Document:

Exhibit 4.2

 

Form of:

 

THE RYLAND
GROUP, INC.,

 

as Issuer,

 

THE GUARANTORS
NAMED HEREIN

 

and

 

JPMORGAN CHASE
BANK, N.A.

(formerly known as Chemical Bank),

 

as Trustee

 

 

FOURTH
SUPPLEMENTAL INDENTURE

 

DATED AS OF
JUNE 6, 2006

 

TO INDENTURE

 

DATED AS OF
JUNE 28, 1996

 

 

Relating To

 

6.875%
Senior Notes Due 2013

 

 

FOURTH
SUPPLEMENTAL INDENTURE

 

FOURTH
SUPPLEMENTAL INDENTURE, dated as of June 6, 2006 (the “Supplemental
Indenture”), to the Indenture (defined below) among The Ryland Group, Inc.
(the “Company”), a Maryland corporation, each of the Guarantors named
herein (the “Guarantors”), and JPMorgan Chase Bank, N.A., as trustee
(the “Trustee”).

 

RECITALS

 

WHEREAS,
the Company has heretofore executed and delivered to the Trustee an Indenture,
dated as of June 28, 1996 (the “Base Indenture”), providing for the
issuance from time to time of its notes and other evidences of senior debt
securities, to be issued in one or more series as therein provided (“Securities”);

 

WHEREAS,
pursuant to the terms of the Base Indenture, the Company desires to provide for
the establishment of a new series of its Securities to be known as its 6.875% Senior Notes due 2013 (the “Notes”),
the form and substance of such Notes and the terms, provisions and conditions
thereof to be set forth as provided in the Base Indenture and this Supplemental
Indenture (together, the “Indenture”);

 

WHEREAS,
pursuant to the terms of the Notes, the Guarantors will fully and
unconditionally guarantee the obligations of the Company under the Notes, on a
senior and unsubordinated basis (the “Subsidiary Guarantees”); and

 

WHEREAS,
the Company has requested that the Trustee execute and deliver this
Supplemental Indenture and all requirements necessary to make this Supplemental
Indenture a valid instrument in accordance with its terms, and to make the
Notes, when executed by the Company and authenticated and delivered by the
Trustee, the valid obligations of the Company, and to make the Subsidiary
Guarantees, when executed by the Guarantors and authenticated and delivered by
the Trustee, the valid obligations of the Guarantors, and all acts and things
necessary have been done and performed to make this Supplemental Indenture
enforceable in accordance with its terms, and the execution and delivery of
this Supplemental Indenture has been duly authorized in all respects.

 

WITNESSETH:

 

NOW,
THEREFORE, for and in consideration of the premises
contained herein, each party agrees for the benefit of each other party and for
the equal and ratable benefit of the Holders of the Notes, as follows:

 

 

ARTICLE ONE

 

DEFINITIONS

 

Section
1.01.      Capitalized terms used but not defined in this Supplemental
Indenture shall have the meanings ascribed to them in the Base Indenture.

 

Section
1.02.      References in this Supplemental Indenture to article and
section numbers shall be deemed to be references to article and section numbers
of this Supplemental Indenture unless otherwise specified.

 

Section
1.03.      For purposes of this Supplemental Indenture, the following
terms have the meanings ascribed to them as follows:

 

“Attributable
Debt” means, in respect of a Sale and Leaseback Transaction, the present
value (discounted at the weighted average effective interest cost per annum of
the outstanding debt securities of all series, compounded semiannually) of the
obligation of the lessee for rental payments during the remaining term of the
lease included in such transaction, including any period for which such lease
has been extended or may, at the option of the lessor, be extended or, if
earlier, until the earliest date on which the lessee may terminate such lease
upon payment of a penalty (in which case the obligation of the lessee for
rental payments shall include such penalty), after excluding all amounts
required to be paid on account of maintenance and repairs, insurance, taxes,
assessments, water and utility rates and similar charges.

 

“Base
Indenture” has the meaning provided in the recitals.

 

“Beneficial
Owner” has the meaning provided in Section 2.03.

 

“Capitalized
Lease Obligations” of any Person means the obligations of such Person to
pay rent or other amounts under a lease that is required to be capitalized for
financial reporting purposes in accordance with generally accepted accounting
principles, and the amount of such obligations will be the capitalized amount
thereof determined in accordance with generally accepted accounting principles.

 

“Consolidated
Net Tangible Assets” means the total amount of assets which would be
included on a combined balance sheet of the Restricted Subsidiaries (not
including the Company) together with the total amount of assets that would be
included on the Company’s balance sheet, not including its subsidiaries, under
generally accepted accounting principles (less applicable reserves and other
properly deductible items) after deducting therefrom:

 

(1)           all
short-term liabilities, except for liabilities payable by their terms more than
one year from the date of determination (or renewable or extendible at the
option of the obligor for a period ending more than one year after such date)
and liabilities in respect of retiree benefits other than pensions for which
the Restricted Subsidiaries are required to accrue pursuant to Statement of
Financial Accounting Standards No. 106;

 

(2)           investments
in subsidiaries that are not Restricted Subsidiaries; and

 

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(3)           all
goodwill, trade names, trademarks, patents, unamortized debt discount,
unamortized expense incurred in the issuance of debt and other tangible assets.

 

“Covenant
Defeasance” has the meaning provided in Article Eight.

 

“Depositary”
has the meaning provided in Section 2.03.

 

“Financial
Services Segment” means the business segment of the Company and its
Subsidiaries engaged in mortgage banking (including mortgage origination, loan
servicing, mortgage brokerage and title and escrow businesses), master
servicing and related activities, including, without limitation, a Subsidiary
which facilitates the financing of mortgage loans and mortgage-backed
securities and the securitization of mortgage-backed bonds and other related
activities, which segment currently consists principally of the activities of
Ryland Mortgage Company and its Subsidiaries but excludes the Limited Purpose
Subsidiaries.

 

“Financial
Services Subsidiaries” means Subsidiaries of the Company included within
the Financial Services Segment.

 

“Guaranteed
Obligations” has the meaning provided in Section 6.01.

 

“Guarantor”
means (a) initially, each of the Guarantors named on the signature pages of
this Supplemental Indenture, and (b) each of the Company’s Subsidiaries which
becomes a guarantor of the Notes pursuant to the provisions of this
Supplemental Indenture, subject, in the case of either (a) or (b) to release of
an entity as a Guarantor as provided in this Supplemental Indenture.

 

“Holder”
means a Person in whose name a Note is registered on the Security Registrar’s
books.

 

“Homebuilding
Segment” means the business segment of the Company and its Subsidiaries
engaged in the construction and sale of single-family attached and unattached
dwellings and related activities, including all activities of the Company
outside the Financial Services Segment but excluding the Limited-Purpose
Subsidiaries.

 

“Homebuilding
Subsidiaries” means Subsidiaries of the Company included within the
Homebuilding Segment.

 

“Indebtedness” means
(1) any liability of any person (A) for borrowed money, or (B) evidenced by a
bond, note, debenture or similar instrument (including a purchase money
obligation) given in connection with the acquisition of any businesses,
properties or assets of any kind (other than a trade payable or a current
liability arising in the ordinary course of business), or (C) for the payment
of money relating to a Capitalized Lease Obligation or (D) for all Redeemable
Capital Stock valued at the greater of its voluntary or involuntary liquidation
preference plus accrued and unpaid dividends; (2) any liability of others
described in the preceding clause (1) that such person has guaranteed or that
is otherwise its legal liability; (3) all Indebtedness referred to in (but not
excluded from) clauses (1) and (2) above of other persons

 

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and all dividends of other
persons, the payment of which is secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Security Interest upon or in property (including, without limitation,
accounts and contract rights) owned by such person, even though such person has
not assumed or become liable for the payment of such Indebtedness; and (4) any
amendment, supplement, modification, deferral, renewal, extension or refunding
or any liability of the types referred to in clauses (1), (2) and (3) above.

 

“Indenture”
has the meaning provided in the recitals.

 

“Interest
Payment Date” has the meaning provided in Section 2.04.

 

“Legal
Defeasance” has the meaning provided in Article Eight.

 

“Limited-Purpose
Subsidiaries” means subsidiaries of the Company included within the Limited-Purpose
Subsidiaries Segment.

 

“Limited-Purpose
Subsidiaries Segment” means the business segment of the Company and its
Subsidiaries which facilitates, through special-purpose entities created or
existing solely for such purpose, the financing of mortgage loans and
mortgage-backed securities and the securitization of mortgage loans and other
related activities.

 

“Maximum Liability”
has the meaning provided in Section 6.08.

 

“Non-Paying Guarantor”
has the meaning provided in Section 6.08.

 

“Non-Recourse Indebtedness”
means the Company’s or any of the Company’s Subsidiaries’ Indebtedness or other
obligations secured by a lien on property to the extent that the liability for
the Indebtedness or other obligations is limited to the security of the
property without liability for any deficiency, including liability by reason of
any agreement between the Company or any Subsidiary to provide additional
capital or maintain the financial condition of or otherwise support the credit
of the Subsidiary incurring the Indebtedness.

 

“Non-Recourse Land
Financing” means any Indebtedness of the Company or any Restricted
Subsidiary for which the holder of such Indebtedness has no recourse, directly
or indirectly, to the Company or such Restricted Subsidiary for the principal of,
premium, if any, and interest on such Indebtedness, and for which the Company
or such Restricted Subsidiary is not, directly or indirectly, obligated or
otherwise liable for the principal of, premium, if any, and interest on such
Indebtedness, except pursuant to mortgages, deeds of trust or other Security
Interests or other recourse obligations or liabilities in respect of specific
land or other real property interests of the Company or such Restricted
Subsidiary; provided that recourse obligations or liabilities of the Company or
such Restricted Subsidiary solely for indemnities, covenants or breach of any
warranty, representation or covenant in respect of any Indebtedness will not
prevent Indebtedness from being classified as Non-Recourse Land Financing.

 

“Notes”
has the meaning provided in the recitals.

 

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“Paying Guarantor”
has the meaning provided in Section 6.08.

 

“Person” means any
individual, corporation, partnership, joint venture, association, joint stock
company, trust, unincorporated organization, limited liability company,
government or any agency or political subdivision hereof or any other entity.

 

“Pro Rata Share” has
the meaning provided in Section 6.08.

 

“Redeemable Capital Stock”
means any capital stock of the Company or any Subsidiary that, either by its
terms, by the terms of any security into which it is convertible or
exchangeable or otherwise, (1) is or upon the happening of an event or passage
of time would be required to be redeemed on or prior to the final stated
maturity of the securities or (2) is redeemable at the option of the holder
thereof at any time prior to such final stated maturity or (3) is convertible
into or exchangeable for debt securities at any time prior to such final stated
maturity.

 

“Restricted Subsidiary”
means any Subsidiary of the Company that is not a Financial Services
Subsidiary.

 

“Sale and Leaseback
Transaction” means a sale or transfer made by the Company or a Restricted
Subsidiary (except a sale or transfer made to the Company or another Restricted
Subsidiary) of any property which is either (1) a manufacturing facility,
office building or warehouse whose book value equals or exceeds 1% of
Consolidated Net Tangible Assets as of the date of determination or (2) another
property (not including a model home) which exceeds 5% of Consolidated Net
Tangible Assets as of the date of determination, if such sale or transfer is
made with the agreement, commitment or intention of leasing such property to
the Company or a Restricted Subsidiary.

 

“Secured Debt” means
any Indebtedness which is secured by (1) a Security Interest in any of the
Company’s property or the property of any Restricted Subsidiary or (2) a
Security Interest in shares of stock owned directly or indirectly by the
Company or a Restricted Subsidiary in a corporation or in equity interests
owned by the Company or a Restricted Subsidiary in a partnership or other
entity not organized as a corporation or in the Company’s rights or the rights
of a Restricted Subsidiary in respect of Indebtedness of a corporation,
partnership or other entity in which the Company or a Restricted Subsidiary has
an equity interest; provided that “Secured Debt” shall not include Non-Recourse
Land Financing that consists exclusively of “land under development,” “land
held for future development” or “improved lots and parcels,” as such categories
of assets are determined in accordance with generally accepted accounting
principles. The securing in the foregoing manner of any such Indebtedness which
immediately prior thereto was not Secured Debt shall be deemed to be the
creation of Secured Debt at the time security is given.

 

“Securities”
has the meaning provided in the recitals.

 

“Security Interest”
means any mortgage, pledge, lien, encumbrance or other security interest which
secures the payment or performance of an obligation.

 

“Senior Indebtedness”
means the principal of (and premium, if any, on) and interest on (including
interest accruing after the occurrence of an Event of Default or after the
filing of a 

 

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petition initiating any proceeding pursuant
to any bankruptcy law whether or not such interest is an allowable claim in any
such proceeding) and other amounts due on or in connection with any of the
Company’s Indebtedness, whether outstanding on the date hereof or hereafter
created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the debt securities. Notwithstanding the
foregoing, “Senior Indebtedness” shall not include (1) the Company’s
Indebtedness that is expressly subordinated in right of payment to any of the
Company’s Senior Indebtedness, (2) the Company’s Indebtedness that by operation
of law is subordinate to any of the Company’s general unsecured obligations,
(3) the Company’s Indebtedness to any Subsidiary, (4) Indebtedness incurred in
violation of the restrictions set forth in Sections 3.01 and 3.02,
(5) to the extent it might constitute Indebtedness, any liability for federal,
state or local taxes or other taxes, owed or owing by the Company, and (6) to
the extent it might constitute Indebtedness, trade account payables owed or
owing by the Company.

 

“Subsidiary” means
any corporation of which at the time of determination by the Company, directly
and/or indirectly through one or more Subsidiaries, owns more than 50% of the
shares of Voting Stock.

 

“Subsidiary
Guarantees” has the meaning provided in the recitals.

 

“Supplemental
Indenture” has the meaning provided in the preamble.

 

“Voting Stock” means
any class or classes of capital stock pursuant to which the holders thereof
have the general voting power under ordinary circumstances to elect at least a
majority of the board of directors, managers or trustees of any person
(irrespective of whether or not, at the time, stock of any other class or
classes shall have, or might have, voting power by reason of the happening of
any contingency).

 

“Wholly
Owned Subsidiary” of a Person means (i) any Subsidiary all of the
outstanding voting securities of which shall at the time be owned or
controlled, directly or indirectly, any such Person or one or more Wholly Owned
Subsidiaries of such Person, or by such Person and one or more Wholly Owned
Subsidiaries of such Person, or (ii) any partnership, limited liability
company, association, joint venture or similar business organization all of the
ownership interests (having ordinary voting power) of which shall at the time
be owned or controlled, directly or indirectly, any such Person or one or more
Wholly Owned Subsidiaries of such Person, or by such Person and one or more
Wholly Owned Subsidiaries of such Person.

 

ARTICLE TWO

 

GENERAL TERMS AND CONDITIONS OF THE NOTES

 

Section
2.01.      Designation and Principal Amount.

 

The Notes are hereby
authorized and are designated the 6.875% Senior Notes due 2013, unlimited in aggregate principal amount. The Notes issued on the date
hereof pursuant to the terms of this Indenture will be in an aggregate
principal amount of $250,000,000, which amount

 

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shall be set forth in the
written order of the Company for the authentication and delivery of the Notes
pursuant to Section 303 of the Indenture. In addition, the Company may issue,
from time to time in accordance with the provisions of this Indenture,
additional Notes ranking equally and ratably with the Notes issued hereunder in
all respects (or in all respects except for the payment of interest following
the Issue Date of such further Notes), so that such further Notes shall be
consolidated and form a single series with the Notes and shall be governed by
the terms of this Indenture.

 

Section
2.02.      Maturity.

 

The principal amount of the
Notes will be payable on June 15, 2013.

 

Section
2.03.      Form and Payment.

 

The Notes will be issued as
global notes, in fully registered book-entry form without coupons in
denominations of $1,000 and integral multiples thereof.

 

Principal, premium, if any,
and/or interest, if any, on the global notes representing the Notes will be
made to The Depository Trust Company (the “Depositary”).

 

The global notes
representing the Notes will be deposited with, or on behalf of, the Depositary
and will be registered in the name of the Depositary or a nominee of the
Depositary. No global note may be transferred except as a whole by a nominee of
the Depositary to the Depositary or to another nominee of the Depositary, or by
the Depositary or such nominee to a successor of the Depositary or a nominee of
such successor.

 

So long as the Depositary or
its nominee is the registered owner of a global note, the Depositary or its
nominee, as the case may be, will be the sole Holder of the Notes represented
thereby for all purposes under the Indenture. Except as otherwise provided
herein, each actual purchaser of each Note represented by a global note (“Beneficial
Owner”) will not be entitled to receive physical delivery of certificated
Notes and will not be considered the holders thereof for any purpose under the
Indenture, and no global note representing the Notes shall be exchangeable or
transferable. Accordingly, each Beneficial Owner must rely on the procedures of
the Depositary and, if such Beneficial Owner is not a participant, on the
procedures of the participant through which such Beneficial Owner owns its
interest in order to exercise any rights of a Holder under such global note or
the Indenture.

 

The global notes
representing the Notes will be exchangeable for certificated Notes of like
tenor and terms and of differing authorized denominations aggregating a like
principal amount, only if (i) the Depositary notifies the Company that it is unwilling
or unable to continue as Depositary for the global debt securities, (ii) the
Depositary ceases to be a clearing agency registered under the Exchange Act and
a successor to the Depository is not appointed by the Company within 90 days,
(iii) the Company in its sole discretion determines that the global notes shall
be exchangeable for certificated Notes and notifies the Trustee in writing of
such determination or (iv) there shall have occurred and be continuing an Event
of Default under the Indenture with respect to the Notes. Upon any such
exchange, the certificated Notes shall be registered in the names of the
Beneficial Owners of the global notes representing the Notes, which names shall
be provided by the Depositary’s relevant participants (as identified by the 

 

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Depositary) to the Trustee.
In such event the Company will execute, and subject to Section 303 of the
Indenture, the Trustee, upon receipt of an Officer’s Certificate evidencing
such determination by the Company, will authenticate and deliver the Notes in
definitive registered form without coupons, in authorized denominations, and in
an aggregate principal amount equal to the principal amount of the global notes
in exchange for such global notes. Upon the exchange of the global notes for
such Notes in definitive registered form without coupons, in authorized
denominations, the global notes shall be cancelled by the Trustee. Such Notes
in definitive registered form issued in exchange for the global notes shall be
registered in such names and in such authorized denominations as the
Depositary, pursuant to instructions from its direct or indirect participants
or otherwise, shall instruct the Trustee in writing. The Trustee shall deliver
such Notes to the Depositary for delivery to the Persons in whose names such
Notes are so registered.

 

Section
2.04.      Interest.

 

The Notes shall bear
interest at a rate equal to 6.875%
per year. Interest on the Notes
shall accrue from June 6, 2006, or from the most recent interest payment date
to which interest has been paid or duly provided upon for the Notes, as the
case may be. Interest on the Notes shall be payable semiannually in arrears on
December 15 and June 15, commencing December 15, 2006 (each an “Interest
Payment Date”), to the persons in whose names the Notes are registered at
the close of business on December 1 and June 1 (whether or not a Business Day),
as the case may be, preceding such Interest Payment Date.

 

ARTICLE THREE

 

ADDITIONAL COVENANTS

 

Section
3.01.      Restrictions
on Secured Debt.

 

The Company will not, and
will not cause or permit a Restricted Subsidiary to, create, incur, assume or
guarantee any Secured Debt unless the Notes will be secured equally and ratably
with (or prior to) such Secured Debt, with certain exceptions. This restriction
does not prohibit the creation, incurrence, assumption or guarantee of Secured
Debt that is secured by:

 

(i)            Security Interests on model homes, homes held
for sale, homes that are under contract for sale, contracts for the sale of
homes, land (improved or unimproved), manufacturing plants, warehouses or
office buildings and fixtures and equipment located thereat, or thereon;

 

(ii)           Security Interests on property at the time of
its acquisition by the Company or a Restricted Subsidiary, which Security
Interests secure obligations assumed by the Company or a Restricted Subsidiary,
or on the property of a corporation or other entity at the time it is merged
into or consolidated with the Company or a Restricted Subsidiary (other than
Secured Debt created in contemplation of the acquisition of such property or
the consummation of such a merger or where the Security Interest attaches to or
affects the Company’s property or the property of a Restricted Subsidiary prior
to such transaction);

 

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(iii)          Security Interests arising from conditional
sales agreements or title retention agreements with respect to property
acquired by the Company or a Restricted Subsidiary; and

 

(iv)          Security Interests securing Indebtedness of a
Restricted Subsidiary owing to the Company or to another Restricted Subsidiary that is a Wholly Owned Subsidiary by the
Company.

 

Additionally, such permitted
Secured Debt includes any amendment, restatement, supplement, renewal,
replacement, extension, refinancing or refunding, in whole or in part, of
Secured Debt permitted at the time of the original incurrence thereof.

 

The Company and its
Restricted Subsidiaries may create, incur, assume or guarantee Secured Debt,
without equally or ratably securing the Notes, if immediately thereafter the
sum of (i) the aggregate principal amount of all Secured Debt outstanding
(excluding Secured Debt permitted under clauses (i) through (iv) above and any
Secured Debt in relation to which the Notes have been secured equally and
ratably (or prior to)) and (ii) all Attributable Debt in respect of Sale and
Leaseback Transactions (excluding Attributable Debt in respect of Sale and
Leaseback Transactions satisfying the conditions set forth in clauses (i), (ii)
and (iii) of Section 3.02 as of the date of determination would not
exceed 20% of Consolidated Net Tangible Assets.

 

The provisions described
above with respect to limitations on Secured Debt are not applicable to Non-Recourse
Land Financing by virtue of the definition of Secured Debt, and will not
restrict or limit the Company’s or its Restricted Subsidiaries’ ability to
create, incur, assume or guarantee any unsecured Indebtedness, or the ability
of any subsidiary which is not a Restricted Subsidiary to create, incur, assume
or guarantee any secured or unsecured Indebtedness.

 

Section
3.02.      Restrictions on Sale and
Leaseback Transactions.

 

The Company will not, and
will not permit any Restricted Subsidiary to, enter into any Sale and Leaseback
Transaction, unless:

 

(i)            notice is promptly given to the Trustee in
writing of the Sale and Leaseback Transaction;

 

(ii)           fair value is received by the Company or the
relevant Restricted Subsidiary for the property sold (as determined in good
faith pursuant to a resolution of the Board of Directors of the Company delivered to the Trustee); and

 

(iii)          the Company or a Restricted Subsidiary,
within 365 days after the completion of the Sale and Leaseback Transaction,
apply an amount equal to the net proceeds therefrom either:

 

(x)            to the redemption, repayment or retirement of
debt securities of any series under the Indenture (including the cancellation
by the Trustee of any debt

 

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securities
of any series delivered by the Company to the Trustee) or Senior Indebtedness
of the Company, or

 

(y)           to the purchase by the Company or any
Restricted Subsidiary of property substantially similar to the property sold or
transferred.

 

The Company and its
Restricted Subsidiaries may enter into a Sale and Leaseback Transaction if
immediately thereafter the sum of (1) the aggregate principal amount of all
Secured Debt outstanding (excluding Secured Debt permitted under clauses (i)
through (iv) of Section 3.01 or Secured Debt in relation to which the
Notes have been secured equally and ratably (or prior to)) and (2) all
Attributable Debt in respect of Sale and Leaseback Transactions (excluding
Attributable Debt in respect of Sale and Leaseback Transactions satisfying the
conditions set forth in clauses (i), (ii) and (iii) in the preceding paragraph)
as of the date of determination would not exceed 20% of Consolidated Net
Tangible Assets.

 

Section
3.03.      Future Subsidiaries.

 

The Company
shall promptly secure the execution and delivery to the Trustee of a Guarantee
in substantially the form of Exhibit A hereto with respect to the Notes,
from each Subsidiary whether now existing or formed and organized after the
date hereof, if such Subsidiary (a) is a Wholly Owned Subsidiary of the
Company, (b) is included in the Homebuilding Segment and (c) guarantees any
indebtedness of the Company, or guarantees obligations of any other Subsidiary
as a guarantor of any indebtedness of the Company; provided that a Subsidiary whose sole purpose is to serve as
a joint venturer, partner, member or shareholder in a joint venture,
partnership, limited liability company or corporation that include one or more
joint venturers, partners, members or shareholders that are not Affiliates of
the Company shall not be required to deliver a Guarantee. Each such Subsidiary
that does not deliver a Guarantee on the date hereof shall execute and deliver
a Guarantee in accordance with Section 6.02 within 30 days after it
meets the criteria set forth in the preceding sentence and the Company shall
furnish to the Trustee an Officers’ Certificate stating that all conditions
precedent, if any, provided for in the Base Indenture and this Supplemental
Indenture relating to the proposed action have been complied with, and an
Opinion of Counsel stating that, in the opinion of such counsel, all such
conditions precedent have been complied with. Thereafter, such Subsidiary shall
(unless released in accordance with the terms hereof) be a Guarantor for all purposes
hereof with respect to the Notes.

 

Section
3.04.      Homebuilding Subsidiaries.

 

The Company
shall not cause or permit the voting securities or other ownership interests of
any Homebuilding Subsidiary to be less than 100% owned and controlled, directly
or indirectly, by the Company except for a legitimate business purpose
unrelated to whether such Subsidiary is required to be a Guarantor hereunder.

 

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ARTICLE
FOUR

 

CONSOLIDATION, MERGER AND SALE OF ASSETS

 

The Company will not
consolidate or merge into or sell, assign, transfer or lease all or
substantially all of its assets to another person unless:

 

(i)            the Person is a corporation organized under
the laws of the United States of America or any state thereof;

 

(ii)           the Person assumes by supplemental indenture
all the obligations of the Company relating to the Notes; and

 

(iii)          immediately after the transaction no event of
default with respect to the Notes exists.

 

Upon any such consolidation,
merger, sale, assignment or transfer, the successor corporation will be
substituted for the Company under the Indenture. The successor corporation may
then exercise every power and right of the Company under the Indenture, and the
Company will be released from all of the Company’s liabilities and obligations
in respect of the Notes and the Indenture. If the Company leases all or
substantially all of its assets, the lessee corporation will be the successor to the Company and may
exercise every power and right of the Company under the Indenture, but the
Company will not be released from its obligations to pay the principal of and
premium, if any, and interest, if any, on the Notes.

 

ARTICLE
FIVE

 

REDEMPTION OF THE NOTES

 

Section
5.01.      Optional Redemption.

 

The Company
may, at its option, redeem the Notes in whole at any time or in part from time
to time, on at least 30 but not more than 60 days’ prior notice, at a
Redemption Price equal to the greater of:

 

(i)            100%
of the principal amount of the Notes being redeemed, and

 

(ii)           the
sum of the present values of the Remaining Scheduled Payments on the Notes
being redeemed, discounted to the Redemption Date, on a semiannual basis, at
the Treasury Rate plus 30 basis points (0.30%).

 

The Company
shall also pay accrued interest on the Notes being redeemed to the Redemption
Date. In determining the Redemption Price and accrued interest, interest will
be calculated on the basis of a 360-day year consisting of twelve 30-day
months.

 

If money
sufficient to pay the Redemption Price of and accrued interest on the Notes to
be redeemed is deposited with the Trustee on or before the Redemption Date, on
and after the

 

- 11 -

 

Redemption
Date interest will cease to accrue on the Notes (or such portions thereof)
called for redemption and such Notes will cease to be Outstanding.

 

If less than
all of the Notes are to be redeemed, not more than 60 days prior to the
Redemption Date, the Trustee will select the Notes to be redeemed by such
method as the Trustee shall deem fair and appropriate. The Trustee may select
for redemption Notes and portions of the Notes in amounts of whole multiples of
$1,000.

 

“Comparable
Treasury Issue” means the United States Treasury security selected by the
Reference Treasury Dealer as having a maturity comparable to the remaining term
of the Notes to be redeemed that would be utilized, at the time of selection
and in accordance with customary financial practice, in pricing new issues of
corporate debt securities of comparable maturity to the remaining term of the
Notes.

 

“Comparable
Treasury Price” means, with respect to any Redemption Date, (1) the average
of the Reference Treasury Dealer Quotations for such Redemption Date, after
excluding the highest and lowest Reference Treasury Dealer Quotations, or (2)
if the Trustee obtains fewer than four such Reference Treasury Dealer
Quotations, the average of all such quotations.

 

“Reference Treasury Dealer” means each
of Citigroup Global Markets Inc. and at least one other primary U.S. Government
securities dealer in the United States selected by UBS Securities LLC, and
their respective successors; provided, however, that, if any of the foregoing
ceases to be a primary U.S. Government securities dealer in the United States
(a “Primary Treasury Dealer”), the Company will substitute another
Primary Treasury Dealer.

 

“Reference
Treasury Dealer Quotation” means, with respect to each Reference Treasury Dealer
and any Redemption Date, the average, as determined by the Trustee, of the bid
and asked prices for the Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) quoted in writing to the Trustee by such
Reference Treasury Dealer at 5:00 p.m., New York City time, on the third
Business Day preceding such Redemption Date.

 

“Remaining
Scheduled Payments” means, with respect to any Note, the remaining
scheduled payments of the principal (or of the portion) thereof to be redeemed
and interest thereon that would be due after the related Redemption Date but
for such redemption; provided, however, that, if such Redemption Date is not an
Interest Payment Date with respect to such Note, the amount of the next
succeeding scheduled interest payment thereon will be reduced by the amount of
interest accrued thereon to such Redemption Date.

 

“Treasury
Rate” means, with respect to any Redemption Date, the rate per annum equal
to the semiannual equivalent yield to maturity of the Comparable Treasury
Issue, assuming a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price for
such Redemption Date.

 

Section
5.02.      No Sinking Fund.

 

The Notes are
not entitled to the benefit of any sinking fund.

 

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ARTICLE SIX

 

GUARANTEE OF NOTES

 

Section
6.01.      Guarantee.

 

Subject to Section
6.08, each of the Guarantors hereby jointly and severally, absolutely and
unconditionally guarantees, as primary obligor and not as surety, the full and
punctual payment (whether at stated maturity, upon acceleration or early
termination or otherwise, and at all times thereafter, at the time and place
and in the manner provided for herein and in the Indenture) and performance of
each series of the Notes and all other amounts due from the Company under the
Indenture (collectively with respect to each series of Notes, the “Guaranteed
Obligations”). Upon failure by the Company to pay punctually any such
amount, each of the Guarantors agrees that it shall forthwith on demand pay to
the Trustee for the benefit of the Holders of the applicable series of Notes,
the amount not so paid at the place and in the manner specified herein and in
the Indenture. This Article Six is a continuing guaranty of payment and
not of collection. Each of the Guarantors waives any right to require any of
the Holders to sue the Company, any other guarantor, or any other Person
obligated for all or any part of the Guaranteed Obligations, or otherwise to
enforce its payment against any collateral securing all or any part of the
Guaranteed Obligations.

 

Section
6.02.      Execution and Delivery of Guarantee.

 

To further
evidence the Guarantee set forth in Section 6.01, each Guarantor hereby
agrees to execute and deliver to the Trustee a Guarantee in substantially the
form of Exhibit A hereto with respect to each series of the Notes. Such
Guarantee shall be executed on behalf of each Guarantor by either manual or
facsimile signature of an officer of each Guarantor, each of whom, in each
case, shall have been duly authorized to so execute by all requisite corporate
action. The validity and enforceability of any Guarantee shall not be affected
by the fact that it is not affixed to any Note or Notes.

 

Section
6.03.      Guarantee Unconditional.

 

Subject to Section
6.08, the obligations of each of the Guarantors hereunder shall be
unconditional and absolute and, without limiting the generality of the
foregoing, shall not be released, discharged or otherwise affected by: (1) any
extension, renewal, settlement, compromise, waiver or release in respect of any
of the Guaranteed Obligations, by operation of law or otherwise, or any
obligation of any other guarantor of any of the Guaranteed Obligations, or any
default, failure or delay, willful or otherwise, in the payment or performance
of the Guaranteed Obligations; (2) any modification or amendment of or
supplement hereto or to the Indenture; (3) 
any change in the corporate existence, structure or ownership of the
Company or any other guarantor of any of the Guaranteed Obligations, or any
insolvency, bankruptcy, reorganization or other similar proceeding affecting
the Company, or any other guarantor of the Guaranteed Obligations, or its
assets or any resulting release or discharge of any obligation of the Company
or any other guarantor of any of the Guaranteed Obligations; (4) the existence
of any claim, setoff or other rights which the Guarantors may have at any time
against the Company or any other guarantor of any of the Guaranteed
Obligations, whether in connection herewith or any

 

- 13 -

 

unrelated
transactions; (5) any invalidity or unenforceability relating to or against the
Company, or any other guarantor of any of the Guaranteed Obligations, for any
reason related hereto or to the Indenture or any provision of applicable law or
regulation purporting to prohibit the payment by the Company, or any other
guarantor of the Guaranteed Obligations, of the principal of or interest on any
Note or any other amount payable by the Company hereunder or under the
Indenture; (6) any law, regulation or order of any jurisdiction, or any other
event affecting any term of any Guaranteed Obligation or any Holder’s rights
with respect thereto; or (7) any other act or omission to act or delay of any
kind by the Company, any other Guarantor of the Guaranteed Obligations or any
other circumstance whatsoever which might, but for the provisions of this
paragraph, constitute a legal or equitable discharge of any Guarantor’s
obligations hereunder.

 

Section
6.04.      Discharge, Release and
Reinstatement of Guarantee In Certain Circumstances.

 

(1)           Subject
to Sections 6.04(2) and (3), each of the Guarantor’s obligations
hereunder with respect to any series of Notes shall remain in full force and
effect until all Guaranteed Obligations with respect to such series of Notes
shall have been indefeasibly paid in full. If at any time any payment of the
principal of or interest on any Note or any other amount payable by the Company
or any other party hereunder or under the Indenture is rescinded or must be
otherwise restored or returned upon the insolvency, bankruptcy or
reorganization of the Company or otherwise, each of the Guarantor’s obligations
hereunder with respect to such payment shall be reinstated as though such
payment had been due but not made at such time.

 

(2)           In
the event a Guarantor is sold or disposed of (whether by merger, consolidation,
the sale of its capital stock or the sale of all or substantially all of its
assets (other than by lease)) and whether or not the Guarantor is the surviving
corporation in such transaction to a Person which is not the Company or a
Restricted Subsidiary of the Company, such Guarantor will be released from its
obligations under its guarantee if:

 

(i)            the sale or other disposition is in
compliance with the Indenture; and

 

(ii)           all the obligations of such Guarantor under
any agreements relating to any other Indebtedness of the Company or its
Restricted Subsidiaries terminate upon consummation of such transaction.

 

(3)           In
the event that any Guarantor ceases to be a Restricted Subsidiary of the
Company in the Homebuilding Segment, such Guarantor shall be released and
discharged from all obligations under this Article Six without any
further action required on the part of the Trustee or any Holder; provided that
at the time of and immediately after such Guarantor ceases to be a Restricted
Subsidiary of the Company in the Homebuilding Segment, no Default or Event of
Default shall have occurred and be continuing with respect to any series of Notes.

 

The Trustee
shall, at the sole cost and expense of the Company and upon receipt an Opinion
of Counsel that the provisions of Sections 6.04(2) or (3) have
been complied with, deliver an appropriate instrument evidencing such release
upon receipt of a request by the Company accompanied by an Officers’
Certificate certifying as to the compliance with Sections

 

- 14 -

 

6.04(2)
or (3). Any Guarantor not so released remains liable for the full amount
of principal of and interest on the Notes and the other obligations of the
Company hereunder as provided in this Article Six.

 

Section
6.05.      Waivers.

 

Each of the
Guarantors irrevocably waives acceptance hereof, presentment, demand, protest
and, to the fullest extent permitted by law, any notice not provided for
herein, as well as any requirement that at any time any action be taken by any
Person against the Company, any other guarantor of any of the Guaranteed
Obligations, or any other Person.

 

Section
6.06.      Subordination; Subrogation.

 

Each of the
Guarantors hereby subordinates to the Guaranteed Obligations all Indebtedness
or other liabilities of the Company or of any other Guarantor to such Guarantor.
Each of the Guarantors hereby further agrees not to assert any right, claim or
cause of action, including, without limitation, a claim for subrogation,
reimbursement, indemnification or otherwise, against the Company arising out of
or by reason of this Article Six or the obligations hereunder,
including, without limitation, the payment or securing or purchasing of any of
the Guaranteed Obligations by any of the Guarantors unless and until the
Guaranteed Obligations are indefeasibly paid in full.

 

Section
6.07.      Stay of Acceleration.

 

If
acceleration of the time for payment of any of the Guaranteed Obligations is
stayed upon the insolvency, bankruptcy or reorganization of the Company, all
such amounts otherwise subject to acceleration under the terms hereof or the
Indenture shall nonetheless be payable by each of the Guarantors hereunder
forthwith on demand by the Holders.

 

Section
6.08.      Limitation on Obligations.

 

(1)           The
provisions of this Article Six are severable, and in any action or
proceeding involving any state corporate law, or any state, federal or foreign
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of any Guarantor under this Article
Six would otherwise be held or determined to be avoidable, invalid or
unenforceable on account of the amount of such Guarantor’s liability under this
Article Six, then, notwithstanding any other provision of this Article
Six to the contrary, the amount of such liability shall, without any
further action by the Guarantors or the Holders, be automatically limited and
reduced to the highest amount that is valid and enforceable as determined in
such action or proceeding (such highest amount determined hereunder being the
relevant Guarantor’s “Maximum Liability”). This Section 6.08(1)
with respect to the Maximum Liability of the Guarantors is intended solely to
preserve the rights of the Holders to the maximum extent not subject to
avoidance under applicable law, and neither the Guarantor nor any other person
or entity shall have any right or claim under this Section 6.08(1) with
respect to the Maximum Liability, except to the extent necessary so that the
obligations of the Guarantors hereunder shall not be rendered voidable under
applicable law.

 

- 15 -

 

(2)           Each
of the Guarantors agrees that the Guaranteed Obligations may at any time and
from time to time exceed the Maximum Liability of each Guarantor, and may
exceed the aggregate Maximum Liability of all other Guarantors, without
impairing this Article Six or affecting the rights and remedies of the
Holders hereunder. Nothing in this Section 6.08(2) shall be construed to
increase any Guarantor’s obligations hereunder beyond its Maximum Liability.

 

(3)           In
the event any Guarantor (a “Paying Guarantor”) shall make any payment or
payments under this Article Six or shall suffer any loss as a result of
any realization upon any collateral granted by it to secure its obligations
under this Article Six, each other Guarantor (each a “Non-Paying
Guarantor”) shall contribute to such Paying Guarantor an amount equal to
such Non-Paying Guarantor’s “Pro Rata Share” of such payment or payments
made, or losses suffered, by such Paying Guarantor. For the purposes hereof,
each Non-Paying Guarantor’s “Pro Rata Share” with respect to any such
payment or loss by a Paying Guarantor shall be determined as of the date on
which such payment or loss was made by reference to the ratio of (i) such
Non-Paying Guarantor’s Maximum Liability as of such date (without giving effect
to any right to receive, or obligation to make, any contribution hereunder) or,
if such Non-Paying Guarantor’s Maximum Liability has not been determined, the
aggregate amount of all monies received by such Non-Paying Guarantor from the
Company after the date hereof (whether by loan, capital infusion or by other
means) to (ii) the aggregate Maximum Liability of all Guarantors hereunder
(including such Paying Guarantor) as of such date (without giving effect to any
right to receive, or obligation to make, any contribution hereunder), or to the
extent that a Maximum Liability has not been determined for any Guarantors, the
aggregate amount of all monies received by such Guarantors from the Company
after the date hereof (whether by loan, capital infusion or by other means). Nothing
in this Section 6.08(3) shall affect any Guarantor’s several liability
for the entire amount of the Guaranteed Obligations (up to such Guarantor’s
Maximum Liability). Each of the Guarantors covenants and agrees that its right
to receive any contribution under this Article Six from a Non-Paying
Guarantor shall be subordinate and junior in right of payment to all the
Guaranteed Obligations. The provisions of this Section 6.08(3) are for
the benefit of both the Holders and the Guarantors and may be enforced by any
one, or more, or all of them in accordance with the terms hereof.

 

Section
6.09.      Default and Enforcement.

 

If any
Guarantor fails to pay in accordance with Section 6.01, the Trustee may
proceed in its name as trustee hereunder in the enforcement of the guarantee of
any such Guarantor and such Guarantor’s obligations thereunder and hereunder by
any remedy provided by law, whether by legal proceedings or otherwise, and to
recover from such Guarantor the obligations.

 

Section
6.10.      Amendment, Etc.

 

No amendment,
modification or waiver of any provision of this Supplemental Indenture relating
to any Guarantor or consent to any departure by any Guarantor or any other
Person from any such provision will in any event be effective unless it is
signed by such Guarantor and the Trustee.

 

- 16 -

 

Section
6.11.      Acknowledgment.

 

Each Guarantor
hereby acknowledges communication of the terms of this Supplemental Indenture,
the Base Indenture and the Notes and consents to and approves of the same.

 

Section
6.12.      Costs and Expenses.

 

Each Guarantor
shall pay on demand by the Trustee any and all costs, fees and expenses
(including, without limitation, legal fees and disbursements) incurred by the
Trustee, its agents, advisors and counsel or any of the Holders in enforcing
any of their rights under any Guarantee.

 

Section
6.13.      No Merger or Waiver; Cumulative Remedies.

 

No Guarantee
shall operate by way of merger of any of the obligations of a Guarantor under
any other agreement, including, without limitation, this Supplemental Indenture.
No failure to exercise and no delay in exercising, on the part of the Trustee
or the Holders, any right, remedy, power or privilege hereunder or under the
Indenture or the Notes, shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, remedy, power or privilege hereunder or under
the Indenture or the Notes preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges in the Guarantee and under this Supplemental
Indenture, the Notes and any other document or instrument between a Guarantor
and/or the Company and the Trustee are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.

 

Section
6.14.      Guarantee in Addition to Other Obligations.

 

The
obligations of each Guarantor under its Guarantee and this Supplemental
Indenture are in addition to and not in substitution for any other obligations
to the Trustee or to any of the Holders in relation to this Supplemental
Indenture or the Notes and any guarantees or security at any time held by or
for the benefit of any of them.

 

Section
6.15.      Severability.

 

Any provision
of this Article Six which is prohibited or unenforceable in any
jurisdiction shall not invalidate the remaining provisions and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction unless its removal
would substantially defeat the basic intent, spirit and purpose of this
Supplemental Indenture and this Article Six.

 

Section
6.16.      Successors and Assigns.

 

Each Guarantee
shall be binding upon and inure to the benefit of each Guarantor and the
Trustee and the other Holders and their respective successors and permitted
assigns, except that no Guarantor may assign any of its obligations hereunder
or thereunder.

 

Section
6.17.      Acknowledgement under the Trust Indenture Act.

 

- 17 -

 

Each Guarantor
acknowledges that, by virtue of its Guarantee, it is becoming an “obligor” on
indenture securities under the Trust Indenture Act.

 

ARTICLE SEVEN

 

EVENTS OF DEFAULT

 

In addition to the Events of
Default set out in Section 501 of the Indenture, the Notes shall also be
subject to the following Events of Default:

 

(i)            the occurrence of any event that results in
the acceleration of any of the Company’s or its Restricted Subsidiaries’
Indebtedness, other than Non-Recourse Indebtedness, that has an outstanding
principal amount of $10 million or more in the aggregate; and

 

(ii)           a default in the payment of any principal or
interest in respect of any of the Company’s or its Restricted Subsidiaries’
Indebtedness, other than Non-Recourse Indebtedness, that has an outstanding
principal amount of $20 million or more and the continuation of that default
for ten Business Days from the date the principal or interest payment became
due and payable, after giving effect to any applicable grace period provided
for in the documents governing the indebtedness.

 

ARTICLE EIGHT

 

DEFEASANCE AND DISCHARGE

 

In addition to the
defeasance and discharge provisions set out in Section 403 of the Indenture,
the following defeasance provision shall apply to the Notes:

 

The Company may, at its
option and at any time (including the exercise by the Company of a Covenant
Defeasance (as defined herein)), elect to have its obligations discharged with
respect to the Notes (“Legal Defeasance”). In the event of a Legal
Defeasance with respect to the Notes, the Company shall be deemed to have paid
and discharged the entire indebtedness on all outstanding Notes and the
provisions of this Indenture as it relates to such Outstanding Notes (except to
(A) the rights of Holders of such Outstanding Notes to receive from the trust
funds described in subparagraph (i) below, payment of the principal of (and
premium, if any) or interest, if any, on such Notes on the Stated Maturity of
such principal of (and premiums, if any) or interest or any mandatory sinking
fund payments or analogous payments applicable to the Notes on the day on which
such payments are due and payable in accordance with the terms of the Indenture
and of such Notes, (B) the Company’s obligations with respect to such Notes
under Sections 304, 305, 306, 1002 and 1003 of the Indenture, (C) the rights,
powers, trusts, duties and immunities of the Trustee under the Indenture,
including without limitation Section 607 of the Indenture and (D) Article Four
of the Base Indenture, which in each case shall survive until otherwise
terminated or discharged hereunder) shall no longer be in effect, and the
Trustee, at the expense of the Company, shall, upon Company Request, execute
proper instruments acknowledging the same, provided that the conditions set out
below have been satisfied.

 

 

- 18 -

 

In addition,
the Company may, at its option and at any time, elect to have the obligations
of the Company with respect to the Notes be released with respect to covenants
provided with respect to the Notes under Sections 301(14) or 901(2) of the
Indenture (“Covenant Defeasance”), and the Trustee, at the expense of
the Company, shall, upon Company Request, execute proper instruments
acknowledging the same, provided that the conditions set out below have been
satisfied. In the event of Covenant Defeasance, those events described under
Section 501 of the Base Indenture and Article Seven of this Supplemental
Indenture will no longer constitute an Event of Default.

 

In order to
exercise either Legal Defeasance or Covenant Defeasance:

 

(i)            the
Company has deposited or caused to be deposited with the Trustee (or another
corporate trustee appointed by the Company satisfying the requirements of
Section 609 of the Indenture who shall have agreed to comply with the
provisions of Article Four of the Base Indenture applicable to it), irrevocably
(irrespective of whether the conditions in Subsections (ii), (iii), (iv), (v),
(vi) and (vii) below have been satisfied, but subject to the provisions of
Section 402(c) and the last paragraph of Section 1003 of the Indenture), as trust
funds in trust, specifically pledged as security for, and dedicated solely to,
the benefit of the Holders of the Notes, with reference to this provision, (A)
moneys in an amount, or (B) U.S. Government Obligations the scheduled principal
of and interest on which in accordance with their terms will provide, not later
than the due date of any payment moneys in an amount, or (C) a combination
thereof, sufficient, in the case of (B) or (C) in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and discharge, and which
shall be applied by the Trustee (or such other corporate trustee, as the case
may be) to pay and discharge, at maturity or upon redemption, the principal of,
any mandatory sinking fund payments or analogous payments applicable to Notes
(and premium, if any) and interest, if any, on such Outstanding Notes on the
stated date for payment thereof or on the applicable redemption date, as the
case may be;

 

(ii)           the
conditions in Subsections (2), (3) and (5) of Section 403 of the Indenture have
been satisfied;

 

(iii)          in
the case of Legal Defeasance, the Company has delivered to the Trustee an
Opinion of Counsel confirming that (A) the Company has received from, or there
has been published by, the Internal Revenue Service a ruling or (B) since the
date of the Indenture, there has been a change in the applicable federal income
tax law, in either case to the effect that, and based thereon such Opinion of
Counsel shall confirm that, the Holders of the Notes will not recognize income,
gain or loss for Federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same amounts and in
the same manner and at the same times, as would have been the case if such
Legal Defeasance had not occurred;

 

(iv)          in
the case of Covenant Defeasance, the Company has delivered to the Trustee an
Opinion of Counsel confirming that the Holders of the Notes will not recognize
income, gain or loss for Federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts and

 

- 19 -

 

in the same
manner and at the same times, as would have been the case if such Covenant
Defeasance had not occurred;

 

(v)           the
Company has delivered to the Trustee an Officers’ Certificate and an Opinion of
Counsel, each stating that all conditions precedent provided for relating to
the Legal Defeasance or the Covenant Defeasance, as the case may be, have been
complied with;

 

(vi)          if
such Notes are to be redeemed prior to final maturity (other than from
mandatory sinking fund payments or analogous payments), notice of such
redemption shall have been duly given pursuant to the Indenture or provision
therefor satisfactory to the Trustee shall have been made; and

 

(vii)         if
such deposit is to be made with a trustee, other than the Trustee, pursuant to
subparagraph (i) above, such other trustee shall have delivered to the Trustee
a certificate satisfactory in form to the Trustee stating that such deposit has
been made in accordance with the provisions of Article Four of the Base
Indenture and that such other
trustee agrees to comply with the provisions of Article Four of the Base
Indenture and the last paragraph
of Section 1003 applicable to it, and the Trustee shall be fully protected in
relying upon such certificate.

 

In the event
that any other trustee is appointed by the Company pursuant to Subsection (i)
above, the Trustee shall have no responsibility with respect to the performance
by such other trustee of its duties or with respect to any monies or U.S.
Government Obligations deposited with such other trustee.

 

Additionally,
all references in the Indenture to Section 403 shall, vis-à-vis the Notes, be
deemed to include amounts set aside as provided herein for a Legal Defeasance
or a Covenant Defeasance.

 

ARTICLE NINE

 

MISCELLANEOUS

 

Section 9.01.          Form of Notes.

 

The Notes and
the Trustee’s Certificates of Authentication to be endorsed thereon are to be
substantially in the form of Exhibit B, which form is hereby
incorporated in and made a part of this Supplemental Indenture.

 

The terms and
provisions contained in the Notes shall constitute, and are hereby expressly
made, a part of this Supplemental Indenture, and the Company and the Trustee,
by their execution and delivery of this Supplemental Indenture, expressly agree
to such terms and provisions and to be bound thereby.

 

- 20 -

 

Section 9.02.          Ratification of Base Indenture.

 

The Base
Indenture, as supplemented by this Supplemental Indenture, is in all respects
ratified and confirmed, and this Supplemental Indenture shall be deemed part of
the Base Indenture in the manner and to the extent herein and therein provided.

 

Section 9.03.          Trust Indenture Act Controls.

 

If any
provision hereof limits, qualifies or conflicts with the duties imposed by
Section 310 through 317 of the Trust Indenture Act, the imposed duties shall
control.

 

Section 9.04.          Conflict with Indenture.

 

To
the extent not expressly amended or modified by this Supplemental Indenture,
the Base Indenture shall remain in full force and effect. If any provision of
this Supplemental Indenture relating to the Notes is inconsistent with any
provision of the Base Indenture, the provision of this Supplemental Indenture
shall control.

 

Section 9.05.          Governing Law.

 

THIS
SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK. The Company and each of the Guarantors
submits to the jurisdiction of the courts of the State of New York sitting in
the Borough of Manhattan, City of New York, and of the United States District
Court for the Southern District of New York, in any action or proceeding to
enforce any of their obligations under this Supplemental Indenture, and agrees
not to seek a transfer of any such action or proceeding on the basis of
inconvenience of the forum or otherwise (but neither the Company nor any of the
Guarantors shall be prevented from removing any such action or proceeding from
a state court to the United States District Court for the Southern District of
New York). The Company and each of the Guarantors agree that process in any
such action or proceeding may be served upon it by registered mail or in any
other manner permitted by the rules of the court in which the action or
proceeding is brought.

 

Section 9.06.          Successors.

 

All
agreements of the Company in the Base Indenture, this Supplemental Indenture
and the Notes shall bind its successors. All agreements of the Guarantors in
this Supplemental Indenture and in the Guarantee shall bind their successors. All
agreements of the Trustee in the Base Indenture and this Supplemental Indenture
shall bind its successors.

 

Section 9.07.          Counterparts.

 

This
instrument may be executed in any number of counterparts, each of which so
executed shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.

 

- 21 -

 

IN WITNESS WHEREOF,
the parties to this Supplemental Indenture have caused it to be duly executed
as of the day and year first above written.

 

	
   

  	
  THE RYLAND GROUP, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  JPMORGAN CHASE BANK, N.A., as

  Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

- 22 -

 

	
   

  	
  GUARANTORS:

  
	
   

  	
   

  
	
   

  	
  CONVEST MANAGEMENT CORPORATION (1)

  
	
   

  	
  MOORE’S ORCHARD, LLC (2)

  
	
   

  	
  RH AT EMORY GROVE, LLC (3)

  
	
   

  	
  RH AT MOUNT HEBRON, LLC (2)

  
	
   

  	
  RH BUILDERS OF INDIANA, INC. (1)

  
	
   

  	
  RH INVESTMENT OF INDIANA, INC. (1)

  
	
   

  	
  RH OF INDIANA, L.P. (4)

  
	
   

  	
  RH OF MARYLAND, LLC (5)

  
	
   

  	
  RH OF TEXAS LIMITED PARTNERSHIP (6)

  
	
   

  	
  RH ORGANIZATION, INC. (1)

  
	
   

  	
  RYLAND COMMUNITIES, INC. (1)

  
	
   

  	
  RYLAND GOLF COURSE AT THE COLONY, INC. (1)

  
	
   

  	
  RYLAND HOMES INVESTMENT-TEXAS, INC. (1)

  
	
   

  	
  RYLAND HOMES NEVADA, LLC (7)

  
	
   

  	
  RYLAND HOMES OF TEXAS, INC. (1)

  
	
   

  	
  RYLAND HOMES OF ARIZONA, INC. (1)

  
	
   

  	
  RYLAND HOMES OF CALIFORNIA, INC. (1)

  
	
   

  	
  RYLAND ORGANIZATION COMPANY (1)

  
	
   

  	
  RYLAND VENTURES, INC. (1)

  
	
   

  	
  RYLAND VENTURES II, INC. (1)

  
	
   

  	
  RYLAND VENTURES III, INC. (1)

  
	
   

  	
  RYLAND VENTURES IV, INC. (1)

  
	
   

  	
  THE REGENCY ORGANIZATION, INC. (1)

  
	
   

  	
  THE RYLAND CORPORATION (1)

  
			

 

- 23 -

 

	
   

  	
   

  	
  (1)

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name:  Cathey S. Lowe

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Title:  Treasurer

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (2)

  	
  By:

  	
  Ryland Ventures III, Inc.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Its:  General Manager

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name:  Cathey S. Lowe

  
	
   

  	
   

  	
   

  	
   

  	
  Title:  Treasurer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (3)

  	
  By:

  	
  Ryland Ventures III, Inc.

  	
   

  
	
   

  	
   

  	
   

  	
  Its:  Managing Member

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name:  Cathey S. Lowe

  
	
   

  	
   

  	
   

  	
   

  	
  Title:  Treasurer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (4)

  	
  By:

  	
  RH Builders of Indiana, Inc.

  	
   

  
	
   

  	
   

  	
   

  	
  Its:

  	
  General Partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name:  Cathey S. Lowe

  
	
   

  	
   

  	
   

  	
   

  	
  Title:  Treasurer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (5)

  	
  By:

  	
  Ryland Ventures, Inc.

  	
   

  
	
   

  	
   

  	
   

  	
  Its:  General Manager

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name:  Cathey S. Lowe

  
	
   

  	
   

  	
   

  	
   

  	
  Title:  Treasurer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (6)

  	
  By:

  	
  Ryland Homes of Texas, Inc.

  	
   

  
	
   

  	
   

  	
   

  	
  Its:  General Partner

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name:  Cathey S. Lowe

  
	
   

  	
   

  	
   

  	
   

  	
  Title:  Treasurer

  

 

- 24 -

 

	
   

  	
   

  	
  (7)

  	
  By:

  	
  The Ryland Group, Inc.

  	
   

  
	
   

  	
   

  	
   

  	
  Its:  General Partner

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name:  Cathey S. Lowe

  
	
   

  	
   

  	
   

  	
   

  	
  Title:  Treasurer

  
							

 

- 25 -Exhibit
4.3

 

Form of:

 

6.875%  Senior Notes due 2013

 

THIS SECURITY
IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED
TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A
DEPOSITARY.  THIS SECURITY IS
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE AND MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO ANOTHER NOMINEE
OF THE DEPOSITARY OR TO THE DEPOSITARY OR BY ANY SUCH NOMINEE TO A SUCCESSOR
DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY.

 

UNLESS THIS
SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL IN AS MUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.

 

THE RYLAND
GROUP, INC.

 

6.875%  Senior Notes due 2013

 

CUSIP #
783764AM5

 

	
  No. R-1

  	
   

  	
  $250,000,000

  

 

THE RYLAND GROUP, INC., a Maryland
corporation (herein called the “Company,” which term includes any successor
Person under the Indenture hereinafter referred to), for value received, hereby
promises to pay to Cede & Co., or registered assigns, the principal sum of
Two Hundred Fifty Million Dollars on June 15, 2013, at the office or agency of
the Company referred to below, and to pay interest thereon, accruing from June
6, 2006, on December 15, 2006 and semi-annually thereafter on June 15 and
December 15 in each year, at the rate of 6.875% per annum until the principal hereof is paid or made
available for payment.  The interest so
payable, and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in such Indenture, be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest, which shall be December
1 or June 1 (whether or not a Business Day), as the case may be, next preceding
such Interest Payment Date.  Any such
interest not so punctually paid or duly provided for will forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of the Securities of this series not less than 10 days prior
to such Special Record Date, or be paid at any time in any other lawful manner
not inconsistent with the requirements of any securities exchange on which the
Securities of this series may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in said Indenture.

 

 

2

 

Payment of the principal of, and interest on,
this Security will be made at the office appointed by the Company in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that at the
option of the Company payment of interest may be made (i) by check mailed to
the address of the Person entitled thereto as such address shall appear in the
Security Register or (ii) by wire transfer to an account maintained by the
Person entitled thereto.

 

Reference is hereby made to the further
provisions of this Security set forth on the reverse hereof, which further
provisions shall for all purposes have the same effect as if set forth at this
place.

 

Unless the certificate of authentication
hereon has been executed by the Trustee referred to on the reverse hereof by
manual signature, this Security shall not be entitled to any benefit under the
Indenture or be valid or obligatory for any purpose.

 

 

3

 

IN WITNESS
WHEREOF, the Company has caused this instrument to be duly executed under
its corporate seal.

 

	
  Dated:

  	
  June 6, 2006

  	
  THE RYLAND
  GROUP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Gordon A
  Milne

  
	
   

  	
   

  	
   

  	
  Executive
  Vice President and

  
	
   

  	
   

  	
   

  	
  Chief Financial
  Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Timothy J. Geckle

  	
   

  	
   

  	
   

  
	
  Secretary

  	
   

  	
   

  	
   

  
						

 

 

TRUSTEE’S
CERTIFICATE OF AUTHENTICATION

 

This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.

 

	
  JPMorgan
  Chase Bank, N.A. (formerly known as Chemical Bank), as Trustee

  
	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Authorized
  Officer

  	
   

  

 

 

4

 

REVERSE OF
SECURITY

 

This Security is one of a duly authorized
issue of securities of the Company (herein called the “Securities”), issued and
to be issued in one or more series under an Indenture, dated as of June 28,
1996 (herein called the “Indenture”), between the Company and JPMorgan Chase
Bank, N.A. (formerly known as Chemical Bank), as Trustee, herein called the
“Trustee” (which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby
made for a statement of the respective rights, limitations of rights,
obligations, duties and immunities thereunder of the Company, the Trustee and
the Holders of the Securities and of the terms upon which the Securities are,
and are to be, authenticated and delivered. 
The terms of this Security include the covenants and terms established
by the Fourth Supplemental Indenture, dated as of June 6, 2006, among the
Company, the Guarantors named therein and the Trustee, pursuant to the
authority granted under the Indenture (such terms and covenants shall be
referred to herein collectively with the terms and covenants set out in the
Indenture that are applicable to the Securities of this series as the
“Indenture Terms”).  Defined terms used
herein that are not otherwise defined shall have the meanings given such terms
in the Indenture Terms.  This Security is
one of the series designated on the face hereof, in an aggregate principal
amount of $250,000,000.  The Company may
subsequently issue additional securities as part of this series of Securities
under the Indenture.

 

The Company
may, at its option, redeem the Securities in whole at any time or in part from
time to time, on at least 30 but not more than 60 days’ prior notice, at a
Redemption Price equal to the greater of (A) 100% of the principal amount of
the Securities being redeemed and (B) the sum of the present values of the
Remaining Scheduled Payments (as defined below) on the Securities being
redeemed, discounted to the Redemption Date, on a semiannual basis, at the
Treasury Rate (as defined below) plus 30 basis points (0.30%).

 

The Company
will also pay accrued interest on the Securities being redeemed to the
Redemption Date.  In determining the
Redemption Price and accrued interest, interest will be calculated on the basis
of a 360-day year consisting of twelve 30-day months.

 

If money
sufficient to pay the Redemption Price of and accrued interest on the
Securities to be redeemed is deposited with the Trustee on or before the
Redemption Date, on and after the Redemption Date interest will cease to accrue
on the Securities (or such portions thereof) called for redemption and such
Securities will cease to be Outstanding.

 

“Comparable Treasury Issue” means the
United States Treasury security selected by the Reference Treasury Dealer as
having a maturity comparable to the remaining term of the Securities to be
redeemed that would be utilized, at the time of selection and in accordance
with customary financial practice, in pricing new issues of corporate debt
securities of comparable maturity to the remaining term of the Securities.

 

“Comparable Treasury Price” means, with
respect to any Redemption Date, (1) the average of the Reference Treasury
Dealer Quotations for such Redemption Date, after excluding the highest and
lowest Reference Treasury Dealer Quotations, or (2) if the Trustee obtains
fewer than four such Reference Treasury Dealer Quotations, the average of all
such quotations.

 

“Reference Treasury Dealer” means each of
Citigroup Global Markets Inc. and at least one other primary U.S. Government
securities dealer in the United States selected by UBS Securities LLC, and
their respective successors; provided, however, that, if any of the foregoing
ceases to be a primary U.S. Government securities dealer in the United States
(a “Primary Treasury Dealer”), the Company will substitute another
Primary Treasury Dealer.

 

 

5

 

“Reference Treasury Dealer Quotations”
means, with respect to each Reference Treasury Dealer and any Redemption Date,
the average, as determined by the Trustee, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Trustee by such Reference Treasury
Dealer at 5:00 p.m., New York City time, on the third Business Day preceding
such Redemption Date.

 

“Remaining Scheduled Payments” means, with
respect to any Security, the remaining scheduled payments of the principal (or
of the portion) thereof to be redeemed and interest thereon that would be due
after the related Redemption Date but for such redemption; provided, however, that, if such
Redemption Date is not an Interest Payment Date with respect to such Security,
the amount of the next succeeding scheduled interest payment thereon will be
reduced by the amount of interest accrued thereon to such Redemption Date.

 

“Treasury Rate” means, with respect to any
Redemption Date, the rate per annum equal to the semiannual equivalent yield to
maturity of the Comparable Treasury Issue, assuming a price for the Comparable
Treasury Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such Redemption Date.

 

The Indenture
Terms contain provisions for defeasance at any time of the entire Indebtedness
of this Security upon compliance with certain conditions set forth therein.

 

The following
constitute Events of Default:  default
for a period of 30 days in payment of any interest on any Security when due;
default in payment of principal of, or premium, if any, on, any Security when
due; default in performance of any other covenant in the Indenture with respect
to the Securities or in the Securities which continues for 60 days after
written notice to the Company by the Trustee or by the Holders of at least 25%
in principal amount of the Securities of this series; the occurrence of any
event that results in the acceleration of any of the Company or its Restricted
Subsidiaries’ Indebtedness, other than Non-Recourse Indebtedness, of the
Company or any of its Restricted Subsidiaries, that has an Outstanding
principal amount of $10,000,000 or more in the aggregate; default in the
payment of any principal or interest in respect of any Indebtedness of the
Company or its Restricted Subsidiaries, other than Non-Recourse Indebtedness,
that has an Outstanding principal amount of $20,000,000 or more and the
continuation of such default for ten Business Days from the date such principal
or interest payment became due and payable, after giving effect to any
applicable grace period set forth in the documents governing such Indebtedness;
and certain events of bankruptcy, insolvency or reorganization as provided in
the Indenture Terms.  If any Event of
Default occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the Outstanding Securities of this series may declare the
principal of all of the Securities of this series to be due and payable
immediately.  Holders of Securities may
not enforce the Indenture or the Securities except as provided in the
Indenture.  The Trustee may require
indemnity satisfactory to it before it enforces the Indenture or the
Securities.  Subject to certain
limitations, Holders of a majority in principal amount of the Securities of
this series may direct the Trustee in its exercise of any trust or power
conferred upon the Trustee with respect to such Securities.  The Trustee may withhold from Holders of the
Securities of this series notice of any continuing default (except a default in
payment of principal or interest) if it determines that withholding notice is
in their interests.  The Company must
furnish an annual compliance certificate to the Trustee.

 

 

6

 

The Indenture
permits, with certain exceptions as therein provided, the amendment thereof and
the modification of the rights and obligations of the Company and the rights of
the Holders of the Securities of each series to be affected under the Indenture
at any time by the Company and the Trustee with the consent of the Holders of a
majority in principal amount of the Securities at the time Outstanding of each
series to be affected.  Without the
consent of any Holder of Securities, the Indenture or the Securities may be
amended to cure any ambiguity, omission, defect or inconsistency or to make any
change that does not adversely affect the rights of any Holder of Securities in
any material respect.  The Indenture also
contains provisions permitting the Holders of specified percentages in
principal amount of the Securities of each series at the time Outstanding, on
behalf of the Holders of all Securities of such series, to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. 
Any such consent or waiver by the Holders of this Security shall be
conclusive and binding upon such Holder and upon all future Holders of this
Security and of any Security issued upon the registration of transfer hereof or
in exchange or in lieu hereof, whether or not notation of such consent or
waiver is made upon this Security.

 

No reference
herein to the Indenture Terms and no provision of this Security or of the
Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and
interest on this Security at the times, places and rates, and in the coin or
currency, herein prescribed.

 

As provided in
the Indenture Terms and subject to certain limitations therein set forth, the
transfer of this Security is registrable in the Security Register, upon
surrender of this Security for registration of transfer at the office or agency
appointed by the Company in any place where the principal of and any premium
and interest on this Security are payable, duly endorsed by, or accompanied by
a written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder thereof or his attorney duly
authorized in writing, and thereupon one or more new Securities of this series
and of like tenor, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.

 

The Securities
of this series are issuable only in registered form without coupons in
denominations of $1,000.00 and any integral multiple thereof.  As provided in the Indenture Terms and
subject to certain limitations set forth therein, Securities of this series are
exchangeable for a like aggregate principal amount of Securities of this series
and of like tenor of a different authorized denomination, as requested by the
Holder surrendering the same.

 

No service
charge shall be made for any such registration of transfer or exchange, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.

 

A director,
officer, employee or stockholder, as such, of the Company shall not have any
liability for any obligations of the Company under the Securities or the
Indenture Terms or for any claim based on, in respect of or by reason of such
obligations or their creation.  Each
Holder of Securities of this series by accepting a Security waives and releases
all such liability.  The waiver and
release are part of the consideration for the issuance of the Securities of
this series.

 

Prior to due
presentment of this Security for registration of transfer, the Company, the
Trustee and any agent of the Company or the Trustee may treat the Person in
whose name this Security is registered as the owner hereof for all purposes,
whether or not this Security is overdue, and neither the Company, the Trustee
nor any such agent shall be affected by notice to the contrary.

 

 

7

 

No recourse
shall be had for the payment of the principal of (and premium, if any) or
interest on this Security, or for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Indenture Terms or any
indenture supplemental thereto, against any incorporator, stockholder, officer
or director, as such, past, present or future, of the Company or of any
successor corporation, whether by virtue of any constitution, statute or rule
of law, or by the enforcement of any assessment or penalty or otherwise, all
such liability being, by the acceptance hereof and as part of the consideration
for the issue hereof, expressly waived and released.

 

JPMorgan Chase
Bank, N.A., the Trustee under the Indenture, or any banking institution serving
as successor Trustee thereunder, in its individual or any other capacity, may
make loans to, accept deposits from and perform services for the Company or its
Affiliates, and may otherwise deal with the Company or its Affiliates as if it
were not Trustee.

 

The Company
will furnish to any Holder of the Securities of this series upon written
request and without charge a copy of the Indenture.  Requests may be made to: The Ryland Group,
Inc., 24025 Park Sorrento, Suite 400, Calabasas, California 91302, Attention:
Treasurer.

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