10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X]          Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2002

or

[   ]        Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ___________ to ___________.
Commission File Number: 1-8029

THE RYLAND GROUP, INC.
(Exact name of registrant as specified in its charter)

Maryland	52-0849948
(State of incorporation)	(I.R.S. Employer Identification Number)

24025 Park Sorrento, Suite 400
Calabasas, California 91302
818.223.7500
(Address and telephone number of principal executive offices)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

[X] Yes    [    ] No

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

     The number of shares of common stock of The Ryland Group, Inc., outstanding on May 5, 2002, was 13,611,003.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
	Item 1. FINANCIAL STATEMENTS
		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
		CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED
	Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
PART II. OTHER INFORMATION
	Item 1. LEGAL PROCEEDINGS
	Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	Item 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
INDEX OF EXHIBITS
EXHIBIT 10.4
EXHIBIT 10.10
EXHIBIT 12.1

THE RYLAND GROUP, INC.
FORM 10-Q
INDEX

		PAGE NO.
PART I	FINANCIAL INFORMATION
Item 1	Financial Statements
	Consolidated Balance Sheets at March 31, 2002 (unaudited) and December 31, 2001		1-2
	Consolidated Statements of Earnings for the Three Months Ended March 31, 2002 and 2001 (unaudited)		3
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2002 and 2001 (unaudited)		4
	Notes to Consolidated Financial Statements (unaudited)		5-8
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations		9-13
Item 3	Quantitative and Qualitative Disclosures About Market Risk		13
PART II	OTHER INFORMATION
Item 1	Legal Proceedings		13
Item 4	Submission of Matters to a Vote of Security Holders		14
Item 6	Exhibits and Reports on Form 8-K		14
SIGNATURES			15
INDEX OF EXHIBITS			16

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

THE RYLAND GROUP, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)

				March 31,		December 31,
				2002		2001
				(unaudited)
ASSETS
	Homebuilding
		Cash and cash equivalents		$	179,665	$	295,015
		Housing inventories:
			Homes under construction		515,265		460,152
			Land under development and improved lots		478,451		439,237
			Total inventories		993,716		899,389
		Property, plant and equipment			34,049		33,371
		Purchase price in excess of net assets acquired			18,185		18,185
		Other			79,894		79,638
					1,305,509		1,325,598
	Financial Services
		Cash and cash equivalents			4,832		3,295
		Mortgage-backed securities and notes receivable			56,470		62,045
		Other			20,546		27,507
					81,848		92,847
	Other Assets
		Net deferred taxes			35,315		36,739
		Other			59,597		55,685
		TOTAL ASSETS		$	1,482,269	$	1,510,869

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THE RYLAND GROUP, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)

				March 31,		December 31,
				2002		2001
				(unaudited)
LIABILITIES
	Homebuilding
		Accounts payable and other liabilities		$	235,685	$	260,908
		Long-term debt			490,500		490,500
					726,185		751,408
	Financial Services
		Accounts payable and other liabilities			17,237		23,586
		Short-term notes payable			56,832		62,119
					74,069		85,705
	Other Liabilities				80,576		110,894
		TOTAL LIABILITIES			880,830		948,007
STOCKHOLDERS’ EQUITY
		Common stock, $1 par value:
			Authorized — 80,000,000 shares
			Issued — 27,058,776 shares (26,433,728 for 2001)		27,058		26,434
		Paid-in capital			38,937		26,297
		Retained earnings			534,085		508,667
		Accumulated other comprehensive income			1,359		1,464
		TOTAL STOCKHOLDERS’ EQUITY			601,439		562,862
		TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	1,482,269	$	1,510,869
Stockholders’ Equity Per Common Share				$	22.23	$	21.30

See Notes to Consolidated Financial Statements.

2

THE RYLAND GROUP, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
(amounts in thousands, except share data)

					Three months ended March 31,
					2002		2001
REVENUES
		Homebuilding			$	525,940	$	503,043
		Financial services				13,420		11,128
				Total revenues		539,360		514,171
EXPENSES
		Homebuilding:
			Cost of sales			421,836		417,723
			Selling, general and administrative			58,755		52,246
			Interest			2,015		3,451
			Total homebuilding expenses			482,606		473,420
		Financial services:
			General and administrative			4,348		4,898
			Interest			720		2,804
			Total financial services expenses			5,068		7,702
		Corporate expenses				8,770		6,455
				Total expenses		496,444		487,577
EARNINGS BEFORE TAXES						42,916		26,594
Tax expense						16,952		10,505
NET EARNINGS					$	25,964	$	16,089
NET EARNINGS PER COMMON SHARE
	Basic				$	0.97	$	0.60
	Diluted				$	0.92	$	0.56
AVERAGE COMMON SHARES OUTSTANDING
	Basic					26,749,112		26,680,408
	Diluted					28,318,346		28,727,616

See Notes to Consolidated Financial Statements.

3

THE RYLAND GROUP, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(amounts in thousands)

				Three months ended March 31,
				2002			2001
CASH FLOWS FROM OPERATING ACTIVITIES
	Net earnings			$	25,964		$	16,089
	Adjustments to reconcile net earnings to net cash provided by operating activities:
		Depreciation and amortization			6,891			6,900
		Changes in assets and liabilities:
			Increase in inventories		(94,327	)		(28,832	)
			Net change in other assets, payables and other liabilities		(56,664	)		(55,194	)
		Other operating activities, net			(2,208	)		(177	)
	Net cash used for operating activities				(120,344	)		(61,214	)
CASH FLOWS FROM INVESTING ACTIVITIES
	Net additions to property, plant and equipment				(6,539	)		(7,265	)
	Principal reduction of mortgage-backed securities, notes receivable and mortgage collateral				6,976			12,426
	Net cash provided by investing activities				437			5,161
CASH FLOWS FROM FINANCING ACTIVITIES
	Decrease in short-term notes payable				(5,287	)		(6,106	)
	Common and preferred stock dividends				(530	)		(693	)
	Common stock repurchases				(9,533	)		(6,853	)
	Proceeds from stock option exercises				16,512			5,256
	Other financing activities, net				4,932			(3,444	)
	Net cash provided by (used for) financing activities				6,094			(11,840	)
	Net decrease in cash and cash equivalents				(113,813	)		(67,893	)
	Cash and cash equivalents at beginning of period				298,310			142,201
CASH AND CASH EQUIVALENTS AT END OF PERIOD				$	184,497		$	74,308
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
	Cash paid for interest (net of capitalized interest)			$	8,881		$	7,075
	Cash paid for income taxes			$	16,354		$	10,324

See Notes to Consolidated Financial Statements.

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THE RYLAND GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(amounts in thousands, except share data)

Note 1. Consolidated Financial Statements

The consolidated financial statements include the accounts of The Ryland Group, Inc. and its wholly owned subsidiaries (“the Company”). Intercompany transactions have been eliminated in consolidation.

The consolidated balance sheet as of March 31, 2002, the consolidated statements of earnings for the three months ended March 31, 2002 and 2001, and the consolidated statements of cash flows for the three months ended March 31, 2002 and 2001, have been prepared by the Company without audit. In the opinion of management, all adjustments, which include normal recurring adjustments necessary to present fairly the Company’s financial position, results of operations and cash flows at March 31, 2002 and for all periods presented, have been made. The consolidated balance sheet at December 31, 2001 is taken from the audited financial statements as of that date.

Certain amounts in the consolidated statements have been reclassified to conform to the 2002 presentation.

All references in the consolidated financial statements to common shares, share prices, per share amounts and stock plans have been retroactively restated for the two-for-one stock split declared on April 24, 2002 (see Note 8.)

Certain information and footnote disclosures normally included in the financial statements have been condensed or omitted. These financial statements should be read in conjunction with the financial statements and related notes included in the Company’s 2001 annual report to its shareholders.

The results of operations for the three months ended March 31, 2002 are not necessarily indicative of the operating results for the full year.

Assets presented in the financial statements are net of any valuation allowances.

The following table is a summary of capitalized interest:

	2002			2001
Capitalized interest as of January 1	$	33,291		$	33,494
Interest capitalized		9,029			8,879
Interest amortized to cost of sales		(6,151	)		(6,018	)
Capitalized interest as of March 31	$	36,169		$	36,355

Note 2. New Accounting Pronouncements

SFAS 141 and 142

In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141 (SFAS 141), “Business Combinations,” and No. 142 (SFAS 142), “Goodwill and Other Intangible Assets.” SFAS 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. It also includes guidance on the initial recognition and measurement of goodwill and other intangible assets arising from business combinations completed after

5

THE RYLAND GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(amounts in thousands, except share data)

that date. SFAS 142 requires that these assets no longer be amortized but be reviewed for impairment at least annually. Intangible assets with finite lives will continue to be amortized over their estimated useful lives. Additionally, SFAS 142 requires that goodwill included in the carrying value of equity-method investments no longer be amortized.

The Company adopted the provisions of SFAS 142 on January 1, 2002 and has performed an impairment test of goodwill. The first of these tests performed by the Company as of March 31, 2002 indicated no impairment.

The Company’s application of the nonamortization provisions of SFAS 142 resulted in the elimination of goodwill amortization expense in the first quarter of 2002. Results reported for the first quarter of 2001 included after-tax goodwill amortization expense of $0.3 million or $0.01 per diluted share.

Note 3. Segment Information

Operations of the Company consist of two business segments: homebuilding and financial services. The Company’s homebuilding segment specializes in the sale and construction of single-family attached and detached housing in 21 markets. The financial services segment provides mortgage-related products and services for Ryland Homes’ customers and also manages a declining investment portfolio. Corporate expenses represent the costs of corporate functions, which support the business segments.

		Three months ended March 31,
		2002			2001
Earnings before taxes
	Homebuilding	$	43,334		$	29,623
	Financial services		8,352			3,426
	Corporate and other		(8,770	)		(6,455	)
	Total	$	42,916		$	26,594

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THE RYLAND GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(amounts in thousands, except share data)

Note 4. Earnings Per Share Reconciliation

The following table sets forth the computation of basic and diluted earnings per share:

			Three months ended March 31,
			2002		2001
Numerator
	Net earnings		$	25,964	$	16,089
	Preferred stock dividends			—		(157	)
	Numerator for basic earnings per share, earnings available to common stockholders			25,964		15,932
	Effect of dilutive securities, preferred stock dividends			—		157
	Numerator for diluted earnings per share, earnings available to common stockholders		$	25,964	$	16,089
Denominator
	Denominator for basic earnings per share, weighted-average shares			26,749,112		26,680,408
	Effect of dilutive securities:
		Stock options		1,354,782		1,317,854
		Equity incentive plan		214,452		150,666
		Conversion of preferred shares		—		578,688
	Dilutive potential of common shares			1,569,234		2,047,208
	Denominator for diluted earnings per share, adjusted weighted-average shares and assumed conversions			28,318,346		28,727,616
	Basic earnings per share		$	0.97	$	0.60
	Diluted earnings per share		$	0.92	$	0.56

Note 5. Commitments and Contingencies

Refer to Part II, Other Information, Item 1, Legal Proceedings of this document for updated information regarding the Company’s commitments and contingencies.

Note 6. Comprehensive Income

Comprehensive income consists of net income and the increase or decrease in unrealized gains or losses on the Company’s available-for-sale securities. Comprehensive income totaled $25.9 million and $16.9 million for the three months ended March 31, 2002 and 2001, respectively.

Note 7. Financial Services Short-term Notes Payable

In March 2002, the Company amended a revolving credit facility used to finance mortgage-backed securities in the financial services segment. The facility, previously $45 million, was renewed at $35 million. The agreement was extended through March 2003, bears interest at market rates and is collateralized by collateralized mortgage obligations previously issued by one of the Company’s limited-

7

THE RYLAND GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(amounts in thousands, except share data)

purpose subsidiaries. Borrowings outstanding under this facility were $30.6 million and $33.1 million at March 31, 2002 and December 31, 2001, respectively.

Note 8. Stockholders’ Equity

On April 24, 2002, Ryland’s Board of Directors approved a two-for-one stock split of the Company’s common stock which will be effected in the form of a stock dividend. Record holders of the Company’s common stock as of the close of business on May 15, 2002 will be entitled to one additional share for each share held at that time. The new shares will be distributed on May 30, 2002.

All references in the consolidated financial statements to common shares, share prices, per share amounts and stock plans have been retroactively restated for the two-for-one stock split declared on April 24, 2002.

Note 9. Equity Incentive Plan

On April 24, 2002, the Company’s stockholders approved an equity incentive plan, The Ryland Group 2002 Equity Incentive Plan (the “Plan”), which permits the granting of stock options, stock appreciation rights, restricted or unrestricted stock awards, stock units or any combination of the foregoing, to employees. This Plan replaces the Company’s 1992 Equity Incentive Plan, which expired on April 15, 2002. The number of shares available for issuance under the Plan includes 15,432 shares carried over from the 1992 Equity Incentive Plan and 1,300,000 new shares available under the terms of the 2002 Equity Incentive Plan. Any shares of the Company’s common stock covered by an award (or portion of an award) granted under the Plan or the 1992 Equity Incentive Plan that are forfeited, expire or are canceled without delivery of shares of common stock, or which are tendered to the Company as full or partial payment of the exercise price or related tax withholding obligations, will again be available for award under the Plan. The Plan will remain in effect until April 24, 2012, unless it is terminated by the Board of Directors at an earlier date.

8

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

RESULTS OF OPERATIONS

For the first quarter of 2002, the Company reported consolidated net earnings of $26 million, or $0.97 per share ($0.92 per diluted share) compared to consolidated net earnings from operations of $16.1 million, or $0.60 per share ($0.56 per diluted share), for the first quarter of 2001.

The homebuilding segment reported pretax earnings of $43.3 million for the first quarter of 2002, a $13.7 million increase over the $29.6 million reported for the first quarter of 2001. The increase over the prior year was primarily attributable to a higher closing volume, an increase in average sales price and a 220-basis-point increase in gross profit margins.

Pretax homebuilding margins increased 230 basis points to 8.2 percent for the three months ended March 31, 2002 compared to 5.9 percent for the same period in 2001.

The financial services segment reported pretax earnings from operations of $8.4 million for the three months ended March 31, 2002 compared to $3.4 million for the same period in 2001. The increase for the first quarter over the same period in the prior year was primarily attributable to a 10 percent increase in the number of originations, an 18.2 percent increase in loan sales volume and lower interest costs. Additionally, the percentage of Ryland homebuyers who chose the Ryland Mortgage Company to finance their new-home purchases increased from 77.4 percent in first quarter 2001 to 79.6 percent in first quarter 2002.

Although the Company’s limited-purpose subsidiaries no longer issue mortgage-backed securities and mortgage-participation securities, they continue to hold collateral for previously issued mortgage-backed bonds in which the Company maintains a residual interest. Revenues, expenses and portfolio balances continue to decline as the mortgage collateral pledged to secure the bonds decreases due to scheduled payments, prepayments and exercises of early-redemption provisions.

Corporate expenses represent the cost of corporate functions, which support the business segments. Corporate expenses were $8.8 million for the first quarter of 2002 compared to $6.5 million for the first quarter of 2001. The rise in corporate expenses was primarily attributable to increased incentive compensation due to higher stock prices and earnings.

9

HOMEBUILDING SEGMENT

Results of operations from the homebuilding segment are summarized as follows:
($ amounts in thousands, except average closing price)

			Three months ended March 31,
			2002		2001
Revenues
	Residential		$	521,424	$	486,965
	Other			4,516		16,078
	Total			525,940		503,043
Gross profit				104,104		85,320
Selling, general and administrative expenses				58,755		52,246
Interest expense				2,015		3,451
Homebuilding pretax earnings			$	43,334	$	29,623
Operational unit data
	New orders (units)			3,757		3,970
	Closings (units)			2,501		2,381
Outstanding contracts at March 31:
		Units		5,833		5,757
		Dollar value	$	1,199,005	$	1,196,844
Average closing price			$	208,000	$	205,000

Homebuilding revenues increased 4.6 percent for the first quarter of 2002 compared to the same period last year primarily due to a 5 percent increase in closings (2,501 homes closed in the first quarter of 2002 compared to 2,381 homes in the first quarter of 2001) as well as a 1.5 percent increase in average closing price.

Gross profit margins from home sales averaged 19.8 percent for the first quarter of 2002, an increase from 17.6 percent for the first quarter of 2001. The increase is attributable to the composition of closings for the period, selected price increases and cost reduction initiatives.

New orders for the first quarter of 2002 were 3,757 compared to 3,970 for the first quarter of the prior year. The Company operated in the same number of active communities as in the first quarter of last year but expects to operate out of more than 25 additional active communities by the end of 2002.

Outstanding contracts as of March 31, 2002 were 5,833 versus 5,757 at March 31, 2001 and 4,577 at December 31, 2001. Outstanding contracts represent the Company’s backlog of homes sold but not yet closed, which are generally built and closed, subject to cancellation, over the subsequent two quarters. The value of outstanding contracts at March 31, 2002 was $1.2 billion, approximately the same as that at March 31, 2001 and an increase of 30.8 percent from December 31, 2001.

Selling, general and administrative expenses, as a percentage of revenue, were 11.2 percent for the three months ended March 31, 2002 compared to 10.4 percent for the same period in the prior year. The

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increase in S,G&A for the first quarter was primarily due to increased incentive compensation for operations personnel, related to higher earnings, and increases in insurance costs. Compared to the first quarter of 2001, interest expense decreased $1.4 million to $2 million in the first quarter of 2002. This was partially attributable to lower interest rates on the Company’s long-term debt, reduced borrowings against the revolving credit facility and interest earned on increased cash investments.

FINANCIAL SERVICES

Results of operations of the Company’s financial services segment are summarized as follows:
($ amounts in thousands)

					Three months ended March 31,
					2002			2001
RESULTS OF OPERATIONS
	Revenues
			Net gains on sales of mortgages and mortgage servicing rights		$	8,654		$	4,983
			Title/escrow/insurance			2,599			2,449
			Net origination fees			178			12
			Interest
				Mortgage-backed securities and notes receivable		1,758			3,341
				Other		227			313
				Total interest		1,985			3,654
			Other			4			30
				Total revenues		13,420			11,128
	Expenses
			General and administrative			4,348			4,898
			Interest			720			2,804
				Total expenses		5,068			7,702
	Pretax earnings				$	8,352		$	3,426
OPERATIONAL DATA
	Retail operations:
		Originations				1,929			1,754
		Percent of Ryland Homes closings				96.9	%		96.7	%
		Ryland Homes capture rate				79.6	%		77.4	%
	Investment operations:
		Portfolio average balance (in millions)			$	57.0		$	78.6

Revenues for the financial services segment increased $2.3 million, or 20.6 percent, for the quarter ended March 31, 2002 compared to the same period in 2001. The increase from the prior year was primarily attributable to a 10 percent increase in the number of originations and an 18.2 percent increase in loan sales

11

volume partially offset by reduced interest income as a result of the declining investment balances. The capture rate increased to 79.6 percent in the first quarter of 2002 compared to 77.4 percent in the first quarter of 2001.

General and administrative expenses were $4.3 million for the three months ended March 31, 2002 compared to $4.9 million for the three months ended March 31, 2001. Interest expense was $0.7 million for the three months ended March 31, 2002 versus $2.8 million for the same period in 2001. The decrease in interest expense was primarily due to a continued decline in the credit facilities used to finance mortgage-backed securities, a decline in average borrowing rates and the termination of the warehouse funding facility.

FINANCIAL CONDITION AND LIQUIDITY

Cash requirements for the Company’s homebuilding and financial services segments are generally provided from outside borrowings and internally generated funds. The Company believes that its current sources of cash are sufficient to finance its current requirements.

The homebuilding segment’s borrowings include senior notes, senior subordinated notes, an unsecured revolving credit facility and nonrecourse secured notes payable. Senior and senior subordinated notes outstanding totaled $490.5 million at March 31, 2002 and December 31, 2001.

The Company uses its unsecured revolving credit facility to finance increases in its homebuilding inventory and working capital. This facility matures in October 2003 and provides for borrowings up to $400 million. There were no borrowings under this facility at March 31, 2002 or December 31, 2001. The Company had letters of credit outstanding under this facility totaling $85.9 million at March 31, 2002 and $83.5 million at December 31, 2001. To finance land purchases, the Company also uses seller-financed nonrecourse secured notes payable. At March 31, 2002 and December 31, 2001, such notes payable outstanding amounted to $3.3 million.

Housing inventories increased to $993.7 million as of March 31, 2002 from $899.4 million at December 31, 2001. This increase represents construction activity following higher sold-inventory levels related to a significant increase in quarter-end backlog and acquisition and development activity required for expansion in the second half of 2002. The increase was primarily funded with internally generated funds.

The financial services segment uses cash generated from operations and borrowing arrangements to finance its operations. The financial services segment has borrowing arrangements that include repurchase agreement facilities aggregating $80 million and a $35 million revolving credit facility, which are used to finance mortgage-backed securities. At March 31, 2002 and December 31, 2001, the combined borrowings of the financial services segment outstanding under all agreements totaled $56.8 million and $62.1 million, respectively.

Mortgage loans, notes receivable and mortgage-backed securities held by the financial services subsidiaries were pledged as collateral for previously issued mortgage-backed bonds, the terms of which provided for the retirement of all bonds from the proceeds of the collateral. The source of cash for the bond payments was received from the mortgage loans, notes receivable and mortgage-backed securities.

The Company has not guaranteed the debt of either its financial services segment or limited-purpose subsidiaries.

During the three months ended March 31, 2002, the Company repurchased approximately 112,500 shares (pre-split) of its outstanding common stock at a cost of approximately $9.5 million. As of March 31, 2002, the Company had Board authorization to repurchase up to an additional 1.5 million shares of its common

12

stock. The Company’s repurchase program has been funded primarily through internally generated funds.

Note: Certain statements in the Management’s Discussion and Analysis of Financial Condition and Results of Operations may be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on various factors and assumptions that include risks and uncertainties, such as: the completion and profitability of sales reported; the market for homes generally and in areas where the Company operates; the availability and cost of land; changes in economic conditions and interest rates; the availability and increases in raw material and labor costs; consumer confidence; government regulations; and general competitive factors, all or each of which may cause actual results to differ materially.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no other material changes in the Company’s market risk from December 31, 2001. For information regarding the Company’s market risk, refer to Form 10-K for the fiscal year ended December 31, 2001 of The Ryland Group, Inc.

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

Contingent liabilities may arise from obligations incurred in the ordinary course of business or from the usual obligations of on-site housing producers for the completion of contracts.

During the first quarter of 2002, Ryland Mortgage Company (RMC) settled its outstanding claims related to mortgage servicing contracts entered into during 1991 and 1992 with the Resolution Trust Company.

The Company is party to various legal proceedings generally incidental to its businesses. Based on evaluations of these other matters and discussions with counsel, management believes that liabilities to the Company arising from these other matters will not have a material adverse effect on its financial condition.

13

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

The Annual Meeting of Stockholders of the Company was held on April 24, 2002. Proxies were solicited by the Company pursuant to Regulation 14 under the Securities Exchange Act of 1934 to elect directors of the Company for the ensuing year and approve the 2002 Equity Incentive Plan. Proxies representing 12,100,321 shares of stock eligible to vote at the meeting, or 90.9 percent of the outstanding shares, were voted.

The 11 incumbent directors nominated by the Company were reelected. The following is a separate tabulation with respect to the vote for each nominee:

Name	Total Votes For		Total Votes Withheld
R. Chad Dreier		12,068,514		31,807
Leslie M. Frécon		12,066,257		34,064
Roland A. Hernandez		12,059,765		40,556
William L. Jews		12,068,659		31,662
William G. Kagler		12,068,707		31,614
Ned Mansour		12,064,842		35,479
Robert E. Mellor		12,068,857		31,464
Norman J. Metcalfe		12,069,357		30,964
Charlotte St. Martin		12,069,157		31,164
Paul J. Varello		12,064,957		35,364
John O. Wilson		12,064,362		35,959

The 2002 Equity Incentive Plan was approved by 54.3 percent of the shares voting. The following is a breakdown of the vote on such matter:

Total Votes For	Total Votes Withheld		Abstain
6,572,799		5,482,559		44,963

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

     A. Exhibits

10.4	Amended Credit Agreement dated as of March 29, 2002 among Ryland Mortgage Company; Associates Funding, Inc. and JPMorgan Chase Bank.
10.10	The Ryland Group, Inc. 2002 Equity Incentive Plan
12.1	Computation of Ratio of Earnings to Fixed Charges

     B. Reports on Form 8-K

          No reports on Form 8-K were filed during the first quarter of 2002.

14

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	THE RYLAND GROUP, INC. Registrant
May 14, 2002	By:	/s/ Gordon A. Milne
Date		Gordon A. Milne Senior Vice President and Chief Financial Officer (Principal Financial Officer)

May 14, 2002	By:	/s/ David L. Fristoe
Date		David L. Fristoe Senior Vice President, Chief Information Officer, Controller, and Chief Accounting Officer (Principal Accounting Officer)

15

INDEX OF EXHIBITS

     A. Exhibits

Exhibit No.		Page No.
10.4	Amended Credit Agreement dated as of March 29, 2002 among Ryland Mortgage Company; Associates Funding, Inc. and JPMorgan Chase Bank (filed herewith)	17-29
10.10	The Ryland Group, Inc. 2002 Equity Incentive Plan (filed herewith)	30-36
12.1	Computation of Ratio of Earnings to Fixed Charges (filed herewith)	37

16 EX-10.4 3 a81639ex10-4.txt EXHIBIT 10.4 EXHIBIT 10.4 3/02 AMENDMENT (THE NINTH AMENDMENT) DATED AS OF MARCH 29, 2002 TO REPURCHASE FINANCING AGREEMENT DATED AS OF OCTOBER 9, 1996 AMONG ASSOCIATES FUNDING, INC. ("BORROWER") RYLAND MORTGAGE COMPANY ("GUARANTOR") JPMORGAN CHASE BANK ("CHASE"), AS AGENT ("AGENT") AND CERTAIN LENDERS $35,000,000 (ORIGINALLY $100,000,000) REVOLVING CREDIT FACILITY INDEX "3/02 AMENDMENT"......................................................1 "AGENT"...............................................................1 "BORROWER"............................................................1 "CHASE"...............................................................1 "COMPANIES"...........................................................1 "GUARANTOR"...........................................................1 "LENDERS".............................................................1 "LOAN AGREEMENT"......................................................1 "STATED TERMINATION DATE".............................................1 TABLE OF CONTENTS Preamble ..........................................................................1 Recitals ..........................................................................1 Amendments ........................................................................1 1. Amendment of Section 1.1........................................................1 2. Conditions Precedent............................................................2 3. Representations and Warranties..................................................2 4. Ratification....................................................................2 5. Miscellaneous...................................................................2 3/02 AMENDMENT TO REPURCHASE FINANCING AGREEMENT PREAMBLE THIS 3/02 AMENDMENT TO REPURCHASE FINANCING AGREEMENT (the "3/02 AMENDMENT") entered into as of March 29, 2002, among ASSOCIATES FUNDING, INC., a Delaware corporation ("BORROWER"), RYLAND MORTGAGE COMPANY, an Ohio corporation ("GUARANTOR"), JPMORGAN CHASE BANK ("CHASE"), a New York banking corporation, formerly known as The Chase Manhattan Bank and successor by merger to Chase Bank of Texas, National Association, a national banking association formerly named Texas Commerce Bank National Association, as a lender and as agent for the lenders from time to time party thereto (in that capacity, the "AGENT"), and Chase, as currently the only lender party to the Loan Agreement (defined below) to amend (for the ninth time) the Loan Agreement, recites and provides as follows: RECITALS Borrower and Guarantor (the "COMPANIES") and Chase, as Agent and the only lender (the lenders thereunder being called the "LENDERS"), are party to the Repurchase Financing Agreement dated as of October 9, 1996 (as amended through the date of this amendment, the "LOAN AGREEMENT") providing for revolving credit loans of (originally) up to $100 million of principal lent and outstanding on any day during the term of the Loan Agreement, and previously amended to, among other things, reduce such limit to $35 million and subsequently (by the 9/00 Amendment to Repurchase Financing Agreement dated as of September 1, 2000) to increase it back up to $45 million. Terms defined in the Loan Agreement have the same meanings when used, unless otherwise defined, in this amendment. THIS AMENDMENT IS FOR THE PURPOSES OF (i) DECREASING SUCH LIMIT TO $35 MILLION AND (ii) EXTENDING THE STATED TERMINATION DATE TO MARCH 31, 2003. Accordingly, for valuable and acknowledged consideration, the parties to this amendment agree as follows: AMENDMENTS 1. AMENDMENT OF SECTION 1.1. SECTION 1.1 is amended by adding the following new definition, in alphabetical order: "3/02 AMENDMENT" means the 3/02 Amendment to Repurchase Financing Agreement dated as of March 29, 2002, executed by the parties hereto and amending this Agreement (for the ninth time). SECTION 1.1 is further amended by amending the following definitions to henceforth read as follows: "STATED TERMINATION DATE" means March 31, 2003. And SCHEDULE 1.1(a) (first referred to in the Loan Agreement in the definition of "Commitment" in SECTION 1.1 and last updated by the 9/00 Amendment to Repurchase Financing Agreement dated September 1, 2000) is amended in its entirety to henceforth read as does SCHEDULE 3/02-1.1(a) attached to this amendment and hereby made a part hereof. 2. CONDITIONS PRECEDENT. The Companies agree to forthwith deliver to the Agent: (a) counterparts of this amendment executed by all of the parties named below, (b) for any officer of either Company signing below on behalf of that Company but not included in certificates of incumbency for that Company delivered to the Agent before this amendment, a certificate of the secretary or assistant secretary of that Company about the due incumbency of that officer, and (c) if the Agent reasonably requires, resolutions of the directors of any Company authorizing this amendment certified as accurate and complete by the secretary or assistant secretary of the appropriate Company. This amendment shall become effective as of the effective date of this amendment upon execution of this amendment by the Borrower and the Agent. 3. REPRESENTATIONS AND WARRANTIES. The Companies jointly and severally represent and warrant to Agent and Lenders that, as of the date of this amendment and on the date of its execution (a) the representations and warranties in the Loan Papers are true and correct in all material respects except to the extent that (i) a representation or warranty speaks to a specific date or (ii) the facts on which a representation or warranty is based have changed by transactions or conditions contemplated or permitted by the Loan Papers, and (b) no Default or Potential Default exists. 4. RATIFICATION. The Companies ratify and confirm (a) all provisions of the Loan Papers as amended by this amendment and (b) that all guaranties, assurances and Liens granted, conveyed, or assigned to Agent or Lenders under the Loan Papers -- including, but not limited to, the unconditional and irrevocable guaranty by the Guarantor of (i) the prompt payment of the Obligation at maturity, by acceleration or otherwise, and at all times after maturity in accordance with the Loan Papers, and (ii) the prompt performance of and compliance with every term, covenant, and condition of the Loan Papers when due, all as stated in Section 4.1 of the Loan Agreement -- as they may have been revised, extended, and amended, continue to guarantee, assure and secure the full payment and performance of the Obligation (including, without limitation, all amounts evidenced now or in the future by any note delivered under this amendment). In addition and without limiting the generality of the foregoing (and without establishing or implying any requirement for any future republication or reconfirmation thereof, the parties agreeing that there is and shall be no such requirement), Guarantor hereby specifically republishes and reconfirms its letter agreement with the Lender dated September 13, 2001, an unsigned copy of which is attached as EXHIBIT 3/02-1 hereto and hereby made a part hereof. 5. MISCELLANEOUS. All references in the Loan Papers to the "Loan Agreement" are to the Loan Agreement as heretofore amended and as amended by this amendment. This amendment is a "Loan Paper" referred to in the Loan Agreement, and the provisions relating to Loan Papers in the Loan Agreement are incorporated in this amendment by reference. Except as specifically amended and modified in this amendment, the Loan Agreement is unchanged and continues in full force and effect. This amendment may be executed in any number of counterparts with the same effect as if all signatories had signed the same document. All counterparts must be construed together to constitute one and the same instrument. This amendment binds and benefits the Companies, Agent, Lenders and their respective successors and permitted assigns. THIS AMENDMENT AND THE OTHER LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL 2 AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. The remainder of this page is intentionally blank; counterpart signature pages follow. 3 EXECUTED as of the day and year first stated above. ASSOCIATES FUNDING, INC. RYLAND MORTGAGE COMPANY By: /s/ SUSAN M. CASS By: /s/ SUSAN M. CASS ------------------------------- ------------------------------- (Name) SUSAN M. CASS (Name) SUSAN M. CASS ----------------------------- ---------------------------- (Title) SR. VP & CFO (Title) SR. VP & CFO ---------------------------- --------------------------- JPMORGAN CHASE BANK, as Agent and as a Lender By: /s/ CYNTHIA E. CRITES ------------------------------- (Name) CYNTHIA E. CRITES ----------------------------- (Title) VICE PRESIDENT ---------------------------- Counterpart signature page to 3/02 Amendment to Repurchase Financing Agreement among Associates Funding, Inc., Ryland Mortgage Company and JPMorgan Chase Bank SCHEDULE 3/02-1.1(a) LENDERS AND COMMITMENTS

================================================================================ NAME OF LENDER COMMITMENT - -------------------------------------------------------------------------------- JPMorgan Chase Bank $35,000,000 707 Travis, 6th Floor North Houston, TX 77002 Attention: Cynthia E. Crites, Vice President Fed Tax ID No. 13-4994650 Tel (713) 216-4425 Fax (713) 216-1567 ================================================================================

[JPMORGAN LOGO] THE CHASE MANHATTAN BANK 717 Travis, 6th Floor North Houston, Texas 77002 September 27, 2001 Ryland Mortgage Company 6300 Canoga, 14th Floor Woodland Hills, California 91367 Attention: Ms. Susan Cass, Chief Financial Officer Re: Repurchase Financing Agreement dated as of October 9, 1996 (as heretofore amended eight times, the "LOAN AGREEMENT") among Associates Funding, Inc., Ryland Mortgage Company ("RYLAND") and The Chase Manhattan Bank (successor by merger to Texas Commerce Bank National Association which was renamed Chase Bank of Texas, National Association before such merger) Ladies and Gentlemen: 1. Negative Covenant. Section 8.3 of the Loan Agreement prohibits Ryland from making any loan, advance, extension of credit or capital contribution to, making any investment in, or purchasing or committing to purchase any stock or other securities or evidences of Debt of, or interests in, any other Person other than Permitted Loans/Investments, which are defined in the Loan Agreement as those loans and investments that are listed on Schedule 8.3 to the Loan Agreement, item 2 of which list of Permitted Loans/Investments is "Permitted Loans and Investments of Guarantor under the Existing Loan Agreement," which are those loans and investments that are listed on Schedule 8.3 to the Restated Credit Agreement dated June 16, 1995 between Ryland, as borrower, Bank One, Texas, N.A., as Agent, and certain lenders, as amended (the "EXISTING LOAN AGREEMENT"). This Bank and Ryland intend that Schedule 8.3 to the Loan Agreement and Schedule 8.3 to the Existing Loan Agreement be read together to determine what loans, advances, extensions of credit or capital advances are permitted by the Loan Agreement (copies of both Schedule 8.3 to the Loan Agreement and Schedule 8.3 to the Existing Loan Agreement are attached hereto, as EXHIBITS 1 and 2, respectively, to facilitate that). Ryland has requested that, for purposes of the Loan Agreement, this Bank agree that henceforth, in determining whether Ryland is in compliance with item 10 of the Existing Loan Agreement's list of Permitted Loans and Investments, which reads substantially as follows (modified as indicated by brackets to clarify its intended meaning in the present context): 10. Loans or advances by [Ryland] to Ryland Group in the management of its cash so long as (a)(i) they are not made at a time when (and do not cause) a Default, or any default by Ryland Group exists, in respect of any of [Ryland's] material debt, and (ii) the total of those loans and advances never (without the prior approval of [The Chase Manhattan Bank]) exceeds the lesser of either 50% of [Ryland's] Net Worth or $7,500,000 or (b) [they are] otherwise approved by [The Chase Manhattan Bank] in writing; the short term payment obligations of Ryland Group to Ryland that result from Ms. Susan Cass September 27, 2001 Page 3 Countrywide's making single payments on the last two business days of a quarter to Ryland Group under Countrywide's Early Purchase Program of amounts that are owed by Countrywide part to Ryland and part to Ryland Group, be disregarded in determining the sum of loans or advances by Ryland to Ryland Group outstanding from time to time (specifically, to test for compliance with clause (a)(ii) of the above-quoted item 10.) Please sign and return a copy of this letter to this Bank to confirm our agreements as stated in clauses (a) and (b) of the second sentence of this Part 0 of this letter. 2. Financial Covenants. Section 9.3 of the Loan Agreement states that the Guarantor (Ryland) must comply in all respects with the financial covenants applicable to it as set forth in Section 9 of the Existing Loan Agreement, to the same effect as if they were set forth in the Loan Agreement. Please sign and return a copy of this letter to this Bank also to confirm that such provision remains applicable, even though the Existing Loan Agreement has been terminated, and that the referenced financial covenants with which Ryland continues to be obligated to comply pursuant to Section 9.3 of the Loan Agreement are the following: - Ryland's Net Worth may not be less than $15 million at the end of any quarter in Ryland's fiscal year. - The ratio of Ryland's Total Liabilities to Ryland's Tangible Net Worth may not exceed 13.5 to 1.0 at the end of any quarter in Ryland's fiscal year. - The sum of Ryland's net income (excluding any recognized non-cash income) or loss plus (to the extent deducted in calculating that net income or loss) amortization, depreciation and other noncash charges (on a consolidated basis) may never be less than $1.00 at the end of any of Ryland's fiscal quarters for the four fiscal quarter periods then ended. As used above: - - "Net Worth" means, on a consolidated basis and at anytime, Ryland's stockholders' equity reflected on its balance sheet. - - "Total Liabilities" means, for Ryland, on a consolidated basis, and at any time, all amounts that should be reflected as a liability on Ryland's balance sheet. The consolidated repurchase and consolidated reverse repurchase obligations of Ryland and its affiliates under Repurchase Agreements in connection with the sale of, and secured by, Mortgage Securities, may be excluded from Total Liabilities. - - "Mortgage Securities" means (a) participation certificates representing undivided interests in first lien residential mortgage loans purchased by the Federal Home Loan Mortgage Corporation under the Emergency Home Finance Act of 1970, (b) modified pass through mortgage backed certificates guaranteed by the Federal National Mortgage Association under the National Housing Act, (c) modified pass through mortgage backed certificates guaranteed by the Government National Mortgage Association under Section 306(g) of the National Housing Act, or (d) any other security issued by an investor that was an "Approved Investor" under the Existing Loan Agreement or that is approved by The Chase Manhattan Bank, that is based on or backed by a pool of mortgage loans providing for pass through payments of principal and interest. - - "Tangible Net Worth" means, on a consolidated basis, at any time, and without duplication, the sum of (a) Ryland's Net Worth plus (b) Ryland's long term debt if its maturity is no earlier than 30 days after the Stated Termination Date, as defined in the Loan Agreement and its payment is subordinated to payment of Ryland's Obligation Ms. Susan Cass September 27, 2001 Page 4 (as defined in the Loan Agreement) in form and substance acceptable to The Chase Manhattan Bank; minus (c) Ryland's goodwill, including, without limitation, any amounts representing the excess of the purchase price for acquired assets, stock or interests over the book value assigned to them minus (d) Ryland's patents, trademarks, service marks, trade names and copyrights minus (e) Ryland's other intangible assets. Please call if you have any questions or comments. Very truly yours, [Original signed by Cynthia E. Crites] Vice President Agreed: RYLAND MORTGAGE COMPANY By: [Original signed by Susan M. Cass] ------------------------------------------------------ Name: [Susan M. Cass] ---------------------------------------------------- Title: [Senior Vice President and Chief Financial Officer] --------------------------------------------------- Date: [September 27] , 2001 --------------------------------------------------- EXHIBIT 1 SCHEDULE 8.3 PERMITTED LOANS/INVESTMENTS 1. Mortgage-backed securities and related residual interests, acquired by Borrower in the ordinary course of it business. 2. Permitted Loans and Investments of Guarantor under the Existing Loan Agreement. 3. Mortgage Securities or other mortgage-backed securities issued by any Subsidiary of Ryland Group that are acquired by Guarantor under its exercise of call Rights with respect to them. 4. (a) Investments having a maturity of one year or less in commercial paper given the highest rating by a nationally recognized credit rating agency, (b) the United States governmental obligations having maturities of one year or less, and (c) certificates of deposit, bankers acceptances, and repurchase agreements issued by a Lender or any other commercial bank that has combined capital and surplus of at least Two Hundred Fifty Million Dollars ($250,000,000) and a rating of C or better by Thompson Bank Watch, Inc. 5. Eurodollar investments with (a) any Lender or (b) any other financial institution that has (i) combined capital, surplus, and undivided profits of at least One Hundred Million Dollars ($100,000,000) and (ii) a Moody's Investors Service, Inc., or Standard & Poor's Corporation commercial paper rating of at least P-1 or A-1, respectively, or (iii) if it does not have a commercial paper rating, a bond rating of at least A-1 or A-, respectively. 6. Extensions of trade credit and other payables in the ordinary course of business. 7. Acquisition of securities or evidences of Debt of others when acquired by either Company in settlement of accounts receivable or other debts arising in the ordinary course of business so long as the total of all of those securities or evidences of debt is not material to the Companies' financial condition taken as a whole. 8. Loans or advances to officers or employees (a) of Guarantor or its Subsidiaries for travel, entertainment, and relocation expense in the ordinary course of business or (b) of either borrower or Guarantor that are not in the ordinary course and are never more than a total of Five Hundred Thousand Dollars ($500,000) outstanding for both Borrower and Guarantor together. 9. Loans or advances to Guarantor. EXHIBIT 2 SCHEDULE 8.3 TO EXISTING LOAN AGREEMENT PERMITTED LOANS/INVESTMENTS 1. Mortgage loans and mortgage-backed securities and related residual interests, originated or acquired by Borrower in the ordinary course of it business. 2. Acquisition by Borrower of the stock or assets of any Person conducting a mortgage-servicing business. 3. Mortgage Securities or other mortgage-backed securities issued by any Subsidiary of Borrower that are acquired by Borrower under its exercise of call Rights with respect to them. 4. Investments that (a) are made by Borrower in joint ventures with homebuilders and realtors for the purpose of originating mortgage loans and (b) never exceed a total of $5,000,000. 5. (a) Investments having a maturity of one year or less in commercial paper given the highest rating by a nationally recognized credit rating agency, (b) United States governmental obligations having maturities of one year or less, and (c) certificates of deposit, bankers acceptances, and repurchase agreements issued by a Lender or any other commercial bank that has combined capital and surplus of at least $250,000,000 and a rating of C or better by Thompson Bank Watch, Inc. 6. Eurodollar investments with (a) any Lender or (b) any other financial institution that has (i) combined capital, surplus, and undivided profits of at least $100,000,000 and (ii) a Moody's Investors Service, Inc., or Standard & Poor's Corporation commercial-paper rating of at least P-1 or A-1, respectively, or (iii) if it does not have a commercial-paper rating, a bond rating of at least A-1 or A-, respectively. 7. Extensions of trade credit and other payables in the ordinary course of business. 8. Acquisition of securities or evidences of Debt of others when acquired by Borrower in settlement of accounts receivable or other debts arising in the ordinary course of business so long as the total of all of those securities or evidences of debt is not material to the Borrower's financial condition taken as a whole. 9. Loans or advances to officers or employees (a) of Borrower or its Subsidiaries for travel, entertainment, and relocation expense in the ordinary course of business or (b) of Borrower that are not in the ordinary course and are never more than a total of $500,000 outstanding for Borrower. 10. Loans or advances by Borrower to Ryland Group in the management its cash so long as (a) (i) they are not made at a time when (and do not cause) a Default or any default by Ryland Group exists in respect of any of its material debt, and (ii) the total of those loans and advances never (without the prior written approval by Administrative Agent) exceeds the lesser of either 50% of Borrower's Net Worth or $7,500,000 or (b) is otherwise approved by Administrative Agent in writing. EX-10.10 4 a81639ex10-10.txt EXHIBIT 10.10 EXHIBIT 10.10 THE RYLAND GROUP, INC. 2002 EQUITY INCENTIVE PLAN 1. Purpose and Types of Awards The purpose of THE RYLAND GROUP, INC. 2002 EQUITY INCENTIVE PLAN (the "Plan") is to promote the long-term growth and profitability of the Corporation by providing key people with incentives to improve stockholder value and to contribute to the growth and financial success of the Corporation. The Plan permits the granting of stock options (including incentive stock options qualifying under Code section 422 and nonqualified stock options), stock appreciation rights, restricted or unrestricted stock awards, stock units, or any combination of the foregoing. 2. Definitions Under this Plan, except where the context otherwise indicates, the following definitions apply: (a) "Affiliate" shall mean any entity, whether now or hereafter existing, which controls, is controlled by, or is under common control with, the Corporation (including, but not limited to, joint ventures, limited liability companies, and partnerships). For this purpose, "control" shall mean ownership of 50% or more of the total combined voting power or value of all classes of stock or interests of the entity. (b) "Award" shall mean any stock option, stock appreciation right, restricted or unrestricted stock award, or stock unit award. (c) "Board" shall mean the Board of Directors of the Corporation. (d) "Change in Control" shall mean: (i) The acquisition by any person, other than the Corporation or any employee benefit plans of the Corporation, of beneficial ownership of 20 percent or more of the combined voting power of the Corporation's then outstanding voting securities; (ii) The first purchase under a tender offer or exchange offer, other than an offer by the Corporation or any employee benefit plans of the Corporation, pursuant to which shares of Common Stock have been purchased; (iii) During any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Corporation cease for any reason to constitute at least a majority thereof, unless the election or the nomination for the election by stockholders of the Corporation of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period; or (iv) Approval by stockholders of the Corporation of a merger, consolidation, liquidation or dissolution of the Corporation, or the sale of all or substantially all of the assets of the Corporation. (e) "Code" shall mean the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder. (f) "Common Stock" shall mean shares of common stock, $1.00 par value, of the Corporation. (g) "Corporation" shall mean The Ryland Group, Inc. and its successors and assigns. (h) "Designated Beneficiary" shall mean the beneficiary designated by an Award holder, in a manner and to the extent determined by the Administrator, to receive amounts due or exercise rights of the Award holder in the event of the Award holder's death. In the absence of an effective designation by an Award holder, "Designated Beneficiary" shall mean the Award holder's estate. (i) "Effective Date" shall mean the date the Plan is approved by the stockholders of the Corporation. (j) "Fair Market Value" shall mean, with respect to a share of the Corporation's Common Stock or other property for any purpose on a particular date, the value determined by the Administrator in good faith. However, if the Common Stock is registered under Section 12(b) of the Securities Exchange Act of 1934, as amended, "Fair Market Value" with respect to a share of the Corporation's Common Stock shall mean, as applicable, (i) either the closing price or the average of the high and low sale price on the relevant date, as determined in the Administrator's discretion, quoted on the New York Stock Exchange, the American Stock Exchange, or the Nasdaq National Market; (ii) the last sale price on the relevant date quoted on the Nasdaq SmallCap Market; (iii) the average of the high bid and low asked prices on the relevant date quoted on the Nasdaq OTC Bulletin Board Service or by the National Quotation Bureau, Inc. or a comparable service as determined in the Administrator's discretion; or (iv) if the Common Stock is not quoted by any of the above, the average of the closing bid and asked prices on the relevant date furnished by a professional market maker for the Common Stock, or by such other source, selected by the Administrator. If no public trading of the Common Stock occurs on the relevant date, then Fair Market Value shall be determined as of the next preceding date on which trading of the Common Stock does occur. For all purposes under this Plan, the term "relevant date" as used in this Section 2.1(i) shall mean either the date as of which Fair Market Value is to be determined or the next preceding date on which public trading of the Common Stock occurs, as determined in the Administrator's discretion. (k) "Grant Agreement" shall mean a written document memorializing the terms and conditions of an Award granted pursuant to the Plan and shall incorporate the terms of the Plan. (l) "1992 Equity Incentive Plan" shall mean The Ryland Group, Inc. 1992 Equity Incentive Plan, the term of which expires on April 15, 2002. 3. Administration (a) Administration of the Plan. The Plan shall be administered by the Board, the Compensation Committee of the Board, or any committee or committees that are appointed by the Compensation Committee or the Board from time to time (the Board, the Compensation Committee of the Board and any appointed committee or committees are referred to as the "Administrator"). (b) Powers of the Administrator. The Administrator shall have all the powers vested in it by the terms of the Plan, such powers to include authority, in its sole and absolute discretion, to grant Awards under the Plan, prescribe Grant Agreements evidencing such Awards and establish programs for granting Awards. The Administrator shall have full power and authority to take all other actions necessary to carry out the purpose and intent of the Plan, including, but not limited to, the authority to: (i) determine the eligible persons to whom, and the time or times at which Awards shall be granted; (ii) determine the types of Awards to be granted; (iii) determine the number of shares to be covered by or used for reference purposes for each Award; (iv) impose such terms, limitations, restrictions and conditions upon any such Award as the Administrator shall deem appropriate; (v) modify, amend, extend or renew outstanding Awards, or accept the surrender of outstanding Awards and substitute new Awards (provided however, that, except as provided in Section 7(c) of the Plan, (A) any modification that would materially adversely affect any outstanding Award shall not be made without the consent of the holder, and (B) the exercise price for any outstanding stock option granted under the Plan may not be decreased after the date of grant nor may any outstanding stock option granted under the Plan be surrendered to the Corporation as consideration for the grant of a new stock option with a lower exercise price); and (vi) accelerate or otherwise change the time in which an Award may be exercised or becomes payable and to waive or accelerate the lapse, in whole or in part, of any restriction or condition with respect to such Award, including, but not limited to, any restriction or condition with respect to the vesting or exercisability of an Award following termination of any grantee's employment or other service relationship with the Corporation. The Administrator shall have full power and authority, in its sole and absolute discretion, to administer and interpret the Plan and to adopt and interpret such rules, regulations, agreements, guidelines and instruments for the administration of the Plan and for the conduct of its business as the Administrator deems necessary or advisable. To the extent permitted by applicable law, the Administrator may delegate to one or more executive officers of the Corporation the power to (i) grant Awards to individuals who are not subject to Section 16 of the Securities Exchange Act of 1934, as amended, or any successor provision and are not officers of the Corporation, and (ii) make all determinations under the Plan with respect thereto, provided that the Administrator shall fix the maximum amount of such Awards for the group and a maximum for any one Award recipient. (c) Non-Uniform Determinations. The Administrator's determinations under the Plan (including without limitation, determinations of the persons to receive Awards, the form, amount and timing of such Awards, the terms and provisions of such Awards and the Grant Agreements evidencing such Awards) need not be uniform and may be made by the Administrator selectively among persons who receive, or are eligible to receive, Awards under the Plan, whether or not such persons are similarly situated. (d) Limited Liability. To the maximum extent permitted by law, no member of the Administrator shall be liable for any action taken or decision made in good faith relating to the Plan or any Award thereunder. (e) Indemnification. To the maximum extent permitted by law and by the Corporation's charter and by-laws, the members of the Administrator shall be indemnified by the Corporation in respect of all their activities under the Plan. (f) Effect of Administrator's Decision. All actions taken and decisions and determinations made by the Administrator on all matters relating to the Plan pursuant to the powers vested in it hereunder shall be in the Administrator's sole and absolute discretion and shall be conclusive and binding on all parties concerned, including the Corporation, its stockholders, any participants in the Plan and any other employee, consultant, or director of the Corporation, and their respective successors in interest. 4. Shares Available for the Plan; Maximum Awards (a) Subject to the following provisions of this Section 4 and adjustments as provided in Section 7(c) of the Plan, the maximum number of shares of Common Stock that may be issued with respect to Awards granted under the Plan shall be equal to the sum of: (i) 650,000 shares of Common Stock; (ii) any shares of Common Stock remaining under the 1992 Equity Incentive Plan on the date such Plan expires that were not then subject to outstanding Awards; and (iii) any shares of Common Stock that are represented by Awards granted under the 1992 Equity Incentive Plan that are forfeited, expire or are canceled without delivery of shares of Common Stock or which result in the forfeiture of the shares of Common Stock back to the Corporation. (b) If any Award, or portion of an Award, under the Plan or the 1992 Equity Incentive Plan expires or terminates unexercised, becomes unexercisable or is forfeited or otherwise terminated, surrendered or canceled as to any shares, or if any shares of Common Stock are surrendered to the Corporation in connection with any Award under the Plan or the 1992 Equity Incentive Plan (whether or not such surrendered shares were acquired pursuant to any Award), or if any shares are withheld by the Corporation, the shares subject to such Award and the surrendered and withheld shares shall thereafter be available for further Awards under the Plan; provided, however, that any such shares that are surrendered to or withheld by the Corporation in connection with any Award or that are otherwise forfeited after issuance shall not be available for purchase pursuant to incentive stock options intended to qualify under Code section 422 and provided further, that no more than the number of shares available for issuance on the Effective Date shall be made available for purchase pursuant to such incentive stock options. (c) If the exercise price of any stock option granted under the Plan or the 1992 Equity Incentive Plan is satisfied by tendering shares of Common Stock to the Corporation (by either actual delivery or by attestation), only the number of shares of Common Stock issued net of the shares of Common Stock tendered shall be deemed to have been issued for purposes of determining the maximum number of shares of Common Stock available for issuance under the Plan. To the extent any shares of Common Stock covered by an Award are not delivered to an Award holder or the holder's Designated Beneficiary because the Award is settled in cash, such shares shall not be deemed to have been issued for purposes of determining the maximum number of shares of Common Stock available for issuance under the Plan. (d) Notwithstanding the provisions of Section 4(a) of the Plan and subject to adjustment as provided in Section 7(c) of the Plan, the maximum number of shares of Common Stock that may be issued in conjunction with Awards granted pursuant to subsections (c) and (d) of Section 6 of the Plan (relating to restricted and unrestricted stock awards and stock units) shall be 130,000 shares of Common Stock; provided, however, that any shares of Common Stock that are forfeited back to the Corporation with respect to any such Awards shall be available for further Awards under subsections (c) and (d) of Section 6 of the Plan. (e) Subject to adjustments as provided in Section 7(c) of the Plan, the maximum number of shares of Common Stock subject to Awards of any combination that may be granted during any one fiscal year of the Corporation to any one individual under this Plan shall be limited to 500,000 shares. Such per-individual limit shall not be adjusted to effect a restoration of shares of Common Stock with respect to which the related Award is terminated, surrendered or canceled. 5. Participation Participation in the Plan shall be open to all employees, officers, and directors of, and other individuals providing bona fide services to or for, the Corporation, or of any Affiliate of the Corporation, as may be selected by the Administrator from time to time. The Administrator may also grant Awards to individuals in connection with hiring, retention or otherwise, prior to the date the individual first performs services for the Corporation or an Affiliate provided that such Awards shall not become vested prior to the date the individual first performs such services. 6. Awards The Administrator, in its sole discretion, establishes the terms of all Awards granted under the Plan. Awards may be granted individually or in tandem with other types of Awards. All Awards are subject to the terms and conditions provided in the Grant Agreement. The Administrator may permit or require a recipient of an Award to defer such individual's receipt of the payment of cash or the delivery of Common Stock that would otherwise be due to such individual, including the crediting of interest on deferred amounts denominated in cash and dividend equivalents on amounts denominated in Common Stock, by virtue of the exercise of, payment of, or lapse or waiver of restrictions respecting, any Award. If any such payment deferral is required or permitted, the Administrator shall, in its sole discretion, establish rules and procedures for such payment deferrals. (a) Stock Options. The Administrator may from time to time grant to eligible participants Awards of incentive stock options as that term is defined in Code section 422 or nonqualified stock options; provided, however, that Awards of incentive stock options shall be limited to employees of the Corporation or of any current or hereafter existing "parent corporation" or "subsidiary corporation," as defined in Code sections 424(e) and (f), respectively, of the Corporation. No stock option shall be an incentive stock option unless so designated by the Administrator at the time of grant or in the Grant Agreement evidencing such stock option. All stock options granted under the Plan must have an exercise price at least equal to Fair Market Value as of the date of grant and may not have a term longer than ten (10) years. Except for adjustments pursuant to Section 7(c), the exercise price for any outstanding stock option granted under the Plan may not be decreased after the date of grant nor may any outstanding stock option granted under the Plan be surrendered to the Corporation as consideration for the grant of a new stock option with a lower exercise price. (b) Stock Appreciation Rights. The Administrator may from time to time grant to eligible participants Awards of Stock Appreciation Rights ("SAR"). An SAR entitles the grantee to receive, subject to the provisions of the Plan and the Grant Agreement, a payment having an aggregate value equal to the product of (i) the excess of (A) the Fair Market Value on the exercise date of one share of Common Stock over (B) the base price per share specified in the Grant Agreement, times (ii) the number of shares specified by the SAR, or portion thereof, which is exercised. The base price per share with respect to an SAR shall in no event be lower than Fair Market Value as of the date of grant. Payment by the Corporation of the amount receivable upon any exercise of an SAR may be made by the delivery of Common Stock or cash, or any combination of Common Stock and cash, as determined in the sole discretion of the Administrator. If upon settlement of the exercise of an SAR a grantee is to receive a portion of such payment in shares of Common Stock, the number of shares shall be determined by dividing such portion by the Fair Market Value of a share of Common Stock on the exercise date. No fractional shares shall be used for such payment and the Administrator shall determine whether cash shall be given in lieu of such fractional shares or whether such fractional shares shall be eliminated. (c) Stock Awards. The Administrator may from time to time grant restricted or unrestricted stock Awards to eligible participants in such amounts, on such terms and conditions, and for such consideration, including no consideration or such minimum consideration as may be required by law, as it shall determine. A stock Award may be paid in Common Stock, in cash, or in a combination of Common Stock and cash, as determined in the sole discretion of the Administrator. (d) Stock Units. The Administrator may from time to time grant Awards to eligible participants denominated in stock-equivalent units in such amounts and on such terms and conditions as it shall determine. Stock units granted to a participant shall be credited to a bookkeeping reserve account solely for accounting purposes and shall not require a segregation of any of the Corporation's assets. An Award of stock units may be settled in Common Stock, in cash, or in a combination of Common Stock and cash, as determined in the sole discretion of the Administrator. Shares of Common Stock awarded in connection with an Award of stock units may be issued for such consideration as may be determined by the Administrator, including for no consideration or such minimum consideration as may be required by law. Except as otherwise provided in the applicable Grant Agreement, the grantee shall not have the rights of a stockholder with respect to any shares of Common Stock represented by a stock unit solely as a result of the grant of a stock unit to the grantee. 7. Miscellaneous (a) Withholding of Taxes. Grantees and holders of Awards shall pay to the Corporation or its Affiliate, or make provision satisfactory to the Administrator for payment of, any taxes required to be withheld in respect of Awards under the Plan no later than the date of the event creating the tax liability. The Corporation or its Affiliate may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to the grantee or holder of an Award. In the event that payment to the Corporation or its Affiliate of such tax obligations is made in shares of Common Stock, such shares shall be valued at Fair Market Value on the applicable date for such purposes. (b) Transferability. Except as otherwise determined by the Administrator, and in any event in the case of an incentive stock option or a stock appreciation right granted with respect to an incentive stock option, no Award granted under the Plan shall be transferable by a grantee otherwise than by will or the laws of descent and distribution. Unless otherwise determined by the Administrator in accord with the provisions of the immediately preceding sentence, an Award may be exercised during the lifetime of the grantee, only by the grantee or, during the period the grantee is under a legal disability, by the grantee's guardian or legal representative. (c) Adjustments; Business Combinations. (i) Upon a stock dividend of, or stock split or reverse stock split affecting, the Common Stock of the Corporation, (A) the maximum number of shares reserved for issuance or with respect to which Awards may be granted under the Plan and the maximum number of shares with respect to which Awards may be granted during any one fiscal year of the Corporation to any individual, as provided in Section 4 of the Plan, and (B) the number of shares covered by and the exercise price and other terms of outstanding Awards, shall, without further action of the Board, be adjusted to reflect such event unless the Board determines, at the time it approves such stock dividend, stock split or reverse stock split, that no such adjustment shall be made. The Administrator may make adjustments, in its discretion, to address the treatment of fractional shares and fractional cents that arise with respect to outstanding Awards as a result of the stock dividend, stock split or reverse stock split. (ii) In the event of any other changes affecting the Corporation, the capitalization of the Corporation or the Common Stock of the Corporation by reason of any spin-off, split-up, dividend, recapitalization, merger, consolidation, business combination or exchange of shares and the like, the Administrator except as otherwise provided in Section 7(d), in its discretion and without the consent of holders of Awards, may make: (A) appropriate adjustments to the maximum number and kind of shares reserved for issuance or with respect to which Awards may be granted under the Plan, in the aggregate and with respect to any individual, as provided in Section 4 of the Plan, and to the number, kind and price of shares covered by outstanding Awards; and (B) any other adjustments in outstanding Awards, including but not limited to reducing the number of shares subject to Awards or providing or mandating alternative settlement methods such as settlement of the Awards in cash or in shares of Common Stock or other securities of the Corporation or of any other entity, or in any other matters which relate to Awards as the Administrator shall, in its sole discretion, determine to be necessary or appropriate. (iii) The Administrator is authorized to make, in its discretion and without the consent of holders of Awards, adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events affecting the Corporation, or the financial statements of the Corporation or any Affiliate, or of changes in applicable laws, regulations, or accounting principles, whenever the Administrator determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan and outstanding Awards. (d) Change in Control. Notwithstanding the provisions of Section 7(c)(ii), in the event of a Change in Control, all Awards under the Plan are automatically and fully vested and immediately exercisable or payable in whole or in part. The obligations of the Corporation pursuant to the Plan and performance with respect to rights of Award holders thereunder shall be assumed by any participant, successor-in-interest or beneficiary of or interested party in the Change in Control (collectively, the Change-in-Control Participant), and the Change-in Control Participant shall cause the Awards to be assumed, or new rights substituted therefor, by another entity. (e) Substitution of Awards in Mergers and Acquisitions in which the Corporation or an Affiliate is the Acquiring Entity. Solely in the event that the Corporation or an Affiliate is an acquiring entity in a merger, acquisition and other business combination, Awards may be granted under the Plan from time to time in substitution for Awards held by employees, officers, consultants or directors of a target entity who become or are about to become employees, officers, consultants or directors of the Corporation or an Affiliate as the result of a merger or consolidation of the employing entity with the Corporation or an Affiliate, or the acquisition by the Corporation or an Affiliate of the assets or stock of the employing entity. The terms and conditions of any substitute Awards so granted may vary from the terms and conditions set forth herein to the extent that the Administrator deems appropriate at the time of grant to conform the substitute Awards to the provisions of the awards for which they are substituted. (f) Termination, Amendment and Modification of the Plan. The Board may terminate, amend or modify the Plan or any portion thereof at any time; provided, however, that the provisions of Section 6(a) relating to stock option repricing shall not be amended without approval by the Corporation's stockholders. (g) Non-Guarantee of Employment or Service. Nothing in the Plan or in any Grant Agreement thereunder shall confer any right on an individual to continue in the service of the Corporation or shall interfere in any way with the right of the Corporation to terminate such service at any time with or without cause or notice. The Corporation expressly reserves the right at any time to dismiss an Award recipient free from any liability or claim under the Plan, except as expressly provided in the applicable Grant Agreement. (h) No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Corporation and a grantee or any other person. To the extent that any grantee or other person acquires a right to receive payments from the Corporation pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Corporation. (i) Designated Beneficiaries. Unless otherwise provided in the applicable Grant Agreement, amounts or certificates due an Award recipient after his or her death under an Award shall be paid or delivered to the Award recipient's Designated Beneficiary in accordance with the terms and conditions of the Award. (j) Governing Law. The validity, construction and effect of the Plan, of Grant Agreements entered into pursuant to the Plan, and of any rules, regulations, determinations or decisions made by the Administrator relating to the Plan or such Grant Agreements, and the rights of any and all persons having or claiming to have any interest therein or thereunder, shall be determined exclusively in accordance with applicable federal laws and the laws of the State of Maryland, without regard to its conflict of laws principles. (k) Effective Date; Termination Date. The Plan is effective as of the date on which the Plan is approved by the stockholders of the Corporation. Prior to such approval, Awards may be made under the Plan expressly subject to such approval but any such Awards shall be void and ineffective if the Plan is not approved by the stockholders. The Plan shall be unlimited in duration and, in the event of Plan termination, shall remain in effect as long as any Awards under it are outstanding; provided, however, that no Awards shall be granted under the Plan after the close of business on April 24, 2012. EX-12.1 5 a81639ex12-1.txt EXHIBIT 12.1 EXHIBIT 12.1 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (amounts in thousands, except ratio)

YEAR ENDED DECEMBER 31, THREE MONTHS ------------------------------------------------------------------------- ENDED 1997 1998 1999 2000 2001 3/31/2002 --------- --------- --------- --------- --------- ------------ Consolidated pretax income before extraordinary item $ 36,470 $ 75,158 $ 109,336 $ 134,840 $ 225,580 $ 25,964 Share of distributed income of 50%-or-less-owned affiliates net of equity pickup 1,334 2,602 (263) (163) (26) (33) Amortization of capitalized interest 21,581 20,645 19,027 27,581 31,878 6,151 Interest 74,950 63,410 52,764 62,610 55,327 11,764 Less interest capitalized during the period (17,636) (18,601) (24,397) (34,105) (31,675) (9,029) Net amortization of debt discount and premium and issuance expense 84 36 33 -- -- -- Interest portion of rental expense 3,541 4,709 4,522 6,065 7,190 1,578 --------- --------- --------- --------- --------- --------- EARNINGS $ 120,324 $ 147,959 $ 161,022 $ 196,828 $ 288,274 $ 36,395 Interest $ 74,950 $ 63,410 $ 52,764 $ 62,610 $ 55,327 $ 11,764 Net amortization of debt discount and premium and issuance expense 84 36 33 -- -- -- Interest portion of rental expense 3,541 4,709 4,522 6,065 7,190 1,578 --------- --------- --------- --------- --------- --------- FIXED CHARGES $ 78,575 $ 68,155 $ 57,319 $ 68,675 $ 62,517 $ 13,342 Ratio of earnings to fixed charges 1.53 2.17 2.81 2.87 4.61 2.73

-----END PRIVACY-ENHANCED MESSAGE-----

EX-10.4

                                                                   EXHIBIT 10.4


                                 3/02 AMENDMENT
                              (THE NINTH AMENDMENT)

                           DATED AS OF MARCH 29, 2002
                                       TO

                         REPURCHASE FINANCING AGREEMENT
                           DATED AS OF OCTOBER 9, 1996

                                      AMONG

                            ASSOCIATES FUNDING, INC.
                                  ("BORROWER")

                             RYLAND MORTGAGE COMPANY
                                  ("GUARANTOR")

                               JPMORGAN CHASE BANK
                          ("CHASE"), AS AGENT ("AGENT")

                                       AND

                                 CERTAIN LENDERS

         $35,000,000 (ORIGINALLY $100,000,000) REVOLVING CREDIT FACILITY





                                      INDEX



                                                                  
"3/02 AMENDMENT"......................................................1
"AGENT"...............................................................1
"BORROWER"............................................................1
"CHASE"...............................................................1
"COMPANIES"...........................................................1
"GUARANTOR"...........................................................1
"LENDERS".............................................................1
"LOAN AGREEMENT"......................................................1
"STATED TERMINATION DATE".............................................1






                                TABLE OF CONTENTS

                                                                                        
         Preamble ..........................................................................1
         Recitals ..........................................................................1
         Amendments ........................................................................1
         1. Amendment of Section 1.1........................................................1
         2. Conditions Precedent............................................................2
         3. Representations and Warranties..................................................2
         4. Ratification....................................................................2
         5. Miscellaneous...................................................................2






                               3/02 AMENDMENT TO
                         REPURCHASE FINANCING AGREEMENT

                                    PREAMBLE

        THIS 3/02 AMENDMENT TO REPURCHASE FINANCING AGREEMENT (the "3/02
AMENDMENT") entered into as of March 29, 2002, among ASSOCIATES FUNDING, INC., a
Delaware corporation ("BORROWER"), RYLAND MORTGAGE COMPANY, an Ohio corporation
("GUARANTOR"), JPMORGAN CHASE BANK ("CHASE"), a New York banking corporation,
formerly known as The Chase Manhattan Bank and successor by merger to Chase Bank
of Texas, National Association, a national banking association formerly named
Texas Commerce Bank National Association, as a lender and as agent for the
lenders from time to time party thereto (in that capacity, the "AGENT"), and
Chase, as currently the only lender party to the Loan Agreement (defined below)
to amend (for the ninth time) the Loan Agreement, recites and provides as
follows:

                                    RECITALS

        Borrower and Guarantor (the "COMPANIES") and Chase, as Agent and the
only lender (the lenders thereunder being called the "LENDERS"), are party to
the Repurchase Financing Agreement dated as of October 9, 1996 (as amended
through the date of this amendment, the "LOAN AGREEMENT") providing for
revolving credit loans of (originally) up to $100 million of principal lent and
outstanding on any day during the term of the Loan Agreement, and previously
amended to, among other things, reduce such limit to $35 million and
subsequently (by the 9/00 Amendment to Repurchase Financing Agreement dated as
of September 1, 2000) to increase it back up to $45 million. Terms defined in
the Loan Agreement have the same meanings when used, unless otherwise defined,
in this amendment. THIS AMENDMENT IS FOR THE PURPOSES OF (i) DECREASING SUCH
LIMIT TO $35 MILLION AND (ii) EXTENDING THE STATED TERMINATION DATE TO MARCH 31,
2003. Accordingly, for valuable and acknowledged consideration, the parties to
this amendment agree as follows:

                                   AMENDMENTS

                          1. AMENDMENT OF SECTION 1.1.

        SECTION 1.1 is amended by adding the following new definition, in
alphabetical order:

                "3/02 AMENDMENT" means the 3/02 Amendment to Repurchase
        Financing Agreement dated as of March 29, 2002, executed by the parties
        hereto and amending this Agreement (for the ninth time).

        SECTION 1.1 is further amended by amending the following definitions to
henceforth read as follows:

                "STATED TERMINATION DATE" means March 31, 2003.

        And SCHEDULE 1.1(a) (first referred to in the Loan Agreement in the
definition of "Commitment" in SECTION 1.1 and last updated by the 9/00 Amendment
to Repurchase Financing Agreement dated September 1, 2000) is amended in its
entirety to henceforth read as does SCHEDULE 3/02-1.1(a) attached to this
amendment and hereby made a part hereof.


                            2. CONDITIONS PRECEDENT.

        The Companies agree to forthwith deliver to the Agent: (a) counterparts
of this amendment executed by all of the parties named below, (b) for any
officer of either Company signing below on behalf of that Company but not
included in certificates of incumbency for that Company delivered to the Agent
before this amendment, a certificate of the secretary or assistant secretary of
that Company about the due incumbency of that officer, and (c) if the Agent
reasonably requires, resolutions of the directors of any Company authorizing
this amendment certified as accurate and complete by the secretary or assistant
secretary of the appropriate Company. This amendment shall become effective as
of the effective date of this amendment upon execution of this amendment by the
Borrower and the Agent.

                       3. REPRESENTATIONS AND WARRANTIES.

        The Companies jointly and severally represent and warrant to Agent and
Lenders that, as of the date of this amendment and on the date of its execution
(a) the representations and warranties in the Loan Papers are true and correct
in all material respects except to the extent that (i) a representation or
warranty speaks to a specific date or (ii) the facts on which a representation
or warranty is based have changed by transactions or conditions contemplated or
permitted by the Loan Papers, and (b) no Default or Potential Default exists.

                                4. RATIFICATION.

        The Companies ratify and confirm (a) all provisions of the Loan Papers
as amended by this amendment and (b) that all guaranties, assurances and Liens
granted, conveyed, or assigned to Agent or Lenders under the Loan Papers --
including, but not limited to, the unconditional and irrevocable guaranty by the
Guarantor of (i) the prompt payment of the Obligation at maturity, by
acceleration or otherwise, and at all times after maturity in accordance with
the Loan Papers, and (ii) the prompt performance of and compliance with every
term, covenant, and condition of the Loan Papers when due, all as stated in
Section 4.1 of the Loan Agreement -- as they may have been revised, extended,
and amended, continue to guarantee, assure and secure the full payment and
performance of the Obligation (including, without limitation, all amounts
evidenced now or in the future by any note delivered under this amendment).

        In addition and without limiting the generality of the foregoing
(and without establishing or implying any requirement for any future
republication or reconfirmation thereof, the parties agreeing that there is and
shall be no such requirement), Guarantor hereby specifically republishes and
reconfirms its letter agreement with the Lender dated September 13, 2001, an
unsigned copy of which is attached as EXHIBIT 3/02-1 hereto and hereby made a
part hereof.

                               5. MISCELLANEOUS.

        All references in the Loan Papers to the "Loan Agreement" are to the
Loan Agreement as heretofore amended and as amended by this amendment. This
amendment is a "Loan Paper" referred to in the Loan Agreement, and the
provisions relating to Loan Papers in the Loan Agreement are incorporated in
this amendment by reference. Except as specifically amended and modified in this
amendment, the Loan Agreement is unchanged and continues in full force and
effect. This amendment may be executed in any number of counterparts with the
same effect as if all signatories had signed the same document. All counterparts
must be construed together to constitute one and the same instrument. This
amendment binds and benefits the Companies, Agent, Lenders and their respective
successors and permitted assigns. THIS AMENDMENT AND THE OTHER LOAN PAPERS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL



                                       2


AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.

        The remainder of this page is intentionally blank; counterpart signature
pages follow.




                                       3


        EXECUTED as of the day and year first stated above.



ASSOCIATES FUNDING, INC.                     RYLAND MORTGAGE COMPANY

By: /s/ SUSAN M. CASS                        By: /s/ SUSAN M. CASS
    -------------------------------             -------------------------------
(Name) SUSAN M. CASS                         (Name) SUSAN M. CASS
      -----------------------------                ----------------------------
(Title) SR. VP & CFO                         (Title) SR. VP & CFO
       ----------------------------                 ---------------------------



JPMORGAN CHASE BANK, as Agent and as a Lender


By: /s/ CYNTHIA E. CRITES
    -------------------------------
(Name) CYNTHIA E. CRITES
      -----------------------------
(Title) VICE PRESIDENT
       ----------------------------




      Counterpart signature page to 3/02 Amendment to Repurchase Financing
        Agreement among Associates Funding, Inc., Ryland Mortgage Company
                             and JPMorgan Chase Bank



                              SCHEDULE 3/02-1.1(a)

                             LENDERS AND COMMITMENTS





================================================================================
             NAME OF LENDER                                        COMMITMENT
- --------------------------------------------------------------------------------
                                                               
JPMorgan Chase Bank                                                $35,000,000
707 Travis, 6th Floor North
Houston, TX  77002
Attention: Cynthia E. Crites, Vice President
Fed Tax ID No. 13-4994650
Tel (713) 216-4425
Fax (713) 216-1567
================================================================================


                                [JPMORGAN LOGO]


                            THE CHASE MANHATTAN BANK
                           717 Travis, 6th Floor North
                              Houston, Texas 77002

                               September 27, 2001



Ryland Mortgage Company
6300 Canoga, 14th Floor
Woodland Hills, California 91367

Attention: Ms. Susan Cass, Chief Financial Officer

        Re: Repurchase Financing Agreement dated as of October 9, 1996 (as
        heretofore amended eight times, the "LOAN AGREEMENT") among Associates
        Funding, Inc., Ryland Mortgage Company ("RYLAND") and The Chase
        Manhattan Bank (successor by merger to Texas Commerce Bank National
        Association which was renamed Chase Bank of Texas, National Association
        before such merger)

Ladies and Gentlemen:

        1. Negative Covenant. Section 8.3 of the Loan Agreement prohibits Ryland
from making any loan, advance, extension of credit or capital contribution to,
making any investment in, or purchasing or committing to purchase any stock or
other securities or evidences of Debt of, or interests in, any other Person
other than Permitted Loans/Investments, which are defined in the Loan Agreement
as those loans and investments that are listed on Schedule 8.3 to the Loan
Agreement, item 2 of which list of Permitted Loans/Investments is "Permitted
Loans and Investments of Guarantor under the Existing Loan Agreement," which are
those loans and investments that are listed on Schedule 8.3 to the Restated
Credit Agreement dated June 16, 1995 between Ryland, as borrower, Bank One,
Texas, N.A., as Agent, and certain lenders, as amended (the "EXISTING LOAN
AGREEMENT"). This Bank and Ryland intend that Schedule 8.3 to the Loan Agreement
and Schedule 8.3 to the Existing Loan Agreement be read together to determine
what loans, advances, extensions of credit or capital advances are permitted by
the Loan Agreement (copies of both Schedule 8.3 to the Loan Agreement and
Schedule 8.3 to the Existing Loan Agreement are attached hereto, as EXHIBITS 1
and 2, respectively, to facilitate that). Ryland has requested that, for
purposes of the Loan Agreement, this Bank agree that henceforth, in determining
whether Ryland is in compliance with item 10 of the Existing Loan Agreement's
list of Permitted Loans and Investments, which reads substantially as follows
(modified as indicated by brackets to clarify its intended meaning in the
present context):

        10. Loans or advances by [Ryland] to Ryland Group in the management of
        its cash so long as (a)(i) they are not made at a time when (and do not
        cause) a Default, or any default by Ryland Group exists, in respect of
        any of [Ryland's] material debt, and (ii) the total of those loans and
        advances never (without the prior approval of [The Chase Manhattan
        Bank]) exceeds the lesser of either 50% of [Ryland's] Net Worth or
        $7,500,000 or (b) [they are] otherwise approved by [The Chase Manhattan
        Bank] in writing;

the short term payment obligations of Ryland Group to Ryland that result from


Ms. Susan Cass
September 27, 2001
Page 3

Countrywide's making single payments on the last two business days of a quarter
to Ryland Group under Countrywide's Early Purchase Program of amounts that are
owed by Countrywide part to Ryland and part to Ryland Group, be disregarded in
determining the sum of loans or advances by Ryland to Ryland Group outstanding
from time to time (specifically, to test for compliance with clause (a)(ii) of
the above-quoted item 10.)

        Please sign and return a copy of this letter to this Bank to confirm our
agreements as stated in clauses (a) and (b) of the second sentence of this Part
0 of this letter.

        2. Financial Covenants. Section 9.3 of the Loan Agreement states that
the Guarantor (Ryland) must comply in all respects with the financial covenants
applicable to it as set forth in Section 9 of the Existing Loan Agreement, to
the same effect as if they were set forth in the Loan Agreement.

        Please sign and return a copy of this letter to this Bank also to
confirm that such provision remains applicable, even though the Existing Loan
Agreement has been terminated, and that the referenced financial covenants with
which Ryland continues to be obligated to comply pursuant to Section 9.3 of the
Loan Agreement are the following:

        - Ryland's Net Worth may not be less than $15 million at the end of any
quarter in Ryland's fiscal year.

        - The ratio of Ryland's Total Liabilities to Ryland's Tangible Net Worth
may not exceed 13.5 to 1.0 at the end of any quarter in Ryland's fiscal year.

        - The sum of Ryland's net income (excluding any recognized non-cash
income) or loss plus (to the extent deducted in calculating that net income or
loss) amortization, depreciation and other noncash charges (on a consolidated
basis) may never be less than $1.00 at the end of any of Ryland's fiscal
quarters for the four fiscal quarter periods then ended.

As used above:

- -       "Net Worth" means, on a consolidated basis and at anytime, Ryland's
        stockholders' equity reflected on its balance sheet.

- -       "Total Liabilities" means, for Ryland, on a consolidated basis, and at
        any time, all amounts that should be reflected as a liability on
        Ryland's balance sheet. The consolidated repurchase and consolidated
        reverse repurchase obligations of Ryland and its affiliates under
        Repurchase Agreements in connection with the sale of, and secured by,
        Mortgage Securities, may be excluded from Total Liabilities.

- -       "Mortgage Securities" means (a) participation certificates representing
        undivided interests in first lien residential mortgage loans purchased
        by the Federal Home Loan Mortgage Corporation under the Emergency Home
        Finance Act of 1970, (b) modified pass through mortgage backed
        certificates guaranteed by the Federal National Mortgage Association
        under the National Housing Act, (c) modified pass through mortgage
        backed certificates guaranteed by the Government National Mortgage
        Association under Section 306(g) of the National Housing Act, or (d) any
        other security issued by an investor that was an "Approved Investor"
        under the Existing Loan Agreement or that is approved by The Chase
        Manhattan Bank, that is based on or backed by a pool of mortgage loans
        providing for pass through payments of principal and interest.

- -       "Tangible Net Worth" means, on a consolidated basis, at any time, and
        without duplication, the sum of (a) Ryland's Net Worth plus (b) Ryland's
        long term debt if its maturity is no earlier than 30 days after the
        Stated Termination Date, as defined in the Loan Agreement and its
        payment is subordinated to payment of Ryland's Obligation




Ms. Susan Cass
September 27, 2001
Page 4

        (as defined in the Loan Agreement) in form and substance acceptable to
        The Chase Manhattan Bank; minus (c) Ryland's goodwill, including,
        without limitation, any amounts representing the excess of the purchase
        price for acquired assets, stock or interests over the book value
        assigned to them minus (d) Ryland's patents, trademarks, service marks,
        trade names and copyrights minus (e) Ryland's other intangible assets.


                Please call if you have any questions or comments.


                                          Very truly yours,
                                          [Original signed by
                                          Cynthia E. Crites]
                                          Vice President



Agreed:

RYLAND MORTGAGE COMPANY


By: [Original signed by Susan M. Cass]
    ------------------------------------------------------
Name: [Susan M. Cass]
      ----------------------------------------------------
Title: [Senior Vice President and Chief Financial Officer]
       ---------------------------------------------------
Date:  [September 27]                 , 2001
       ---------------------------------------------------




                                    EXHIBIT 1

                                  SCHEDULE 8.3

                           PERMITTED LOANS/INVESTMENTS


1.      Mortgage-backed securities and related residual interests, acquired by
        Borrower in the ordinary course of it business.

2.      Permitted Loans and Investments of Guarantor under the Existing Loan
        Agreement.

3.      Mortgage Securities or other mortgage-backed securities issued by any
        Subsidiary of Ryland Group that are acquired by Guarantor under its
        exercise of call Rights with respect to them.

4.      (a) Investments having a maturity of one year or less in commercial
        paper given the highest rating by a nationally recognized credit rating
        agency, (b) the United States governmental obligations having maturities
        of one year or less, and (c) certificates of deposit, bankers
        acceptances, and repurchase agreements issued by a Lender or any other
        commercial bank that has combined capital and surplus of at least Two
        Hundred Fifty Million Dollars ($250,000,000) and a rating of C or better
        by Thompson Bank Watch, Inc.

5.      Eurodollar investments with (a) any Lender or (b) any other financial
        institution that has (i) combined capital, surplus, and undivided
        profits of at least One Hundred Million Dollars ($100,000,000) and (ii)
        a Moody's Investors Service, Inc., or Standard & Poor's Corporation
        commercial paper rating of at least P-1 or A-1, respectively, or (iii)
        if it does not have a commercial paper rating, a bond rating of at least
        A-1 or A-, respectively.

6.      Extensions of trade credit and other payables in the ordinary course of
        business.

7.      Acquisition of securities or evidences of Debt of others when acquired
        by either Company in settlement of accounts receivable or other debts
        arising in the ordinary course of business so long as the total of all
        of those securities or evidences of debt is not material to the
        Companies' financial condition taken as a whole.

8.      Loans or advances to officers or employees (a) of Guarantor or its
        Subsidiaries for travel, entertainment, and relocation expense in the
        ordinary course of business or (b) of either borrower or Guarantor that
        are not in the ordinary course and are never more than a total of Five
        Hundred Thousand Dollars ($500,000) outstanding for both Borrower and
        Guarantor together.

9.      Loans or advances to Guarantor.




                                    EXHIBIT 2

                     SCHEDULE 8.3 TO EXISTING LOAN AGREEMENT

                           PERMITTED LOANS/INVESTMENTS


1.      Mortgage loans and mortgage-backed securities and related residual
        interests, originated or acquired by Borrower in the ordinary course of
        it business.

2.      Acquisition by Borrower of the stock or assets of any Person conducting
        a mortgage-servicing business.

3.      Mortgage Securities or other mortgage-backed securities issued by any
        Subsidiary of Borrower that are acquired by Borrower under its exercise
        of call Rights with respect to them.

4.      Investments that (a) are made by Borrower in joint ventures with
        homebuilders and realtors for the purpose of originating mortgage loans
        and (b) never exceed a total of $5,000,000.

5.      (a) Investments having a maturity of one year or less in commercial
        paper given the highest rating by a nationally recognized credit rating
        agency, (b) United States governmental obligations having maturities of
        one year or less, and (c) certificates of deposit, bankers acceptances,
        and repurchase agreements issued by a Lender or any other commercial
        bank that has combined capital and surplus of at least $250,000,000 and
        a rating of C or better by Thompson Bank Watch, Inc.

6.      Eurodollar investments with (a) any Lender or (b) any other financial
        institution that has (i) combined capital, surplus, and undivided
        profits of at least $100,000,000 and (ii) a Moody's Investors Service,
        Inc., or Standard & Poor's Corporation commercial-paper rating of at
        least P-1 or A-1, respectively, or (iii) if it does not have a
        commercial-paper rating, a bond rating of at least A-1 or A-,
        respectively.

7.      Extensions of trade credit and other payables in the ordinary course of
        business.

8.      Acquisition of securities or evidences of Debt of others when acquired
        by Borrower in settlement of accounts receivable or other debts arising
        in the ordinary course of business so long as the total of all of those
        securities or evidences of debt is not material to the Borrower's
        financial condition taken as a whole.

9.      Loans or advances to officers or employees (a) of Borrower or its
        Subsidiaries for travel, entertainment, and relocation expense in the
        ordinary course of business or (b) of Borrower that are not in the
        ordinary course and are never more than a total of $500,000 outstanding
        for Borrower.

10.     Loans or advances by Borrower to Ryland Group in the management its cash
        so long as (a) (i) they are not made at a time when (and do not cause) a
        Default or any default by Ryland Group exists in respect of any of its
        material debt, and (ii) the total of those loans and advances never
        (without the prior written approval by Administrative Agent) exceeds the
        lesser of either 50% of Borrower's Net Worth or $7,500,000 or (b) is
        otherwise approved by Administrative Agent in writing.

EX-10.10

                                                                  EXHIBIT 10.10


THE RYLAND GROUP, INC.
2002 EQUITY INCENTIVE PLAN

1. Purpose and Types of Awards

        The purpose of THE RYLAND GROUP, INC. 2002 EQUITY INCENTIVE PLAN (the
"Plan") is to promote the long-term growth and profitability of the Corporation
by providing key people with incentives to improve stockholder value and to
contribute to the growth and financial success of the Corporation.

        The Plan permits the granting of stock options (including incentive
stock options qualifying under Code section 422 and nonqualified stock options),
stock appreciation rights, restricted or unrestricted stock awards, stock units,
or any combination of the foregoing.

2. Definitions

        Under this Plan, except where the context otherwise indicates, the
following definitions apply:

(a) "Affiliate" shall mean any entity, whether now or hereafter existing, which
controls, is controlled by, or is under common control with, the Corporation
(including, but not limited to, joint ventures, limited liability companies, and
partnerships). For this purpose, "control" shall mean ownership of 50% or more
of the total combined voting power or value of all classes of stock or interests
of the entity.

(b) "Award" shall mean any stock option, stock appreciation right, restricted or
unrestricted stock award, or stock unit award.

(c) "Board" shall mean the Board of Directors of the Corporation.

(d) "Change in Control" shall mean:

(i) The acquisition by any person, other than the Corporation or any employee
benefit plans of the Corporation, of beneficial ownership of 20 percent or more
of the combined voting power of the Corporation's then outstanding voting
securities;

(ii) The first purchase under a tender offer or exchange offer, other than an
offer by the Corporation or any employee benefit plans of the Corporation,
pursuant to which shares of Common Stock have been purchased;

(iii) During any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors of the Corporation
cease for any reason to constitute at least a majority thereof, unless the
election or the nomination for the election by stockholders of the Corporation
of each new director was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning of the
period; or

(iv) Approval by stockholders of the Corporation of a merger, consolidation,
liquidation or dissolution of the Corporation, or the sale of all or
substantially all of the assets of the Corporation.

(e) "Code" shall mean the Internal Revenue Code of 1986, as amended, and any
regulations promulgated thereunder.

(f) "Common Stock" shall mean shares of common stock, $1.00 par value, of the
Corporation.

(g) "Corporation" shall mean The Ryland Group, Inc. and its successors and
assigns.


(h) "Designated Beneficiary" shall mean the beneficiary designated by an Award
holder, in a manner and to the extent determined by the Administrator, to
receive amounts due or exercise rights of the Award holder in the event of the
Award holder's death. In the absence of an effective designation by an Award
holder, "Designated Beneficiary" shall mean the Award holder's estate.

(i) "Effective Date" shall mean the date the Plan is approved by the
stockholders of the Corporation.

(j) "Fair Market Value" shall mean, with respect to a share of the Corporation's
Common Stock or other property for any purpose on a particular date, the value
determined by the Administrator in good faith. However, if the Common Stock is
registered under Section 12(b) of the Securities Exchange Act of 1934, as
amended, "Fair Market Value" with respect to a share of the Corporation's Common
Stock shall mean, as applicable, (i) either the closing price or the average of
the high and low sale price on the relevant date, as determined in the
Administrator's discretion, quoted on the New York Stock Exchange, the American
Stock Exchange, or the Nasdaq National Market; (ii) the last sale price on the
relevant date quoted on the Nasdaq SmallCap Market; (iii) the average of the
high bid and low asked prices on the relevant date quoted on the Nasdaq OTC
Bulletin Board Service or by the National Quotation Bureau, Inc. or a comparable
service as determined in the Administrator's discretion; or (iv) if the Common
Stock is not quoted by any of the above, the average of the closing bid and
asked prices on the relevant date furnished by a professional market maker for
the Common Stock, or by such other source, selected by the Administrator. If no
public trading of the Common Stock occurs on the relevant date, then Fair Market
Value shall be determined as of the next preceding date on which trading of the
Common Stock does occur. For all purposes under this Plan, the term "relevant
date" as used in this Section 2.1(i) shall mean either the date as of which Fair
Market Value is to be determined or the next preceding date on which public
trading of the Common Stock occurs, as determined in the Administrator's
discretion.

(k) "Grant Agreement" shall mean a written document memorializing the terms and
conditions of an Award granted pursuant to the Plan and shall incorporate the
terms of the Plan.

(l) "1992 Equity Incentive Plan" shall mean The Ryland Group, Inc. 1992 Equity
Incentive Plan, the term of which expires on April 15, 2002.

3. Administration

(a) Administration of the Plan. The Plan shall be administered by the Board, the
Compensation Committee of the Board, or any committee or committees that are
appointed by the Compensation Committee or the Board from time to time (the
Board, the Compensation Committee of the Board and any appointed committee or
committees are referred to as the "Administrator").

(b) Powers of the Administrator. The Administrator shall have all the powers
vested in it by the terms of the Plan, such powers to include authority, in its
sole and absolute discretion, to grant Awards under the Plan, prescribe Grant
Agreements evidencing such Awards and establish programs for granting Awards.

        The Administrator shall have full power and authority to take all other
actions necessary to carry out the purpose and intent of the Plan, including,
but not limited to, the authority to: (i) determine the eligible persons to
whom, and the time or times at which Awards shall be granted; (ii) determine the
types of Awards to be granted; (iii) determine the number of shares to be
covered by or used for reference purposes for each Award; (iv) impose such
terms, limitations, restrictions and conditions upon any such Award as the
Administrator shall deem appropriate; (v) modify, amend, extend or renew
outstanding Awards, or accept the surrender of outstanding Awards and substitute
new Awards (provided however, that, except as provided in Section 7(c) of the
Plan, (A) any modification that would materially adversely affect any
outstanding Award shall not be made without the consent of the holder, and (B)
the exercise price for any outstanding stock option granted under the Plan may
not be decreased after the date of grant nor may any outstanding stock option
granted under the Plan be surrendered




to the Corporation as consideration for the grant of a new stock option with a
lower exercise price); and (vi) accelerate or otherwise change the time in which
an Award may be exercised or becomes payable and to waive or accelerate the
lapse, in whole or in part, of any restriction or condition with respect to such
Award, including, but not limited to, any restriction or condition with respect
to the vesting or exercisability of an Award following termination of any
grantee's employment or other service relationship with the Corporation.

        The Administrator shall have full power and authority, in its sole and
absolute discretion, to administer and interpret the Plan and to adopt and
interpret such rules, regulations, agreements, guidelines and instruments for
the administration of the Plan and for the conduct of its business as the
Administrator deems necessary or advisable. To the extent permitted by
applicable law, the Administrator may delegate to one or more executive officers
of the Corporation the power to (i) grant Awards to individuals who are not
subject to Section 16 of the Securities Exchange Act of 1934, as amended, or any
successor provision and are not officers of the Corporation, and (ii) make all
determinations under the Plan with respect thereto, provided that the
Administrator shall fix the maximum amount of such Awards for the group and a
maximum for any one Award recipient.

(c) Non-Uniform Determinations. The Administrator's determinations under the
Plan (including without limitation, determinations of the persons to receive
Awards, the form, amount and timing of such Awards, the terms and provisions of
such Awards and the Grant Agreements evidencing such Awards) need not be uniform
and may be made by the Administrator selectively among persons who receive, or
are eligible to receive, Awards under the Plan, whether or not such persons are
similarly situated.

(d) Limited Liability. To the maximum extent permitted by law, no member of the
Administrator shall be liable for any action taken or decision made in good
faith relating to the Plan or any Award thereunder.

(e) Indemnification. To the maximum extent permitted by law and by the
Corporation's charter and by-laws, the members of the Administrator shall be
indemnified by the Corporation in respect of all their activities under the
Plan.

(f) Effect of Administrator's Decision. All actions taken and decisions and
determinations made by the Administrator on all matters relating to the Plan
pursuant to the powers vested in it hereunder shall be in the Administrator's
sole and absolute discretion and shall be conclusive and binding on all parties
concerned, including the Corporation, its stockholders, any participants in the
Plan and any other employee, consultant, or director of the Corporation, and
their respective successors in interest.

4. Shares Available for the Plan; Maximum Awards

(a) Subject to the following provisions of this Section 4 and adjustments as
provided in Section 7(c) of the Plan, the maximum number of shares of Common
Stock that may be issued with respect to Awards granted under the Plan shall be
equal to the sum of: (i) 650,000 shares of Common Stock; (ii) any shares of
Common Stock remaining under the 1992 Equity Incentive Plan on the date such
Plan expires that were not then subject to outstanding Awards; and (iii) any
shares of Common Stock that are represented by Awards granted under the 1992
Equity Incentive Plan that are forfeited, expire or are canceled without
delivery of shares of Common Stock or which result in the forfeiture of the
shares of Common Stock back to the Corporation.

(b) If any Award, or portion of an Award, under the Plan or the 1992 Equity
Incentive Plan expires or terminates unexercised, becomes unexercisable or is
forfeited or otherwise terminated, surrendered or canceled as to any shares, or
if any shares of Common Stock are surrendered to the Corporation in connection
with any Award under the Plan or the 1992 Equity Incentive Plan (whether or not
such surrendered shares were acquired pursuant to any Award), or if any shares
are withheld by the Corporation, the shares subject to such Award and the
surrendered and withheld shares shall thereafter be available for further Awards
under the Plan; provided, however, that any such shares that are surrendered to
or withheld by the Corporation in connection with any Award or that are
otherwise forfeited after issuance shall not be available for purchase pursuant
to incentive stock options intended to qualify under Code section 422 and
provided further, that no more than the number of




shares available for issuance on the Effective Date shall be made available for
purchase pursuant to such incentive stock options.

(c) If the exercise price of any stock option granted under the Plan or the 1992
Equity Incentive Plan is satisfied by tendering shares of Common Stock to the
Corporation (by either actual delivery or by attestation), only the number of
shares of Common Stock issued net of the shares of Common Stock tendered shall
be deemed to have been issued for purposes of determining the maximum number of
shares of Common Stock available for issuance under the Plan. To the extent any
shares of Common Stock covered by an Award are not delivered to an Award holder
or the holder's Designated Beneficiary because the Award is settled in cash,
such shares shall not be deemed to have been issued for purposes of determining
the maximum number of shares of Common Stock available for issuance under the
Plan.

(d) Notwithstanding the provisions of Section 4(a) of the Plan and subject to
adjustment as provided in Section 7(c) of the Plan, the maximum number of shares
of Common Stock that may be issued in conjunction with Awards granted pursuant
to subsections (c) and (d) of Section 6 of the Plan (relating to restricted and
unrestricted stock awards and stock units) shall be 130,000 shares of Common
Stock; provided, however, that any shares of Common Stock that are forfeited
back to the Corporation with respect to any such Awards shall be available for
further Awards under subsections (c) and (d) of Section 6 of the Plan.

(e) Subject to adjustments as provided in Section 7(c) of the Plan, the maximum
number of shares of Common Stock subject to Awards of any combination that may
be granted during any one fiscal year of the Corporation to any one individual
under this Plan shall be limited to 500,000 shares. Such per-individual limit
shall not be adjusted to effect a restoration of shares of Common Stock with
respect to which the related Award is terminated, surrendered or canceled.

5. Participation

        Participation in the Plan shall be open to all employees, officers, and
directors of, and other individuals providing bona fide services to or for, the
Corporation, or of any Affiliate of the Corporation, as may be selected by the
Administrator from time to time. The Administrator may also grant Awards to
individuals in connection with hiring, retention or otherwise, prior to the date
the individual first performs services for the Corporation or an Affiliate
provided that such Awards shall not become vested prior to the date the
individual first performs such services.

6. Awards

The Administrator, in its sole discretion, establishes the terms of all Awards
granted under the Plan. Awards may be granted individually or in tandem with
other types of Awards. All Awards are subject to the terms and conditions
provided in the Grant Agreement. The Administrator may permit or require a
recipient of an Award to defer such individual's receipt of the payment of cash
or the delivery of Common Stock that would otherwise be due to such individual,
including the crediting of interest on deferred amounts denominated in cash and
dividend equivalents on amounts denominated in Common Stock, by virtue of the
exercise of, payment of, or lapse or waiver of restrictions respecting, any
Award. If any such payment deferral is required or permitted, the Administrator
shall, in its sole discretion, establish rules and procedures for such payment
deferrals.

(a) Stock Options. The Administrator may from time to time grant to eligible
participants Awards of incentive stock options as that term is defined in Code
section 422 or nonqualified stock options; provided, however, that Awards of
incentive stock options shall be limited to employees of the Corporation or of
any current or hereafter existing "parent corporation" or "subsidiary
corporation," as defined in Code sections 424(e) and (f), respectively, of the
Corporation. No stock option shall be an incentive stock option unless so
designated by the Administrator at the time of grant or in the Grant Agreement
evidencing such stock option. All stock options granted under the Plan must have
an exercise price at least equal to Fair Market Value as of the date of grant
and may not have a term longer than ten (10) years. Except for adjustments
pursuant to Section 7(c), the




exercise price for any outstanding stock option granted under the Plan may not
be decreased after the date of grant nor may any outstanding stock option
granted under the Plan be surrendered to the Corporation as consideration for
the grant of a new stock option with a lower exercise price.

(b) Stock Appreciation Rights. The Administrator may from time to time grant to
eligible participants Awards of Stock Appreciation Rights ("SAR"). An SAR
entitles the grantee to receive, subject to the provisions of the Plan and the
Grant Agreement, a payment having an aggregate value equal to the product of (i)
the excess of (A) the Fair Market Value on the exercise date of one share of
Common Stock over (B) the base price per share specified in the Grant Agreement,
times (ii) the number of shares specified by the SAR, or portion thereof, which
is exercised. The base price per share with respect to an SAR shall in no event
be lower than Fair Market Value as of the date of grant. Payment by the
Corporation of the amount receivable upon any exercise of an SAR may be made by
the delivery of Common Stock or cash, or any combination of Common Stock and
cash, as determined in the sole discretion of the Administrator. If upon
settlement of the exercise of an SAR a grantee is to receive a portion of such
payment in shares of Common Stock, the number of shares shall be determined by
dividing such portion by the Fair Market Value of a share of Common Stock on the
exercise date. No fractional shares shall be used for such payment and the
Administrator shall determine whether cash shall be given in lieu of such
fractional shares or whether such fractional shares shall be eliminated.

(c) Stock Awards. The Administrator may from time to time grant restricted or
unrestricted stock Awards to eligible participants in such amounts, on such
terms and conditions, and for such consideration, including no consideration or
such minimum consideration as may be required by law, as it shall determine. A
stock Award may be paid in Common Stock, in cash, or in a combination of Common
Stock and cash, as determined in the sole discretion of the Administrator.

(d) Stock Units. The Administrator may from time to time grant Awards to
eligible participants denominated in stock-equivalent units in such amounts and
on such terms and conditions as it shall determine. Stock units granted to a
participant shall be credited to a bookkeeping reserve account solely for
accounting purposes and shall not require a segregation of any of the
Corporation's assets. An Award of stock units may be settled in Common Stock, in
cash, or in a combination of Common Stock and cash, as determined in the sole
discretion of the Administrator. Shares of Common Stock awarded in connection
with an Award of stock units may be issued for such consideration as may be
determined by the Administrator, including for no consideration or such minimum
consideration as may be required by law. Except as otherwise provided in the
applicable Grant Agreement, the grantee shall not have the rights of a
stockholder with respect to any shares of Common Stock represented by a stock
unit solely as a result of the grant of a stock unit to the grantee.

7. Miscellaneous

(a) Withholding of Taxes. Grantees and holders of Awards shall pay to the
Corporation or its Affiliate, or make provision satisfactory to the
Administrator for payment of, any taxes required to be withheld in respect of
Awards under the Plan no later than the date of the event creating the tax
liability. The Corporation or its Affiliate may, to the extent permitted by law,
deduct any such tax obligations from any payment of any kind otherwise due to
the grantee or holder of an Award. In the event that payment to the Corporation
or its Affiliate of such tax obligations is made in shares of Common Stock, such
shares shall be valued at Fair Market Value on the applicable date for such
purposes.

(b) Transferability. Except as otherwise determined by the Administrator, and in
any event in the case of an incentive stock option or a stock appreciation right
granted with respect to an incentive stock option, no Award granted under the
Plan shall be transferable by a grantee otherwise than by will or the laws of
descent and distribution. Unless otherwise determined by the Administrator in
accord with the provisions of the immediately preceding sentence, an Award may
be exercised during the lifetime of the grantee, only by the grantee or, during
the period the grantee is under a legal disability, by the grantee's guardian or
legal representative.




(c) Adjustments; Business Combinations.

(i) Upon a stock dividend of, or stock split or reverse stock split affecting,
the Common Stock of the Corporation, (A) the maximum number of shares reserved
for issuance or with respect to which Awards may be granted under the Plan and
the maximum number of shares with respect to which Awards may be granted during
any one fiscal year of the Corporation to any individual, as provided in Section
4 of the Plan, and (B) the number of shares covered by and the exercise price
and other terms of outstanding Awards, shall, without further action of the
Board, be adjusted to reflect such event unless the Board determines, at the
time it approves such stock dividend, stock split or reverse stock split, that
no such adjustment shall be made. The Administrator may make adjustments, in its
discretion, to address the treatment of fractional shares and fractional cents
that arise with respect to outstanding Awards as a result of the stock dividend,
stock split or reverse stock split.

(ii) In the event of any other changes affecting the Corporation, the
capitalization of the Corporation or the Common Stock of the Corporation by
reason of any spin-off, split-up, dividend, recapitalization, merger,
consolidation, business combination or exchange of shares and the like, the
Administrator except as otherwise provided in Section 7(d), in its discretion
and without the consent of holders of Awards, may make: (A) appropriate
adjustments to the maximum number and kind of shares reserved for issuance or
with respect to which Awards may be granted under the Plan, in the aggregate and
with respect to any individual, as provided in Section 4 of the Plan, and to the
number, kind and price of shares covered by outstanding Awards; and (B) any
other adjustments in outstanding Awards, including but not limited to reducing
the number of shares subject to Awards or providing or mandating alternative
settlement methods such as settlement of the Awards in cash or in shares of
Common Stock or other securities of the Corporation or of any other entity, or
in any other matters which relate to Awards as the Administrator shall, in its
sole discretion, determine to be necessary or appropriate.

(iii) The Administrator is authorized to make, in its discretion and without the
consent of holders of Awards, adjustments in the terms and conditions of, and
the criteria included in, Awards in recognition of unusual or nonrecurring
events affecting the Corporation, or the financial statements of the Corporation
or any Affiliate, or of changes in applicable laws, regulations, or accounting
principles, whenever the Administrator determines that such adjustments are
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan and outstanding
Awards.

(d) Change in Control. Notwithstanding the provisions of Section 7(c)(ii), in
the event of a Change in Control, all Awards under the Plan are automatically
and fully vested and immediately exercisable or payable in whole or in part. The
obligations of the Corporation pursuant to the Plan and performance with respect
to rights of Award holders thereunder shall be assumed by any participant,
successor-in-interest or beneficiary of or interested party in the Change in
Control (collectively, the Change-in-Control Participant), and the Change-in
Control Participant shall cause the Awards to be assumed, or new rights
substituted therefor, by another entity.

(e) Substitution of Awards in Mergers and Acquisitions in which the Corporation
or an Affiliate is the Acquiring Entity. Solely in the event that the
Corporation or an Affiliate is an acquiring entity in a merger, acquisition and
other business combination, Awards may be granted under the Plan from time to
time in substitution for Awards held by employees, officers, consultants or
directors of a target entity who become or are about to become employees,
officers, consultants or directors of the Corporation or an Affiliate as the
result of a merger or consolidation of the employing entity with the Corporation
or an Affiliate, or the acquisition by the Corporation or an Affiliate of the
assets or stock of the employing entity. The terms and conditions of any
substitute Awards so granted may vary from the terms and conditions set forth
herein to the extent that the Administrator deems appropriate at the time of
grant to conform the substitute Awards to the provisions of the awards for which
they are substituted.

(f) Termination, Amendment and Modification of the Plan. The Board may
terminate, amend or modify the Plan or any portion thereof at any time;
provided, however, that the provisions of Section 6(a) relating to stock option
repricing shall not be amended without approval by the Corporation's
stockholders.




(g) Non-Guarantee of Employment or Service. Nothing in the Plan or in any Grant
Agreement thereunder shall confer any right on an individual to continue in the
service of the Corporation or shall interfere in any way with the right of the
Corporation to terminate such service at any time with or without cause or
notice. The Corporation expressly reserves the right at any time to dismiss an
Award recipient free from any liability or claim under the Plan, except as
expressly provided in the applicable Grant Agreement.

(h) No Trust or Fund Created. Neither the Plan nor any Award shall create or be
construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Corporation and a grantee or any other person. To the
extent that any grantee or other person acquires a right to receive payments
from the Corporation pursuant to an Award, such right shall be no greater than
the right of any unsecured general creditor of the Corporation.

(i) Designated Beneficiaries. Unless otherwise provided in the applicable Grant
Agreement, amounts or certificates due an Award recipient after his or her death
under an Award shall be paid or delivered to the Award recipient's Designated
Beneficiary in accordance with the terms and conditions of the Award.

(j) Governing Law. The validity, construction and effect of the Plan, of Grant
Agreements entered into pursuant to the Plan, and of any rules, regulations,
determinations or decisions made by the Administrator relating to the Plan or
such Grant Agreements, and the rights of any and all persons having or claiming
to have any interest therein or thereunder, shall be determined exclusively in
accordance with applicable federal laws and the laws of the State of Maryland,
without regard to its conflict of laws principles.

(k) Effective Date; Termination Date. The Plan is effective as of the date on
which the Plan is approved by the stockholders of the Corporation. Prior to such
approval, Awards may be made under the Plan expressly subject to such approval
but any such Awards shall be void and ineffective if the Plan is not approved by
the stockholders. The Plan shall be unlimited in duration and, in the event of
Plan termination, shall remain in effect as long as any Awards under it are
outstanding; provided, however, that no Awards shall be granted under the Plan
after the close of business on April 24, 2012.

EX-12.1

EXHIBIT 12.1 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(amounts in thousands, except ratio)





                                                               YEAR ENDED DECEMBER 31,                                THREE MONTHS
                                       -------------------------------------------------------------------------         ENDED
                                         1997            1998            1999            2000            2001          3/31/2002
                                       ---------       ---------       ---------       ---------       ---------      ------------
                                                                                                     
Consolidated pretax income
  before extraordinary item            $  36,470       $  75,158       $ 109,336       $ 134,840       $ 225,580       $  25,964

Share of distributed income
  of 50%-or-less-owned
  affiliates net of equity pickup          1,334           2,602            (263)           (163)            (26)            (33)

Amortization of capitalized
  interest                                21,581          20,645          19,027          27,581          31,878           6,151

Interest                                  74,950          63,410          52,764          62,610          55,327          11,764

Less interest capitalized
  during the period                      (17,636)        (18,601)        (24,397)        (34,105)        (31,675)         (9,029)

Net amortization of debt
  discount and premium
  and issuance expense                        84              36              33              --              --              --

Interest portion of
  rental expense                           3,541           4,709           4,522           6,065           7,190           1,578
                                       ---------       ---------       ---------       ---------       ---------       ---------

EARNINGS                               $ 120,324       $ 147,959       $ 161,022       $ 196,828       $ 288,274       $  36,395




Interest                               $  74,950       $  63,410       $  52,764       $  62,610       $  55,327       $  11,764

Net amortization of debt
  discount and premium
  and issuance expense                        84              36              33              --              --              --

Interest portion of
  rental expense                           3,541           4,709           4,522           6,065           7,190           1,578
                                       ---------       ---------       ---------       ---------       ---------       ---------

FIXED CHARGES                          $  78,575       $  68,155       $  57,319       $  68,675       $  62,517       $  13,342

Ratio of earnings to
  fixed charges                             1.53            2.17            2.81            2.87            4.61            2.73