Exhibit 10.1


 


THIRD
AMENDMENT TO CREDIT AGREEMENT


 


This THIRD
AMENDMENT TO CREDIT AGREEMENT (“Amendment”), dated as of June 27, 2008,
among THE RYLAND GROUP, INC., a Maryland corporation (the “Borrower”), the
Lenders that are identified on the signature pages hereto and JPMORGAN
CHASE BANK, N.A., as Agent (the “Agent”).


 


RECITALS


 


WHEREAS, the
Borrower, the Lenders identified on the signature pages hereto, certain
other Lenders and Agent are parties to that certain Credit Agreement dated as
of January 12, 2006 (as amended by First Amendment to Credit Agreement
dated as of October 17, 2007 and Second Amendment to Credit Agreement
dated as of February 15, 2008 and as it may be further amended, renewed
and restated from time to time, the “Credit Agreement”) (all capitalized terms
not defined herein shall have the meanings given such terms in the Credit
Agreement);


 


WHEREAS, the
Borrower and the Lenders desire to amend the Credit Agreement for the purposes
hereinafter set forth;


 


NOW,
THEREFORE, for good and valuable consideration, the parties hereto hereby agree
as follows:


 


1.                                       Definition
of “Leverage Ratio”.  The definition
of “Leverage Ratio” in Article 1 of the Credit Agreement is hereby amended
and restated in its entirety as follows:


 


“Leverage
Ratio” means, at any date, the ratio of (a) Consolidated Indebtedness at
such date, less Unrestricted Cash of the Borrower and Guarantors in excess of
$25,000,000 but not to exceed $300,000,000 to (b) the sum of Consolidated
Indebtedness and Consolidated Tangible Net Worth at such date, less
Unrestricted Cash of the Borrower and Guarantors in excess of $25,000,000 but
not to exceed $300,000,000.


 


2.                                       Reduction
of Aggregate Commitment.  Pursuant to
Section 2.5.2 of the Credit Agreement, the Aggregate Commitment is hereby reduced
from $750,000,000 to $550,000,000, allocated to each Lender’s Commitment
ratably.  The amounts of the reduced
Commitments of the Lenders are set forth in Schedule I hereto.


 


3.                                       Pricing.  The Pricing Schedule attached to the Credit
Agreement is hereby deleted and replaced by the Pricing Schedule attached
hereto, and the pricing set forth in Level III of the Pricing Schedule shall be
in effect as of the date of this Amendment.


 


4.                                       Consolidated
Tangible Net Worth.  Section 6.24
of the Credit Agreement is hereby amended and restated in its entirety as
follows:


 


                                                6.24                           Consolidated
Tangible Net Worth.  The Borrower
shall not permit Consolidated Tangible Net Worth at any time to be less than
the sum of (a) $600,000,000


 













 


plus (b) 50%
of the Consolidated Net Income (without deduction for losses sustained during
any fiscal quarter) for each fiscal quarter subsequent to the fiscal quarter
ended June 30, 2008, plus (c) 50%
of the net proceeds from any equity offerings of the Borrower from and after June 30,
2008.  Notwithstanding the foregoing, in
the event that the Borrower shall at any time engage in an Acquisition with a
purchase price (determined under GAAP) equaling or exceeding $100,000,000, the
minimum Consolidated Tangible Net Worth requirement shall be adjusted to the
sum of (i) 80% of Consolidated Tangible Net Worth at the end of the fiscal
quarter in which the closing of such Acquisition occurs, plus
(ii) an amount equal to 50% of the Consolidated Net Income (without
deduction for losses sustained in any fiscal quarter) for each fiscal quarter
subsequent to the closing of such Acquisition, plus
(iii) 50% of the net proceeds received by the Borrower for any capital
stock issued after the closing of such Acquisition.


 


5.                                       Leverage
Ratio.  Section 6.25 of the
Credit Agreement is hereby amended and restated in its entirety as follows:


 


6.25                           Leverage
Ratio.


 


(a)                                  Leverage
Covenant.  As of the last day of each
fiscal quarter of the Borrower (beginning with the fiscal quarter ending September 30,
2007), the Leverage Ratio shall be less than or equal to the then applicable
Permitted Leverage Ratio (the “Leverage Covenant”).


 


(b)                                 Interest
Coverage Test.  If at any time
Borrower shall fail to maintain, for two (2) consecutive fiscal quarters,
an Interest Coverage Ratio, determined as of the last day of each fiscal
quarter (each, a “Testing Date”) for the four-quarter period ending on such
Testing Date, of at least 2.0 to 1.0 (the “Interest Coverage Test”), then the
Permitted Leverage Ratio for the fiscal quarter next succeeding the second such
consecutive fiscal quarter with respect to which Borrower shall have so failed
the Interest Coverage Test (such second consecutive fiscal quarter being herein
referred to as the “Coverage Test Failure Quarter”) shall, subject to the
provisions of Section 6.25(d), be decreased by subtracting 2.5% from the
Permitted Leverage Ratio that was in effect on the Testing Date.  (By way of example, if the Permitted Leverage
Ratio for the Coverage Test Failure Quarter was 52.5%, the Permitted Leverage
Ratio for the next succeeding fiscal quarter shall be 50.0%.)  The decreased Permitted Leverage Ratio shall
remain in effect unless and until further decreased pursuant to this Section 6.25(b)
or increased pursuant to Section 6.25(c).


 


(c)                                  Adjustment
of Permitted Leverage Ratio.  If at
any time at which the Permitted Leverage Ratio is less than 57.5%, Borrower
shall have satisfied the Interest Coverage Test (which for purposes of this Section 6.25(c) shall
be deemed satisfied only if, on the same Testing Date on which Borrower
satisfies the Interest Coverage Test, Borrower is also in compliance with the
Leverage Covenant), then the Permitted Leverage Ratio, effective as of the
fiscal quarter immediately following the fiscal quarter with respect to which
Borrower shall have so satisfied the Interest Coverage Test, shall be increased
by adding 2.5% to the Permitted Leverage Ratio that was in effect on the
Testing Date.  (By


 


2













 


way of example, if the Permitted Leverage Ratio was 52.5% in the fiscal
quarter in which the Interest Coverage Test was satisfied, the Permitted
Leverage Ratio for the next fiscal quarter shall be 55.0%.)  The increased Permitted Leverage Ratio shall
remain in effect unless and until further increased pursuant to this Section 6.25(c) or
decreased pursuant to Section 6.25(b). In no event shall the Permitted
Leverage Ratio exceed 57.5%.


 


(d)                                 Limits
on Permitted Leverage Ratio. 
Notwithstanding anything to the contrary contained herein, in no event
shall the Permitted Leverage Ratio be less than the following amounts for the
following fiscal quarters:


 


	
  Permitted Leverage Ratio

  	
   

  	
  Fiscal Quarters

  
	
   

  	
   

  	
   

  
	
  55.0%

  	
   

  	
  The last
  fiscal quarter of 2008 and first fiscal quarter of 2009

  
	
   

  	
   

  	
   

  
	
  52.5%

  	
   

  	
  The second,
  third and fourth fiscal quarters of 2009

  
	
   

  	
   

  	
   

  
	
  50.0%

  	
   

  	
  The first
  fiscal quarter of 2010 and thereafter

  



 


(e)                                  Measure
of Compliance.  Borrower’s
satisfaction of the Interest Coverage Test shall be measured on a quarterly
basis, based on the financial statements delivered to Agent pursuant to Section 6.1(a) or
(b).  A failure to satisfy the Interest
Coverage Test alone shall not constitute a Default or Unmatured Default.


 


6.                                       Land
Inventory.  Section 6.29 is
hereby amended by deleting the reference “1.0 to 1.0” and replacing it with “1.15
to 1.0.”


 


7.                                       Compliance
Certificate.  The Compliance
Certificate provided for in the Credit Agreement shall be modified (as
applicable) to conform to the terms of this Amendment.


 


8.                                       Conditions
Precedent.  This Amendment shall be
effective as of the date (“Amendment Effective Date”) upon which the following
conditions are satisfied:


 


(a)                                  The
Agent shall have received from the Borrower and the Required Lenders a
counterpart of this Amendment signed on behalf of each such party.


 


(b)                                 The
Agent shall have received from the Guarantors the Consent and Agreement
substantially in the form attached hereto as Appendix I.


 


(c)                                  The
Agent shall have received such documents and certificates as the Agent or its
counsel may reasonably request relating to the organization or formation,
existence and good standing of the Borrower, the authorization of this
Amendment and any other legal matters relating to the Borrower, the Agreement
or this Amendment, all in form and substance satisfactory to the Agent and its
counsel.


 


3













 


(d)                                 The
Agent shall have received all fees and other amounts due and payable on or
prior to the Amendment Effective Date, including reimbursement or payment of
all out-of-pocket expenses required to be reimbursed or paid by the Borrower
hereunder.


 


The Agent shall notify the Borrower and the
Lenders of the Amendment Effective Date, and such notice shall be conclusive
and binding.


 


9.                                       Representations
and Warranties.  The Borrower hereby
represents and warrants that as of the date hereof:


 


(a)                                  The
representations and warranties of the Borrower in the Credit Agreement are true
and correct in all material respects.


 


(b)                                 There
exists no Default or Unmatured Default.


 


10.                                 Ratification.  The Credit Agreement, as amended hereby, is
hereby ratified and remains in full force and effect.


 


11.                                 Counterparts.  This Amendment may be executed in any number
of counterparts, all of which taken together shall constitute one agreement and
any of the parties hereto may execute this Amendment by signing any such
counterpart.


 


12.                                 Choice
of Law.  This Agreement shall be
construed in accordance with the internal laws (but without regard to the
conflict of laws provisions) of the State of New York, but giving effect to
federal laws applicable to national banks.


 


4













 


IN WITNESS WHEREOF, the Borrower and the
undersigned Lenders have caused this Amendment to be duly executed as of the
date first above written.


 


 


	
   

  	
  Borrower:

  
	
   

  	
   

  
	
   

  	
  THE RYLAND GROUP, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gordon Milne

  	
   

  
	
   

  	
  Name:

  	
  Gordon Milne

  	
   

  
	
   

  	
  Title:

  	
  Executive Vice President and

  	
   

  
	
   

  	
   

  	
  Chief Financial Officer

  	
   

  
						



 


5













 


	
   

  	
  Lenders:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  JPMORGAN CHASE BANK, N.A.,

  
	
   

  	
  As Lender and Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kimberly Turner

  	
   

  
	
   

  	
  Name:

  	
  Kimberly Turner

  	
   

  
	
   

  	
  Its:

  	
  Executive Director

  	
   

  
						



 


6












 


SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT
AGREEMENT


WITH THE RYLAND GROUP, INC.


 


 


	
   

  	
  BANK OF AMERICA, N.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Eyal Namordi

  	
   

  
	
   

  	
  Name:

  	
  Eyal Namordi

  	
   

  
	
   

  	
  Title:

  	
  Senior Vice President

  	
   

  
						



 













 


SIGNATURE PAGE TO THIRD
AMENDMENT TO CREDIT AGREEMENT


WITH THE RYLAND GROUP, INC.


 


 


	
   

  	
  THE ROYAL BANK OF SCOTLAND PLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Timothy McNaught

  	
   

  
	
   

  	
  Name:

  	
   Timothy McNaught

  	
   

  
	
   

  	
  Title:

  	
   Managing Director

  	
   

  
						



 













 


SIGNATURE PAGE TO THIRD
AMENDMENT TO CREDIT AGREEMENT


WITH THE RYLAND GROUP, INC.


 


 


	
   

  	
  WACHOVIA BANK, NATIONAL

  
	
   

  	
  ASSOCIATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/ R. Scott Holtzapple

  	
   

  
	
   

  	
  Name:

  	
    R. Scott Holtzapple

  	
   

  
	
   

  	
  Title:

  	
   Director

  	
   

  
						



 













 


SIGNATURE PAGE TO THIRD
AMENDMENT TO CREDIT AGREEMENT


WITH THE RYLAND GROUP, INC.


 


 


	
   

  	
  CITICORP NORTH AMERICA, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Marni McManus

  	
   

  
	
   

  	
  Name:

  	
   Marni McManus

  	
   

  
	
   

  	
  Title:

  	
   Vice President

  	
   

  
						



 













 


SIGNATURE PAGE TO THIRD
AMENDMENT TO CREDIT AGREEMENT


WITH THE RYLAND GROUP, INC.


 


 


	
   

  	
  BARCLAYS BANK PLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Douglas Bernegger

  	
   

  
	
   

  	
  Name:

  	
   Douglas Bernegger

  	
   

  
	
   

  	
  Title:

  	
   Director

  	
   

  
						



 













 


SIGNATURE PAGE TO THIRD
AMENDMENT TO CREDIT AGREEMENT


WITH THE RYLAND GROUP, INC.


 


 


	
   

  	
  COUNTRYWIDE BANK, N.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Gregory W. Jackson

  	
   

  
	
   

  	
  Name:

  	
   Gregory W. Jackson

  	
   

  
	
   

  	
  Title:

  	
  Managing Director

  	
   

  
						



 













 


SIGNATURE PAGE TO THIRD
AMENDMENT TO CREDIT AGREEMENT


WITH THE RYLAND GROUP, INC.


 


 


	
   

  	
  GUARANTY BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Ross Evans

  	
   

  
	
   

  	
  Name:

  	
   Ross Evans

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  
						



 













 


SIGNATURE PAGE TO THIRD
AMENDMENT TO CREDIT AGREEMENT


WITH THE RYLAND GROUP, INC.


 


 


	
   

  	
  SUNTRUST BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/ W. John Wendler

  	
   

  
	
   

  	
  Name:

  	
   W. John Wendler

  	
   

  
	
   

  	
  Title:

  	
   Senior Vice President

  	
   

  
						



 













 


SIGNATURE PAGE TO THIRD
AMENDMENT TO CREDIT AGREEMENT


WITH THE RYLAND GROUP, INC.


 


 


	
   

  	
  WASHINGTON MUTUAL BANK, FA

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/ Gary Handcox

  	
   

  
	
   

  	
  Name:

  	
   Gary Handcox

  	
   

  
	
   

  	
  Title:

  	
   Senior Vice President

  	
   

  
						



 













 


SIGNATURE PAGE TO THIRD
AMENDMENT TO CREDIT AGREEMENT


WITH THE RYLAND GROUP, INC.


 


 


	
   

  	
  REGIONS BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/ Daniel McClurkin

  	
   

  
	
   

  	
  Name:

  	
   Daniel McClurkin

  	
   

  
	
   

  	
  Title:

  	
   Assistant Vice President

  	
   

  
						



 













 


SIGNATURE PAGE TO THIRD
AMENDMENT TO CREDIT AGREEMENT


WITH THE RYLAND GROUP, INC.


 


 


	
   

  	
  PNC BANK, NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Douglas G. Paul

  	
   

  
	
   

  	
  Name:

  	
   Douglas G. Paul

  	
   

  
	
   

  	
  Title:

  	
    Senior Vice President

  	
   

  
						



 













 


SIGNATURE PAGE TO THIRD
AMENDMENT TO CREDIT AGREEMENT


WITH THE RYLAND GROUP, INC.


 


 


	
   

  	
  UBS LOAN FINANCE LLC

  



 


 


	
   

  	
  By:

  	
    /s/ Irja R. Otsa

  	
   

  
	
   

  	
  Name:

  	
    Irja R. Otsa

  	
   

  
	
   

  	
  Title:

  	
    Associate Director

  	
   

  
						



 


	
   

  	
  By:

  	
    /s/ David B. Julie

  	
   

  
	
   

  	
  Name:

  	
    David B. Julie

  	
   

  
	
   

  	
  Title:

  	
    Associate Director

  	
   

  
						



 













 


SIGNATURE PAGE TO THIRD
AMENDMENT TO CREDIT AGREEMENT


WITH THE RYLAND GROUP, INC.


 


 


	
   

  	
  COMERICA BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/ Leslie A. Vogel

  	
   

  
	
   

  	
  Name:

  	
   Leslie A. Vogel

  	
   

  
	
   

  	
  Title:

  	
   Vice President

  	
   

  
						



 













 


SIGNATURE PAGE TO THIRD
AMENDMENT TO CREDIT AGREEMENT


WITH THE RYLAND GROUP, INC.


 


 


	
   

  	
  NATIXIS

  
	
   

  	
   

  



 


	
   

  	
  By:

  	
    /s/ Natalie Trojan

  	
   

  
	
   

  	
  Name:

  	
   Natalie Trojan

  	
   

  
	
   

  	
  Title:

  	
    Director

  	
   

  
						



 


	
   

  	
  By:

  	
    /s/ Timothee Delpont

  	
   

  
	
   

  	
  Name:

  	
   Timothee Delpont

  	
   

  
	
   

  	
  Title:

  	
    Associate

  	
   

  
						



 












 


SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT
AGREEMENT


WITH THE RYLAND GROUP, INC.


 


 


	
   

  	
  CALYON NEW YORK BRANCH

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
     /s/ Robert Smith

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
     Robert Smith

  	
   

  
	
   

  	
  Title:

  	
    Managing Director

  	
   

  
						



 


 


	
   

  	
  By: 

  	
     /s/ Brian Myers

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
     Brian Myers

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
    Managing Director

  	
   

  
							



 













 


SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT
AGREEMENT


WITH THE RYLAND GROUP, INC.


 


 


	
   

  	
  CITY NATIONAL BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
     /s/ Xavier Barrera

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
     Xavier Barrera

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
    Vice President

  	
   

  
							



 













 


SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT
AGREEMENT


WITH THE RYLAND GROUP, INC.


 


 


	
   

  	
  THE GOVERNOR AND COMPANY OF

  THE BANK OF IRELAND

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
    /s/ Emer Dalton

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
    Emer Dalton

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
    Authorized Signatory

  	
   

  
							



 


 


	
   

  	
  By: 

  	
     /s/ Elaine Crowley

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
     Elaine Crowley

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
    Authorized Signatory

  	
   

  
							



 













 


SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT
AGREEMENT


WITH THE RYLAND GROUP, INC.


 


 


	
   

  	
  CHANG HWA COMMERCIAL BANK,

  
	
   

  	
  LTD., LOS ANGELES BRANCH

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
								



 

















 


 SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT
AGREEMENT


WITH THE RYLAND GROUP, INC.


 


 


	
   

  	
  FIRST COMMERCIAL BANK,

  
	
   

  	
  LOS ANGELES BRANCH

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
    /s/ Rong-Ko Chen

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   Rong-Ko Chen

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   Vice President and General Manager

  	
   

  
								



 













 


 


SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT
AGREEMENT


WITH THE RYLAND GROUP, INC.


 


 


	
   

  	
  MALAYAN BANKING BERHAD,

  
	
   

  	
  NEW YORK BRANCH

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
     /s/ Fauzi Zulkifli

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   Fauzi Zulkifli

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   General Manager

  	
   

  
							



 













 


SCHEDULE I


 


COMMITMENTS


 


	
  Lender

  	
   

  	
  Commitment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  $550,000,000.00

  	
   

  



 













 


PRICING SCHEDULE


 


 


	
   

  	
  Level I

  	
  Level II

  	
  Level III

  	
  Level IV

  	
  Level V

  
	
    Rating

  	
  BBB+/Baa1

  	
  BBB/Baa2

  	
  BBB-/Baa3

  	
  BB+/Bal

  	
  BB/Ba2 or

  below or no

  Rating

  
	
    Leverage Ratio

  	
  <
  30%

  	
  > 30% < 40%

  	
  > 40% < 50%

  	
  > 50% < 55%

  	
  > 55%

  
	
    Applicable Margin

  	
  1.125%

  	
  1.25%

  	
  1.375%

  	
  1.625%

  	
  2.00%

  
	
    Applicable Fee Rate

  	
  0.175%

  	
  0.20%

  	
  0.225%

  	
  0.25%

  	
  0.275%

  



 


“Rating”
means the higher of the publicly announced ratings of the Borrower’s senior
unsecured public debt by Moody’s and S&P. 
If only one of Moody’s or S&P announces a rating of the Borrower’s
senior unsecured public debt, no Rating shall be deemed to exist.


 


If
the Level as determined by the Rating is not the same as the Level as
determined by the Leverage Ratio, but no more than one Level apart, then the
Applicable Margin and the Applicable Fee Rate shall correspond to the Level
which causes pricing to be lower.  If the
Level as determined by the Rating is more than one Level different from the
Level as determined by the Leverage Ratio, then the Applicable Margin and the
Applicable Fee Rate shall be one Level lower (i.e., lower pricing) than the
higher of such two Levels.


 


Notwithstanding the
foregoing, at any time at which the Interest Coverage Ratio is less than 2.00
to 1.00, the Applicable Margin and Applicable Fee Rate determined as provided
above shall be increased based upon the Interest Coverage Ratio as follows:


 


	
    Interest Coverage Ratio

  	
    Less than 2.0 to 1.0 but

    greater than or equal to

    1.5 to 1.0 

  	
    Less than 1.5 to 1.0 but

    greater than or equal to

    1.0 to 1.0

  	
    Less than 1.0 to 1.0

  
	
   

  	
   

  	
   

  	
   

  
	
    Increase in Applicable

    Margin and Applicable Fee

    Rate

  	
    0.125%

  	
    0.25%

  	
    0.375%

  



 


The
Applicable Margin and Applicable Fee Rate shall be determined in accordance
with the foregoing table based on the Borrower’s status as reflected in the
then most recent Ratings and the then most recent annual or quarterly financial
statements of the Borrower delivered pursuant to Section 6.1(a) or (b) (the
“Financials”).  Adjustments, if any, to
the Applicable Margin or Applicable Fee Rate resulting from changes in the
Leverage Ratio or Interest Coverage Ratio shall be effective five Business Days
after the Agent has received the applicable Financials.  If the Borrower fails to deliver the Financials
to the Agent at the time required pursuant to Section 6.1, then the
Applicable Margin and Applicable Fee Rate shall be the highest Applicable
Margin and Applicable Fee Rate set forth in the foregoing table until five days
after such Financials are so delivered. 
The Rating in effect on any date for the purposes of this Schedule is
that in effect at the close of business on such date.


 













 


In the event that any of the
Financials or any certificate delivered by Borrower under Section 6.2(b) is
shown to be inaccurate (regardless of whether this Agreement is in effect or
any Loans or Commitments are outstanding when such inaccuracy is discovered),
and such inaccuracy, if corrected, would have led to the application of a
higher Applicable Margin and Applicable Fee Rate for any period (an “Applicable
Period”) than the Applicable Margin and Applicable Fee Rate actually applied
for such Applicable Period, then (i) the Borrower shall immediately
deliver to the Agent a correct certificate under Section 6.2(b) for such
Applicable Period, (ii) the Applicable Margin and Applicable Fee Rate
shall be determined at such higher Applicable Margin and Applicable Fee Rate
for such Applicable Period, and (iii) the Borrower shall immediately pay
to the Agent (for the benefit of the Lenders) the accrued additional interest
and additional fees owing as a result of such higher Applicable Margin and
Applicable Fee Rate for such Applicable Period.


 


In the event that any of the
Financials or any certificate delivered by Borrower under Section 6.2(b) is
shown to be inaccurate and such inaccuracy, if corrected, would have led to the
application of a lower Applicable Margin and Applicable Fee Rate for any
Applicable Period than the Applicable Margin and Applicable Fee Rate actually
applied for such Applicable Period, and provided such inaccuracy was not as a
result of any fraudulent act, then (i) the Borrower may, within 60 days of
its discovery of such inaccuracy (but in no event later than one (1) year
after delivery of the inaccurate Financials or certificate), deliver to the
Agent a correct certificate under Section 6.2(b) for such Applicable
Period and (ii) provided this Agreement is then in effect, Borrower may,
from time to time after timely delivery of such correct certificate, offset,
against payments of interest and fees thereafter payable under this Agreement
to any Lender that received payments of interest and fees for the Applicable
Period (“Overpayments”) in excess of the fees and interest that would have been
payable to such Lender if such payment had been made based upon the corrected
Financials and certificate, amounts not to exceed in the aggregate the
Overpayments received by such Lender. No Lender shall have any liability or
obligation with respect to any Overpayment received by any other Lender nor
shall any Lender have any liability or obligation with respect to any
Overpayment received by it other than Borrower’s right of offset hereunder.


 













 


Appendix I


 


CONSENT AND AGREEMENT OF GUARANTORS


 


THIS CONSENT AND
AGREEMENT OF GUARANTORS (“Consent”) is executed and delivered as of June        ,
2008, by the undersigned (the “Guarantors”), in favor of the “Lenders” under
that certain Credit Agreement dated January 12, 2006, among The Ryland
Group, Inc., the Lenders from time to time parties thereto and JPMorgan
Chase Bank, N.A., in its capacity as Agent. 
Such Credit Agreement, as it has been and may be amended, modified or
supplemented from time to time, is hereinafter referred to as the “Credit
Agreement.”  Unless otherwise defined
herein, capitalized terms used herein shall have the meanings ascribed to them
in the Credit Agreement.


 


W I T N E S S E T H:


 


WHEREAS, the Guarantors
have executed and delivered a Guaranty dated January 12, 2006 in favor of
the Lenders under the Credit Agreement or a Supplemental Guaranty thereto
(collectively, the “Guaranty”); and


 


WHEREAS, the Borrower,
the Agent and certain Lenders have entered into that certain Third Amendment to
Credit Agreement of even date herewith amending the Credit Agreement (the “Amendment”);
and


 


WHEREAS, it is a
condition to the Amendment that the Guarantors shall have executed this
Consent;


 


NOW THEREFORE, for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Guarantors hereby consent to the Amendment and agree that the
Guaranty continues in full force and effect.


 













 


IN WITNESS WHEREOF, this
Consent has been duly executed by the Guarantors as of the day and year first
set forth above.


 


[Guarantors]