<PAGE> 1
PROSPECTUS SUPPLEMENT Filed Pursuant to Rule 424(b)(5)
(TO PROSPECTUS DATED MARCH 2, 2000) Registration No. 333-31034
[RYLAND LOGO]
$150,000,000
THE RYLAND GROUP, INC.
9.75% SENIOR NOTES DUE 2010
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The notes will bear interest at a rate of 9.75% per year. Interest on the
notes is payable on March 1 and September 1 of each year, beginning on March 1,
2001. The notes will mature on September 1, 2010. Ryland may redeem some or all
of the notes at any time after September 1, 2005. The redemption prices are
discussed under the caption "Description of Notes--Optional Redemption."
The notes will be unsecured and unsubordinated obligations of Ryland and
will rank equally with all of Ryland's other unsecured and unsubordinated
indebtedness which is not guaranteed by or otherwise an obligation of a
subsidiary of Ryland.
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INVESTING IN THE NOTES INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 5 OF THE ACCOMPANYING PROSPECTUS.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus supplement or the related prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
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<TABLE>
<CAPTION>
PER SENIOR NOTE TOTAL
--------------- ------------
<S> <C> <C>
Public Offering Price 100.0000% $150,000,000
Underwriting Discount 1.3788% $ 2,068,200
Proceeds to Ryland (before expenses) 98.6212% $147,931,800
</TABLE>
Interest on the notes will accrue from August 24, 2000 to the date of
delivery.
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The underwriter is offering the notes subject to various conditions. The
underwriter expects to deliver the notes to purchasers on or about August 24,
2000.
------------------
SALOMON SMITH BARNEY
August 21, 2000
<PAGE> 2
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. RYLAND
HAS NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. RYLAND IS
NOT MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THE INFORMATION PROVIDED BY THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN
THE DATE ON THE FRONT OF THIS PROSPECTUS SUPPLEMENT.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Offering Summary............................................ S-1
Ratio of Earnings to Fixed Charges.......................... S-2
Use of Proceeds............................................. S-2
Description of Notes........................................ S-2
Underwriting................................................ S-20
Legal Matters............................................... S-21
Experts..................................................... S-21
How to Obtain More Information.............................. S-21
PROSPECTUS
Summary..................................................... 1
How to Obtain More Information.............................. 3
Ratio of Earnings to Fixed Charges.......................... 4
Use of Proceeds............................................. 4
Risk Factors................................................ 5
General Description of Securities........................... 8
Description of Debt Securities.............................. 8
Description of Common Stock................................. 15
Description of Preferred Stock.............................. 18
Description of Depositary Shares............................ 19
Description of Stock Purchase Units and Stock Purchase
Contracts................................................. 21
Description of Warrants to Purchase Debt Securities......... 21
Description of Warrants to Purchase Common Stock or
Preferred Stock........................................... 23
Plan of Distribution........................................ 24
Legal Matters............................................... 25
Experts..................................................... 25
</TABLE>
<PAGE> 3
OFFERING SUMMARY
This summary may not contain all of the information that may be important
to you. You should read carefully the entire prospectus supplement, the
accompanying prospectus and the documents incorporated by reference in this
prospectus supplement and the accompanying prospectus before making an
investment decision.
<TABLE>
<S> <C>
SENIOR NOTES OFFERED......................... We are offering $150,000,000 aggregate
principal amount of our 9.75% Senior Notes
due September 1, 2010. Interest on the notes
will be payable semiannually on March 1 and
September 1, commencing on March 1, 2001.
RECORD DATE.................................. We will make each interest payment to holders
of record at the close of business on the
immediately preceding February 15 and August
15.
RANKING...................................... The notes will be our direct, unsecured and
unsubordinated obligations, ranking pari
passu with all our other unsecured and
unsubordinated indebtedness which is not
guaranteed by or otherwise an obligation of
one of our subsidiaries.
OPTIONAL REDEMPTION.......................... We may redeem some or all of the notes at any
time after September 1, 2005. The redemption
prices are discussed under the caption
"Description of Notes--Optional Redemption."
CHANGE OF CONTROL............................ In the event of a change of control of
Ryland, each holder of notes may require us
to repurchase their notes at 101% of their
principal amount, plus accrued and unpaid
interest, if any, to the date of purchase.
See "Description of Notes--Certain
Covenants--Change of Control."
COVENANTS.................................... We have agreed to certain restrictions on our
ability to incur additional indebtedness,
incur liens, make certain distributions or
other restricted payments, enter into certain
transactions with affiliates or merge,
consolidate or transfer substantially all of
our assets. Although the indenture limits the
amount of indebtedness we and our restricted
subsidiaries may incur, we and our restricted
subsidiaries will retain the ability to incur
significant additional indebtedness. The
indenture does not limit our ability to incur
indebtedness for our financial services
segment. See "Description of Notes--Certain
Covenants."
USE OF PROCEEDS.............................. We intend to use the net proceeds of this
offering to repay certain indebtedness
outstanding under our unsecured revolving
credit facility. See "Use of Proceeds."
RYLAND....................................... Our headquarters are located at 24025 Park
Sorrento, Suite 400, Calabasas, California
91302. Our telephone number is (818)
223-7500.
</TABLE>
RISK FACTORS
See "Risk Factors" in the accompanying prospectus for a discussion of
certain factors that should be considered by prospective purchasers of the
notes.
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<PAGE> 4
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of earnings to fixed charges for
the six months ended June 30, 2000 and for each of the last five years ended
December 31.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------
2000 1999 1998 1997 1996 1995
---------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges............. 2.19 2.81 2.17 1.53 1.29 --
</TABLE>
The ratio of our earnings to fixed charges is computed on a consolidated
basis. On a consolidated basis, the ratios of earnings to fixed charges include
the earnings and fixed charges of Ryland Mortgage Company and subsidiaries and
our limited-purpose subsidiaries. For purposes of computing the ratio of
earnings to fixed charges, earnings represent earnings from continuing
operations before income taxes plus fixed charges. Fixed charges include
interest on indebtedness (whether expensed or capitalized), amortization of debt
discounts and premiums and the portion of rent expense we believe to be
representative of interest. For the year ended December 31, 1995, the deficiency
of earnings to fixed charges totaled $37 million, primarily due to a $45 million
impairment charge relating to homebuilding inventories.
USE OF PROCEEDS
We estimate that we will receive approximately $147.8 million in net
proceeds from this offering. We expect to use the net proceeds from this
offering to repay certain indebtedness outstanding under our unsecured revolving
credit facility. Approximately $246 million was outstanding under the facility
as of August 15, 2000. This debt bears interest at a floating rate which was
approximately 8.3% as of August 15, 2000. The facility matures in October 2003.
Until that time, we may borrow up to $400 million under the facility, subject to
certain financial covenants. We may reborrow amounts repaid under the facility
for general corporate purposes.
DESCRIPTION OF NOTES
The following description of the terms of the notes we are offering
supplements, and to the extent it is inconsistent, replaces the descriptions of
the general terms and provisions of our notes under the heading "Description of
Debt Securities" in the accompanying prospectus. Certain terms used in the
following description are defined in this prospectus supplement under the
caption "--Certain Definitions."
GENERAL
The notes will constitute a series of senior debt securities. The notes
will be in an aggregate principal amount of $150 million and will mature on
September 1, 2010. The notes will be general unsecured obligations of Ryland and
will be issued in fully registered form in denominations that are integral
multiples of $1,000.
We are issuing the notes under an indenture dated as of June 28, 1996
between Ryland and The Chase Manhattan Bank, as trustee, as supplemented by an
officers' certificate or resolutions containing the terms of the notes adopted
by our board of directors or an authorized committee of our board of directors.
When we describe the indenture, we include the terms contained in the officers'
certificate or resolutions in our description. The notes are subject to all of
these terms and you should read the indenture for a full description of them.
The following description of the notes and the indenture are summaries and
do not purport to be complete. These summaries are qualified in their entirety
by express reference to the indenture. A copy of the indenture is on file with
the SEC.
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<PAGE> 5
Interest
The notes will bear interest from August 24, 2000 at the rate shown on the
cover page of this prospectus supplement, payable semi-annually on March 1 and
September 1 of each year, which dates we refer to as the "interest payment
dates." The first interest payment date will be March 1, 2001. Payments will be
made to holders of record of the notes at the close of business on the February
15 and August 15 immediately preceding each interest payment date. The notes
will mature on September 1, 2010.
Optional Redemption
At any time on or after September 1, 2005, we may redeem all or a portion
of the notes upon at least 30 and not more than 60 days' notice by mail to the
holders of the notes, by paying the redemption price, plus accrued and unpaid
interest, to the date fixed for redemption. The redemption price, expressed as a
percentage of the principal amount, is as follows for the periods shown below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
September 1, 2005 through August 14, 2006................... 104.875%
September 1, 2006 through August 14, 2007................... 103.250%
September 1, 2007 through August 14, 2008................... 101.625%
September 1, 2008 and thereafter............................ 100.000%
</TABLE>
If we decide to redeem less than all of the notes, the trustee will select
which notes will be redeemed on a pro rata basis. The trustee will mail a notice
of redemption to each holder of notes, which specifies the portion of the
principal amount of notes to be redeemed.
The notes will not be subject to the operation of any mandatory sinking
fund.
GLOBAL SECURITIES
The notes will be represented by one or more global registered securities,
registered in the name of a nominee of The Depository Trust Company, or DTC, as
depositary. The provisions set forth under "Description of Debt
Securities--Global Securities" in the accompanying prospectus will be applicable
to the notes. Accordingly, ownership of interests in the global securities will
be shown on, and transfers of notes will be effected only through, records
maintained by DTC or its nominee and on the records of participants in DTC.
Except as otherwise described under "Description of Debt Securities--Global
Securities" in the accompanying prospectus, owners of beneficial interests in
the global securities will not be entitled to receive notes in definitive form
and will not be considered the holders of notes.
DTC has advised us and the underwriter in this offering that it is:
- a limited-purpose trust company organized under New York Banking Law;
- a "banking corporation" within the meaning of the New York Banking Law;
- a member of the Federal Reserve System;
- a "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
- a "clearing agency" registered under the Exchange Act.
DTC holds securities that persons having accounts with DTC deposit with it.
DTC also facilitates the clearance and settlement of securities transactions
among its participants in securities through electronic book-entry changes in
accounts of the participants, eliminating the need for physical movement of
securities certificates. DTC's participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations, some of whom own DTC. Access to DTC's book-entry system is also
available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly.
S-3
<PAGE> 6
Under the terms of the indenture, we and the trustee will treat the persons
in whose names the notes are registered as the owners of the notes for the
purpose of receiving payment of the principal of and interest on the notes and
for all other purposes whatsoever. Therefore, neither we, the trustee nor any
paying agent has any direct responsibility or liability for the payment of
principal of, or interest on, the notes to owners of beneficial interest in the
global securities. DTC has advised us and the trustee that its current practice
is, upon receipt of any payment of principal or interest, to credit the accounts
of the participants with payment in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the global securities as
shown in DTC's records. Payments by participants and indirect participants to
owners of beneficial interests in the global securities will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers registered in "street name," and
will be the responsibility of the participants or indirect participants.
CERTAIN COVENANTS
Disposition of Proceeds of Assets Sales
The notes will provide, subject to the provisions of the indenture limiting
mergers and consolidations, that we will not, and will not permit any subsidiary
designated as a "restricted subsidiary" to, directly or indirectly, make any
asset sale unless:
- we or the restricted subsidiary, as the case may be, receive
consideration at the time of the asset sale at least equal to the fair
market value for the assets sold or otherwise disposed of. Our board of
directors will determine the fair market value of the assets by a
resolution, which determination shall be conclusive. However, the
aggregate fair market value of the consideration received from any asset
sale that is not in the form of cash or cash equivalents will not, when
aggregated with the fair market value of all other noncash consideration
that we and our restricted subsidiaries received from all previous asset
sales since the date of the issuance of the notes that has not been
converted into cash or cash equivalents, exceed 5% of our consolidated
tangible net assets at the time of the asset sale under consideration;
and
- we will apply the aggregate net proceeds that we or any restricted
subsidiary received from all asset sales occurring after the date of the
issuance of the notes as follows:
-- to repay any of our outstanding indebtedness that is not
subordinated to the notes or our other indebtedness, or to the
payment of any indebtedness of any restricted subsidiary, in each
case, within one year after the asset sale; or
-- to acquire or improve properties and assets that will be used in
our or our restricted subsidiaries' businesses existing on the date
of the issuance of the notes or any related business within one
year after the asset sale.
The amount of net proceeds neither used to repay the indebtedness described
above nor used or invested as set forth in the preceding sentence constitutes
"excess proceeds."
The notes will also provide that, notwithstanding the foregoing, to the
extent we or any of our restricted subsidiaries receives securities or other
noncash property or assets as proceeds of an asset sale, we will not be required
to make any application of the noncash proceeds required by the provisions of
the notes described in the preceding paragraph until we receive cash or cash
equivalent proceeds from a sale, repayment, exchange, redemption or retirement
of, or extraordinary dividend or return of capital on the noncash property. Any
amounts deferred pursuant to the preceding sentence will be applied in
accordance with the provisions of the notes described in the preceding paragraph
when cash proceeds are then received from a sale, repayment, exchange,
redemption or retirement of or extraordinary dividend or return of capital on
the noncash property.
The notes will also provide that, when the aggregate amount of excess
proceeds equals $5 million or more, we will notify the trustee in writing by
delivery of an officers' certificate and will offer to purchase from all
holders, and will purchase from holders accepting the offer, on the date fixed
for the closing of the offer, the maximum principal amount, in multiples of
$1,000, of notes that may be purchased out of the excess proceeds,
S-4
<PAGE> 7
at an offer price in cash equal to 100% of the principal amount of the notes
plus accrued and unpaid interest, if any, to the date of the closing of the
offer. Procedures for the offer and closing are described below. To the extent
that the aggregate amount of notes tendered pursuant to an offer of excess
proceeds is less than the amount of excess proceeds, then we may use the rest of
the excess proceeds for general corporate purposes. Upon completion of this type
of offer, the amount of excess proceeds will be reset at zero.
Within 30 days after the date on which the amount of excess proceeds equals
$5 million or more, we, or the trustee at our request, will mail or cause to be
mailed to all holders of notes of record on the date the excess proceeds equals
$5 million, a notice stating that the amount of excess proceeds equals or
exceeds $5 million and describing the holders' rights which are triggered. The
notice will contain instructions and materials necessary to enable holders of
notes to tender their notes to us.
The notes will also provide that:
- In the event the aggregate principal amount of notes surrendered by
holders exceeds the amount of excess proceeds, we will select the notes
to be purchased on a pro rata basis from all notes so surrendered, with
adjustments we deem appropriate so that only notes in denominations of
$1,000, or integral multiples thereof, will be purchased. To the extent
that the excess proceeds remaining are less than $1,000, we may use those
remaining excess proceeds for general corporate purposes. For those
holders whose notes are purchased only in part we will issue new notes
equal in principal amount to the unpurchased portion of the notes they
surrendered.
- We will not, and will not permit any restricted subsidiary to, create or
permit to exist or become effective any restriction (other than any
restriction set forth in any agreement, indenture, document or instrument
relating to any existing indebtedness or refinancing indebtedness with
respect thereto or entered into in connection with refinancing our
unsecured revolving credit facility or any successor facility) that would
materially impair our ability to make an offer out of excess proceeds as
described above. Notwithstanding the foregoing, if an offer out of excess
proceeds is made, we will pay for notes tendered for purchase as
described below.
- Not later than one business day prior to the date fixed for the closing
of the offer in connection with which an excess proceeds offer is made,
we will:
-- accept for payment notes or portions thereof tendered pursuant to
the excess proceeds offer (on a pro rata basis if required pursuant
to the provisions in the indenture described in the third preceding
bullet point);
-- deposit with a paying agent money, in immediately available funds,
sufficient to pay the purchase price of all notes or portions
thereof so accepted; and
-- deliver to the paying agent an officers' certificate identifying
the notes or portions thereof accepted for payment.
The paying agent will then promptly mail or deliver to holders of notes so
accepted payment in an amount equal to the offer price of the notes purchased
from each holder, and we will execute a new note and deliver to the trustee an
officers' certificate, and then the trustee will promptly authenticate and
deliver to the holder a new note equal in principal amount to any unpurchased
portion of the note surrendered. The paying agent will promptly mail or deliver
to the holder, at our expense, the new note. We will publicly announce the
results of the excess proceeds offer on the date the purchase of the notes is
completed. For purposes of the provisions of the notes described above, we will
choose a paying agent which will not be us or one of our subsidiaries.
- We will conduct any excess proceeds offer in compliance with applicable
tender offer rules, including Section 14(e) of the Exchange Act and Rule
14e-1 thereunder.
- Whenever we receive excess proceeds, and prior to the allocation of the
excess proceeds according to the provisions of the notes described above,
we will set aside the excess proceeds in a separate account to be held in
trust for the benefit of the holders of the notes; provided, however,
that we will not be required to set aside the excess proceeds if we are
unable to set aside the excess proceeds in a separate
S-5
<PAGE> 8
account because of provisions of applicable law or any agreement,
indenture, document or instrument relating to any existing indebtedness
or refinancing indebtedness with respect thereto or our unsecured
revolving credit facility or any successor credit facility.
We cannot assure you that sufficient funds will be available at the time of
an excess proceeds offer to make any required repurchases or that such
repurchases will not be prohibited by another debt agreement. Our failure to
make any required repurchases in the event of an excess proceeds offer will
create an event of default under the indenture.
Limitation on Restricted Payments
The notes will provide that neither we nor any restricted subsidiary will
make any restricted payment if, at the time of the restricted payment, or after
giving effect to it:
- an event of default has occurred and is continuing; or
- the aggregate amount of restricted payments after June 30, 2000 would
exceed the sum of:
-- 50% of our consolidated net income (or, in case the consolidated
net income is negative, minus 100% of that number), excluding cash
dividends and distributions from unrestricted subsidiaries, accrued
on a cumulative basis after June 30, 2000;
-- the aggregate net cash proceeds, including the fair market value of
property other than cash (as determined by resolution of our board
of directors, which determination is conclusive), that we received
from the issue or sale after June 30, 2000 of our capital stock,
but excluding stock that is disqualified stock;
-- cash dividends and distributions received from unrestricted
subsidiaries after June 30, 2000 up to, but not to exceed, the sum
of our and our restricted subsidiaries' previous investments in the
respective unrestricted subsidiary on June 30, 2000, plus any
subsequent investments, plus 50% of any cash dividends received in
excess thereof;
-- the amount of any guarantee of indebtedness or other obligation of
any person that was initially treated as a restricted payment under
this covenant and which has subsequently terminated or expired, net
of any amounts paid by us or a restricted subsidiary in respect of
the guarantee; and
-- $50 million; or
- We would be unable to incur an additional $1.00 of indebtedness under the
covenant described under the caption "--Limitation on Incurrence of
Indebtedness;"
provided however, that the foregoing provisions will not prevent:
- the payment of any dividend or distribution within 60 days after the date
of its declaration, if the payment would have complied with the foregoing
provisions on the date of its declaration; or
- the retirement of any shares of our capital stock in exchange for, on
conversion of or out of the proceeds of a substantially concurrent sale
(other than to one of our subsidiaries) of other shares of our capital
stock, other than disqualified stock.
Limitation on Payment Restrictions Affecting Subsidiaries
The notes will provide that we will not, and will not permit any
non-financial services restricted subsidiary to, make any investment in any
financial services subsidiary, if, at the time of the investment, the financial
services subsidiary would not be permitted to pay, by dividend, distribution,
loan payment or otherwise, to us or the non-financial services restricted
subsidiary the amount of our aggregate net investment (including the aggregate
net investment of our non-financial services restricted subsidiaries) in the
financial services subsidiary, after giving effect to the additional investment.
In addition, if at any time the financial services subsidiaries are not
permitted to, or would by virtue of incurring additional indebtedness become not
permitted to, pay, by dividend, distribution, loan payment or otherwise, to us
or our non-financial services restricted
S-6
<PAGE> 9
subsidiaries, the amount of our and our non-financial services restricted
subsidiaries' aggregate net investment in the financial services subsidiaries,
the financial services subsidiaries may not incur any indebtedness.
Notwithstanding the foregoing, the financial services subsidiaries may
incur indebtedness during any period in which the financial services
subsidiaries are not permitted to pay, by dividend, distribution, loan payment
or otherwise, to us and any non-financial services restricted subsidiary, the
amount of the aggregate net investment, if after giving effect to the incurrence
the total amount of indebtedness of the financial services subsidiaries would be
an amount less than or equal to the indebtedness of the financial services
subsidiaries on the date the financial services subsidiaries first were
prohibited from paying to us and our non-financial services restricted
subsidiaries the amount of the aggregate net investment.
"Aggregate net investment" means the cumulative amount of any investment by
us and our non-financial services restricted subsidiaries in any such financial
services subsidiary after July 15, 1992, less the cumulative amount of any cash
dividends or distributions in respect of, or purchases, redemptions or
retirements of, capital stock, or repayment or release of any other form of
investment, paid by the financial services subsidiary to us or our non-financial
services restricted subsidiaries after July 15, 1992. As of June 30, 2000, the
aggregate net investment based on this definition was a negative $172.4 million,
reflecting the net dividends and distributions paid by the financial services
subsidiaries to us and our non-financial services restricted subsidiaries after
July 15, 1992. Accordingly, we and our non-financial services restricted
subsidiaries would be entitled to make an investment of up to $172.4 million in
the financial services subsidiaries without restriction.
The notes will further provide that the financial services subsidiaries
will not amend, modify or change, or consent to any amendment, modification of
change to, any of the terms of, or allow to exist, any debt instrument to which
any of the financial services subsidiaries is a party, the effect of which would
be to impose restrictions on the payment of dividends, directly or indirectly,
to or for our benefit which would limit the dividends to an aggregate amount for
all financial services subsidiaries which are restricted subsidiaries in any
fiscal year which is less than our combined net income for the then-current
fiscal year, determined on a combined basis in accordance with GAAP, of the
financial services subsidiaries; provided, that provisions which by their terms
would impose the restrictions only in the event of a default under any debt
instrument and solely as a result of the default will not be included in this
restriction.
In addition, the notes will provide that the restricted subsidiaries, other
than the financial services subsidiaries, will not amend, modify or change, or
consent to any amendment, modification of change to, any of the terms of, or
allow to exist, any debt instrument to which any of such restricted subsidiaries
is a party, the effect of which would be to impose restrictions on the payment
of dividends, directly or indirectly, to or for our benefit, except for
restrictions arising in connection with refinancing indebtedness which are not
more restrictive than those under the agreement creating or evidencing the
indebtedness being refunded, refinanced or extended; provided, that provisions
which by their terms would impose those types of restrictions only in the event
of a default under any such debt instrument and solely as a result of the
default will not be deemed to be included in the foregoing restriction.
Notwithstanding the foregoing, any restricted subsidiary which is acquired by us
or by any of our subsidiaries after the date of the issuance of the notes will
not be subject to the restrictions contained in the preceding two sentences, so
long as that restricted subsidiary and any other restricted subsidiaries
acquired after the date of the issuance of the notes which are not subject to
these restrictions do not in the aggregate contribute greater than 10% of our
consolidated EBITDA for any one year period consisting of our and our restricted
subsidiaries' last four fiscal quarters for which financial statements are
available, measured (1) as of the time our quarterly or year end financial
statements, as applicable, are filed with the SEC and (2) as of the date of each
acquisition (and measured on a pro forma basis giving effect to any acquisition
of a restricted subsidiary not owned for the entire period); provided, however,
if after any measurement date identified in clause (1), all restricted
subsidiaries not subject to the restrictions constitute more than 10% of our
consolidated EBITDA on that date, we will not be in default of this provision so
long as we are in compliance on the measurement date for the next succeeding
fiscal quarter, after giving effect to any refinancing, repayment or
modification of indebtedness of any such restricted subsidiaries.
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<PAGE> 10
Maintenance of Consolidated Net Worth
If our adjusted consolidated net worth at the end of each of two
consecutive fiscal quarters (we refer to the last day of the second fiscal
quarter as the "trigger date") is less than $200 million, then we will make an
offer to acquire, on a pro rata basis, on or before the last day of the next
following fiscal quarter, notes in an aggregate principal amount equal to 10% of
the initial outstanding principal amount of the notes at a purchase price of
100% of the principal amount, plus accrued interest to the date the notes are
acquired. We may credit against our obligation to purchase the notes under these
provisions the principal amount of notes acquired by us and surrendered for
cancellation through purchase, optional redemption or exchange subsequent to the
trigger date. In no event will the failure to meet the minimum adjusted
consolidated net worth requirement described above at the end of any fiscal
quarter be counted toward the making of more than one offer.
Limitation on Transactions with Affiliates
We may not, and may not permit any restricted subsidiary to, directly or
indirectly, knowingly conduct any business or enter into any transaction or
series of related transactions with any officer or director or any beneficial
owner of 10% or more of any class of our capital stock or with any affiliate of
any 10% owner known to us or our restricted subsidiaries (other than us or a
restricted subsidiary) unless:
- the terms of the business, transaction or series of transactions are as
favorable to us or the restricted subsidiary as terms that would be
obtainable at the time for a comparable transaction or series of related
transactions in arm's-length dealings with an unrelated third person; and
- if the business or transaction or series of related transactions is in an
aggregate amount greater than $10 million;
-- the terms are set forth in writing; and
-- our board of directors has, by resolution, determined that the
business or transaction or series of transactions meets the
criterion set forth in the first bullet point under the caption
"--Limitation on Transactions with Affiliates."
Notwithstanding the foregoing, this provision will not apply to any transaction
with any of our or our subsidiaries' officers or directors in their capacity as
officers or directors entered into in the ordinary course of business, including
compensation and employee benefit arrangements. This provision also will not
apply to any contractual arrangements in effect on the date of the issuance of
the notes, or any amendment thereto or any transaction contemplated thereby
(including pursuant to an amendment thereto) in any replacement agreement so
long as any amendment or replacement agreement is not disadvantageous to the
holders of the notes in any material respect than the original agreement as in
effect on the date of issuance of the notes.
Limitations on Liens
The notes will provide that we will not, and will not permit any of our
restricted subsidiaries to, incur or allow to exist any liens, other than
permitted liens on any of our or their assets, property, income or profits
unless contemporaneously or prior to incurring the lien, all payments due under
the indenture and the notes are secured on an equal and ratable basis with the
obligation or liability so secured until the obligation or liability is no
longer secured by a lien.
Limitation on Guarantees
We will not, and will not permit any of our restricted subsidiaries to,
directly or indirectly, guarantee any payments of or on the indebtedness of any
financial services subsidiary or any unrestricted subsidiary. Notwithstanding
the preceding sentence, we and any of our restricted subsidiaries may incur
guarantee obligations for the benefit of a financial services subsidiary if the
aggregate amount of the guarantee
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obligations, plus the net amount of our and our restricted subsidiaries'
investments in the financial services subsidiary after the date of the issuance
of the notes does not exceed the sum of:
- $50 million; plus
- an amount, if a positive number, equal to the aggregate value of all cash
dividends or distributions in respect of, or purchases, redemptions or
retirements of, capital stock, or release of any other form of
investment, paid after the date of the issuance of the notes by the
financial services subsidiary to us or our restricted subsidiaries that
are not financial service subsidiaries.
In addition, any financial services subsidiary may, directly or indirectly,
guarantee any payments of or on the indebtedness of any other financial services
subsidiary.
Limitation on Incurrence of Indebtedness
We will not, and will not permit any of our restricted subsidiaries to,
incur any indebtedness; provided, that we may incur indebtedness if, after
giving effect to the incurrence and the receipt and application of the proceeds
of the indebtedness, either:
- our and our restricted subsidiaries' fixed charge coverage ratio, as
determined on a pro forma basis for our and our subsidiaries' last four
fiscal quarters for which financial statements are available, is greater
than 2.0 to 1.0; or
- our and our restricted subsidiaries' (excluding, for purposes of this
calculation, indebtedness of the financial services subsidiaries) ratio
of indebtedness to adjusted consolidated net worth is less than 2.5 to
1.0.
Notwithstanding the foregoing, we and our restricted subsidiaries may incur:
- existing indebtedness;
- non-recourse indebtedness;
- indebtedness of the financial services subsidiaries;
- refinancing indebtedness; provided that for purposes of this bullet
point, application of the proceeds from the sale of our assets or assets
of our restricted subsidiaries in the ordinary course of business to
reduce indebtedness and the subsequent reborrowing within six months to
purchase assets in the ordinary course of business will be considered
refinancing indebtedness;
- outstanding indebtedness of a restricted subsidiary that we acquired
after the date of the issuance of the notes which, when taken together
with all other outstanding indebtedness of a restricted subsidiary
incurred under this bullet point is not in excess of 10% of homebuilding
assets and is incurred and outstanding on or prior to the date on which
we acquired the restricted subsidiary. This will not include indebtedness
incurred as consideration in, or to provide all or any portion of the
funds or credit support used to complete, the transaction or series of
related transactions in which the restricted subsidiary became a
subsidiary or that we otherwise acquired. However, at the time we acquire
the restricted subsidiary, we must be able to incur at least $1.00 of
additional indebtedness under the fixed charge coverage ratio described
above after giving effect to the incurrence of the indebtedness pursuant
to this bullet point; and
- indebtedness to us or to restricted subsidiaries.
Change of Control
On the occurrence of a change of control we will offer to purchase all
outstanding notes at a purchase price equal to 101% of the aggregate principal
amount of the outstanding notes, plus accrued and unpaid interest to the date of
purchase.
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Within 30 days after any change of control, we, or the trustee at our
request, will mail or cause to be mailed to all holders of notes of record on
the date of the change of control a notice of the occurrence of the change of
control and of the holders' rights arising as a result of the change of control.
The notice will contain instructions and materials necessary to enable holders
of notes to tender their notes to us. Any offer on a change of control will be
conducted in compliance with applicable tender offer rules, including Section
14(e) of the Exchange Act and Rule 14e-1 thereunder.
Limitations on Mergers and Consolidations
The notes will provide that we will not consolidate with or merge into any
other corporation or convey, transfer or lease our properties and assets
substantially as an entirety to any person (other than a transfer of properties
and assets to one or more of our wholly-owned subsidiaries), and we will not
permit any person to consolidate with or merge into us or convey, transfer or
lease its properties and assets substantially as an entirety to us, unless:
- in case we will consolidate with or merge into another corporation or
convey, transfer or lease our properties and assets substantially as an
entirety to any person, other than a transfer of properties and assets to
one or more of our wholly-owned subsidiaries, the corporation formed by
the consolidation or into which we are merged or the person which
acquires by conveyance or transfer, or which leases, our properties and
assets substantially as an entirety, will be a corporation organized and
existing under the laws of the United States of America, any State or the
District of Columbia and will expressly assume, by a supplemental
indenture in satisfactory form to the trustee, executed and delivered to
the trustee, the due and punctual payment of the principal of, and
premium, if any, and interest on all the notes and the performance of
every covenant of the indenture that we are required to perform or
observe;
- immediately after giving effect to the transaction and treating any
indebtedness which becomes our obligation or an obligation of a
subsidiary as a result of the transaction as having been incurred by us
or the subsidiary at the time of the transaction, no event of default,
and no event which, after notice or lapse of time or both, would become
an event of default, will have occurred and be continuing;
- immediately after giving effect to the transaction and the use of any net
proceeds on a pro forma basis, our consolidated net worth or the
consolidated net worth of our successor, as the case may be, would be at
least equal to our consolidated net worth immediately prior to the
transaction;
- our and our restricted subsidiaries' fixed charge coverage ratio,
determined on a pro forma basis for our and our restricted subsidiaries'
last four fiscal quarters for which financial statements are available at
the date of determination, immediately after giving effect to the
transaction, would permit us or our successor, as the case may be, to
incur at least $1.00 of additional indebtedness under the fixed charge
coverage ratio test described under the caption "--Limitation on
Incurrence of Indebtedness;" and
- in case we consolidate with or merge into any other corporation or
convey, transfer or lease our properties and assets substantially as an
entirety to any person (other than a transfer of property or assets to
one or more of our wholly-owned subsidiaries), we have delivered to the
trustee an officers' certificate and an opinion of counsel, each stating
that the transaction and the supplemental indenture comply with the
provisions of the indenture and that all conditions precedent provided
for in the indenture relating to the transaction have been complied with.
EVENTS OF DEFAULT
The following will be events of default with respect to the notes:
- default for a period of 30 days in payment of any interest on any note
when due;
- default in payment of principal of, or premium, if any, on, any note when
due, including any default in payment pursuant to an offer on a change of
control, due to a trigger date with respect to a net worth offer or an
offer out of excess proceeds;
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- default in performance of any other covenant in the indenture with
respect to the notes or in the notes which continues for 60 days after
written notice to us by the trustee or by the holders of at least 25% in
principal amount of the notes;
- the occurrence of any event that results in the acceleration of any of
our or our restricted subsidiaries' indebtedness (other than non-recourse
indebtedness) that has an outstanding principal amount of $10 million or
more in the aggregate;
- default in the payment of any principal or interest in respect of any
indebtedness of our or of any of our restricted subsidiaries, other than
non-recourse indebtedness, that has an outstanding principal amount of
$10 million or more and the continuation of that default for ten business
days from the date the principal or interest payment became due and
payable, after giving effect to any applicable grace period provided for
in the documents governing the indebtedness; and
- certain events of bankruptcy, insolvency or reorganization.
DEFEASANCE AND DISCHARGE
The notes will provide that we will be discharged from any and all
obligations in respect of the notes (except for certain obligations to register
the transfer or exchange of notes, to replace stolen, lost or mutilated notes,
to maintain paying agencies and to hold monies for payment in trust) upon the
deposit with the trustee, in trust, of money and/or U.S. government obligations
which through the payment of interest and principal in respect of such U.S.
government obligations will provide money in an amount sufficient to pay the
principal of, and premium, if any, and each installment of principal of, and
premium, if any, and interest, if any, on the notes at maturity on the day on
which the payments are due and payable in accordance with the terms of the
indenture and the notes. A trust may only be established for these purposes if,
among other things, we have received from, or there has been published by, the
IRS a ruling to the effect that holders of the notes will not recognize income,
gain or loss for federal income tax purposes as a result of such deposit,
defeasance and discharge and will be subject to federal income tax on the same
amounts and in the same manner and at the same times, as would have been the
case if such deposit, defeasance and discharge had not occurred.
CERTAIN DEFINITIONS
"adjusted consolidated net worth" means our consolidated net worth less (1)
the pro rata portion owned by us of the consolidated net worth of each of our
unrestricted subsidiaries, and (2) any investment by us, other than investments
in capital stock, in each of our unrestricted subsidiaries.
"affiliate" of any person means (1) any person who, directly or indirectly,
is in control of, is controlled by or is under common control with that person
or (2) any person who is a director or officer of that person. For purposes of
this definition, control of a person means the power, direct or indirect, to
direct or cause the direction of the management and policies of the person
whether by contract or otherwise; and the terms "controlling" and "controlled"
have meanings correlative to the foregoing. Notwithstanding the foregoing, the
term "affiliate" does not include, with respect to us or any restricted
subsidiary, any of our subsidiaries.
"asset sale" for any person means the sale, lease, conveyance or other
disposition (including by merger, consolidation or sale and leaseback
transaction, and whether by operation of law or otherwise) of any of that
person's assets (including the sale or other disposition of capital stock of any
subsidiary of the person, whether by the person or the subsidiary), whether
owned on the date of the issuance of the notes or subsequently acquired in one
transaction or a series of related transactions, in which the person and/or
subsidiaries receive cash and/or other consideration (including the
unconditional assumption of indebtedness of the person and/or its subsidiaries)
having an aggregate fair market value of $5 million or more as to the
transaction or series of related transactions; provided, however:
- sales of homes and sales of mortgages on homes in the ordinary course of
business consistent with past practices will not constitute asset sales;
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- sales, leases, conveyances or other dispositions, including, without
limitation, exchanges or swaps, of real estate or other assets in the
ordinary course of business consistent with past practices will not
constitute asset sales;
- sales, leases, sale-leasebacks or other dispositions of model homes,
amenities and other improvements at our or our subsidiaries' communities
in the ordinary course of business will not constitute asset sales; and
- transactions between us and any of our restricted subsidiaries which are
wholly-owned subsidiaries, or among our wholly-owned restricted
subsidiaries, will not constitute asset sales.
"capital stock" of any person means any and all shares, interests,
participations or other equivalents of interest in (however designated) the
equity of such person, including, without limitation, common stock, preferred
stock and partnership and joint venture interests.
"capitalized lease obligations" of any person means any obligation of the
person to pay rent or other amounts under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP, and the
amount of the obligation will be the capitalized amount thereof determined in
accordance with GAAP.
A "change in control" of Ryland will be deemed to have occurred upon the
happening of any of the following:
- whether or not approved by our board of directors, any person or "group"
within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act is
or becomes the beneficial owner, directly or indirectly, of securities
having 30% or more of the voting power of our common stock; or
- we consolidate with or merge into any other entity, or another entity
merges into us, or we sell or transfer all or substantially all of our
assets, other than any sale or transfer to one or more of our restricted
subsidiaries, in one transaction or a series of related transactions, to
one or more persons. The preceding clause will not include:
-- a merger which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of our common stock;
-- a merger which is effected solely to change our jurisdiction of
incorporation;
-- the sale or transfer of any of the stock or assets of the
limited-purpose subsidiaries; or
-- a merger pursuant to which the holders of our common stock prior to
the effective date of the merger hold immediately after the effective
date 70% or more of the class of stock of the surviving entity or its
parent corporation that is entitled to vote generally for the
election of directors.
"common stock" of any person means all capital stock of the person that is
generally entitled to (1) vote in the election of directors of the person or (2)
if the person is not a corporation, vote or otherwise participate in the
selection of the governing body, partners, managers or others that will control
the management and policies of the person.
"consolidated interest expense" means, for any period:
- the aggregate amount of interest which, in conformity with GAAP, would be
set forth opposite the caption "interest expense" or any like caption on
an income statement for us and our restricted subsidiaries on a
consolidated basis. This will include:
-- imputed interest included on capitalized lease obligations;
-- all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing;
-- the net costs associated with hedging obligations;
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-- amortization of other financing fees and expenses;
-- the interest portion of any deferred payment obligation, amortization
of discount or premium, if any; and
-- all other noncash interest expense (other than interest amortized to
cost of sales); plus
- without duplication, all capitalized interest for the period and all
interest incurred or paid under any guarantee of indebtedness, including
a guarantee of principal, interest or any combination thereof, of any
person.
In making this calculation on a pro forma basis, interest attributable to
indebtedness bearing a floating interest rate will be computed as if the rate in
effect on the date of computation had been the applicable rate for the entire
period.
"consolidated net income" means, for any period, our and our restricted
subsidiaries' aggregate net income for the period, on a consolidated basis,
determined in accordance with GAAP, provided that
- the net income of any person which is not a restricted subsidiary or is
accounted for by the person by the equity method of accounting will be
included only to the extent of the amount of dividends or distributions
paid to us or a restricted subsidiary by the person;
- the net income of any person acquired in a pooling of interests
transaction for any period prior to the date of the acquisition will be
excluded; and
- the net income of any subsidiary, other than a financial services
subsidiary, that is subject to restrictions, direct or indirect, on the
payment of dividends or the making of distributions to the person will be
excluded, except to the extent dividends are actually received by us or a
restricted subsidiary from the subsidiary.
"consolidated net worth" means, with respect to any person, the
consolidated net worth of the person determined in accordance with GAAP.
"consolidated tangible net assets" as of any date means our and our
restricted subsidiaries' total amount of assets, less applicable reserves, on a
consolidated basis at the end of the fiscal quarter immediately preceding that
date, as determined in accordance with GAAP, less (1) intangible assets and (2)
appropriate adjustments on account of minority interests of other persons
holding equity investments in restricted subsidiaries, in the case of each of
clauses (1) and (2) above as reflected on our and our restricted subsidiaries'
consolidated balance sheet as of the end of the fiscal quarter immediately
preceding that date.
"consolidated tax expense" means, for any period, our and our restricted
subsidiaries' aggregate federal, state, local and foreign tax expense for the
period, determined on a consolidated basis in accordance with GAAP.
"disqualified stock" means any capital stock that, by its terms, or by the
terms of any security into which it is convertible or for which it is
exchangeable, or on the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder, in whole or in part, on or prior to the final
maturity date of the notes.
"EBITDA" means earnings (loss) before (1) taxes, (2) interest expensed, (3)
amortization of capitalized interest included in cost of sales, (4) equity in
earnings (losses) of unconsolidated joint ventures and (5) depreciation and
amortization.
"existing indebtedness" means all of our and our subsidiaries' indebtedness
that is outstanding on the date of the issuance of the notes.
"financial services subsidiaries" means our subsidiaries engaged in the
mortgage banking (including mortgage origination, loan servicing, mortgage
brokerage and title and escrow businesses), master servicing and related
activities, which as of the date of the issuance of the notes included Ryland
Mortgage Company but excludes the limited purpose subsidiaries.
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"fixed charge coverage ratio" means, for any period, the ratio of:
- the sum of our and our restricted subsidiaries' consolidated net income,
consolidated interest expense and consolidated tax expense, plus all
depreciation, and without duplication, all amortization which includes
the allocation of noncash costs to cost of sales, in each case, for the
period; to
- our and our restricted subsidiaries' consolidated interest expense for
the period;
provided however, that in making the computation, the consolidated interest
expense attributable to interest on any indebtedness computed on a pro forma
basis and bearing a floating interest rate will be computed as if the rate in
effect on the date of computation had been the applicable rate for the entire
period.
"GAAP" means generally accepted accounting principles as in effect and
implemented by us.
A "guarantee" by any person means any obligation, contingent or otherwise,
of the person directly or indirectly guaranteeing any indebtedness of any other
person including any obligation, direct or indirect, contingent or otherwise, of
the person to purchase or pay principal of, or interest on, or advance or supply
funds or pledge assets for the purchase or payment of or payment of interest on,
the indebtedness of the other person, whether by agreement to provide additional
capital or to maintain financial condition or other similar agreement.
"homebuilding assets" means the total assets of our homebuilding business
segment as reported in our consolidated financial statements prepared in
accordance with GAAP.
"incur" means to, directly or indirectly, create, incur, assume, guarantee,
extend the maturity of, or otherwise become liable with respect to any
indebtedness.
"indebtedness" means
(1) any liability of any person;
- for borrowed money or for the deferred purchase price of property
or services (other than current liabilities, including trade
payables, arising in the ordinary course of business) or which is
evidenced by a note, bond, debenture or similar instrument, and
which would appear as a liability upon a balance sheet of the
person prepared on a consolidated basis in accordance with GAAP; or
- for the payment of money relating to a capitalized lease
obligation;
(2) any liability of any person under any obligation incurred under
letters of credit not in the ordinary course of business; and
(3) any liability of others described in clause (1) or (2) with
respect to which the person had made a guarantee or similar arrangement,
directly or indirectly, but does not include obligations in respect of
performance bonds, banker's acceptances, escrow agreements, letters of
credit and surety bonds provided in the ordinary course of business.
The amount of indebtedness of any person at any date will be the outstanding
balance at that date of all unconditional obligations described above and the
maximum liability of the person for any contingent obligations at that date. To
the extent the person guarantees the obligation of another person to pay
interest on indebtedness owed by the other person, then a designated percentage
of the interest guaranteed or the principal amount of the underlying
indebtedness, as the case may be, will be deemed indebtedness of the referent
person. For purposes of this definition, the amount of deemed indebtedness of
the referent person will be equal to the lesser of:
- the aggregate principal amount of the underlying indebtedness relating to
the interest guarantee; or
- the aggregate amount of interest due and payable over the term of the
indebtedness (or the term of the notes, if shorter) determined based upon
the rate of interest in effect as of the date of the determination,
together with the maximum prepayment premium or penalty which could
become due
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or payable with respect to the indebtedness if the indebtedness was
prepaid prior to the maturity of the notes.
"intangible assets" means all unamortized debt discount and expense,
unamortized deferred charges, goodwill, patents, trademarks, service marks,
trade names, copyrights, write-ups of assets over their carrying value at the
end of the last fiscal quarter ended prior to the date of the issuance of the
notes or the date of acquisition, if acquired after the date of the issuance of
the notes, and all other items which would be treated as intangibles on our and
our restricted subsidiaries' consolidated balance sheet prepared in accordance
with GAAP.
"investments" means, with respect to any person, (1) all investments by the
person in any other person in the form of loans, advances or capital
contributions, (2) all guarantees of indebtedness or other obligations of any
other person by the person, and (3) all purchases, or other acquisitions for
consideration, by the person of indebtedness, capital stock or other securities
of any other person and purchases of assets outside the ordinary course of
business.
"lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or other similar encumbrance of any kind upon or in
respect of the asset, whether or not filed, recorded or otherwise perfected
under applicable law, including any conditional sale or other title retention
agreement, and any lease in the nature thereof, any option or other agreement to
sell, and any filing of, or agreement to give, any financing statement under the
uniform commercial code or equivalent statutes of any jurisdiction.
"limited-purpose subsidiaries" means our subsidiaries which facilitate the
financing of mortgage loans and mortgage-backed securities and the
securitization of mortgage-backed bonds and other related activities.
"net income" means, with respect to any person, the net income (loss) of
the person, determined in accordance with GAAP, excluding, however, (1) any gain
(but not loss) realized upon the sale or other disposition (including
dispositions pursuant to sale and leaseback transactions) of any real property
or equipment of the person which is not sold or otherwise disposed of in the
ordinary course of business, and (2) any noncash gain (but not loss) realized
upon the sale or other disposition by the person of any capital stock or
marketable securities.
"net proceeds" means:
- cash (in US dollars or freely convertible into US dollars) that we or any
restricted subsidiary receive from any asset sale net of: (1) all
brokerage commissions, investment banking fees and all other fees and
expenses (including, without limitation, fees and expenses of counsel and
investment bankers) related to the asset sale, (2) provisions for all
income and other taxes measured by or resulting from the asset sale, (3)
payments made to retire indebtedness where payment of the indebtedness is
required in connection with the asset sale, (4) amounts required to be
paid to any person (other than us or a restricted subsidiary) owning a
beneficial interest in the assets subject to the asset sale, and (5)
appropriate amounts that we or our restricted subsidiary will provide as
a reserve, in accordance with GAAP, against any liabilities associated
with the asset sale and retained by us or any restricted subsidiary,
including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities
under any indemnification obligations associated with the asset sale, all
as reflected in an officers' certificate delivered to the trustee; and
- all noncash consideration that we or any restricted subsidiary receive
from the asset sale upon the liquidation or conversion of the noncash
consideration into cash, without duplication, net of all items described
in clauses (1) through (5).
"non-financial services restricted subsidiary" means any restricted
subsidiary which is not a financial services subsidiary.
"non-recourse indebtedness" means our or any of our subsidiaries'
indebtedness or other obligations secured by a lien on property to the extent
that the liability for the indebtedness or other obligations is limited to the
security of the property without liability for any deficiency, including
liability by reason of any
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agreement by us or any subsidiary to provide additional capital or maintain the
financial condition of or otherwise support the credit of the subsidiary
incurring the indebtedness.
"permitted liens" means:
- liens for taxes, assessments or governmental charges or claims that
either:
-- are not yet delinquent; or
-- are being contested in good faith by appropriate proceedings and as
to which appropriate reserves have been established or other
provisions have been made in accordance with GAAP;
- statutory liens of landlords and carriers', warehousemen's, mechanics',
suppliers', materialmen's, repairmen's or other liens imposed by law and
arising in the ordinary course of business and with respect to amounts
that, to the extent applicable; either:
-- are not yet delinquent; or
-- are being contested in good faith by appropriate proceedings and as
to which appropriate reserves have been established or other
provisions have been made in accordance with GAAP;
- liens, other than any lien imposed by the employee retirement income
security act of 1974, as amended, incurred or deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security and deposits
securing liability to insurance carriers under insurance or
self-insurance arrangements;
- liens incurred or deposits made to secure the performance of tenders,
trade contracts, bids, leases, statutory obligations, surety and appeal
bonds, progress payments, government contracts and other obligations of
like nature (excluding obligations for the payment of borrowed money), in
each case incurred in the ordinary course of our business and the
business of our subsidiaries;
- attachment or judgment liens not giving rise to an event of default and
which are being contested in good faith by appropriate proceedings;
- easements, rights-of-way, restrictions and other similar charges or
encumbrances which, in the aggregate, are not substantial in amount and
which do not materially detract from the value of the property subject to
which they relate or are not materially interfering with the ordinary
course of our business and the business of our subsidiaries;
- zoning restrictions, licenses, restrictions on the use of real property
or minor irregularities in title in the property, which do not materially
impair the use of the real property in the ordinary course of our
business and the business of our subsidiaries or the value of the real
property for the purpose of the business;
- leases or subleases granted to others not materially interfering with the
ordinary course of our business and the business of our subsidiaries;
- purchase money mortgages including, without limitation, capitalized lease
obligations and purchase money security interests;
- liens securing refinancing indebtedness; provided, that the liens only
extend to assets which are similar to the type of assets securing the
indebtedness being refinanced and the refinanced indebtedness was
previously secured by the similar assets;
- liens securing our or our restricted subsidiaries' indebtedness permitted
to be incurred under the indenture; provided, that the aggregate amount
of indebtedness secured by liens other than non-recourse indebtedness
secured by liens will not exceed 40% of homebuilding assets;
- any interest in or title of a lessor to property subject to any
capitalized lease obligations incurred in compliance with the provisions
of the indenture;
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- liens existing on the date of the issuance of the notes, including,
without limitation, liens securing existing indebtedness;
- any option, contract or other agreement to sell an asset; provided, that
the sale is not otherwise prohibited under the indenture;
- liens securing our or our restricted subsidiaries' non-recourse
indebtedness;
- liens on property or assets of any restricted subsidiary securing
indebtedness of the restricted subsidiary owing to us or one or more
restricted subsidiaries;
- liens securing indebtedness of an unrestricted subsidiary, financial
services subsidiary or affiliate;
- any right of a lender or lenders to which we or a restricted subsidiary
may be indebted to offset against, or appropriate and apply to the
payment of, the indebtedness any and all of our or our restricted
subsidiaries' balances, credits, deposits, accounts or monies with or
held by the lender or lenders; and
- any pledge or deposit of cash or property in conjunction with obtaining
surety and performance bonds and letters of credit required to engage in
constructing on-site and off-site improvements required by municipalities
or other governmental authorities in the ordinary course of our business
or the business of any restricted subsidiary.
"person" means any individual, corporation, limited liability company,
partnership, joint venture, trust, unincorporated organization or government or
any agency or political subdivision of any of the foregoing.
"refinancing indebtedness" means indebtedness that solely refunds,
refinances or extends, within six months of the repayment of, any notes,
existing indebtedness or other indebtedness that we or our subsidiaries incurred
in accordance with the terms of the indenture, but only to the extent that:
- the refinancing indebtedness is subordinated to the notes to the same
extent as the indebtedness being refunded, refinanced or extended, if at
all;
- the refinancing indebtedness is scheduled to mature either (1) no earlier
than the indebtedness being refunded, refinanced or extended, or (2)
after the maturity date of the notes;
- the portion, if any, of the refinancing indebtedness that is scheduled to
mature on or prior to the maturity date of the notes has a weighted
average life to maturity at the time the refinancing indebtedness is
incurred that is equal to or greater than the weighted average life to
maturity of the portion of the indebtedness being refunded, refinanced or
extended that is scheduled to mature on or prior to the maturity date of
the notes;
- the refinancing indebtedness is in an aggregate principal amount that is
equal to or less than the aggregate principal amount then outstanding
under the indebtedness being refunded, refinanced or extended; and
- the refinancing indebtedness is incurred by the same person that
initially incurred the indebtedness being refunded, refinanced or
extended except that:
-- we may incur refinancing indebtedness to refund, refinance or extend
Indebtedness of any restricted subsidiary, other than the financial
services subsidiaries; and
-- any restricted subsidiary may incur refinancing indebtedness to
refund, refinance or extend indebtedness of any restricted
subsidiary, except that indebtedness of any financial services
subsidiaries may be refinanced only by that subsidiary or another
financial services subsidiary.
"restricted investment" means investments in any unrestricted subsidiary or
any of our affiliates.
"restricted payment" means:
- with respect to us, any restricted investment made after the issuance of
the notes, any dividend, either in cash or in property, except dividends
payable in our capital stock (other than disqualified stock), on, or the
making by us of any other distribution in respect of, our capital stock,
now or hereafter
S-17
<PAGE> 20
outstanding, or the redemption, repurchase, retirement or other
acquisition for value by us or any subsidiary, directly or indirectly, of
our capital stock or any warrants, rights (other than exchangeable or
convertible indebtedness), or options to purchase or acquire shares of
any class of our capital stock, now or hereafter outstanding; and
- with respect to any restricted subsidiary, any restricted investment made
after the issuance of the notes, any dividend on, either in cash or
property (except (1) dividends payable in capital stock, other than
disqualified stock, of the subsidiary and (2) dividends or distributions
payable to us or to a restricted subsidiary), or the making by any
restricted subsidiary of any other distribution in respect of, its
capital stock, now or hereafter outstanding, or the redemption,
repurchase, retirement or other acquisition for value, directly or
indirectly, of the restricted subsidiary's capital stock or any warrants,
rights (other than exchangeable or convertible indebtedness of any
restricted subsidiary), or options to purchase or acquire shares of any
class of the restricted subsidiary's capital stock now or hereafter
outstanding (except with respect to capital stock or warrants, rights or
options owned by us or a restricted subsidiary).
Notwithstanding the foregoing, restricted payments will not include dividends on
or distributions in respect of, or any redemption, repurchase, retirement or
acquisition for value of our class of convertible preferred stock outstanding on
the date of the indenture.
"restricted subsidiaries" means each of our subsidiaries which is not as of
a determination date, an unrestricted subsidiary.
"subsidiary" means (1) a corporation, the majority of the common stock of
which we or one of our subsidiaries own, directly or indirectly, and (2) any
entity other than a corporation, the majority of the common stock of which we or
one of our subsidiaries own, directly or indirectly.
"unrestricted subsidiaries" means:
- the limited-purpose subsidiaries;
- each of the subsidiaries so designated by a resolution adopted by our
board of directors and whose creditors have no direct or indirect
recourse (including recourse with respect to the payment of principal or
interest on indebtedness of the subsidiary) to us or a restricted
subsidiary; and
- any subsidiary of an unrestricted subsidiary.
Our board of directors may designate an unrestricted subsidiary to be a
restricted subsidiary, provided that any redesignation will be deemed to be an
incurrence by us and our restricted subsidiaries of the indebtedness, if any, of
the redesignated subsidiary for purposes of the covenant described under the
caption "--Limitation on Incurrence of Indebtedness" as of the date of the
redesignation. Subject to the foregoing, our board of directors also may
designate any restricted subsidiary to be an unrestricted subsidiary, provided
that:
- all of our and our restricted subsidiaries' previous investments in the
restricted subsidiary shall be deemed to be restricted payments at the
time of the designation and will reduce the amount available for
restricted payments under the covenant described under the caption
"--Limitation on Restricted Payments;" and
- immediately after giving effect to the designation and reduction of
amounts available for restricted payments under the limitation on
restricted payments covenant in the indenture, we and our restricted
subsidiaries could make $1.00 of additional restricted payments under the
covenant described under the caption "--Limitation on Restricted
Payments."
On any designation or redesignation by the board of directors, we must file with
the trustee a certified copy of the board resolution giving effect to the
designation or redesignation and an officer's certificate certifying that the
designation or redesignation complied with the conditions in the indenture and
setting forth the underlying calculations of the certificate. As of the date of
the issuance of the notes, the only unrestricted subsidiaries are
limited-purpose subsidiaries.
S-18
<PAGE> 21
"weighted average life to maturity" means, when applied to any indebtedness
or portion thereof at any date, the number of years obtained by dividing (1) the
then outstanding principal amount of the indebtedness or portion thereof into
(2) the sum of the products obtained by multiplying:
- the amount of each then remaining installment, sinking fund, serial
maturity or other required payment of principal, including payment at
final maturity, in respect thereof; by
- the number of years (calculated to the nearest one-twelfth) that will
elapse between that date and the making of the payment.
S-19
<PAGE> 22
UNDERWRITING
Subject to the terms and conditions stated in the underwriting agreement
dated the date hereof, Salomon Smith Barney Inc., which we refer to as the
underwriter, has agreed to purchase, and we have agreed to sell to the
underwriter, all of the notes.
The underwriting agreement provides that the obligation of the underwriter
to purchase the notes included in this offering is subject to approval of
certain legal matters by counsel and to certain other conditions. The
underwriter is obligated to purchase all the notes if it purchases any of the
notes.
The underwriter proposes to offer some of the notes directly to the public
at the public offering price set forth on the cover page of this prospectus
supplement and some of the notes to certain dealers at the public offering price
less a concession not in excess of 0.5% of the principal amount of the notes.
The underwriter may allow, and such dealers may reallow a concession not in
excess of 0.25% of the principal amount of the notes on sales to certain other
dealers. After the initial offering of the notes to the public, the public
offering price and such concessions may be changed by the underwriter.
The following table shows the underwriting discounts and commissions we
will pay to the underwriter in connection with this offering (expressed as a
percentage of the principal amount of the notes).
<TABLE>
<CAPTION>
PAID BY RYLAND
--------------
<S> <C>
Per note.................................................... 1.3788%
</TABLE>
In connection with the offering, the underwriter may purchase and sell
notes in the open market. These transactions may include over-allotment,
covering transactions and stabilizing transactions. Over-allotment involves
sales of notes in excess of the principal amount of notes to be purchased by the
underwriter in the offering, which creates a short position. Covering
transactions involve purchases of the notes in the open market after the
distribution has been completed in order to cover short positions. Stabilizing
transactions consist of certain bids or purchases of notes made for the purpose
of preventing or retarding a decline in the market price of the notes while the
offering is in progress.
The underwriter also may impose a penalty bid. Penalty bids permit the
underwriter to reclaim a selling concession from a dealer when the underwriter,
in covering short positions or making stabilizing purchases, repurchases notes
originally sold by that dealer.
Any of these activities may cause the price of the notes to be higher than
the price that otherwise would exist in the open market in the absence of such
transactions. These transactions may be effected in the over-the-counter market
or otherwise and, if commenced, may be discontinued at any time.
Ryland estimates that its total expenses of this offering will be $100,000.
Ryland has agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, or to
contribute to payments the underwriters may be required to make in respect of
any of those liabilities.
S-20
<PAGE> 23
LEGAL MATTERS
Piper Marbury Rudnick & Wolfe LLP, Baltimore, Maryland, will provide us
with an opinion as to legal matters in connection with the notes we are
offering. Simpson Thacher & Bartlett, New York, New York, will pass upon certain
legal matters for the underwriter.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule included in our Annual Report on Form 10-K for
the year ended December 31, 1999, as set forth in their report, which is
incorporated by reference in this prospectus supplement and elsewhere in the
registration statement of which this prospectus supplement is a part. Our
financial statements and schedule are incorporated by reference in reliance on
Ernst & Young LLP's report, given on their authority as experts in accounting
and auditing.
HOW TO OBTAIN MORE INFORMATION
The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus supplement, and information in
documents that we file later with the SEC will automatically update and
supersede information in this prospectus supplement. We incorporate by reference
the documents listed below and any future filings we will make with the SEC
under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act until this offering
is completed:
- Our Annual Report on Form 10-K for the year ended December 31, 1999;
- Our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2000
and June 30, 2000; and
- The description of our common stock contained in our Registration
Statement on Form 8-A filed pursuant to the Exchange Act.
We will provide copies of these documents, other than exhibits, free of
charge, to any person who receives this prospectus. To request a copy, you
should contact our corporate secretary at our headquarters which are located at
24025 Park Sorrento, Suite 400, Calabasas, California 91302, telephone number
(818) 223-7500.
S-21
<PAGE> 24
$200,000,000
THE RYLAND GROUP, INC.
DEBT SECURITIES
COMMON STOCK
PREFERRED STOCK
DEPOSITARY SHARES
STOCK PURCHASE UNITS
STOCK PURCHASE CONTRACTS
WARRANTS TO PURCHASE DEBT SECURITIES,
COMMON STOCK OR PREFERRED STOCK
------------------------
We will provide the specific terms for each of these securities in
supplements to this prospectus. You should read carefully this prospectus and
any supplement before you invest.
Our common stock is listed on the New York Stock Exchange under the symbol
"RYL."
------------------------
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 5 OF THIS
PROSPECTUS BEFORE PURCHASING ANY OF THE SECURITIES OFFERED BY THIS PROSPECTUS.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED OF THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is March 2, 2000.
<PAGE> 25
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary..................................................... 1
How to Obtain More Information.............................. 3
Ratio of Earnings to Fixed Charges.......................... 4
Use of Proceeds............................................. 4
Risk Factors................................................ 5
General Description of Securities........................... 8
Description of Debt Securities.............................. 8
Description of Common Stock................................. 15
Description of Preferred Stock.............................. 18
Description of Depositary Shares............................ 19
Description of Stock Purchase Units and Stock Purchase
Contracts................................................. 21
Description of Warrants to Purchase Debt Securities......... 21
Description of Warrants to Purchase Common Stock or
Preferred Stock........................................... 23
Plan of Distribution........................................ 24
Legal Matters............................................... 25
Experts..................................................... 25
</TABLE>
i
<PAGE> 26
SUMMARY
This summary highlights information from this prospectus. Because this is a
summary, it may not contain all the information you should consider before
investing in the securities we are offering. You should read this entire
prospectus and any supplement carefully. You should also read the documents
listed below in "How to Obtain More Information" for information about us and
our financial statements.
RYLAND
We are one of the largest homebuilders in the U.S. and a leading
mortgage-finance company. We have building operations in 21 markets across the
U.S. We have built approximately 170,000 homes. Our mortgage company has
provided mortgage-financing and related services for more than 150,000
homebuyers. Our operations span the significant aspects of the home-buying
process - from the design, construction and sale of single-family homes to
competitive mortgage-financing programs, title search, settlement and escrow
services and homeowners insurance. We believe our geographic diversity,
financial strength, decentralized operating structure and market-proven
strategies are critical elements of our success. Together, they enhance our
ability to take advantage of growth opportunities and provide maximum value for
homebuyers in a variety of markets.
We are a Maryland corporation. Our headquarters are located at 11000 Broken
Land Parkway, Columbia, Maryland 21044. Our telephone number is (410) 715-7000.
SECURITIES WE MAY OFFER
This prospectus is part of a registration statement (No. 333-31034) that we
filed with the SEC using a "shelf" registration process. Under this shelf
process, we may offer, from time to time, in one or more offerings:
- our debt securities;
- shares of our common stock;
- shares of our preferred stock;
- shares of our preferred stock represented by depositary shares;
- stock purchase units or stock purchase contracts; or
- warrants to purchase our debt securities, common stock or preferred
stock.
The total offering price of these securities will not exceed $200,000,000.
This prospectus provides you with a general description of the securities we may
offer. Each time we offer securities, we will provide you with a prospectus
supplement that will describe the specific amounts, prices and terms of the
securities we offer. The prospectus supplement also may add, update or change
information contained in this prospectus.
We may sell the securities to or through underwriters, dealers or agents or
directly to purchasers. We and our agents reserve the sole right to accept and
to reject in whole or in part any proposed purchase of securities. The
prospectus supplement, which we will provide to you each time we offer
securities, will provide the names of any underwriters, dealers or agents
involved in the sale of the securities, and any applicable fee, commission or
discount arrangements with them. See "Plan of Distribution."
DEBT SECURITIES
We may offer unsecured general obligations of our company, which may be
senior debt securities or subordinated debt securities. The senior debt
securities will have the same rank as all our other unsecured, unsubordinated
debt. The subordinated debt securities will be entitled to payment only if all
payments due under our senior indebtedness, including any outstanding senior
debt securities, have been made.
1
<PAGE> 27
The debt securities will be issued under an indenture between us and the
trustee or trustees we name in the prospectus supplement. We have summarized
certain general features of the debt securities from the indentures, which are
or will be exhibits to the registration statement of which this prospectus is a
part. We encourage you to read the indentures and our recent periodic and
current reports that we file with the SEC. We provide directions on how to
obtain copies of these reports under "How to Obtain More Information."
COMMON STOCK
We may issue our common stock, $1.00 par value per share. Holders of common
stock are entitled to one vote per share on all matters submitted to a vote of
stockholders. Holders of common stock are entitled to receive dividends declared
by our board of directors, subject to the rights of preferred stockholders.
PREFERRED STOCK AND DEPOSITARY SHARES
We may issue our preferred stock, $1.00 par value per share, in one or more
series. Our board of directors will determine the dividend, voting, conversion
and other rights of the series being offered and the terms and conditions of its
offering and sale. We may also issue fractional shares of preferred stock that
will be represented by depositary shares and depositary receipts.
STOCK PURCHASE UNITS AND STOCK PURCHASE CONTRACTS
We may issue stock purchase units and stock purchase contracts, including
contracts obligating holders to purchase from us, and us to sell to the holders,
a specified number of shares of common stock or preferred stock at a future date
or dates. We may determine the price of shares of common stock or preferred
stock at the time we issue the stock purchase contracts or the price may be
determined by referring to a specific formula described in the stock purchase
contracts. We may issue the stock purchase contracts separately or as a part of
stock purchase units consisting of a stock purchase contract and debt
securities, preferred stock or debt obligations of third parties, including U.S.
Treasury securities, which secure the holders' obligations to purchase the
common stock or preferred stock under the stock purchase contracts. The stock
purchase contracts may require us to make periodic payments to the holders of
the stock purchase units or vice versa. These payments may be unsecured or
prefunded on some basis. The stock purchase contracts may require holders to
secure their obligations in a specified manner.
WARRANTS
We may issue warrants to purchase our debt securities, common stock or
preferred stock. The applicable prospectus supplement will describe the details
of the warrants.
2
<PAGE> 28
HOW TO OBTAIN MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC under the Exchange Act. The Exchange Act file number
for our SEC filings is 1-8029. You may read any document we file at the SEC's
public reference rooms in Washington, D.C., Chicago, Illinois and New York, New
York. Please call the SEC toll free at 1-800-SEC-0330 for information about its
public reference rooms. We file information electronically with the SEC. Our SEC
filings are available from the SEC's Internet site at http://www.sec.gov, which
contains reports, proxy and information statements and other information
regarding issuers that file electronically.
We have filed with the SEC a registration statement on Form S-3 under the
Securities Act. This prospectus does not contain all of the information in the
registration statement. We have omitted parts of the registration statement, as
permitted by the rules and regulations of the SEC. You may inspect the
registration statement, including exhibits, at the SEC's public reference
facilities or Internet site. Our statements in this prospectus about the
contents of any contract or other document are not necessarily complete. You
should refer to the copy of each contract or other document we have filed as an
exhibit to the registration statement for complete information.
The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information in documents that we
file later with the SEC will automatically update and supersede information in
this prospectus. We incorporate by reference the documents listed below and any
future filings we will make with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act until this offering is completed:
- Our Annual Report on Form 10-K for the year ended December 31, 1998;
- Our Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999,
June 30, 1999 and September 30, 1999; and
- The description of our common stock contained in our Registration
Statement on Form 8-A filed pursuant to the Exchange Act.
We will provide copies of these documents, other than exhibits, free of
charge, to any person who receives this prospectus. To request a copy, you
should contact our corporate secretary at our headquarters which are located at
11000 Broken Land Parkway, Columbia, Maryland 21044, telephone number (410)
715-7000.
------------------------
We furnish our stockholders with annual reports that contain audited
financial statements and quarterly reports for the first three quarters of each
year that contain unaudited interim financial information.
------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION INCORPORATED BY REFERENCE OR
PROVIDED IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT. WE HAVE NOT AUTHORIZED
ANYONE ELSE TO PROVIDE YOU WITH DIFFERENT INFORMATION. YOU SHOULD NOT ASSUME
THAT THE INFORMATION IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT IS ACCURATE
AFTER THE DATE ON THE FRONT OF THE DOCUMENT.
3
<PAGE> 29
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of earnings to fixed charges for
the nine months ended September 30, 1999 and for each of the last five years
ended December 31.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, --------------------------------
1999 1998 1997 1996 1995 1994
------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges................ 2.63 2.17 1.53 1.29 -- 1.30
</TABLE>
The ratio of our earnings to fixed charges is computed on a consolidated
basis. On a consolidated basis, the ratios of earnings to fixed charges include
the earnings and fixed charges of Ryland Mortgage Company and subsidiaries and
our limited-purpose subsidiaries. For purposes of computing the ratio of
earnings to fixed charges, earnings represent earnings from continuing
operations before income taxes plus fixed charges. Fixed charges include
interest on indebtedness (whether expensed or capitalized), amortization of debt
discounts and premiums and the portion of rent expense we believe to be
representative of interest. For the year ended December 31, 1995, the deficiency
of earnings to fixed charges totaled $37.0 million, primarily due to a $45.0
million impairment charge relating to homebuilding inventories.
USE OF PROCEEDS
Except as described in an accompanying prospectus supplement, we expect to
use the net proceeds from the sale of the securities for general corporate
purposes, which may include, among other things:
- working capital;
- capital expenditures;
- acquisitions;
- stock repurchases; and
- the repayment of outstanding indebtedness.
When we offer a particular series of securities, the prospectus supplement
relating to that offering will describe the intended use of the net proceeds
received from that offering. Pending the use of the net proceeds, we expect to
invest the proceeds in short-term interest-bearing instruments or other debt
securities.
4
<PAGE> 30
RISK FACTORS
You should carefully consider the following risk factors and the other
information in this prospectus and any supplement before investing in our
securities.
IF REAL ESTATE AND ECONOMIC CONDITIONS DETERIORATE, OUR REVENUE MAY DECREASE
We are significantly affected by the cyclical nature of the homebuilding
industry. This industry is sensitive to fluctuations in economic activity,
interest rates and levels of consumer confidence. The effects of these
fluctuations differ among the various geographic markets in which we operate.
Higher interest rates may affect the ability of buyers to qualify for mortgage
financing and decrease demand for new homes. As a result, rising interest rates
generally will decrease our home sales and mortgage originations. Sales of new
homes are also affected by market conditions for resale homes and rental
properties. Our business is also affected by local economic conditions, such as
employment rates and housing demand in the markets in which we build homes. Some
of the markets in which we operate have at times in the past experienced a
significant decline in housing demand. We cannot assure you that declines will
not occur in the future.
Inventory risk can be substantial for homebuilders like us. The market
value of our land, building lots and housing inventories fluctuates
significantly as a result of changing market and economic conditions. In
addition, inventory carrying costs can be significant and can result in losses
in poorly performing projects or markets. In the event of significant changes in
economic or market conditions, we may dispose of community inventories on a bulk
or other basis which may result in a loss. In the course of our business, we
must continuously seek and make acquisitions of land for expansion into new
markets, as well as for replacement and expansion of land inventory within our
current markets. Although we employ various measures, including our land
approval process and continued review by senior management designed to manage
inventory risks, we cannot assure you that these measures will enable us to
manage our inventory risk.
OUR FINANCIAL SERVICES SEGMENT REPRESENTS A SMALLER PORTION OF OUR PROFITS DUE
TO DIVESTITURES AND OTHER ACTIONS IN RECENT YEARS, PLACING GREATER DEPENDENCE ON
OUR HOMEBUILDING SEGMENT
Our financial services segment was a significant source of profits in past
years. However, in recent years we have repositioned this segment by:
- focusing on retail mortgage loan originations and improving the
efficiency of these activities by establishing regional operating
centers;
- divesting non-core assets and lines of business, including the sale of
loan servicing rights;
- leveraging the relationship with our homebuilding segment to increase its
capture rate for builder loans; and
- reaching mortgage customers directly at the point of sale through the use
of technology.
As a result, our financial services segment contributed a much smaller
percentage of our total operating earnings in 1998 and 1999, and we expect this
trend to continue in the future. As a result, our future results will be
substantially dependent upon the performance of our homebuilding segment, and
subject to the risks associated with that segment.
IF INTEREST RATES RISE, THEN OUR BUSINESS MAY DECLINE
Interest rates can significantly affect our lines of business. The level
and expected direction of interest rates can adversely affect the sales of new
homes, the profitability of sales, the rate of mortgage originations and
refinancings and the value of and interest spread earned on mortgage-backed
securities held-for-sale. Any of these could have an adverse impact on our
results of operations or financial position.
5
<PAGE> 31
BECAUSE OUR INDUSTRY IS HIGHLY COMPETITIVE, OTHERS MAY BE MORE SUCCESSFUL AT
HOMEBUILDING AND CAUSE OUR BUSINESS TO DECLINE
The residential housing industry is highly competitive. We compete in each
of our markets with a large number of national, regional and local homebuilding
companies. Some of these companies are larger than us and have greater financial
resources. In addition, the general increase in the availability of capital and
financing in recent years has made it easier for both large and small
homebuilders to expand and enter new markets and has increased competition. This
competition could make it more difficult to acquire suitable land at acceptable
prices, force us to increase selling incentives or lower our sales per
community. Any of these could have an adverse impact on our results of
operations. We also compete with other housing alternatives, including existing
homes and rental housing. Principal competitive factors in homebuilding are home
price, design, quality, reputation, relationship with developers, accessibility
of subcontractors, availability and location of lots and availability of
customer financing.
Our financial services segment competes with other mortgage bankers to
arrange financing for home buyers and refinancing customers. Principal
competitive factors include interest rates and other features of mortgage loan
products available to the consumer.
BECAUSE OUR BUSINESS IS SUBJECT TO VARIOUS REGULATORY AND ENVIRONMENTAL
LIMITATIONS, WE MAY NOT BE ABLE TO CONDUCT OUR BUSINESS AS PLANNED
Our homebuilding segment is subject to various local, state and federal
statutes, ordinances, rules and regulations concerning zoning, building design,
construction and similar matters. These include local regulations which impose
restrictive zoning and density requirements in order to limit the number of
homes that can be built within the boundaries of a particular area. We may also
experience periodic delays in homebuilding projects due to building moratoria in
any of the areas in which we operate. Generally, moratoria relate to
insufficient water or sewage facilities or inadequate roads or local services.
We are also subject to a variety of local, state and federal statutes,
ordinances, rules and regulations concerning the protection of health and the
environment. We are subject to a variety of environmental conditions that can
affect our business and homebuilding projects. The particular environmental laws
which apply to any given homebuilding site vary greatly according to the site's
location, environmental condition and the present and former uses of the site,
and adjoining properties. Environmental laws and conditions may result in
delays, may cause us to incur substantial compliance and other costs, and can
prohibit or severely restrict homebuilding activity in certain environmentally
sensitive regions or areas.
Our financial services segment is subject to the rules and regulations of
HUD, FHA, VA, FNMA, FHLMC and GNMA with respect to originating, processing,
selling and servicing mortgage loans. In addition, there are other federal and
state statutes and regulations affecting these activities. These rules and
regulations, among other things, prohibit discrimination and establish
underwriting guidelines which include provisions for inspections and appraisals,
require credit reports on prospective borrowers and fix maximum loan amounts. We
are required to submit audited financial statements annually, and each
regulatory entity has its own financial requirements. Our affairs are also
subject to examination by these regulatory agencies at all times to assure
compliance with applicable regulations, policies and procedures. Mortgage
origination activities are subject to the Equal Credit Opportunity Act, Federal
Truth-in-Lending Act and Real Estate Settlement Procedures Act and the
associated regulations which prohibit discrimination and require the disclosure
of certain information to mortgagors concerning credit and settlement costs.
NATURAL DISASTERS MAY HAVE A SIGNIFICANT IMPACT ON OUR BUSINESS
The climates and geology of many of the states in which we operate present
increased risks of natural disasters. To the extent that hurricanes, severe
storms, earthquakes, droughts, floods, wildfires or other natural disasters or
similar events occur, our business in those states may be adversely affected.
6
<PAGE> 32
BECAUSE OF OUR USE OF DEBT, THE VALUE OF OUR SECURITIES MAY DECLINE
At September 30, 1999, we had total consolidated homebuilding debt of
approximately $368 million and a ratio of total consolidated homebuilding debt
to stockholders' equity of approximately 1.0 to 1.0. Of this amount, $168
million was senior indebtedness. In addition, at September 30, 1999, our
financial services subsidiaries had outstanding debt of $206 million and our
limited-purpose subsidiaries had outstanding non-recourse debt of $57 million.
Our ability to meet our debt service obligations will depend on our future
performance, which, in turn, will be subject to general economic conditions and
to financial, competitive, business and other factors. Many of these factors are
beyond our control. Our use of debt could restrict our flexibility in responding
to changing business and economic conditions. If we are unable to generate
sufficient cash flow from operations to service our debt, we may be required to
seek refinancing for all or a portion of that debt or to obtain additional
financing. We cannot assure you that refinancing would be possible or that we
could obtain any additional financing on terms that are favorable or acceptable.
Our unsecured revolving credit facility, other senior debt and senior
subordinated debt instruments contain financial covenants that may restrict our
operations. Significant losses in our homebuilding segment could result in the
violation of one or more of these covenants. Our revolving credit facility is
guaranteed by our homebuilding subsidiaries.
A significant portion of our homebuilding operations and all of our
financial services business are conducted through subsidiaries. Accordingly, we
derive a significant portion of our operating income and cash flows from our
homebuilding and financial services subsidiaries, and rely on these subsidiaries
to generate the funds necessary to satisfy our debt obligations. The ability of
our subsidiaries to pay dividends or otherwise make payments to us will be
subject to, among other things, applicable state laws. In addition, the ability
of our financial services segment to provide funds to us is subject to certain
restrictions in its debt instruments. We cannot assure you that we will be able
to realize from these subsidiaries any funds required to meet our debt
obligations.
THE RIGHTS OF HOLDERS OF ANY SUBORDINATED SECURITIES WILL BE JUNIOR TO OUR
EXISTING INDEBTEDNESS AND POSSIBLY ALL OF OUR FUTURE BORROWINGS
We will be required to pay all of our senior indebtedness in full before we
pay any of our subordinated indebtedness. At September 30, 1999, our senior
debt, excluding indebtedness of our subsidiaries, was $168 million. Of this
amount, $1.4 million was secured. In the event of any payment or distribution of
assets in any dissolution, insolvency, bankruptcy or other similar proceeding,
we will be required to pay our senior debt in full before we make any payment to
holders of our subordinated securities. In the event of our dissolution,
insolvency or bankruptcy, holders of subordinated securities may recover less,
ratably, than holders of our senior indebtedness and other creditors, or may
recover nothing.
Our financial services segment and a significant portion of our
homebuilding operations are conducted through subsidiaries. Our right to receive
assets of these subsidiaries upon the liquidation or recapitalization of any
subsidiaries will be subject to the claims of the subsidiaries' creditors,
except to the extent that we are recognized as a creditor of the subsidiary. If
we are recognized as a creditor, our claims would still be subject to any
security interests in the assets of the subsidiary and any indebtedness of the
subsidiary senior to its indebtedness to us. At September 30, 1999, we had
outstanding $206 million of financial services subsidiary debt and $57 million
of non-recourse limited-purpose subsidiary debt. All of this debt is
structurally senior to any of our subordinated securities.
BECAUSE THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS, IT MAY NOT PROVE TO
BE ACCURATE
This prospectus and the documents we incorporate by reference contain
forward-looking statements. We generally identify forward-looking statements
using words like "believe," "intend," "expect," "may," "should," "plan,"
"project," "contemplate," "anticipate" or similar statements. We base these
statements on our beliefs as well as assumptions we made using information
currently available to us. Because these
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statements reflect our current views concerning future events, these statements
involve risks, uncertainties and assumptions. Actual results may differ
significantly from the results discussed in these forward-looking statements. We
do not undertake to update our forward-looking statements or risk factors to
reflect future events or circumstances.
GENERAL DESCRIPTION OF SECURITIES
We may offer debt securities, shares of common stock, shares of preferred
stock, depositary shares, stock purchase units, stock purchase contracts or
warrants to purchase debt securities, common stock or preferred stock, or any
combination of the foregoing, either individually or as units consisting of one
or more securities. We may offer up to $200,000,000 of securities under this
prospectus. If securities are offered as units, we will describe the terms of
the units in a prospectus supplement.
DESCRIPTION OF DEBT SECURITIES
We may offer any combination of senior debt securities or subordinated debt
securities. Debt securities are unsecured general obligations. Senior debt
securities rank above all subordinated indebtedness and equal to all other
indebtedness outstanding on the date of the prospectus supplement. Subordinated
debt securities rank in right of payment below all other indebtedness
outstanding at or after the time issued, unless the other indebtedness provides
that it is not senior to the subordinated debt.
We may issue the senior debt securities and the subordinated debt
securities under separate indentures between us, as issuer, and the trustee or
trustees identified in the prospectus supplement. Any senior debt securities
will be issued under an indenture dated as of June 28, 1996 between us and The
Chase Manhattan Bank, as trustee. Any subordinated debt securities will be
issued under an indenture dated as of July 15, 1992 between us and First Union
National Bank, as trustee. A copy of the form of each type of indenture is filed
as an exhibit to the registration statement of which this prospectus is a part.
A prospectus supplement will describe the particular terms of any debt
securities we may offer.
The following summaries of the debt securities and the indentures are not
complete. We urge you to read the indentures and the description of the debt
securities included in the prospectus supplement.
GENERAL
We may issue an unlimited principal amount of debt securities in separate
series. We may specify a maximum aggregate principal amount for the debt
securities of any series. The debt securities will have terms that are
consistent with the indentures. Unless otherwise specified in the prospectus
supplement, senior debt securities will be unsecured and unsubordinated
obligations and will rank equal with all our other unsecured and unsubordinated
debt. Subordinated debt securities will be paid only if all payments due under
our senior indebtedness, including any outstanding senior debt securities, have
been made.
The indentures might not limit the amount of other debt that we may incur
and might not contain financial or similar restrictive covenants. The indentures
might not contain any provision to protect holders of debt securities against a
sudden or dramatic decline in our ability to pay our debt.
The prospectus supplement will describe the debt securities and the price
or prices at which we will offer the debt securities. The description will
include:
- the title of the debt securities;
- any limit on the aggregate principal amount of the debt securities or the
series of which they are a part;
- the person to whom any interest on a debt security of the series will be
paid;
- the date or dates on which we must pay the principal;
- the rate or rates at which the debt securities will bear interest, if
any, the date or dates from which interest will accrue, and the dates on
which we must pay interest;
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- the place or places where we must pay the principal and any premium or
interest on the debt securities;
- the terms and conditions on which we may redeem any debt security, if at
all;
- any obligation to redeem or purchase any debt securities, and the terms
and conditions on which we must do so;
- the denominations in which we may issue the debt securities;
- the manner in which we will determine the amount of principal of or any
premium or interest on the debt securities;
- the currency in which we will pay the principal of and any premium or
interest on the debt securities;
- the principal amount of the debt securities that we will pay upon
declaration of acceleration of their maturity;
- the amount that will be deemed to be the principal amount for any
purpose, including the principal amount that will be due and payable upon
any maturity or that will be deemed to be outstanding as of any date;
- if applicable, that the debt securities are defeasible;
- if applicable, the terms of any right to convert debt securities into, or
exchange debt securities for, shares of common stock or other securities
or property;
- whether we will issue the debt securities in the form of one or more
global securities and, if so, the respective depositaries for the global
securities and the terms of the global securities;
- the subordination provisions that will apply to any subordinated debt
securities;
- any addition to or change in the events of default applicable to the debt
securities and any change in the right of the trustee or the holders to
declare the principal amount of any of the debt securities due and
payable; and
- any addition to or change in the covenants in the indentures.
We may sell the debt securities at a substantial discount below their
stated principal amount. We will describe U.S. federal income tax
considerations, if any, applicable to debt securities sold at an original issue
discount in the prospectus supplement. An "original issue discount security" is
any debt security that provides for an amount less than the principal amount to
be due and payable upon the declaration of acceleration of the maturity under
the terms of the applicable indenture. The prospectus supplement relating to any
original issue discount securities will describe the particular provisions
relating to acceleration of the maturity upon the occurrence of an event of
default. In addition, we will describe U.S. federal income tax or other
considerations applicable to any debt securities that are denominated in a
currency or unit other than U.S. dollars in the prospectus supplement.
CONVERSION AND EXCHANGE RIGHTS
The prospectus supplement will describe, if applicable, the terms on which
you may convert debt securities into or exchange them for common stock or other
securities or property. The conversion or exchange may be mandatory or may be at
your option. The prospectus supplement will describe how the number of shares of
common stock or other securities or property to be received upon conversion or
exchange would be calculated.
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
Unless the prospectus supplement indicates otherwise, the following
provisions will apply to the subordinated debt securities. The indebtedness
underlying the subordinated debt securities will be payable only if all payments
due under our senior indebtedness, including any outstanding senior debt
securities, have been made. If we distribute our assets to creditors upon any
dissolution, winding-up, liquidation or
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reorganization or in bankruptcy, insolvency, receivership or similar
proceedings, we must first pay all amounts due or to become due on all senior
indebtedness before we pay the principal of, or any premium or interest on, the
subordinated debt securities. In the event the subordinated debt securities are
accelerated because of an event of default, we may not make any payment on the
subordinated debt securities until we have paid all senior indebtedness or the
acceleration is rescinded. If the payment of subordinated debt securities
accelerates because of an event of default, we must promptly notify holders of
senior indebtedness of the acceleration.
We may not make any payment on the subordinated debt securities if a
default in the payment of the principal of, premium, if any, interest, rent or
other obligations, including a default under any repurchase or redemption
obligation, in respect of designated senior indebtedness occurs and continues
beyond any applicable grace period. We may not make any payment on the
subordinated debt securities if any other default occurs and continues with
respect to designated senior indebtedness that permits holders of the designated
senior indebtedness to accelerate its maturity and the trustee receives a notice
of such default from us, a holder of such designated senior indebtedness or
other person permitted to give such notice. We may not resume payments on the
subordinated debt securities until the defaults are cured or certain periods
pass.
If we experience a bankruptcy, dissolution or reorganization, holders of
senior indebtedness may receive more, ratably, and holders of subordinated debt
securities may receive less, ratably, than our other creditors.
The term "designated senior indebtedness" means our obligations under any
particular senior indebtedness in which the debt instrument expressly provides
that the senior indebtedness will be designated senior indebtedness with respect
to the subordinated debt securities. The indenture for subordinated debt
securities may not limit our ability to incur additional senior indebtedness.
Our financing agreements contain certain restrictions on our ability to
incur additional senior and subordinated indebtedness.
FORM, EXCHANGE AND TRANSFER
We will issue debt securities only in fully registered form, without
coupons, and, unless otherwise specified in the prospectus supplement, only in
denominations of $1,000 and integral multiples thereof.
The holder of a debt security may elect, subject to the terms of the
indentures and the limitations applicable to global securities, to exchange them
for other debt securities of the same series of any authorized denomination and
of a like tenor and aggregate principal amount.
Holders of debt securities may present them for exchange as provided above
or for registration of transfer, duly endorsed or with the form of transfer duly
executed, at the office of the transfer agent we designate for that purpose. We
will not impose a service charge for any registration of transfer or exchange of
debt securities, but we may require a payment sufficient to cover any tax or
other governmental charge payable in connection with the transfer or exchange.
We will name the transfer agent in the prospectus supplement. We may designate
additional transfer agents or rescind the designation of any transfer agent or
approve a change in the office through which any transfer agent acts, but we
must maintain a transfer agent in each place in which we will pay on debt
securities.
If we redeem the debt securities, we will not be required to issue,
register the transfer of or exchange any debt security during a specified period
prior to mailing a notice of redemption. We are not required to register the
transfer of or exchange any debt security selected for redemption, except the
unredeemed portion of the debt security being redeemed.
GLOBAL SECURITIES
The debt securities may be represented, in whole or in part, by one or more
global securities that will have an aggregate principal amount equal to that of
the debt securities. Each global security will be registered in the name of a
depositary identified in the prospectus supplement. We will deposit the global
security with the depositary or a custodian, and the global security will bear a
legend regarding the restrictions on exchanges and registration of transfer.
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No global security may be exchanged in whole or in part for debt securities
registered, and no transfer of a global security in whole or in part may be
registered, in the name of any person other than the depositary or any nominee
of the depositary unless:
- the depositary has notified us that it is unwilling or unable to continue
as depositary; or
- an event of default occurs and continues with respect to the debt
securities.
The depositary will determine how all securities issued in exchange for a
global security will be registered.
As long as the depositary or its nominee is the registered holder of a
global security, we will consider the depositary or the nominee to be the sole
owner and holder of the global security and the underlying debt securities.
Except as stated above, owners of beneficial interests in a global security will
not be entitled to have the global security or any debt security registered in
their names, will not receive physical delivery of certificated debt securities
and will not be considered to be the owners or holders of the global security or
underlying debt securities. We will make all payments of principal, premium and
interest on a global security to the depositary or its nominee. The laws of some
jurisdictions require that some purchasers of securities take physical delivery
of such securities in definitive form. These laws may prevent you from
transferring your beneficial interests in a global security.
Only institutions that have accounts with the depositary or its nominee and
persons that hold beneficial interests through the depositary or its nominee may
own beneficial interests in a global security. The depositary will credit, on
its book-entry registration and transfer system, the respective principal
amounts of debt securities represented by the global security to the accounts of
its participants. Ownership of beneficial interests in a global security will be
shown only on, and the transfer of those ownership interests will be effected
only through, records maintained by the depositary or any such participant.
The policies and procedures of the depositary may govern payments,
transfers, exchanges and others matters relating to beneficial interests in a
global security. We and the trustee assume no responsibility or liability for
any aspect of the depositary's or any participant's records relating to, or for
payments made on account of, beneficial interests in a global security.
PAYMENT AND PAYING AGENTS
Unless the prospectus supplement indicates otherwise, we will pay principal
and any premium or interest on a debt security to the person in whose name the
debt security is registered at the close of business on the regular record date
for such interest.
Unless the prospectus supplement indicates otherwise, we will pay principal
and any premium or interest on the debt securities at the office of our
designated paying agent, except we may pay interest by check mailed to the
address of the person entitled to the payment. Unless the prospectus supplement
indicates otherwise, the corporate trust office of the trustee will be the
paying agent for the debt securities.
Any other paying agents we designate for the debt securities of a
particular series will be named in the prospectus supplement. We may designate
additional paying agents, rescind the designation of any paying agent or approve
a change in the office through which any paying agent acts, but we must maintain
a paying agent in each place of payment for the debt securities.
The paying agent will return to us all money we pay to it for the payment
of the principal, premium or interest on any debt security that remains
unclaimed for a specified period. Thereafter, the holder may look only to us for
payment.
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CONSOLIDATION, MERGER AND SALE OF ASSETS
Under the terms of the indentures, we may not consolidate or enter into a
share exchange with or merge into any other person, in a transaction in which we
are not the surviving corporation, or convey, transfer or lease our properties
and assets substantially as an entirety to, any person, unless:
- the successor is a corporation, limited liability company, partnership,
trust or other entity organized and existing under the laws of the United
States, or any state, and assumes our obligations under the debt
securities and the indentures;
- immediately after the transaction, no event of default occurs and
continues; and
- we meet the other conditions described in the indentures.
EVENTS OF DEFAULT
Each of the following will constitute an event of default under each
indenture:
- failure to pay the principal of or any premium on any debt security when
due;
- failure to pay any interest on any debt security when due, continued for
a specified number of days;
- failure to deposit any sinking fund payment when due;
- failure to perform any other covenant in the indenture that continues for
a specified number of days after written notice has been given by the
trustee or the holders of a specified percentage in aggregate principal
amount of the debt securities of that series;
- certain events in bankruptcy, insolvency or reorganization; and
- any other event of default specified in the prospectus supplement.
If an event of default, other than an event of default as a result of
bankruptcy, insolvency or reorganization, occurs and continues, either the
trustee or the holders of a specified percentage in aggregate principal amount
of the outstanding securities of that series may declare the principal amount of
the debt securities of that series to be immediately due and payable. If an
event of default occurs as a result of certain events of bankruptcy, insolvency
or reorganization, the principal amount of all the debt securities of that
series automatically will become immediately due and payable. The holders of a
majority in aggregate principal amount of the outstanding securities of that
series may, under certain circumstances, rescind and annul the acceleration if
all events of default, other than the nonpayment of accelerated principal, have
been cured or waived.
Except for certain duties in case of an event of default, the trustee will
not be obligated to exercise any of its rights or powers at the request or
direction of any of the holders, unless the holders have offered the trustee
reasonable indemnity. If they provide this indemnification, the holders of a
majority in aggregate principal amount of the outstanding securities of any
series may direct the time, method and place of conducting any proceeding for
any remedy available to the trustee or exercising any trust or power conferred
on the trustee with respect to the debt securities of that series.
No holder of a debt security of any series may institute any proceeding
with respect to the indentures, or for the appointment of a receiver or a
trustee, or for any other remedy, unless:
- the holder has previously given the trustee written notice of a
continuing event of default;
- the holders of a specified percentage in aggregate principal amount of
the outstanding securities of that series have made a written request,
and the holders have offered reasonable indemnity to the trustee to
institute the proceeding; and
- the trustee has failed to institute the proceeding, and has not received
a direction inconsistent with the request within a specified number of
days.
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Each indenture will include a covenant requiring our officers to furnish to
the trustee annually a statement as to whether, to their knowledge, we are in
default under the indenture and, if so, specifying all such known defaults.
MODIFICATION AND WAIVER
We and the trustee may amend the indentures with the consent of the holders
of a majority in aggregate principal amount of the outstanding securities of
each series affected by the amendment. However, to the extent discussed in the
prospectus supplement, without the consent of each holder, we may not make any
amendment that would:
- change the stated maturity of the principal of, or any installment of
principal or interest on, any debt security;
- reduce the principal, premium or interest on any debt security;
- reduce the amount of principal of an original issue discount security or
any other debt security payable upon acceleration of the maturity;
- change the place or currency of payment of principal, premium or interest
on any debt security;
- impair the right to enforce any payment on any debt security;
- in the case of subordinated debt securities, modify the subordination
provisions in a manner materially adverse to their holders;
- in the case of debt securities that are convertible or exchangeable into
other securities, adversely affect the right of holders to convert or
exchange any of the debt securities;
- reduce the percentage in principal amount of outstanding securities of
any series for which the holders' consent is required;
- reduce the percentage in principal amount of outstanding securities of
any series necessary for waiver of compliance with certain provisions of
the indentures or for waiver of certain defaults; or
- modify provisions with respect to modification and waiver.
The holders of a majority in aggregate principal amount of the outstanding
debt securities of any series may waive, on behalf of the holders of all debt
securities of that series, our compliance with certain restrictive provisions of
the indenture. The holders of a majority in principal amount of the outstanding
debt securities of any series may waive any past default under the indenture
with respect to debt securities of that series, except a default in the payment
of principal, premium or interest on any debt security of that series or in
respect of a covenant or provision of the indenture that cannot be amended
without each holder's consent.
Except in certain limited circumstances, we may set any day as a record
date for the purpose of determining the holders of outstanding securities of any
series entitled to give or take any direction, notice, consent, waiver or other
action under the indentures. In certain limited circumstances, the trustee may
set a record date for action by holders. To be effective, the action must be
taken by holders of the requisite principal amount of such debt securities
within a specified period following the record date.
DEFEASANCE AND COVENANT DEFEASANCE
To the extent stated in the prospectus supplement, we may elect to apply
the provisions relating to defeasance and discharge of indebtedness, or to
defeasance of certain restrictive covenants in the indentures, to the debt
securities of any series.
NOTICES
We will mail notices to holders of debt securities at the addresses that
appear in the security register.
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TITLE
We may treat the person in whose name a debt security is registered as the
absolute owner, whether or not such debt security may be overdue, for the
purpose of making payment and for all other purposes.
GOVERNING LAW
The indentures and the debt securities will be governed by and construed in
accordance with the laws of the state of New York.
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DESCRIPTION OF COMMON STOCK
GENERAL
Under our current amended and restated articles of incorporation, we may
issue up to 80,000,000 shares of our common stock. Holders of common stock are
entitled to one vote per share on all matters submitted to a vote of
stockholders. Subject to preferences that may apply to our preferred stock, the
holders of common stock receive ratably any dividends that may be declared by
the board of directors. If we are liquidated, dissolved or wound up, we must
first pay all amounts we owe our creditors and then pay the full amounts
required to be paid to holders of any shares of our preferred stock then
outstanding before we may make any payments to holders of shares of our common
stock. All holders of shares of our common stock are entitled to share ratably
in any assets available for distribution to them, after all of our creditors
have been satisfied and we have paid the liquidation preferences of any of our
preferred stock. Holders of common stock have no preemptive rights or rights to
convert their common stock into any other securities. Our common stock is
neither redeemable nor subject to call. No sinking fund provisions apply to the
common stock. All outstanding shares of common stock are fully paid and
nonassessable.
LIMITATION OF LIABILITY AND INDEMNIFICATION
As permitted by Maryland law, our amended and restated articles of
incorporation obligates us to indemnify our present and former directors and
officers to the maximum extent permitted by Maryland law. Maryland law permits a
corporation to indemnify its present and former directors and officers, among
others, against judgments, penalties, fines, settlements and reasonable expenses
actually incurred by them in connection with any proceeding to which they may be
made a party by reason of their service in those or other capacities, unless it
is established that:
- the act or omission of the director or officer was material to the matter
giving rise to such proceeding and was committed in bad faith or was the
result of active and deliberate dishonesty,
- the director or officer actually received an improper personal benefit in
money, property or services, or
- in the case of any criminal proceeding, the director or officer had
reasonable cause to believe that the act or omission was unlawful.
As permitted by Maryland law, our amended and restated articles of
incorporation limits the liability of our directors and officers to us and our
stockholders for money damages, except to the extent that:
- the person actually received an improper benefit or profit in money,
property or services, or
- a judgment or other final adjudication is entered in a proceeding based
on a finding that the person's action, or failure to act, was the result
of active and deliberate dishonesty and was material to the cause of
action adjudicated in the proceeding.
As a result of these provisions, we and our stockholders may be unable to
obtain monetary damages from a director for breach of his of her duty of care.
POSSIBLE ANTI-TAKEOVER EFFECTS
Special Meetings. Our bylaws provide that special meetings of our
stockholders may only be called by a majority of our board, the chairman of our
board, our president or holders of a majority of our outstanding voting stock.
These provisions may make it more difficult for stockholders to take an action
that our board opposes.
Advance Notice Provisions. Our bylaws establish an advance written notice
procedure for stockholders seeking:
- to nominate candidates for election as directors at any annual meeting of
stockholders; and
- to bring business before an annual meeting of our stockholders.
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Our bylaws provide that only persons who are nominated by our board or by a
stockholder who has given timely written notice to our secretary before the
meeting to elect directors will be eligible for election as our directors. Our
bylaws also provide that any matter to be presented at any meeting of
stockholders must be presented either by our board or by a stockholder in
compliance with the procedures in our bylaws. A stockholder must give timely
written notice to our secretary of its intention to present a matter before an
annual meeting of stockholders. Our board then will consider whether the matter
is one that is appropriate for consideration by our stockholders under Maryland
corporate law and the SEC's rules.
To be timely, we must receive any stockholder notice at least 75 days
before the meeting. A stockholder's notice must also contain the information
specified in the bylaws. These provisions may prevent or deter some stockholders
from bringing matters before a stockholders' meeting or from making nominations
for directors at an annual meeting.
Business Combinations. Maryland law prohibits specified "business
combinations" between a Maryland corporation and an "interested stockholder."
These business combinations include a merger, consolidation, share exchange, an
asset transfer or issuance or reclassification of equity securities. Interested
stockholders are either:
- anyone who beneficially owns 10% or more of the voting power of the
corporation's shares; or
- an affiliate or associate of the corporation who was an interested
stockholder or an affiliate or an associate of the interested stockholder
at any time within the two-year period prior to the date in question.
Business combinations with a past interested stockholder are prohibited for
five years after the most recent date on which the stockholder became an
interested stockholder. Thereafter, any business combinations with the
interested stockholder must be recommended by the board of directors of the
corporation and approved by the vote of:
- at least 80% of the votes entitled to be cast by all holders of voting
shares of the corporation's voting shares; and
- at least 66 2/3% of the votes entitled to be cast by all holders of the
corporation's voting other than voting shares held by the interested
stockholder or an affiliate or associate of the interested stockholder.
However, these special voting requirements do not apply if the
corporation's stockholders receive a minimum price for their shares, as
specified in the statute, and the consideration is received in cash or in the
same form previously paid by the interested stockholder for its shares.
This business combination statute does not apply to business combinations
that are approved or exempted by the corporation's board of directors prior to
the time that the interested stockholder becomes an interested stockholder. The
statute also does not apply to stockholders that acquired 10% or more of the
corporation's voting shares in a transaction approved by the corporation's board
of directors. A Maryland corporation may adopt an amendment to its charter
electing not to be subject to these special voting requirements. Any amendment
would have to be approved by at least 80% of the votes entitled to be cast by
all holders of outstanding shares of voting stock and 66 2/3% of the votes
entitled to be cast by holders of outstanding shares of voting stock who are not
interested stockholders. We have elected to be generally subject to this
statute.
Control Share Acquisitions. Maryland law provides that "control shares" of
a Maryland corporation acquired in a "control share acquisition" have no voting
rights unless approved by a vote of two-thirds of the votes entitled to be cast
on the matter, excluding shares owned by the acquiror or by the corporation's
officers or directors who are employees of the corporation. Control shares are
shares of voting stock which, if aggregated with all other shares of stock
previously acquired, would entitle the acquiror to exercise voting power in
electing directors within one of the following ranges of voting power:
- 20% or more but less than 33 1/3%;
- 33 1/3% or more but less than a majority; or
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- a majority of all voting power.
Control shares do not include shares of stock an acquiring person is
entitled to vote as a result of having previously obtained stockholder approval.
A control share acquisition generally means the acquisition of, ownership of or
the power to direct the exercise of voting power with respect to, control
shares.
A person who has made or proposes to make a "control share acquisition,"
under specified conditions, including an undertaking to pay expenses, may
require the board of directors to call a special stockholders' meeting to
consider the voting rights of the shares. The meeting must be held within 50
days of the demand. If no request for a meeting is made, the corporation may
itself present the question at any stockholders' meeting.
If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as permitted by the statute, the
corporation generally may redeem any or all of the control shares, except those
for which voting rights have previously been approved. This redemption of shares
must be for fair value, determined without regard to voting rights as of the
date of the last control share acquisition or of any stockholders' meeting at
which the voting rights of the shares are considered and not approved. If voting
rights for "control shares" are approved at a stockholders' meeting and the
acquiror becomes entitled to vote a majority of the shares entitled to vote, all
other stockholders may exercise appraisal rights. The fair value of the stock
determined for purposes of appraisal rights may not be less than the highest
price per share paid in the control share acquisition. The limitations and
restrictions otherwise applicable to the exercise of dissenters' rights do not
apply in the context of a "control share acquisition."
The control share acquisition statute does not apply to stock acquired in a
merger, consolidation or share exchange if the corporation is a party to the
transaction, or to acquisitions previously approved or exempted by a provision
in the charter or bylaws of the corporation.
RIGHTS PLAN
Our board of directors has adopted a rights plan. As a result, we issued
one common share purchase right for each outstanding share of common stock. One
common share purchase right will be issued for each additional share of common
stock that we issue. Each right entitles the holder to purchase one share of
common stock at an exercise price of $70. The rights become exercisable 10
business days after any party acquires or announces an offer to acquire 20
percent or more of our common stock. The rights expire on January 13, 2007. The
rights are redeemable at $0.01 per right at any time before 10 business days
following the time that any party acquires 20 percent or more of our common
stock. In the event we enter into a merger or other business combination, or if
we sell a substantial amount of our assets after the time that the rights become
exercisable, the rights provide that the holder will receive, upon exercise,
shares of the common stock of the surviving or acquiring company having a market
value of twice the exercise price.
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DESCRIPTION OF PREFERRED STOCK
Our board is authorized to classify or reclassify any unissued portion of
our authorized shares of common stock to provide for the issuance of shares of
other classes or series, including preferred stock in one or more series. We may
issue preferred stock from time to time in one or more classes or series, with
the exact terms of each class or series established by our board. Without
seeking stockholder approval, our board may issue preferred stock with voting
and other rights that could adversely affect the voting power of the holders of
our common stock.
The rights, preferences, privileges and restrictions of the preferred stock
of each series will be fixed by the articles supplementary relating to each
series. A prospectus supplement relating to each series will specify the terms
of the preferred stock, including:
- the maximum number of shares in the series and the distinctive
designation;
- the terms on which dividends, if any, will be paid;
- the terms on which the shares may be redeemed, if at all;
- the liquidation preference, if any;
- the terms of any retirement or sinking fund for the purchase or
redemption of the shares of the series;
- the terms and conditions, if any, on which the shares of the series shall
be convertible into, or exchangeable for, shares of any other class or
classes of capital stock;
- the voting rights, if any, on the shares of the series; and
- any or all other preferences and relative, participating, operational or
other special rights or qualifications, limitations or restrictions of
the shares.
The issuance of preferred stock may delay, deter or prevent a change in
control.
We will describe the specific terms of a particular series of preferred
stock in the prospectus supplement relating to that series. The description of
preferred stock above and the description of the terms of a particular series of
preferred stock in the prospectus supplement are not complete. You should refer
to the applicable articles supplementary for complete information. The
prospectus supplement will contain a description of U.S. federal income tax
consequences relating to the preferred stock.
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DESCRIPTION OF DEPOSITARY SHARES
The description below and in the prospectus supplement is not complete. You
should read the forms of deposit agreement and depositary receipts filed with
the SEC in connection with the offering of each series of the preferred stock
described below.
GENERAL
We may, at our option, elect to offer fractional interests in shares of
preferred stock, rather than shares of preferred stock. If we exercise that
option, we will provide for a depositary to issue receipts for depositary
shares, each of which will represent a fractional interest in a share of
preferred stock.
The shares of preferred stock underlying the depositary shares will be
deposited under a separate deposit agreement between us and a bank or trust
company depositary that has its principal office in the U.S. The prospectus
supplement will include the name and address of the depositary. Subject to the
terms of the deposit agreement, each owner of a depositary share will be
entitled, in proportion to the applicable fractional interest in a share of
preferred stock, to all the rights and preferences of the underlying preferred
stock, including dividend, voting, redemption, conversion and liquidation
rights. Depositary receipts will be issued for depositary shares.
The depositary may issue temporary depositary receipts substantially
identical to, and entitling the holders to all the rights pertaining to, the
definitive depositary receipts. Definitive depositary receipts will then be
prepared thereafter and temporary depositary receipts may be exchanged for
definitive depositary receipts at our expense.
Upon surrender of depositary receipts and payment of the charges provided
in the deposit agreement, the depositary will deliver the whole shares of
preferred stock underlying the depositary shares.
DIVIDENDS AND OTHER DISTRIBUTIONS
The depositary will distribute all cash dividends or other cash
distributions on the preferred stock, rounded to the nearest cent, to the record
holders of depositary shares in proportion to the numbers of such depositary
shares owned by them on the relevant record date. Fractions of one cent not so
distributed will be added to the next sum received by the depositary for
distribution to record holders of depositary shares.
In the event of a non-cash distribution, the depositary will, if feasible,
distribute property received by it to the record holders of depositary shares
entitled to them. If the distribution is not feasible, the depositary may sell
the property and distribute the net proceeds to such holders.
REDEMPTION OF DEPOSITARY SHARES
If we redeem the preferred stock underlying the depositary shares, the
depositary will redeem the depositary shares from the proceeds of the redemption
of the preferred stock held by the depositary. The depositary will mail notice
of redemption not less than 30 or more than 60 days prior to the date fixed for
redemption to the record holders of the depositary shares. The redemption price
per depositary share will be equal to the applicable fraction of the redemption
price per share payable with respect to the preferred stock. Whenever we redeem
shares of preferred stock held by the depositary, the depositary will redeem the
corresponding depositary shares as of the same redemption date. If less than all
the depositary shares are to be redeemed, the depositary will select by lot or
pro rata which depositary shares will be redeemed.
After the redemption, the depositary shares called for redemption will no
longer be deemed to be outstanding. All rights of the holders of the depositary
shares will cease, except the right to receive the money or other property to
which the holders are entitled upon redemption and surrender of the depositary
receipts for their depositary shares.
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VOTING THE PREFERRED STOCK
The depositary will mail to the holders of depositary shares the
information contained in any notice of meeting at which the holders of preferred
stock are entitled to vote. Each record holder of depositary shares on the
record date for the preferred stock may instruct the depositary to exercise its
voting rights with respect to the depositary shares. The depositary will attempt
to vote the number of shares of preferred stock underlying such depositary
shares in accordance with these instructions. We will agree to take any action
required to enable the depositary to vote the depositary shares. The depositary
will abstain from voting shares of preferred stock to the extent it does not
receive instructions from the holders of depositary shares relating to that
preferred stock.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
We and the depositary may amend the form of depositary receipt and any
provision of the deposit agreement at any time. However, neither of us can make
any amendment that would materially and adversely alter the rights of the
existing holders of depositary shares without approval by the record holders of
at least a majority of the outstanding depositary shares. We or the depositary
may terminate a deposit agreement only if:
- all outstanding depositary shares relating thereto have been redeemed; or
- there has been a final distribution to the holders of preferred stock and
to the holders of the related depositary shares in the event of our
liquidation, dissolution or winding up.
CHARGES OF DEPOSITARY
We will pay all transfer and other taxes and governmental charges arising
solely from the depositary arrangements. We will pay charges of the depositary
in connection with the initial deposit of the preferred stock and any redemption
of the preferred stock. Holders of depositary shares will pay transfer and other
taxes and governmental charges and any other charges listed in the deposit
agreement as holders' charges.
MISCELLANEOUS
The depositary will forward to the holders of depositary shares all reports
and communications that we are required to furnish to the holders of the
preferred stock.
Neither the depositary nor Ryland will be liable if the law or any
circumstance beyond its control prevents it from performing its obligations
under the deposit agreement. Ryland and the depositary will be required only to
perform their duties in good faith. They will not be obligated to prosecute or
defend any legal proceeding regarding any depositary shares or preferred stock
unless the holders of those securities provide them with satisfactory indemnity.
They may rely on written advice of counsel or accountants, or information
provided by persons presenting preferred stock for deposit, holders of
depositary shares or other persons believed to be competent and on documents
believed to be genuine.
RESIGNATION AND REMOVAL OF DEPOSITARY
The depositary may resign at any time by delivering notice to us, and we
may at any time remove the depositary. Any such resignation or removal will take
effect when a successor depositary is established.
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DESCRIPTION OF STOCK PURCHASE UNITS
AND STOCK PURCHASE CONTRACTS
The following summarizes the general terms of stock purchase units and
stock purchase contracts we may issue. The particular terms of any stock
purchase units or stock purchase contracts we offer will be described in the
prospectus supplement. This description is subject to the stock purchase
contracts, and any collateral arrangements and depositary arrangements, relating
to the stock purchase or stock purchase contracts.
We may issue stock purchase contracts, including contracts obligating
holders to purchase from us, and us to sell to the holders, a specified number
of shares of common stock or preferred stock at a future date or dates. We may
fix the consideration per share of common stock or preferred stock at the time
we issue the stock purchase contracts, or the consideration may be determined by
referring to a specific formula stated in the stock purchase contracts. We may
issue the stock purchase contracts separately or as a part of stock purchase
units consisting of a stock purchase contract and debt securities, preferred
securities or debt obligations of third parties, including U.S. Treasury
securities, which secure the holders' obligations to purchase the common stock
or preferred stock under the stock purchase contracts. The stock purchase
contracts may require us to make periodic payments to the holders of the stock
purchase units or vice versa. These payments may be unsecured or prefunded on
some basis. The stock purchase contracts may require holders to secure their
obligations in a specified manner.
DESCRIPTION OF WARRANTS TO PURCHASE DEBT SECURITIES
The following summarizes the terms of the debt warrants we may offer. The
debt warrants will be subject to the detailed provisions of a debt warrant
agreement that we will enter into with a debt warrant agent we select at the
time of issue.
GENERAL
We may issue debt warrants evidenced by debt warrant certificates
independently or together with any securities offered by any prospectus
supplement. If we offer debt warrants, the prospectus supplement will describe
the terms of the warrants, including:
- the offering price, if any;
- the designation, aggregate principal amount and terms of the debt
securities purchasable upon exercise of the warrants and the terms of the
indenture under which the debt securities will be issued;
- if applicable, the designation and terms of the debt securities with
which the debt warrants are issued and the number of debt warrants issued
with each debt security;
- if applicable, the date on and after which the debt warrants and the
related securities will be separately transferable;
- the principal amount of debt securities purchasable upon exercise of one
debt warrant and the price at which the principal amount of debt
securities may be purchased upon exercise;
- the dates on which the right to exercise the debt warrants begins and
expires;
- U.S. federal income tax consequences;
- whether the warrants represented by the debt warrant certificates will be
issued in registered or bearer form;
- the currencies in which the offering price and exercise price are
payable; and
- if applicable, any antidilution provisions.
You may exchange debt warrant certificates for new debt warrant
certificates of different denominations and may present debt warrant
certificates for registration of transfer at the corporate trust office of the
debt warrant agent, which will be listed in the prospectus supplement.
Warrantholders do not have any of the rights
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of holders of debt securities, except to the extent that the consent of
warrantholders may be required for certain modifications of the terms of an
indenture or form of the debt security, as the case may be, and the series of
debt securities issuable upon exercise of the debt warrants. In addition,
warrantholders are not entitled to payments of principal of and interest, if
any, on the debt securities.
EXERCISE OF DEBT WARRANTS
You may exercise debt warrants by surrendering the debt warrant certificate
at the corporate trust office of the debt warrant agent, with payment in full of
the exercise price. Upon the exercise of debt warrants, the debt warrant agent
will, as soon as practicable, deliver the debt securities in authorized
denominations in accordance with your instructions and at your sole cost and
risk. If less than all the debt warrants evidenced by the debt warrant
certificate are exercised, the agent will issue a new debt warrant certificate
for the remaining amount of debt warrants.
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DESCRIPTION OF WARRANTS TO PURCHASE
COMMON STOCK OR PREFERRED STOCK
The following summarizes the terms of common stock warrants and preferred
stock warrants we may issue. This description is subject to the detailed
provisions of a stock warrant agreement that we will enter into between us and a
stock warrant agent we select at the time of issue.
GENERAL
We may issue stock warrants evidenced by stock warrant certificates under a
stock warrant agreement independently or together with any securities we offer
by any prospectus supplement. If we offer stock warrants, the prospectus
supplement will describe the terms of the stock warrants, including:
- the offering price, if any;
- if applicable, the designation and terms of the preferred stock
purchasable upon exercise of the preferred stock warrants;
- the number of shares of common or preferred stock purchasable upon
exercise of one stock warrant and the initial price at which the shares
may be purchased upon exercise;
- the dates on which the right to exercise the stock warrants begins and
expires;
- U.S. federal income tax consequences;
- call provisions, if any;
- the currencies in which the offering price and exercise price are
payable; and
- if applicable, the antidilution provisions of the stock warrants.
The shares of common stock or preferred stock we issue upon exercise of the
stock warrants will, when issued in accordance with the stock warrant agreement,
be validly issued, fully paid and nonassessable.
EXERCISE OF STOCK WARRANTS
You may exercise stock warrants by surrendering to the stock warrant agent
the stock warrant certificate, which indicates your election to exercise all or
a portion of the stock warrants evidenced by the certificate. Surrendered stock
warrant certificates must be accompanied by payment of the exercise price in the
form of cash or a check. The stock warrant agent will deliver certificates
evidencing duly exercised stock warrants to the transfer agent. Upon receipt of
the certificates, the transfer agent will deliver a certificate representing the
number of shares of common stock or preferred stock purchased. If you exercise
fewer than all the stock warrants evidenced by any certificate, the stock
warrant agent will deliver a new stock warrant certificate representing the
unexercised stock warrants.
NO RIGHTS AS STOCKHOLDERS
Holders of stock warrants are not entitled to vote, to consent, to receive
dividends or to receive notice as stockholders with respect to any meeting of
stockholders, or to exercise any rights whatsoever as stockholders of Ryland.
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PLAN OF DISTRIBUTION
We may sell the securities through underwriters or dealers, through agents,
or directly to one or more purchasers. The applicable prospectus supplement will
describe the terms of the offering of the securities, including:
- the name or names of any underwriters, if any;
- the purchase price of the securities and the proceeds we will receive
from the sale;
- any underwriting discounts and other items constituting underwriters'
compensation;
- any initial public offering price;
- any discounts or concessions allowed or reallowed or paid to dealers; and
- any securities exchange or market on which the securities may be listed.
Only underwriters named in the prospectus supplement are underwriters of
the securities offered by the prospectus supplement.
If underwriters are used in the sale, they will acquire the securities for
their own account and may resell them from time to time in one or more
transactions at a fixed public offering price or at varying prices determined at
the time of sale. We may offer the securities to the public through underwriting
syndicates represented by managing underwriters or by underwriters without a
syndicate. Subject to certain conditions, the underwriters will be obligated to
purchase all the securities of the series offered by the prospectus supplement.
Any public offering price and any discounts or concessions allowed or reallowed
or paid to dealers may change from time to time.
We may sell securities directly or through agents we designate from time to
time. We will name any agent involved in the offering and sale of securities and
we will describe any commissions we will pay the agent in the prospectus
supplement. Unless the prospectus supplement states otherwise, our agent will
act on a best-efforts basis for the period of its appointment.
We may authorize agents or underwriters to solicit offers by certain types
of institutional investors to purchase securities from us at the public offering
price set forth in the prospectus supplement pursuant to delayed delivery
contracts providing for payment and delivery on a specified date in the future.
We will describe the conditions to these contracts and the commissions we must
pay for solicitation of these contracts in the prospectus supplement.
We may provide agents and underwriters with indemnification against certain
civil liabilities, including liabilities under the Securities Act, or
contribution with respect to payments that the agents or underwriters may make
with respect to such liabilities. Agents and underwriters may engage in
transactions with, or perform services for, us in the ordinary course of
business.
All securities we offer other than common stock will be new issues of
securities with no established trading market. Any underwriters may make a
market in these securities, but will not be obligated to do so and may
discontinue any market making at any time without notice. We cannot guarantee
the liquidity of the trading markets for any securities.
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LEGAL MATTERS
Piper Marbury Rudnick & Wolfe LLP will provide us with an opinion as to
legal matters in connection with the securities we are offering.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule included in our Annual Report on Form 10-K for
the year ended December 31, 1998, as set forth in their report, which is
incorporated by reference in this prospectus and elsewhere in the Registration
Statement. Our financial statements and schedule are incorporated by reference
in reliance on Ernst & Young LLP's report, given on their authority as experts
in accounting and auditing.
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$150,000,000
THE RYLAND GROUP, INC.
9.75% SENIOR NOTES DUE 2010
[LOGO]
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PROSPECTUS SUPPLEMENT
AUGUST 21, 2000
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SALOMON SMITH BARNEY
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