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



                           EMPLOYMENT AGREEMENT


EMPLOYMENT  AGREEMENT  dated as of the 21st day of April 1999,  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 supersedes the Employment  Agreement  dated as of January 28,
      1997,  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  until
      December 31, 2003.  This Agreement shall  automatically  renew for a one
      (1) year  renewal  period on December  31,  2003,  or for a one (1) year
      renewal  period at the end of each renewal  period until  terminated  in
      accordance  with  the  terms  of  this   Agreement.   Either  party  may
      terminate  this  Agreement on December  31, 2003,  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
      December 31, 2003, 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
            the fixed amount of seven hundred fifty thousand dollars  ($750,000)
            per year for the term of this Employment Agreement. This Base Salary
            is paid in installments consistent with the normal payroll practices
            of the Company.

      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  amount of
            Ordinary Course Pre-Tax Income that equals or is less than the prior
            fiscal year's  Ordinary  Course  Pre-Tax Income and one and one-half
            percent (1.5%) of the amount of Ordinary  Course Pre-Tax Income that
            exceeds the prior fiscal  year's  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
            non-recurring 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  the  TRG
            Incentive Plan and shall have an individual target performance award
            equal to 120% of the  Executive's  Base Salary.  The Executive shall
            participate in any additional  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)   Prior Grant of Stock Option (January 1997)

                  Pursuant to the terms and conditions of The Ryland Group, Inc.
                  1992 Equity Incentive Plan (the 'Plan), the Company previously
                  granted to the  Executive on January 28, 1997,  the ability to
                  exercise  during the period ending at the close of business on
                  January 28, 2007, the option to purchase 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.

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

                                       2


                  The  aggregate  number of shares of Common  Stock  optioned by
                  this Agreement are divided into three (3) installments.

                  The first  installment  for 50,000 shares was  exercisable  in
                  whole or in part beginning 1/29/98. The second installment for
                  50,000 shares was  exercisable  in whole or in part  beginning
                  1/29/99.   The  third   installment   for  50,000   shares  is
                  exercisable in whole or in part beginning 1/29/00.

             (b)   Current Grant of Stock Option.

                  Pursuant to the terms and  conditions of the Plan, the Company
                  grants to the Executive  during the period ending at the close
                  of business on April 21, 2009, the option to purchase from the
                  Company at a price equal to the Fair  Market  Value per share,
                  which is the closing  price on the New York Stock  Exchange on
                  April 21, 1999, of the Company's  Common Stock,  up to 200,000
                  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.

                  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
                  pursuant to this Section  5.5(b) of this Agreement are divided
                  into three (3) installments.

                  The first  installment  for 70,000  shares is  exercisable  in
                  whole or in part beginning 4/21/00. The second installment for
                  70,000  shares is  exercisable  in whole or in part  beginning
                  4/21/01.   The  third   installment   for  60,000   shares  is
                  exercisable in whole or in part beginning 4/21/02.

             (c) Exercise of Option.

                  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.

             (d)  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).

                                       3


                  (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.

            (e)   Termination

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

                  (i) In accordance with Sections 5.5 (a) and (b) above.

                  (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.

            (f)   Merger, Consolidation or Share Exchange

                                       4


                  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

            (a)   Prior Grant of Stock Units (January 1997)

                  Pursuant to the terms and  conditions of the Plan, the Company
                  previously  granted to the  Executive an award of 45,000 Stock
                  Units pursuant to Section 10 of the Plan.

                  The Stock Units become vested and payable in  accordance  with
                  the following vesting schedule:

                             DATE                       VESTING

                        November 1, 1999             15,000 Stock Units
                        November 1, 2000             30,000 Stock Units

            (b)   Current Grant of Stock Units

                  Pursuant to the terms and  conditions of the Plan, the Company
                  grants  to the  Executive  an  award  of  45,000  Stock  Units
                  pursuant to Section 10 of the Plan.

                  The Stock Units become vested and payable in  accordance  with
                  the following vesting schedule:

                             DATE                       VESTING

                        February 15, 2001            15,000 Stock Units
                        February 15, 2002            15,000 Stock Units
                        February 15, 2003            15,000 Stock Units

            (c)   Vesting of Stock Units.

                  If the Executive  terminates  employment  with the Company for
                  any reason prior to any vesting date, all unvested Stock Units
                  are immediately  forfeited and cancelled.  Notwithstanding the
                  foregoing,  all unvested Stock Units shall vest and be paid by
                  the Company to the Executive  upon the  occurrence of a Change
                  of Control (as defined in Section 7.2 below).

                                       5


            (d)   Payment of Stock Units.

                  Upon each vesting  date on which the  Executive is employed by
                  the Company,  the number of Stock Units which become vested on
                  such date shall be paid to the Executive in an equal number of
                  shares of Common Stock of the Company and, upon payment,  such
                  Stock Units are automatically fully paid and cancelled.

            (e)   Dividend Equivalents.

                  As of each dividend payment date with respect to Common Stock,
                  the Executive shall receive a cash dividend equivalent payment
                  equal to the product of (i) the per-share cash dividend amount
                  payable  with  respect to each  share of Common  Stock on that
                  date and (ii) the total  number of Stock  Units which have not
                  been  vested,   paid  or  cancelled  as  of  the  record  date
                  corresponding to such dividend payment date.

            (f)   Delivery of Stock Certificates.

                  The stock certificate for shares of Common Stock issued to the
                  Executive  in  payment  of any  vested  Stock  Unit  shall  be
                  delivered to the Executive on the applicable vesting date.

            (g)   Tax Matters.

                  The  Executive  will  pay to the  Company,  or make  provision
                  satisfactory to the Company for payment of, any taxes required
                  by law to be withheld with respect to the payment of any Stock
                  Unit no later than the date of vesting of each Stock Unit. Tax
                  obligations  may be paid in  whole  or in  part in  shares  of
                  Common Stock,  including  shares  retained from the payment of
                  the Stock Units, valued at their Fair Market Value (as defined
                  in the Plan) on the date of payment.

            (h)   Rights of Executive With Respect to Stock Units.

                  The  Executive  shall  have no  rights as a  stockholder  with
                  respect to any Stock  Unit or any share of Common  Stock to be
                  issued  with  respect  to any  Stock  Unit  until  the date of
                  vesting and payment.  The  Executive's  rights with respect to
                  Stock  Units  shall  be  the  rights  of a  general  unsecured
                  creditor of the Company  until the Stock Units vest and shares
                  of Common Stock are actually issued to the Executive.

            (i)   Adjustments.

                  The number of Stock Units shall be appropriately  adjusted, as
                  determined by the Board of Directors or Compensation Committee
                  of the Board of Directors  pursuant to the Plan,  in the event
                  of any stock split, combination or similar transaction.

                                       6




            (j)   Stock Units Subject to Terms and Conditions of the Plan.

                  The Stock  Units and all shares of Common  Stock  issued  with
                  respect  to Stock  Units  shall be  subject  to the  terms and
                  conditions of the Plan,  which is incorporated  herein by this
                  reference.

6.    Employment Termination.

      6.1   Termination Due to Retirement or Death. In the event the Executive's
            employment  is  terminated  by reason of  retirement  or death,  the
            Executive's  benefits  shall be determined  in  accordance  with the
            Company's  retirement,   survivor's  benefits,  insurance  or  other
            applicable  program  then in  effect.  Upon  the  effective  date of
            termination,  the  Company's  obligation  to  pay  and  provide  the
            compensation  described  in  Section 5 shall  expire,  except to the
            extent the benefits described in Section 5 continue after retirement
            or death. In addition, the Company shall pay to the Executive or the
            Executive's  beneficiaries  or estate a pro rata  share of the Bonus
            for the year in which the termination occurs based on the results of
            the  Company  for that  fiscal  year.  This pro rata Bonus  shall be
            determined by multiplying  the Bonus for the applicable  fiscal year
            by a fraction,  the numerator of which is the number of days in such
            fiscal year prior to the date of termination  and the denominator of
            which is the total number of days in such fiscal year.  The pro rata
            Bonus  shall  be  paid  within  sixty  (60)  days  of the end of the
            applicable fiscal year.

      6.2   Termination  Due to Disability.  In the event the Executive  becomes
            Disabled (as defined  below) and is unable to perform his duties for
            more than one hundred  twenty (120) days during any period of twelve
            (12)  months  or, in the  reasonable  determination  of the Board of
            Directors,  the Executive's Disability (as defined below) will exist
            for more than one hundred  twenty  (120)  days,  the Company has the
            right to terminate  the  Executive's  employment  and the  Company's
            obligation to pay and provide the compensation  described in Section
            5 shall  expire,  except to the extent  the  benefits  described  in
            Section 5 continue after Disability.  In addition, the Company shall
            pay to the  Executive  a pro rata share of the Bonus for the year in
            which the termination occurs based on the results of the Company for
            that fiscal year determined as provided in Section 6.1. The pro rata
            Bonus  shall  be  paid  within  sixty  (60)  days  of the end of the
            applicable fiscal year.

            The term  'Disabled'  or  'Disability'  means the  incapacity of the
            Executive,  due to  injury,  illness,  disease  or  bodily or mental
            infirmity,  to  engage in the  performance  of his  duties  with the
            Company.  A Disability is determined by the Board of Directors  upon
            receipt of and in reliance on competent  medical  advice from one or
            more  individuals  selected by the Board who are  qualified  to give
            professional medical advice.

      6.3   Voluntary Termination by the Executive.  The Executive may terminate
            this Agreement at any time by giving the Board of Directors  written
            notice of intent to  terminate  delivered  at least ninety (90) days
            prior to the effective date of such termination. Upon the expiration
            of this ninety (90) day period,  the  termination  by the  Executive
            shall become effective. The Company shall pay the Executive his Base
            Salary through the effective  date of termination  plus all benefits
            to  which  the  Executive  has a  vested  right  at that  time.  The
            Executive  shall not  receive a Bonus for the  fiscal  year in which
            voluntary  termination  occurs.  Upon the date of  termination,  the
            Company and the Executive  shall have no further  obligations  under
            this Agreement except as set forth in Sections 8 and 9.

                                       7


      6.4   Termination by the Company Without Cause. Other than during a Change
            of  Control  Period  (as  defined  in  Section  7.2),  the  Board of
            Directors may terminate the Executive's employment for reasons other
            than  death,  Disability,  retirement  or for Cause (as  defined  in
            Section 6.5) by notifying  the  Executive in writing at least thirty
            (30)  days  prior to the  effective  date of  termination.  Upon the
            expiration of this thirty (30) day period,  the  termination  by the
            Company  is  effective.  Within  thirty  (30) days after the date of
            termination,  the Company shall pay to the Executive a lump sum cash
            payment  equal to the  greater of (a) the Base  Salary in effect for
            the remaining term of this Agreement, or (b) twenty-four (24) months
            of  the  Base  Salary  in  effect  as  of  the  effective   date  of
            termination,  and shall provide to the Executive a  continuation  of
            his  health  and  welfare  benefits  for  the  greater  of (a)  such
            remaining term of this Agreement or (b) twenty-four (24) months.  If
            the  Company is unable to provide  health and  welfare  benefits  as
            required by this Section 6.4, the Company shall  provide  equivalent
            benefits to the  Executive  or pay to the  Executive a lump sum cash
            payment  equal to the value of the  benefits  which the  Company  is
            unable to provide.  The Company  shall pay the  Executive  an annual
            Bonus  for the  year in  which  termination  occurs  based  upon the
            performance  of the  Company  through  the end of the fiscal year in
            which the termination occurs. This annual Bonus shall be paid within
            sixty  (60)  days  of the end of the  applicable  fiscal  year.  The
            Company  shall  also pay the  Executive  all  benefits  to which the
            Executive  has a  vested  right  at the  time  of  termination.  For
            purposes of this Section 6.4: (i) with respect to the fiscal year in
            which termination occurs, the Executive shall be fully vested in any
            prior year awards that remain unvested or awards made for the fiscal
            year in which termination occurs under the TRG Incentive Plan or any
            successor  plan,  and (ii) all  vested  awards  under any  incentive
            programs  shall  be  paid   notwithstanding  any  provision  of  the
            governing  plan or program  calling for  forfeiture of benefits upon
            termination.  If for any reason the Company is unable to comply with
            the  preceding  sentence,  the  Company  shall pay the  Executive  a
            lump-sum  cash payment  equal to the value of the benefits or awards
            it is  unable  to vest,  pay or give  credit  for.  Upon the date of
            termination,  the  Company and the  Executive  shall have no further
            obligations  under this Agreement  except as set forth in Sections 8
            and 9.

      6.5   Termination  for Cause.  The Board of Directors  may  terminate  the
            Executive's   employment  at  any  time  for  'Cause'.   'Cause'  is
            determined  by the  Board of  Directors  and is  defined  as  fraud,
            embezzlement,  theft or other  criminal  act  constituting  a felony
            under U.S.  laws,  or the  failure of the  Executive  to perform any
            material obligations under this Agreement for reasons other than the
            Executive's  death,  Disability  or  retirement.  In the event  this
            Agreement is  terminated  by the Board of Directors  for Cause,  the
            Company shall pay the Executive his Base Salary  through the date of
            termination  and the Executive shall forfeit all rights and benefits
            he is  entitled  to receive  including  any right to a Bonus for the
            fiscal  year in which the  termination  occurs.  The Company and the
            Executive  thereafter shall have no further  obligations  under this
            Agreement except as set forth in Sections 8 and 9.

                                       8


      6.6   Termination  for Good  Reason.  The  Executive  may  terminate  this
            Agreement for Good Reason (as defined  below) by giving the Board of
            Directors  thirty (30) days written  notice of intent to  terminate,
            which  notice  sets  forth  the  facts  and  circumstances  for  the
            termination. Upon the expiration of this thirty (30) day period, the
            termination  by the Executive is effective and the Company shall pay
            the  Executive  the  benefits  set forth in  Section  6.4 unless the
            provisions of Section 7 apply.

            'Good Reason' means,  without the Executive's written consent, the
            occurrence of any of the following:

            (a)   The   assignment  of  the   Executive  to  duties   materially
                  inconsistent  with, or a reduction or alteration in the nature
                  or   status   of,   the   Executive's   authorities,   duties,
                  responsibilities  or status  as an  executive  officer  of the
                  Company from those in effect during the preceding year;

            (b)   The Company  requires the  Executive to be based at a location
                  which is more than fifty (50) miles from the Executive's  then
                  current primary residence;

            (c)   A reduction by the Company in the Executive's Base Salary; or

            (d)   The  failure of the  Company to obtain an  agreement  from any
                  successor to the Company to perform this Agreement.

7.    Change in Control.

      7.1   Termination After Change of Control. In lieu of the compensation and
            benefits  provided in Sections 5 or 6, which will be superseded  and
            replaced by the provisions of this Section 7, the following payments
            and benefits will be provided to the Executive by the Company in the
            event of a  Termination  of Employment  (as defined  below) during a
            Change of Control Period (as defined below) of the Company:

            (a)   Lump Sum Cash  Payment.  On or before the  Executive's  last
                  day of  employment  with the  Company,  the Company will pay
                  the  Executive  an amount  equal to the  Executive's  unpaid
                  Base  Salary  for  the  year in  which  the  Termination  of
                  Employment  occurs and a pro rata Bonus  through the date of
                  Termination  of Employment  determined  in  accordance  with
                  Section 6.1.  Also,  on or before the  Executive's  last day
                  of  employment  with the  Company,  the Company will pay the
                  Executive a lump sum cash  payment  equal to three (3) times
                  the highest Annual  Compensation  (as defined below) paid to
                  the  Executive  in any  of  the  three  (3)  calendar  years
                  immediately preceding the date of Termination of Employment.

                                       9


            (b)   Accelerated Vesting and Supplemental  Payments.  All rights,
                  awards and benefits of the  Executive  provided  pursuant to
                  this  Agreement,  the TRG Incentive Plan or other  incentive
                  plan,  Stock Units granted  pursuant to this Agreement,  the
                  deferred   compensation   plans  (including  the  Retirement
                  Savings  Opportunity  Plan,  Executive and Director Deferred
                  Compensation  Plan and any successor or replacements  plans)
                  and any stock option or other  benefit  plans of the Company
                  in which the Executive  participates  shall immediately vest
                  in full  and the  Executive  shall  be paid in a lump sum as
                  soon  as  practicable  after  the  date  of  Termination  of
                  Employment.  To the  extent  that  any of the  plans  of the
                  Company would not under  applicable  law permit  accelerated
                  vesting,  the Executive will be paid  supplementally  by the
                  Company the amount of  additional  benefits  payable if full
                  vesting  had taken  place as of the date of  Termination  of
                  Employment.  All  supplemental  payments  are provided on an
                  unfunded basis,  are not intended to meet the  qualification
                  requirements  of Section 401 of the Internal  Revenue  Code,
                  and shall be payable  solely from the general  assets of the
                  Company.

            (c)   Insurance  and  Other  Special  Benefits.   The  Executive's
                  participation  in the life,  accident and health  insurance,
                  employee  welfare  benefit plans (as defined in the Employee
                  Retirement  Income  Security  Act of 1974) and other  fringe
                  benefits (the  'Benefits')  provided to the Executive  prior
                  to the Change of Control or the  Termination  of  Employment
                  shall be continued or  equivalent  benefits  provided by the
                  Company at no cost to the  Executive for a period of two (2)
                  years  from  the  date  of the  Executive's  Termination  of
                  Employment.  If for any  reason  the  Company  is  unable to
                  continue   the   Benefits  as  required  by  the   preceding
                  sentence,  the Company shall pay to the Executive a lump sum
                  cash payment  equal to the value of the  Benefits  which the
                  Company is unable to provide.

            (d)   Relocation   Assistance.   Should  the  Executive  move  his
                  primary   residence  in  order  to  pursue  other   business
                  opportunities  within  two (2)  years  after the date of the
                  Executive's   Termination   of   Employment,   he   will  be
                  reimbursed  for any  expenses  incurred in that  relocation,
                  including taxes payable on the reimbursement,  which are not
                  reimbursed  by  another   employer.   Benefits   under  this
                  paragraph   will   include   assistance   in   selling   the
                  Executive's  home  and all  other  assistance  and  benefits
                  which are provided by the Company under its relocation  plan
                  as in effect  immediately  prior to the  Change  of  Control
                  Period or the Termination of Employment.

            (e)   Stock Rights. All stock options,  stock  appreciation  rights,
                  stock purchase rights, restricted stock rights and any similar
                  rights which the Executive holds shall become fully vested and
                  be exercisable on the date of Termination of Employment.

                                       10


            (f)   Outplacement  Assistance.  The Executive shall be reimbursed
                  by the  Company  for the cost of all  outplacement  services
                  obtained  by the  Executive  within the two (2) year  period
                  after the date of  Termination  of  Employment  provided the
                  total  reimbursement  shall be limited to an amount equal to
                  fifteen   percent   (15%)   of   the   Executive's    Annual
                  Compensation  for the calendar  year  immediately  preceding
                  the date of Termination of Employment.

      7.2   Definitions.

            (a)   A 'Change  of  Control'  shall  take  place on the date of the
                  earlier to occur of any of the following events:

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

                  (ii)  The  first  purchase  under a tender  offer or  exchange
                        offer,  other  than  an  offer  by  the  Company  or any
                        employee benefit plans of the Company, 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  Company  cease for any  reason to
                        constitute  at  least a  majority  thereof,  unless  the
                        election  or  the   nomination   for  the   election  by
                        stockholders  of the  Company 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  Company of a merger,
                        consolidation,   liquidation   or   dissolution  of  the
                        Company,  or the sale of all or substantially all of the
                        assets of the Company.

            (b)   'Annual  Compensation'  shall mean the sum of the Base  Salary
                  and the Bonus paid to the  Executive  and all  vested  amounts
                  credited to the Executive under any incentive  compensation or
                  other  benefit  plans of the  Company  in which the  Executive
                  participates during the applicable calendar year.

            (c)   A 'Termination of Employment'  shall take place in the event
                  that (a) the  Executive's  employment is terminated  for any
                  reason other than as a consequence  of death,  disability or
                  normal retirement,  (b) the Executive is assigned any duties
                  or  responsibilities  that are  inconsistent  in any respect
                  with his position, duties,  responsibilities or status prior
                  to a Change of Control Period,  (c) the Company requires the
                  Executive  to be based  at a  location  which  is more  than
                  fifty (50) miles from the  Executive's  then current primary
                  residence,  (d) the Executive's Base Salary is reduced,  (e)
                  the  Executive  experiences  in any year a reduction  in the
                  ratio of his  incentive  compensation,  bonus or other  such
                  payments to his base compensation  which is greater than the
                  average  reduction in the ratio of  incentive  compensation,
                  bonus  or  other   such   payments   to  base   compensation
                  experienced  by  all  of  the  Company's  or  the  successor
                  company's  executive  officers or (f) the Company  gives the
                  Executive  notice  of an  intent  not to  renew  or does not
                  renew  the  term of this  Agreement  at any  time  during  a
                  Change of Control Period.

                                       11


            (d)   A 'Change of Control  Period'  shall mean the period of time
                  commencing  with the date of a Change of Control or on which
                  the Company  becomes aware of or enters into any discussions
                  or negotiations  that could involve a Change of Control or a
                  proposed  transaction  which  could  result  in a Change  of
                  Control,  and  ending on the  first to occur  of:  (a) three
                  (3)  years  after  the  effective  date  of  the  Change  of
                  Control,  or (b) the date on which  the  proposed  Change of
                  Control is no longer discussed or expected to occur.

      7.3   Subsequent  Imposition of Excise Tax. If it is ultimately determined
            by a court or  pursuant  to a final  determination  by the  Internal
            Revenue Service that any portion of the payments to the Executive is
            considered  to be an  'excess  parachute  payment,'  subject  to the
            excise tax under Section 4999 of the Code,  the  Executive  shall be
            entitled to receive a lump sum cash payment  sufficient to place the
            Executive in the same net after-tax position,  computed by using the
            'Special Tax Rate' as such term is defined below, that the Executive
            would have been in had such  payment not been subject to such excise
            tax, and had the  Executive  not  incurred  any interest  charges or
            penalties  with  respect to the  imposition  of such excise tax. For
            purposes  of this  Agreement,  the  'Special  Tax Rate' shall be the
            highest effective Federal and state marginal tax rates applicable to
            the  Executive in the year in which the payment  contemplated  under
            this Section 7.3 is made.

8.    Noncompetition and Proprietary Information.

      8.1   Prohibition  on  Competition.  During the term of this Agreement and
            for twenty-four  (24) months following the expiration or termination
            of this  Agreement as a result of notice of  nonrenewal by Executive
            pursuant  to  Section  2  or  following  the  effective  date  of  a
            termination of this  Agreement by the Executive  pursuant to Section
            6.3 (the  'Restrictive  Period'),  the  Executive  shall  not,  as a
            stockholder,  partner,  employee  or  officer,  engage,  directly or
            indirectly,  in any business or enterprise which is 'in competition'
            with the  Company.  For  purposes of this  Agreement,  a business or
            enterprise  will  be  'in  competition'  if it  is  engaged  in  any
            significant  business  activity of the  Company or its  subsidiaries
            within the United States.

                                       12


            The Executive  shall be allowed to purchase and hold for  investment
            less than three percent (3%) of the shares of any corporation  whose
            shares are regularly traded on a national  securities exchange or in
            the over-the-counter market.

      8.2   Disclosure  of  Information.  The Executive  recognizes  that he has
            access to and  knowledge  of certain  confidential  and  proprietary
            information of the Company which is essential to the  performance of
            his duties under this  Agreement.  The Executive will not, during or
            after  the term of his  employment  by the  Company,  in whole or in
            part,  disclose such information to any person,  firm,  corporation,
            association  or other  entity for any reason or purpose  whatsoever,
            nor shall he make use of any such information for his own purposes.

      8.3   Covenants  Regarding  Other  Employees.  During  the  term  of  this
            Agreement and the Restrictive  Period,  the Executive  agrees not to
            attempt to induce any  employee of the Company to  terminate  his or
            her  employment  with  the  Company,   accept  employment  with  any
            competitor of the Company, or interfere in a similar manner with the
            business of the Company.

      8.4   Specific  Performance.  The parties  recognize that the Company will
            have no  adequate  remedy at law for breach of the  requirements  of
            this Section 8 and, in the event of such breach, the Company and the
            Executive  agree that,  in  addition  to the right to seek  monetary
            damages,  the  Company  will be  entitled  to a decree  of  specific
            performance,  mandamus,  or  other  appropriate  remedy  to  enforce
            performance of these requirements.

9.    Indemnification.  The  Company  covenants  and agrees to  indemnify  and
      hold harmless the Executive  fully,  completely and  absolutely  against
      any and all actions, suits,  proceedings,  claims,  demands,  judgments,
      costs,  expenses  (including  reasonable  attorney's  fees),  losses and
      damages  resulting from the  Executive's  good faith  performance of his
      duties under this Agreement  subject to the requirements and limitations
      imposed by the  Company's  Articles  of  Incorporation  and  By-Laws and
      applicable law.

10.   Assignment.

      10.1  Assignment by Company. This Agreement may be assigned or transferred
            to,  and shall be  binding  upon and inure to the  benefit  of,  any
            successor  of  the  Company,  and  any  successor  shall  be  deemed
            substituted  for all  purposes of the  'Company'  under the terms of
            this  Agreement.  As used in this  Agreement,  the term  'successor'
            shall mean any person, firm, corporation or business entity which at
            any time,  whether by merger,  purchase or otherwise acquires all or
            substantially  all of the  assets or the  business  of the  Company.
            Notwithstanding  such  assignment,  the Company shall remain jointly
            and severally liable for all obligations hereunder.

      10.2  Assignment  by  Executive.  The  services  to  be  provided  by  the
            Executive  to the Company  are  personal  to the  Executive  and the
            Executive's  duties  may  not be  assigned  by the  Executive.  This
            Agreement shall, however, inure to the benefit of and be enforceable
            by the  Executive's  personal or legal  representatives,  executors,
            administrators,   successors,  heirs,  distributees,   devisees  and
            legatees.  If the  Executive  dies while any amounts  payable to the
            Executive remain outstanding,  all such amounts shall be paid to the
            Executive's designee, estate or beneficiaries.

                                       13


11.   Dispute  Resolution.  Either the  Executive  or the Company may elect to
      have  any  good  faith  dispute  or  controversy  arising  under  or  in
      connection  with this  Agreement  settled by  arbitration  by  providing
      written  notice of such  election  to the  other  party  specifying  the
      nature of the dispute to be  arbitrated.  If  arbitration  is  selected,
      such  proceeding  shall  be  conducted  before  a  panel  of  three  (3)
      arbitrators  sitting  in a  location  agreed to by the  Company  and the
      Executive  within fifty (50) miles from the location of the  Executive's
      principal  place of  employment  in  accordance  with  the  rules of the
      American Arbitration  Association.  Judgment may be entered on the award
      of the arbitrators in any court having  competent  jurisdiction.  To the
      extent that the  Executive  prevails in any  litigation  or  arbitration
      seeking to enforce  the  provisions  of this  Agreement,  the  Executive
      shall be entitled  to  reimbursement  by the Company of all  expenses of
      such  litigation or  arbitration,  including  reasonable  legal fees and
      expenses and necessary costs and disbursements.

12.   Miscellaneous.

      12.1  Entire Agreement.  This Agreement supersedes any prior agreements or
            understandings,  oral or  written,  between  the  Executive  and the
            Company with respect to the subject matter hereof,  and  constitutes
            the entire agreement of the parties with respect thereto.

      12.2  Modification. This Agreement shall not be varied, altered, modified,
            cancelled,  changed or in any way amended except by mutual agreement
            of the  parties in a written  instrument  executed by the parties or
            their legal representatives.

      12.3  Severability.  In the event  that any  provision  or portion of this
            Agreement shall be determined to be invalid or unenforceable for any
            reason,  the  remaining   provisions  of  this  Agreement  shall  be
            unaffected and shall remain in full force and effect.

      12.4  Tax Withholding.  The Company may withhold all Federal,  state, city
            or  other  taxes  required  pursuant  to  any  law  or  governmental
            regulation or ruling.

      12.5  Beneficiaries.  The  Executive  may designate one or more persons or
            entities  as the  primary  and/or  contingent  beneficiaries  of any
            amounts to be received under this Agreement.  Such  designation must
            be in a signed  writing  acceptable to the Board of  Directors,  the
            Company or  designees  of the Board or Company.  The  Executive  may
            change such designation at any time.

      12.6  Board Committee. Any action taken or determination made by the Board
            of  Directors  under  this  Agreement  may be  taken  or made by the
            Compensation  Committee  or any  other  Committee  of the  Board  of
            Directors.

                                       14


      12.7  Governing  Law.  To the extent not  preempted  by Federal  law,  the
            provisions  of this  Agreement  shall be  construed  and enforced in
            accordance with the laws of the State of Maryland.

      12.8  Notice.  Any  notices,  requests,  demands  or other  communications
            required by or provided for in this Agreement shall be sufficient if
            in writing and sent by registered or certified mail to the Executive
            at the last  address he has filed in writing with the Company or, in
            the case of the Company, at its principal office.


IN WITNESS  WHEREOF,  the Executive and the Company have executed this Agreement
as of the date first above written.

THE RYLAND GROUP, INC.                       EXECUTIVE:



By: /s/ Edward W. Gold                       /s/ R. Chad Dreier
    -------------------------------------    -----------------------------------
    Edward W. Gold, Senior Vice President    R. Chad Dreier



Attest: /s/ Timothy J. Geckle
        ----------------------------
        Timothy J. Geckle, Secretary

                                       15