EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of the 28th day of January 1997, by and between
The Ryland Group, Inc., a Maryland corporation (the 'Company'), and R. Chad
Dreier (the 'Executive').
In consideration of the mutual covenants and agreements of the parties set
forth in this Agreement, and other good and valuable consideration the receipt
and sufficiency of which are acknowledged, the parties agree as follows:
1. Replacement of Prior Employment Agreement. This Employment Agreement
replaces and supercedes the Employment Agreement dated as of December
31, 1994 between the Company and the Executive which upon the effective
date of this Employment Agreement is terminated and no longer effective.
2. Term of Employment. The Company agrees to employ the Executive for a
period of four (4) years commencing as of January 1, 1997. This
Agreement shall be automatically renewed for a one (1) year period at
the end of the initial four (4) year term or at the end of each renewal
period until terminated in accordance with the terms of this Agreement.
Either party may terminate this Agreement at the end of the initial four
(4) year term or at the end of each one (1) year renewal period by
giving the other party written notice of termination delivered at least
one hundred eighty (180) days prior to the end of the initial term or
any renewal period.
If at any time during the initial term or any renewal period, a Change
of Control of the Company occurs (as defined in Section 7.2 below), the
term of this Agreement shall be the longer of (a) three (3) years
beyond the effective date of the Change of Control or (b) the term as
provided in this Section 2.
3. Position and Responsibilities. The Executive shall serve as the
Chairman of the Board of Directors, President and Chief Executive
Officer of the Company. In his capacity as Chairman of the Board,
President and Chief Executive Officer, the Executive shall be the
Company's highest ranking executive officer and shall have full
authority and responsibility for formulating and administering the plans
and policies of the Company subject to the control of the Board of
Directors.
4. Performance of Duties. The Executive shall devote his full time
attention and energies to the Company's business and will not engage in
consulting work or any business for his own account or for any person,
firm or corporation. The Executive may serve as a director of other
companies so long as this service does not interfere with the
performance of his duties with the Company.
5. Compensation. For all services to be rendered by the Executive during
the term of this Agreement, the Company shall pay and provide to the
Executive:
5.1 Base Salary. The Company shall pay the Executive a Base Salary in
an amount which shall be established from time to time by the
Board of Directors, provided the Base Salary shall not be less
than six hundred fifty-five thousand dollars ($655,000) per year.
This Base Salary is paid in installments consistent with the
normal payroll practices of the Company and reviewed annually to
determine whether, in the judgment of the Board of Directors, it
should be increased based on the performance of the Executive and
any other factors deemed appropriate.
5.2 Annual Bonus. The Executive is eligible to receive an annual cash
bonus (the 'Bonus') in respect of each fiscal year during the term
of this Agreement equal to one percent (1.0%) of the Ordinary
Course Pre-Tax Income. 'Ordinary Course Pre-Tax Income' is the
consolidated pre-tax income of the Company and its subsidiaries as
reflected in the audited consolidated financial statements of the
Company, as adjusted in good faith by the Compensation Committee
to eliminate the effect of nonrecurring gains and losses and other
items not reflective of the ongoing ordinary course of business
and operating performance of the Company. The Bonus shall be
payable to the Executive in cash within sixty (60) days after the
end of each fiscal year during the term of this Agreement.
5.3 Incentive Plans. The Executive shall participate in any stock
option and incentive award programs available to executive
officers of the Company. This participation is on a basis which
is commensurate with the Executive's position with the Company.
5.4 Other Benefits. The Executive is entitled to receive other
employee benefits, such as disability, group life, sickness,
accident and health insurance programs, split-dollar life
insurance programs and other perquisites that are available to
executive officers of the Company. This participation is on a
basis which is commensurate with the Executive's position with the
Company.
5.5 Stock Option
(a) Grant of Option
Pursuant to the terms and conditions of The Ryland Group,
Inc. 1992 Equity Incentive Plan (the 'Plan), the Company
grants to the Executive during the period ending at the
close of business on January 28, 2007 (the 'Option Period'),
the option to purchase (the 'Option') from the Company at a
price of $12.75 per share up to 150,000 shares of the
Company's Common Stock. THE OPTION GRANTED SHALL NOT BE
TREATED AS AN 'INCENTIVE STOCK OPTION' WITHIN THE MEANING OF
SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986. AS
AMENDED. The option is governed and controlled by all terms
of the Plan.
(b) Exercise of Option.
The Option may be exercised in whole or in part in
accordance with the following vesting schedule:
The aggregate number of shares of Common Stock optioned by
this Agreement shall be dividend into 3 installments.
The first installment for 50,000 shares may be exercised in
whole or in part beginning 1/29/98
The second installment for 50,000 shares may be exercised in
whole or in part beginning 1/29/99
The third installment for 50,000 shares may be exercised in
whole or in part beginning 1/29/00
In case an installment is not immediately exercisable, the
Board of Directors or the Compensation Committee of the Board
may in its discretion accelerate the time at which the
installment may be exercised. To the extent not exercised,
installments shall accumulate and be exercisable by the
Executive during the Option Period. Continued accrual and
vesting of installments shall cease immediately upon
termination of employment for any reason whatsoever, subject to
acceleration by the Board of Directors or the Compensation
Committee.
(c) Payment of Exercise Price.
The Executive shall pay the exercise price in the following
ways:
(I) cash payment (by certified check, bank draft or money
order payable to the order of the Company).
(ii) if approved by the Company, cash payment may be made from
the proceeds of an immediate sale of Common Stock
receivable upon the exercise of the Option; or
(iii) if approved by the Company, delivery of Common Stock
(including executed stock powers attached thereto);
The payment of the exercise price shall be delivered with a
notice of exercise, which notice will be in a form provided by
the Company.
The Company shall, subject to the receipt of withholding tax,
issue to the Executive the stock certificate for the number of
shares of Common Stock with respect to which the Option is
exercised.
The value of shares of Common Stock used as payment for the
exercise of an Option shall be the closing price of such shares
on the New York Stock Exchange on the date of exercise of an
Option or as otherwise determined by the Company, the Board of
Directors or the Compensation Committee of the Board of
Directors.
(d) Termination
The Option shall terminate upon the happening of the earliest
of the following events:
(i) January 28, 2007
(ii) The expiration of 90 days after the date of termination
of the Executive's employment, except in the case of
death, Disability (defined below) or retirement. During
this period, the Executive shall have the right to
exercise the Option to the extent it is exercisable on
the termination date.
(iii) The expiration of three (3) years after the date of death
of the Executive if death occurs during the term of this
Agreement. During this period, the Executive's estate,
personal representative or beneficiary shall have the
right to exercise the Option to the extent it is
exercisable on the date of death.
(iv) The expiration of three (3) years after the date the
Executive's employment is terminated due to Disability or
retirement. During this period, the Executive shall have
the right to exercise the Option to the extent it is
exercisable on the date of termination.
(e) Merger, Consolidation or Share Exchange.
After any merger, consolidation or share exchange in which the
Company is the surviving or resulting corporation, the
Executive shall be entitled, upon the exercise of an Option, to
receive the number and class of shares of stock or other
consideration to which the Executive would have been entitled,
if, immediately prior to such merger, consolidation or share
exchange, the Executive had exercised the Option in accordance
with and subject to the terms of this Agreement and the Plan.
If the Company is not the surviving or resulting corporation in
any merger, consolidation or share exchange, the surviving or
resulting corporation shall tender stock options to purchase
its shares on terms and conditions that substantially preserve
the rights and benefits under this Option.
5.6 Stock Units