transaction, covenant, condition, restriction,
         easement, encumbrance or other Contract pertaining to the property
         involved in any Project. All subdivision improvement bonds and other
         sureties or assurances relating in any way to any such property and
         required by any applicable Governmental Entity or pursuant to any
         Entitlements have been posted and are being maintained in accordance
         with the requirements of such applicable Governmental Entities or
         Entitlements and no claim has been made thereunder or thereto.

                           (iv)   (A) No Acquired Company is obligated to pay
                  nor is any Acquired Company otherwise subject to any monetary
                  charges, assessments or fees imposed by any Governmental
                  Entity or quasi-governmental entity (such as special
                  districts, improvement districts or the like) in connection
                  with receipt by the Acquired Companies of the Entitlements or
                  otherwise relating to the development or improvement of the
                  Projects.

                                  (B) Except for obligations contained in the
                  Contracts listed in Section 4.4(a) of the Sellers' Disclosure
                  Schedule, none of the Acquired Companies has any development
                  or improvement obligations with respect to the Projects.

                           (v)    None of the Acquired Companies (or to
         knowledge of the Sellers and the Acquired Companies, the fee owner, if
         the Acquired Companies are not the fee owner) has made any oral or,
         except for the Entitlements, written commitments or representations to,
         or understandings or Contracts with, any Person or any adjoining
         property owner which would in any way be binding on the Acquired
         Companies and would interfere with the Acquired Companies' ability to
         develop and improve any of the properties involved in the Projects with
         residential developments in accordance with the Entitlements.

                           (vi)   To the knowledge of the Sellers and the
         Acquired Companies, no platted lot involved in the Projects is located
         in an area designated as having special flood hazards or designated as
         a wetland by the Army Corps of Engineers, except to the extent that any
         such designation would not interfere with the Acquired Companies'
         ability to develop such Project in accordance with the Business Plan.
         No property involved in the

                                       37



         Projects is located in an area that is designated, or in the process of
         being designated, as a critical habitat for any threatened or
         endangered species under the Endangered Species Act of 1973, as
         amended, or designated under any other law for the preservation of
         fish, wildlife, plants, insects, forests or wetlands, or for the
         preservation of any historical or archeological site under the National
         Historic Preservation Act of 1979, as amended, or designated under any
         other law, that would limit, impair, delay or prohibit the construction
         and development of the Project in accordance with the existing or
         proposed plans therefor.

                           (vii)  None of the Sellers or the Acquired Companies
         has received any notice from its insurance carriers of any defects or
         inadequacies in any of the properties involved in the Projects, or any
         portion thereof, which would adversely affect the insurability of any
         properties or the cost of any such insurance. There are no pending
         insurance claims with respect to any portion of any such properties.

                           (viii) There are no soil conditions that would
         require construction of foundations different than those customarily
         built in residential projects in the areas in which the Projects are
         located, nor, to the knowledge of the Sellers and the Acquired
         Companies, are there any seismic safety problems relating to any of the
         properties involved in the Projects, any recent seismic activity
         affecting any such properties or any active fault bisecting, underlying
         or adjacent to any such properties. Each of the Acquired Companies and
         their respective contractors have installed foundations appropriate and
         customary for the applicable soil conditions.

                           (ix)   All work performed with respect to the
         Projects has been approved by holders of security interests in the
         Projects to the extent required by the applicable Contracts.

                           (x)    Other than in connection with its sales of
         homes to buyers in the ordinary course of business, none of the
         Acquired Companies has assigned to any third party any of its
         respective development or other rights with respect to the properties
         involved in the Projects.

                  (f)      Except as set forth on Section 4.15(f) of the
Sellers' Disclosure Schedule, since December 31, 2001 no real property owned by
the Acquired Companies has become subject to repurchase by any Person, whether
as a result of the failure of the Acquired Companies or any other Person to
begin construction thereon or to complete construction thereon within the time
period required or otherwise.

                  (g)      The backlog of home sales of each of the Projects as
of the date of the Interim Statements is set forth in Section 4.15(g) of the
Sellers' Disclosure Schedule. All of the home purchase Contracts representing
the backlog of home sales set forth on Section 4.15(g) of the Sellers'
Disclosure Schedule have been incurred in the ordinary course of business. None
of the Sellers or the Acquired Companies is aware of any reason that the
cancellation rates for such backlog would be expected to exceed those
experienced by the Acquired Companies during the period covered by the Financial
Statements.

                                       38



         4.16     Intellectual Property.

                  (a)      Section 4.16(a) of the Sellers' Disclosure Schedule
sets forth a true and complete list of all patents, trademarks, trade names,
service marks, internet domain names and copyrights and applications for
registration of any of the foregoing, technology, know-how, computer software
programs or applications, and tangible or intangible intellectual property and
proprietary rights, whether or not subject to statutory registration or
protection (collectively, "Intellectual Property"), owned, used, filed by or
licensed to any of the Acquired Companies, in each case which are, individually
or in the aggregate, material to the financial condition, operating results,
assets or operations of the Acquired Companies. Except as set forth in Section
4.16(a) of the Sellers' Disclosure Schedule, the Acquired Companies own, free
and clear of any and all Liens, or are licensed or otherwise possess legally
enforceable rights to use, without payment to any other Person, all Intellectual
Property that is used in the business of the Acquired Companies as currently
conducted, except where the failure to own, be licensed or to possess such
rights would not have, individually or in the aggregate, a Material Adverse
Effect on the Acquired Companies, and the consummation of the transactions
contemplated hereby will not conflict with, alter or impair any such rights.

                  (b)      To the knowledge of the Sellers and the Acquired
Companies, the conduct of the business of the Acquired Companies does not
conflict with the valid Intellectual Property rights of others and there are no
conflicts with or infringements of any of the Intellectual Property of the
Acquired Companies by any other Person. Except as set forth on Section 4.16(b)
of the Sellers' Disclosure Schedule, no other Person has any rights in or right
to use any of the Intellectual Property owned by any of the Acquired Companies.

         4.17     Other Assets.

                  (a)      Except as set forth in Section 4.17 of the Sellers'
Disclosure Schedule, the Acquired Companies own beneficially and of record, and
have good and valid title to, all material assets reflected on the 2001 Balance
Sheet or thereafter acquired (except those sold or otherwise disposed of since
December 31, 2001 in the ordinary course of business consistent with past
practice and not in violation of this Agreement), in each case free and clear of
all Liens except:

                           (i)    such Liens as are set forth in Section 4.17 of
         the Sellers' Disclosure Schedule;

                           (ii)   mechanics', carriers', workmen's, repairmen's
         or other like Liens arising or incurred in the ordinary course of
         business, Liens arising under original purchase price conditional sales
         contracts and equipment leases with third parties entered into in the
         ordinary course of business and Liens for Taxes or assessments which
         are not due and payable or which may thereafter be paid without
         penalty;

                           (iii)  Liens which secure debt that is reflected as a
         Liability on the 2001 Balance Sheet or the existence of which is
         expressly indicated in the notes thereto; and

                           (iv)   other imperfections of title or encumbrances,
         if any, which, do not, individually or in the aggregate, materially
         impair the assets or the intended use thereof.

                                       39



                  (b)      All the material tangible personal property of the
Acquired Companies has been maintained in accordance with the past practice of
the Acquired Companies and generally accepted industry practice and is in good
operating condition and repair, ordinary wear and tear excepted. The assets
owned or leased by the Acquired Companies include all of the properties and
other assets necessary for the Acquired Companies to conduct their respective
businesses in the manner currently conducted.

                  (c)      All of the books and records of the Acquired
Companies (including without limitation, the financial records) are true,
complete and accurate in all material respects and have been maintained in
accordance with sound business practices. True, complete and accurate copies of
such records have been made available to Buyer.

         4.18     Insurance.

                  (a)      Section 4.18(a) of the Sellers' Disclosure Schedule
contains a true and complete list of all liability, property, workers'
compensation, directors' and officers' liability and other insurance policies in
effect at any time since January 1, 1998 (except in the case of liability
insurance, which shall be listed from June 1, 1994) that insure or did insure
the business, operations or employees of the Acquired Companies or affect or
relate to the ownership, use or operation of any of the assets (both past and
present) of the Acquired Companies, whether issued to the Acquired Companies or
to any other Person for the benefit of the Acquired Companies (the "Insurance
Policies"). For each Insurance Policy, Section 4.18(a) of the Sellers'
Disclosure Schedule lists (i) the names and addresses of the insurers, (ii) the
names of the Persons to whom such policies have been issued (including
additional insureds), (iii) the expiration dates thereof, (iv) whether the
policies are currently in effect, (v) the annual premiums and payment terms
thereof, (vi) whether it is a "claims made" or an "occurrence" policy, (vii) any
self insured retention or deductible, (viii) the aggregate limit of the policy
and the currently available limit, and (ix) a brief description of the interests
insured thereby. The Sellers have provided Buyer with true, accurate and
complete copies of each Insurance Policy.

                  (b)      Section 4.18(b) of the Sellers' Disclosure Schedule
lists any Contract, other than a policy of insurance, for the transfer or
sharing of any risk by the Acquired Companies in a manner similar to an
insurance policy, and all obligations of the Acquired Companies to third parties
with respect to insurance (including such obligations under leases and service
agreements) and identifies the policy under which such coverage is provided.

                  (c)      Except as set forth in Section 4.18(c) of the
Sellers' Disclosure Schedule, (i) the insurance coverage provided by any of the
Insurance Policies will not terminate or lapse by reason of the transactions
contemplated by this Agreement and the other Transaction Documents, (ii) the
Insurance Policies were placed (at the time of placement and as of the date
hereof) with insurers who are financially sound and reputable and, in light of
the respective business, operations and assets of the Acquired Companies, are or
were in amounts and have or had coverages that are reasonable and customary for
Persons engaged in such businesses and operations and having such assets; (iii)
none of the Sellers, the Acquired Companies, nor the Person to whom such policy
has been issued has received notice that any insurer under any Insurance Policy
is denying liability with respect to a claim thereunder or defending under a
reservation of rights clause, or, to the knowledge of the Sellers and the
Acquired Companies,

                                       40



indicated any intent to do so or not to renew any such policy; (iv) the
Insurance Policies are sufficient for compliance with all applicable laws and
Contracts to which the Acquired Companies are a party or by which they are
bound; and do not provide for any retrospective premium adjustment or other
experienced-based liability on the part of the Acquired Companies, (v) no side
agreements or other Contracts exist that alter the terms of the Insurance
Policies, and (vi) none of the liability Insurance Policies contain any mold,
soils, attached product, completed operations or construction defects exclusions
from coverage.

                  (d)      Each current Insurance Policy is valid and binding
and in full force and effect, no premiums due thereunder have not been paid and
none of the Acquired Companies, the Sellers, nor the Person to whom such policy
has been issued has received any notice of cancellation or termination in
respect of any such policy or is in default thereunder. Section 4.18(d) of the
Sellers' Disclosure Schedule contains a listing of all material open claims made
or otherwise asserted by the Acquired Companies against any Insurance Policy.
All material claims under the Insurance Policies have been filed in a timely
fashion. To the knowledge of the Sellers and the Acquired Companies, the
activities and operations of the Acquired Companies have been conducted in a
manner so as to conform in all material respects to all applicable provisions of
the Insurance Policies. None of the Acquired Companies has failed to disclose
any fact to the insurance companies or failed to take any other action, the
consequences of which non-disclosure or failure to take action would render any
Insurance Policy void, or voidable, or suspend, impair or defeat in whole or in
part such insurance coverage. None of the Sellers nor the Acquired Companies has
received (A) any refusal of coverage from any insurer from which the Acquired
Companies sought coverage, (B) any notice that a defense will be afforded with
reservation of rights, or (C) any notice of cancellation or any other indication
that any insurance policy is no longer in full force or effect or will not be
renewed or that the issuer of any policy is not willing or able to perform its
obligations thereunder.

         4.19     Warranties. The Sellers have delivered to Buyer complete and
accurate copies of all written warranties and guaranties by the Acquired
Companies currently in effect with respect to their respective products. There
have not been any material deviations from such warranties and guaranties, and
none of the Acquired Companies, nor any of their respective salespersons,
employees and agents is authorized to undertake obligations to any customer or
to other third parties in excess of such warranties or guaranties. None of the
Acquired Companies, nor any of their respective salespersons, employees and
agents has made any oral warranty or guaranty with respect to the products of
the Acquired Companies. The reserve for warranty and guaranty costs included in
the 2001 Balance Sheet and the Interim Statements sets forth the reasonable
judgment of management of the Acquired Companies of the estimate of the
aggregate Liability of the Acquired Companies in respect of warranty and
guaranty obligations.

         4.20     Suppliers and Subcontractors. The documents and information
supplied by the Sellers, the Acquired Companies and any of their respective
representatives in connection with this Agreement with respect to relationships
and volumes of business done with the significant suppliers and subcontractors
of the Acquired Companies are accurate in all material respects. Except as set
forth in Section 4.20 of the Sellers' Disclosure Schedule, during the last 12
months, none of the Acquired Companies has received any notices of termination
or threats of

                                       41



termination from any of the five largest suppliers or ten largest subcontractors
for the Acquired Companies, taken as a whole.

         4.21     HSR Matters. The fair market value of the "non-exempt assets"
of the Acquired Companies within the meaning of the regulations under the
Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended (16 C.F.R.
801.10, 802.2 and 802.4) is less than $50 million.

         4.22     Corporate Dividend. The Company has declared and paid a
dividend on the Shares to the Sellers in their Pro Rata Portion of all interests
in the Excluded Company held by the Acquired Companies (the "Corporate
Dividend"), and such Corporate Dividend was made in compliance with all
applicable laws.

         4.23     Disclosure. No representation or warranty of the Sellers
contained in this Agreement, and no statement contained in any document,
certificate or schedule furnished or to be furnished by or on behalf of the
Sellers or the Acquired Companies to Standard Pacific, Buyer or any of their
representatives, contains or will contain any untrue statement of a material
fact, or omits or will omit to state any material fact necessary, in light of
the circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading or necessary to fully and fairly
provide the information required to be provided in any such document,
certificate or schedule. The descriptions set forth in the Sellers' Disclosure
Schedule are accurate descriptions of the matters disclosed therein. Copies of
all documents heretofore or hereafter delivered or made available by the Sellers
or any of the Acquired Companies to Standard Pacific and Buyer and their
representatives pursuant hereto were or will be complete and accurate records of
such documents.

                                    ARTICLE V
                         REPRESENTATIONS AND WARRANTIES
                                    OF BUYER

         Buyer and Standard Pacific, jointly and severally represent and warrant
to the Sellers, as of the date of this Agreement and as of the Closing Date, as
follows:

         5.1      Existence; Good Standing; Corporate Authority. Buyer and
Standard Pacific are corporations duly incorporated, validly existing and in
good standing under the laws of the State of Delaware. Buyer and Standard
Pacific are duly licensed or qualified to do business as foreign corporations
and are in good standing under the laws of any other state of the United States
in which the character of the properties owned or leased by them therein or in
which the transaction of their business makes such qualification necessary,
except where the failure to be so qualified or in good standing would not have a
Material Adverse Effect on Standard Pacific. Buyer and Standard Pacific have all
requisite corporate power and authority to own, operate and lease their
properties and carry on their businesses as now conducted. Neither Buyer nor
Standard Pacific is in violation of any order or decree of any Governmental
Entity, or any law, ordinance, or regulation to which Buyer, Standard Pacific or
any of their respective properties or assets is subject, except where such
violation, individually or in the aggregate, has not and would not reasonably be
expected to have a Material Adverse Effect on Standard Pacific.

                                       42



         5.2      Authorization, Validity, and Effect of Agreements. Each of
Buyer and Standard Pacific has the requisite corporate power and authority to
execute and deliver this Agreement and the other Transaction Documents to be
executed by it. The consummation by Buyer and Standard Pacific of the
transactions contemplated herein and therein has been duly authorized by all
requisite corporate action on the part of Standard Pacific and Buyer. This
Agreement constitutes, and the other Transaction Documents to be executed by
Buyer and Standard Pacific (when executed and delivered pursuant hereto for
value received) will constitute, the valid and legally binding obligations of
Buyer and Standard Pacific, enforceable in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, moratorium, fraudulent
conveyance, reorganization or other similar laws relating to creditors' rights
and general principles of equity, whether at equity or at law.

         5.3      No Violation. Neither the execution and delivery by Buyer or
Standard Pacific of this Agreement, nor the consummation by Buyer or Standard
Pacific of the transactions contemplated herein in accordance with the terms
hereof, will:

                           (i)    conflict with or result in a breach of any
         provisions of the certificate of incorporation or by-laws of Buyer or
         Standard Pacific;

                           (ii)   violate, or conflict with, or result in a
         breach of any provision of, or constitute a default (or an event which,
         with notice or lapse of time or both, would constitute a default)
         under, or result in the termination or in a right of termination or
         cancellation of, or accelerate the performance required by, or result
         in the creation of any Lien upon any of the material properties of
         Buyer or Standard Pacific under, or result in being declared void,
         voidable, or without further binding effect, any of the terms,
         conditions or provisions of any material Contract to which Buyer or
         Standard Pacific is a party, or by which Buyer or Standard Pacific or
         any of their respective properties is bound or affected; or

                           (iii)  require any material consent, approval or
         authorization of, or declaration, filing or registration with, any
         Governmental Entity or other Person (assuming the accuracy of the
         Sellers' representations set forth in Sections 3.4 and 4.23).

         5.4      No Brokers. Neither Buyer nor Standard Pacific has entered
into any Contract with any Person, or taken any other action, which may result
in the obligation of any other party to this Agreement to pay any finder's fees,
brokerage or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby.

         5.5      Funds. Buyer will have at the Closing Date the funds necessary
to consummate the Stock Purchase on a timely basis in accordance with this
Agreement.

         5.6      Investment Purpose. Buyer is an "accredited investor," as such
term is defined in Regulation D of the Securities Act and will acquire the
Shares for its own account and not with a view to a sale or distribution thereof
in violation of any securities laws and will not sell or distribute any of the
Shares in violation of any securities laws. Buyer has the present intention of
holding the Shares for investment purposes.

                                       43



         5.7      Access to Information.

                  (a)      During the course of the negotiation of this
Agreement, Buyer and Standard Pacific reviewed or have been afforded the
opportunity to review all information provided to it by the Sellers and have had
the opportunity to ask questions of and receive answers to their satisfaction
from representatives of the Sellers concerning the Acquired Companies and the
Shares, and to obtain certain additional information reasonably requested by
them.

                  (b)      Standard Pacific and Buyer have relied solely on the
representations of the Sellers made in Articles III and IV of this Agreement and
in the Transaction Documents and not on any other representations made by or on
behalf of the Sellers.

                  (c)      Standard Pacific has expertise in evaluating and
investing in private placement transactions of securities of companies similar
to the Acquired Companies and has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
prospective investment in the Shares.

                  (d)      The foregoing shall not be deemed to affect the
representations and warranties and indemnities made by the Sellers hereunder.
Notwithstanding any "due diligence" investigations made by Buyer or Standard
Pacific, no information shall be deemed to have been disclosed for purposes of
the representations and warranties made by the Sellers in Articles III and IV
unless contained in the Sellers' Disclosure Schedule.

         5.8      SEC Filings. Since December 31, 1999, Standard Pacific has
timely filed all reports and registration statements and other documents
required to be filed with the SEC under the rules and regulations of the SEC and
all such reports and registration statements or other documents have complied in
all material respects, as of their respective filing dates and effective dates,
as the case may be, with all the applicable requirements of the Securities Act
and the Exchange Act. As of the respective filing and effective dates, none of
such reports or registration statements or other documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.

         5.9      Disclosure. No representation or warranty of the Buyer or
Standard Pacific contained in this Agreement, and no statement contained in any
document, certificate or schedule furnished or to be furnished by or on behalf
of Buyer or Standard Pacific to Sellers or any of their representatives pursuant
to this Agreement, contains or will contain any untrue statement of a material
fact, or omits or will omit to state any material fact necessary, in light of
the circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading or necessary to fully and fairly
provide the information required to be provided in any such document,
certificate or schedule. The descriptions set forth in the Buyer Disclosure
Schedule are accurate descriptions of the matters disclosed therein. Copies of
all documents heretofore or hereafter delivered or made available by Buyer and
Standard Pacific to the Sellers and their representatives pursuant hereto were
or will be complete and accurate records of such documents.

                                       44



                                   ARTICLE VI
                                    COVENANTS

         6.1      Conduct of Business. Except as (i) expressly contemplated in
this Agreement, or (ii) as expressly agreed to in writing by Buyer, during the
period from the Balance Sheet Date to the earlier of the termination of this
Agreement or the Closing Date, the Sellers (other than the Gatewood Children
Sellers) shall use their best efforts to cause the Acquired Companies:

                  (a)      to conduct their respective operations according to
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted;

                  (b)      to preserve intact their respective business
organization and goodwill, keep available the services of their respective
officers and employees and maintain satisfactory relationships with their
customers, suppliers and other Persons having business relationships with them;

                  (c)      to confer on a weekly basis with one or more
representatives of Standard Pacific and Buyer, including to report operational
matters of materiality and any proposals of the Acquired Companies to engage in
material transactions, and to provide such other information as Standard Pacific
or Buyer may reasonably request;

                  (d)      not to amend the organizational documents of the
Acquired Companies;

                  (e)      to notify Buyer within three business days of (i) any
material change in the condition (financial or otherwise) of the business,
properties, assets, Liabilities, prospects of any of the Acquired Companies or
the normal course of their respective businesses or in the operation of the
properties of the Acquired Companies, (ii) any material litigation or material
complaints, investigations or hearings of any Governmental Entity (or
communications indicating that the same may be contemplated) against any
Acquired Company or involving the business, operations or properties of any
Acquired Company; or (iii) the breach in any material respect of any
representation or warranty or covenant contained herein;

                  (f)      to deliver to Buyer within five business days any
material report, statement, schedule or correspondence filed or submitted by the
Acquired Companies to, or received by the Acquired Companies from, any
Governmental Entity;

                  (g)      not to (i) issue any Capital Stock, effect any stock
split or combination, reclassify its Capital Stock or otherwise change its
capitalization as it existed on the Balance Sheet Date, (ii) grant, confer or
award any option, warrant, conversion right or other right to acquire any of its
Capital Stock, (iii) increase any compensation or benefits or enter into or
amend any employment, severance, termination or similar Contract with any of its
present or future employees, officers or directors, except for normal increases
in compensation and benefits to employees consistent with past practice and the
payment of cash bonuses to employees pursuant to and consistent with existing
plans or programs, (iv) adopt any new employee benefit plan (including any stock
option, stock benefit or stock purchase plan) or amend any existing employee
benefit plan in any material respect, except for changes which may be required
by applicable law, or (v) increase the amount, or expand the scope, of any
indemnification currently provided for employees, officers or directors;

                                       45



                  (h)      not to (i) declare, set aside or pay any dividend or
make any other distribution or payment with respect to any of its Capital Stock
(other than the Corporate Dividend); or (ii) directly or indirectly redeem,
purchase or otherwise acquire any of its Capital Stock or that of any of the
other Acquired Companies, or make any commitment for any such action;

                  (i)      not to sell, lease or otherwise dispose of any
assets, or enter into any commitment to do so; provided that (A) the sale of
completed homes to individual homebuyers by the Acquired Companies in the
ordinary the course of business, and (B) the sale of lots pursuant to existing
Contracts listed in Section 4.4(a)(i) of Sellers' Disclosure Schedule, shall not
be a violation of this clause (i);

                  (j)      not to (i) incur or assume any long-term or
short-term Debt or issue any Debt securities, including without limitation, any
Debt that Buyer shall payoff at the Closing; (ii) assume, guaranty, endorse or
otherwise become liable or responsible (whether directly, indirectly,
contingently or otherwise) for the obligations of any other Person; (iii) modify
in any manner adverse to any of the Acquired Companies any outstanding Debt or
obligation of the Acquired Companies; (iv) pledge or otherwise encumber the
Capital Stock of any of the Acquired Companies; or (v) mortgage or pledge any of
its material assets, tangible or intangible, or create or suffer to create any
Lien of any kind in respect to such asset except in the ordinary course of
business consistent with past practices;

                  (k)      not to change any of its accounting principles or
practices, except as requested by Standard Pacific or Buyer or otherwise
required pursuant to GAAP;

                  (l)      not, without the prior consent of Standard Pacific or
Buyer (which will not be unreasonably withheld) to:

                           (i)   acquire (by merger, consolidation or
         acquisition of stock or assets) any Person or division thereof or any
         Capital Stock therein;

                           (ii)  enter into any Contract which would be
         required to be listed on Section 4.4(a) of the Sellers' Disclosure
         Schedule, or amend any Material Contract;

                           (iii) authorize any new capital expenditure or
         expenditures (except in the ordinary course of business consistent with
         past practice or pursuant to Contracts listed in Section 4.4(a) of the
         Sellers' Disclosure Schedule) which, individually, is in excess of
         $250,000 or, in the aggregate, are in excess of $500,000 for the
         Acquired Companies, as a whole; or

                           (iv)  enter into any Contract to purchase any real
         property;

                  (m)      not to pay, discharge or satisfy any Liabilities,
other than the payment, discharge or satisfaction in the ordinary course of
business of Liabilities reflected, reserved against or disclosed in the Interim
Financial Statements or incurred in the ordinary course of business thereafter
consistent with past practice;

                                       46



                  (n)      not to settle or compromise any pending or threatened
suit, action or claim, except settlements or compromises in the ordinary course
of business with respect to immaterial claims by individual homeowners not yet
the subject of pending litigation;

                  (o)      not to make any material Tax election (other than in
a manner consistent with prior practices of the Acquired Companies), file any
Tax Return (other than Tax Returns due), settle or compromise any material Tax
liability (other than Taxes due) or agree to an extension of a statute of
limitations with respect to any material amount of Tax (other than extensions
for filing Tax Returns), except to the extent the amount of any such Tax,
settlement or compromise has been reserved for in the Interim Financial
Statements; provided, Standard Pacific and Buyer shall not unreasonably withhold
or delay consent as to such matters;

                  (p)      not to loan or advance any amount to, or sell,
transfer or lease any of its assets to, or enter into any Contract or other
transaction with, or otherwise make any payments to any Seller, the Excluded
Company (other than the repayment by the Acquired Companies of Debt to the
Excluded Company reflected on the Balance Sheet Date Financial Statements), or
any of their respective Affiliates or (with the exception of payments of salary
in the ordinary course, consistent with past practice, in their capacity as
employees of the Acquired Companies) any officer or director thereof;

                  (q)      not to, nor permit the fee owner to, if the Acquired
Companies are not the fee owner, make or enter into any commitment,
representation, understanding or Contract with any Person or adjoining property
owner which would in any way be binding on the Acquired Companies and could
interfere with the Acquired Companies' ability to develop and improve any of the
properties involved in the Projects with residential developments in accordance
with the Entitlements pertaining to such Projects;

                  (r)      not to take any action that would knowingly result in
a breach of any representation, warranty or covenant of the Sellers contained in
this Agreement; and

                  (s)      not to take any action or fail to take any reasonable
action, or agree in writing or otherwise to take any actions having the same or
similar effect, or being of the same or similar nature, as any of the actions
described in Sections 6.1(a) through (r).

                  Each of the Sellers represents and warrants to Buyer and
Standard Pacific that no actions or events have occurred that would violate
Sections 6.1(a) through (s) since the Balance Sheet Date.

         6.2      Further Action.

                  (a)      Upon the terms and subject to the conditions of this
Agreement, the Sellers, on the one hand, and Buyer and Standard Pacific, on the
other hand, shall use all reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all other things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated in this Agreement, to obtain in a timely manner all
material waivers, consents and approvals, and to effect all necessary
registrations and filings, and otherwise to satisfy or cause to be satisfied in
all material respects all conditions precedent to its obligations under this
Agreement.

                                       47



                  (b)      From the date of this Agreement until the termination
of this Agreement or the Closing Date, no party shall take any action which
would (i) materially adversely affect the ability of any party to this Agreement
to obtain any consents, approvals, or authorizations required for the
transactions contemplated herein, (ii) breach in any material respect any
representation or warranty contained herein, or (iii) materially adversely
affect the ability of any party to perform its covenants and agreements under
this Agreement.

                  (c)      With respect to each calendar month ending prior to
the earlier of termination of this Agreement or the Closing Date, including the
month of July 2002, the Sellers shall provide to Buyer, within 30 days following
the end of each such calendar month, true and complete copies of the unaudited
consolidated balance sheet of the Acquired Companies as at the end of each such
month and the related unaudited consolidated income statement and cash flow
statement for the month then ended, which financial statements shall be prepared
in the same manner as the 2001 Balance Sheet and in compliance with Section 4.5.

                  (d)      In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each party shall use its respective reasonable efforts to take or cause to be
taken all such necessary or desirable action. Without limiting the foregoing,
Standard Pacific shall cause Buyer to fulfill its covenants, agreement and
obligations hereunder.

         6.3      Access to Information; Confidentiality.

                  (a)      From the date hereof until the termination of this
Agreement or the Closing Date, upon reasonable notice and subject to applicable
laws, the Sellers shall cause the Acquired Companies to afford Standard Pacific,
Buyer and their accountants, counsel, and other representatives, during normal
business hours, access to all of the properties and assets, books, Contracts,
and records of the Subject Companies reasonably requested by Buyer. Buyer and
Standard Pacific shall, and shall cause their respective advisors and
representatives to:

                           (i)   conduct its investigation in such a manner
         that will not unreasonably interfere with the normal operations,
         customers or employee relations of the Subject Companies, and

                           (ii)  treat as confidential in accordance the
         terms of the Confidentiality Agreement all such information obtained
         hereunder or in connection herewith and not otherwise known to them
         prior to disclosure hereunder.

                  (b)      From the date hereof until the termination of this
Agreement or the Closing Date, each party shall furnish promptly to the other a
copy of all filings made by such party or its Affiliates with any Governmental
Entity in connection with the transactions contemplated in this Agreement and
all written communications received from such Governmental Entities related
thereto.

                  (c)      The Sellers shall, and shall cause their respective
advisors and representatives (including the Sellers' Representative) to, treat
as confidential in accordance the terms of the Confidentiality Agreement all
information obtained hereunder or in connection

                                       48



herewith and not otherwise known to them prior to disclosure hereunder, and each
of the Sellers hereby agrees to comply with the terms thereof as if a party
thereto.

                  (d)      Each party shall promptly notify the other parties
orally and in writing if such party becomes aware of:

                           (i)   (A) the material inaccuracy at any time of any
         representation or warranty contained in this Agreement of such party;
         or (B) the breach of any covenant or agreement under this Agreement of
         such party or the inability of such party to comply with or satisfy in
         any material respect any covenant, condition or agreement under this
         Agreement; provided, however, that no such notification shall affect
         the representations, warranties, covenants or agreements of any party
         or the conditions to the obligations of any party hereunder; and

                           (ii)  any notice or other communication from any
         third party alleging that the consent of such third party is or may be
         required in connection with the transactions contemplated in this
         Agreement or the other Transaction Documents.

         6.4      Publicity. The initial press release relating to this
Agreement shall be in the form heretofore approved by the parties hereto, and
thereafter until the Closing Date the Sellers, the Acquired Companies, Standard
Pacific and Buyer shall, subject to their respective legal obligations
(including requirements of stock exchanges and other similar Governmental
Entities), consult with each other, and use reasonable efforts to agree upon the
text of any press release, before issuing any such press release or otherwise
making public statements with respect to the transactions contemplated hereby
and in making any filings with any Governmental Entity or with any national
securities exchange with respect thereto.

         6.5      Expenses. Except as set forth herein, all costs and expenses
(including fees of attorneys, accountants and brokers or finders) incurred or in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses, provided however if the Stock
Purchase is consummated, the Sellers shall pay all costs and expenses (including
fees of attorneys, accountants and brokers or finders) of the Sellers and the
Company incurred in connection with this Agreement and the transactions
contemplated hereby.

         6.6      Employee Benefits.

                  (a)      Until December 31, 2005, the continuing employees of
the Acquired Companies shall be entitled to employee benefits that are
substantially equivalent to those provided to, at the option of Standard
Pacific, either of the following: (i) such employees as of the Closing Date by
the Acquired Companies or (ii) similarly situated employees of Standard Pacific.
Such benefits shall be provided though Company Benefit Plans, Standard Pacific
benefit plans, Buyer benefit plans, or a combination of the foregoing, as
determined by Standard Pacific after consultation with the Company. Following
the Closing, Standard Pacific shall cause Standard Pacific or Buyer to recognize
the years of service of each continuing employee of the Acquired Companies with
the Acquired Companies prior to the Closing Date for determining the level of
benefits to be provided under applicable vacation plans and policies and for
eligibility and vesting determinations under any applicable 401(k) plan. For
purposes of this Section 6.6 ,

                                       49



"continuing employee of the Acquired Companies" means an employee of the
Acquired Companies as of the Closing Date.

                  (b)      Nothing contained in this Section 6.6 is intended to
confer upon any employee of the Acquired Companies any right to continued
employment or any right to wages or benefits at any time after the Closing Date.

                  (c)      Standard Pacific, on behalf of the Acquired
Companies, currently intends to enter into a mutually acceptable new agreement
with Paychex that provides for the administration by Paychex of the wages,
incentive compensation and benefits of the continuing employees from the Closing
Date through December 31, 2002.

         6.7      Third Party Offers.

                  (a)      From and after the date of this Agreement until the
earlier of the Closing or termination of this Agreement, each of the Sellers,
the Acquired Companies, and their Affiliates and their respective officers,
directors, employees, representatives (including, without limitation, any
investment banker, attorney or accountant) and agents shall immediately cease
any discussions or negotiations with any parties with respect to any Third Party
Acquisition, and none of the Sellers, the Acquired Companies nor any of their
Affiliates shall, nor shall any Seller authorize or permit any of its Affiliates
or their respective officers, directors, employees, representatives (including,
without limitation, any investment banker, attorney or accountant) or agents to,
directly or indirectly, encourage, solicit, participate in or initiate any
inquiries, discussions or negotiations with or provide any information or access
to any Person concerning any potential Third Party Acquisition or that may
reasonably be expected to lead to any Third Party Acquisition or attempted Third
Party Acquisition, or otherwise facilitate any effort or attempt to make or
implement a Third Party Acquisition. The Sellers shall promptly communicate to
Buyer the existence or occurrence and the terms of any potential Third Party
Acquisition or contact related to any potential Third Party Acquisition that the
Sellers, the Acquired Companies or any of their respective Affiliates, or their
respective officers, directors, employees, representatives or agents, receive in
respect of such a proposed transaction, and the identity of the Person from whom
such proposal or contact was received.

                  (b)      "Third Party Acquisition" means the acquisition by a
Person or group, other than Buyer or any Affiliate of Buyer, of more than 10%,
in a single transaction or series of transactions, of the Capital Stock or the
assets of any of the Acquired Companies, or any interest therein, whether by
sale or other disposition of Capital Stock, sale, lease or other disposition of
assets (other than assets solely held and used by the Excluded Company), merger
or otherwise, or any other transaction that would interfere with the Stock
Purchase.

                  (c)      The Sellers represent and warrant to Standard Pacific
and Buyer that each of the Sellers, the Acquired Companies, and their respective
Affiliates, officers, directors, and employees, and to the knowledge of Sellers
and the Acquired Companies, the representatives (including, without limitation,
any investment banker, attorney or accountant) and agents of the Sellers and the
Acquired Companies, have terminated any and all existing discussions with third
parties relating to a Third Party Acquisition. The Sellers and the Acquired
Companies have

                                       50



instructed all of their respective representatives or agents to terminate all
discussions relating to a Third Party Acquisition.

         6.8      Restrictive Covenants.

                  (a)      The Sellers recognize that the covenants of the
Employee Sellers contained in this Section 6.8 are an essential part of this
Agreement and that but for the agreement of each Employee Seller to comply with
such covenants Buyer and Standard Pacific would not enter into this Agreement.
The Sellers acknowledge and agree that the covenants set forth in this Section
6.8 are necessary to protect the legitimate business interests of the business
acquired by Buyer, including without limitation, goodwill, and that irreparable
harm and damage will be done to Buyer and Standard Pacific if any Employee
Seller competes with Buyer in any way prohibited by such covenants. In addition,
the Sellers acknowledge that the Purchase Price is consideration for
professional relationships and marketplace reputation developed by the Acquired
Companies and the Sellers and such covenants are necessary for Buyer and
Standard Pacific to receive the full benefit of this Agreement.

                  (b)      After the Closing, each Employee Seller shall not
individually, or in concert, directly or indirectly:

                           (i)   engage or become interested in, as owner,
         employee, partner, through equity ownership (not including up to a 1%
         passive equity interest in a public company), investment of capital,
         lending of money or property, rendering of services, including as a
         director, or otherwise, either alone or in association with others, any
         business competitive with the Business;

                           (ii)  take any action intended to advance an
         interest of any competitor of the Business, or encourage any other
         Person to take such action; or

                           (iii) take any material action intended to cause
         any customer or prospective customer of the Acquired Companies to use
         the services or purchase the products of any competitor of the
         Business.

                  The covenants of the Employee Sellers set forth in this
Section 6.8(b) are referred to herein as the "Covenant Not to Compete".

                  This Covenant Not to Compete shall cover all of the counties
and other political subdivisions of the states of Florida, North Carolina and
South Carolina and the District of Columbia. This Covenant Not to Compete shall
bind each Employee Seller for the four year period immediately following the
Closing Date, provided however, that if, after the Closing, the employment of
any Employee Seller is terminated by Buyer or the Acquired Companies without
Cause (as defined in the Employee Seller's Employment Agreement) or, in the case
of Roger Gatewood, without Cause or for Cause pursuant to Section 5(b)(ix) of
his Employment Agreement, then after termination of such Employee Seller's
employment with Buyer or the Acquired Companies, such Employee Seller shall no
longer be subject to the covenants contained in Sections 6.8(b)(i) and (ii). The
parties hereto agree that the duration and area for which the Covenant Not to
Compete set forth in this Section 6.8(b) is to be effective are reasonable.

                                       51



                  Each of the Employee Sellers hereby acknowledges and agrees
that the benefit of this Covenant Not to Compete may be assigned by Buyer to any
Subsidiary of Standard Pacific in connection with any corporate restructuring or
reorganization of any of the Acquired Companies, without the further consent of
such Employee Seller.

                  (c)      For four years following the Closing Date, each of
the Employee Sellers shall not, and shall cause their Affiliates not to,
directly or indirectly, divert or attempt to divert or take advantage of or
attempt to take advantage of any actual or potential business or opportunities
of Buyer or its Affiliates of which any of the Employee Sellers become aware
which relate to the Business, or any part thereof and which are located in any
county or any other political subdivision of the states of Florida, North
Carolina and South Carolina or the District of Columbia.

                  (d)      Except in the performance of his or her duties as an
employee of the Acquired Companies, for a period of four years from the Closing
Date, each of the Employee Sellers shall not, and each Employee Seller shall
cause each of its Affiliates under its control not to, directly or indirectly:

                           (i)   perform any action, activity or course of
         conduct consisting of or encouraging the following: (A) soliciting,
         recruiting or hiring any employees of Buyer or the Acquired Companies;
         (B) soliciting or encouraging any employee of Buyer or the Acquired
         Companies to leave the employment of Buyer or the Acquired Companies;
         and (C) disclosing or furnishing to anyone any confidential information
         relating to Buyer or the Acquired Companies or otherwise using such
         confidential information for the Employee Seller's own benefit or the
         benefit of any other Person (other than Buyer or the Acquired
         Companies); or

                           (ii)  solicit or encourage any contractor,
         subcontractor or other supplier of Buyer or the Acquired Companies to
         terminate or adversely alter in any material respect any relationship
         such supplier may have with any of the Acquired Companies, Buyer or any
         Affiliate of Buyer or any of their successors.

                  (e)      The covenants set forth in this Section 6.8 are in
addition to and not by way of limitation of any other duties the Employee
Sellers may have to Buyer or its Affiliates. The Employee Sellers acknowledge
that the covenants contained in this Section 6.8 impose a reasonable restraint
on the Employee Sellers in light of the activities and business of the Acquired
Companies and future plans of Buyer. The Employee Sellers acknowledge that if
they violate any of the covenants contained in this Section 6.8 (collectively,
the "Restrictive Covenants"), it will be difficult to determine the resulting
damages to Buyer and, in addition to any other remedies Buyer may have, Buyer
shall be entitled to temporary injunctive relief and permanent injunctive relief
without the necessity of proving actual damages. Each Seller shall be solely
liable for a breach by such Seller of the covenants contained in this Section
6.8, and such liability shall not be joint. The non-prevailing party or parties
shall be severally liable to pay all costs, including reasonable attorneys' fees
and expenses, that the prevailing party or parties may incur in enforcing or
defending, to any extent, any of the Restrictive Covenants, whether or not
litigation is actually commenced and including litigation of any appeal. Buyer
may elect to seek one or more remedies at its discretion on a case by case
basis. Failure to seek any or all remedies in one case shall not restrict Buyer
from

                                       52



seeking any remedies in another situation. Such action by Buyer shall not
constitute a waiver of any of its rights.

                  (f)      Each of the Restrictive Covenants will be read and
interpreted with every reasonable inference given to its enforceability.
However, if any term, provision or condition of the Restrictive Covenants is
held by a court or arbitrator to be invalid, void or unenforceable, the
remainder of the provisions thereof shall remain in full force and effect and
shall in no way be affected, impaired or invalidated. If a court or arbitrator
should determine any of the Restrictive Covenants are unenforceable because of
over-breadth, then the court or arbitrator shall modify such covenant so as to
make it enforceable to the fullest extent the court or arbitrator deems
reasonable and enforceable under the prevailing circumstances. The Covenant Not
to Compete shall be deemed to be a series of separate covenants, one for each
and every county or other political subdivision of the states of Florida, North
Carolina and South Carolina and the District of Columbia, where the Covenant Not
to Compete is intended to be effective. Any violation of the provisions of this
Section 6.8 shall automatically toll and suspend the four year period set forth
in Section 6.8 for the duration of such violations.

                  (g)      Nothing contained in this Section 6.8 is intended to
confer upon any Employee Seller any right to continued employment or any right
to wages or benefits at any time after the Closing Date. Each Employee Seller
expressly acknowledges that such Employee Seller's employment with the Acquired
Companies will be governed by the terms of his employment agreement, which
agreement shall be with the Company substantially in the form of Exhibit C-1 for
Roger Gatewood and substantially in the form of Exhibit C-2 for Frank Baker, and
with a Subsidiary of the Company substantially in the form of Exhibit C-3 for
Andrew Berger, John Schlichenmaier and Robert Siuda (collectively, the "Division
Presidents"), and with such compensation as is set forth in those certain
letters dated August 2, 2002 from Standard Pacific to each of the Employee
Sellers regarding "Proposed Employment Agreements " (collectively, the
"Employment Agreements"). Termination of the employment with the Acquired
Companies of any or all of the Employee Sellers will in no way diminish Buyer's
obligations to make any Earnout Payment calculated pursuant to Sections 2.5(a)
and (f).

         6.9      Directors. Effective as of the Closing Date, the Sellers shall
cause Roger Gatewood and Frank Baker to each resign from the position of
director with all Acquired Companies for which they are a member of the of the
Board of Directors.

         6.10     Securities Restrictions.

                  (a)      For a period commencing on the Closing Date and
continuing through the close of trading on the date that is the first
anniversary of the Closing Date, none of the Sellers shall, without the prior
written consent of Standard Pacific (which consent may be withheld in Standard
Pacific's sole discretion), (i) directly or indirectly, sell, offer, contract or
grant any option to sell (including without limitation any short sale), pledge,
transfer, establish an open "put equivalent position" within the meaning of Rule
16a-1(h) under the Exchange Act, or otherwise dispose of any Standard Pacific
Common Stock acquired by the Sellers in connection with this Agreement, or (ii)
enter into any swap or other agreement that transfers, in whole or in part, any
of the economic consequences of ownership of any Standard Pacific Common Stock
acquired by the Sellers in connection with this Agreement (whether any such
transaction

                                       53



described in clause (i) or (ii) above is to be settled by delivery of Standard
Pacific Common Stock, other securities, cash or otherwise), or publicly announce
its intention to do any of the foregoing, provided, however, (A) Roger Gatewood
or Frank Baker may, if their employment with the Acquired Companies is
terminated, or (B) the Division Presidents may, whether or not employed by the
Acquired Companies, enter into "hedging" transactions designed to lessen the
economic risk of such Employee Seller's continued ownership of such shares, in
each case, to the extent permitted by applicable securities laws. The Sellers
acknowledge and consent to the entry of stop transfer instructions with Standard
Pacific's transfer agent and registrar against the transfer of shares of
Standard Pacific Common Stock held by each Seller except in compliance with the
foregoing restrictions.

                  (b)      In addition to the contractual restrictions on
transfer set forth in Section 6.10(a), the Standard Pacific Common Stock (or
interests therein) held by the Sellers cannot be offered, sold or transferred
unless such Standard Pacific Common Stock is registered and qualified under the
Securities Act and applicable state securities laws or exemptions from such
registration and qualification requirements are available, or such registration
and qualification requirements are inapplicable, as reflected in an opinion of
counsel to any transferring Seller in form and substance reasonably satisfactory
to Standard Pacific. In the absence of an effective registration statement
covering the Standard Pacific Common Stock or an available exemption from
registration under the Securities Act, the Standard Pacific Common Stock must be
held indefinitely, and may not be sold pursuant to Rule 144 promulgated under
the Securities Act unless all of the conditions of that rule are met. The
Sellers acknowledge that they do not have any right to demand registration of
any offer or sale of the Standard Pacific Common Stock held by them, or to
participate in any registered offering of Standard Pacific Common Stock
undertaken by Standard Pacific.

                  (c)      The certificates issued to the Sellers representing
the Standard Pacific Common Stock will bear a legend to the effect set forth
below, and appropriate stop transfer instructions against the Standard Pacific
Common Stock will be placed with any transfer agent of Standard Pacific to
ensure compliance with the restrictions set forth herein.

                  "THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW AND MAY NOT
BE SOLD, OFFERED FOR SALE, TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED
UNLESS AND UNTIL REGISTERED UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES
LAWS, OR UNLESS STANDARD PACIFIC CORP. HAS RECEIVED AN OPINION OF COUNSEL TO THE
HOLDER OF THE SHARES OR OTHER EVIDENCE, SATISFACTORY TO STANDARD PACIFIC CORP.
AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED. IN ADDITION, THE
TRANSFER, SALE, ASSIGNMENT, PLEDGE, MORTGAGE, HYPOTHECATION, ENCUMBRANCE, GIFT
OR OTHER DISPOSITION OF THE SHARES REPRESENTED HEREBY IS RESTRICTED BY AN
AGREEMENT, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF STANDARD
PACIFIC CORP."

                  Upon delivery by a Seller to Standard Pacific of documentation
reasonably satisfactory to Standard Pacific that all of the conditions of Rule
144 promulgated under the Securities Act have been met with respect to a
transfer of shares of Standard Pacific Common

                                       54



Stock bearing such legend, and that such transfer is in compliance with this
Section 6.10, Standard Pacific shall deliver to its transfer agent instructions
authorizing such transfer and removal of such legend.

         6.11     Warranty Indemnification.

                  (a)      For a period of five years following the Closing
Date, the Sellers (other than the Gatewood Children Sellers) shall jointly and
severally, and the Gatewood Children Sellers shall severally, indemnify, defend
and hold harmless Standard Pacific, Buyer and their Affiliates (including the
Acquired Companies) from any Liability incurred by such Persons as a result of
any Warranty Claims that relate to real property developed or homes that close
escrow on or before the Closing Date, to the extent that such Liabilities exceed
the sum of (i) the warranty reserve for the Acquired Companies on the Balance
Sheet Date Financial Statements (prepared in conformity with GAAP, and
consistent with the practices and policies of the Company in preparing the 2001
Balance Sheet), and (ii) $550,000 (the "Warranty Threshold"), subject to the
Maximum Warranty Amount. The indemnity described in the immediately preceding
sentence shall include, without limitation, all costs and out-of-pocket expenses
(including legal and expert fees) and a reasonable allocation of labor costs for
persons performing or directly overseeing the work Buyer deems reasonably
necessary to address such Warranty Claims. The Sellers acknowledge that the
Maximum Warranty Amount is in addition to all insurance proceeds, meaning that
the Sellers shall be obligated to pay, up to the Maximum Warranty Amount, all
Warranty Claims that are not paid by insurance and that exceed the Warranty
Threshold. The obligation of the Sellers under this Section 6.11 shall terminate
on the fifth anniversary of the Closing Date, except to the extent that Buyer
notifies the Sellers' Representative in writing of a claim pursuant to this
Section 6.11 on or before such date specifying the factual basis of such claim
in reasonable detail to the extent then known by Buyer. The Sellers shall be
obligated to promptly pay to Buyer the amount of all Warranty Claims in excess
of the Warranty Threshold irrespective of whether such amounts may be
potentially covered by insurance. If an amount initially paid by the Sellers
with respect to a Warranty Claim is later reimbursed to Buyer by applicable
insurance policies of the Acquired Companies in effect at the time of the
Closing (including the Tail Policy) or prior thereto, Standard Pacific shall
cause Buyer to promptly reimburse Sellers for such payment (after deduction of
all out-of-pocket expenses relating to seeking such payment) and the reimbursed
payment will not count against the Maximum Warranty Amount or the limitations to
the Sellers' liability set forth in Section 7.4(c). During the five year period
referred to herein (or if earlier, until the limitations to the Sellers'
liability set forth in Section 7.4(c) have been met), (A) if at any time the
Sellers' Representative no longer serves as an officer of the Company, Standard
Pacific shall cause Buyer to provide written notice to the Sellers'
Representative of all Warranty Claims reasonably expected to result in
settlement or repair expenses in excess of $25,000; (B) Buyer shall take
reasonable actions to defend all Warranty Claims and to seek timely recovery
with respect to such claims under applicable insurance policies of the Acquired
Companies in effect at the time of the Closing (including the Tail Policy) or
prior thereto; and (C) the Sellers, at their sole expense, shall have the right
to participate in the defense of all Warranty Claims; provided, however, that
Buyer shall have the sole right to control the defense and settlement of each
such Warranty Claim.

                                       55



                  (b)      The aggregate maximum out-of-pocket liability of the
Sellers for Warranty Claims (the "Maximum Warranty Amount"), shall equal
$6,500,000, provided, however, that such amount shall be reduced to $5,000,000
if the Acquired Companies prior to the Closing Date, or the Sellers within 90
days after the Closing Date, purchase an insurance policy covering all Warranty
Claims that relate to real property developed or homes sold or constructed by
the Acquired Companies prior to the Closing Date, which in light of the
operations of the Acquired Companies prior to the Closing Date, is in an amount
and with coverages, deductibles and other terms that are reasonable and
customary for entities engaged in such operations, including an aggregate loss
limit of not less than $5,000,000 (the "Tail Policy"). The named insureds under
the Tail Policy shall be the Acquired Companies, Buyer and Standard Pacific. If
purchased by the Acquired Companies, the cost of the Tail Policy shall be borne
by the Acquired Companies and such cost will be reflected in the Balance Sheet
Date Financial Statements and will have the effect of decreasing the Balance
Sheet Date Net Book Value by the full amount of such payment. If purchased by
the Sellers, the cost of the Tail Policy shall be borne by the Sellers.

         6.12     Insurance Rights and Indemnification. The Sellers shall use
their best efforts to cause Buyer and the Acquired Companies to be named as
additional insureds as of the Closing (in form reasonably acceptable to Buyer)
on all insurance policies of the Sellers or their respective Affiliates that
cover any Liabilities of the Acquired Companies arising with respect to acts or
omissions on or prior to the Closing Date, except to the extent such Liabilities
are retained by the Sellers pursuant to Section 7.2(a). In the event that the
Sellers are unable to add Buyer and the Acquired Companies as additional
insureds pursuant to this Section 6.12, the Sellers shall afford the benefits of
the insurance rights to Buyer and the Acquired Companies with respect to such
Liabilities.

         6.13     Sellers' Representative. The Sellers shall at all times
maintain a representative (the "Sellers' Representative") for purposes of taking
certain actions and giving certain consents on behalf of the Sellers as
specified herein. Each Seller hereby appoints Roger Gatewood as the Sellers'
Representative, provided however, if Roger Gatewood dies, is incapacitated or
unavailable to act, Andrew Berger is hereby authorized to take all actions as
the Sellers' Representative, and provided further if Andrew Berger dies, is
incapacitated or unavailable to act, then Frank Baker is hereby authorized to
take all actions as the Sellers' Representative hereunder. The Sellers, each
having voting power in proportion to such Seller's Pro Rata Portion, may elect
one or more replacements to the Sellers' Representatives appointed hereunder by
majority vote of such interests, provided that Buyer is notified in writing
thereof (including written agreement by such replacement to serve as Sellers'
Representative as set forth herein). Each of the Sellers acknowledge that
actions taken, consents given and representations made by the Sellers'
Representative on behalf of the Sellers pursuant hereto shall be binding upon
the Sellers. This appointment and grant of power and authority by each Seller is
coupled with an interest and is irrevocable and shall not be terminated by any
act of the Seller or by operation of law, whether by the death or incapacity of
the Seller or by the occurrence of any other event. The Sellers' Representative
is authorized by the Sellers to take any action on behalf of the Sellers to
facilitate or administer the transactions contemplated hereby, including without
limitation, amending this Agreement, and executing such other documents or
instruments as the Sellers' Representative deems appropriate.

                                       56



         6.14     Use of "Westfield Homes" Trade Mark.

                  (a)      For so long as the Sellers own the Excluded Company,
Buyer shall license the use of the service mark "Westfield Homes" (the "Trade
Mark") to the Excluded Company pursuant to the License Agreement, to be entered
into between the Company and the Excluded Company.

                  (b)      If the Acquired Companies, Buyer and Standard Pacific
and each of their respective Affiliates, successors and assigns have completely
abandoned the use of the Trade Mark in all jurisdictions for a period of 24
months, then, provided that Roger Gatewood is no longer an employee of the
Acquired Companies (and their respective successors) and the covenants of Roger
Gatewood set forth in Section 6.8 have expired, Standard Pacific shall, and
shall cause its Affiliates to, upon written request of Roger Gatewood to
Standard Pacific, and to the extent of their respective rights in the Trade Mark
at such time, license to Roger Gatewood the right to use the Trade Mark in any
jurisdiction requested by Roger Gatewood, other than the States of Florida,
North Carolina and South Carolina and any other jurisdiction where the Trade
Mark has been used at any time after the Closing Date by the Acquired Companies,
Buyer or Standard Pacific or any of their respective Affiliates, successors or
assigns. Such license agreement shall be in form and substance reasonably
satisfactory to Buyer. The licensor shall not be required to make any
representations as to the ownership, validity, enforceability or scope of the
Trade Mark in the license agreement.

                  (c)      Except as set forth in this Section 6.14, the Sellers
shall not, and shall cause their Affiliates, including the Excluded Company, not
to use the Trade Mark or any mark confusingly similar to the Trade Mark in any
jurisdiction at any time.

         6.15     Payment of Debt of Related Parties.

                  (a)      Prior to the Closing, the Sellers will cause all Debt
owed to any Acquired Company by any of the Sellers or any of their Affiliates
(including the Excluded Company, but excluding the other Acquired Companies) to
be paid in full.

                  (b)      Prior to the Closing, the Sellers shall cause the
Excluded Company to satisfy in full all Debt incurred by the Excluded Company
under the Credit Agreement and any other Contract pursuant to which any of the
Acquired Companies is a guarantor or otherwise obligated.

         6.16     Release. In consideration of the payments of the Purchase
Price by Buyer to the Sellers, each Seller hereby gives the following general
release effective as of the Closing Date.

                  (a)      Each Seller on behalf of himself or herself and his
or her agents, successors and assigns, hereby irrevocably and unconditionally
releases, acquits and forever discharges each of the Acquired Companies, Buyer
and their respective Affiliates and their respective partners, shareholders,
directors, officers and agents, and respective successors and assigns
(collectively, the "Released Parties"), to the extent not prohibited by
applicable law, from any and all charges, complaints, claims, obligations,
promises, agreements, controversies, damages, actions, causes of action, suits,
rights, demands, remedies, costs, losses, debts, expenses and fees, of every
type, kind, nature, description or character, whether known or

                                       57



unknown, suspected or unsuspected, liquidated or unliquidated, including those
arising out of or in connection with the Seller's employment with any of the
Acquired Companies and any equity or other interests the Seller may have or
claim to have in the Company (the "Claims"). Each Seller represents that he or
she has not heretofore assigned or transferred or purported to have assigned or
transferred to any Person any Claims released, acquitted and forever discharged
herein. This general release shall not affect any rights that the Seller may
have which arise solely under this Agreement, including payment of the Purchase
Price, or that arise after the Closing Date.

                  (b)      Each Seller acknowledges and agrees that the releases
made herein constitute final and complete releases of the Released Parties with
respect to all Claims. Seller expressly acknowledges and agrees that this
general release is intended to include in its effect, without limitation, all
Claims which Seller does not know or suspect to exist in his or her favor at the
time hereof, and this general release contemplates the extinguishment of any and
all such Claims. In this regard, Seller expressly waives the provisions of
Section 1542 of the California Civil Code, which state:

                  A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH
THE DEBTOR.

                  Furthermore, each Seller hereby expressly waives and
relinquishes any rights and benefits he or she may have under other statutes or
common law principles of similar effect. Each Seller understands that the facts
under which he or she gives this full and complete release and discharge of the
Released Parties may hereafter prove to be different than now known or believed
by him or her and Seller hereby accepts and assumes the risk thereof and agrees
that his or her full and complete release and discharge of the Released Parties
shall remain effective in all respects and not be subject to termination,
rescission or modification by reason of any such difference in facts.

                  (c)      Each Seller represents that he or she has not filed
with any Governmental Entity any complaint, charge or lawsuit against any of the
Released Parties involving any Claims released herein, and that, except as
otherwise permitted by law, he or she will not do so at any time hereafter.

                  (d)      Each Seller represents and acknowledges that in
executing this general release he or she does not rely and has not relied upon
any representation or statement not set forth herein made by any of the Released
Parties or by any of the Released Parties' agents, representatives or attorneys
with regard to the subject matter, basis or effect of this general release or
otherwise.

                  (e)      Without limiting the foregoing, each Seller agrees
that he or she will not, directly or indirectly, (i) bring or cause to be
brought, or encourage or participate in the prosecution of, any action,
proceeding or suit seeking recovery by or on behalf of any Person from any
Released Party of any amount in respect of, or Damages with respect to, any of
the Claims, or (ii) defend any action, proceeding or suit in whole or in part on
the grounds that any

                                       58



or all of the terms or provisions of this Section 6.16 are illegal, invalid, not
binding, unenforceable or against public policy.

         6.17     Villa Rosa Property. Following the Closing Date, the Employee
Sellers shall use their best efforts to cause Westfield Development to sell, by
September 30, 2002, the fill dirt located at the Villa Rosa Property (the "Fill
Dirt"), pursuant to a purchase and license agreement reasonably satisfactory to
Westfield Development and Buyer (the "Fill Dirt License Agreement"), for not
less than $250,000. If the Fill Dirt License Agreement is not entered into by
Westfield Development on or before September 30, 2002, Roger Gatewood shall
enter into the Fill Dirt License Agreement and purchase the Fill Dirt from
Westfield Development on October 1, 2002, for $250,000 in cash. If the Fill Dirt
License Agreement is entered into by Westfield Development on or before
September 30, 2002, for less than $250,000, concurrent with the execution of the
Fill Dirt License Agreement, Roger Gatewood shall pay to Westfield Development
the difference between the price paid under the Fill Dirt License Agreement for
the Fill Dirt and $250,000. Notwithstanding the foregoing, for purposes of (a)
the Balance Sheet Date Financial Statements, the current zero valuation of the
Fill Dirt as reflected on the Financial Statements will remain unchanged, and
(b) the Earnout, the Company Pre-Tax Income shall not include any net income of
the Company and its Subsidiaries arising under the Fill Dirt License Agreement
or from any payments by Roger Gatewood to Westfield Development under this
Section 6.17.

                                   ARTICLE VII
                            SURVIVAL; INDEMNIFICATION

         7.1      Survival of Representations and Warranties. The
representations and warranties made in this Agreement shall survive for two
years following the Closing Date. Notwithstanding the foregoing, the
representations and warranties set forth in Sections 3.1, 3.3, 4.2, 4.3, 4.9,
4.10, 4.12, 4.13 and 5.4 shall survive for the applicable statute of limitations
period.

         7.2      Indemnification.

                  (a)      Each of the Sellers (other than the Gatewood Children
Sellers) shall, jointly and severally, and the Gatewood Children Sellers shall
severally, indemnify Standard Pacific, Buyer, their Affiliates (including the
Acquired Companies following the Closing) and each of their respective officers,
directors, employees, stockholders, agents and representatives (the "Buyer
Indemnified Parties") against and hold them harmless from any loss, Liability,
diminution in value, claim, damage or expense (including reasonable legal fees
and expenses) (collectively "Damages") suffered or incurred by any such
indemnified party to the extent arising from (i) any breach of any
representation or warranty of the Sellers contained in this Agreement or any of
the other Transaction Documents (without giving effect to any supplement to the
Sellers' Disclosure Schedule disclosing inaccuracies in the representations and
warranties as of the date of this Agreement); (ii) any breach of any covenant of
the Sellers contained in this Agreement (provided however, that each Seller
shall be solely liable for a breach by such Seller of the covenants contained in
Section 6.8, and such liability shall not be joint); (iii) the business and
operations of any business owned or operated by any of the Sellers or any of
their Affiliates (other than the Acquired Companies, but including the Excluded
Company) whether before or after the Closing Date; (iv) any Warranty Claims
relating to homes sold by the Acquired

                                       59



Companies on or prior to the Closing Date, to the extent such Damages exceed the
Warranty Threshold and subject to the Maximum Warranty Amount; (v) any Damages
relating to or arising from the sale of assets of Westfield Homes of Illinois,
Inc. pursuant to that certain Asset Purchase Agreement between Westfield Homes
of Illinois, Inc. and DRH Cambridge Homes, Inc., dated September 19, 2001; (vi)
any Damages relating to ERISA or the Code arising from the relationship prior to
the Closing Date of the Acquired Companies with Paychex, including under the
Paychex Agreement; and (vii) any Damages relating to or arising from easements
granted by any of the Acquired Companies in connection with development of the
Villa Rosa projects located in Sarasota County, Florida. The express written
waiver by Buyer and Standard Pacific of any condition set forth in Section 9.2
based on the inaccuracy of any representation or warranty, or on the
nonperformance of or noncompliance with any covenant or obligation, will not
preclude any right of Buyer or Standard Pacific or any other indemnified Person
to indemnification, payment of Damages, or other remedy based on such
representation, warranty, covenant, and obligation.

                  (b)      Buyer and Standard Pacific shall, jointly and
severally, indemnify the Sellers and their Affiliates and each of their
respective officers, directors, employees, stockholders, agents and
representatives against and hold them harmless from any Damages suffered or
incurred by any such indemnified party to the extent arising from (i) any breach
of any representation or warranty of Standard Pacific or Buyer contained in this
Agreement or any of the other Transaction Documents (without giving effect to
any supplement to Buyer's Disclosure Schedule); and (ii) any breach of any
covenant of Standard Pacific or Buyer contained in this Agreement. The express
written waiver by the Sellers of any condition set forth in Section 9.3 based on
the inaccuracy of any representation or warranty, or on the nonperformance of or
noncompliance with any covenant or obligation, will not preclude any right of
the Sellers to indemnification, payment of Damages, or other remedy based on
such representation, warranty, covenant, and obligation.

         7.3      Time Limitations. Neither the Buyer and Standard Pacific, nor
the Sellers will have any liability (for indemnification or otherwise) with
respect to any representation or warranty contained in this Agreement, other
than those in Sections 3.1, 3.3, 4.2, 4.3, 4.9, 4.10, 4.12, 4.13 and 5.4, unless
on or before the date that is two years following the Closing Date, the party
seeking indemnification notifies the party or parties from which it is seeking
indemnification in writing of a claim for Damages specifying the factual basis
of that claim in reasonable detail to the extent then known by such party.
Subject to Sections 7.4(c) and (d), a claim with respect to Section 3.1, 3.3,
4.2, 4.3, 4.9, 4.10, 4.12, 4.13 and 5.4 may be made at any time prior to 90 days
after the expiration of the applicable statute of limitations period.

         7.4      Other Limitations.

                  (a)      The Sellers shall have no liability (for
indemnification or otherwise) with respect to the matters described in Section
7.2(a)(i) (except for matters arising under Section 3.3 or Section 4.10 to which
the threshold described in this Section 7.4(a) shall be inapplicable) until the
total of all Damages with respect to such matters exceeds $250,000 (it being
agreed and acknowledged by the parties that for purposes of determining whether
the foregoing $250,000 threshold has been exceeded in the aggregate, the
representations and warranties of the Sellers contained herein shall not be
deemed qualified by any references herein to materiality generally

                                       60



or to whether any such breach results or may result in a Material Adverse Effect
on the Acquired Companies), and then only for the amount by which such Damages
exceed $250,000.

                  (b)      Buyer and Standard Pacific will have no liability
(for indemnification or otherwise) with respect to the matters described in
Section 7.2(b)(i) until the total of all Damages with respect to such matters
exceeds $250,000 (it being agreed and acknowledged by the parties that for
purposes of determining whether the foregoing $250,000 threshold has been
exceeded in the aggregate, the representations and warranties of Buyer and
Standard Pacific contained herein shall not be deemed qualified by any
references herein to materiality generally or to whether any such breach results
or may result in a Material Adverse Effect on Buyer or Standard Pacific), and
then only for the amount by which such Damages exceed $250,000.

                  (c)      (i)      In no event will the Sellers' liability (for
         indemnification or otherwise) with respect to the matters in Section
         7.2(a)(i) and (iv) exceed, in the aggregate, the Cap, provided,
         however,

                                    (A) the Sellers' liability for claims or
                  causes of action arising from fraud or arising from the
                  representations and warranties contained in Sections 3.1, 3.2,
                  3.6, 4.2, 4.3 and 4.9 shall not be subject to the Cap
                  (collectively, with fraud, the "Excluded Claims");

                                    (B) the Sellers' aggregate liability for
                  claims or causes of action arising from Warranty Claims that
                  relate to real property developed or homes that close escrow
                  on or before the Closing Date shall not exceed the Maximum
                  Warranty Amount (subject to the Warranty Threshold);

                                    (C) the Sellers' aggregate liability for
                  claims from or causes of action arising from the
                  representations and warranties contained in Sections 3.4, 3.5,
                  4.1, 4.5(e), 4.6, 4.8, 4.11, 4.14, 4.16, 4.17, 4.18, 4.19,
                  4.20 and 4.21 shall not exceed $6,000,000;

                                    (D) after the third anniversary of the
                  Closing Date, the Sellers' aggregate liability for all claims
                  under Section 7.2(a)(i) and (iv) arising after such date,
                  other than the Excluded Claims, shall not exceed (1)
                  $6,000,000 less (2) all indemnification payments made by the
                  Sellers for claims or causes of action arising under Section
                  7.2(a)(i) and (iv) from the Closing Date through the third
                  anniversary of the Closing Date (and if such sum is negative,
                  then the Sellers shall have no further liability for such
                  claims, other than the Excluded Claims); and

                                    (E) from and after the fifth anniversary of
                  the Closing Date, the Sellers shall have no further liability
                  for claims under Section 7.2(a)(i) and (iv) arising after such
                  date, other than for the Excluded Claims which shall survive.

                  (ii)     For purposes of this Section 7.4(c), a claim shall be
         deemed to have arisen on the date Buyer or Standard Pacific provide
         notice to the indemnifying party of such claim for Damages specifying
         the factual basis of such claim in reasonable detail to the extent then
         known by Buyer and Standard Pacific.

                                       61



                  (iii)    If the Sellers indemnify Buyer or a Subsidiary of
         Buyer for Damages which Buyer or any of its Subsidiaries subsequently
         reimburse to the Sellers, such reimbursed amount shall not count
         against the limits set forth in this Section 7.4(c).

                  (d)      In no event will the liability of Buyer and Standard
Pacific (for indemnification or otherwise) with respect to the matters in
Section 7.2(b)(i) exceed, in the aggregate, the Cap, provided, however, claims
or causes of action arising from fraud, shall not be subject to the Cap.

                  (e)      If Buyer or Standard Pacific seek indemnification
hereunder for any Warranty Claim, Buyer and Standard Pacific shall comply with
Section 6.11(a) in seeking timely insurance recoveries.

                  (f)      Prior to commencing any arbitration against the
Sellers seeking indemnification hereunder, Buyer will, to the extent it can,
first utilize its rights to offset against amounts due under the Earnout;
provided, however, that this requirement will not apply if (i) the claim in
question arises more than 120 days prior to the next scheduled Earnout Payment
or (ii) if the amount of such claim exceeds Buyer's good faith projection of the
amount of such next scheduled Earnout Payment. Buyer may retain such amount of
the Earnout Payment as it reasonably believes is an adequate reserve against any
claims of which it has been advised and which may be covered by indemnification
hereunder, whether or not liquidated. To the extent Buyer offsets any amount
owed to it against an Earnout Payment under this Section 7.4(f), Buyer shall
offset such amount against the Earnout Payment, and then pay the remainder, if
any, to each Person, in proportion to their interest in the Earnout Payment.

                  (g)      If Buyer or Standard Pacific commence any arbitration
seeking indemnification hereunder, or legal proceedings to enforce any such
arbitration award, they shall use their commercially reasonable efforts (for a
period of 30 days) to serve, and join in such action, all of the Sellers
potentially liable therefor. Notwithstanding the foregoing, (i) each of the
Sellers (other than the Gatewood Children Sellers) shall be jointly and
severally liable to the Buyer Indemnified Parties hereunder for 100% of the
Damages to which the Buyer Indemnified Parties are entitled under this
Agreement, and (ii) Buyer and Standard Pacific shall have no obligation to
exhaust remedies against any Seller before proceeding or enforcing against any
other Seller. Nothing herein shall effect the rights of such Sellers to
contribution from the other Sellers.

         7.5      Set-Off. In addition to any rights of set-off, off-set or
other rights that Buyer or Standard Pacific may have at common law, by statute
or otherwise, Buyer and Standard Pacific shall have the right to set-off against
any amount that Buyer or Standard Pacific would otherwise be required to pay to
any Seller any amounts owing by the Sellers to Buyer pursuant to this Article
VII; provided, however, that notwithstanding Buyer or Standard Pacific's
exercise of the right to set-off described in this Section 7.5, Buyer, Standard
Pacific and the Sellers shall remain obligated to comply with their respective
obligations described in Section 7.6. Standard Pacific shall cause Buyer to
provide written notice to the Sellers of the nature and reason for any set-off
that occurs pursuant to this Section 7.5.

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         7.6      Procedures Relating to Indemnification Involving Third Party
                  Claims.

                  (a)      In order for an indemnified party to be entitled to
any indemnification provided for under this Agreement in respect of, arising out
of or involving a claim or demand made by any Person not a party to this
Agreement against the indemnified party (a "Third Party Claim"), such
indemnified party must promptly notify the indemnifying party in writing, and in
reasonable detail, of the Third Party Claim after receipt by such indemnified
party of written notice of the Third Party Claim; provided, however, that
failure to give such notification shall not affect the indemnification provided
hereunder except to the extent the indemnifying party shall have been actually
prejudiced as a result of such failure. Thereafter, the indemnified party shall
promptly deliver to the indemnifying party after the indemnified party's receipt
thereof, copies of all notices and documents (including court papers) received
by the indemnified party relating to the Third Party Claim. In the event the
provisions of Section 8.4 are inconsistent with any provision of this Article
VII, the provisions of Section 8.4 shall control with respect to the contest of
tax matters. In the event that more than one Seller is an indemnifying party
hereunder, the indemnified party may provide the notices and other
communications required pursuant to this Section 7.6 solely to the Sellers'
Representative (or such other person selected by the Sellers based on their Pro
Rata Portion and provided in writing to the indemnified party).

                  (b)      If a Third Party Claim is made against an indemnified
party, the indemnifying party shall be entitled to participate in the defense
thereof and, if it promptly so chooses and acknowledges its obligation to
indemnify the indemnified party therefore, to assume the defense thereof with
counsel selected by the indemnifying party; provided that such counsel is not
reasonably objected to by the indemnified party and provided further, that if
the indemnified party reasonably believes that the Damages that will be
recovered by such third parties may exceed the indemnification obligations of
the indemnifying parties (giving effect to the prior indemnification payments
made by the indemnifying parties, other claims pending, and the limitations set
forth in Section 7.4), then the indemnified party shall have the right, but not
the obligation, to assume such defense. Should the indemnifying party assume the
defense of a Third Party Claim, the indemnifying party shall not be liable to
the indemnified party for legal expenses subsequently incurred by the
indemnified party in connection with the defense thereof. If the indemnifying
party assumes such defense, the indemnified party shall have the right to
participate in the defense thereof and to employ counsel (not reasonably
objected to by the indemnifying party), at its own expense, separate from the
counsel employed by the indemnifying party, it being understood that the
indemnifying party shall control such defense.

                  (c)      The indemnifying party shall be liable for the fees
and expenses of counsel employed by the indemnified party in connection with a
Third Party Claim for any period during which the indemnifying party has failed
to assume the defense thereof. In connection with any Third Party Claim, the
indemnified party and the indemnifying party shall cooperate with in the defense
or prosecution thereof. Such cooperation shall include the retention and (upon
the indemnified or indemnifying party's request) the provision to such party of
records and information which are reasonably relevant to such Third Party Claim,
and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder.

                                       63



                  (d)      If the indemnifying party shall have assumed the
defense of a Third Party Claim, the indemnified party shall agree to any
settlement, compromise or discharge of a Third Party Claim which the
indemnifying party may recommend and which by its terms obligates the
indemnifying party to pay the full amount of the liability in connection with
such Third Party Claim, which releases the indemnified party completely in
connection with such Third Party Claim and which would not otherwise adversely
affect the indemnified party. If the indemnifying party shall not have assumed
the defense of a Third Party Claim, the indemnified party may settle, compromise
or discharge, such Third Party Claim in good faith without the indemnifying
party's prior consent.

                  (e)      Notwithstanding the foregoing, the indemnifying party
shall not be entitled to assume the defense of any Third Party Claim (and shall
be liable for the reasonable fees and expenses of counsel incurred by the
indemnified party in defending such Third Party Claim) if:

                           (i)   the Third Party Claim seeks an order,
         injunction or other equitable relief or relief for other than money
         damages against the indemnified party which the indemnified party
         reasonably determines, after conferring with its outside counsel,
         cannot be separated from any related claim for money damages, or

                           (ii)  the indemnified party reasonably determines,
         after conferring with its outside counsel, that joint representation
         would be expected to give rise to a conflict of interest.

                  If such equitable relief or other relief portion of the Third
Party Claim can be so separated from that for money damages, the indemnifying
party shall be entitled to assume the defense of the portion relating to money
damages. All claims under Section 7.2 other than Third Party Claims shall be
governed by Section 7.7.

         7.7      Other Claims. A claim for indemnification for any matter not
involving a Third Party Claim may be asserted by written notice to the party
from whom indemnification is sought and shall be paid promptly after receipt of
such notice.

         7.8      Sole and Exclusive Remedy. Should the Closing occur, except as
set forth in the Confidentiality Agreement and Section 6.8(e), (i) Buyer and
Standard Pacific's sole and exclusive remedies for any breach of the
representations, warranties or covenants of the Sellers under this Agreement and
any other Transaction Documents (other than claims of or causes of action
arising from fraud), shall be the remedies provided in this Article VII and
Article VIII, and Buyer and Standard Pacific hereby waive, from and after the
Closing, any and all other remedies (other than claims of or causes of actions
arising from fraud) which may be available at law or equity for any breach or
alleged breach of the representations, warranties and covenants of the Sellers
hereunder, and (ii) the Sellers' sole and exclusive remedies for any breach of
the representations, warranties or covenants of Buyer and Standard Pacific under
this Agreement and any other Transaction Documents (other than claims of or
causes of action arising from fraud), shall be the remedies provided in this
Article VII and Article VIII, and each of the Sellers hereby waives, from and
after the Closing, any and all other remedies (other than claims of or causes of
actions arising from fraud) which may be available at law or equity for any
breach or alleged

                                       64



breach of the representations, warranties and covenants of Buyer and Standard
Pacific hereunder. Notwithstanding the foregoing, nothing herein will limit the
right of any party to seek injunctive or other equitable relief for any breach
or alleged or threatened breach of any covenant in this Agreement or any other
Transaction Document.

                                  ARTICLE VIII
                                   TAX MATTERS

         8.1      Section 338(h)(10) Elections.

                  (a)      The parties intend that the acquisition by Buyer of
the stock of the Company qualify as a "qualified stock purchase" under Section
338 of the Code. At Buyer's request, the Sellers shall join Buyer in making a
timely election under Section 338(h)(10) of the Code and any comparable election
under state or local law with respect to the acquisition of the Shares acquired
pursuant to this Agreement (the "Section 338(h)(10) Election"). Buyer and the
Sellers shall be jointly responsible for the preparation and filing of all forms
that are necessary to effect the Section 338(h)(10) Election, including without
limitation an IRS Form 8023. Buyer and the Sellers shall execute and timely file
IRS Forms 8023 and all other forms, returns, elections, schedules and documents
required to effect and preserve timely the Section 338(h)(10) Election. After
the Closing Date, each party shall cooperate with the other and shall take all
actions reasonably requested by the other to assure timely and accurate filing
of the Section 338(h)(10) Election.

                  (b)      In connection with the Section 338(h)(10) Election,
the parties agree that as of the Closing Date the fair market values of the
assets and liabilities deemed purchased for purposes of the computation of the
Aggregate Deemed Sale Price (as defined under applicable Treasury Regulations)
of the assets of the Acquired Companies with respect to which a Section
338(h)(10) Election is to be made and the allocation of such Aggregate Deemed
Sale Price among such assets in accordance with Section 338 of the Code is as
set forth on Schedule 8.1(b), as the same may be adjusted by Buyer and Standard
Pacific in their good faith reasonable judgment solely to reflect (i) changes
between the Balance Sheet Date Financial Statements and the financial statements
used to calculate the Estimated Balance Sheet Date Net Book Value, and (ii) the
financial results of operations of the Acquired Companies between the Balance
Sheet Date and the Closing Date (the "Allocation Agreement"). Subject to Section
8.1(d), Standard Pacific, Buyer and the Sellers shall act, and shall cause their
respective Affiliates to act, in accordance with the allocations contained in
the Allocation Agreement in any relevant Tax Returns or similar filings.

                  (c)      The Sellers, Standard Pacific and Buyer agree that,
except as required by a final determination with any tax authority, they will
report, and will cause their respective Affiliates to report, the transfers
under this Agreement consistent with the Section 338(h)(10) Election and will
not take, or cause to be taken, any action in connection with the filing of any
Tax Return on behalf of the Sellers, Standard Pacific, Buyer, or their
Affiliates or otherwise that would be inconsistent with or prejudice the Section
338(h)(10) Election or the Allocation Agreement, and they will take all steps
necessary to obtain comparable treatment, where applicable, for state income Tax
purposes.

                                       65



                  (d)      (i)   In the event a Section 338(h)(10) Election is
         made and the allocation set forth in the Allocation Agreement for
         purposes of the Section 338(h)(10) Election changes as a result of a
         tax determination, accounting determination or otherwise, such that the
         after-tax amount received by the Sellers from this transaction is
         decreased, Buyer agrees to pay to the Sellers, in their Pro Rata
         Portion, an amount in cash such that the after-tax amount received by
         the Sellers from this transaction equals the after-tax amount that the
         Sellers would have received as a result of this transaction if the
         Section 338(h)(10) Election had been made based on the values set forth
         in the Allocation Agreement (the "Seller Gross-Up Amount").

                           (ii)  In the event (A) a Section 338(h)(10)
         Election is not made, or (B) the allocation set forth in the Allocation
         Agreement for purposes of the Section 338(h)(10) Election changes as a
         result of a tax determination, accounting determination or otherwise,
         in either case such that the after-tax amount received by the Sellers
         from this transaction is increased, the Sellers agree to pay to Buyer,
         in their Pro Rata Portion, an amount in cash such that the after-tax
         amount received by the Sellers from this transaction equals the
         after-tax amount that the Sellers would have received as a result of
         this transaction if the Section 338(h)(10) Election had been made based
         on the values set forth in the Allocation Agreement (the "Buyer
         Gross-Up Amount"). The Seller Gross Up Amount, or the Buyer Gross Up
         Amount, as applicable, is referred to herein as the "Gross Up Amount").

                           (iii) The Gross-Up Amount shall be computed
         assuming each Seller is taxable at the maximum marginal federal tax
         rate applicable in 2002. Buyer shall provide to the Sellers the initial
         computation of the Gross-Up Amount within a reasonable time following
         the Closing Date. The Sellers shall have the right to review and
         comment on such computations and, in the event the parties are unable
         to resolve any differences, they shall appoint an Unrelated Accounting
         Firm to finally resolve such differences and the Gross-Up Amount as so
         resolved shall be paid either (A) to the Sellers, no later than five
         days prior to the due date of Taxes (including payments of estimated
         Taxes) resulting from the making of the Section 338(h)(10) Election, or
         (B) to Buyer within five days after resolution of the Gross Up amount,
         but no later than December 31, 2002. The parties agree that any Gross
         Up Amounts paid hereunder shall be deemed to be an adjustment to the
         Purchase Price. The parties further agree that all Tax Returns of the
         Company and the Sellers shall be prepared in a manner consistent with
         the computations that form the basis for the calculation of the
         Gross-Up Amount, and further agree not to take any position
         inconsistent with such calculations.

         8.2      Indemnification Obligations With Respect to Taxes.

                  (a)      The Sellers shall be responsible for, and shall
indemnify, defend and hold harmless Standard Pacific, Buyer and the Acquired
Companies from and against:

                           (i)   all Taxes of the Acquired Companies due with
         respect to periods ending on or prior to the Balance Sheet Date
         including, without limitation, any Taxes resulting from the Corporate
         Dividend;

                                       66



                           (ii)  all Taxes of the Acquired Companies that are
         due with respect to periods ("Straddle Periods") that include but do
         not end on the Balance Sheet Date to the extent attributable to the
         portion of the Straddle Period ending at the close of business on the
         Balance Sheet Date;

                           (iii) all losses resulting from any inaccuracy in
         or breach of the representations and warranties with respect to tax
         matters that are contained in Section 4.8 or in this Article VIII and
         any covenants contained in this Agreement with respect to tax matters
         (without giving effect to any supplement to the Sellers' Disclosure
         Schedule delivered after the date hereof), or contained in any
         certificate or other Transaction Document delivered pursuant hereto;
         and

                           (iv)  all losses imposed on or sustained by Buyer
         or its Affiliates (including the Acquired Companies after the Closing
         Date), directly or indirectly, by reason of or in connection with the
         foregoing amounts.

                  (b)      Buyer shall be responsible for, and shall indemnify,
defend and hold harmless the Sellers from and against:

                           (i)   all Taxes of the Acquired Companies that are
         due with respect to periods commencing after the Balance Sheet Date;

                           (ii)  all Taxes of the Acquired Companies that are
         due with respect to Straddle Periods to the extent attributable to the
         portion of the Straddle Period commencing with the Balance Sheet Date;

                           (iii) all losses resulting from any breach of any
         covenants of Standard Pacific and Buyer contained in this Agreement
         with respect to tax matters or contained in any certificate or other
         Transaction Document delivered by Standard Pacific and Buyer pursuant
         hereto; and

                           (iv)  all losses imposed on or sustained by the
         Sellers or their Affiliates, directly or indirectly, by reason or in
         connection with the foregoing amounts.

                  (c)      For purposes of this Article VIII, whenever it is
necessary to determine the liability for Taxes of the Acquired Companies for a
Straddle Period, the determination of the Taxes for the portion of the Straddle
Period ending on and including, and the portion of the Straddle Period beginning
after, the Balance Sheet Date shall be determined by assuming that the Straddle
Period consisted of two taxable years or periods, one which ended at the close
of the Balance Sheet Date and the other which began at the beginning of the day
following the Balance Sheet Date, and items of income, gain, deduction, loss or
credit, and state and local apportionment factors of the Acquired Companies for
the Straddle Period shall be allocated between such two taxable years or periods
on a "closing of the books basis" by assuming that the books of the Acquired
Companies were closed at the close of business on the Balance Sheet Date,
provided however, (i) exemptions, allowances or deductions that are calculated
on an annual basis, such as the deduction for depreciation; and (ii) periodic
taxes, such as real and personal property taxes, shall be apportioned ratably
between such periods on a daily basis.

                                       67



                  (d)      Notwithstanding anything to the contrary in this
Agreement (including provisions set forth in Section 7.4 of this Agreement), the
obligations of the Sellers and Buyer under this Article VIII shall be
unconditional and absolute, shall not be limited, shall not be subject to a
deductible, threshold, cap, or similar concept, and shall remain in effect until
90 days after the expiration of all applicable statutes of limitation as to
time.

         8.3      Tax Returns and Payment Responsibility.

                  (a)      The Sellers will be responsible for and will cause to
be prepared and duly filed (i) all Tax Returns of the Acquired Companies that
are due before the Balance Sheet Date, and (ii) all Tax Returns of the Acquired
Companies that are income Tax Returns for all taxable periods ending on or
before the Balance Sheet Date. The Sellers shall pay any Taxes due in respect of
the Tax Returns described in the preceding sentence. Buyer shall file or cause
to be filed when due all Tax Returns with respect to the Acquired Companies,
other than those that are the responsibility of the Sellers pursuant to this
paragraph. Without affecting the indemnification obligations of the Sellers
under this Agreement, in the event that the Sellers fail to prepare and file or
cause to be prepared and filed any Tax Return that they are required to file
pursuant to this paragraph, Buyer shall have the right, but not the obligation,
to prepare and file all such Tax Returns at their expense. The Sellers shall pay
by wire transfer to Buyer the Taxes for which they are liable pursuant to this
Article VIII (including Taxes set forth in Section 8.2(a)(i) and (ii)), but
which are payable with Tax Returns to be filed by Buyer pursuant to this section
at least three days prior to the due date for the payment of such Taxes.

                  (b)      All Tax Returns that are to be prepared and filed by
Buyer pursuant to the preceding paragraph and that relate to Taxes for which the
Sellers are liable under this Article VIII (including Straddle Period Tax
Returns) shall be submitted to the Sellers not later than 15 days prior to the
due date for filing of such Tax Returns (or if such due date is within 45 days
following the Closing Date, as promptly as practicable following the Closing
Date). The Sellers shall have the right to review such Tax Returns and to review
all work papers and procedures used to prepare any such Tax Return. If the
Sellers' Representative, within 10 days after delivery of any such Tax Return,
notifies Buyer in writing that it objects to any of the items in such Tax
Return, the parties shall attempt in good faith to resolve the dispute and, if
they are unable to do so, the disputed items shall be resolved (within a
reasonable time, taking into account the deadline for filing such Tax Return) by
an internationally recognized independent accounting firm chosen by both Buyer
and the Sellers. Upon resolution of all such items, the relevant Tax Return
shall be filed on that basis. The costs, fees and expenses of such accounting
firm shall be borne equally by Buyer and the Sellers.

                  (c)      Buyer shall not (and shall not cause or permit the
Acquired Companies to) amend, refile or otherwise modify (or grant an extension
of any statute of limitation with respect to) any Tax Return relating in whole
or in part to the Acquired Companies with respect to any taxable year or period
ending on or before the Balance Sheet Date or with respect to any Straddle
Period without the prior written consent of the Sellers' Representative, which
consent may not be unreasonably withheld or delayed. The Sellers shall not
amend, refile, or otherwise modify any such Tax Return if such action could have
an adverse affect on the liability of the Acquired Companies, without the prior
written consent of Buyer, which consent may not be unreasonably withheld or
delayed.

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                  (d)      All sales, use, transfer and other similar Taxes,
including any stock or asset transfer stamp Taxes shall be borne jointly and
severally by the Sellers.

         8.4      Contest Provisions.

                  (a)      In the event (i) any Seller or their Affiliates or
(ii) Buyer or its Affiliates receive notice of any pending or threatened Tax
audits or assessments or other disputes concerning Taxes with respect to which
the other party may incur liability under this Article VIII, the party in
receipt of such notice shall promptly notify the other party of such matter in
writing, provided that failure to comply with this provision shall not affect a
party's right to indemnification hereunder unless such failure materially
adversely affects the party's ability to challenge such Tax audits or
assessments.

                  (b)      The Sellers shall have the sole right to represent
the interests of the Acquired Companies in any Tax audit or administrative or
court proceeding relating to any Tax for any taxable period ending on or before
the Balance Sheet Date, and to employ counsel of their choice at their expense.
Notwithstanding the foregoing, the Sellers shall not be entitled to settle,
either administratively or after the commencement of litigation, any claim for
Taxes with respect to any Tax Return of any of the Acquired Companies that is
not prepared on a consolidated, combined or unitary basis which would adversely
affect the liability for Taxes of Buyer or the Acquired Companies for any period
after the Balance Sheet Date to any extent (including, but not limited to, the
imposition of income Tax deficiencies, the reduction of asset basis or cost
adjustments, the lengthening of any amortization or depreciation periods, the
denial of amortization or depreciation deductions, or the reduction of the loss
or credit carry forwards) without the prior written consent of Buyer, which
consent shall not be unreasonably withheld, and such consent shall not be
necessary to the extent that the Sellers have indemnified Buyer against the
effect of any such settlement.

                  (c)      Buyer shall have the sole right to represent the
interests of the Acquired Companies in any Tax audit or administrative or court
proceeding relating to Taxes with respect to taxable periods including (but not
ending on) or beginning after the Balance Sheet Date and to employ counsel of
its choice at its expense, provided that Buyer shall not be entitled to settle,
either administratively or after the commencement of litigation, any claim
regarding Taxes that would adversely affect the liability of the Sellers for any
Taxes for any period ending on or before the Balance Sheet Date or for any
Straddle Period, without the prior consent of the Sellers' Representative, which
consent shall not be unreasonably withheld and shall not be required to the
extent that Buyer has indemnified the Sellers against the effects of such
settlement. Where consent to a settlement is withheld by the Sellers'
Representative pursuant to this section, the Sellers may continue or initiate
any further proceedings at their own expense, provided that the liability of
Buyer, after giving effect to this Agreement, shall not exceed the liability
that would have resulted from the settlement or amended return.

         8.5      Assistance and Cooperation. After the Closing Date, the
Sellers, on the one hand, and Buyer, on the other hand, shall (and shall cause
their respective Affiliates to): (a) assist the other party in preparing and
filing any Tax Returns or reports which such other party is responsible for
preparing and filing in accordance with this Article VIII; (b) cooperate fully
in preparing for any audits of, or disputes with taxing authorities regarding,
any Tax Returns of the

                                       69



Acquired Companies; (c) make available to the other and to any taxing authority
as reasonably requested all information, records, and documents relating to
Taxes of the Acquired Companies; (d) provide timely notice to the other in
writing of any pending or threatened Tax audits or assessments of the Acquired
Companies for taxable periods for which the other may have a liability under
this Article VIII; and (e) furnish the other with copies of all correspondence
received from any taxing authority in connection with any Tax audit or
information request with respect to any such taxable period.

         8.6      Retention of Records. After the Closing Date, the Sellers,
Buyer and the Acquired Companies will preserve all information, records or
documents relating to liabilities for Taxes of the Acquired Companies until six
months after the expiration of any applicable statute of limitations (including
extensions thereof) with respect to the assessment of such Taxes, provided that
neither party shall dispose of any of the foregoing items without first offering
such items to the other party.

         8.7      Other Provisions. The provisions of this Article VIII (and not
Section 7.2) shall govern all indemnity claims with respect to Tax matters of
the Acquired Companies and the purchase of the Shares pursuant to this
Agreement. All indemnity payments under this Agreement and any adjustment to any
payment of the Purchase Price as described in Section 2.3 shall be treated as an
adjustment to the Purchase Price paid for the Shares for tax purposes.

                                   ARTICLE IX
                                   CONDITIONS

         9.1      Conditions to Each Party's Obligation to Effect the Stock
Purchase. The respective obligations of each party to effect the Stock Purchase
and the other transactions contemplated hereby are subject to the satisfaction
or waiver at or prior to the Closing Date of each of the following conditions:

                  (a)      All filings with any Governmental Entity required to
be made prior to the Closing Date by the Sellers, Buyer, Standard Pacific or any
of their respective Affiliates, and all consents of any Governmental Entity
required to be obtained prior to the Closing Date by the Sellers, Buyer,
Standard Pacific or any of their respective Affiliates in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein by the Sellers, Buyer and Standard Pacific
shall have been made or obtained (as the case may be).

                  (b)      No court or other Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, judgment, decree, injunction or other order, whether
temporary, preliminary or permanent (collectively, an "Order") that is in effect
and restrains, enjoins or otherwise prohibits, materially delays, makes illegal,
or would be violated by consummation of the transactions contemplated in this
Agreement.

         9.2      Conditions to Obligations of Buyer and Standard Pacific. The
obligations of Buyer and Standard Pacific to effect the Stock Purchase are also
subject to the satisfaction or waiver by Buyer and Standard Pacific at or prior
to the Closing Date of the following conditions:

                                       70



                  (a)      each of the representations and warranties of the
Sellers set forth in this Agreement qualified as to materiality shall be true
and correct, and those not so qualified shall each be true and correct in all
material respects, as of the date of this Agreement and as of the Closing Date
(without giving effect to any amendment or supplement to the Sellers' Disclosure
Schedule) as though made on and as of the Closing Date (except to the extent
such representations and warranties speak as of an earlier date, in which case
such representation or warranty shall be true and correct as of such earlier
date);

                  (b)      the Sellers shall have performed in all material
respects all obligations required to be performed by them under this Agreement
at or prior to the Closing Date;

                  (c)      Buyer shall have been furnished with a certificate,
executed by the Sellers' Representative, dated the Closing Date, certifying as
to the fulfillment of the conditions in Sections 9.2(a) and (b);

                  (d)      all consents required under the Material Contracts in
connection with the execution, delivery and performance of this Agreement, the
other Transaction Documents or the consummation of the transactions contemplated
hereby or thereby, including, to the extent necessary, consents to the
prepayment of all Debt of the Acquired Companies as contemplated by Section
2.2(a)(iii), shall been obtained by the Sellers on terms that are not materially
burdensome, shall be in full force and effect and shall have been delivered to
Buyer;

                  (e)      Buyer shall have received opinions dated the Closing
Date of counsel to Sellers, substantially in the form of Exhibit D-1 from
Bricklemyer, Smolker & Bolves, P.A., substantially in the form of Exhibit D-2
from Hill, Ward & Henderson, P.A., substantially in the form of Exhibit D-3 from
Kennedy Covington, and substantially in the form of Exhibit D-4 from Ungaretti &
Harris;

                  (f)      there shall not be pending or threatened by any
Governmental Entity any suit, action or proceeding (or by any other Person any
suit, action or proceeding which has a reasonable likelihood of success), (A)
seeking to obtain from Buyer, Standard Pacific or any Affiliate thereof, in
connection with the purchase and sale of the Shares or the other transactions
contemplated hereby any money damages; (B) seeking to prohibit or limit the
ownership or operation by Buyer, Standard Pacific or any of the Acquired
Companies, of any material portion of the business or assets of Buyer, Standard
Pacific or any of the Acquired Companies, or to compel Buyer, Standard Pacific
or any of the Acquired Companies to dispose of or hold separate any material
portion of the business or assets of Buyer, Standard Pacific or the Acquired
Companies, in each case as a result of the purchase and sale of the Shares or
any of the other transactions contemplated by this Agreement; (C) seeking to
impose limitations on the ability of Buyer or Standard Pacific to acquire or
hold, or exercise full rights of ownership of the Shares, including the right to
vote the Shares on all matters properly presented to the shareholders of the
Company; (D) seeking to prohibit Buyer or Standard Pacific from effectively
controlling in any material respect the business or operations of any of the
Acquired Companies; (E) claiming that such Person is a beneficial owner of, or
has the right to acquire or to obtain beneficial ownership of, any Capital Stock
of any of the Acquired Companies or is entitled to any portion of the Purchase
Price; or (F) that may otherwise have the effect of preventing, materially
delaying, or

                                       71



otherwise materially interfering with the transaction contemplated by this
Agreement and the other Transaction Documents;

                  (g)      since the date of this Agreement, there shall have
been no event, change, occurrence or circumstance having, or which could have,
individually or in the aggregate, a Material Adverse Effect on the Acquired
Companies;

                  (h)      Buyer shall have received the resignations of the
directors of the Acquired Companies pursuant to Section 6.9;

                  (i)      Buyer shall have received a duly executed and
delivered copy of a United States Internal Revenue Service Form 8023 from each
of the Sellers( and, to the extent any information in such forms is not
available on the Closing Date, such information may be added by Standard
Pacific, subject to the reasonable prior approval of the Sellers'
Representative), and each of the Sellers shall have delivered such other
documents Standard Pacific deems reasonably necessary or advisable for an
election under Section 338(h)(10) of the Code and any comparable election under
state or local law with respect to the transactions contemplated hereby, each in
a form reasonably satisfactory to Standard Pacific;

                  (j)      all assets of the Acquired Companies shall be free
and clear of all Liens and Buyer shall have received original UCC Termination
Statements and mortgage reconveyances suitable for filing with the appropriate
authorities to evidence the release of such Liens;

                  (k)      Buyer shall have received such other documents as
Buyer reasonably requests evidencing the satisfaction of any condition referred
to in this Section 9.2.;

                  (l)      each of the Employee Sellers shall have entered into
his respective Employment Agreement;

                  (m)      the Stockholder Agreement shall have been terminated;
and

                  (n)      the Wells Fargo Agreement shall have been amended to
the reasonable satisfaction of Standard Pacific.

         9.3      Conditions to Obligations of the Sellers. The obligations of
the Sellers to effect the Stock Purchase are also subject to the satisfaction or
waiver by the Sellers prior to the Closing Date of the following conditions:

                  (a)      each of the representations and warranties of Buyer
and Standard Pacific set forth in this Agreement qualified as to materiality
shall be true and correct, and those not so qualified shall each be true and
correct in all material respects, as of the date of this Agreement and as of the
Closing Date (without giving effect to any amendment or supplement to Buyer's
Disclosure Schedule) as though made on and as of the Closing Date (except to the
extent such representations and warranties speak as of an earlier date, in which
case such representation or warranty shall be true and correct as of such
earlier date);

                                       72



                  (b)      Buyer and Standard Pacific shall have performed in
all material respects all obligations required to be performed by them under
this Agreement at or prior to the Closing Date;

                  (c)      the Sellers' Representative shall have been furnished
with a certificate, executed by a duly authorized officer of Buyer, dated the
Closing Date, certifying as to the fulfillment of conditions in Sections 9.3(a)
and (b);

                  (d)      Buyer shall have delivered to each Seller, such
Seller's Pro Rata Portion of the Closing Payment;

                  (e)      the Sellers shall have received an opinion dated the
Closing Date of Gibson, Dunn & Crutcher LLP, counsel to Buyer, substantially in
the form of Exhibit E; and

                  (f)      the Sellers shall have received such other documents
as the Sellers' Representative reasonably requests evidencing the satisfaction
of any condition referred to in this Section 9.3.

                                    ARTICLE X
                                   TERMINATION

         10.1     Termination by Mutual Consent. This Agreement may be
terminated and the Stock Purchase may be abandoned at any time prior to the
Closing Date, by mutual written consent of the Sellers, Buyer and Standard
Pacific.

         10.2     Termination by Either Buyer or the Sellers. This Agreement may
be terminated and the Stock Purchase may be abandoned at any time prior to the
Closing Date by either Standard Pacific and Buyer or the Sellers if any Order
permanently restraining, enjoining or otherwise prohibiting the Stock Purchase
shall be entered and such Order is or shall have become nonappealable, provided
that (i) the party seeking to terminate this Agreement shall have complied with
its obligations under Section 6.2 with respect to the removal or lifting of such
Order, and (ii) the noncompliance with this Agreement by the party seeking to
terminate this Agreement shall not have been the proximate cause of the issuance
of the Order.

         10.3     Termination by Sellers. This Agreement may be terminated and
the Stock Purchase may be abandoned at any time prior to the Closing Date, by
the Sellers if:

                  (a)      (i)   the Stock Purchase shall not have been
         consummated on or before August 31, 2002, or

                           (ii)  any of the conditions set forth in Section 9.1
         or 9.3 shall have become incapable of fulfillment;

provided, however, that the right to terminate this Agreement pursuant to this
subsection (a) shall not be available to the Sellers if any of them has breached
in any material respect its obligations under this Agreement in any manner that
shall have proximately contributed to the failure referenced in this subsection
(a); or

                                       73



                  (b)      there has been a material breach by Buyer or Standard
Pacific of any representation, warranty, covenant or agreement of Standard
Pacific and Buyer contained in this Agreement that is not curable or, if
curable, is not cured prior to the earlier of (i) 30 days after written notice
of such breach is given by the Sellers to Buyer and Standard Pacific and (ii)
the date referred to in subsection (a).

         10.4     Termination by Buyer. This Agreement may be terminated and the
Stock Purchase may be abandoned at any time prior to the Closing Date by Buyer
and Standard Pacific if:

                  (a)      (i)   the Stock Purchase shall not have been
         consummated on or before August 31, 2002, or

                           (ii)  any of the conditions set forth in Section
         9.1 or Section 9.2 shall have become incapable of fulfillment;

provided, however, that the right to terminate this Agreement pursuant to this
subsection (a) shall not be available to Buyer or Standard Pacific if they have
breached in any material respect their obligations under this Agreement in any
manner that shall have proximately contributed to the failure referred to in
this subsection (a); or

                  (b)      there has been a material breach of any
representation, warranty, covenant or agreement of the Sellers contained in this
Agreement that is not curable or, if curable, is not cured prior to the earlier
of (i) 30 days after written notice of such breach is given by Buyer or Standard
Pacific to the Sellers' Representative, and (ii) the date referred to in
subsection (a).

         10.5     Effect of Termination. Each party's right of termination under
this Article X is in addition to any other rights it may have under this
Agreement or otherwise, and the exercise of a right of termination will not be
an election of remedies. If this Agreement is terminated, all further
obligations of the parties under this Agreement will terminate, except that
Sections 6.3 and 6.5 and Article XI hereof and the Confidentiality Agreement
entered into between Standard Pacific and the Company on February 13, 2002 (the
"Confidentiality Agreement"), will survive. Notwithstanding the foregoing, if
this Agreement is terminated by a party because of the breach of the Agreement
by another party or because one or more of the conditions to the terminating
party's obligations under this Agreement is not satisfied as a result of another
party's failure to comply with its obligations under this Agreement, the
terminating party's right to pursue all legal remedies will survive such
termination unimpaired.

                                   ARTICLE XI
                                  MISCELLANEOUS

         11.1     Entire Agreement; Assignment.

                  (a)      This Agreement (including the documents, schedules,
exhibits and instruments referred to herein) constitutes the entire agreement
and supersedes all prior agreements and understandings, both written and oral,
and all contemporaneous oral agreements and understandings among the parties
with respect to the subject matter hereof, except for (i) the provisions of the
Confidentiality Agreement not inconsistent herewith, and (ii) the compensation

                                       74



provisions set forth in those certain letters from Standard Pacific to each
Employee Seller regarding "Proposed Employee Compensation," dated August 2,
2002. Except for express representations, warranties and covenants of Standard
Pacific, Buyer, and the Sellers contained herein, in the Transaction Documents,
or made by the executive officers or other authorized officers of such Persons
in writing after the date hereof, there are no representations or warranties
whatsoever by or on behalf of the Sellers, their Affiliates or agents relating
to the Acquired Companies, on the one hand and Standard Pacific, Buyer, their
Affiliates or agents relating to Standard Pacific, Buyer or the Standard Pacific
Common Stock, on the other hand.

                  (b)      Neither this Agreement nor any of the rights,
interests or obligations hereunder will be assigned by any of the parties hereto
(whether by operation of law or otherwise) without the prior written consent of
each of the other parties hereto; provided, however, that Buyer may assign all
or a portion of its rights and obligations under this Agreement to any
Subsidiary of Standard Pacific without the consent of the Sellers (which such
assignment shall not relieve Buyer of any obligation or liability under this
Agreement).

                  (c)      This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.

         11.2     Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, each of which shall remain in full force and effect
and in lieu of such invalid or unenforceable provision there shall be
automatically added as part of this Agreement a valid and enforceable provision
as similar in terms to the invalid or unenforceable provision as possible,
provided that this Agreement as amended, (i) reflects the intent of the parties
hereto, and (ii) does not change the bargained for consideration or benefits to
be received by each party hereto.

         11.3     Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by overnight courier or telecopier to the
respective parties as follows:

         If to Standard Pacific or Buyer:

         Standard Pacific Corp.
         15326 Alton Parkway
         Irvine, California  92618
         Attn: Clay A. Halvorsen
         Facsimile Number: (949) 789-1609

                  with a copy to:

                  Gibson, Dunn & Crutcher LLP
                  333 South Grand Avenue
                  Los Angeles, California  90071-3197
                  Attn: Gregory L. Surman
                  Facsimile Number: (213) 229-7520

                                       75



         If to the Sellers (prior to the Closing) or the Sellers' Representative
(post-Closing):

         Westfield Homes USA, Inc.
         4300 W. Cypress Street, Suite 980
         Tampa, Florida 33607
         Attn:  Roger Gatewood
         Facsimile Number: (813) 874-0700

                  with a copy to:
                  Sack & Harris, P.C.
                  8270 Greensboro Drive, Suite 630
                  McLean, Virginia 22101
                  Attention:  James M. Sack
                  Facsimile Number: (703) 883-0108

or to such other address as the Person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above;
provided that notice of any change of address shall be effective only upon
receipt thereof.

         11.4     Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida, regardless of the
laws or rules that might otherwise govern under applicable principles of
conflicts of laws thereof. In the event of the bringing of any action or suit by
a party hereto against another party hereunder arising out of or relating to
this Agreement, which claim or suit is for equitable relief, or to enforce any
resolution, opinion or order of an arbitrator pursuant to Section 11.12, or is
not subject to arbitration, as determined pursuant to Section 11.12, then in
that event, (i) the sole forum for resolving such disputes shall be the state
and federal courts located in Tampa, Florida, and each of the parties hereby
irrevocably submits to such exclusive jurisdiction, and (ii) the prevailing
party in such action or dispute, whether by final judgment, or out of court
settlement shall be entitled to have and recover of and from the non-prevailing
parties all costs and expenses of suit, including actual attorneys' fees. Any
judgment or order entered in any final judgment shall contain a specific
provision providing for the recovery of all costs and expenses of suit,
including actual attorneys' fees (collectively "Costs") incurred in enforcing,
perfecting and executing such judgment. For the purposes of this paragraph,
Costs shall include, without limitation, attorneys' fees, costs and expenses
incurred in (a) appeals, (b) post-judgment motions, (c) contempt proceeding, (d)
garnishment, levy, and debtor and third party examination, (e) discovery, and
(f) bankruptcy litigation. This paragraph shall survive any termination of this
Agreement and the Closing.

         11.5     Construction. The headings herein are inserted for convenience
of reference only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement. Unless the context clearly requires otherwise
"or" is not exclusive, and "includes" means "includes, but is not limited to."

         11.6     Counterparts. This Agreement may be executed in counterparts,
including facsimile counterparts, each of which shall be deemed to be an
original, but all of which shall

                                       76



constitute one and the same agreement. Delivery of an executed counterpart of a
signature page to this Agreement by facsimile transmission shall be effective
delivery of a manually executed counterpart to this Agreement.

         11.7     Parties In Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other Person any rights or
remedies of any nature whatsoever under or by reason of this Agreement,
including any employee or former employee of the Acquired Companies (or any
beneficiary or dependent thereof).

         11.8     Waiver. No waiver of any breach of the provisions of this
Agreement will be deemed to have been made by any party, unless such waiver is
expressed in writing and signed by the party against which it is to be enforced.
The waiver by any party of any right under this Agreement or to a remedy for the
breach of any of the provisions herein shall not operate nor be construed by the
breaching party as a waiver of the non-breaching party's remedies with respect
to any other or continuing or subsequent breach.

         11.9     Amendments. No amendment or modification in respect of this
Agreement shall be effective unless it shall be in writing and signed by the
parties hereto.

         11.10    Further Assurances. The parties agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such other documents, and (c) to do such other acts and things, all
as any other party hereto may reasonably request for the purpose of carrying out
the transactions contemplated by this Agreement.

         11.11    Cumulative Remedies. The rights, remedies, powers and
privileges herein provided are cumulative and not exclusive of any other rights,
remedies, powers and privileges provided by law.

         11.12    Arbitration. Any dispute, claim or controversy arising out of
or relating to this Agreement or the breach, termination, enforcement,
interpretation or validity thereof, including the determination of the scope or
applicability of this Agreement to arbitrate, shall be determined by arbitration
in Tampa, Florida, before a sole arbitrator, in accordance with the laws of the
State of Florida for agreements made in and to be performed in that State. If
any dispute, claim or controversy arising out of or relating to this Agreement
or any other Transaction Document arises at the same time and relates to the
same or similar facts, claims or events as a dispute, claim or controversy
relating to or arising out of the employment of any Seller by Buyer or any of
the Acquired Companies or the License Agreement, such disputes, claims or
controversies shall, to the extent practicable, be combined in one arbitration
proceeding, and in such event, the provisions of this Agreement governing
dispute resolution shall supersede any provisions relating to such matters in
any employment agreement between any such Seller and any Acquired Company or any
Affiliate of the Acquired Companies or in the License Agreement, as applicable.
The arbitration shall be administered by the American Arbitration Association
pursuant to Commercial Arbitration Rules including the Emergency Interim Relief
Procedures, and judgment on the award rendered by the arbitrator may be entered
in any court set forth in Section 11.4. The sole arbitrator shall be a retired
or former district court or appellate court judge of a United States District
Court or United States Court of Appeals. The Federal Rules of

                                       77



Evidence shall govern the admissibility of evidence during the arbitration. The
arbitrator will have no authority to award punitive or other damages not
measured by the prevailing party's actual damages, except as may be required by
statute. The arbitrator shall award to the prevailing party, if any, as
determined by the arbitrator, all of its costs and fees. "Costs and fees" mean
all reasonable pre-award expenses of the arbitration, including the arbitrators'
fees, administrative fees, travel expenses, out-of-pocket expenses such as
copying and telephone, court costs, witness fees, expert costs and fees, and
attorneys' fees. In absence of a determination of a prevailing party, the
parties shall split equally all expenses of the arbitration and shall bear their
own attorneys', expert, and witness fees and costs. The decision and award of
the arbitrator shall be accompanied by a reasoned opinion.

                            [Signature page follows]

                                       78



                   [SIGNATURE PAGE - STOCK PURCHASE AGREEMENT]

         IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its respective officer thereunto duly authorized, all
as of the day and year first above written.

"STANDARD PACIFIC"
Standard Pacific Corp.,
a Delaware corporation


By:   /s/ Stephen J. Scarborough             By:   /s/ Michael C. Cortney
      ------------------------------------         -----------------------------
Name: Stephen J. Scarborough                 Name: Michael C. Cortney
Title Chief Executive Officer and            Title President
      Chairman of the Board

"BUYER"
WF Acquisition, Inc.,
a Delaware corporation


By:   /s/ Stephen J. Scarborough             By:   /s/ Michael C. Cortney
      ------------------------------------         -----------------------------
Name: Stephen J. Scarborough                 Name: Michael C. Cortney
Title Chief Executive Officer and            Title President
      Chairman of the Board

"SELLERS"

By:   /s/ Roger Gatewood                     By:   /s/ Frank Baker
      ------------------------------------         -----------------------------
Name:        Roger Gatewood                  Name:         Frank Baker


By:   /s/ John Schlichenmaier                By:   /s/ Andrew Berger
      ------------------------------------         -----------------------------
Name:        John Schlichenmaier             Name:         Andrew Berger


By:   /s/ Robert Suida                       By:   /s/ Brian Harris
      ------------------------------------         -----------------------------
Name:        Robert Siuda                    Name:         Brian Harris

                                       S-1



By:   /s/ David Pelletz                      By:   /s/ Lindsey Gatewood
      ------------------------------------         -----------------------------
Name:        David Pelletz                   Name:          Lindsey Gatewood

Roger B. Gatewood Irrevocable                Roger B. Gatewood Irrevocable
Trust for Catherine Gatewood, dated          Trust for Elizabeth Gatewood, dated
May 16, 1988                                 May 16, 1988


By:   /s/ Arthur S. Gatewood                 By:   /s/ Arthur S. Gatewood
      ------------------------------------         -----------------------------
Name:        Arthur S. Gatewood, Trustee     Name:  Arthur S. Gatewood, Trustee

                                       S-2

EX-10.2

                                                                    EXHIBIT 10.2
================================================================================




                           MASTER REPURCHASE AGREEMENT



            CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, as buyer
               ("Buyer", which term shall include any "Principal"
                 -----                                 ---------
 as defined and provided for in Annex I) or as agent pursuant hereto ("Agent"),
                                                                       -----



            FAMILY LENDING SERVICES, INC., as seller ("Seller"), and
                                                       ------




                              Dated October 5, 2001






================================================================================



                                TABLE OF CONTENTS



                                                                                Page
                                                                                ----
                                                                             
1.   Applicability .........................................................       1

2.   Definitions ...........................................................       1

3.   Program; Initiation of Transactions ...................................      17

4.   Repurchase ............................................................      18

5.   Price Differential ....................................................      19

6.   Margin Maintenance ....................................................      20

7.   Income Payments .......................................................      20

8.   Security Interest .....................................................      21

9.   Payment and Transfer ..................................................      22

10.  Conditions Precedent ..................................................      22

11.  Program ...............................................................      24

12.  Servicing .............................................................      25

13.  Representations; Warranties and Covenants .............................      26

14.  Events of Default .....................................................      35

15.  Remedies Upon Default .................................................      37

16.  Reports ...............................................................      39

17.  Repurchase Transactions ...............................................      41

18.  Single Agreement ......................................................      42

19.  Notices and Other Communications ......................................      42

20.  Entire Agreement; Severability ........................................      43

21.  Non assignability .....................................................      43

22.  Set-off ...............................................................      44


                                      -i-



                                                                             
23.  Binding Effect; Governing Law; Jurisdiction ...........................       44

24.  No Waivers, Etc. ......................................................       44

25.  Intent ................................................................       45

26.  Disclosure Relating to Certain Federal Protections ....................       45

27.  Power of Attorney .....................................................       46

28.  Buyer May Act Through Affiliates ......................................       46

29.  Indemnification; Obligations ..........................................       46

30.  Counterparts ..........................................................       47

31.  Confidentiality .......................................................       47

32.  Recording of Communications ...........................................       47

33.  Facility Fee ..........................................................       47

34.  Non-Utilization Fee ...................................................       48

35.  Periodic Due Diligence Review .........................................       48



                                      -ii-



SCHEDULES

Schedule 1 - Representations and Warranties with Respect to Purchased Mortgage
             Loans

ANNEXES

Annex I - Buyer Acting as Agent

Annex II - Facility Fee Schedule

Annex III - Non-Utilization Fee Formula

EXHIBITS

Exhibit A - Form of Transaction Request

Exhibit B - Form of Purchase Confirmation

Exhibit C - Form of Mortgage Loan Schedule and Exception Report

Exhibit D - Form of Officer's Compliance Certificate

Exhibit E - Form of Opinion of Seller's counsel

Exhibit F - Underwriting Guidelines of Seller

Exhibit G - Authorized Signatories of Seller

Exhibit H - Corporate Resolutions of Seller

Exhibit I - Seller's Tax Identification Number

Exhibit J - Existing Indebtedness

Exhibit K - Wet-Ink Procedures

Exhibit L - Escrow Instruction Letter

Exhibit M - Custodial and Bank Fee Schedule

Exhibit N - Form of Servicer Notice

Exhibit O - Initial Exception Mortgage Loans

                                     -iii-



          1.   Applicability

          From time to time the parties hereto may enter into transactions in
which Seller agrees to transfer to Buyer Mortgage Loans (as hereinafter defined)
against the transfer of funds by Buyer, with a simultaneous agreement by Buyer
to transfer to Seller such Mortgage Loans at a date certain or on demand,
against the transfer of funds by Seller. Each such transaction shall be referred
to herein as a "Transaction" and, unless otherwise agreed in writing, shall be
governed by this Agreement, including any supplemental terms or conditions
contained in any annexes identified herein, as applicable hereunder.

          2.   Definitions

          Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:

          "Acceptable State" means any state acceptable pursuant to Seller's
Underwriting Guidelines.

          "Accepted Servicing Practices" means, with respect to any Mortgage
Loan, those mortgage servicing practices of prudent mortgage lending
institutions which service mortgage loans of the same type as such Mortgage Loan
in the jurisdiction where the related Mortgaged Property is located.

          "Act of Insolvency" means, with respect to the Seller or any of the
Seller's Material Affiliates, (i) the filing of a petition, commencing, or
authorizing the commencement of any case or proceeding, or the voluntary joining
of any case or proceeding under any bankruptcy, insolvency, reorganization,
liquidation, dissolution or similar law relating to the protection of creditors,
or suffering any such petition or proceeding to be commenced by another which is
consented to, not timely contested or results in entry of an order for relief;
(ii) the seeking of the appointment of a receiver, trustee, custodian or similar
official for Seller or such Material Affiliate or any substantial part of the
property of Seller or such Material Affiliate; (iii) the appointment of a
receiver, conservator, or manager for Seller or such Material Affiliate by any
governmental agency or authority having the jurisdiction to do so; (iv) the
making or offering by Seller or such Material Affiliate of a composition with
its creditors or a general assignment for the benefit of creditors; (v) the
admission by Seller or such Material Affiliate of its inability to pay its debts
or discharge its obligations as they become due or mature; or (vi) that any
governmental authority or agency or any person, agency or entity acting or
purporting to act under governmental authority shall have taken any action to
condemn, seize or appropriate, or to assume custody or control of, all or any
substantial part of the property of Seller or such Material Affiliate, or shall
have taken any action to displace the management of Seller or such Material
Affiliate or to curtail its authority in the conduct of the business of Seller
or such Material Affiliate.

          "Adjusted Tangible Net Worth" means, Net Worth plus 1% of the
outstanding servicing portfolio balance of such Person plus Subordinated Debt
(provided that Subordinated Debt shall not be taken into account to the extent
that it would cause greater than 25% of



Adjusted Tangible Net Worth to be comprised of Subordinated Debt), minus
intangible assets such as capitalized servicing rights, goodwill and trademarks,
minus notes receivable from shareholders or affiliates.

          "Affiliate" means, with respect to any Person, any "affiliate" of such
Person, as such term is defined in the Bankruptcy Code.

          "Aged Loan" means a Mortgage Loan which has been held by the Custodian
for the benefit of Buyer (in its capacity as Buyer hereunder or as a secured
lender) for a period of greater than 90 days but less than 120 days.

          "Agency" means Freddie Mac or Fannie Mae, as applicable.

          "Agency Security" means a mortgage-backed security issued by an
Agency.

          "Agent" means Credit Suisse First Boston Mortgage Capital LLC or any
affiliate or successor thereto.

          "Agreement" means this Master Repurchase Agreement, as it may be
amended, supplemented or otherwise modified from time to time.

          "Alt A Mortgage Loan" means a Mortgage Loan originated in accordance
with the criteria established by Buyer for Alt-A Mortgage Loans, as determined
by Buyer in its sole discretion.

          "Appraised Value" means the value set forth in an appraisal made in
connection with the origination of the related Mortgage Loan as the value of the
Mortgaged Property.

          "Asset Tape" means a remittance report on a monthly basis or as
otherwise requested by Buyer pursuant to Section 17d hereof containing servicing
information, including, without limitation, those fields reasonably requested by
Buyer from time to time, on a loan-by-loan basis and in the aggregate, with
respect to the Purchased Mortgage Loans serviced by Seller or any Servicer for
the month (or any portion thereof) prior to the Reporting Date.

          "Assignment of Mortgage" means an assignment of the Mortgage, notice
of transfer or equivalent instrument in recordable form, sufficient under the
laws of the jurisdiction wherein the related Mortgaged Property is located to
reflect the sale of the Mortgage to Buyer.

          "Bailee Letter" has the meaning assigned to such term in the Custodial
Agreement.

          "Bankruptcy Code" means the United States Bankruptcy Code of 1978, as
amended from time to time.

          "Bid" has the meaning set forth in Section 4(c) hereof.

          "Bid Fee" has the meaning set forth in Section 4(c) hereof.

                                      -2-



          "Business Day" means any day other than (A) a Saturday or Sunday and
(B) a public or bank holiday in New York City.

          "Buyer" means Credit Suisse First Boston Mortgage Capital LLC, and any
successor hereunder.

          "Buyer's Margin Amount" means with respect to any Transaction as of
any date of determination, an amount equal to the product of (A) Buyer's Margin
Percentage and (B) the Purchase Price for such Transaction.

          "Buyer's Margin Percentage" means, with respect to any Transaction as
of any date, a percentage equal to the percentage obtained by dividing the (A)
Market Value of the Purchased Mortgage Loans on the Purchase Date for such
Transaction by (B) the Purchase Price on the Purchase Date for such Transaction;
provided, that, with respect to any Mortgage Loan which was not an Exception
Mortgage Loan on the related Purchase Date and which, as of the date of
determination, is an Exception Mortgage Loan, Buyer's Margin Percentage as of
such date of determination shall be equal to the percentage obtained by dividing
(A) the Market Value of such Mortgage Loan on the related Purchase Date by (B)
the amount the Purchase Price would have been on the Purchase Date if such
Mortgage Loan had been categorized as the type of Mortgage Loan (e.g., Exception
Mortgage Loan, etc.) that it is categorized on the date of determination.

          "Calmco" means Vesta Servicing L.P., or any successor in interest
thereto.

          "Capital Lease Obligations" means, for any Person, all obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) Property to the extent such obligations are required
to be classified and accounted for as a capital lease on a balance sheet of such
Person under GAAP, and, for purposes of this Agreement, the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP.

          "Change in Control" means:

          (A)  any transaction or event as a result of which Standard Pacific
     Corp. ceases to own, beneficially or of record, 100% of the stock of
     Seller;

          (B)  the sale, transfer, or other disposition of all or substantially
     all of Seller's assets (excluding any such action taken in connection with
     (x) any securitization transaction or (y) any Transaction or series of
     Transactions hereunder).

          "Code" means the Internal Revenue Code of 1986, as amended.

          "Collection Account" means one or more accounts established by the
Servicer into which all collections and proceeds on or in respect of the
Mortgage Loans shall be deposited by Servicer.

          "Committed Mortgage Loan" means a Mortgage Loan which is the subject
of a Take-out Commitment with a Take-out Investor.

                                      -3-



          "Conforming Mortgage Loan" means a Mortgage Loan originated in
accordance with the criteria of an Agency for purchase of Mortgage Loans,
including, without limitation, conventional Mortgage Loans, FHA Loans and VA
Loans, as determined by Buyer in its sole discretion.

          "Custodial Agreement" means the custodial agreement dated as of the
date hereof, among Seller, Buyer and Custodian as the same may be amended from
time to time.

          "Custodian" means LaSalle Bank, National Association or such other
party specified by Buyer and agreed to by Seller, which approval shall not be
unreasonably withheld.

          "Default" means an Event of Default or an event that with notice or
lapse of time or both would become an Event of Default.

          "Dollars" and "$" means dollars in lawful currency of the United
States of America.

          "Due Date" means the day of the month on which the Monthly Payment is
due on a Mortgage Loan, exclusive of any days of grace.

          "Effective Date" means the date upon which the conditions precedent
set forth in Section 10 shall have been satisfied.

          "Electronic Tracking Agreement" means an Electronic Tracking Agreement
among Buyer, Seller, MERS and MERSCORP, Inc., to the extent applicable.

          "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.

          "ERISA Affiliate" means any corporation or trade or business that is a
member of any group of organizations (i) described in Section 414(b) or (c) of
the Code of which Seller is a member and (ii) solely for purposes of potential
liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code
and the lien created under Section 302(f) of ERISA and Section 412(n) of the
Code, described in Section 414(m) or (o) of the Code of which Seller is a
member.

          "Escrow Instruction Letter" means the Escrow Instruction Letter from
Seller to the Settlement Agent, in the form of Exhibit L hereto, as the same may
be modified, supplemented and in effect from time to time.

          "Escrow Payments" means, with respect to any Mortgage Loan, the
amounts constituting ground rents, taxes, assessments, water rates, sewer rents,
municipal charges, mortgage insurance premiums, fire and hazard insurance
premiums, condominium charges, and any other payments required to be escrowed by
the Mortgagor with the mortgagee pursuant to the Mortgage or any other document.

          "Event of Default" has the meaning specified in Section 15 hereof.

                                      -4-



          "Event of Termination" means with respect to Seller (i) with respect
to any Plan, a reportable event, as defined in Section 4043 of ERISA, as to
which the PBGC has not by regulation waived the requirement of Section 4043(a)
of ERISA that it be notified with 30 days of the occurrence of such event, or
(ii) the withdrawal of Seller or any ERISA Affiliate thereof from a Plan during
a plan year in which it is a substantial employer, as defined in Section
4001(a)(2) of ERISA, or (iii) the failure by Seller or any ERISA Affiliate
thereof to meet the minimum funding standard of Section 412 of the Code or
Section 302 of ERISA with respect to any Plan, including, without limitation,
the failure to make on or before its due date a required installment under
Section 412(m) of the Code or Section 302(e) of ERISA, or (iv) the distribution
under Section 4041 of ERISA of a notice of intent to terminate any Plan or any
action taken by Seller or any ERISA Affiliate thereof to terminate any plan, or
(v) the adoption of an amendment to any Plan that, pursuant to Section
401(a)(29) of the Code or Section 307 of ERISA, would result in the loss of
tax-exempt status of the trust of which such Plan is a part if Seller or any
ERISA Affiliate thereof fails to timely provide security to the Plan in
accordance with the provisions of said sections, or (vi) the institution by the
PBGC of proceedings under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or (vii) the receipt by Seller
or any ERISA Affiliate thereof of a notice from a Multiemployer Plan that action
of the type described in the previous clause (vi) has been taken by the PBGC
with respect to such Multiemployer Plan, or (viii) any event or circumstance
exists which may reasonably be expected to constitute grounds for Seller or any
ERISA Affiliate thereof to incur liability under Title IV of ERISA or under
Sections 412(c)(11) or 412(n) of the Code with respect to any Plan.

          "Exception Mortgage Loan" means any Mortgage Loan which is otherwise
ineligible for purchase hereunder, or which otherwise becomes ineligible for
purchase hereunder and which is approved by Buyer in its sole discretion,
including the Mortgage Loans listed on Exhibit O hereto (the "Initial Exception
Mortgage Loans"). The Pricing Rate, Market Value, Purchase Price and Buyer's
Margin Percentage with respect to Exception Mortgage Loans, including without
limitation, the Initial Exception Mortgage Loans, shall be set in the sole
discretion of Buyer. Buyer may at any time, and in its sole discretion, no
longer consider a Mortgage Loan which is, or would be, otherwise ineligible for
purchase to be an Exception Mortgage Loan, including, without limitation, any
Initial Exception Mortgage Loan, for any reason including without limitation as
a result of the original characteristic or defect which made it ineligible for
purchase or any other characteristic or defect which could make it ineligible
for purchase, in which case such Mortgage Loan shall have a Market Value of
zero.

          "Existing Indebtedness" has the meaning specified in Section 13(a)(24)
hereof.

          "Fannie Mae" means Fannie Mae, the government sponsored enterprise
formerly known as the Federal National Mortgage Association.

          "FHA" means the Federal Housing Administration, an agency within the
United States Department of Housing and Urban Development, or any successor
thereto, and including the Federal Housing Commissioner and the Secretary of
Housing and Urban Development where appropriate under the FHA Regulations.

                                      -5-



          "FHA Approved Mortgagee" means a corporation or institution approved
as a mortgagee by the FHA under the National Housing Act, as amended from time
to time, and applicable FHA Regulations, and eligible to own and service
mortgage loans such as the FHA Loans.

          "FHA Loan" means a Mortgage Loan which is the subject of an FHA
Mortgage Insurance Contract.

          "FHA Mortgage Insurance" means, mortgage insurance authorized under
the National Housing Act, as amended from time to time, and provided by the FHA.

          "FHA Mortgage Insurance Contract" means the contractual obligation of
the FHA respecting the insurance of a Mortgage Loan.

          "FHA Regulations" means the regulations promulgated by the Department
of Housing and Urban Development under the National Housing Act, as amended from
time to time and codified in 24 Code of Federal Regulations, and other
Department of Housing and Urban Development issuances relating to FHA Loans,
including the related handbooks, circulars, notices and mortgagee letters.

          "Foreclosed Loan" means a Mortgage Loan, the property securing which
has been foreclosed upon by Seller.

          "Freddie Mac" means the Federal Home Loan Mortgage Corporation.

          "GAAP" means generally accepted accounting principles in effect from
time to time in the United States of America and applied on a consistent basis.

          "Governmental Authority" means any nation or government, any state or
other political subdivision thereof, or any entity exercising executive,
legislative, judicial, regulatory or administrative functions over Seller or
Buyer, as applicable.

          "Gross Margin" means, with respect to each adjustable rate Mortgage
Loan, the fixed percentage amount added to the Index for the purpose of
calculating the applicable Mortgage Interest Rate, as set forth in the related
Mortgage Note.

          "Guarantee" means, as to any Person, any obligation of such Person
directly or indirectly guaranteeing any Indebtedness of any other Person or in
any manner providing for the payment of any Indebtedness of any other Person or
otherwise protecting the holder of such Indebtedness against loss (whether by
virtue of partnership arrangements, by agreement to keep-well, to purchase
assets, goods, securities or services, or to take-or-pay or otherwise); provided
that the term "Guarantee" shall not include (i) endorsements for collection or
deposit in the ordinary course of business, or (ii) obligations to make
servicing advances for delinquent taxes and insurance or other obligations in
respect of a Mortgaged Property, to the extent required by Buyer. The amount of
any Guarantee of a Person shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
is made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect

                                      -6-



thereof as determined by such Person in good faith. The terms "Guarantee" and
"Guaranteed" used as verbs shall have correlative meanings.

          "High Cost Mortgage Loans" means any Mortgage Loans classified as (a)
"high cost" loans under the Home Ownership and Equity Protection Act of 1994, as
amended or (b) "high cost," "threshold," or "predatory" loans under any other
applicable state, federal or local law.

          "Income" means with respect to any Purchased Mortgage Loan at any time
until repurchased by the Seller, any principal received thereon or in respect
thereof and all interest, dividends or other distributions thereon.

          "Increased Maximum Aggregate Purchase Price Period" shall mean the
period from and including November 1, 2001 up to but not including February 1,
2002.

          "Indebtedness" means, for any Person: (a) obligations created, issued
or incurred by such Person for borrowed money (whether by loan, the issuance and
sale of debt securities or the sale of Property to another Person subject to an
understanding or agreement, contingent or otherwise, to repurchase such Property
from such Person); (b) obligations of such Person to pay the deferred purchase
or acquisition price of Property or services, other than trade accounts payable
(other than for borrowed money) arising, and accrued expenses incurred, in the
ordinary course of business, so long as such trade accounts payable are payable
within 90 days of the date the respective goods are delivered or the respective
services are rendered; (c) Indebtedness of others secured by a Lien on the
Property of such Person, whether or not the respective Indebtedness so secured
has been assumed by such Person; (d) obligations (contingent or otherwise) of
such Person in respect of letters of credit or similar instruments issued or
accepted by banks and other financial institutions for the account of such
Person; (e) Capital Lease Obligations of such Person; (f) obligations of such
Person under repurchase agreements, sale/buy-back agreements or like
arrangements; (g) Indebtedness of others Guaranteed by such Person; (h) all
obligations of such Person incurred in connection with the acquisition or
carrying of fixed assets by such Person; and (i) Indebtedness of general
partnerships of which such Person is a general partner.

          "Index" means, with respect to any adjustable rate Mortgage Loan, the
index identified on the Mortgage Loan Schedule and set forth in the related
Mortgage Note for the purpose of calculating the applicable Mortgage Interest
Rate.

          "Interest Rate Adjustment Date" means the date on which an adjustment
to the Mortgage Interest Rate with respect to each Mortgage Loan becomes
effective.

          "Interest Rate Protection Agreement" means, with respect to any or all
of the Mortgage Loans, any short sale of a US Treasury Security, or futures
contract, or mortgage related security, or Eurodollar futures contract, or
options related contract, or interest rate swap, cap or collar agreement or
Take-out Commitment, or similar arrangement providing for protection against
fluctuations in interest rates or the exchange of nominal interest obligations,
either generally or under specific contingencies, entered into by Seller and an
Affiliate of Buyer

                                      -7-



or such other party acceptable to Buyer in its sole good faith discretion, which
agreement is acceptable to Buyer in its sole good faith discretion.

          "Jumbo Mortgage Loan" means an A quality Mortgage Loan which is not
eligible for sale to an Agency.

          "LIBOR" means for each day, the rate of interest (calculated on a per
annum basis) equal to the overnight British Bankers Association Rate as reported
on the display designated as "BBAM" "Page DG8 4a" on Bloomberg (or such other
display as may replace "BBAM" "Page DG8 4a" on Bloomberg) on such date of
determination, and if such rate shall not be so quoted, the rate per annum at
which Buyer is offered Dollar deposits at or about 11:00 a.m., (New York City
time), on such day, by prime banks in the interbank eurodollar market where the
eurodollar and foreign currency exchange operations in respect of its loans are
then being conducted for delivery on such day for an overnight period, and in an
amount comparable to the amount of the Purchase Price of Transactions to be
outstanding on such day.

          "Lien" means any mortgage, lien, pledge, charge, security interest or
similar encumbrance.

          "Margin Call" has the meaning specified in Section 6(a) hereof.

          "Margin Deadline" has the meaning specified in Section 6(b) hereof.

          "Margin Deficit" has the meaning specified in Section 6(a) hereof.

          "Market Value" means, with respect to any Purchased Mortgage Loan as
of any date of determination, the whole-loan servicing released fair market
value of such Purchased Mortgage Loan on such date as determined by Buyer (or an
Affiliate thereof) in its sole good faith discretion. Without limiting the
generality of the foregoing, Seller acknowledges that (a) in the event that a
Purchased Mortgage Loan is not subject to a Take-out Commitment or otherwise
hedged in a manner acceptable to Buyer, Buyer may deem the Market Value for such
Mortgage Loan to be no greater than par and (b) the Market Value of a Purchased
Mortgage Loan may be reduced to zero by Buyer if:

               (i)   a breach of a representation, warranty or covenant made by
          Seller in this Agreement with respect to such Purchased Mortgage Loan
          has occurred and is continuing;

               (ii)  such Purchased Mortgage Loan is not a Non-Performing
          Mortgage Loan;

               (iii) such Purchased Mortgage Loan has been released from the
          possession of the Custodian under the Custodial Agreement (other than
          to a Take-out Investor pursuant to a Bailee Letter) for a period in
          excess of ten (10) calendar days;

                                      -8-



               (iv)   such Purchased Mortgage Loan has been released from the
          possession of the Custodian under the Custodial Agreement to a
          Take-out Investor pursuant to a Bailee Letter for a period in excess
          of 45 calendar days;

               (v)    such Purchased Mortgage Loan has been held by the
          Custodian for the benefit of Buyer (in its capacity as Buyer hereunder
          or as a secured lender) for a period of greater than (a) 90 days for
          all Mortgage Loans other than Aged Loans or (b) 120 days with respect
          to each Aged Loan;

               (vi)   such Purchased Mortgage Loan is a Wet-Ink Mortgage Loan
          for which the Wet-Ink Documents has not been delivered to the
          Custodian on or prior to the seventh Business Day after the related
          Purchase Date;

               (vii)  when the Purchase Price for such Purchased Mortgage Loan
          is added to other Purchased Mortgage Loans, the aggregate Purchase
          Price of all Aged Loans that are Purchased Mortgage Loans exceeds $5
          million;

               (viii) when the Purchase Price for such Purchased Mortgage Loan
          is added to other Purchased Mortgage Loans, the aggregate Purchase
          Price of all Alt A Mortgage Loans that are Purchased Mortgage Loans
          exceeds $15 million;

               (ix)   when the Purchase Price for such Purchased Mortgage Loan
          is added to other Purchased Mortgage Loans, the aggregate Purchase
          Price of all Wet-Ink Mortgage Loans that are Purchased Mortgage Loans
          exceeds 30% of the then applicable Maximum Aggregate Purchase Price;

               (x)    when the Purchase Price for such Purchased Mortgage Loan
          is added to other Purchased Mortgage Loans, the aggregate Purchase
          Price of all Sub-Prime Mortgage Loans that are Purchased Mortgage
          Loans exceeds $2.5 million.

               (xi)   when the Purchase Price for such Purchased Mortgage Loan
          is added to other Purchased Mortgage Loans, the aggregate Purchase
          Price of all Second Lien Mortgage Loans that are Purchased Mortgage
          Loans exceeds $4 million.

          "Material Adverse Effect" means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties, condition
(financial or otherwise) or prospects of Seller or any Material Affiliate taken
as a whole; (b) a material impairment of the ability of Seller or any Affiliate
that is a party to any Program Agreement to perform under any Program Agreement
and to avoid any Event of Default; or (c) a material adverse effect upon the
legality, validity, binding effect or enforceability of any Program Agreement
against Seller or any Affiliate that is a party to any Program Agreement.

          "Material Affiliates" means any of Seller's Subsidiaries, or Standard
Pacific Corp.

          "Maximum Aggregate Purchase Price" means SIXTY MILLION DOLLARS
($60,000,000); provided, however, that during the Increased Maximum Aggregate
Purchase

                                      -9-



Price Period, the Maximum Aggregate Purchase Price means NINETY MILLION DOLLARS
($90,000,000).

          "MERS" means Mortgage Electronic Registration Systems, Inc., a
corporation organized and existing under the laws of the State of Delaware, or
any successor thereto.

          "MERS System" means the system of recording transfers of mortgages
electronically maintained by MERS.

          "Monthly Payment" means the scheduled monthly payment of principal and
interest on a Mortgage Loan.

          "Moody's" means Moody's Investors Service, Inc. or any successors
thereto.

          "Mortgage" means each mortgage, assignment of rents, security
agreement and fixture filing, or deed of trust, assignment of rents, security
agreement and fixture filing, deed to secure debt, assignment of rents, security
agreement and fixture filing, or similar instrument creating and evidencing a
lien on real property and other property and rights incidental thereto.

          "Mortgage File" means, with respect to a Mortgage Loan, the documents
and instruments relating to such Mortgage Loan and set forth in Exhibit F to the
Custodial Agreement.

          "Mortgage Interest Rate" means the rate of interest borne on a
Mortgage Loan from time to time in accordance with the terms of the related
Mortgage Note.

          "Mortgage Interest Rate Cap" means, with respect to an adjustable rate
Mortgage Loan, the limit on each Mortgage Interest Rate adjustment as set forth
in the related Mortgage Note.

          "Mortgage Loan" means any Sub-Prime Mortgage Loan, Exception Mortgage
Loan, Jumbo Mortgage Loan, Alt A Mortgage Loan, Second Lien Mortgage Loan or
Conforming Mortgage Loan which is a fixed or floating-rate, first or second
lien, one-to-four-family residential mortgage or home equity loan evidenced by a
promissory note and secured by a mortgage, which satisfies the requirements set
forth in the Underwriting Guidelines and Section 13(b) hereof; provided,
however, that, except as expressly approved in writing by Buyer, Mortgage Loans
shall not include any "high-LTV" loans (i.e., a mortgage loan having a
loan-to-value ratio in excess of 100% or in excess of such lower percentage set
forth in the Underwriting Guidelines or with respect to Second Lien Mortgage
Loans, a combined loan-to value ratio, in excess of the lower of (i) the
percentage specified in the Underwriting Guidelines or (ii) 100%) or any High
Cost Mortgage Loans and; provided, further, that the origination date with
respect to such Mortgage Loan is no earlier than thirty (30) days prior to the
related Purchase Date.

          "Mortgage Loan Schedule" means with respect to any Transaction as of
any date, a mortgage loan schedule in the form of either (a) Exhibit C attached
hereto or (b) a computer tape or other electronic medium generated by Seller and
delivered to Buyer and Custodian,

                                      -10-



which provides information (including, without limitation, the information set
forth on Exhibit C attached hereto) relating to the Purchased Mortgage Loans in
a format acceptable to Buyer.

          "Mortgage Loan Schedule and Exception Report" has the meaning assigned
to such term in the Custodial Agreement

          "Mortgage Note" means the promissory note or other evidence of the
indebtedness of a Mortgagor secured by a Mortgage.

          "Mortgaged Property" means the real property securing repayment of the
debt evidenced by a Mortgage Note.

          "Mortgagor" means the obligor or obligors on a Mortgage Note,
including any person who has assumed or guaranteed the obligations of the
obligor thereunder.

          "Multiemployer Plan" means a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been or are required to be
made by Seller or any ERISA Affiliate and that is covered by Title IV of ERISA.

          "Net Income" means, for any period and any Person, the net income of
such Person for such period as determined in accordance with GAAP.

          "Net Worth" means, with respect to any Person, an amount equal to, on
a consolidated basis, such Person's stockholder equity (determined in accordance
with GAAP).

          "1934 Act" means the Securities Exchange Act of 1934, as amended from
time to time.

          "Non-Performing Mortgage Loan" means (i) any Mortgage Loan for which
any payment of principal or interest is more than twenty-nine (29) days past
due, (ii) any Mortgage Loan with respect to which the related mortgagor is in
bankruptcy or (iii) any Mortgage Loan with respect to which the related
mortgaged property is in foreclosure.

          "Notice Date" has the meaning given to it in Section 3(b) hereof.

          "Obligations" means (a) all of Seller's indebtedness, obligations to
pay the Repurchase Price on the Repurchase Date, the Price Differential on each
Price Differential Payment Date, and other obligations and liabilities, to
Buyer, its Affiliates or Custodian arising under, or in connection with, the
Program Agreements, whether now existing or hereafter arising; (b) any and all
sums paid by Buyer or on behalf of Buyer in order to preserve any Purchased
Mortgage Loan or its interest therein; (c) in the event of any proceeding for
the collection or enforcement of any of Seller's indebtedness, obligations or
liabilities referred to in clause (a), the reasonable expenses of retaking,
holding, collecting, preparing for sale, selling or otherwise disposing of or
realizing on any Purchased Mortgage Loan, or of any exercise by Buyer of its
rights under the Program Agreements, including, without limitation, attorneys'
fees and disbursements and court costs; and (d) all of Seller's indemnity
obligations to Buyer or Custodian or both pursuant to the Program Agreements.

                                      -11-



          "PBCG" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.

          "Person" means an individual, partnership, corporation (including a
business trust), limited liability company, unlimited liability company, join
stock company, trust, unincorporated association, joint venture or other entity,
or a government or any political subdivision or agency thereof.

          "Plan" means an employee benefit or other plan established or
maintained by any Seller or any ERISA Affiliate and covered by Title IV of
ERISA, other than a Multiemployer Plan.

          "Post Default Rate" means an annual rate of interest equal to the
Pricing Rate plus 3%.

          "Price Differential" means with respect to any Transaction as of any
date of determination, an amount equal to the product of (A) the Pricing Rate
for such Transaction and (B) the Purchase Price for such Transaction, calculated
daily on the basis of a 360-day year for the actual number of days during the
period commencing on (and including) the Purchase Date for such Transaction and
ending on (but excluding) the Repurchase Date.

          "Price Differential Payment Date" means, with respect to a Purchased
Mortgage Loan, the 5th day of the month following the related Purchase Date and
each succeeding 5th day of the month thereafter; provided, that, with respect to
such Purchased Mortgage Loan, the final Price Differential Payment Date shall be
the related Repurchase Date; and provided, further, that if any such day is not
a Business Day, the Price Differential Payment Date shall be the next succeeding
Business Day.

          "Pricing Rate" means LIBOR plus:

               (a) 0.95% with respect to Transactions the subject of which are
          Conforming Mortgage Loans (other than Wet-Ink Mortgage Loans, Aged
          Loans or Second Lien Mortgage Loans);

               (b) 0.95% with respect to Transactions the subject of which are
          Jumbo Mortgage Loans (other than Wet-Ink Mortgage Loans, Aged Loans or
          Second Lien Mortgage Loans);

               (c) 1.125% with respect to Transactions the subject of which are
          Sub-Prime Mortgage Loans (other than Wet-Ink Mortgage Loans, Aged
          Loans or Second Lien Mortgage Loans);

               (d) 1.125% with respect to Transactions the subject of which are
          Alt A Mortgage Loans (other than Wet-Ink Mortgage Loans, Aged Loans or
          Second Lien Mortgage Loans);

               (e) 1.25% with respect to Transactions the subject of which are
          Wet-Ink Mortgage Loans;

                                      -12-



               (f) 1.25% with respect to Transactions the subject of which are
          or Second Lien Mortgage Loans (other than Aged Loans);

               (g) 1.50% with respect to Transactions the subject of which are
          Aged Loans; and

               (h) the rate determined in the sole discretion of Buyer with
          respect to Transactions the subject of which are Exception Mortgage
          Loans.

          The Pricing Rate shall change in accordance with LIBOR, as provided in
Section 5(a).

          "Principal" has the meaning given to it in Annex I.

          "Program Agreements" means, collectively, the Servicing Agreement, the
Servicer Notice, the Custodial Agreement, this Agreement, the Electronic
Tracking Agreement, if entered into, and, with respect to each Exception
Mortgage Loan, a Purchase Confirmation.

          "Property" means any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or intangible.

          "Purchase Confirmation" means a confirmation of a Transaction, in the
form attached as Exhibit B hereto.

          "Purchase Date" means the date on which Purchased Mortgage
Loans are to be transferred by Seller to Buyer.

          "Purchase Price" means (i) on the Purchase Date, (A) with respect to
each Purchased Mortgage Loan other than a Sub-Prime Mortgage Loan, the price at
which each Purchased Mortgage Loan is transferred by Seller to Buyer, which
shall not exceed the lesser of (w) the outstanding principal amount thereof as
set forth on the related Mortgage Loan Schedule and Exception Report and (x) (1)
the Market Value of such Purchased Mortgage Loan multiplied by (2) the
applicable Purchase Price Percentage, and (B) with respect to Purchased Mortgage
Loans that are Sub-Prime Mortgage Loans, the price at which each Purchased
Mortgage Loan is transferred by Seller to Buyer, which shall not exceed the
applicable Purchase Price Percentage multiplied by the lesser of (y) the
outstanding principal amount thereof as set forth on the related Mortgage Loan
Schedule and Exception Report and (z) the Market Value of such Purchased
Mortgage Loan, and (ii) thereafter, except where Buyer and Seller agree
otherwise, the applicable amount determined under the immediately preceding
clause (i) decreased by the amount of any cash transferred by Seller to Buyer
pursuant to Section 4(c) hereof or applied to reduce Seller's obligations under
clause (ii) of Section 4(b) hereof.

          "Purchase Price Percentage" means, with respect to each Mortgage Loan,
the following percentage, as applicable:

          (a)  98% with respect to Purchased Mortgage Loans that are Jumbo
     Mortgage Loans (other than Second Lien Mortgage Loans);

                                      -13-



          (b)  98% with respect to Purchased Mortgage Loans that are Conforming
     Mortgage Loans (other than Second Lien Mortgage Loans);

          (c)  97% with respect to Purchased Mortgage Loans that are Alt A
     Mortgage Loans (other than Second Lien Mortgage Loans);

          (d)  95% with respect to Purchased Mortgage Loans that are Sub-Prime
     Mortgage Loans;

          (e)  95% with respect to Transactions the subject of which are Second
     Lien Mortgage Loans; and

          (f)  with respect to Transactions the subject of which are Exception
     Mortgage Loans, a percentage to be determined by Buyer in its sole
     discretion;

          "Purchased Mortgage Loans" means the collective reference to Mortgage
Loans together with the Repurchase Assets related to such Mortgage Loans
transferred by Seller to Buyer in a Transaction hereunder, listed on the related
Mortgage Loan Schedule attached to the related Transaction Request, which such
Mortgage Loans the Custodian has been instructed to hold pursuant to the
Custodial Agreement.

          "Qualified Insurer" means a mortgage guaranty insurance company duly
authorized and licensed where required by law to transact mortgage guaranty
insurance business and approved as an insurer by Fannie Mae or Freddie Mac.

          "Qualified Originator" means an originator of Mortgage Loans which is
acceptable under the Underwriting Guidelines.

          "Records" means all instruments, agreements and other books, records,
and reports and data generated by other media for the storage of information
maintained by Seller or any other person or entity with respect to a Purchased
Mortgage Loan. Records shall include the mortgage notes, any Mortgages, the
Mortgage Files, the credit files related to the Purchased Mortgage Loan and any
other instruments necessary to document or service a Mortgage Loan.

          "REO Property" means real property acquired by Seller or the Servicer
for the benefit of Seller, including a Mortgaged Property acquired through
foreclosure of a Mortgage Loan or by deed in lieu of such foreclosure.

          "Reporting Date" means the 5th day of each month or, if such day is
not a Business Day, the next succeeding Business Day.

          "Repurchase Assets" has the meaning assigned thereto in Section 8
hereof.

          "Repurchase Date" means the earlier of (i) the Termination Date, (ii)
the date set forth in the applicable Purchase Confirmation, (iii) the date
determined by application of Section 16 hereof or (iv) the date identified to
Buyer by Seller as the date that the related Mortgage Loan is to be sold
pursuant to a Take-out Commitment.

                                      -14-



          "Repurchase Price" means the price at which Purchased Mortgage Loans
are to be transferred from Buyer to Seller upon termination of a Transaction,
which will be determined in each case (including Transactions terminable upon
demand) as the sum of the Purchase Price and the accrued but unpaid Price
Differential as of the date of such determination.

          "Request for Certification" means a notice sent to the Custodian
reflecting the sale of one or more Purchased Mortgage Loans to Buyer hereunder.

          "Requirement of Law" means, with respect to any Person, any law,
treaty, rule or regulation or determination of an arbitrator, a court or other
governmental authority, applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.

          "Responsible Officer" means shall mean, as to any Person, the chief
executive officer or, with respect to financial matters, the chief financial
officer of such Person.

          "S&P" means Standard & Poor's Ratings Services, or any successor
thereto.

          "SEC" means the Securities and Exchange Commission, or any successor
thereto.

          "Second Lien Mortgage Loan" means a second lien Mortgage Loan where
the second lien on the related Mortgaged Property is contemplated and incurred
simultaneously with the first lien on the related Mortgaged Property.

          "Seller" means Family Lending Services, Inc. or its permitted
successors and assigns.

          "Servicer" means Calmco Servicing, LP, or any other servicer approved
by Buyer in its sole discretion, which may be Seller.

          "Servicer Notice" means the notice acknowledged by the Servicer
substantially in the form of Exhibit N hereto.

          "Servicing Agreement" means a servicing agreement among Seller, Buyer
and a Servicer as the same may be amended from time to time.

          "Settlement Agent" means, with respect to any Transaction the subject
of which is a Wet-Ink Mortgage Loan, the entity approved by Buyer, in its sole
good-faith discretion, which may be a title company, escrow company or attorney
in accordance with local law and practice in the jurisdiction where the related
Wet-Ink Mortgage Loan is being originated. A Settlement Agent is deemed approved
unless Buyer notifies Seller otherwise at any time electronically or in writing.

          "SIPA" means the Securities Investor Protection Act of 1970, as
amended from time to time.

          "Subordinated Debt" means, Indebtedness of Seller which is (i)
unsecured, (ii) no part of the principal of such Indebtedness is required to be
paid (whether by way of mandatory

                                      -15-



sinking fund, mandatory redemption, mandatory prepayment or otherwise) prior to
the date which is one year following the Termination Date and (iii) the payment
of the principal of and interest on such Indebtedness and other obligations of
Seller in respect of such Indebtedness are subordinated to the prior payment in
full of the principal of and interest (including post-petition obligations) on
the Transactions and all other obligations and liabilities of Seller to Buyer
hereunder on terms and conditions approved in writing by Buyer and all other
terms and conditions of which are satisfactory in form and substance to Buyer.

          "Subsidiary" means, with respect to any Person, any corporation,
partnership or other entity of which at least a majority of the securities or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions of such corporation, partnership or other entity (irrespective of
whether or not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity shall have or
might have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person.

          "Sub-Prime Mortgage Loan" means a first lien Mortgage Loan which
originated in accordance with the criteria established by Buyer for sub-prime
mortgage loans, as determined by Buyer in its sole discretion, and in which the
FICO score is no less than 530. Any Sub-Prime Mortgage Loans not subject to a
Take-out Commitment by Buyer or an Affiliate of Buyer must be pre-approved for
purchase by the Take-out Investor as evidenced by an approval through an
automated underwriting system or such other written approval acceptable to
Buyer.

          "Take-out Commitment" means a commitment of Seller to either (a) sell
one or more Mortgage Loans to a Take-out Investor or (b) (i) swap one or more
Mortgage Loans with a Take-out Investor that is an Agency for an Agency
Security, and (ii) sell the related Agency Security to a Take-out Investor, and
in each case, the corresponding Take-out Investor's commitment back to Seller to
effectuate any of the foregoing, as applicable. With respect to any Take-out
Commitment with an Agency, the applicable agency documents list Buyer as sole
subscriber.

          "Take-out Investor" means (i) an Agency or (ii) other institution
which has made a Take-out Commitment and has been approved by Buyer.

          "Termination Date" means the earlier of (a) October [4], 2002 and (b)
the date of the occurrence of an Event of Default.

          "Test Period" means any period of three (3) consecutive calendar
months.

          "Transaction" has the meaning set forth in Section 1 hereof.

          "Transaction Request" means a request from Seller to Buyer, in the
form attached as Exhibit A hereto, to enter into a Transaction.

                                      -16-



          "Trust Receipt and Certification" means, with respect to any
Transaction as of any date, a receipt and certification in the form attached as
an exhibit to the Custodial Agreement.

          "Underwriting Guidelines" means the standards, procedures and
guidelines of Seller for underwriting and acquiring Mortgage Loans, which are
set forth in written policies and procedures of Seller, and the guidelines of
the Agencies and any Takeout Investor or Investors for underwriting and
acquiring Mortgage Loans, which guidelines are acceptable to Buyer in its sole
discretion, which guidelines are listed or attached hereto in Exhibit F.

          "Uniform Commercial Code" means the Uniform Commercial Code as in
effect on the date hereof in the State of New York or the Uniform Commercial
Code as in effect in the applicable jurisdiction.

          "VA" means the U.S. Department of Veterans Affairs, an agency of the
United States of America, or any successor thereto including the Secretary of
Veterans Affairs.

          "VA Approved Lender" means a lender which is approved by the VA to act
as a lender in connection with the origination of VA Loans.

          "VA Loan" means a Mortgage Loan which is subject of a VA Loan Guaranty
Agreement as evidenced by a VA Loan Guaranty Agreement, or a Mortgage Loan which
is a vender loan sold by the VA.

          "VA Loan Guaranty Agreement" means the obligation of the United States
to pay a specific percentage of a Mortgage Loan (subject to a maximum amount)
upon default of the Mortgagor pursuant to the Servicemen's Readjustment Act, as
amended.

          "Violation Deadline" has the meaning assigned thereto in Section 4(c)
hereof.

          "Wet-Ink Documents" means, with respect to any Wet-Ink Mortgage Loan,
the documents set forth in Exhibit K hereto.

          "Wet-Ink Mortgage Loan" means a Mortgage Loan which Seller is selling
to Buyer simultaneously with the origination thereof.

          3. Program; Initiation of Transactions

          a. From time to time Buyer will purchase from Seller certain Mortgage
Loans that have been either originated by Seller or purchased by Seller from
other originators. All Purchased Mortgage Loans shall exceed or meet the
Underwriting Guidelines, and shall be serviced by Servicer. The aggregate
Purchase Price of Purchased Mortgage Loans subject to outstanding Transactions
shall not exceed the Maximum Aggregate Purchase Price.

          b. With respect to each Transaction involving Mortgage Loans which are
not Wet-Ink Mortgage Loans, Seller shall give Buyer and Custodian at least 1
Business Day's prior notice of any proposed Purchase Date (the date on which
such notice is given, the "Notice Date"); provided, that if Seller is delivering
25 or fewer Mortgage Loans, which are not Wet-Ink

                                      -17-



Mortgage Loans, on a Purchase Date, the notice shall be delivered on or before
10:30 a.m. (New York City time) on the Purchase Date. With respect to Wet-Ink
Mortgage Loans, Seller shall deliver notice of any proposed purchase on or
before 3:30 p.m. (New York City time) on the Purchase Date. On the Notice Date,
Seller shall (i) request that Buyer enter into a Transaction by furnishing to
Buyer a Transaction Request, (ii) deliver to Buyer and Custodian a Mortgage Loan
Schedule and (iii) deliver to Custodian a Request for Certification and each
Mortgage File or Wet-Ink Documents for each Wet-Ink Mortgage Loan in accordance
with Section 10(b)(3) and otherwise comply with the procedures set forth in
Exhibit K hereto.

          c. With respect to each Exception Mortgage Loan, upon receipt of the
Transaction Request, Buyer shall, consistent with this Agreement, specify the
terms for such proposed Transaction, including the Purchase Price, the Pricing
Rate, the Market Value and the Repurchase Date in respect of such Transaction.
The terms thereof shall be set forth in the Purchase Confirmation to be
delivered to Seller on or prior to the Purchase Date.

          d. With respect to each Exception Mortgage Loan, the Purchase
Confirmation, together with this Agreement, shall constitute conclusive evidence
of the terms agreed between Buyer and Seller with respect to the Transaction to
which the Purchase Confirmation relates, and Seller's acceptance of the related
proceeds shall constitute Seller's agreement to the terms of such Purchase
Confirmation. It is the intention of the parties that, with respect to each
Exception Mortgage Loan, each Purchase Confirmation shall not be separate from
this Agreement but shall be made a part of this Agreement. In the event of any
conflict between this Agreement and, with respect to each Exception Mortgage
Loan, a Purchase Confirmation, the terms of the Purchase Confirmation shall
control with respect to the related Transaction.

          e. Upon the satisfaction of the applicable conditions precedent set
forth in Section 10 hereof, all of Seller's interest in the Repurchase Assets
shall pass to Buyer on the Purchase Date, against the transfer of the Purchase
Price to Seller. Upon transfer of the Mortgage Loans to Buyer as set forth in
this Section and until termination of any related Transactions as set forth in
Sections 4 or 16 of this Agreement, ownership of each Mortgage Loan, including
each document in the related Mortgage File and Records, is vested in Buyer;
provided that, prior to the recordation by the Custodian as provided for in the
Custodial Agreement record title in the name of Seller to each Mortgage shall be
retained by Seller in trust, for the benefit of Buyer, for the sole purpose of
facilitating the servicing and the supervision of the servicing of the Mortgage
Loans.

          f. With respect to each Wet-Ink Mortgage Loan, by no later than 12:00
noon, (New York City time) on the seventh Business Day following the applicable
Purchase Date, Seller shall cause the related Settlement Agent to deliver to the
Custodian the remaining documents in the Mortgage File.

          4.    Repurchase

          a. Seller shall repurchase the related Purchased Mortgage Loans from
Buyer on each related Repurchase Date. Such obligation to repurchase exists
without regard to any prior or intervening liquidation or foreclosure with
respect to any Purchased Mortgage Loan (but liquidation or foreclosure proceeds
received by Buyer shall be applied to reduce the Repurchase

                                      -18-



Price for such Purchased Mortgage Loan on each Price Differential Payment Date
except as otherwise provided herein). Seller is obligated to repurchase and take
physical possession of the Purchased Mortgage Loans from Buyer or its designee
(including the Custodian) at Seller's expense on the related Repurchase Date.

          b. Provided that Buyer has received the related Repurchase Price upon
repurchase of all of the Purchased Mortgage Loans, Buyer agrees to release its
ownership interest hereunder in the Purchased Mortgage Loans (including, the
Repurchase Assets related thereto) at the request of Seller. With respect to
payments in full by the related Mortgagor of a Purchased Mortgage Loan, Seller
agrees to (i) provide Buyer with a copy of a report from the related Servicer
indicating that such Purchased Mortgage Loan has been paid in full, (ii) remit
to Buyer, within two Business Days, the Repurchase Price with respect to such
Purchased Mortgage Loans and (iii) provide Buyer a notice specifying each
Purchased Mortgage Loan that has been prepaid in full. Buyer agrees to release
its ownership interest in Purchased Mortgage Loans which have been prepaid in
full after receipt of evidence of compliance with clauses (i) through (iii) of
the immediately preceding sentence.

          c. In the event that at any time any Purchased Mortgage Loan violates
the applicable sublimit set forth in the definition of Market Value, Buyer may,
in its sole discretion, redesignate such Mortgage Loan as an Exception Mortgage
Loan. If Buyer does not redesignate such Mortgage Loan as an Exception Mortgage
Loan, and if Seller fails to notify Buyer within five (5) Business Days
following notice or knowledge of such violation that Seller does not want to
receive a bid for such Mortgage Loan as described below, Buyer or an Affiliate
of Buyer may offer to terminate Seller's right and obligation to repurchase such
Mortgage Loan by paying Seller a price to be set by Buyer in its sole discretion
(a "Bid"). Seller, within five (5) Business Days of receipt of Buyer's bid (the
"Violation Deadline") may, in its sole discretion, either (i) accept Buyer's
bid, terminating Seller's right to repurchase such Mortgage Loan under this
Agreement or (ii) immediately repurchase the Mortgage Loan at the Repurchase
Price in accordance with this Section 4. Seller shall pay Buyer a bid fee equal
to $250 (the "Bid Fee") with respect to each Mortgage Loan on which Buyer or its
Affiliate makes a Bid, regardless of whether the Bid is accepted and such Bid
Fee shall be due and payable to Buyer on or before the Violation Deadline. Any
amount paid by Buyer or its Affiliate to terminate Seller's right to repurchase
a Purchased Mortgage Loan if a Bid is accepted pursuant to this Section shall be
applied by Buyer toward the outstanding Repurchase Price for the applicable
Transaction.

          5.    Price Differential.

          a. On each Business Day that a Transaction is outstanding, the Pricing
Rate shall be reset and, unless otherwise agreed, the accrued and unpaid Price
Differential shall be settled in cash on each related Price Differential Payment
Date. Two Business Days prior to the Price Differential Payment Date, Buyer
shall give Seller written or electronic notice of the amount of the Price
Differential due on such Price Differential Payment Date. On the Price
Differential Payment Date, Seller shall pay to Buyer the Price Differential for
such Price Differential Payment Date (along with any other amounts to be paid
pursuant to Sections 7, 34 and 35 hereof), by wire transfer in immediately
available funds.

                                      -19-



          b. If Seller fails to pay all or part of the Price Differential by
3:00 p.m. (New York City time) on the related Price Differential Payment Date,
with respect to any Purchased Mortgage Loan, Seller shall be obligated to pay to
Buyer (in addition to, and together with, the amount of such Price Differential)
interest on the unpaid Repurchase Price at a rate per annum equal to the Post
Default Rate from and after the date of such failure until the Price
Differential is received in full by Buyer.

          6.   Margin Maintenance

          a. If at any time the Market Value of any Purchased Mortgage Loan
subject to a Transaction is less than Buyer's Margin Amount for such Transaction
(a "Margin Deficit"), then Buyer may by notice to any Seller require Seller to
transfer to Buyer cash in an amount at least equal to the Margin Deficit (such
requirement, a "Margin Call").

          b. Notice delivered pursuant to Section 6(a) may be given by any
written means. Any notice given before 10:00 a.m. (New York City time) on a
Business Day shall be met, and the related Margin Call satisfied, no later than
5:00 p.m. (New York City time) on such Business Day; notice given after 10:00
a.m. (New York City time) on a Business Day shall be met, and the related Margin
Call satisfied, no later than 5:00 p.m. (New York City time) on the following
Business Day (the foregoing time requirements for satisfaction of a Margin Call
are referred to as the "Margin Deadlines"). The failure of Buyer, on any one or
more occasions, to exercise its rights hereunder, shall not change or alter the
terms and conditions to which this Agreement is subject or limit the right of
Buyer to do so at a later date. Seller and Buyer each agree that a failure or
delay by Buyer to exercise its rights hereunder shall not limit or waive Buyer's
rights under this Agreement or otherwise existing by law or in any way create
additional rights for Seller.

          7.   Income Payments

          a. If Income is paid in respect of any Purchased Mortgage Loan during
the term of a Transaction, such Income shall be the property of Buyer.
Notwithstanding the foregoing, and provided no Event of Default has occurred and
is continuing, Buyer agrees that if a third-party Servicer is in place for any
Purchased Mortgage Loans, such Servicer shall deposit such Income to the
Collection Account. Seller shall deposit all Income received in its capacity as
Servicer of any Purchased Mortgage Loans to the Collection Account in accordance
with Section 12(c) hereof.

          b. Provided no Event of Default has occurred and is continuing, on
each Price Differential Payment Date, Seller shall remit to Buyer an amount
equal to the Price Differential out of the interest portion of the Income paid
in respect to the Purchased Mortgage Loans for the preceding month in accordance
with Section 5 of this Agreement. Upon termination of any Transaction, to the
extent that there is any excess Income after repayment of all amounts to be
transferred to Buyer by Seller, Buyer, in its sole option, may apply the excess
income to reduce the Repurchase Price due upon termination of any other
outstanding Transactions or return such excess income to the Seller.

                                      -20-



          c. In the event that an Event of Default has occurred and is
continuing, notwithstanding any provision set forth herein, Seller shall remit
to Buyer all Income received with respect to each Purchased Mortgage Loan on the
related Price Differential Payment Date or on such other date or dates as Buyer
notifies Seller in writing. In such event, Buyer shall apply such Income to
reduce the Obligations or shall return such Income to Seller on each Price
Differential Payment Date.

          d. Notwithstanding any provision to the contrary in this Section 7,
within two (2) Business Days of receipt by Seller of any prepayment of principal
in full, with respect to a Purchased Mortgage Loan, Seller shall remit such
amount to Buyer and Buyer shall immediately apply any such amount received by
Buyer to reduce the amount of the Repurchase Price due upon termination of the
related Transaction.

          e. Notwithstanding anything to the contrary set forth herein, upon
notice by Buyer to Seller, Seller shall remit to Buyer all collections received
by Servicer or Seller on the Purchased Mortgage Loans in accordance with Buyer's
directions no later than the day on which aggregate collections of principal and
interest (excluding principal prepayments) on the Purchased Mortgaged Loans
reaches an amount to be indicated by Buyer in its sole discretion.

          8.   Security Interest

          Although the parties intend that all Transactions hereunder be sales
and purchases and not loans, in the event any such Transactions are deemed to be
loans, Seller hereby pledges to Buyer as security for the performance by Seller
of its Obligations and hereby grants, assigns and pledges to Buyer a fully
perfected first priority security interest in the Purchased Mortgage Loans, the
Records, and all related servicing rights, the Program Agreements (to the extent
such Program Agreements and Seller's right thereunder relate to the Purchased
Mortgage Loans), any related Take-out Commitments, Property, all insurance
policies and insurance proceeds relating to any Mortgage Loan or the related
Mortgaged Property, including, but not limited to, any payments or proceeds
under any related primary insurance, hazard insurance and FHA Mortgage Insurance
Contracts and VA Loan Guarantee Agreements (if any), Income, the Collection
Account, Interest Rate Protection Agreements, accounts (including any interest
of Seller in escrow accounts) and any other contract rights, accounts, payments,
rights to payment (including payments of interest or finance charges) general
intangibles and other assets relating to the Purchased Mortgage Loans
(including, without limitation, any other accounts) or any interest in the
Purchased Mortgage Loans, the servicing of the Purchased Mortgage Loans, and any
proceeds (including the related securitization proceeds) and distributions with
respect to any of the foregoing and any other property, rights, title or
interests as are specified on a Transaction Request and/or Trust Receipt and
Certification, in all instances, whether now owned or hereafter acquired, now
existing or hereafter created (collectively, the "Repurchase Assets"). Seller
agrees to execute, deliver and/or file such documents and perform such acts as
may be reasonably necessary to fully perfect Buyer's security interest created
hereby. Furthermore, the Seller hereby authorizes the Buyer to file financing
statements relating to the Repurchase Assets without the signature of the
Seller, as the Buyer, at its option, may deem appropriate. The Seller shall pay
the filing costs for any financing statement or statements prepared pursuant to
this Section.

                                      -21-



          9.   Payment and Transfer

          Unless otherwise mutually agreed in writing, all transfers of funds to
be made by Seller hereunder shall be made in Dollars, in immediately available
funds, without deduction, set-off or counterclaim, to Buyer at the following
account maintained by Buyer: Account No. 00-410-413, for the account of CSFB
Buyer/Family Lending Seller - Inbound Account, Deutsche Bank, ABA No. 021 001
033 or such other account as Buyer shall specify to Seller in writing. Seller
acknowledges that it has no rights of withdrawal from the foregoing account. All
Purchased Mortgage Loans transferred by one party hereto to the other party
shall be in suitable form for transfer or shall be accompanied by duly executed
instruments of transfer or assignment in blank and such other documentation as
the transferee may reasonably request. All Purchased Mortgage Loans shall be
evidenced by a Trust Receipt and Certification. Any Repurchase Price received by
Buyer after 2:00 p.m. (New York City time) shall be deemed received on the next
succeeding Business Day.

          10.  Conditions Precedent

          a. Initial Transaction. As conditions precedent to the initial
Transaction, Buyer shall have received on or before the day of such initial
Transaction the following, in form and substance satisfactory to Buyer and duly
executed by Seller and each other party thereto:

          (1) Program Agreements. The Program Agreements (including a Custodial
     Agreement in a form acceptable to Buyer) duly executed and delivered by the
     parties thereto and being in full force and effect, free of any
     modification, breach or waiver.

          (2) Security Interest. Evidence that all other actions necessary or,
     in the opinion of Buyer, desirable to perfect and protect Buyer's interest
     in the Purchased Mortgage Loans and other Repurchase Assets have been
     taken, including, without limitation, duly executed and filed Uniform
     Commercial Code financing statements on Form UCC-1.

          (3) Organizational Documents. A certified copy of Seller's charter,
     bylaws and corporate resolutions approving the Program Agreements and
     transactions thereunder (either specifically or by general resolution) and
     all documents evidencing other necessary corporate action or governmental
     approvals as may be required in connection with the Program Agreements.

          (4) Good Standing Certificate. A certified copy of a good standing
     certificate of Seller, dated as of no earlier than the date 10 Business
     Days prior to the Purchase Date with respect to the initial Transaction
     hereunder.

          (5) Incumbency Certificate. An incumbency certificate of the corporate
     secretary of each of Seller, certifying the names, true signatures and
     titles of the representatives duly authorized to request transactions
     hereunder and to execute the Program Agreements.

          (6) Opinion of Counsel. An opinion of Seller's counsel, in form and
     substance substantially as set forth in Exhibit E attached hereto.

                                      -22-



          (7) Subordination Agreement. With respect to any Indebtedness of the
     Seller owed to an Affiliate of the Seller, a Subordination Agreement in
     form and substance acceptable to Buyer.

          (8) Fees. Payment of any fees due to Buyer hereunder.

          b. All Transactions. The obligation of Buyer to enter into each
Transaction pursuant to this Agreement is subject to the following conditions
precedent:

          (1) Due Diligence Review. Without limiting the generality of Section
     36 hereof, Buyer shall have completed, to its satisfaction, its due
     diligence review of the related Mortgage Loans and Seller and the Servicer.

          (2) Required Documents.

              (a) With respect to each Purchased Mortgage Loan which is not a
          Wet-Ink Mortgage Loan, the Mortgage File has been delivered to the
          Custodian (i) with respect to any purchase of 25 or fewer Mortgage
          Loans on a single Purchase Date, on or prior to 3:00 p.m. (New York
          City time) on the Purchase Date, and (ii) with respect to any purchase
          of 26 or more Mortgage Loans on a single Purchase Date, at least 24
          hours prior to the Purchase Date;

              (b) With respect to each Wet-Ink Mortgage Loan, the Wet-Ink
          Documents have been delivered to Buyer or Custodian, as the case may
          be, by 3:30 p.m. (New York City time) on the Purchase Date.

          (3) Transaction Documents. Buyer or its designee shall have received
     on or before the day of such Transaction (unless otherwise specified in
     this Agreement) the following, in form and substance satisfactory to Buyer
     and (if applicable) duly executed:

              (a) A Transaction Request delivered pursuant to Section 3(c)
          hereof and a Purchase Confirmation.

              (b) The Request for Certification and the related Mortgage Loan
          Schedule and Exception Report, and the Trust Receipt.

              (c) Such certificates, opinions of counsel or other documents as
          Buyer may reasonably request.

          (4) No Default. No Default or Event of Default shall have occurred and
     be continuing;

          (5) Requirements of Law. Buyer shall not have determined that the
     introduction of or a change in any Requirement of Law or in the
     interpretation or administration of any Requirement of Law applicable to
     Buyer has made it unlawful, and no Governmental Authority shall have
     asserted that it is unlawful, for Buyer to enter into Transactions with a
     Pricing Rate based on LIBOR.

                                      -23-



          (6) Representations and Warranties. Both immediately prior to the
     related Transaction and also after giving effect thereto and to the
     intended use thereof, the representations and warranties made by Seller in
     each Program Agreement shall be true, correct and complete on and as of
     such Purchase Date in all material respects with the same force and effect
     as if made on and as of such date (or, if any such representation or
     warranty is expressly stated to have been made as of a specific date, as of
     such specific date).

          (7) Electronic Tracking Agreement. To the extent Seller is selling
     Mortgage Loans which are registered on the MERS(R) System, an Electronic
     Tracking Agreement entered into, duly executed and delivered by the parties
     thereto and being in full force and effect, free of any modification,
     breach or waiver.

          (8) Material Adverse Change. None of the following shall have occurred
     and/or be continuing:

              (a) Credit Suisse First Boston, New York Branch's corporate bond
          rating as calculated by S&P or Moody's has been lowered or downgraded
          to a rating below investment grade by S&P or Moody's;

              (b) an event or events shall have occurred in the good faith
          determination of Buyer resulting in the effective absence of a "repo
          market" or comparable "lending market" for financing debt obligations
          secured by mortgage loans or securities or an event or events shall
          have occurred resulting in Buyer not being able to finance Purchased
          Assets through the "repo market" or "lending market" with traditional
          counterparties at rates which would have been reasonable prior to the
          occurrence of such event or events; or

              (c) an event or events shall have occurred resulting in the
          effective absence of a "securities market" for securities backed by
          mortgage loans or an event or events shall have occurred resulting in
          Buyer not being able to sell securities backed by mortgage loans at
          prices which would have been reasonable prior to such event or events;
          or

          11. Program; Costs

          a. Seller shall reimburse Buyer for any of Buyer's reasonable
out-of-pocket costs, including due diligence review costs and reasonable
attorney's fees, incurred by Buyer in determining the acceptability to Buyer of
any Mortgage Loans. Seller shall also pay, or reimburse Buyer if Buyer shall
pay, any termination fee, which may be due any servicer. Seller shall pay the
fees and expenses of Buyer's counsel in connection with the Program Agreements.
Legal fees for any subsequent amendments to this Agreement or related documents
shall be borne by Seller. Seller shall pay ongoing custodial and bank fees and
expenses as set forth on Exhibit M hereto, and any other ongoing fees and
expenses under any other Program Document.

          b. If Buyer determines that, due to the introduction of, any change
in, or the compliance by Buyer with (i) any eurocurrency reserve requirement or
(ii) the interpretation of any law, regulation or any guideline or request from
any central bank or other Governmental

                                      -24-



Authority (whether or not having the force of law), there shall be an increase
in the cost to Buyer in engaging in the present or any future Transactions, then
Seller agrees to pay to Buyer, from time to time, upon demand by Buyer (with a
copy to Custodian) the actual cost of additional amounts as specified by Buyer
as sufficient to compensate Buyer for such increased costs.

          c. If Buyer becomes entitled to claim any additional amounts pursuant
to this Section, it shall promptly notify Seller of the event by reason of which
it has become so entitled. A certificate as to any additional amounts payable
pursuant to this Section submitted by Buyer to Seller shall be conclusive in the
absence of manifest error, provided, however, that the Buyer shall use good
faith efforts to (i) calculate such amounts in a manner which is consistent with
the manner in which it makes calculations for comparable claims with respect to
similarly situated sellers and (ii) not allocate to the Seller a proportionately
greater amount of such additional compensation than it allocates to each of its
other similarly situated sellers.

          d. With respect to any Transaction, Buyer may conclusively rely upon,
and shall incur no liability to Seller in acting upon, any request or other
communication that Buyer reasonably believes to have been given or made by a
person authorized to enter into a Transaction on Seller's behalf, whether or not
such person is listed on the certificate delivered pursuant to Section 10(a)(5)
hereof. In each such case, the terms of the Purchase Confirmation, request or
other communication shall be deemed correct absent manifest error.

          e. Notwithstanding the assignment of the Program Agreements with
respect to each Purchased Mortgage Loan to Buyer, Seller agrees and covenants
with Buyer to enforce diligently Seller's rights and remedies set forth in the
Program Agreements.

          f. Any payments made by Seller to Buyer shall be free and clear of,
and without deduction or withholding for, any taxes; provided, however, that if
such payer shall be required by law to deduct or withhold any taxes from any
sums payable to Buyer, then such payer shall (A) make such deductions or
withholdings and pay such amounts to the relevant authority in accordance with
applicable law, (B) pay to Buyer the sum that would have been payable had such
deduction or withholding not been made, and (C) at the time Price Differential
is paid, pay to Buyer all additional amounts as specified by Buyer to preserve
the after-tax yield Buyer would have received if such tax had not been imposed.

          12.  Servicing

          a. Seller, on Buyer's behalf, shall contract with Servicer to, or if
Seller is the Servicer, Seller shall, service the Mortgage Loans consistent with
the degree of skill and care that Seller customarily requires with respect to
similar Mortgage Loans owned or managed by it and in accordance with Accepted
Servicing Practices. The Servicer shall (i) comply with all applicable Federal,
State and local laws and regulations, (ii) maintain all state and federal
licenses necessary for it to perform its servicing responsibilities hereunder
and (iii) not impair the rights of Buyer in any Mortgage Loans or any payment
thereunder. Buyer may terminate the servicing of any Mortgage Loan with the
then-existing servicer in accordance with Section 12(e) hereof.

                                      -25-



          b. Seller shall cause the Servicer to hold or cause to be held all
escrow funds collected by Servicer with respect to any Purchased Mortgage Loans
in trust accounts and shall apply the same for the purposes for which such funds
were collected.

          c. Seller shall cause the Servicer to deposit all collections received
by Servicer on the Purchased Mortgage Loans in the Collection Account no later
than the 5th Business Day following receipt; provided, however, that any amounts
required to be remitted to Buyer shall be deposited in the Collection Account on
or prior to the day on which such remittance is to occur.

          d. Upon Buyer's request, Seller shall provide promptly to Buyer (i) a
Servicer Notice addressed to and agreed to by the Servicer of the related
Purchased Mortgage Loans, advising such Servicer of such matters as Buyer may
reasonably request, including, without limitation, recognition by the Servicer
of Buyer's interest in such Purchased Mortgage Loans and the Servicer's
agreement that upon receipt of notice of an Event of Default from Buyer, it will
follow the instructions of Buyer with respect to the Purchased Mortgage Loans
and any related Income with respect thereto.

          e. Upon the occurrence of an Event of Default hereunder or a material
default under the Servicing Agreement, Buyer shall have the right to immediately
terminate the Servicer's right to service the Purchased Mortgage Loans under the
Servicing Agreement without payment of any penalty or termination fee. Seller
and the Servicer shall cooperate in transferring the servicing of the Purchased
Mortgage Loans to a successor servicer appointed by Buyer in its sole
discretion.

          f. If Seller should discover that, for any reason whatsoever, Seller
or any entity responsible to Seller for managing or servicing any such Purchased
Mortgage Loan has failed to perform fully Seller's obligations under the Program
Agreements or any of the obligations of such entities with respect to the
Purchased Mortgage Loans, Seller shall promptly notify Buyer.

          13.   Representations and Warranties

          a. Seller represents and warrants to Buyer as of the date hereof and
as of each Purchase Date for any Transaction that:

          (1) Seller Existence. Seller has been duly organized and is validly
     existing as a corporation in good standing under the laws of the State of
     Delaware.

          (2) Licenses. Seller is duly licensed or is otherwise qualified in
     each jurisdiction in which it transacts business for the business which it
     conducts and is not in default of any applicable federal, state or local
     laws, rules and regulations unless, in either instance, the failure to take
     such action is not reasonably likely (either individually or in the
     aggregate) to cause a Material Adverse Effect (hereinafter defined) and is
     not, to the best of Seller's knowledge, in default of such state's
     applicable laws, rules and regulations. Seller has the requisite power and
     authority and legal right to originate and purchase Mortgage Loans (as
     applicable) and to own, sell and grant a lien on all of its right, title
     and interest in and to the Mortgage Loans, and to execute and deliver,
     engage in the transactions contemplated by, and perform and observe the
     terms and conditions of, this Agreement, each Program Agreement and any
     Transaction Request or, if

                                      -26-



     applicable, Purchase Confirmation. Seller is an FHA Approved Mortgagee and
     VA Approved Lender.

          (3) Power. Seller has all requisite corporate or other power, and has
     all governmental licenses, authorizations, consents and approvals necessary
     to own its assets and carry on its business as now being or as proposed to
     be conducted, except where the lack of such licenses, authorizations,
     consents and approvals would not be reasonably likely to have a Material
     Adverse Effect.

          (4) Due Authorization. Seller has all necessary corporate or other
     power, authority and legal right to execute, deliver and perform its
     obligations under each of the Program Agreements, as applicable. This
     Agreement, any Transaction Request, Purchase Confirmation and the Program
     Agreements have been (or, in the case of Program Agreements and any
     Transaction Request, Purchase Confirmation not yet executed, will be) duly
     authorized, executed and delivered by Seller, all requisite corporate
     action having been taken, and each is valid, binding and enforceable
     against Seller in accordance with its terms except as such enforcement may
     be affected by bankruptcy, by other insolvency laws, or by general
     principles of equity.

          (5) Financial Statements. The Seller has heretofore furnished to Buyer
     a copy of (a) its consolidated balance sheet for the fiscal year of the
     Seller ended December 31, 2000 and the related consolidated statements of
     income and retained earnings and of cash flows for the Seller and its
     consolidated Subsidiaries for such fiscal year, setting forth in each case
     in comparative form the figures for the previous year, with the opinion
     thereon of Arthur Andersen LLP and (b) its consolidated balance sheet for
     the quarterly fiscal periods of the Seller ended March 31, 2001 and June
     30, 2001 and the related consolidated statements of income and retained
     earnings and of cash flows for the Seller and its consolidated Subsidiaries
     for such quarterly fiscal periods, setting forth in each case in
     comparative form the figures for the previous year. All such financial
     statements are complete and correct and fairly present, in all material
     respects, the consolidated financial condition of the Seller and its
     Subsidiaries and the consolidated results of their operations as at such
     dates and for such fiscal periods, all in accordance with GAAP applied on a
     consistent basis. Since December 31, 2000, there has been no material
     adverse change in the consolidated business, operations or financial
     condition of the Seller and its consolidated Subsidiaries taken as a whole
     from that set forth in said financial statements nor is Seller aware of any
     state of facts which (without notice or the lapse of time) would or could
     result in any such material adverse change. The Seller has, on the date of
     the statements delivered pursuant to this Section (the "Statement Date") no
     liabilities, direct or indirect, fixed or contingent, matured or unmatured,
     known or unknown, or liabilities for taxes, long-term leases or unusual
     forward or long-term commitments not disclosed by, or reserved against in,
     said balance sheet and related statements, and at the present time there
     are no material unrealized or anticipated losses from any loans, advances
     or other commitments of Seller except as heretofore disclosed to Buyer in
     writing.

          (6) Event of Default. There exists no Event of Default under Section
     15(b) hereof, which default gives rise to a right to accelerate
     indebtedness as referenced in

                                      -27-



     Section 15(b) hereof, under any mortgage, borrowing agreement or other
     instrument or agreement pertaining to indebtedness for borrowed money or to
     the repurchase of mortgage loans or securities.

          (7)  Solvency. Seller is solvent and will not be rendered insolvent by
     any Transaction and, after giving effect to such Transaction, will not be
     left with an unreasonably small amount of capital with which to engage in
     its business. Seller does not intend to incur, nor believes that it has
     incurred, debts beyond its ability to pay such debts as they mature and is
     not contemplating the commencement of insolvency, bankruptcy, liquidation
     or consolidation proceedings or the appointment of a receiver, liquidator,
     conservator, trustee or similar official in respect of such entity or any
     of its assets. The amount of consideration being received by Seller upon
     the sale of the Purchased Mortgage Loans to Buyer constitutes reasonably
     equivalent value and fair consideration for such Purchased Mortgage Loans.
     Seller is not transferring any Purchased Mortgage Loans with any intent to
     hinder, delay or defraud any of its creditors.

          (8)  No Conflicts. The execution, delivery and performance by Seller
     of this Agreement, any Transaction Request or Purchase Confirmation
     hereunder and the Program Agreements do not conflict with any term or
     provision of the certificate of incorporation or by-laws of Seller or any
     law, rule, regulation, order, judgment, writ, injunction or decree
     applicable to Seller of any court, regulatory body, administrative agency
     or governmental body having jurisdiction over Seller, which conflict would
     have a Material Adverse Effect and will not result in any violation of any
     such mortgage, instrument, agreement or repurchase agreement.

          (9)  True and Complete Disclosure. All information, reports, exhibits,
     schedules, financial statements or certificates of Seller, any Material
     Affiliate thereof or any of their officers furnished or to be furnished to
     Buyer in connection with the initial or any ongoing due diligence of
     Seller, or any Material Affiliate or officer thereof, negotiation,
     preparation, or delivery of the Program Agreements are true and complete
     and do not omit to disclose any material facts necessary to make the
     statements herein or therein, in light of the circumstances in which they
     are made, not misleading. All financial statements have been prepared in
     accordance with GAAP.

          (10) Approvals. No consent, approval, authorization or order of,
     registration or filing with, or notice to any governmental authority or
     court is required under applicable law in connection with the execution,
     delivery and performance by Seller of this Agreement, any Transaction
     Request, Purchase Confirmation and the Program Agreements.

          (11) Litigation. There is no action, proceeding or investigation
     pending with respect to which Seller has received service of process or, to
     the best of Seller's knowledge threatened against it before any court,
     administrative agency or other tribunal (A) asserting the invalidity of
     this Agreement, any Transaction, Transaction Request, Purchase Confirmation
     or any Program Agreement, (B) seeking to prevent the consummation of any of
     the transactions contemplated by this Agreement, any

                                      -28-



     Transaction Request, Purchase Confirmation or any Program Agreement, (C)
     makes a claim or claims in an aggregate amount greater than $1,000,000, (D)
     which requires filing with the Securities and Exchange Commission in
     accordance with the 1934 Act or any rules thereunder or (E) which might
     materially and adversely affect the validity of the Mortgage Loans or the
     performance by it of its obligations under, or the validity or
     enforceability of, this Agreement, any Transaction Request, Purchase
     Confirmation or any Program Agreement.

          (12) Material Adverse Change. There has been no material adverse
     change in the business, operations, financial conditions, properties or
     prospects of Seller or its Material Affiliates since the date set forth in
     the most recent financial statements supplied to Buyer.

          (13) Ownership. Upon payment of the Purchase Price and the filing of
     the financing statement and delivery of the Mortgage Files to the Custodian
     and the Custodian's receipt of the related Request for Certification, Buyer
     shall become the sole owner of the Purchased Mortgage Loans and related
     Repurchase Assets, free and clear of all liens and encumbrances subject to
     Seller's right to repurchase such Mortgage Loans hereunder.

          (14) Underwriting Guidelines. The Underwriting Guidelines provided to
     Buyer are the true and correct Underwriting Guidelines of Seller.

          (15) Taxes. Seller and its Subsidiaries have filed all Federal income
     tax returns and all other material tax returns that are required to be
     filed by them and have paid all taxes due pursuant to such returns or
     pursuant to any assessment received by any of them, except for any such
     taxes as are being appropriately contested in good faith by appropriate
     proceedings diligently conducted and with respect to which adequate
     reserves have been provided. The charges, accruals and reserves on the
     books of Seller, and its Subsidiaries in respect of taxes and other
     governmental charges are, in the opinion of Seller, adequate.

          (16) Investment Company. Neither Seller nor any of its Subsidiaries is
     an "investment company", or a company "controlled" by an "investment
     company," within the meaning of the Investment Company Act of 1940, as
     amended.

          (17) Chief Executive Office; Jurisdiction of Organization. During the
     four months immediately preceding July 1, 2001 and on the Effective Date,
     Seller's chief executive office, is, and has been, located at 470 Von
     Karman Avenue, Suite 200, Newport Beach, CA 92660. On the Effective Date,
     Seller's jurisdiction of organization is Delaware. Seller shall provide
     Buyer with thirty days advance notice of any change in Seller's principal
     office or place of business or jurisdiction. Seller has no trade name.
     During the preceding five years, Seller has not been known by or done
     business under any other name, corporate or fictitious, and has not filed
     or had filed against it any bankruptcy receivership or similar petitions
     nor has it made any assignments for the benefit of creditors.

                                      -29-



     (18) Location of Books and Records. The location where Seller keeps its
books and records, including all computer tapes and records relating to the
Purchased Mortgage Loans and the related Repurchase Assets is its chief
executive office.

     (19) Adjusted Tangible Net Worth. On the Effective Date, Seller's Adjusted
Tangible Net Worth is greater than $9 million; provided that, during the
Increased Maximum Aggregate Purchase Price Period, Seller shall maintain an
Adjusted Tangible Net Worth greater than $10.5 million.

     (20) ERISA. Each Plan to which Seller or its Subsidiaries make direct
contributions, and, to the knowledge of Seller, each other Plan and each
Multiemployer Plan, is in compliance in all material respects with, and has been
administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other Federal or State law.

     (21) Adverse Selection. Seller has not selected the Purchased Mortgage
Loans in a manner so as to adversely affect Buyer's interests.

     (22) Agreements. Neither Seller nor any Subsidiary of Seller is a party to
any agreement, instrument, or indenture or subject to any restriction materially
and adversely affecting its business, operations, assets or financial condition,
except as disclosed in the financial statements described in Section 13(a)(5)
hereof. Neither Seller nor any Subsidiary of Seller is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any agreement, instrument, or indenture which default
would reasonably be expected to have a material adverse effect on the business,
operations, properties, or financial condition of Seller as a whole. No holder
of any indebtedness of Seller or of any of its Subsidiaries has given notice of
any asserted default thereunder.

     (23) Other Indebtedness. All Indebtedness (other than Indebtedness
evidenced by this Agreement) of Seller existing on the date hereof is listed on
Exhibit J hereto (the "Existing Indebtedness").

     (24) Agency Approvals. With respect to each Agency Security and to the
extent necessary, Seller is an FHA Approved Mortgagee and a VA Approved Lender.
Seller is also approved by Fannie Mae as an approved lender and Freddie Mac as
an approved seller/servicer, and, to the extent necessary, approved by the
Secretary of Housing and Urban Development pursuant to Sections 203 and 211 of
the National Housing Act. In each such case, Seller is in good standing, with no
event having occurred or Seller having any reason whatsoever to believe or
suspect will occur prior to the issuance of the Agency Security or the
consummation of the Take-out Commitment, as the case may be, including, without
limitation, a change in insurance coverage which would either make Seller unable
to comply with the eligibility requirements for maintaining all such applicable
approvals or require notification to the relevant Agency or to the Department of
Housing and Urban Development, FHA or VA. Should Seller for any reason cease to
possess all such applicable approvals, or should notification to the relevant
Agency or to the Department of Housing and Urban Development, FHA or VA

                                      -30-



     be required, Seller shall so notify Buyer immediately in writing. Seller
     has adequate financial standing, servicing facilities, procedures and
     experienced personnel necessary for the sound servicing of mortgage loans
     of the same types as may from time to time constitute Mortgage Loans and in
     accordance with Accepted Servicing Practices.

          b. With respect to every Purchased Mortgage Loan, Seller represents
and warrants to Buyer as of the applicable Purchase Date for any Transaction and
each date thereafter that each representation and warranty set forth on Schedule
1 is true and correct.

          c. The representations and warranties set forth in this Agreement
shall survive transfer of the Purchased Mortgage Loans to Buyer and shall
continue for so long as the Purchased Mortgage Loans are subject to this
Agreement. Upon discovery by Seller, Servicer or Buyer of any breach of any of
the representations or warranties set forth in this Agreement, the party
discovering such breach shall promptly give notice of such discovery to the
others. Buyer has the right to require, in its unreviewable discretion, Seller
to repurchase within 1 Business Day after receipt of notice from Buyer any
Purchased Mortgage Loan (i) for which a breach of one or more of the
representations and warranties referenced in Section 13(b) exists and which
breach has a material adverse effect on the value of such Mortgage Loan or the
interests of Buyer or (ii) which is determined by Buyer, in its good faith
discretion, to be unacceptable for inclusion in a securitization.

          14.    Covenants

Seller covenants with Buyer that, during the term of this facility:

          a. Adjusted Tangible Net Worth. For each quarter commencing after
December 31, 2000, Seller shall maintain an Adjusted Tangible Net Worth greater
than $9 million.

          b. Indebtedness to Adjusted Tangible Net Worth Ratio. For each quarter
commencing after December 31, 2000, Seller's ratio of Indebtedness to Adjusted
Tangible Net Worth shall not exceed 10:1.

          c. Litigation. Seller will promptly, and in any event within ten (10)
days after service of process on any of the following, give to Buyer notice of
all litigation, actions, suits, arbitrations, investigations (including, without
limitation, any of the foregoing which are threatened or pending) or other legal
or arbitrable proceedings affecting Seller or any of its Subsidiaries or
affecting any of the Property of any of them before any Governmental Authority
that (i) questions or challenges the validity or enforceability of any of the
Program Agreements or any action to be taken in connection with the transactions
contemplated hereby, (ii) makes a claim or claims in an aggregate amount greater
than $1,000,000, (iii) which, individually or in the aggregate, if adversely
determined, would be reasonably likely to have a Material Adverse Effect, or
(iv) requires filing with the Office of the Comptroller of the Currency in
accordance its regulations.

          d. Prohibition of Fundamental Changes. Seller shall not enter into any
transaction of merger or consolidation or amalgamation, or liquidate, wind up or
dissolve itself (or suffer any liquidation, winding up or dissolution) or sell
all or substantially all of its assets;

                                      -31-



provided, that Seller may merge or consolidate with (a) any wholly owned
subsidiary of Seller, or (b) any other Person if Seller is the surviving
corporation; and provided further, that if after giving effect thereto, no
Default would exist hereunder.

          e. Servicer; Asset Tape. Upon the occurrence of any of the following
(a) the occurrence and continuation of an Event of Default, (b) upon any
Purchased Mortgage Loan becoming an Aged Loan, (c) the fifth Business Day of
each month, or (d) upon the request of Buyer, Seller shall cause Servicer to
provide to Buyer, electronically, in a format mutually acceptable to Buyer and
Seller, an Asset Tape by no later than the Reporting Date. Seller shall not
cause the Mortgage Loans to be serviced by any servicer other than a servicer
expressly approved in writing by Buyer, which approval shall be deemed granted
by Buyer with respect to Seller with the execution of this Agreement.

          f. Insurance. Seller or any of Seller's Affiliates will continue to
maintain, for Seller and its subsidiaries, insurance coverage with respect to
employee dishonesty, forgery or alteration, theft, disappearance and
destruction, robbery and safe burglary, property (other than money and
securities) and computer fraud in an aggregate amount acceptable to Fannie Mae
and Freddie Mac.

          g. No Adverse Claims. Seller warrants and will defend, and shall cause
any Servicer to defend, the right, title and interest of Buyer in and to all
Purchased Mortgage Loans and the related Repurchase Assets against all adverse
claims and demands.

          h. Assignment. Except as permitted herein, neither Seller nor any
Servicer shall sell, assign, transfer or otherwise dispose of, or grant any
option with respect to, or pledge, hypothecate or grant a security interest in
or lien on or otherwise encumber (except pursuant to the Program Agreements),
any of the Purchased Mortgage Loans or any interest therein, provided that this
Section shall not prevent any transfer of Purchased Mortgage Loans in accordance
with the Program Agreements.

          i. Security Interest. Seller shall do all things necessary to preserve
the Purchased Mortgage Loans and the related Repurchase Assets so that they
remain subject to a first priority perfected security interest hereunder.
Without limiting the foregoing, Seller will comply with all rules, regulations
and other laws of any Governmental Authority and cause the Purchased Mortgage
Loans or the related Repurchase Assets to comply with all applicable rules,
regulations and other laws. Seller will not allow any default for which Seller
is responsible to occur under any Purchased Mortgage Loans or the related
Repurchase Assets or any Program Agreement and Seller shall fully perform or
cause to be performed when due all of its obligations under any Purchased
Mortgage Loans or the related Repurchase Assets and any Program Agreement.

          j. Records.

          (1) Seller shall collect and maintain or cause to be collected and
     maintained all Records relating to the Purchased Mortgage Loans in
     accordance with industry custom and practice for assets similar to the
     Purchased Mortgage Loans, including those maintained pursuant to the
     preceding subparagraph, and all such Records shall be in

                                      -32-



     Custodian's possession unless Buyer otherwise approves. Seller will not
     allow any such papers, records or files that are an original or an only
     copy to leave Custodian's possession, except for individual items removed
     in connection with servicing a specific Mortgage Loan, in which event
     Seller will obtain or cause to be obtained a receipt from a financially
     responsible person for any such paper, record or file. Seller or the
     Servicer of the Purchased Mortgage Loans will maintain all such Records not
     in the possession of Custodian in good and complete condition in accordance
     with industry practices for assets similar to the Purchased Mortgage Loans
     and preserve them against loss.

          (2) For so long as Buyer has an interest in or lien on any Purchased
     Mortgage Loan, Seller will hold or cause to be held all related Records in
     trust for Buyer. Seller shall notify, or cause to be notified, every other
     party holding any such Records of the interests and liens in favor of Buyer
     granted hereby.

          (3) Upon reasonable advance notice from Custodian or Buyer, Seller
     shall (x) make any and all such Records available to Custodian or Buyer to
     examine any such Records, either by its own officers or employees, or by
     agents or contractors, or both, and make copies of all or any portion
     thereof, and (y) permit Buyer or its authorized agents to discuss the
     affairs, finances and accounts of Seller with its chief operating officer
     and chief financial officer and to discuss the affairs, finances and
     accounts of Seller with its independent certified public accountants.

          k. Books. Seller shall keep or cause to be kept in reasonable detail
books and records of account of its assets and business and shall clearly
reflect therein the transfer of Purchased Mortgage Loans to Buyer.

          l. Approvals. Seller shall maintain all licenses, permits or other
approvals necessary for Seller to conduct its business and to perform its
obligations under the Program Agreements, and Seller shall conduct its business
strictly in accordance with applicable law.

          m. Material Change in Business. Seller shall not make any material
change in the nature of its business as carried on at the date hereof.

          n. Underwriting Guidelines. Without the prior written consent of
Buyer, Seller shall not amend or otherwise modify the Underwriting Guidelines.
Without limiting the foregoing, in the event that Seller or any Agency or
Takeout Investor makes any amendment or modification to the Underwriting
Guidelines, Seller shall promptly deliver to Buyer a complete copy of the
amended or modified Underwriting Guidelines.

          o. Distributions. If an Event of Default has occurred and is
continuing, Seller shall not pay any dividends with respect to any capital stock
or other equity interests in such entity, whether now or hereafter outstanding,
or make any other distribution in respect thereof, either directly or
indirectly, whether in cash or property or in obligations of Seller.

          p. Applicable Law. Seller shall comply with the requirements of all
applicable laws, rules, regulations and orders of any Governmental Authority.

                                      -33-



          q. Existence. Seller shall preserve and maintain its legal existence
and all of its material rights, privileges, licenses and franchises.

          r. Chief Executive Office; Jurisdiction of Organization. Seller shall
not move its chief executive office from the address referred to in Section
13(a)(17) or change its jurisdiction of organization from the jurisdiction
referred to in Section 13(a)(17) unless it shall have provided Buyer 30 days'
prior written notice of such change.

          s. Taxes. Seller shall pay and discharge all taxes, assessments and
governmental charges or levies imposed on it or on its income or profits or on
any of its property prior to the date on which penalties attach thereto, except
for any such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and against which adequate
reserves are being maintained.

          t. Transactions with Affiliates. Seller will not enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transaction is (a) otherwise not prohibited under the Program Agreements,
(b) in the ordinary course of Seller's business and (c) upon fair and reasonable
terms no less favorable to Seller than it would obtain in a comparable arm's
length transaction with a Person which is not an Affiliate.

          u. Guarantees. Seller shall not create, incur, assume or suffer to
exist any Guarantees, except (i) to the extent reflected in Seller's financial
statements or notes thereto and (ii) to the extent the aggregate Guarantees of
Seller do not exceed $2 million.

          v. Indebtedness. Seller shall not incur any additional material
Indebtedness (other than (i) the Existing Indebtedness in amounts not to exceed
the amounts specified on Exhibit J hereto and (ii) usual and customary accounts
payable for a mortgage company) without the prior written consent of Buyer.

          w. Hedging. Seller has entered into Interest Rate Protection
Agreements with respect to the Alt A Mortgage Loans, Jumbo Mortgage Loans and
Conforming Mortgage Loans, having terms with respect to protection against
fluctuations in interest rates acceptable to Buyer in its sole discretion.

          x. True and Correct Information. All information, reports, exhibits,
schedules, financial statements or certificates of Seller any Affiliate thereof
or any of their officers furnished to Buyer hereunder and during Buyer's
diligence of Seller, taken as a whole, are and will be true and complete and do
not omit to disclose any material facts necessary to make the statements herein
or therein, in light of the circumstances in which they are made, not
misleading. All required financial statements, information and reports delivered
by Seller to Buyer pursuant to this Agreement shall be prepared in accordance
with U.S. GAAP, or, if applicable, to SEC filings, the appropriate SEC
accounting regulations.

          y. Agency Approvals; Servicing. Seller shall maintain its status with
Fannie Mae as an approved lender and Freddie Mac as an approved seller/servicer,
in each case in good standing. Seller shall service all Purchased Mortgage Loans
which are Committed Mortgage Loans in accordance with the applicable agency
guide. Should Seller, for any reason, cease to

                                      -34-



possess all such applicable Agency Approvals, or should notification to the
relevant Agency or to the Department of Housing and Urban Development, FHA or VA
be required, such Seller shall so notify Buyer immediately in writing.
Notwithstanding the preceding sentence, Seller shall take all necessary action
to maintain all of their applicable Agency Approvals at all times during the
term of this Agreement and each outstanding Transaction. Seller has adequate
financial standing, servicing facilities, procedures and experienced personnel
necessary for the sound servicing of mortgage loans of the same types as may
from time to time constitute Mortgage Loans and in accordance with Accepted
Servicing Practices.

          z.  Take-out Payments. With respect to each Committed Mortgage Loan,
Seller shall arrange that all payments under the related Take-out Commitment
shall be paid directly to Buyer at the account set forth in Section 9 hereof, or
to an account approved by Buyer in writing prior to such payment. With respect
to any Agency Take-out Commitment, if applicable, (1) with respect to the wire
transfer instructions as set forth in Freddie Mac Form 987 (Wire Transfer
Authorization for a Cash Warehouse Delivery) such wire transfer instructions are
identical to Buyer's wire instructions or Buyer has approved such wire transfer
instructions in writing in its sole discretion, or (2) the Payee Number set
forth on Fannie Mae Form 1068 (Fixed-Rate, Graduated-Payment, or Growing-Equity
Mortgage Loan Schedule) or Fannie Mae Form 1069 (Adjustable-Rate Mortgage Loan
Schedule), as applicable, is identical to the Payee Number that has been
identified by Buyer in writing as Buyer's Payee Number or Buyer has previously
approved the related Payee Number in writing in its sole discretion; with
respect to any Take-out Commitment with an Agency, the applicable agency
documents list Buyer as sole subscriber, unless otherwise agreed to in writing
by Buyer, in Buyer's sole discretion.

          aa. No Pledge. Seller shall not pledge, transfer or convey any
security interest in the Collection Account to any Person without the express
written consent of Buyer.

          bb. No Investment in Standard Pacific Corp. The Seller shall not (A)
make or maintain any investments in the form of advances or notes receivable, or
(B) make or maintain any other investments outstanding, in either case, in
Standard Pacific Corp. at any time (i) during the Increased Aggregate Maximum
Purchase Price Period or (ii) following a downgrade of Standard Pacific Corp.'s
corporate bond rating either below "BB" by S&P or below "Ba2" by Moody's.

          15.   Events of Default

          Each of the following shall constitute an "Event of Default"
hereunder:

          a.  Payment Failure. Failure of Seller to (i) make any payment of
Price Differential or Repurchase Price or any other sum which has become due, on
a Price Differential Payment Date or a Repurchase Date or otherwise, whether by
acceleration or otherwise, under the terms of this Agreement, any other
warehouse and security agreement or any other document evidencing or securing
indebtedness of Seller to Buyer or to any affiliate of Buyer, or (ii) cure any
Margin Deficit when due pursuant to Section 6 hereof.

          b.  Cross Default. Any of Seller or any of Seller's Material
Affiliates shall be in default under (i) any Indebtedness of Seller or any of
Seller's Material Affiliates which has, in

                                      -35-



any one instance, or in the aggregate, an outstanding principal balance (or
equivalent) in excess of $3,000,000, which default or defaults (1) involves the
failure to pay a matured obligation, or (2) permits the acceleration of the
maturity of obligations by any other party to or beneficiary with respect to
such Indebtedness, or (ii) any other contract to which Seller or any of Seller's
Material Affiliates is a party which has, in any one instance, or in the
aggregate, an outstanding principal balance (or equivalent) in excess of
$3,000,000, which default (1) involves the failure to pay a matured obligation,
or (2) permits the acceleration of the maturity of obligations by any other
party to or beneficiary of such contract.

          c. Assignment. Assignment or attempted assignment by Seller of this
Agreement or any rights hereunder without first obtaining the specific written
consent of Buyer, or the granting by Seller of any security interest, lien or
other encumbrances on any Purchased Mortgage Loans to any person other than
Buyer.

          d. Insolvency. An Act of Insolvency shall have occurred with respect
to Seller or any of Seller's Material Affiliates.

          e. Material Adverse Change. Any material adverse change in the
Property, business, financial condition or operations of Seller or any of
Seller's Material Affiliates shall occur, in each case as determined by Buyer in
its sole good faith discretion, or any other condition shall exist which, in
Buyer's sole good faith discretion, constitutes a material impairment of
Seller's ability to perform its obligations under this Agreement or any other
Program Agreement.

          f. Breach of Financial Representation or Covenant or Obligation. A
breach by Seller of any of the representations, warranties or covenants or
obligations set forth in Sections 13(a)(1), 13(a)(7), 13(a)(12), 13(a)(19),
13(a)(23), 14a, 14b, 14d, 14q, 14u, 14v or 14aa of this Agreement.

          g. Breach of Non-Financial Representation or Covenant. A breach by
Seller of any other material representation, warranty or covenant set forth in
this Agreement (and not otherwise specified in Section 15(f) above) breach is
not cured within seven (7) Business Days (other than the representations and
warranties set forth in Schedule 1, which shall be considered solely for the
purpose of determining the Market Value and the obligation to repurchase such
Mortgage Loan unless (i) Seller shall have made any such representations and
warranties with knowledge that they were materially false or misleading at the
time made, (ii) any such representations and warranties have been determined by
Buyer in its sole discretion to be materially false or misleading on a regular
basis, or (iii) Buyer, in its sole discretion, determines that such breach of a
material representation, warranty or covenant materially and adversely affects
(A) the condition (financial or otherwise) of Seller or any of Seller's Material
Affiliates, or (B) Buyer's determination to enter into this Agreement or
Transactions with Seller, then such breach shall constitute an immediate Event
of Default and Seller shall have no cure right hereunder.

          h. Change of Control. The occurrence of a Change in Control.

                                      -36-



          i. Failure to Transfer. Seller fails to transfer the Purchased
Mortgage Loans to Buyer on the applicable Purchase Date (provided Buyer has
tendered the related Purchase Price).

          j. Judgment. A final judgment or judgments for the payment of money in
excess of $1,000,000 in the aggregate shall be rendered against the Seller or
any of Seller's Material Affiliates by one or more courts, administrative
tribunals or other bodies having jurisdiction and the same shall not be
satisfied, discharged (or provision shall not be made for such discharge) or
bonded, or a stay of execution thereof shall not be procured, within 30 days
from the date of entry thereof.

          k. Government Action. Any Governmental Authority or any person, agency
or entity acting or purporting to act under governmental authority shall have
taken any action to condemn, seize or appropriate, or to assume custody or
control of, all or any substantial part of the Property of Seller or any of
Seller's Material Affiliates, or shall have taken any action to displace the
management of Seller or any of Seller's Material Affiliates or to curtail its
authority in the conduct of the business of Seller or any of Seller's Material
Affiliates, or takes any action in the nature of enforcement to remove, limit or
restrict the approval of Seller or any of Seller's Material Affiliates as an
issuer, buyer or a seller/servicer of Loans or securities backed thereby, and
such action provided for in this subparagraph (k) shall not have been
discontinued or stayed within 30 days.

          l. Inability to Perform. An officer of Seller shall admit its
inability to, or its intention not to, perform any of Seller's Obligations
hereunder.

          m. Security Interest. This Agreement shall for any reason cease to
create a valid, first priority security interest in any material portion of the
Purchased Mortgage Loans purported to be covered hereby.

          n. Financial Statements. Seller's audited annual financial statements
or the notes thereto or other opinions or conclusions stated therein shall be
qualified or limited by reference to the status of Seller as a "going concern"
or a reference of similar import.

          An Event of Default shall be deemed to be continuing unless expressly
waived by Buyer in writing.

          16.   Remedies Upon Default

          In the event that an Event of Default shall have occurred and while it
is continuing:

          a. Buyer may, at its option (which option shall be deemed to have been
exercised immediately upon the occurrence of an Act of Insolvency), declare an
Event of Default to have occurred hereunder and, upon the exercise or deemed
exercise of such option, the Repurchase Date for each Transaction hereunder
shall, if it has not already occurred, be deemed immediately to occur (except
that, in the event that the Purchase Date for any Transaction has not yet
occurred as of the date of such exercise or deemed exercise, such Transaction
shall be deemed immediately canceled). Buyer shall (except upon the occurrence
of an Act of Insolvency) give notice to Seller of the exercise of such option as
promptly as practicable.

                                      -37-



          b. If Buyer exercises or is deemed to have exercised the option
referred to in subparagraph (a) of this Section, (i) Seller's obligations in
such Transactions to repurchase all Purchased Mortgage Loans, at the Repurchase
Price therefor on the Repurchase Date determined in accordance with subparagraph
(a) of this Section, shall thereupon become immediately due and payable, (ii)
all Income paid after such exercise or deemed exercise shall be retained by
Buyer and applied, in Buyer's sole discretion, to the aggregate unpaid
Repurchase Prices for all outstanding Transactions and any other amounts owing
by Seller hereunder, and (iii) unless Seller satisfies all of its Obligations
hereunder, Seller shall immediately deliver to Buyer the Mortgage Files relating
to any Purchased Mortgage Loans subject to such Transactions then in Seller's
possession or control.

          c. Buyer also shall have the right to obtain physical possession, and
to commence an action to obtain physical possession, of all Records and files of
Seller relating to the Purchased Mortgage Loans and all documents relating to
the Purchased Mortgage Loans (including, without limitation, any legal, credit
or servicing files with respect to the Purchased Mortgage Loans) which are then
or may thereafter come in to the possession of Seller or any third party acting
for Seller. To obtain physical possession of any Purchased Mortgage Loans held
by Custodian, Buyer shall present to Custodian a Trust Receipt and
Certification. Buyer shall be entitled to specific performance of all agreements
of Seller contained in this Agreement.

          d. Buyer shall have the right to direct all servicers then servicing
any Purchased Mortgage Loans to remit all collections thereon to Buyer, and if
any such payments are received by Seller, Seller shall not commingle the amounts
received with other funds of Seller and shall promptly pay them over to Buyer.
Buyer shall also have the right to terminate any one or all of the servicers
then servicing any Purchased Mortgage Loans with or without cause. In addition,
Buyer shall have the right to immediately sell the Purchased Mortgage Loans.
Such disposition of Purchased Mortgage Loans may be, at Buyer's option, on
either a servicing-released or a servicing-retained basis. Buyer shall be
entitled to place the Purchased Mortgage Loans in a pool for issuance of
mortgage-backed securities at the then-prevailing price for such securities and
to sell such securities for such prevailing price in the open market. Buyer
shall also be entitled to sell any or all of such Mortgage Loans individually
for the prevailing price.

          e. Upon the occurrence and during the continuation of one or more
Events of Default, Buyer may apply any proceeds from the liquidation of the
Purchased Mortgage Loans to the Repurchase Prices hereunder and all other
Obligations in the manner Buyer deems appropriate in its sole discretion.

          f. Seller shall be liable to Buyer for (i) the amount of all
reasonable legal or other expenses (including, without limitation, all costs and
expenses of Buyer in connection with the enforcement of this Agreement or any
other agreement evidencing a Transaction, whether in action, suit or litigation
or bankruptcy, insolvency or other similar proceeding affecting creditors'
rights generally, further including, without limitation, the reasonable fees and
expenses of counsel (including the costs of internal counsel of Buyer) incurred
in connection with or as a result of an Event of Default, (ii) damages in an
amount equal to the cost (including all fees, expenses and commissions) of
entering into replacement transactions and entering into or terminating hedge
transactions in connection with or as a result of an Event of Default, and

                                      -38-



(iii) any other loss, damage, cost or expense directly arising or resulting from
the occurrence of an Event of Default in respect of a Transaction.


          g. To the extent permitted by applicable law, Seller shall be liable
to Buyer for interest on any amounts owing by Seller hereunder, from the date
Seller becomes liable for such amounts hereunder until such amounts are (i) paid
in full by Seller or (ii) satisfied in full by the exercise of Buyer's rights
hereunder. Interest on any sum payable by Seller under this Section 16(g) shall
be at a rate equal to the Post-Default Rate.

          h. Buyer shall have, in addition to its rights hereunder, any rights
otherwise available to it under any other agreement or applicable law.

          i. Buyer may exercise one or more of the remedies available to Buyer
immediately upon the occurrence of an Event of Default and, except to the extent
provided in subsections (a) and (d) of this Section, at any time thereafter
while such Event of Default is continuing without notice to Seller. All rights
and remedies arising under this Agreement as amended from time to time hereunder
are cumulative and not exclusive of any other rights or remedies which Buyer may
have.

          j. Buyer may enforce its rights and remedies hereunder without prior
judicial process or hearing, and Seller hereby expressly waives any defenses
Seller might otherwise have to require Buyer to enforce its rights by judicial
process. Seller also waives any defense (other than a defense of payment or
performance) Seller might otherwise have arising from the use of nonjudicial
process, enforcement and sale of all or any portion of the Purchased Mortgage
Loans, or from any other election of remedies. Seller recognizes that
nonjudicial remedies are consistent with the usages of the trade, are responsive
to commercial necessity and are the result of a bargain at arm's length.

          k. Buyer shall have the right to perform reasonable due diligence with
respect to Seller and the Mortgage Loans, which review shall be at the expense
of Seller.

          17.    Reports

          a. Notices. Seller shall furnish to Buyer (x) promptly, copies of any
material and adverse notices (including, without limitation, notices of
defaults, breaches, potential defaults or potential breaches) and any material
financial information that is not otherwise required to be provided by Seller
hereunder which is given to Seller's lenders, (y) immediately, notice of the
occurrence of any Event of Default hereunder or default or breach by Seller or
Servicer of any obligation under any Program Agreement or any material contract
or agreement of Seller or Servicer or the occurrence of any event or
circumstance that Seller reasonably expects has resulted in, or will, with the
passage of time, result in, a Material Adverse Effect or an Event of Default or
such a default or breach by such party and (z) the following:

          (1) as soon as available and in any event within forty-five (45)
     calendar days after the end of each calendar quarter, the unaudited
     consolidated and consolidating balance sheets of Seller and its
     consolidated Subsidiaries as at the end of such period and the related
     unaudited consolidated and consolidating statements of income and retained
     earnings and of cash flows for the Seller and its consolidated Subsidiaries
     for such period

                                      -39-



         and the portion of the fiscal year through the end of such period,
         accompanied by a certificate of a Responsible Officer of Seller, which
         certificate shall state that said consolidated and consolidating
         financial statements fairly present in all material respects the
         consolidated financial condition and results of operations of Seller
         and its consolidated Subsidiaries in accordance with GAAP, consistently
         applied, as at the end of, and for, such period (subject to normal
         year-end adjustments);

                (2)    as soon as available and in any event within ninety (90)
         days after the end of each fiscal year of Seller, the consolidated and
         consolidating balance sheets of Seller and its consolidated
         Subsidiaries as at the end of such fiscal year and the related
         consolidated and consolidating statements of income and retained
         earnings and of cash flows for the Seller and its consolidated
         Subsidiaries for such year, setting forth in each case in comparative
         form the figures for the previous year, accompanied by an opinion
         thereon of independent certified public accountants of recognized
         national standing, which opinion shall be acceptable to Buyer in its
         sole good faith discretion, shall have no "going concern" or scope of
         audit qualification and shall state that said consolidated and
         consolidating financial statements fairly present the consolidated
         financial condition and results of operations of Seller and its
         respective consolidated Subsidiaries as at the end of, and for, such
         fiscal year in accordance with GAAP;

                (3)    such other prepared statements that Buyer may reasonably
         request;

                (4)    if applicable, copies of any 10-Ks, 10-Qs, registration
         statements and other "corporate finance" SEC filings (other than 8-Ks)
         by Seller or an Affiliate, within 5 Business Days of their filing with
         the SEC;

                (5)    from time to time such other information regarding the
         financial condition, operations, or business of the Seller as Buyer may
         reasonably request;

                (6)    as soon as reasonably possible, and in any event within
         thirty (30) days after a Responsible Officer of the Seller has
         knowledge of the occurrence of any Event of Termination, stating the
         particulars of such Event of Termination in reasonable detail;

                (7)    As soon as reasonably possible, notice of any of the
         following events:

                       (a) change in the insurance coverage required of Seller,
                Servicer or any other Person pursuant to any Program Agreement,
                with a copy of evidence of same attached;

                       (b) any material dispute, litigation, investigation,
                proceeding or suspension between Seller or Servicer, on the one
                hand, and any Governmental Authority or any Person;

                       (c) any material change in accounting policies or
                financial reporting practices of Seller or Servicer;

                       (d) with respect to any Purchased Mortgage Loan,
                immediately upon receipt of notice or knowledge thereof, that
                the underlying Secured Property has

                                      -40-



         been damaged by waste, fire, earthquake or earth movement, windstorm,
         flood, tornado or other casualty, or otherwise damaged so as to affect
         adversely the value of such Mortgaged Loan;

                (e)    any material issues raised upon examination of Seller or
         Seller's facilities by any Governmental Authority;

                (f)    promptly upon receipt of notice or knowledge of (i) any
         default related to any Repurchase Asset, (ii) any lien or security
         interest (other than security interests created hereby or by the other
         Program Agreements) on, or claim asserted against, any of the Purchased
         Mortgage Loans; and

                (g)    any other event, circumstance or condition that has
         resulted, or has a possibility of resulting, in a Material Adverse
         Effect with respect to Seller or Servicer.

         b. Officer's Certificates.

         (1) Seller will furnish to Buyer, at the time the Seller furnishes each
    set of financial statements pursuant to Section 17(a)(1) or (2) above, a
    certificate of a Responsible Officer of Seller in the form of Exhibit D
    hereto.

         c. Mortgage Loan Reports. Seller will furnish to Buyer monthly
electronic Mortgage Loan performance data, including, without limitation,
delinquency reports (i.e., delinquency, foreclosure and net charge-off reports).

         d. Asset Tape. Seller shall provide to Buyer, electronically, in a
format mutually acceptable to Buyer and Seller, an Asset Tape by no later than
the Reporting Date.

         e. Other. Seller shall deliver to Buyer any other reports or
information reasonably requested by Buyer or as otherwise required pursuant to
this Agreement.

         18. Repurchase Transactions

         Buyer may, in its sole election, engage in repurchase transactions with
the Purchased Mortgage Loans or otherwise pledge, hypothecate, assign, transfer
or otherwise convey the Purchased Mortgage Loans with a counterparty of Buyer's
choice. Unless an Event of Default shall have occurred, no such transaction
shall relieve Buyer of its obligations to transfer Purchased Mortgage Loans to
Seller pursuant to Section 4 or 6 hereof, or of Buyer's obligation to credit or
pay Income to, or apply Income to the obligations of, Seller pursuant to Section
7 hereof. In the event Buyer engages in a repurchase transaction with any of the
Purchased Mortgage Loans or otherwise pledges or hypothecates any of the
Purchased Mortgage Loans, Buyer shall have the right to assign to Buyer's
counterparty any of the applicable representations or warranties herein and the
remedies for breach thereof, as they relate to the Purchased Mortgage Loans that
are subject to such repurchase transaction.

                                      -41-



             19.  Single Agreement

             Buyer and Seller acknowledge that, and have entered hereunto, and
will enter into each Transaction hereunder, in consideration of and in reliance
upon the fact that, all Transactions hereunder constitute a single business and
contractual relationship and have been made in consideration of each other.
Accordingly, each of Buyer and Seller agrees (i) to perform all of its
obligations in respect of each Transaction hereunder, and that a default in the
performance of any such obligations shall constitute a default by it in respec t
of all Transactions hereunder, (ii) that each of them shall be entitled to
set-off claims and apply property held by them in respect of any Transaction
against obligations owing to them in respect of any other Transactions hereunder
and (iii) that payments, deliveries and other transfers made by either of them
in respect of any Transaction shall be deemed to have been made in consideration
of payments, deliveries and other transfers in respect of any other Transactions
hereunder, and the obligations to make any such payments, deliveries and other
transfers may be applied against each other and netted.

             20.  Notices and Other Communications

             Any and all notices (with the exception of Transaction Requests or
Purchase Confirmations, which shall be delivered via facsimile only),
statements, demands or other communications hereunder may be given by a party to
the other by mail, facsimile, messenger or otherwise to the address specified
below, or so sent to such party at any other place specified in a notice of
change of address hereafter received by the other. All notices, demands and
requests hereunder may be made orally, to be confirmed promptly in writing, or
by other communication as specified in the preceding sentence.

             If to Seller:

                  Family Lending Services, Inc.
                  4701 Von Karman Avenue, Suite 200
                  Newport Beach, CA 92660
                  Attention:  Richard Ambrose
                  Phone Number: (949) 724-7805
                  Fax Number: (949) 724-7880

                  with a copy to:

                  Standard Pacific Corp.
                  15326 Alton Parkway
                  Irvine, CA 92618
                  Attention:  Clay Halvorsen
                  Phone Number:  (949) 789-1600
                  Fax Number: (949) 789-1609

                                      -42-



                  If to Buyer:

                  For Transaction Requests and Purchase Confirmations:

                           Credit Suisse First Boston Mortgage Capital LLC
                           302 Carnegie Center, 2/nd/ Floor
                           Princeton, NJ 08540
                           Attention: Kelly Phinney
                           Phone Number: 609-627-5053
                           Fax Number:   609-627-5080

                  For all other Notices:

                           Credit Suisse First Boston Mortgage Capital LLC
                           302 Carnegie Center, 2/nd/ Floor
                           Princeton, NJ 08540
                           Attention:    Gary Timmerman
                                         Terry Farley

                  with a copy to:

                           Credit Suisse First Boston Mortgage Capital LLC
                           Eleven Madison Avenue
                           New York, NY 10010
                           Attention: Legal Department

                  21.      Entire Agreement; Severability

                  This Agreement shall supersede any existing agreements between
the parties containing general terms and conditions for repurchase transactions.
Each provision and agreement herein shall be treated as separate and independent
from any other provision or agreement herein and shall be enforceable
notwithstanding the unenforceability of any such other provision or agreement.
Each provision and agreement herein shall be treated as separate and independent
from any other provision or agreement herein and shall be enforceable
notwithstanding the unenforceability of any such other provision or agreement.

                  22.      Non assignability

The Program Agreements are not assignable by Seller. Buyer may from time to time
assign all or a portion of its rights and obligations under this Agreement and
the Program Agreements; provided, however that Buyer shall maintain, for review
by Seller upon written request, a register of assignees and a copy of an
executed assignment and acceptance by Buyer and assignee ("Assignment and
Acceptance"), specifying the percentage or portion of such rights and
obligations assigned. Upon such assignment, (a) such assignee shall be a party
hereto and to each Program Agreement to the extent of the percentage or portion
set forth in the Assignment and Acceptance, and shall succeed to the applicable
rights and obligations of Buyer hereunder, and (b) Buyer shall, to the extent
that such rights and obligations have been so assigned by it to

                                      -43-



either (i) an Affiliate of Buyer which assumes the obligations of Buyer or (ii)
to another Person approved by Seller (such approval not to be unreasonably
withheld) which assumes the obligations of Buyer, be released from its
obligations hereunder and under the Program Agreements. Unless otherwise stated
in the Assignment and Acceptance, Seller shall continue to take directions
solely from Buyer unless otherwise notified by Buyer in writing. Buyer may
distribute to any prospective assignee any document or other information
delivered to Buyer by Seller.

                  23.      Set-off

                  In addition to any rights and remedies of Buyer provided by
law, Buyer shall have the right, without prior notice to Seller, any such notice
being expressly waived by Seller to the extent permitted by applicable law, upon
any amount becoming due and payable by Seller hereunder (whether at the stated
maturity, by acceleration or otherwise) to set-off and appropriate and apply
against such amount any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by Buyer or any
branch or agency thereof to or for the credit or the account of Seller. Buyer
agrees promptly to notify Seller after any such set-off and application made by
Buyer; provided, that the failure to give such notice shall not affect the
validity of such set-off and application.

                  24.      Binding Effect; Governing Law; Jurisdiction

                  a. This Agreement shall be binding and inure to the benefit of
the parties hereto and their respective successors and permitted assigns. Seller
acknowledges that the obligations of Buyer hereunder or otherwise are not the
subject of any guaranty by, or recourse to, any direct or indirect parent or
other Affiliate of Buyer. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH,
AND GOVERNED BY, THE LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PRINCIPLES THEREOF.

                  b. SELLER HEREBY WAIVES TRIAL BY JURY. SELLER HEREBY
IRREVOCABLY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY COURT OF THE STATE OF
NEW YORK, OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK, ARISING OUT OF OR RELATING TO THE PROGRAM AGREEMENTS IN ANY ACTION OR
PROCEEDING. SELLER HEREBY SUBMITS TO, AND WAIVES ANY OBJECTION IT MAY HAVE TO,
EXCLUSIVE PERSONAL JURISDICTION AND VENUE IN THE COURTS OF THE STATE OF NEW YORK
AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, WITH
RESPECT TO ANY DISPUTES ARISING OUT OF OR RELATING TO THE PROGRAM AGREEMENTS.

                  25. No Waivers, Etc.

                  No express or implied waiver of any Event of Default by either
party shall constitute a waiver of any other Event of Default and no exercise of
any remedy hereunder by

                                      -44-



any party shall constitute a waiver of its right to exercise any other remedy
hereunder. No modification or waiver of any provision of this Agreement and no
consent by any party to a departure herefrom shall be effective unless and until
such shall be in writing and duly executed by both of the parties hereto.
Without limitation on any of the foregoing, the failure to give a notice
pursuant to Section 6(a), 16(a) or otherwise, will not constitute a waiver of
any right to do so at a later date.

             26.    Intent

             a. The parties recognize that each Transaction is a "repurchase
agreement" as that term is defined in Section 101 of Title 11 of the United
States Code, as amended (except insofar as the type of Purchased Mortgage Loans
subject to such Transaction or the term of such Transaction would render such
definition inapplicable), and a "securities contract" as that term is defined in
Section 741 of Title 11 of the United States Code, as amended (except insofar as
the type of assets subject to such Transaction would render such definition
inapplicable).

             b. It is understood that either party's right to liquidate
Purchased Mortgage Loans delivered to it in connection with Transactions
hereunder or to exercise any other remedies pursuant to Section 16 hereof is a
contractual right to liquidate such Transaction as described in Sections 555 and
559 of Title 11 of the United States Code, as amended.

             c. The parties agree and acknowledge that if a party hereto is an
"insured depository institution," as such term is defined in the Federal Deposit
Insurance Act, as amended ("FDIA"), then each Transaction hereunder is a
"qualified financial contract," as that term is defined in FDIA and any rules,
orders or policy statements thereunder (except insofar as the type of assets
subject to such Transaction would render such definition inapplicable).

             d. It is understood that this Agreement constitutes a "netting
contract" as defined in and subject to Title IV of the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA") and each payment entitlement and
payment obligation under any Transaction hereunder shall constitute a "covered
contractual payment entitlement" or "covered contractual payment obligation",
respectively, as defined in and subject to FDICIA (except insofar as one or both
of the parties is not a "financial institution" as that term is defined in
FDICIA).

             27.    Disclosure Relating to Certain Federal Protections

             The parties acknowledge that they have been advised that:

             a. in the case of Transactions in which one of the parties is a
broker or dealer registered with the SEC under Section 15 of the 1934 Act, the
Securities Investor Protection Corporation has taken the position that the
provisions of the SIPA do not protect the other party with respect to any
Transaction hereunder;

             b. in the case of Transactions in which one of the parties is a
government securities broker or a government securities dealer registered with
the SEC under Section 15C of the 1934 Act, SIPA will not provide protection to
the other party with respect to any Transaction hereunder; and

                                      -45-



             c. in the case of Transactions in which one of the parties is a
financial institution, funds held by the financial institution pursuant to a
Transaction hereunder are not a deposit and therefore are not insured by the
Federal Deposit Insurance Corporation or the National Credit Union Share
Insurance Fund, as applicable.

             28.    Power of Attorney

             Seller hereby authorizes Buyer to file such financing statement or
statements which Buyer deems appropriate to perfect and continue its ownership
interest in and/or the security interest granted hereby relating to the
Purchased Mortgage Loans, without Seller's signature thereon as Buyer, at its
option, may deem appropriate. Seller hereby appoints Buyer as Seller's agent and
attorney-in-fact to protect, preserve and realize upon the Purchased Mortgage
Loans, including, but not limited to, the right to endorse notes, complete
blanks in documents, transfer servicing, and sign assignments on behalf of
Seller as its agent and attorney-in-fact. This agency and power of attorney is
coupled with an interest and is irrevocable without Buyer's consent.
Notwithstanding the foregoing, the power of attorney hereby granted may be
exercised only during the occurrence and continuance of any Event of Default
hereunder. Seller shall pay the filing costs for any financing statement or
statements prepared pursuant to this Section 28.

             29.    Buyer May Act Through Affiliates

                    Buyer may, from time to time, designate one or more
affiliates for the purpose of performing any action hereunder.

             30.    Indemnification; Obligations

             a. Seller agrees to hold Buyer and each of its respective
Affiliates and their officers, directors, employees, agents and advisors (each,
an "Indemnified Party") harmless from and indemnify each Indemnified Party (and
will reimburse each Indemnified Party as the same is incurred) against all
liabilities, losses, damages, judgments, costs and expenses (including, without
limitation, reasonable fees and expenses of counsel) of any kind which may be
imposed on, incurred by, or asserted against any Indemnified Party relating to
or arising out of this Agreement, any Transaction Request, Purchase
Confirmation, any Program Agreement or any transaction contemplated hereby or
thereby resulting from anything other than the Indemnified Party's gross
negligence or willful misconduct. Seller also agrees to reimburse each
Indemnified Party for all reasonable out-of-pocket expenses in connection with
the enforcement of this Agreement and the exercise of any right or remedy
provided for herein, any Transaction Request, Purchase Confirmation and any
Program Agreement, including, without limitation, the reasonable fees and
disbursements of counsel. Seller's agreements in this Section 30 shall survive
the payment in full of the Repurchase Price and the expiration or termination of
this Agreement. Seller hereby acknowledges that its obligations hereunder are
recourse obligations of Seller and are not limited to recoveries each
Indemnified Party may have with respect to the Purchased Mortgage Loans. Seller
also agrees not to assert any claim against Buyer or any of its Affiliates, or
any of their respective officers, directors, employees, attorneys and agents, on
any theory of liability, for special, indirect, consequential or punitive
damages arising out of or otherwise relating to the facility established
hereunder, the actual or proposed use of the proceeds of the Transactions, this
Agreement or any of the transactions contemplated thereby.

                                      -46-



THE FOREGOING INDEMNITY AND AGREEMENT NOT TO ASSERT CLAIMS EXPRESSLY APPLIES,
WITHOUT LIMITATION, TO THE NEGLIGENCE (BUT NOT GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT) OF THE INDEMNIFIED PARTIES.

             b. Without limitation to the provisions of Section 4, if any
payment of the Repurchase Price of any Transaction is made by Seller other than
on the then scheduled Repurchase Date thereto as a result of an acceleration of
the Repurchase Date pursuant to Section 16 or for any other reason, Seller
shall, upon demand by Buyer, pay to Buyer an amount sufficient to compensate
Buyer for any losses, costs or expenses that it may reasonably incur as of a
result of such payment.

             c. Without limiting the provisions of Section 30(a) hereof, if
Seller fails to pay when due any costs, expenses or other amounts payable by it
under this Agreement, including, without limitation, fees and expenses of
counsel and indemnities, such amount may be paid on behalf of Seller by Buyer,
in its sole discretion.

             31.    Counterparts

             This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, and all such counterparts shall
together constitute one and the same instrument.

             32.    Confidentiality

             This Agreement and its terms, provisions, supplements and
amendments, and notices hereunder, are proprietary to Buyer and Agent and shall
be held by Seller in strict confidence and shall not be disclosed to any third
party without the written consent of Buyer except for (i) disclosure to Seller's
direct and indirect affiliates and Subsidiaries, attorneys or accountants, but
only to the extent such disclosure is necessary and such parties agree to hold
all information in strict confidence, or (ii) disclosure required by law, rule,
regulation or order of a court or other regulatory body.

             33.    Recording of Communications

             Buyer and Seller shall have the right (but not the obligation)
from time to time to make or cause to be made tape recordings of communications
between its employees and those of the other party with respect to Transactions.
Buyer and Seller consent to the admissibility of such tape recordings in any
court, arbitration, or other proceedings. The parties agree that a duly
authenticated transcript of such a tape recording shall be deemed to be a
writing conclusively evidencing the parties' agreement.

             34.    Facility Fee

             Seller shall pay to Buyer in immediately available funds a non-
refundable fee due and owing upon closing and payable in arrears no later than
the Price Differential Payment Date following the end of each calendar quarter,
in the amount set forth in the fee schedule attached hereto as Annex II. Such
payment shall be made in Dollars, in immediately available funds, without
deduction, set-off or counterclaim, to Buyer at such account designated by
Buyer.

                                      -47-



             35.    Non-Utilization Fee

             No later than the Price Differential Payment Date following the end
of each calendar month, Seller shall pay in immediately available funds to Buyer
a non-refundable fee calculated in accordance with the formula set forth in the
schedule attached hereto as Annex III. Such payment shall be made in Dollars, in
immediately available funds, without deduction, set-off or counterclaim, to
Buyer at such account designated by Buyer.

             36.    Periodic Due Diligence Review

             Seller acknowledges that Buyer has the right to perform continuing
due diligence reviews with respect to the Mortgage Loans, for purposes of
verifying compliance with the representations, warranties and specifications
made hereunder, or otherwise, and Seller agrees that upon reasonable (but no
less than one (1) Business Day's) prior notice unless an Event of Default shall
have occurred and is continuing, in which case no notice is required, to Seller,
Buyer or its authorized representatives will be permitted during normal business
hours to examine, inspect, and make copies and extracts of, the Mortgage Files
and any and all documents, records, agreements, instruments or information
relating to such Mortgage Loans in the possession or under the control of Seller
and/or the Custodian. Seller also shall make available to Buyer a knowledgeable
financial or accounting officer for the purpose of answering questions
respecting the Mortgage Files and the Mortgage Loans. Without limiting the
generality of the foregoing, Seller acknowledges that Buyer may purchase
Mortgage Loans from Seller based solely upon the information provided by Seller
to Buyer in the Purchased Assets Schedule and the representations, warranties
and covenants contained herein, and that Buyer, at its option, has the right at
any time to conduct a partial or complete due diligence review on some or all of
the Mortgage Loans purchased in a Transaction, including, without limitation,
ordering Broker's price opinions, new credit reports and new appraisals on the
related Mortgaged Properties and otherwise re-generating the information used to
originate such Mortgage Loan. Buyer may underwrite such Mortgage Loans itself or
engage a mutually agreed upon third party underwriter to perform such
underwriting. Seller agrees to cooperate with Buyer and any third party
underwriter in connection with such underwriting, including, but not limited to,
providing Buyer and any third party underwriter with access to any and all
documents, records, agreements, instruments or information relating to such
Mortgage Loans in the possession, or under the control, of Seller. Seller
further agrees that Seller shall pay all reasonable out-of-pocket costs and
expenses incurred by Buyer in connection with Buyer's activities pursuant to
this Section 36 ("Due Diligence Costs")

                            [Signature Page Follows]

                                      -48-



Credit Suisse First Boston Mortgage Capital LLC


By:    /s/ Kari S. Roberts
       ----------------------------------------

Title: Vice President
       ----------------------------------------

Date:  October 5, 2001
       ----------------------------------------


Family Lending Services, Inc.


By:    /s/ Richard N. Ambrose
       ----------------------------------------

Title: President
       ----------------------------------------

Date:  October 5, 2001
       ----------------------------------------



                                 AMENDMENT NO. 1
                         TO MASTER REPURCHASE AGREEMENT

          Amendment No. 1, dated as of December 28, 2001, (this "Amendment"),
between CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC (the "Buyer") and FAMILY
LENDING SERVICES, INC. (the "Seller").

                                    RECITALS

          The Buyer and the Seller are parties to that certain Master Repurchase
Agreement, dated as of October 5, 2001 (the "Existing Repurchase Agreement"; as
amended by this Amendment, the "Repurchase Agreement"). Capitalized terms used
but not otherwise defined herein shall have the meanings given to them in the
Existing Repurchase Agreement.

          The Buyer and the Seller have agreed, subject to the terms and
conditions of this Amendment, that the Existing Repurchase Agreement be amended
to reflect certain agreed upon revisions to the terms of the Existing Repurchase
Agreement.

          Accordingly, the Buyer and the Seller hereby agree, in consideration
of the mutual premises and mutual obligations set forth herein, that the
Existing Repurchase Agreement is hereby amended as follows:

          SECTION 1.  Definitions.

          (a) Section 2 of the Existing Repurchase Agreement is hereby
temporarily amended by adding the following defined the, which amendment shall
be effective solely during the Additional Increased Maximum Aggregate Purchase
Price Period (as defined below):

          ""Additional Increased Maximum Aggregate Purchase Price Period" shall
          mean the period beginning on the date hereof through and including
          January 15, 2002."

          (b)    Section 2 of the Existing Repurchase Agreement is hereby
temporarily amended by deleting the definition of "Maximum Aggregate Purchase
Price" in its entirety and replacing it with the following language, which
amendment shall be effective solely during the Additional Increased Maximum
Aggregate Purchase Price Period:

          ""Maximum Aggregate Purchase Price" means NINETY-EIGHT MILLION DOLLARS
          ($98,000,000)."

          SECTION 2. Conditions Precedent. This Amendment shall become effective
          as of the date hereof (the "Amendment Effective Date"), subject to the
          satisfaction of the following conditions precedent:

               2.1 Delivered Documents. On the Amendment Effective Date, the
          Buyer shall have received the following documents, each of which shall
          be satisfactory to the Buyer in form and substance:

                                       1



               (a) this Amendment, executed and delivered by a duly authorized
          officer of the Buyer and Seller;

               (b) such other documents as the Buyer or counsel to the Buyer may
          reasonable request.

          SECTION 3 Representations and Warranties. The Seller hereby represents
          and warrants to the Buyer that it is in compliance with all the terms
          and provisions set forth in the Repurchase Agreement on their part to
          be observed or performed, and that no Event of Default has occurred or
          is continuing, and hereby confirms and reaffirms the representations
          and warranties contained in Section 13 of the Repurchase Agreement.

          SECTION 4. Limited Effect. Except as expressly amended and modified by
          this Amendment, the Existing Repurchase Agreement shall continue to
          be, and shall remain, in full force and effect in accordance with its
          terms. The amendments set forth in this Amendment shall expire upon
          the expiration of the Additional Increased Maximum Aggregate Purchase
          Price Period at which time the definition of Maximum Aggregate
          Purchase Price shall revert to that set forth in the Existing
          Repurchase Agreement.

          SECTION 5. Counterparts. This Amendment may be executed by each of the
          parties hereto on any number of separate counterparts, each of which
          shall be an original and all of which taken together shall constitute
          one and the same instrument.

          SECTION 6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REFERENCE TO THE CHOICE OF LAW PROVISIONS THEREOF.

                            [SIGNATURE PAGE FOLLOWS]

                                       2



               IN WITNESS WHEREOF, the parties have caused their names to be
signed hereto by their respective officers thereunto duly authorized as of the
day and year first above written.

Buyer:                                   CREDIT SUISSE FIRST BOSTON
                                         MORTGAGE CAPITAL LLC,
                                         as Buyer

                                         By: /s/ Jeffrey S. Detwile
                                             -----------------------------------
                                             Jeffrey S. Detwile:
                                             Managing Director


Seller:                                  FAMILY LENDING SERVICES, INC.
                                         as Seller

                                         By: /s/ Tam Truong
                                             -----------------------------------
                                             Tam Truong
                                             Vice President

                                       1



                                                               EXECUTION VERSION


                                 AMENDMENT NO. 2
                         TO MASTER REPURCHASE AGREEMENT

          Amendment No. 2, dated as of March 1, 2002 (this "Amendment"), between
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC (the "Buyer") and FAMILY LENDING
SERVICES, INC. (the "Seller").

                                    RECITALS

          The Buyer and the Seller are parties to that certain Master Repurchase
Agreement, dated as of October 5, 2001, as amended by Amendment No. 1. dated as
of December 28, 2001, (the "Existing Master Repurchase Agreement"; as amended by
this Amendment, the "Master Repurchase Agreement"). Capitalized terms used but
not otherwise defined herein shall have the meanings given to them in the
Existing Master Repurchase Agreement.

          The Buyer and the Seller have agreed, subject to the terms and
conditions of this Amendment, that the Existing Master Repurchase Agreement be
amended to reflect certain agreed upon revisions to the terms of the Existing
Master Repurchase Agreement.

          Accordingly, the Buyer and the Seller hereby agree, in consideration
of the mutual premises and mutual obligations set forth herein, that the
Existing Master Repurchase Agreement is hereby amended as follows:

          SECTION 1. Definitions. Section 2 of the Existing Master Repurchase
Agreement is hereby amended as follows:

          (a) The definition of "Exception Mortgage Loan" is hereby amended by
      adding the following language at the end of the first sentence thereof:

          "; provided, however, that Seller shall pay to Buyer a fee of $25 with
respect to any such approval of an Exception Mortgage Loan other than a Wet-Ink
Mortgage Loan and $10 with respect to any such approval of an Exception Mortgage
Loan which is a Wet-Ink Mortgage Loan provided, that upon 30 days' notice to the
Seller, Buyer may change such Exception Mortgage Loan fee."

          (b) The definition of "Market Value" is hereby amended by deleting
      subclause (xi) and replacing it with the following:

          "(xi) when the Purchase Price for such Purchased Mortgage Loan is
added to other Purchased Mortgaged Loans, the aggregate Purchase Price of all
Second Lien Mortgage Loans that are Purchased Mortgage Loans exceeds $6 million"

          SECTION 2. Program; Initiation. Section 3 of the Existing Master
Repurchase Agreement is hereby amended by inserting the following language at
the end of subclause (b):



          "In the event the Mortgage Loan Schedule provided by Seller contains
erroneous computer data, is not formatted properly or the computer fields are
otherwise improperly aligned, Buyer shall provide written or electronic notice
to Seller describing such error and Seller may either (i) give Buyer written or
electronic authority to correct the computer data, reformat such Mortgage Loan
Schedule or properly align the computer fields or (ii) correct the computer
data, reformat the Mortgage Loan Schedule or properly align the computer fields
itself and resubmit the Mortgage Loan Schedule as required herein. In the event
that Seller gives Buyer authority to correct the computer data, reformat the
Mortgage Loan Schedule or properly align the computer fields, Seller shall pay
$10 per change and any other direct expenses incurred by Buyer; provided, that
upon 30 day's notice to the Seller, Buyer may change such computer correction
fee. Seller shall hold Buyer harmless for such correction, reformatting or
realigning, as applicable, except as otherwise expressly provided herein"

          SECTION 3. Covenants. Section 14 of the Existing Master Repurchase
Agreement is hereby amended by:

          (a) Deleting subclause (a) and replacing it with the following:

          "Adjusted Tangible Net Worth. Seller shall maintain an Adjusted
Tangible Net Worth greater than $6 million."

          (b) Deleting subclause (bb) in its entirety and adding the following
subclause (bb):

          "(bb) Net Worth. Seller shall maintain a Net Worth greater than $9
million."

          SECTION 4. Exhibit M - Custodial and Bank Fee Schedule. Exhibit M to
the Existing Master Repurchase Agreement is hereby amended by adding the
following language thereto:

          "Bailee Violation Letter $5 per Mortgage Loan"

          SECTION 5. Ratification. In the event that any changes to a Mortgage
Loan Schedule have been made in accordance with Section 2 hereof prior to the
date of this Amendment, the terms hereof shall also govern such changes.

          SECTION 6. Limited Effect. Except as expressly amended and modified by
this Amendment, the Existing Master Repurchase Agreement shall continue to be,
and shall remain, in full force and effect in accordance with its terms.

          SECTION 7. Counterparts. This Amendment may be executed by each of the
parties hereto on any number of separate counterparts, each of which shall be an
original and all of which taken together shall constitute one and the same
instrument.

          SECTION 8. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REFERENCE TO THE CHOICE OF LAW PROVISIONS THEREOF.

                                      -2-



          IN WITNESS WHEREOF, the parties have caused their names to be
signed hereto by their respective officers thereunto duly authorized as of the
day and year first above written.

Buyer:                                      CREDIT SUISSE FIRST BOSTON
                                            MORTGAGE CAPITAL LLC,
                                            as Buyer

                                            By: /s/ Jeffrey S. Detwile
                                                --------------------------------
                                                Jeffrey S. Detwile:
                                                Managing Director

Seller:                                     FAMILY LENDING SERVICES, INC.
                                            as Seller

                                            By: /s/ Richard N. Ambrose
                                                --------------------------------
                                                Richard N. Ambrose
                                                President

                                      -3-



                                 AMENDMENT NO. 3
                         TO MASTER REPURCHASE AGREEMENT

          Amendment No. 3, dated as of October 4, 2002 (this "Amendment"), among
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC (the "Buyer") and FAMILY LENDING
SERVICES, INC. (the "Seller").

                                    RECITALS

          The Buyer and the Seller are parties to that certain Master Repurchase
Agreement, dated as of October 5, 2001, as amended by Amendment No. 1, dated as
of December 28, 2001 and Amendment No. 2, dated as of March 1, 2002 (the
"Existing Master Repurchase Agreement"; as amended by this Amendment, the
"Master Repurchase Agreement"). Capitalized terms used but not otherwise defined
herein shall have the meanings given to them in the Existing Master Repurchase
Agreement.

          The Buyer and the Seller have agreed, subject to the terms and
conditions of this Amendment, that the Existing Master Repurchase Agreement be
amended to reflect certain agreed upon revisions to the terms of the Existing
Master Repurchase Agreement.

          Accordingly, the Buyer and the Seller hereby agree, in consideration
of the mutual premises and mutual obligations set forth herein, that the
Existing Master Repurchase Agreement is hereby amended as follows:

          Section 1. Definitions. Section 2 of the Existing Master Repurchase
Agreement is hereby amended as follows:

          (a)  By inserting the following language at the beginning thereof:

          "All capitalized terms used herein but not defined shall have the
     meanings set forth in the Custodial Agreement."

          (b)  The definition of "Adjusted Tangible Net Worth" is hereby amended
     by deleting it in its entirety and replacing it with the following:

          "Adjusted Tangible Net Worth" means, for any Person, Net Worth of such
Person plus 1% of the outstanding servicing portfolio balance of such Person
plus Subordinated Debt (provided that Subordinated Debt shall not be taken into
account to the extent that it would cause Adjusted Tangible Net Worth to be
comprised of greater than 25% Subordinated Debt), minus all intangible assets,
including capitalized servicing rights, goodwill, patents, tradenames,
trademarks, copyrights, franchises, any organizational expenses, deferred
expenses, receivables from shareholders, Affiliates or employees, and any other
asset as shown as an intangible asset on the balance sheet of the Seller on a
consolidated basis as determined at a particular date in accordance with GAAP."

          (c) The definition of "Alt A Mortgage Loan" is hereby amended by
     deleting it in its entirety and replacing it with the following:



          "Alt A Mortgage Loan" means a Mortgage Loan originated in accordance
with the criteria established in the Underwriting Guidelines submitted by Seller
and approved by Buyer for Alt A Mortgage Loans, and which has a FICO score of at
least 600.

          (d)  The definition of "Calmco" is hereby deleted in its entirety.

          (e)  The definition of "Increased Maximum Aggregate Purchase Price
     Period" is hereby amended by deleting it in its entirety and replacing it
     with the following, which amendment shall be effective solely during the
     Increased Maximum Aggregate Purchase Price Period::

          "Increased Maximum Aggregate Purchase Price Period" means the period
from and including November 1, 2002 up to but not including February 1, 2003.

          (f)  The definition of "Maximum Aggregate Purchase Price" is hereby
     amended by deleting it in its entirety and replacing it with the following,
     which amendment shall be effective solely during the Increased Maximum
     Aggregate Purchase Price Period:

          "Maximum Aggregate Purchase Price" means the sum of (a) the Standard
Aggregate Purchase Price plus (b) the Increased Aggregate Purchase Price. All
funds made available by Buyer to Seller under this Agreement will first be
attributed to the Standard Aggregate Purchase Price."

          (g)  The definition of "Post Default Rate" is hereby amended by
     deleting it in its entirety and replacing it with the following:

          "Post Default Rate" means an annual rate of interest equal to the
greater of (a) the Pricing Rate plus 3% or (b) the Mortgage Interest Rate.

          (h)  The definition of "Purchase Price Percentage" is hereby amended
     by deleting it in its entirety and replacing it with the following, which
     amendment shall be effective solely during the Increased Maximum Aggregate
     Purchase Price Period::

          "Purchase Price Percentage" means

          (i)  with respect to each Increased Purchase Price Mortgage Loan, 92%;
and

          (ii) with respect to each Mortgage Loan (other than Increased Purchase
Price Mortgage Loans), the following percentage, as applicable:

          (a) 98% with respect to Purchased Mortgage Loans that are Jumbo
     Mortgage Loans (other than Second Lien Mortgage Loans);

          (b) 98% with respect to Purchased Mortgage Loans that are Conforming
     Mortgage Loans (other than Second Lien Mortgage Loans);

                                       2



          (c)  97% with respect to Purchased Mortgage Loans that are Alt A
     Mortgage Loans (other than Second Lien Mortgage Loans);

          (d)  95% with respect to Purchased Mortgage Loans that are Sub-Prime
     Mortgage Loans;

          (e)  95% with respect to Purchased Mortgage Loans that are Second Lien
     Mortgage Loans; or

          (f)  with respect to Transactions the subject which are Exception
     Mortgage Loans, a percentage to be determined by Buyer in its sole
     discretion.

          (i)  The definition of "Servicer" is hereby amended by deleting it in
     its entirety and replacing it with the following:

          "Servicer" means Seller or Fairbanks, or any other servicer approved
by Buyer in its sole discretion.

          (j)  The definition of "Termination Date" is hereby amended by
     deleting it in its entirety and replacing it with the following:

          "Termination Date" means the earlier of (a) April 4, 2003, or (b) the
date of the occurrence of an Event of Default.

          (k)  By inserting the following definitions in their proper
     alphabetical order:

          "BPO" means an opinion of the fair market value of a Mortgaged
Property given by a licensed real estate agent or broker which generally
includes three comparable sales and three comparable listings.

          "E&O Insurance" means insurance coverage with respect to employee
dishonesty, forgery or alteration, theft, disappearance and destruction, robbery
and safe burglary, property (other than money and securities) and computer fraud
in an aggregate amount acceptable to Fannie Mae and Freddie Mac.

          "Fairbanks" means Fairbanks Capital Corp., a corporation organized and
existing under the laws of the State of Utah, or any successor thereto.

          "FICO" means Fair Isaac & Co., or any successor thereto.

          "Increased Aggregate Purchase Price" means THIRTY MILLION DOLLARS
($30,000,000).

          "Increased Purchase Price Mortgage Loan" means a Mortgage Loan which
is purchased with the proceeds of the Increased Aggregate Purchase Price. Any
Mortgage Loans subject to a Transaction will first be attributed to the Standard
Aggregate Purchase Price prior to any Mortgage Loans being attributed to the
Increased Aggregate Purchase Price. To the extent that funds are no longer
available under the Standard Aggregate Purchase Price, any further

                                       3



Mortgage Loans subject to a Transaction will be considered Increased Purchase
Price Mortgage Loans. For purposes of this Agreement, Mortgage Loans will be
allocated first to the Standard Aggregate Purchase Price based on the date on
which such Mortgage Loan becomes subject to this Agreement, commencing from the
earliest date to the most recent date.

          "Mortgage Loan Documents" means the documents in the related Mortgage
File to be delivered to the Custodian.

          "Standard Aggregate Purchase Price" means SIXTY MILLION DOLLARS
($60,000,000).

          SECTION 2. Covenants. Section 14 of the Existing Master Repurchase
Agreement is hereby amended by (i) deleting subclause (bb) in its entirety and
(ii) adding the following sentence to end of subclause (a):

          "Seller shall maintain a Net Worth of at least $10 million."

          SECTION 3. Remedies Upon Default.

          (a)  Section 16(d) of the Existing Master Repurchase Agreement is
     hereby amended by adding the phrase "and liquidate all Repurchase Assets"
     at the end of the third sentence thereof.

          (b)  Section 16(e) of the Existing Master Repurchase Agreement is
     hereby amended by adding the phrase "and Repurchase Assets" after the
     phrase "Purchased Mortgage Loans".

          (c)  Section 16(j) of the Existing Master Repurchase Agreement is
     hereby amended by deleting the phrase "Purchased Mortgage Loans" in the
     second sentence thereof and replacing it with "Repurchase Assets".

          SECTION 4. Power of Attorney. Section 28 of the Existing Master
Repurchase Agreement is hereby amended by replacing the phrase "Purchased
Mortgage Loans" with "Repurchase Assets" in the first sentence thereof.

          SECTION 5. Authorizations. The Existing Master Repurchase Agreement is
hereby amended by adding the following Section 36:

          "Authorizations. Any of the persons whose signatures and titles appear
on Schedule 2 are authorized, acting singly for the Seller or the Buyer, as the
case may be, under this Agreement."

          SECTION 6. Schedule 2: Authorized Representatives. The Existing Master
Repurchase Agreement is hereby amended by adding Schedule 1 of this Amendment as
Schedule 2 to the Existing Master Repurchase Agreement.

                                       4



          Section 7. Conditions Precedent. This Amendment shall become effective
on October 4, 2002 (the "Amendment Effective Date"), subject to the satisfaction
of the following conditions precedent:

          7.1 Delivered Documents. On the Amendment Effective Date, the Buyer
shall have received the following documents, each of which shall be satisfactory
to the Buyer in form and substance:

          (a)  this Amendment, executed and delivered by duly authorized
     officers of the Buyer and the Seller;

          (b)  evidence that the Seller has added the Buyer as loss payee under
     the Seller's E&O Insurance; and

          (c)  such other documents as the Buyer or counsel to the Buyer may
     reasonably request.

          Section 8. Representations and Warranties. Seller hereby represents
and warrants to the Buyer that it is in compliance with all the terms and
provisions set forth in the Existing Master Repurchase Agreement on its part to
be observed or performed, and that no Event of Default has occurred or is
continuing, and hereby confirms and reaffirms the representations and warranties
contained in Section 13 of the Existing Master Repurchase Agreement.

Section 9. Limited Effect. Except as expressly amended and modified by this
Amendment, the Existing Master Repurchase Agreement shall continue to be, and
shall remain, in full force and effect in accordance with its terms.

          Section 10. Counterparts. This Amendment may be executed by each of
the parties hereto on any number of separate counterparts, each of which shall
be an original and all of which taken together shall constitute one and the same
instrument.

          Section 11. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REFERENCE TO THE CHOICE OF LAW PROVISIONS THEREOF.

                            [SIGNATURE PAGE FOLLOWS]

                                       5



          IN WITNESS WHEREOF, the parties have caused their names to be signed
hereto by their respective officers thereunto duly authorized as of the day and
year first above written.

Buyer:                                             CREDIT SUISSE FIRST BOSTON
                                                   MORTGAGE CAPITAL LLC,
                                                   as Buyer


                                                   By: /s/ Jeffrey S. Detwile
                                                       -------------------------
                                                       Jeffrey S. Detwile:
                                                       Managing Director

Seller:                                            FAMILY LENDING SERVICES, INC.
                                                   as Seller


                                                   By: /s/ Richard N. Ambrose
                                                       -------------------------
                                                       Richard N. Ambrose
                                                       President

                                  Schedule 1-1



                                 AMENDMENT NO. 4
                         TO MASTER REPURCHASE AGREEMENT

          Amendment No. 4, dated as of October 9, 2002 (this "Amendment"), among
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC (the "Buyer") and FAMILY LENDING
SERVICES, INC. (the "Seller").

                                    RECITALS

          The Buyer and the Seller are parties to that certain Master Repurchase
Agreement, dated as of October 5, 2001, as amended by Amendment No. 1, dated as
of December 28, 2001, Amendment No. 2, dated as of March 1, 2002 and Amendment
No. 3, dated as of October 4, 2002 (the "Existing Master Repurchase Agreement";
as amended by this Amendment, the "Master Repurchase Agreement"). Capitalized
terms used but not otherwise defined herein shall have the meanings given to
them in the Existing Master Repurchase Agreement.

          The Buyer and the Seller have agreed, subject to the terms and
conditions of this Amendment, that the Existing Master Repurchase Agreement be
amended to reflect certain agreed upon revisions to the terms of the Existing
Master Repurchase Agreement.

          Accordingly, the Buyer and the Seller hereby agree, in consideration
of the mutual premises and mutual obligations set forth herein, that the
Existing Master Repurchase Agreement is hereby amended as follows:

          Section 1. Definitions. Section 2 of the Existing Master Repurchase
Agreement is hereby amended by deleting the definition of "Increased Maximum
Aggregate Purchase Price Period" in its entirety and replacing it with the
following, which amendment shall be effective solely during the Increased
Maximum Aggregate Purchase Price Period:

          "Increased Maximum Aggregate Purchase Price Period" means the period
from and including October 9, 2002 up to but not including January 9, 2003.

          Section 2. Conditions Precedent. This Amendment shall become effective
on October 9, 2002 (the "Amendment Effective Date"), subject to the satisfaction
of the following conditions precedent:

          2.1    Delivered Documents. On the Amendment Effective Date, the Buyer
shall have received the following documents, each of which shall be satisfactory
to the Buyer in form and substance:

          (a) this Amendment, executed and delivered by duly authorized officers
     of the Buyer and the Seller; and

          (b) such other documents as the Buyer or counsel to the Buyer may
     reasonably request.



          Section 3. Representations and Warranties. Seller hereby represents
and warrants to the Buyer that it is in compliance with all the terms and
provisions set forth in the Existing Master Repurchase Agreement on its part to
be observed or performed, and that no Event of Default has occurred or is
continuing, and hereby confirms and reaffirms the representations and warranties
contained in Section 13 of the Existing Master Repurchase Agreement.

          Section 4. Limited Effect. Except as expressly amended and modified by
this Amendment, the Existing Master Repurchase Agreement shall continue to be,
and shall remain, in full force and effect in accordance with its terms.

          Section 5. Counterparts. This Amendment may be executed by each of the
parties hereto on any number of separate counterparts, each of which shall be an
original and all of which taken together shall constitute one and the same
instrument.

          Section 6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REFERENCE TO THE CHOICE OF LAW PROVISIONS THEREOF.

                            [SIGNATURE PAGE FOLLOWS]

                                       2



                  IN WITNESS WHEREOF, the parties have caused their names to be
signed hereto by their respective officers thereunto duly authorized as of the
day and year first above written.

Buyer:                                         CREDIT SUISSE FIRST BOSTON
                                               MORTGAGE CAPITAL LLC,
                                               as Buyer

                                               By:  /s/ Jeffrey S. Detwile
                                               ---------------------------------
                                                    Jeffrey S. Detwile:
                                                    Managing Director

Seller:                                        FAMILY LENDING SERVICES, INC.
                                               as Seller

                                               By:  /s/ Tam Truong
                                               ---------------------------------
                                                    Tam Truong
                                                    Vice President

                                   Annex 1-1