Document:

Exhibit 10.2

  	
  Non-Qualified
  Stock Option Agreement

  	
   

  
	
   

  	
  pursuant to

  	
   

  
	
   

  	
  The Ryland Group, Inc.

  	
   

  
	
   

  	
  2007 Equity Incentive Plan

  	
   

  

 

AGREEMENT, dated
               ,
200   , between THE
RYLAND GROUP, INC. (the “Corporation”) and
                       
(the “Optionee”).

WHEREAS, pursuant to The Ryland
Group, Inc. 2007 Equity Incentive Plan (the “Plan”), the Board of Directors
wishes to provide participation in the appreciated equity value of the
Corporation by providing the Optionee with a grant of non-qualified stock
options related to Ryland Common Stock (“Common Stock”), and thereby increase
the Optionee’s proprietary interest in the success of the Corporation; and

WHEREAS, the Optionee desires to
accept said grant in accordance with the terms and provisions of the Plan and
this Agreement.

NOW THEREFORE, in consideration
of the premises and of the mutual covenants and agreements hereinafter set
forth, the Corporation and the Optionee agree as follows:

1.  Grant of Option

Subject to the terms and conditions set forth herein,
the Corporation hereby grants to the Optionee during the period ending at the
close of business five years from the date hereof (the “Option Period”), the
option to purchase (the “Option”) from the Corporation at a price of $             
per share up to but not exceeding in the aggregate                
shares of the Corporation’s Common Stock. 
THE OPTION GRANTED UNDER THIS AGREEMENT SHALL NOT BE TREATED AS AN
“INCENTIVE STOCK OPTION” WITHIN THE MEANING OF SECTION 422 OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED.

2.  Exercise of Option

The Option granted in paragraph 1 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 divided into three installments.

The
first installment for              
shares may be exercised in whole or in part beginning         ,
200  .

The
second installment for              
shares may be exercised in whole or in part beginning         ,
200  .

The third installment for              
shares may be exercised in whole or in part beginning        ,
200  .

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 Optionee during the Option Period.  Continued accrual 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.

3.  Method of Exercising Option and Payment of
Exercise Price

The Option shall be exercised by delivery of a written
Notice of Exercise stating the number of shares the Optionee desires to
purchase.  The form of Notice of Exercise
is attached to this Agreement as Exhibit A. 
Notice(s) should be delivered to Valerie Zook, The Ryland Group, Inc.,
24025 Park Sorrento, Suite 400, Calabasas, CA 91302; Telephone No. (818)
223-7558; Facsimile No. (818) 223-7675. 

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

(a)           cash
payment (by certified check, bank draft or money order payable to the order of
the Corporation);

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

(c)           if
approved by the Corporation, delivery of Common Stock (including executed stock
powers attached thereto).

The payment of the exercise price shall be delivered
to Valerie Zook together with the Notice of Exercise.

The Corporation shall, subject to the receipt of
withholding tax, issue to the Optionee 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 if no longer
listed on such exchange, as otherwise determined by the Corporation, the Board
of Directors or the Compensation Committee of the Board.

4.  Certain Tax Matters

Optionee agrees that the Corporation may withhold any
federal, state or local taxes upon exercise of an Option, at such time and upon
such terms and conditions as required by law or determined by the Corporation.

5.  Termination

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

(a)           The
expiration of five years from the date of this Agreement;

(b)           The
expiration of 90 days after the date of termination of the Optionee’s
employment, except in the case of death, disability or retirement.  During this period, the Optionee shall have
the right to exercise the Option to the extent it is exercisable on the
termination date.

(c)           The
expiration of three years after the date of death of the Optionee if death
occurs while the Optionee is in the employ of the Corporation.  During this period, the Optionee’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.

(d)           The
expiration of three years after the date the Optionee’s employment is terminated
due to disability or retirement.  During
this period, the Optionee shall have the right to exercise the Option to the
extent it is exercisable on the date of termination due to disability or
retirement.

The Board of Directors or the Compensation Committee
of the Board shall have absolute discretion to determine whether any other  termination of Optionee’s employment is to be
considered as retirement for the purposes of this Agreement and whether an
authorized leave of absence or  otherwise
shall constitute a termination of employment for the purposes of this
Agreement.  Any determination made by the
Board of Directors or the Compensation Committee of the Board with respect to
any matter referred to in this paragraph 5 shall be final and conclusive on all
persons affected thereby.

6.  Assignability 

The Option is not assignable or transferable except by
will or the laws of descent and distribution. 
The Option is exercisable during the Optionee’s lifetime only by the
Optionee or the Optionee’s guardian or legal representative.

7.  Rights as a Stockholder

The Optionee shall have no rights as a stockholder
with respect to any shares covered by the Option until the date of issuance of
the shares to the Optionee, and the Corporation has receipt of payment for the
full exercise price of the Option shares. 
No adjustment will be made for dividends, distributions or other rights
for which the record date is prior to the date of issuance of the shares of
Common Stock related to the exercise of an Option.

8.  Merger, Consolidation or Share Exchange

After any merger, consolidation or share exchange in
which the Corporation is the surviving or resulting corporation, the Optionee
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 Optionee would
have been entitled, if, immediately prior to such merger, consolidation or
share exchange, the Optionee had exercised the Option in accordance with and
subject to the terms of this Agreement. 
If the Corporation 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. 

9.  No Employment Agreement

Nothing in this Agreement
or in the Plan shall confer any right to continued employment with the
Corporation or its subsidiaries nor restrict the termination of the employment
relationship with the Optionee at any time.

10.  Employee’s Agreement

Notwithstanding any other provision of this Agreement,
Optionee agrees that Optionee will not exercise any Option and the Corporation
shall not be obligated to deliver any shares of Common Stock or make any cash
payment if counsel to the Corporation determines such exercise, delivery or
payment would violate any law or regulation of any governmental authority or
agreement to which the Corporation is subject.

11.  Resolution of Disputes

Any dispute or disagreement which shall arise under,
or as a result of, or pursuant to, this Agreement shall be determined by the
Board of Directors of the Corporation or the Compensation Committee of the
Board of Directors in its absolute discretion, and any determination by the
Board of Directors or the Compensation Committee under or pursuant to this
Agreement and any interpretation by the Board of Directors or the Compensation
Committee of the terms of this Agreement or the Plan shall be final, binding
and conclusive on all persons affected thereby.

12.  Amendments

The Board of Directors of the Corporation or the
Compensation Committee of the Board of Directors shall have the right, in its
absolute discretion, to alter or amend this Agreement in any manner, and any alteration
or amendment of this Agreement by the Board of Directors or the Compensation
Committee shall, upon adoption thereof by the Board of Directors or the
Compensation Committee, become and be binding and conclusive on all 

persons affected thereby without requirement of
consent or other action with respect thereto. 
The Corporation shall give written notice to the Optionee of any
alteration or amendment of this Agreement by the Board or the Compensation
Committee as promptly as practical after the adoption thereof.

13. Construction

This Agreement has been entered into in accordance
with the terms of the Plan, and wherever a conflict may arise between the terms
of this Agreement and the terms of the Plan, the terms of the Plan shall
control.

The Optionee hereby agrees by acceptance of the Option
that the terms, conditions and provisions of this Agreement and the Plan shall
determine the rights and obligations of the Corporation and the Optionee in
connection with the Option.

	
  

  	
  THE RYLAND GROUP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:Exhibit 4.1

FIRST AMENDMENT dated as of April 26, 2007 (this “Amendment”) to the First Lien Credit
Agreement dated as of December 8, 2006 (as amended, supplemented or otherwise
modified from time to time, the “Credit Agreement”),
among FOREST ALASKA OPERATING LLC, a limited liability company organized under
the laws of the State of Delaware (the “Borrower”),
FOREST ALASKA HOLDING LLC, a limited liability company organized under the laws
of the State of Delaware (“Holdings”),
the LENDERS from time to time party thereto and CREDIT SUISSE, as
administrative agent for the Lenders and collateral agent for the Secured
Parties (in such capacities, the “Agent”).

WHEREAS Holdings, the Borrower, the Agent and the
Required Lenders have agreed, on the terms and subject to the conditions set
forth herein, to amend the Credit Agreement in the manner set forth herein.

NOW, THEREFORE, in consideration of the above premises
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:

SECTION  1.          Defined Terms.  Each capitalized term used and not defined
herein shall have the meaning assigned to it in the Credit Agreement (as
amended hereby).

SECTION  2.          Amendment to the Credit Agreement.  Effective as of the First Amendment Effective
Date (as defined below), the Credit Agreement is hereby amended as follows:

(a)           the definitions of “4Q06 Consolidated EBITDAX”, “4Q06 Consolidated Interest Expense”,
“Change in Control”, “Consolidated
EBITDAX”, “Consolidated
Interest Expense” and “Equity
Issuance” in Section 1.01 of the Credit Agreement are deleted in
their entirety and replaced with the following definitions:

“4Q06 Consolidated EBITDAX”
shall mean $9,420,000.

“4Q06 Consolidated Interest
Expense” shall mean the amount equal to the product of (a)
Consolidated Interest Expense for the period from and including the Closing
Date through and including December 31, 2006 and (b) 3.833.

A “Change in Control”
shall be deemed to have occurred if (a) at any time the Parent shall not
beneficially own, directly or indirectly, at least 85% of the issued and
outstanding Equity Interests in Holdings, (b) at any time Holdings shall fail
to directly own, beneficially and of record, 100% of the issued and outstanding
Equity Interests in the Borrower or (c) any change in control (or similar
event, however denominated) with respect to Holdings, the Borrower or any
Subsidiary shall occur under 

and as defined in any indenture or agreement in
respect of Material Indebtedness to which Holdings, the Borrower or any
Subsidiary is a party.

“Consolidated EBITDAX”
shall mean, for any period, (a) Consolidated Net Income of Holdings and its
subsidiaries for such period plus (b) the sum of Consolidated Interest
Expense, depreciation, depletion expense, amortization expense, income taxes,
exploration expense and other non-cash charges and expenses (except those
excluded in determining Consolidated Net Income) incurred by Holdings and its
subsidiaries during such period plus (c) to the extent deducted in
determining Consolidated Net Income, fees and expenses paid in connection with
the First Amendment to this Agreement and the First Amendment to the Second
Lien Credit Agreement; provided, however, that, except for purposes of determining Excess
Cash Flow, Consolidated EBITDAX for any period shall be calculated on a pro  forma basis for
any divestitures or acquisitions consummated during such period and, if any
such acquisition or divestiture has a fair market value in excess of $5,000,000,
as if such acquisition or divestiture had occurred on the first day of such
period).  Notwithstanding any other
provision in this Agreement, “Consolidated EBITDAX”
for the fiscal quarter ended on June 30, 2006, September 30, 2006 and December
31, 2006 shall be deemed to be $23,733,000, $18,106,000 and 4Q06 Consolidated
EBITDAX.

“Consolidated Interest
Expense” shall mean, for any period, (a) the interest expense
(including imputed interest expense in respect of Capital Lease Obligations and
Synthetic Lease Obligations) of Holdings and its subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP plus (b) any
interest accrued during such period in respect of Indebtedness of Holdings or
any of its subsidiaries that is required to be capitalized rather than included
in consolidated interest expense for such period in accordance with GAAP plus
(c) the amount of dividends paid to any person (other than Holdings or any of
its subsidiaries) during such period on preferred stock in Holdings or any of
its subsidiaries minus (d) to the extent otherwise included in
Consolidated Interest Expense, pay-in-kind interest expense or other noncash
interest expense (including as a result of the effects of purchase accounting)
of Holdings or any of its subsidiaries, determined on a consolidated basis in
accordance with GAAP minus (e) to the extent otherwise included in
Consolidated Interest Expense, the amortization of any financing fees paid by,
or on behalf of, Holdings or any of its subsidiaries (including such fees paid
in connection with the Transactions) during such period, determined on a
consolidated basis in accordance with GAAP. 
For purposes of the foregoing, interest expense shall be determined
after giving effect to any net payments made or received by Holdings or any of
its subsidiaries with respect to interest rate Hedging Agreements.  Notwithstanding any other provision in this
Agreement, “Consolidated Interest Expense”
for any period of four fiscal quarters ended on or prior to September 30, 2007
shall be deemed to be Annualized Consolidated Interest Expense.

“Equity Issuance”
shall mean any issuance or sale by Holdings or the Borrower of any Equity
Interests in Holdings or the Borrower, as applicable, except in each case for
(a) any issuance of directors’ qualifying shares and (b) issuances or sales of
common stock in Holdings to management or employees in Holdings, the Borrower
or any Subsidiary under any employee stock option or stock purchase plan or
employee 

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benefit plan in existence from time to time.

(b)           Section 1.01 of the
Credit Agreement is amended to add the definitions of the following terms in
appropriate alphabetical order:

“Cure Amount”
shall have the meaning assigned to such term in Section 7.02.

“Cure Right”  shall have the meaning assigned to
such term in Section 7.02.

(c)           Section 2.12(a) of
the Credit Agreement is amended to insert the following sentence at the end of
such Section:

“Any prepayment of any Loan made pursuant to this paragraph (a) at any
time on or prior to the first anniversary of the Closing Date shall be
accompanied by a prepayment premium equal to 1% of the principal amount of the
such prepaid Loan.”.

(d)           the reference to “1.65
to 1.00” set forth under the caption “Ratio” and opposite the date March 31,
2007 in the table set forth in Section 6.10 of the Credit Agreement is replaced
with a reference to “1.40 to 1.00”.

(e)           the reference to “5.750
to 1.00” set forth under the caption “Ratio” and opposite the date March 31,
2007 in the table set forth in Section 6.12 of the Credit Agreement is replaced
with a reference to “6.500 to 1.00”.

(f)            Article VII of the
Credit Agreement is amended to (i) designate the text in such Article as
Section 7.01 of the Credit Agreement and (ii) insert the heading “SECTION 7.01  Events of
Default.” immediately before the words “In the case of the
happening”.

(g)           Article VII of the
Credit Agreement is amended to insert the following Section at the end of such Article:

“SECTION 7.02  Equity Cure Right.  Notwithstanding anything to the contrary in
this Agreement, if the Borrower fails to comply with the requirement of Section
6.10 with respect to the period of four consecutive fiscal quarters ending on
June 30, 2007, until the expiration of the 10th day following the date on which
the certificate calculating the Interest Coverage Ratio for such period is
required to be delivered pursuant to Section 5.04(c), the Parent shall have the
right to make a cash common equity contribution to Holdings of up to $12,000,000,
and Holdings shall have the right to make a cash common equity contribution to
the Borrower of up to $12,000,000 (the “Cure Right”),
and upon the receipt by the Borrower of such cash amount (the “Cure Amount”), the Interest Coverage
Ratio for such period shall be recalculated after decreasing Consolidated
Interest Expense for such period (solely for the purpose of calculating the Interest
Coverage Ratio and not for any other purpose under this Agreement) by an amount
equal to the Cure Amount; provided that
if, after giving effect to such recalculation, Holdings and the Borrower shall
then be in compliance with the 

 3
 

requirement of Section 6.10, Holdings and the Borrower
shall be deemed to have satisfied the requirement of Section 6.10 for such
period with the same effect as though there had been no failure to comply with
the requirements of such Section for such period.”.

SECTION  3.          Representations and Warranties.  Each of Holdings and the Borrower hereby
represents and warrants to the Agent and the Lenders that as of the First
Amendment Effective Date and after giving effect hereto:

(a)           This Amendment has been duly
authorized, executed and delivered by Holdings and the Borrower, and each of
this Amendment and the Credit Agreement (as amended hereby) constitutes Holdings’
and the Borrower’s legal, valid and binding obligation, enforceable against each
of them in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors’
rights generally and subject to general principles of equity, regardless of
whether considered in a proceeding in equity or at law.

(b)           All representations and warranties of
each Loan Party contained in the Loan Documents (as amended hereby) are true
and correct in all material respects on and as of the First Amendment Effective
Date (except with respect to representations and warranties expressly made only
as of an earlier date, in which case such representations and warranties were
true and correct in all material respects as of such earlier date).

(c)           No Default or Event of Default has
occurred and is continuing.

(d)           This Amendment and the transactions
contemplated hereby (a) do not require any consent or approval of, registration
or filing with, or any other action by, any Governmental Authority, (b) will
not (i) violate (A) in any material respect any provision of any material
law, statute, rule or regulation, or of the certificate or articles of
incorporation or other constitutive documents or by-laws of Holdings, the
Borrower or any Subsidiary, (B) in any material respect any material order of
any Governmental Authority or (C) any provision of any material indenture,
agreement or other instrument to which the Parent, its subsidiaries, Holdings,
the Borrower or any Subsidiary is a party or by which any of them or any of
their property is or may be bound, (ii) be in conflict with, result in a
breach of or constitute (alone or with notice or lapse of time or both) a
default under, or give rise to any right to accelerate or to require the
prepayment, repurchase or redemption of any obligation under, any such
indenture, agreement or other instrument or (iii) result in the creation
or imposition of any Lien upon or with respect to any property or assets now
owned or hereafter acquired by Holdings, the Borrower or any Subsidiary.

 4
 

SECTION  4.          Effectiveness.  The amendments contemplated by Section 2
shall become effective as of the first date (the “First Amendment Effective Date”) on
which:

(a)           The Agent shall have received counterparts
hereof duly executed and delivered by Holdings, the Borrower and the Required Lenders.

(b)           The Borrower shall have paid to the
Agent in immediately available funds, for the account of each of the Lenders
entitled thereto, the Amendment Fee referred to in Section 5.

(c)           The Agent shall have received payment
of all reasonable fees and out-of-pocket expenses, to the extent invoiced, to
be paid or reimbursed to it by the Borrower pursuant to the Credit Agreement,
including those referred to in Section 7.

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

SECTION  5.          Amendment Fee.  The Borrower agrees to pay to the Agent, for
the account of each Lender that delivers (including by facsimile or other
electronic imagining means) an executed counterpart of this Amendment prior to
5:00 p.m., New York City time, on April 26, 2007, an amendment fee (the “Amendment Fee”) in an
amount equal to 0.15% of the aggregate principal amount of such Lender’s
outstanding Loans.

SECTION  6.          Effect of Amendment.  (a)  Except as expressly set forth
herein, this Amendment shall not by implication or otherwise limit, impair,
constitute a waiver of, or otherwise affect the rights and remedies of the
Agent or the Lenders under the Credit Agreement or any other Loan Document, and
shall not alter, modify, amend or in any way affect any of the terms,
conditions, obligations, covenants or agreements contained in the Credit
Agreement or any other Loan Document, all of which are ratified and affirmed in
all respects and shall continue in full force and effect.  Nothing herein shall be deemed to entitle any
Loan Party to a consent to, or a waiver, amendment, modification or other
change of, any of the terms, conditions, obligations, covenants or agreements
contained in the Credit Agreement or any other Loan Document in similar or
different circumstances.  This Amendment
shall apply and be effective only with respect to the provisions of the Credit
Agreement specifically referred to herein. 
This Amendment shall constitute a Loan Document.

(b)           On and after the First
Amendment Effective Date, each reference in the Credit Agreement to “this
Agreement”, “hereunder”, “hereof”, “herein” or words of like import, and each
reference to the Credit Agreement in any other Loan Document, shall be deemed a
reference to the Credit Agreement (as amended hereby).

SECTION  7.          Expenses. 
The Borrower agrees to reimburse the Agent for its reasonable
out-of-pocket expenses in connection with this Amendment, including the
reasonable fees, charges and disbursements of counsel for the Agent.

 5
 

SECTION  8.          Governing Law; Counterparts.  (a)This Amendment shall be governed by, and
construed and interpreted in accordance with, the laws of the State of
New York.

(b)           This Amendment may
be executed in any number of counterparts and by different parties hereto in
separate counterparts, and all such counterparts together shall constitute one
and the same instrument.  Delivery of any
executed counterpart of a signature page to this Amendment by facsimile transmission
or other electronic imaging means shall be as effective as delivery of a
manually executed counterpart hereof.

SECTION  9.          Headings. 
The headings of this Amendment are for purposes of reference only and
shall not limit or otherwise affect the meaning hereof.

 6
 

IN WITNESS WHEREOF, the parties hereto have caused
this First Amendment to be duly executed and delivered by their duly authorized
officers as of the day and year first above written.

	
  

  	
  FOREST ALASKA
  OPERATING LLC,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  by

  	
  /s/ Michael N.
  Kennedy

  
	
   

  	
   

  	
  Name:

  	
  Michael N.
  Kennedy

  
	
   

  	
   

  	
  Title:

  	
  Treasurer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  FOREST ALASKA
  HOLDING LLC,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  by

  	
  /s/ Cyrus D.
  Marter IV

  
	
   

  	
   

  	
  Name: 

  	
  Cyrus D. Marter
  IV

  
	
   

  	
   

  	
  Title:

  	
  Vice President
  & Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  CREDIT SUISSE,
  Cayman Islands branch, as Agent,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  by

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  by

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

 7
 

 

Lender Signature page to

the First Amendment

to the Forest Alaska Operating LLC

First Lien Credit Agreement

 

	
  To approve the First
  Amendment:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Name of Lender:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  by

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  For any Lender
  requiring a second signature line:

  	
   

  
	
   

  	
   

  
	
  by

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  

 

 8

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