Employment Agreement - The Ryland Group Inc. and R. Chad Dreier


EMPLOYMENT AGREEMENT


EMPLOYMENT AGREEMENT dated as of the 28th day of January 1997, by and between 
The Ryland Group, Inc., a Maryland corporation (the 'Company'), and R. Chad 
Dreier (the 'Executive').

In consideration of the mutual covenants and agreements of the parties set 
forth in this Agreement, and other good and valuable consideration the receipt 
and sufficiency of which are acknowledged, the parties agree as follows:

1.    Replacement of Prior Employment Agreement.  This Employment Agreement 
replaces and supercedes the Employment Agreement dated as of December 
31, 1994 between the Company and the Executive which upon the effective 
date of this Employment Agreement is terminated and no longer effective.

2.    Term of Employment.  The Company agrees to employ the Executive for a 
period of four (4) years commencing as of January 1, 1997.  This 
Agreement shall be automatically renewed for a one (1) year period at 
the end of the initial four (4) year term or at the end of each renewal 
period until terminated in accordance with the terms of this Agreement.  
Either party may terminate this Agreement at the end of the initial four 
(4) year term or at the end of each one (1) year renewal period by 
giving the other party written notice of termination delivered at least 
one hundred eighty (180) days prior to the end of the initial term or 
any renewal period.

      If at any time during the initial term or any renewal period, a Change 
of Control of the Company occurs (as defined in Section 7.2 below), the 
term of this Agreement shall be the longer of  (a) three (3) years 
beyond the effective date of the Change of Control or (b) the term as 
provided in this Section 2.

3.    Position and Responsibilities.  The Executive shall serve as the 
Chairman of the Board of Directors, President and Chief Executive 
Officer of the Company.  In his capacity as Chairman of the Board, 
President and Chief Executive Officer, the Executive shall be the 
Company's highest ranking executive officer and shall have full 
authority and responsibility for formulating and administering the plans 
and policies of the Company subject to the control of the Board of 
Directors.

4.    Performance of Duties.  The Executive shall devote his full time 
attention and energies to the Company's business and will not engage in 
consulting work or any business for his own account or for any person, 
firm or corporation.  The Executive may serve as a director of other 
companies so long as this service does not interfere with the 
performance of his duties with the Company.

5.    Compensation.  For all services to be rendered by the Executive during 
the term of this Agreement, the Company shall pay and provide to the 
Executive:

5.1   Base Salary.  The Company shall pay the Executive a Base Salary in 
an amount which shall be established from time to time by the 
Board of Directors, provided the Base Salary shall not be less 
than six hundred fifty-five thousand dollars ($655,000) per year.  
This Base Salary is paid in installments consistent with the 
normal payroll practices of the Company and reviewed annually to 
determine whether, in the judgment of the Board of Directors, it 
should be increased based on the performance of the Executive and 
any other factors deemed appropriate.

5.2   Annual Bonus.  The Executive is eligible to receive an annual cash 
bonus (the 'Bonus') in respect of each fiscal year during the term 
of this Agreement equal to one percent (1.0%) of the Ordinary 
Course Pre-Tax Income.  'Ordinary Course Pre-Tax Income' is the 
consolidated pre-tax income of the Company and its subsidiaries as 
reflected in the audited consolidated financial statements of the 
Company, as adjusted in good faith by the Compensation Committee 
to eliminate the effect of nonrecurring gains and losses and other 
items not reflective of the ongoing ordinary course of business 
and operating performance of the Company.  The Bonus shall be 
payable to the Executive in cash within sixty (60) days after the 
end of each fiscal year during the term of this Agreement.

5.3   Incentive Plans.  The Executive shall participate in any stock 
option and incentive award programs available to executive 
officers of the Company.  This participation is on a basis which 
is commensurate with the Executive's position with the Company.

5.4   Other Benefits.  The Executive is entitled to receive other 
employee benefits, such as disability, group life, sickness, 
accident and health insurance programs, split-dollar life 
insurance programs and other perquisites that are available to 
executive officers of the Company.  This participation is on a 
basis which is commensurate with the Executive's position with the 
Company.

5.5   Stock Option

(a)   Grant of Option

      Pursuant to the terms and conditions of The Ryland Group, 
Inc. 1992 Equity Incentive Plan (the 'Plan), the Company 
grants to the Executive during the period ending at the 
close of business on January 28, 2007 (the 'Option Period'), 
the option to purchase (the 'Option') from the Company at a 
price of $12.75 per share up to 150,000 shares of the 
Company's Common Stock.  THE OPTION GRANTED SHALL NOT BE 
TREATED AS AN 'INCENTIVE STOCK OPTION' WITHIN THE MEANING OF 
SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986.  AS 
AMENDED.  The option is governed and controlled by all terms 
of the Plan.

(b)   Exercise of Option.

The Option may be exercised in whole or in part in 
accordance with the following vesting schedule:

The aggregate number of shares of Common Stock optioned by 
this Agreement shall be dividend into 3 installments.

The first installment for 50,000 shares may be exercised in 
whole or in part beginning 1/29/98
The second installment for 50,000 shares may be exercised in 
whole or in part beginning 1/29/99
The third installment for 50,000 shares may be exercised in 
whole or in part beginning 1/29/00

In case an installment is not immediately exercisable, the 
Board of Directors or the Compensation Committee of the Board 
may in its discretion accelerate the time at which the 
installment may be exercised.  To the extent not exercised, 
installments shall accumulate and be exercisable by the 
Executive during the Option Period.  Continued accrual and 
vesting of installments shall cease immediately upon 
termination of employment for any reason whatsoever, subject to 
acceleration by the Board of Directors or the Compensation 
Committee.

(c)   Payment of Exercise Price.

The Executive shall pay the exercise price in the following
ways:

(I)   cash payment (by certified check, bank draft or money 
order payable to the order of the Company).

(ii)  if approved by the Company, cash payment may be made from 
the proceeds of an immediate sale of Common Stock 
receivable upon the exercise of the Option; or

(iii) if approved by the Company, delivery of Common Stock 
(including executed stock powers attached thereto);

The payment of the exercise price shall be delivered with a 
notice of exercise, which notice will be in a form provided by 
the Company.  

The Company shall, subject to the receipt of withholding tax, 
issue to the Executive the stock certificate for the number of 
shares of Common Stock with respect to which the Option is 
exercised.

The value of shares of Common Stock used as payment for the 
exercise of an Option shall be the closing price of such shares 
on the New York Stock Exchange on the date of exercise of an 
Option or as otherwise determined by the Company, the Board of 
Directors or the Compensation Committee of the Board of 
Directors.

(d)   Termination

The Option shall terminate upon the happening of the earliest 
of the following events:

(i)   January 28, 2007

(ii)  The expiration of 90 days after the date of termination 
of the Executive's employment, except in the case of 
death, Disability (defined below) or retirement.  During 
this period, the Executive shall have the right to 
exercise the Option to the extent it is exercisable on 
the termination date.

(iii) The expiration of three (3) years after the date of death 
of the Executive if death occurs during the term of this 
Agreement.  During this period, the Executive's estate, 
personal representative or beneficiary shall have the 
right to exercise the Option to the extent it is 
exercisable on the date of death.

(iv)  The expiration of three (3) years after the date the 
Executive's employment is terminated due to Disability or 
retirement.  During this period, the Executive shall have 
the right to exercise the Option to the extent it is 
exercisable on the date of termination.

(e)   Merger, Consolidation or Share Exchange.

After any merger, consolidation or share exchange in which the 
Company is the surviving or resulting corporation, the 
Executive shall be entitled, upon the exercise of an Option, to 
receive the number and class of shares of stock or other 
consideration to which the Executive would have been entitled, 
if, immediately prior to such merger, consolidation or share 
exchange, the Executive had exercised the Option in accordance 
with and subject to the terms of this Agreement and the Plan.  
If the Company is not the surviving or resulting corporation in 
any merger, consolidation or share exchange, the surviving or 
resulting corporation shall tender stock options to purchase 
its shares on terms and conditions that substantially preserve 
the rights and benefits under this Option.



5.6   Stock Units