SCHULER HOMES INC, S-8, 1998-07-31

SCHULER HOMES INC
S-8, 1998-07-31
OPERATIVE BUILDERS

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As filed with the Securities and Exchange Commission on July 31, 1998
Registration No. 333-
---------

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

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

-----------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

-----------------------
SCHULER HOMES, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 99-0293125
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)

828 FORT STREET MALL, 4TH FLOOR
HONOLULU, HAWAII 96813
(Address of principal executive offices) (Zip Code)

-----------------------
SCHULER HOMES, INC. 1998 EMPLOYEE STOCK PURCHASE PLAN
(Full title of the Plans)

-----------------------
JAMES K. SCHULER
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
SCHULER HOMES, INC.
828 FORT STREET MALL, 4TH FLOOR, HONOLULU, HAWAII 96813
(Name and address of agent for service)
(808) 521-5661
(Telephone number, including area code, of agent for service)

CALCULATION OF REGISTRATION FEE

Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered(1) per Share(2) Price(2) Fee
---------- ------------- --------- ----- ---

Schuler Homes, Inc.
1998 Employee Stock Purchase Plan
- ---------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value 500,000 shares $6.875 $3,437,500.00 $1,015.00

</TABLE>

(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the Schuler Homes, Inc. 1998
Employee Stock Purchase Plan by reason of any stock dividend, stock
split, recapitalization or other similar transaction effected without
the Registrant's receipt of consideration which results in an increase
in the number of the outstanding shares of Common Stock of Schuler
Homes, Inc.

(2) Calculated solely for purposes of this offering under Rule 457(h) of
the Securities Act of 1933, as amended, on the basis of the average of
the high and low selling prices per share of Common Stock of Schuler
Homes, Inc. on July 28, 1998, as reported by the Nasdaq National
Market.

<PAGE>
PART II

INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3. INCORPORATION OF DOCUMENTS BY REFERENCE

Schuler Homes, Inc. (the "Registrant") hereby incorporates by reference
into this Registration Statement the following documents previously filed with
the Securities and Exchange Commission (the "SEC"):

(a) The Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997, filed with the SEC on March 31, 1998;

(b) The Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998, filed with the SEC on May 14, 1998;

(d) The Registrant's Registration Statement No. 00-19891 on Form 8-A
filed with the SEC on February 27, 1992 pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended (the "1934 Act"),
in which there is described the terms, rights and provisions
applicable to the Registrant's outstanding Common Stock.

All reports and definitive proxy or information statements filed
pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of
this Registration Statement and prior to the filing of a post-effective
amendment which indicates that all securities offered hereby have been sold or
which deregisters all securities then remaining unsold shall be deemed to be
incorporated by reference into this Registration Statement and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Registration Statement
to the extent that a statement contained herein or in any subsequently filed
document which also is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Registration Statement.

Item 4. DESCRIPTION OF SECURITIES

Not Applicable.

Item 5. INTERESTS OF NAMED EXPERTS AND COUNSEL

Not Applicable.

Item 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the General Corporation Law of the state of Delaware (the
"Delaware Law") empowers a Delaware corporation to indemnify any persons who
are, or are threatened to be made, parties to any threatened, pending or
completed legal action, suit or proceedings, whether civil, criminal,
administrative or investigative (other than action by or in the right of such
corporation), by reason of the fact that such person was an officer or director
of such corporation, or is or was serving at the request of such corporation as
a director, officer, employee or agent of another corporation or enterprise.
The indemnity may include expenses (including attorney's fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding, provided that such officer
or director acted in good faith and in a manner he reasonably believed to be in
or not opposed to the corporation's best interests, and, for criminal
proceedings, had no reasonable cause to believe his conduct was illegal. A
Delaware corporation may indemnify officers and directors in an action by or in
the right of the corporation under the same conditions, except that no
indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation in the performance of this
duty. Where

<PAGE>

an officer or director is successful on the merits or otherwise in the defense
of any action referred to above, the corporation must indemnify him against the
expenses which such officer or director actually and reasonably incurred.

In accordance with Delaware Law, the certificate of incorporation of the
Company contains a provision to limit the personal liability of the directors of
the Registrant for violations of their fiduciary duty. This provision
eliminates each director's liability to the Registrant or its stockholders for
monetary damages except (i) for any breach of the director's duty of loyalty to
the Registrant or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware Law providing for liability of directors for
unlawful payment of dividends or unlawful stock purchases or redemptions, or
(iv) for any transaction from which a director derived an improper personal
benefit. The effect of this provision is to eliminate the personal liability of
directors for monetary damages for actions involving a breach of their fiduciary
duty of care, including any such actions involving gross negligence.

Article 5 of the Bylaws of the Registrant provides for indemnification
of the officers and directors of the Registrant to the fullest extent permitted
by applicable law.

The Company has entered into indemnification agreements with its
directors and officers. these agreements provide substantially broader
indemnity rights than those provided under the Delaware Law and the Company's
Bylaws. The indemnification agreements are not intended to deny or otherwise
limit third-party or derivative suits against the Company or its directors or
officers, but if a director or officer were entitled to indemnity or
contribution under the indemnification agreement, the financial burden of a
third-party suit would be borne by the Company, and the Company would not
benefit from derivative recoveries against the director or officer. Such
recoveries would accrue to the benefit of the Company but would be offset by the
Company's obligations to the director or officer under the indemnification
agreement.

Item 7. EXEMPTION FROM REGISTRATION CLAIMED

Not Applicable.

Item 8. EXHIBITS

Number Exhibit
------ -------
<S> <C>
4 Instruments Defining Rights of Stockholders. Reference is made
to Registrant's Registration Statement No. 00-19891 on Form 8-A
which is incorporated herein by reference pursuant to Item 3(d).
5 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.
24.0 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 Schuler Homes, Inc. 1998 Employee Stock Purchase Plan.
99.2 Form of Enrollment/Beneficiary Election Notice in connection with
the Schuler Homes, Inc. 1998 Employee Stock Purchase Plan.
99.3 Form of Stock Purchase Agreement in connection with the Schuler
Homes, Inc. 1998 Employee Stock Purchase Plan.
</TABLE>

Item 9. UNDERTAKINGS

A. The undersigned Registrant hereby undertakes: (1) to file,
during any period in which offers or sales are being made, a post-effective
amendment to this Registration Statement (i) to include any prospectus required
by Section 10(a)(3) of the 1933 Act, (ii) to reflect in the prospectus any facts
or events arising after the effective date of this Registration Statement (or
the most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in this
Registration Statement and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in this
Registration Statement or any material change to such information in this
Registration Statement; PROVIDED, however, that clauses (1)(i) and (1)(ii) shall
not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by the
Registrant pursuant to

II-2.

<PAGE>

Section 13 or Section 15(d) of the 1934 Act that are incorporated by reference
into this Registration Statement; (2) that for the purpose of determining any
liability under the 1933 Act each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and (3) to remove from registration by means
of a post-effective amendment any of the securities being registered which
remain unsold at the termination of the Schuler Homes, Inc. 1998 Employee Stock
Purchase Plan.

B. The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the 1933 Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
1934 Act that is incorporated by reference into this Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

C. Insofar as indemnification for liabilities arising under the
1933 Act may be permitted to directors, officers, or controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that, in the opinion of the SEC, such indemnification is
against public policy as expressed in the 1933 Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.

II-3.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-8, and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Honolulu, State of Hawaii on this 31st
day of July, 1998.

SCHULER HOMES, INC.

By: /s/ James K. Schuler
--------------------------------
James K. Schuler
Chairman of the Board, President
and Chief Executive Officer
(Principal Executive Officer)

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS:

That the undersigned officers and directors of Schuler Homes,
Inc., a Delaware corporation, do hereby constitute and appoint James K. Schuler
and Pamela S. Jones and each of them, the lawful attorneys-in-fact and agents
with full power and authority to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, and any one of them,
determine may be necessary or advisable or required to enable said corporation
to comply with the Securities Act of 1933, as amended, and any rules or
regulations or requirements of the Securities and Exchange Commission in
connection with this Registration Statement. Without limiting the generality of
the foregoing power and authority, the powers granted include the power and
authority to sign the names of the undersigned officers and directors in the
capacities indicated below to this Registration Statement, to any and all
amendments, both pre-effective and post-effective, and supplements to this
Registration Statement, and to any and all instruments or documents filed as
part of or in conjunction with this Registration Statement or amendments or
supplements thereof, and each of the undersigned hereby ratifies and confirms
that all said attorneys and agents, or any one of them, shall do or cause to be
done by virtue hereof. This Power of Attorney may be signed in several
counterparts.

IN WITNESS WHEREOF, each of the undersigned has executed this
Power of Attorney as of the date indicated.

Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.

Signature Title Date
- --------- ----- ----
<S> <C> <C>

/s/ James K. Schuler Chairman of the Board, President July 31, 1998
- ---------------------- and Chief Executive Officer
James K. Schuler (Principal Executive Officer)
</TABLE>

II-4.

<PAGE>

Signature Title Date
- --------- ----- ----
<S> <C> <C>

/s/ Pamela S. Jones Senior Vice President of Finance and July 31, 1998
- ------------------------ Chief Financial Officer
Pamela S. Jones (Principal Financial Officer)

/s/ Douglas A. Tonokawa Vice President of Finance and July 31, 1998
- ------------------------ Chief Financial Officer (Principal
Douglas A. Tonokawa Accounting Officer)

/s/ Michael T. Jones Director July 31, 1998
- ------------------------
Michael T. Jones

/s/ Bert T. Kobayashi Director July 31, 1998
- ------------------------
Bert T. Kobayashi

/s/ Thomas A. Bevilacqua Director July 31, 1998
- ------------------------
Thomas A. Bevilacqua

Director July 31, 1998
- ----------------------
Martin T. Hart
</TABLE>

II-5.

<PAGE>

EXHIBIT INDEX

<PAGE>

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.

EXHIBITS

FORM S-8

UNDER

SECURITIES ACT OF 1933

SCHULER HOMES, INC.

<PAGE>

EXHIBIT 5
OPINION AND CONSENT OF BROBECK, PHLEGER & HARRISON LLP.

<PAGE>

July 31, 1998

Schuler Homes, Inc.
828 Fort Street Mall, 4th Floor
Honolulu, HI 96813

Re: Registration Statement for Offering of an Aggregate of
500,000 Shares of Common Stock
------------------------------------------------------

Ladies and Gentlemen:

We refer to your Registration Statement on Form S-8 (the "Registration
Statement") under the Securities Act of 1933, as amended, of 500,000 shares of
the Common Stock of the Company under the Schuler Homes, Inc. 1998 Employee
Stock Purchase Plan. We advise you that, in our opinion, when such shares have
been issued and sold pursuant to the applicable provisions of the Schuler Homes,
Inc. 1998 Employee Stock Purchase Plan, and in accordance with the Registration
Statement, such shares will be duly authorized, validly issued, fully paid and
non-assessable shares of the Company's Common Stock.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.

Very truly yours,

/s/ BROBECK, PHLEGER & HARRISON LLP

BROBECK, PHLEGER & HARRISON LLP

<PAGE>

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Independent Auditors"
in the Registration Statement (Form S-8 No. 333-________) pertaining to the
Employee Stock Purchase Plan of Schuler Homes, Inc. and to the incorporation by
reference therein of our report dated March 5, 1998, with respect to the
consolidated financial statements of Schuler Homes, Inc. included in its Annual
Report (Form 10-K) for the year ended December 31, 1997, filed with the
Securities and Exchange Commission.

/s/ Ernst & Young LLP
Ernst & Young LLP

Honolulu, Hawaii
July 29, 1998

<PAGE>
SCHULER HOMES, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN

I. PURPOSE OF THE PLAN

This Employee Stock Purchase Plan is intended to promote the interests of
Schuler Homes, Inc. by providing eligible employees with the opportunity to
acquire a proprietary interest in the Corporation through participation in a
payroll-deduction based employee stock purchase plan designed to qualify under
Section 423 of the Code.

Capitalized terms herein shall have the meanings assigned to such terms in
the attached Appendix.

II. ADMINISTRATION OF THE PLAN

The Plan Administrator shall have full authority to interpret and construe
any provision of the Plan and to adopt such rules and regulations for
administering the Plan as it may deem necessary in order to comply with the
requirements of Code Section 423. Decisions of the Plan Administrator shall be
final and binding on all parties having an interest in the Plan.

III. STOCK SUBJECT TO PLAN

A. The stock purchasable under the Plan shall be shares of authorized but
unissued or reacquired Common Stock, including shares of Common Stock purchased
on the open market. The maximum number of shares of Common Stock which may be
issued over the term of the Plan shall not exceed Five Hundred Thousand
(500,000) shares.

B. Should any change be made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, then appropriate adjustments shall
be made to (i) the maximum number and class of securities issuable under the
Plan, (ii) the maximum number and class of securities purchasable per
Participant on any one Purchase Date, (iii) the maximum number and class of
securities purchasable in the aggregate on any one Purchase Date and (iv) the
number and class of securities and the price per share in effect under each
outstanding purchase right in order to prevent the dilution or enlargement of
benefits thereunder.

IV. OFFERING PERIODS

A. Shares of Common Stock shall be offered for purchase under the Plan
through a series of successive offering periods until such time as (i) the
maximum number of shares of Common Stock available for issuance under the Plan
shall have been purchased or (ii) the Plan shall have been sooner terminated.

B. Each offering period shall be of such duration (not to exceed
twenty-four (24) months) as determined by the Plan Administrator prior to the
start date of such offering period. The initial offering period shall commence
on the first business day in August, 1998 (the "Effective Date") and terminate
on the last business day in August 2000. The next offering period shall commence
on the first business day in September 2000, and subsequent offering periods
shall commence as designated by the Plan Administrator.

C. Each offering period shall be comprised of a series of one or more
successive Purchase Intervals. Purchase Intervals shall run from the first
business day in September each year to the last business day in February of the
following year and from the first business day in March each year to the last
business day in August of the same year. However, the first Purchase Interval in
effect under the initial offering period shall commence on the Effective Date
and terminate on the last business day in February 1999.

D. Should the Fair Market Value per share of Common Stock on any Purchase
Date within an offering period be less than the Fair Market Value per share of
Common Stock on the start date of that offering period, then that offering
period shall automatically terminate immediately after the purchase of
<PAGE>
shares of Common Stock on such Purchase Date, and a new offering period shall
commence on the next business day following such Purchase Date. The new offering
period shall have a duration of twenty (24) months, unless a shorter duration is
established by the Plan Administrator within five (5) business days following
the start date of that offering period.

V. ELIGIBILITY

A. Each individual who is an Eligible Employee on the start date of any
offering period under the Plan may enter that offering period on such start date
or on any subsequent Semi-Annual Entry Date within that offering period,
provided he or she remains an Eligible Employee.

B. Each individual who first becomes an Eligible Employee after the start
date of an offering period may enter that offering period on any subsequent
Semi-Annual Entry Date within that offering period on which he or she is an
Eligible Employee.

C. The date an individual enters an offering period shall be designated his
or her Entry Date for purposes of that offering period.

D. To participate in the Plan for a particular offering period, the Eligible
Employee must complete the enrollment forms prescribed by the Plan Administrator
(including a stock purchase agreement and a payroll deduction authorization) and
file such forms with the Plan Administrator (or its designate) on or before his
or her scheduled Entry Date.

VI. PAYROLL DEDUCTIONS

A. The payroll deduction authorized by the Participant for purposes of
acquiring shares of Common Stock during an offering period may be any multiple
of one percent (1%) of the Cash Earnings paid to the Participant during each
Purchase Interval within that offering period, up to a maximum of fifteen
percent (15%). The deduction rate so authorized shall continue in effect
throughout the offering period, except to the extent such rate is changed in
accordance with the following guidelines:

(i) The Participant may, at any time during the offering period, reduce
his or her rate of payroll deduction to become effective as soon as possible
after filing the appropriate form with the Plan Administrator. The
Participant may not, however, effect more than one (1) such reduction per
Purchase Interval.

(ii) The Participant may, prior to the commencement of any new Purchase
Interval within the offering period, increase the rate of his or her payroll
deduction by filing the appropriate form with the Plan Administrator. The
new rate (which may not exceed the fifteen percent (15%) maximum) shall
become effective on the start date of the first Purchase Interval following
the filing of such form.

B. Payroll deductions shall begin on the first pay day following the
Participant's Entry Date into the offering period and shall (unless sooner
terminated by the Participant) continue through the pay day ending with or
immediately prior to the last day of that offering period. The amounts so
collected shall be credited to the Participant's book account under the Plan,
but no interest shall be paid on the balance from time to time outstanding in
such account. The amounts collected from the Participant shall not be required
to be held in any segregated account or trust fund and may be commingled with
the general assets of the Corporation and used for general corporate purposes.

C. Payroll deductions shall automatically cease upon the termination of the
Participant's purchase right in accordance with the provisions of the Plan.

D. The Participant's acquisition of Common Stock under the Plan on any
Purchase Date shall neither limit nor require the Participant's acquisition of
Common Stock on any subsequent Purchase Date, whether within the same or a
different offering period.

2
<PAGE>
VII. PURCHASE RIGHTS

A. GRANT OF PURCHASE RIGHT. A Participant shall be granted a separate
purchase right for each offering period in which he or she participates. The
purchase right shall be granted on the Participant's Entry Date into the
offering period and shall provide the Participant with the right to purchase
shares of Common Stock, in a series of successive installments over the
remainder of such offering period, upon the terms set forth below. The
Participant shall execute a stock purchase agreement embodying such terms and
such other provisions (not inconsistent with the Plan) as the Plan Administrator
may deem advisable.

Under no circumstances shall purchase rights be granted under the Plan to
any Eligible Employee if such individual would, immediately after the grant, own
(within the meaning of Code Section 424(d)) or hold outstanding options or other
rights to purchase, stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Corporation or any
Corporate Affiliate.

B. EXERCISE OF THE PURCHASE RIGHT. Each purchase right shall be
automatically exercised in installments on each successive Purchase Date within
the offering period, and shares of Common Stock shall accordingly be purchased
on behalf of each Participant on each such Purchase Date. The purchase shall be
effected by applying the Participant's payroll deductions for the Purchase
Interval ending on such Purchase Date to the purchase of whole shares of Common
Stock at the purchase price in effect for the Participant for that Purchase
Date.

C. PURCHASE PRICE. The purchase price per share at which Common Stock will
be purchased on the Participant's behalf on each Purchase Date within the
offering period shall be equal to eighty-five percent (85%) of the lower of (i)
the Fair Market Value per share of Common Stock on the Participant's Entry Date
into that offering period or (ii) the Fair Market Value per share of Common
Stock on that Purchase Date.

D. NUMBER OF PURCHASABLE SHARES. The number of shares of Common Stock
purchasable by a Participant on each Purchase Date during the offering period
shall be the number of whole shares obtained by dividing the amount collected
from the Participant through payroll deductions during the Purchase Interval
ending with that Purchase Date by the purchase price in effect for the
Participant for that Purchase Date. However, the maximum number of shares of
Common Stock purchasable per Participant on any one Purchase Date shall not
exceed Two Thousand Five Hundred (2,500) shares, subject to periodic adjustments
in the event of certain changes in the Corporation's capitalization. In
addition, the maximum aggregate number of shares of Common Stock purchasable in
the aggregate by all Participants on any one Purchase Date shall not exceed One
Hundred Twenty-Five Thousand (125,000) shares, subject to periodic adjustments
in the event of certain changes in the Corporation's capitalization.

E. EXCESS PAYROLL DEDUCTIONS. Any payroll deductions not applied to the
purchase of shares of Common Stock on any Purchase Date because they are not
sufficient to purchase a whole share of Common Stock shall be held for the
purchase of Common Stock on the next Purchase Date. However, any payroll
deductions not applied to the purchase of Common Stock by reason of the
limitation on the maximum number of shares purchasable per Participant or in the
aggregate on the Purchase Date shall be promptly refunded.

F. TERMINATION OF PURCHASE RIGHT. The following provisions shall govern
the termination of outstanding purchase rights:

(i) A Participant may, at any time prior to the next scheduled Purchase
Date in the offering period, terminate his or her outstanding purchase right
by filing the appropriate form with the Plan Administrator (or its
designate), and no further payroll deductions shall be collected from the
Participant with respect to the terminated purchase right. Any payroll
deductions collected during the Purchase Interval in which such termination
occurs shall, at the Participant's election, be immediately refunded or held
for the purchase of shares on the next Purchase Date. If no such election is
made at

3
<PAGE>
the time such purchase right is terminated, then the payroll deductions
collected with respect to the terminated right shall be refunded as soon as
possible.

(ii) The termination of such purchase right shall be irrevocable, and
the Participant may not subsequently rejoin the offering period for which
the terminated purchase right was granted. In order to resume participation
in any subsequent offering period, such individual must re-enroll in the
Plan (by making a timely filing of the prescribed enrollment forms) on or
before his or her scheduled Entry Date into that offering period.

(iii) Should the Participant cease to remain an Eligible Employee for any
reason (including death, disability or change in status) while his or her
purchase right remains outstanding, then that purchase right shall
immediately terminate, and all of the Participant's payroll deductions for
the Purchase Interval in which the purchase right so terminates shall be
immediately refunded. However, should the Participant cease to remain in
active service by reason of an approved unpaid leave of absence, then the
Participant shall have the right, exercisable up until the last business day
of the Purchase Interval in which such leave commences, to (a) withdraw all
the payroll deductions collected to date on his or her behalf for that
Purchase Interval or (b) have such funds held for the purchase of shares on
his or her behalf on the next scheduled Purchase Date. In no event, however,
shall any further payroll deductions be collected on the Participant's
behalf during such leave. Upon the Participant's return to active service
(i) within ninety (90) days following the commencement of such leave or (ii)
the expiration of any longer period for which such Participant's right to
reemployment with the Corporation is guaranteed by either statute or
contract, his or her payroll deductions under the Plan shall automatically
resume at the rate in effect at the time the leave began, unless the
Participant withdraws from the Plan prior to his or her return.

G. CHANGE IN CONTROL. Each outstanding purchase right shall automatically
be exercised, immediately prior to the effective date of any Change in Control,
by applying the payroll deductions of each Participant for the Purchase Interval
in which such Change in Control occurs to the purchase of whole shares of Common
Stock at a purchase price per share equal to eighty-five percent (85%) of the
lower of (i) the Fair Market Value per share of Common Stock on the
Participant's Entry Date into the offering period in which such Change in
Control occurs or (ii) the Fair Market Value per share of Common Stock
immediately prior to the effective date of such Change in Control. However, the
applicable limitation on the number of shares of Common Stock purchasable per
Participant shall continue to apply to any such purchase, but not the limitation
applicable to the maximum number of shares of Common Stock purchasable in the
aggregate.

The Corporation shall use its best efforts to provide at least ten (10)-days
prior written notice of the occurrence of any Change in Control, and
Participants shall, following the receipt of such notice, have the right to
terminate their outstanding purchase rights prior to the effective date of the
Change in Control.

H. PRORATION OF PURCHASE RIGHTS. Should the total number of shares of
Common Stock to be purchased pursuant to outstanding purchase rights on any
particular date exceed the number of shares then available for issuance under
the Plan, the Plan Administrator shall make a pro-rata allocation of the
available shares on a uniform and nondiscriminatory basis, and the payroll
deductions of each Participant, to the extent in excess of the aggregate
purchase price payable for the Common Stock pro-rated to such individual, shall
be refunded.

I. ASSIGNABILITY. The purchase right shall be exercisable only by the
Participant and shall not be assignable or transferable by the Participant.

J. STOCKHOLDER RIGHTS. A Participant shall have no stockholder rights with
respect to the shares subject to his or her outstanding purchase right until the
shares are purchased on the Participant's behalf in accordance with the
provisions of the Plan and the Participant has become a holder of record of the
purchased shares.

4
<PAGE>
VIII. ACCRUAL LIMITATIONS

A. No Participant shall be entitled to accrue rights to acquire Common Stock
pursuant to any purchase right outstanding under this Plan if and to the extent
such accrual, when aggregated with (i) rights to purchase Common Stock accrued
under any other purchase right granted under this Plan and (ii) similar rights
accrued under other employee stock purchase plans (within the meaning of Code
Section 423) of the Corporation or any Corporate Affiliate, would otherwise
permit such Participant to purchase more than Twenty-Five Thousand Dollars
($25,000) worth of stock of the Corporation or any Corporate Affiliate
(determined on the basis of the Fair Market Value per share on the date or dates
such rights are granted) for each calendar year such rights are at any time
outstanding.

B. For purposes of applying such accrual limitations to the purchase rights
granted under the Plan, the following provisions shall be in effect:

(i) The right to acquire Common Stock under each outstanding purchase
right shall accrue in a series of installments on each successive Purchase
Date during the offering period on which such right remains outstanding.

(ii) No right to acquire Common Stock under any outstanding purchase
right shall accrue to the extent the Participant has already accrued in the
same calendar year the right to acquire Common Stock under one (1) or more
other purchase rights at a rate equal to Twenty-Five Thousand Dollars
($25,000) worth of Common Stock (determined on the basis of the Fair Market
Value per share on the date or dates of grant) for each calendar year such
rights were at any time outstanding.

C. If by reason of such accrual limitations, any purchase right of a
Participant does not accrue for a particular Purchase Interval, then the payroll
deductions which the Participant made during that Purchase Interval with respect
to such purchase right shall be promptly refunded.

D. In the event there is any conflict between the provisions of this Article
and one or more provisions of the Plan or any instrument issued thereunder, the
provisions of this Article shall be controlling.

IX. EFFECTIVE DATE AND TERM OF THE PLAN

A. The Plan was adopted by the Board on April 13, 1998 and shall become
effective on the Effective Date, PROVIDED no purchase rights granted under the
Plan shall be exercised, and no shares of Common Stock shall be issued
hereunder, until (i) the Plan shall have been approved by the stockholders of
the Corporation and (ii) the Corporation shall have complied with all applicable
requirements of the 1933 Act (including the registration of the shares of Common
Stock issuable under the Plan on a Form S-8 registration statement filed with
the Securities and Exchange Commission), all applicable listing requirements of
any stock exchange (or the Nasdaq National Market, if applicable) on which the
Common Stock is listed for trading and all other applicable requirements
established by law or regulation. In the event such stockholder approval is not
obtained, or such compliance is not effected, within twelve (12) months after
the date on which the Plan is adopted by the Board, the Plan shall terminate and
have no further force or effect, and all sums collected from Participants during
the initial offering period hereunder shall be refunded.

B. Unless sooner terminated by the Board, the Plan shall terminate upon the
EARLIEST of (i) the last business day in August 2008, (ii) the date on which all
shares available for issuance under the Plan shall have been sold pursuant to
purchase rights exercised under the Plan or (iii) the date on which all purchase
rights are exercised in connection with a Change in Control. No further purchase
rights shall be granted or exercised, and no further payroll deductions shall be
collected, under the Plan following such termination.

5
<PAGE>
X. AMENDMENT OF THE PLAN

The Board may alter, amend, suspend or discontinue the Plan at any time to
become effective immediately following the close of any Purchase Interval.
However, the Board may not, without the approval of the Corporation's
stockholders, (i) increase the number of shares of Common Stock issuable under
the Plan or the maximum number of shares purchasable per Participant on any one
Purchase Date, except for permissible adjustments in the event of certain
changes in the Corporation's capitalization, (ii) alter the purchase price
formula so as to reduce the purchase price payable for the shares of Common
Stock purchasable under the Plan or (iii) modify eligibility requirements for
participation in the Plan.

XI. GENERAL PROVISIONS

A. All costs and expenses incurred in the administration of the Plan shall
be paid by the Corporation; however, each Plan Participant shall bear all costs
and expenses incurred by such individual in the sale or other disposition of any
shares purchased under the Plan.

B. Nothing in the Plan shall confer upon the Participant any right to
continue in the employ of the Corporation or any Corporate Affiliate for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Corporate Affiliate employing such person)
or of the Participant, which rights are hereby expressly reserved by each, to
terminate such person's employment at any time for any reason, with or without
cause.

C. The provisions of the Plan shall be governed by the laws of the State of
Hawaii without resort to that State's conflict-of-laws rules.

6
<PAGE>
SCHEDULE A
CORPORATIONS PARTICIPATING IN
EMPLOYEE STOCK PURCHASE PLAN
AS OF THE EFFECTIVE DATE
Schuler Homes, Inc.

Melody Homes, Inc.
Melody Mortgage Company
Schuler Homes of California, Inc.
Schuler Homes of Washington, Inc.
Schuler Homes of Oregon, Inc.
SHLR of Washington, Inc.
Schuler Realty/Maui, Inc.
Schuler Realty/Oahu, Inc.
SHLR of Utah, Inc.
SHLR of Colorado, Inc.
Lokelani Construction Corporation

<PAGE>
APPENDIX

The following definitions shall be in effect under the Plan:

A. BOARD shall mean the Corporation's Board of Directors.

B. CASH EARNINGS shall mean the (i) base salary payable to a Participant by
one or more Participating Companies during such individual's period of
participation in one or more offering periods under the Plan plus (ii) all
overtime payments, bonuses, commissions, current profit-sharing distributions
and other incentive-type payments. Such Cash Earnings shall be calculated before
deduction of (A) any income or employment tax withholdings or (B) any pre-tax
contributions made by the Participant to any Code Section 401(k) salary deferral
plan or any Code Section 125 cafeteria benefit program now or hereafter
established by the Corporation or any Corporate Affiliate. However, Cash
Earnings shall not include any contributions (other than Code Section 401(k) or
Code Section 125 contributions) made on the Participant's behalf by the
Corporation or any Corporate Affiliate to any employee benefit or welfare plan
now or hereafter established.

C. CHANGE IN CONTROL shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:

(i) a merger or consolidation in which securities possessing more than
fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to a person or persons different from
the persons holding those securities immediately prior to such transaction,

(ii) the sale, transfer or other disposition of all or substantially all
of the assets of the Corporation in complete liquidation or dissolution of
the Corporation, or

(iii) the acquisition, directly or indirectly by any person or related
group of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation's
stockholders.

D. CODE shall mean the Internal Revenue Code of 1986, as amended.

E. COMMON STOCK shall mean the Corporation's common stock.

F. CORPORATE AFFILIATE shall mean any parent or subsidiary corporation of
the Corporation (as determined in accordance with Code Section 424), whether now
existing or subsequently established.

G. CORPORATION shall mean Schuler Homes, Inc., a Delaware corporation, and
any corporate successor to all or substantially all of the assets or voting
stock of Schuler Homes, Inc. which shall by appropriate action adopt the Plan.

H. EFFECTIVE DATE shall mean August 1, 1998. Any Corporate Affiliate which
becomes a Participating Corporation after such Effective Date shall designate a
subsequent Effective Date with respect to its employee-Participants.

I. ELIGIBLE EMPLOYEE shall mean any person who is employed by a
Participating Corporation on a basis under which he or she is regularly expected
to render more than twenty (20) hours of service per week for more than five (5)
months per calendar year for earnings considered wages under Code Section
3401(a).

J. ENTRY DATE shall mean the date an Eligible Employee first commences
participation in the offering period in effect under the Plan. The earliest
Entry Date under the Plan shall be the Effective Date.

K. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
be determined in accordance with either of the following provisions:

(i) If the Common Stock is at the time traded on the Nasdaq National
Market, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question, as such price is reported by
the National Association of Securities Dealers on the Nasdaq National
<PAGE>
Market. If there is no closing selling price for the Common Stock on the
date in question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.

(ii) If the Common Stock is at the time listed on any Stock Exchange,
then the Fair Market Value shall be the closing selling price per share of
Common Stock on the date in question on the Stock Exchange determined by the
Plan Administrator to be the primary market for the Common Stock, as such
price is officially quoted in the composite tape of transactions on such
exchange. If there is no closing selling price for the Common Stock on the
date in question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.

L. 1933 ACT shall mean the Securities Act of 1933, as amended.

M. PARTICIPANT shall mean any Eligible Employee of a Participating
Corporation who is actively participating in the Plan.

N. PARTICIPATING CORPORATION shall mean the Corporation and such Corporate
Affiliate or Affiliates as may be authorized from time to time by the Board to
extend the benefits of the Plan to their Eligible Employees. The Participating
Corporations in the Plan are listed in attached Schedule A.

O. PLAN shall mean the Corporation's 1998 Employee Stock Purchase Plan, as
set forth in this document.

P. PLAN ADMINISTRATOR shall mean the committee of two (2) or more Board
members appointed by the Board to administer the Plan.

Q. PURCHASE DATE shall mean the last business day of each Purchase
Interval. The initial Purchase Date shall be February 29, 1999.

R. PURCHASE INTERVAL shall mean each successive six (6)-month period within
the offering period at the end of which there shall be purchased shares of
Common Stock on behalf of each Participant. However, the first Purchase Interval
under the initial offering period shall commence on August 1, 1998 and end on
the last business day in February 1999.

S. SEMI-ANNUAL ENTRY DATE shall mean the first business day in September
and March each year on which an Eligible Employee may first enter an offering
period.

T. STOCK EXCHANGE shall mean either the American Stock Exchange or the New
York Stock Exchange.

<PAGE>

SCHULER HOMES, INC.
EMPLOYEE STOCK PURCHASE PLAN ("ESPP")
ENROLLMENT/CHANGE FORM

Action Complete Sections:
------ ------------------
<S> <C> <C>
SECTION 1: / / New Enrollment 2, 3, 6, 7 AND sign attached
ACTIONS Stock Purchase Agreement
/ / Payroll Deduction Change 2, 4, 7
/ / Terminate Payroll Deductions 2, 5, 7
/ / Beneficiary Change 2, 6, 7

-----------------------------------------------------------------------
City State Zip Code

Social Security #: / / / / / / - / / / / - / / / / / / / /

- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION 4: Effective with the I authorize the following new level of payroll
PAYROLL Pay Period Beginning: _________________________ deduction: _______ % of cash earnings*
DEDUCTION Month, Day and Year
CHANGE * Must be a multiple of 1% up to a maximum of 15% of cash
earnings
NOTE: You may reduce your rate of payroll deductions once per purchase interval to become effective as soon as
possible following the filing of the change form. You may also increase your rate of payroll deductions
to become effective as of the start date of the next purchase interval.

- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION 5: Effective with the Your election to terminate your payroll deductions for the
TERMINATE Pay Period Beginning: _________________________ balance of the offering period cannot be changed, and
PAYROLL Month, Day and Year you may not rejoin the offering period at a later date. You
DEDUCTIONS will not be able to resume participation in the ESPP prior to
the commencement of the next offering period.

In connection with my voluntary termination of payroll deductions (or an approved leave of absence), I elect the
following action regarding my ESPP payroll deductions to date in the current purchase interval:

/ / Purchase shares of Schuler Homes, Inc. at end of the period
OR
/ / Refund ESPP payroll deductions collected

NOTE: If your employment terminates for any reason or your eligibility status changes ( < 20 hrs/wk or < 5 months/yr), you
will immediately cease to participate in the ESPP, and your ESPP payroll deductions collected in that purchase
interval will automatically be refunded to you.

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

/ / My certificates will be issued in street name and delivered to the brokerage account designated by Schuler Homes, Inc..

----------------------------------- ----------------------------------------------------
Date Signature of Employee
</TABLE>

<PAGE>

SCHULER HOMES, INC.
STOCK PURCHASE AGREEMENT

I hereby elect to participate in the Employee Stock Purchase Plan (the
"ESPP") for the offering period specified below, and I hereby subscribe to
purchase shares of Common Stock of Schuler Homes, Inc. (the "Corporation") in
accordance with the provisions of this Agreement and the ESPP. I hereby
authorize payroll deductions from each of my paychecks following my entry into
the offering period in the 1% multiple of my earnings (not to exceed a maximum
of 15%) specified in my attached Enrollment Form.

The offering period is divided into a series of consecutive purchase
intervals. With the exception of the initial purchase interval which begins on
August 1, 1998, those purchase intervals will be of six months duration and
begin on the first business day of March and September each year during the
offering period. My participation will automatically remain in effect from one
purchase interval to the next during the term of the ESPP in accordance with my
payroll deduction authorization, unless I withdraw from the ESPP or change the
rate of my payroll deduction or unless my employment status changes. I may
reduce the rate of my payroll deductions on one occasion per purchase interval
and I may increase my rate of payroll deductions to become effective at the
beginning of any subsequent purchase interval.

My payroll deductions will be accumulated for the purchase of shares of the
Corporation's Common Stock on the last business day of each purchase interval
within the offering period. The purchase price per share will be 85% of the
LOWER of (i) the fair market value per share of Common Stock on my entry date
into the offering period or (ii) the fair market value per share on the purchase
date. However, the clause (i) amount will in no event be less than the fair
market value per share of Common Stock on the start day of the offering period.
I will also be subject to ESPP restrictions (i) limiting the maximum number of
shares which I may purchase during any purchase interval and (ii) prohibiting me
from purchasing more than $25,000 worth of Common Stock for each calendar year
my purchase right remains outstanding.

I may withdraw from the ESPP at any time prior to the last business day of
a purchase interval and elect either to have the Corporation refund all my
payroll deductions for that interval or to have such payroll deductions applied
to the purchase of Common Stock at the end of such interval. However, I may not
rejoin that particular offering period at any later date. Upon the termination
of my employment for any reason including death or disability or my loss of
eligible employee status, my participation in the ESPP will immediately cease
and all my payroll deductions for the purchase interval in which my employment
terminates or my loss of eligibility occurs will automatically be refunded.

If I take an unpaid leave of absence, my payroll deductions will
immediately cease, and any payroll deductions for the purchase interval in which
my leave begins will, at my election, either be refunded or applied to the
purchase of shares of Common Stock at the end of that purchase interval. Upon
my return to active service, my payroll deductions will automatically resume at
the rate in effect when my leave began. The Corporation will issue a stock
certificate for the shares purchased on my behalf after the end of each purchase
interval. The certificate will be issued in the name or names I have selected
on the Enrollment Form accompanying this Agreement or will be deposited directly
in my designated brokerage account. I will notify the Corporation of any
disposition of shares purchased under the ESPP and I will satisfy all applicable
income and employment tax withholding requirements at the time of such
disposition.

The Corporation has the right, exercisable in its sole discretion, to amend
or terminate the ESPP at any time, with such amendment or termination to become
effective immediately following the exercise of outstanding purchase rights at
the end of any current purchase interval. However, such purchase rights may be
amended or terminated with an immediate effective date to the extent necessary
to avoid the Corporation's recognition of compensation expense for financial
reporting purposes, should the accounting principles applicable to the ESPP
change. Upon such termination, I will cease to have any further rights to
purchase shares of Common Stock under this Agreement.

I have received a copy of the official Plan Prospectus summarizing the
major features of the ESPP. I have read this Agreement and the Prospectus and
hereby agree to be bound by the terms of both this Agreement and the ESPP. The
effectiveness of this Agreement is dependent upon my eligibility to participate
in the ESPP.

Date: , 199
--------------- -- -----------------------------------
Signature of Employee

Printed Name:
----------------------

Duration of Offering Period: From: , 1998 to August 31, 2000
----------

Entry Date into Offering Period: , 199
------------- --