EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of the 31st day of December 1994, by and
between The Ryland Group, Inc., a Maryland corporation (the 'Company'), and
R. Chad Dreier (the 'Executive').
W I T N E S S E T H:
The Executive is presently employed by the Company in the capacity of its
Chairman of the Board, President and Chief Executive Officer and possesses
considerable experience and an intimate knowledge of the business and affairs
of the Company, its policies, methods, personnel and operations. The Company
recognizes that the Executive's contributions have been substantial and
meritorious and that the Executive has demonstrated unique qualifications to
act in an executive capacity for the Company. The Company is desirous of
assuring the continued employment of the Executive and the Executive is
desirous of having such assurance.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements of the parties set forth in this Agreement, and of
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, agree
as follows:
1. TERM OF EMPLOYMENT. The Company hereby agrees to employ the Executive
and the Executive hereby agrees to continue to serve the Company, in
accordance with the terms and conditions set forth herein, for an initial
period of three (3) years, commencing as of January 1, 1995 (the 'Effective
Date'); subject, however, to earlier termination as expressly provided herein.
The initial three (3) year period of employment automatically shall be
extended for one (1) additional year at the end of the initial three (3) year
term, and then again after each successive year thereafter. However, either
party may terminate this Agreement at the end of the initial three (3) year
period, or at the end of any successive one (1) year term thereafter, by
giving the other party written notice of intent not to renew, delivered at
least one hundred eighty (180) days prior to the end of such initial period or
successive term. In the event such notice of intent not to renew is properly
delivered, this Agreement, along with all corresponding rights, duties and
covenants, automatically shall expire at the end of the initialperiod or
successive term then in progress (except as otherwise provided in Section 6
and 9 hereof).
Regardless of the above, if at any time during the initial period of
employment, or successive term, a Change in Control of the Company occurs (as
defined in Section 7 hereof), then the term of this Agreement thereafter shall
be the longer of: (a) two (2) years beyond the month in which the effective
date of such Change in Control occurs; or (b) the term as otherwise provided
by this Section 1.
2. POSITION AND RESPONSIBILITIES. During the term of this Agreement, the
Executive shall serve as the President and Chief Executive Officer of the
Company and, if so elected, as a member of the Company's Board of Directors
and Chairman of the Board. In his capacity as President and Chief Executive
Officer of the Company, the Executive shall be the Company's highest ranking
executive officer and shall have full authority and responsibility, subject to
the control of the Board of Directors of the Company, for formulating and
administering the plans and policies of the Company. The Executive shall have
the same status, privileges and responsibilities normally inherent in such
capacities in corporations of similar size and character.
3. PERFORMANCE OF DUTIES. During the term of this Agreement, the Executive
agrees to devote substantially his full time, attention and energies
to the Company's business and will not engage in consulting work or any
trade or business for his own account or for or on behalf of any other
person, firm or corporation which competes or, in a material way,
conflicts or interferes with the performance of his duties hereunder.
Subject to Section 9.1 herein, the Executive may serve as a director of
other companies so long as such service does not interfere with the per-
formance of his duties to the Company.
4. COMPENSATION. As remuneration for all services to be rendered by the
Executive during the term of this Agreement, and as consideration for
complying with the covenants herein, the Company shall pay and provide to the
Executive the following:
4.1 BASE SALARY. The Company shall pay the Executive a Base Salary in an
amount which shall be established from time to time by the Board of Directors
of the Company, provided that such Base Salary shall not be less than six
hundred thousand dollars ($600,000) per year. This Base Salary shall be paid
to the Executive in installments throughout the year consistent with the
normal payroll practices of the Company. The annual Base Salary shall be
reviewed at least annually following the Effective Date of this Agreement to
ascertain whether, in the judgment of the Board of Directors, such Base Salary
should be increased, based on the performance of the Executive during the
year, inflation and other factors deemed appropriate by the Board of
Directors. If so increased, the Base Salary as stated above shall, likewise,
be increased for all purposes of this Agreement.
4.2 ANNUAL BONUS. In addition to his Base Salary, the Executive shall be
eligible to receive an annual cash bonus (the 'Bonus') in respect of each
fiscal year during the term of this Agreement equal to three-quarters of one
percent (0.75%) of the Ordinary Course Pre-Tax Income. For purposes of this
Agreement, 'Ordinary Course Pre-Tax Income' shall mean the consolidated pre-
tax income of the Company and its subsidiaries as reflected in the audited
consolidated financial statements of the Company, as adjusted in good faith by
the Compensation Committee to eliminate the effect of nonrecurring gains and
losses and other items not reflective of the ongoing ordinary course of
business operating performance of the Company and its subsidiaries.
The Bonus shall be payable to the Executive in cash within sixty (60) days
after the end of each fiscal year during the term of the Agreement, commencing
with the fiscal year ending December 31, 1995.
4.3 INCENTIVE PLANS. The Executive shall be eligible to participate in such
profit-sharing, stock option, Bonus, incentive and performance award programs
as are made available generally to executive officers of the Company, such
participation to be on a basis which is commensurate with the Executive's
position with the Company (and in any event a level of participation at least
as favorable as that provided to executives with junior authority or duties).
4.4 OTHER BENEFITS. The Executive shall be entitled to receive employee
benefits, including, without limitation, pension, disability, group life,
sickness, accident and health insurance programs and split-dollar life
insurance programs, and perquisites as are made available generally to
executive officers of the Company, such participation to be on a basis which
is commensurate with the Executive's position within the Company (and in any
event a level of participation at least as favorable as that provided to
executives with junior authority or duties).
4.5 RIGHT TO CHANGE PLANS. By reason of Sections 4.3 and 4.4 herein, the
Company shall not be obligated to institute, maintain, or refrain from
changing, amending, or discontinuing any benefit plan, program, or perquisite,
so long as such changes are similarly applicable to executive employees
generally.
5. EXPENSES. The Company shall pay, or reimburse the Executive, for all
ordinary and necessary expenses, in a reasonable amount, which the Executive
incurs in performing his duties under this Agreement, including, but not
limited to, travel, entertainment, professional dues and subscriptions, and
all dues, fees, and expenses associated with membership in various
professional, business, and civic associations and societies of which the
Executive's participation is in the best interest of the Company.
6. EMPLOYMENT TERMINATIONS.
6.1 TERMINATION DUE TO RETIREMENT OR DEATH. In the event the Executive's
employment is terminated while this Agreement is in force by reason of
Retirement (as defined under the then established rules of the Company's
retirement plans), or death, the Executive's benefits shall be determined in
accordance with the Company's retirement, survivor's benefits, insurance, and
other applicable programs of the Company then in effect. Upon the effective
date of such termination, the Company's obligation under this Agreement to pay
and provide to the Executive the elements of pay described in Sections 4.1,
4.2, 4.3 and 4.4 shall immediately expire, except to the extent that the
benefits described in Section 4.4 continue after Retirement under the terms of
the benefit plans and programs which apply generally to the Company's
executives and except that the Executive shall receive all other rights and
benefits that he is vested in pursuant to other plans and programs of the
Company. In addition, the Company shall pay to the Executive (or the
Executive's beneficiaries, or estate, as applicable), a pro rata share of his
Bonus for the fiscal year in which employment termination occurs, based on the
results of the Company for such fiscal year. This pro rata Bonus amount shall
be determined by multiplying the Bonus which otherwise would apply or such
full fiscal year by a fraction, the numerator of which is the number of days
in such fiscal year prior to the date of employment termination and the
denominator of which is the total number of days in such fiscal year. The pro
rata Bonus shall be paid within sixty (60) days of the end of such fiscal
year.
6.2 TERMINATION DUE TO DISABILITY. In the event that the Executive becomes
Disabled (as defined below) during the term of this Agreement and is,
therefore, unable to perform his duties herein for more than one hundred
twenty (120) total calendar days during any period of twelve (12) consecutive
months, or in the event of the Board's reasonable expectation that the
Executive's Disability will exist for more than a period of one hundred twenty
(120) calendar days, the Company shall have the right to terminate the
Executive's active employment as provided in this Agreement. However, the
Board shall deliver written notice to the Executive of the Company's intent to
terminate for Disability at least thirty (30) calendar days prior to the
effective date of such termination. A termination for Disability shall become
effective upon the end of the thirty (30) day notice period. Upon such
effective date, the Company's obligation to pay and provide to the Executive
the elements of pay described in Sections 4.1, 4.2, 4.3 and 4.4 shall
immediately expire, except to the extent that the benefits described in
Section 4.4 continue after Disability or Retirement under the terms of the
benefit plans and programs which apply generally to the Company's executives
and except that the Executive shall receive all rights and benefits that he is
vested in pursuant to other plans and programs of the Company. In addition,
the Company shall pay to the Executive a pro rata share of his Bonus for the
fiscal year in which employment termination occurs, based on the results for
such fiscal year, determined as provided in Section 6.1. The pro rata Bonus
shall be paid within sixty (60) days of the end of such fiscal year.
The term 'Disability' shall mean, for all purposes of this Agreement, the
incapacity of the Executive, due to injury, illness, disease, or bodily or
mental infirmity, to engage in the performance of substantially all of the
usual duties of employment with the Company as contemplated by Section 2
herein, such Disability to be determined by the Board of Directors of the
Company upon receipt and in reliance on competent medical advice from one (1)
or more individuals, selected by the Board, who are qualified to give such
professional medical advice.It is expressly understood that the Disability of
the Executive for a period of one hundred twenty (120) calendar days or less
in the aggregate during any period of twelve (12) consecutive months, in the
absence of any reasonable expectation that his Disability will exist for more
than such a period of time, shall not constitute a failure by him to perform
his duties hereunder and shall not be deemed a breach or default and the
Executive shall receive full compensation for any such period of Disability or
for any other temporary illness or incapacity during the term of this
Agreement.
6.3 VOLUNTARY TERMINATION BY THE EXECUTIVE. The Executive may terminate this
Agreement at any time by giving the Board of Directors of the Company written
notice of intent to terminate, delivered at least ninety (90) days prior to
the effective date of such termination.Upon the expiration of the ninety (90)
day notice period, the termination by the Executive shall become effective.
The Company shall pay the Executive his Base Salary, at the rate then in
effect as provided in Section 4.1 herein, through the effective date of
termination, plus all other benefits to which the Executive has a vested right
to at that time (for this purpose, the Executive shall not be paid any Bonus
with respect to the fiscal year in which voluntary termination under this
Section 6.3 occurs). The Company and the Executive shall have no further
obligations under this Agreement after the effective date of such termination,
except as set forth in Sections 9 or 10 hereof.
6.4 INVOLUNTARY TERMINATION BY THE COMPANY WITHOUT CAUSE. The Board may
terminate the Executive's employment, as provided under this Agreement, at any
time, for reasons other than death, Disability, Retirement, or for Cause (as
defined in Section 6.5 hereof), by notifying the Executive in writing of the
Company's intent to terminate, at least thirty (30) calendar days prior the
effective date of such termination.Upon the expiration of the thirty (30) day
notice period the termination by the Company shall become effective, and the
Company shall pay and provide to the Executive the benefits set forth in this
Section 6.4 (plus, in the event of termination by the Company during a Change
of Control Period, any additional benefits required by Section 7.1 hereof).
Upon a termination of the Executive's employment by the Company pursuant to
this Section 6.4 at any time other than during a Change of Control Period, the
Company shall pay to the Executive, within thirty (30) days after the
effective date of such termination, a lump sum cash payment equal to the
greater of: (a) the Base Salary then in effect for the remaining term of this
Agreement (assuming no additional extensions of this Agreement's term beyond
that in effect as of the effective date of termination); or (b) eighteen (18)
full months of his Base Salary in effect as of the effective date of
termination, and shall thereafter provide to the Executive a continuation of
his health and welfare benefits for a period equal to the greater of such
remaining term or eighteen (18) months, as applicable. If for any reason the
Company is unable to continue health and welfare benefits as required by the
preceding sentence, the Company shall either provide equivalent benefits to
the Executive or pay to the Executive a lump sum cash payment equal to the
value of the benefits which the Company is unable to provide. Continuation of
health benefits under this Section 6.4 will count against, and will not
extend, the period during which benefits are required to be continued under
COBRA.
In addition, the Company shall make a prorated payment of the Executive's
Bonus for the fiscal year in which termination occurs, calculated based upon
the performance of the Company through the end of the month immediately
preceding the effective date of the termination. Payment of the Bonus shall
be made in cash, in one lump sum, at the same time payment of Base Salary is
made pursuant to this Section 6.4. Further, the Company shall pay the
Executive all other benefits to which the Executive has a vested right at the
time, according to the provisions of each governing plan or program. The
Company and the Executive thereafter shall have no further obligations under
this Agreement after the effective date of termination, except as set forth in
Sections 7, 9 or 10 hereof.
6.5 TERMINATION FOR CAUSE. Nothing in this Agreement shall be construed to
prevent the Board from terminating the Executive's employment under this
Agreement for 'Cause.'
'Cause' shall be determined by the Board in the exercise of good faith and
reasonable judgment, and shall be defined as fraud, embezzlement, theft, or
other criminal act constituting a felony under U.S. laws, or the failure of
the Executive to perform any material covenants under this Agreement, for
reasons other than the Executive's death, Disability or Retirement. In the
event this Agreement is terminated by the Board for Cause, the Company shall
pay the Executive his Base Salary through the effective date of the employment
termination and the Executive shall immediately thereafter forfeit all rights
and benefits (other than vested benefits) he would otherwise have been
entitled to receive under this Agreement, including any right to a Bonus for
the fiscal year in which the termination occurs. The Company and the
Executive thereafter shall have no further obligations under this Agreement,
except as set forth in Sections 9 or 10 hereof.
6.6 TERMINATION FOR GOOD REASON. At any time during the term of this
Agreement, the Executive may terminate this Agreement for Good Reason (as
defined below) by giving the Board of Directors of the Company thirty (30)
calendar days written notice of intent to terminate, which notice sets forth
in reasonable detail the facts and circumstances claimed to provide a basis
for such termination. Upon the expiration of the thirty (30) day notice
period, the Good Reason termination shall become effective, and the Company
shall pay and provide to the Executive the benefits set forth in this
Section 6.6 (plus in the event of termination for Good Reason during a Change
of Control Period, any additional benefits required by Section 7.1 hereof).
Good Reason shall mean, without the Executive's express written consent, the
occurrence of any one or more of the following:
(a) The assignment of the Executive to duties materially inconsistent with
the Executive's authorities, duties, responsibilities and status (including
offices, titles, and reporting requirements) as an officer of the Company, or
a reduction or alteration in the nature or status of the Executive's
authorities, duties, or responsibilities from those in effect during the
immediately preceding fiscal year, other than an insubstantial and inadvertent
act that is remedied by the Company promptly after receipt of notice thereof
given by the Executive;
(b) Without the Executive's consent, the Company's requiring the Executive to
be based at a location which is at least fifty (50) miles further from the
Executive's current primary residence than is such residence from the
Company's current headquarters, except for required travel on the Company's
business;
(c) A reduction by the Company in the Executive's Base Salary as in effect on
the Effective Date, as provided in Section 4.1 herein, or as the same shall be
increased from time to time;
(d) The failure of the Company to obtain a satisfactory agreement from any
successor to the Company to assume and agree to perform this Agreement, as
contemplated in Section 11.1 herein.
Upon a termination of the Executive's employment for Good Reason at any time
other than during a Change of Control Period, the Executive shall be entitled
to receive the same payments and benefits as he is entitled to receive
following an involuntary termination of his employment by the Company without
Cause, as specified in Section 6.4 herein. The payment of Base Salary and pro
rata Bonus shall be made to the Executive within thirty (30) calendar days
following the effective date of employment termination. Upon a termination for
Good Reason during a Change of Control Period the Executive shall be entitled
to receive the payments and benefits set forth in Section 7.1 herein in lieu
of those set forth in this Section 6.6.
The Executive's right to terminate employment for Good Reason shall not be
affected by the Executive's incapacity due to physical or mental illness. The
Executive's continued employment shall not constitute consent to, or a waiver
of rights with respect to, any circumstance constituting Good Reason herein.
6.7 NON-RENEWAL BY COMPANY. Upon any termination of this Agreement as a
result of a notice of non-renewal by the Company pursuant to Section 1 hereof,
upon the effective date of such termination, the Company shall pay to the
Executive a lump sum cash payment equal to twelve (12) full months Base Salary
then in effect and shall continue the Executive's health and welfare benefits
for twelve (12) full months. If for any reason the Company is unable to
continue health and welfare benefits as required by the preceding sentence,
the Company shall either provide equivalent benefits to the Executive or pay
to the Executive a lump sum cash payment equal to the value of the benefits
the Company is unable to provide. Continuation of health benefits under this
Section 6.4 will count against, and will not extend, the period during which
benefits are required to be continued under COBRA.In addition, the Company
shall pay the Executive's Bonus for the finalyear within sixty (60) days after
the effective date of the termination of this Agreement in accordance with the
provisions of Section 4.2 hereof.
7. CHANGE IN CONTROL.
7.1 Employment Terminations in Connection with a Change in Control. In the
event of a Qualifying Termination (as defined below) during a Change of
Control Period, the Company shall pay to the Executive and provide him with
benefits in lieu of the benefits which otherwise would have been payable under
this Agreement such that the total benefits payable to the Executive shall be
as follows:
(a) A lump sum amount equal to three (3) times the highest rate of the
Executive's annualized Base Salary rate in effect at any time up to and
including the effective date of termination;
(b) A lump sum amount equal to three (3) times the higher of the Executive's
Bonus for the last fiscal year prior to the Change in Control or the average
annual Bonus paid to the Executive for the last three (3) fiscal years prior
to the Change in Control;
(c) An amount equal to the Executive's unpaid Base Salary and pro rata Bonus
through the effective date of termination, determined as provided in Section
6.4; and (d) A continuation of health and welfare benefits for three (3) full
years from the effective date of termination. If for any reason the Company
is unable to continue health and welfare benefits as required by the preceding
sentence, the Company shall either provide equivalent benefits to the
Executive or pay to the Executive a lump sum cash payment equal to the value
of the benefits which the Company is unable to provide. Continuation of
health benefits under this Section 6.4 will count against, and will not
extend, the period during which benefits are required to be continued under
COBRA. The continuation of these welfare benefits may be discontinued by the
Company prior to the end of the three (3) year period in the event the
Executive has available substantially similar benefits from a subsequent
employer, as determined by the Company's Board of Directors.
For purposes of this Section 7, a Qualifying Termination shall mean any
termination of the Executive's employment other than:(1) by the Company for
Cause; (2) by reason of death, Disability or Retirement; or (3) by the
Executive without Good Reason. Payment of any lump sum amounts pursuant to
this Section 7.1 will be made within sixty (60) days after the effective date
of the termination of the Executive's Employment
7.2 DEFINITION OF 'CHANGE IN CONTROL'. A Change in Control of the Company
shall be deemed to have occurred as of the first day any one or more of the
following conditions shall have been satisfied:
(a) Any Person (as defined in Section 3(a)(9) of the Securities Exchange Act
of 1934) (other than those Persons in control of the Company as of the
Effective Date, and other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Company, or a corporation owned directly
or indirectly by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company), becomes the
Beneficial Owner (as defined in Rule 13d-3 of the General Rules and
Regulations under the Securities Exchange Act of 1934), directly or
indirectly, of securities of the Company representing over thirty percent
(30%) of the combined voting power of the Company's common stock then
outstanding; or
(b) During any period of two (2) consecutive years (not including any period
prior to the Effective Date), individuals who at the beginning of such period
constitute the Board of Directors (and any new Director, whose election was
approved or recommended by a vote of at least two-thirds (2/3) of the
Directors then still in office who either were Directors at the beginning of
the period or whose election or nomination for election was so approved),
cease for any reason to constitute a majority thereof; or
(c) The stockholders of the Company approve: (i) a plan of complete
liquidation of the Company; or (ii) an agreement for the sale or disposition
of all or substantially all the Company's assets (except as provided in
(iii)); or (iii) a merger, consolidation, share exchange or reorganization of
the Company with or involving any other corporation, other than a merger,
consolidation, share exchange or reorganization that would result in the
owners of common stock having more than fifty percent (50%) of the combined
voting power of the common stock of the Company outstanding immediately prior
thereto, continuing to have (either by such stock remaining outstanding or by
being converted into common stock of another entity or entities), more than
fifty percent (50%) of the combined voting power of the common stock which is
outstanding immediately after such merger, consolidation, share exchange or
reorganization.
However, in no event shall a Change in Control be deemed to have occurred,
with respect to the Executive, if the Executive is part of a purchasing group
which consummates the Change in Control transaction. The Executive shall be
deemed 'part of a purchasing group' for purposes of the preceding sentence if
the Executive is an equity participant in the purchasing company or group
(except for: (i) passive ownership of less than two percent (2%) of the stock
of the purchasing company; or (ii) ownership of equity participation in the
purchasing company or group which is otherwise not significant, as determined
prior to the Change in Control by a majority of the nonemployee continuing
Directors).
7.3 CHANGE OF CONTROL PERIOD. 'Change in Control Period' shall mean the
period of time commencing with the date on which the Company becomes aware of
the Change in Control or becomes aware of a proposed transaction which
reasonably could be expected to result in a change in control and ending on
the first to occur of two (2) years after the effective date of the Change in
Control or the date on which the proposed transaction no longer is reasonably
expected to occur.
7.4 LIMITATION ON CHANGE IN CONTROL BENEFITS. In the event that any of the
amounts payable to the Executive by the Company pursuant to the provisions of
Section 7.1 of this Agreement or otherwise would, if made, be nondeductible
for Federal income tax purposes under Section 280G of the Internal Revenue
Code of 1986, as amended (after application of Section 280G(b)(4)), the amount
payable by the Company shall be reduced by the minimum amount necessary to
cause the Executive to receive no payments which would be nondeductible by the
Company for Federal income tax purposes under Section 280G of the Code. For
purposes of determining whether or not payments under Section 7.1 or otherwise
would in fact be nondeductible to the Company under Code Section 280G, the
following principles and guidelines are agreed to, and, absent contrary mutual
agreement, shall be followed: (i) all payments under or in respect of
supplemental retirement plans, and stock option, bonus and other incentive
compensation plans are intended to represent reasonable compensation for
personal services performed by the Executive through the date of termination
of the Executive's employment, (ii) if there is an issue as to whether any
payments being made to the Executive constitute 'parachute payments' under
Section 280G of the Code,and the Company and the Executive cannot agree upon
the amount thereof within thirty (30) days after the effective date of the
termination of the Executive's employment, the Executive and the Company
shall, within forty-five (45) days after the effective date of the termination
of Executive's employment, mutually agree upon and appoint a third party
arbitrator who shall analyze the issue giving recognition to the foregoing
intentions and shall issue a report within thirty (30) days of the appointment
stating the arbitrator's best estimate of the amount of 'parachute payments'
under Code Section 280G, if any, and the report of such arbitrator shall be
conclusive and binding on the parties,(iii) the third party arbitrator
selected shall be a nationally recognized accounting firm or a management
consulting firm specializing in the area of executive compensation, who shall
be entitled to engage independent legal counsel for advice with respect to
legal matters in connection with the report, (iv) if the parties cannot agree
upon a third party arbitrator within the specified forty-five (45) day time
period, an arbitrator shall be selected and appointed by the Chief Judge of
the United States District Court for the District of Maryland and (v) the
costs and expenses of the arbitrator, including counsel's fees, shall be borne
by the Company.The Executive and the Company agree that each will in all cases
file tax returns on a basis consistent with any conclusions reached with
respect to the deductibility of amounts under Code Section 280G, and will
defend such position to the extent practicable in the event a contrary
position is taken by the Internal Revenue Service. The Executive shall be
entitled to reimbursement of counsel fees in connection with any such defense
as provided in Section 12.1 hereof.
In the event of any reduction of payments made or to be made to the Executive
pursuant to Section 7.1 or otherwise as a result of this Section 7.4, the
Executive shall be entitled to select the amount and form of compensation to
be reduced or eliminated.
7.5 SUBSEQUENT IMPOSITION OF EXCISE TAX. If, notwithstanding compliance with
the provisions of Section 7.4 herein, it is ultimately determined by a court
or pursuant to a final determination by the Internal Revenue Service that any
portion of the payments to the Executive is considered to be an 'excess
parachute payment,' subject to the excise tax under Section 4999 of the Code,
which was not contemplated to be an 'excess parachute payment' at the time of
payment (so as to accurately determine whether a limitation should have been
applied to the payments to maximize the net benefit to the Executive, as
provided in Section 7.4 hereof), the Executive shall be entitled to receive a
lump sum cash payment sufficient to place the Executive in the same net after-
tax position, computed by using the 'Special Tax Rate' as such term is defined
below, that the Executive would have been in had such payment not been subject
to such excise tax, and had the Executive not incurred any interest charges or
penalties with respect to the imposition of such excise tax. For purposes of
this Agreement, the 'Special Tax Rate' shall be the highest effective Federal
and state marginal tax rates applicable to the Executive in the year in which
the payment contemplated under this Section 7.5 is made.
8. Outplacement Assistance. Following a Qualifying Termination (as defined
in Section 7.1 herein) the Executive shall be reimbursed by the Company for
the costs of all outplacement services obtained by the Executive within the
two (2) year period after the effective date of termination; provided,
however, that the total reimbursement shall be limited to an amount equal to
fifteen percent (15%) of the Executive's Base Salary as of the effective date
of termination.
9. NONCOMPETITION
9.1 PROHIBITION ON COMPETITION. Without the prior written consent of the
Company, during the term of this Agreement, and for twenty-four (24) months
following termination of this Agreement by the Company for Cause or expiration
or termination of this Agreement as a result of notice of the Executive to the
Company pursuant to Section 1 or Section 6.3 hereof (the 'Restrictive Period')
of this Agreement, the Executive shall not, as a stockholder, partner,
employee or an officer, engage directly or indirectly in any business or
enterprise which is 'in competition' with the Company or its successors or
assigns. For purposes of this Agreement, a business or enterprise will be
deemed to be 'in competition' if it is engaged in any significant business
activity of the Company or its subsidiaries within the continental United
States.
However, the Executive shall be allowed to purchase and hold for investment
less than two percent (2%) of the shares of any corporation whose shares are
regularly traded on a national securities exchange or in the over-the-counter
market.
9.2 DISCLOSURE OF INFORMATION. The Executive recognizes that he has access
to and knowledge of certain confidential and proprietary information of the
Company which is essential to the performance of his duties under this
Agreement. The Executive will not, during or after the term of his employment
by the Company, in whole or in part, disclose such information to any person,
firm, corporation, association, or other entity for any reason or purpose
whatsoever, nor shall he make use of any such information for his own
purposes.
9.3 COVENANTS REGARDING OTHER EMPLOYEES. During the term of this Agreement,
and during the Restrictive Period, the Executive agrees not to attempt to
induce any employee of the Company to terminate his or her employment with the
Company, accept employment with any competitor of the Company, or to interfere
in a similar manner with the business of the Company.
9.4 SPECIFIC PERFORMANCE. The parties recognize that the Company will have
no adequate remedy at law for breach by the Executive of the requirements of
this Section 9 and, in the event of such breach, the Company and the Executive
hereby agree that, in addition to the right to seek monetary damages, the
Company will be entitled to a decree of specific performance, mandamus, or
other appropriate remedy to enforce performance of such requirements.
10. INDEMNIFICATION. The Company hereby covenants and agrees to indemnify
and hold harmless the Executive fully, completely, and absolutely against and
in respect to any and all actions, suits, proceedings, claims, demands,
judgments, costs, expenses (including attorney's fees), losses, and damages
resulting from the Executive's good faith performance of his duties and
obligations under the terms of this agreement, subject to compliance with any
applicable requirements and limitations improved by the Company's Articles of
Incorporation and By-Laws as in effect on the date hereof and applicable law.
SECTION II. ASSIGNMENT
11.1 ASSIGNMENT BY COMPANY. This Agreement may and shall be assigned or
transferred to, and shall be binding upon and shall inure to the benefit of,
any successor of the Company, and any such successor shall be deemed
substituted for all purposes of the 'Company' under the terms of this
Agreement. As used in this Agreement, the term 'successor' shall mean any
person, firm, corporation, or business entity which at any time, whether by
merger, purchase, or otherwise,acquires all or substantially all of the assets
or the business of the Company. Notwithstanding such assignment, the Company
shall remain, with such successor, jointly and severally liable for all its
obligations hereunder.
Failure of the Company to obtain the agreement of any successor to be bound by
the terms of this Agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement, and shall immediately entitle the
Executive to compensation from the Company in the same amount and on the same
terms as the Executive would be entitled in the event of a termination of
employment for Good Reason during a Change in Control Period, as provided in
Section 7 herein.Except as herein provided, this Agreement may not otherwise
be assigned by the Company.
11.2 ASSIGNMENT BY EXECUTIVE. The services to be provided by the Executive to
the Company hereunder are personal to the Executive, and the Executive's
duties may not be assigned by the Executive; provided, however that this
Agreement shall inure to the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, and administrators, successors,
heirs, distributees, devisees, and legatees. If the Executive dies while any
amounts payable to the Executive hereunder remain outstanding, all such
amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive's devisee, legatee, or other
designee or, in the absence of such designee, to the Executive's estate.
12. DISPUTE RESOLUTION AND NOTICE.
12.1 Dispute Resolution. Either the Executive or the Company may elect to
have any good faith dispute or controversy arising under or in connection with
this Agreement settled by arbitration, by providing written notice of such
election to the other party hereto, specifying the nature of the dispute to be
arbitrated, provided that if the other party objects to the use of arbitration
within thirty (30) days of the receipt of such notice, the dispute may only be
settled by litigation unless otherwise agreed.
If arbitration is selected, such proceeding shall be conducted before a panel
of three (3) arbitrators sitting in a location agreed to by the Company and
the Executive within fifty (50) miles from the location of the Executive's
principal place of employment, in accordance with the rules of the American
Arbitration Association/then in effect. Judgment may be entered on the award
of the arbitrators in any court having competent jurisdiction.To the extent
that the Executive prevails in any litigation or arbitration seeking to
enforce the provisions of this Agreement, the Executive shall be entitled to
reimbursement by the Company of all expenses of such litigation or
arbitration, including the reasonabl fees and expenses of the legal
representative for the Executive, and necessary costs and disbursements
incurred as a result of such dispute or legal proceeding, .
12.2 NOTICE. Any notices, requests, demands, or other communications provided
for by this Agreement shall be sufficient if in writing and if sent by
registered or certified mail to the Executive at the last address he has filed
in writing with the Company or, in the case of the Company, at its principal
offices.
13. MISCELLANEOUS
13.1 ENTIRE AGREEMENT. This Agreement supersedes any prior agreements or
understandings, oral or written, between the parties hereto, or between the
Executive and the Company, with respect to the subject matter hereof, and
constitutes the entire agreement of the parties with respect thereto.
13.2 MODIFICATION. This Agreement shall not be varied, altered, modified,
canceled, changed, or in any way amended except by mutual agreement of the
parties in a written instrument executed by the parties hereto or their legal
representatives.
13.3 SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason,
the remaining provisions of this Agreement shall be unaffected thereby and
shall remain in full force and effect.
13.4 TAX WITHHOLDING. The Company may withhold from any benefits payable
under this Agreement all Federal, state, city, or other taxes as may be
required pursuant to any law or governmental regulation or ruling.
13.5 BENEFICIARIES. The Executive may designate one or more persons or
entities as the primary and/or contingent beneficiaries of any amounts to be
received under this Agreement. Such designation must be in the form of a
signed writing acceptable to the Board or the Board's designee. The Executive
may make or change such designation at any time.
13.6 BOARD COMMITTEE. Any action to be taken, or determination to be made, by
the Board of Directors under this Agreement may be taken or made by the
Compensation Committee or any other Committee authorized by the Board of
Directors to act on its behalf.
13.7 GOVERNING LAW. To the extent not preempted by Federal law, the
provisions of this Agreement shall be construed and enforced in accordance
with the laws of the State of Maryland.
IN WITNESS WHEREOF, the Executive and the Company have executed this Agreement
as of the date first above written.
The Ryland Group, Inc. Executive:
By: \s\ R.Chad Dreier
-------------------- --------------------
R. Chad Dreier
Attest:--------------------
Employment Agreement - The Ryland Group Inc. and R. Chad Dreier
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