SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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THE RYLAND GROUP, INC.
--------------------------------------------
(Name of Registrant as Specified in Charter)
THE RYLAND GROUP, INC.
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THE RYLAND GROUP, INC.
11000 Broken Land Parkway
Columbia, Maryland 21044
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders:
Notice is given that the Annual Meeting of Stockholders of The Ryland
Group, Inc. (the "Corporation") will be held at Ryland's corporate
headquarters, Fourth Floor, 11000 Broken Land Parkway, Columbia, Maryland, on
April 30, 1997, at 9:00 a.m., Eastern Daylight Time, for the following
purposes:
1. To elect 10 directors to serve until the next Annual Meeting of
Stockholders and until their successors are elected and shall qualify.
2. To ratify the selection of independent public accountants for the
Corporation.
3. To act upon other business properly brought before the meeting.
Stockholders of record at the close of business on February 19, 1997, are
entitled to vote at the meeting or any adjournment thereof. Please date and
sign the enclosed proxy and return it in the accompanying postage-paid return
envelope. You may revoke your proxy at any time prior to its exercise by
filing with the Secretary of the Corporation an instrument of revocation or a
duly executed proxy bearing a later date. Your proxy may also be revoked by
attending the meeting and voting in person.
By Order of the Board of Directors
/s/ Timothy J. Geckle
Timothy J. Geckle
Secretary
March 12, 1997
PROXY STATEMENT
The enclosed proxy is being solicited by The Ryland Group, Inc. (the
"Corporation") for use at the Annual Meeting of Stockholders on April 30,
1997. This Proxy Statement and proxy are first being distributed to
stockholders on approximately March 12, 1997. The Annual Report of the
Corporation for the year ended December 31, 1996, including financial
statements and accompanying notes, is enclosed with this Proxy Statement. A
proxy may be revoked by the stockholder at any time prior to its exercise by
filing with the Secretary of the Corporation an instrument of revocation or a
duly executed proxy bearing a later date. It may also be revoked by
attendance at the meeting and election to vote in person.
The election of Directors requires a plurality of the votes cast with a
quorum present. For purposes of the election of Directors, abstentions and
broker non-votes are not considered to be votes cast and have no effect on the
plurality vote required. The ratification of the selection of independent
public accountants requires the affirmative vote of a majority of the shares
of stock of the Corporation present in person or by proxy at the Annual
Meeting of Stockholders. For the vote with respect to the ratification of the
selection of independent public accountants, abstentions are counted as
negative votes and broker non-votes are not counted.
The Corporation may solicit proxies by mail, personal interview or
telephone by officers and other management employees of the Corporation, who
will receive no additional compensation for their services. The cost of
solicitation of proxies will be borne by the Corporation. Arrangements will
be made by the Corporation for the forwarding to beneficial owners, at the
Corporation's expense, of soliciting materials by brokerage firms and others.
Only stockholders of record at the close of business on February 19,
1997, are entitled to vote at the meeting or any adjournment thereof. The
only outstanding securities of the Corporation entitled to vote at the meeting
are shares of Common Stock and shares of ESOP Series A Convertible Preferred
Stock. The holders of Preferred Stock vote together with the holders of
Common Stock as one class. There were 15,869,077 shares of Common Stock
outstanding as of the close of business on February 19, 1997. There were
852,458 shares of Preferred Stock outstanding as of the close of business on
February 19, 1997. Neither Common Stock nor Preferred Stock have cumulative
voting rights. Holders of Common Stock and Preferred Stock are entitled to
one vote per share on all matters.
ELECTION OF DIRECTORS
All Directors (10 in number) are proposed to be elected to hold office
until the next Annual Meeting of Stockholders and until the election and
qualification of their successors. The proxies solicited, unless directed to
the contrary, will be voted FOR the 10 persons named below.
Management has no reason to believe that any nominee will be unable or
unwilling to serve as a Director; but if that should occur for any reason, the
proxy holders reserve the right to vote for another person of their choice.
3
Name, Age and
Year in which
First Elected Principal Occupation for Five Prior Years
a Director and Other Information
- - ------------- -----------------------------------------
R. Chad Dreier
49 (1993) Chairman of the Board of Directors, President and Chief
Executive Officer of the Corporation; Executive Vice
President and Chief Financial Officer of Kaufman and
Broad Home Corporation until 1993.
James A. Flick, Jr.
62 (1990) President, Chief Executive Officer and Director of Dome
Corporation (real estate development and management
services); Executive Vice President of Legg Mason Wood
Walker, Inc. (investment firm) until 1994; Director of
Forensic Technologies International Corporation; Capital
One Financial Corporation; and Bethlehem Steel Credit
Affiliates.
Robert J. Gaw
63 (1967) Executive Vice President of the Corporation and
President of Ryland Mortgage Company until 1996.
Director of Health Services, Inc.; Cedar Emergency
Services; Howard Business Ventures; Mac-O-Cheek, Inc.;
and Columbia Bank.
Leonard M. Harlan
60 (1984) President of Castle Harlan, Inc. (private merchant
-banking firm); President of Castle Harlan Partners II,
G.P., Inc. (corporate buyout fund); General Partner of
Legend Capital Group, L.P. (corporate buyout fund);
Chairman of the Harlan Company until 1996; Director of
MAG Aerospace Industries, Inc., and Tradesco Molding,
Ltd.
L. C. Heist
65 (1989) President, Chief Operating Officer and Director of
Champion International Corporation (forest products)
until 1996; Director of The Lyman Farm, Inc.
William L. Jews
45 (1994) President and Chief Executive Officer of Blue Cross Blue
Shield of Maryland, Inc.; President and Chief Executive
Officer of Dimensions Health Care until 1993; Director
of Crown Central Petroleum Corp.; NationsBank, Inc.; and
The Shelter Advisory Group.
William G. Kagler
64 (1985) Chairman of the Executive Committee and member of the
Board of Directors of Skyline Chili, Inc., until 1995;
Chairman of the Board of Directors of Skyline Chili,
Inc., until 1994; President of Skyline Chili, Inc.,
until 1992; Director of Fifth Third Bankcorp, Union
Central Life Insurance Co. and Grand Union Co.
John H. Mullin, III
55 (1982) Chairman of Ridgeway Farm, Inc. (wholesale nursery);
Director of The Liberty Corp.; Dillon, Read & Co. Inc.
(Note 1); ACX Technologies, Inc.; and Alex. Brown
Realty, Inc.
Charlotte St. Martin
51 (1996) Executive Vice President of Loews Hotels; President and
Chief Executive Officer of Loews Anatole Hotel until
1995; Director of Gibson Greetings, Inc.
John O. Wilson
58 (1987) Executive Vice President and Chief Economist of Bank of
America Corporation; Director of Calpine Corporation.
(1) Dillon, Read & Co. Inc. provided financial advisory services for the
Corporation during 1996 and is expected to provide such services in 1997.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR EACH OF
THE NOMINEES LISTED ABOVE. THE ELECTION OF THE NOMINEES REQUIRES A PLURALITY
OF THE VOTES CAST WITH A QUORUM PRESENT.
4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
To the knowledge of the Corporation, the only beneficial owners of more
than 5 percent of the outstanding shares of Common Stock, as of February 19,
1997, were:
Amount and Nature
Name and Address of Beneficial Ownership Percent of Class
---------------- ----------------------- ----------------
INVESCO PLC and 1,771,000 (1) 11.2
INVESCO Capital Management, Inc.
11 Devonshire Square
London EC2M 4YR
England
Tweedy, Browne Company, L.P. 1,244,020 (2) 7.8
52 Vanderbilt Avenue
New York, NY 10017
Wellington Management Company, LLP 1,217,600 (3) 7.7
75 State Street
Boston, MA 02109
The Capital Group Companies, Inc. 939,700 (4) 5.9
333 S. Hope Street
Los Angeles, CA 90071
Vanguard/Windsor Fund, Inc. 900,200 (5) 5.7
100 Vanguard Boulevard
Malvern, PA 19355
Franklin Advisory Services, Inc. 894,000 (6) 5.6
One Parker Plaza
Sixteenth Floor
Fort Lee, NJ 07024
(1) According to Schedule 13G dated February 10, 1997, filed with the
Securities and Exchange Commission, all of these shares are owned with shared
voting and shared dispositive power.
(2) According to Schedule 13D dated January 31, 1997, filed with the
Securities and Exchange Commission, 1,155,140 of these shares are owned with
sole voting power, and all of these shares are owned with shared dispositive
power.
(3) According to Schedule 13G dated January 24, 1997, filed with the
Securities and Exchange Commission, 201,100 of these shares are owned with
shared voting power, and all of these shares are owned with shared dispositive
power.
(4) According to Schedule 13G dated February 12, 1997, filed with the
Securities and Exchange Commission, all of these shares are owned with sole
dispositive power, and none of these shares are owned with voting power.
(5) According to Schedule 13G dated February 7, 1997, filed with the
Securities and Exchange Commission, all of these shares are owned with sole
voting and shared dispositive power.
(6) According to Schedule 13G dated February 12, 1997, filed with the
Securities and Exchange Commission, all of these shares are owned with sole
voting and sole dispositive power.
The Corporation's Retirement and Stock Ownership Plan is the beneficial
owner of 852,458 shares of ESOP Series A Convertible Preferred Stock
representing 100 percent of the outstanding shares of Preferred Stock of the
Corporation. All of these shares are owned with shared voting and shared
dispositive power. The address of the Retirement and Stock Ownership Plan is
c/o Wachovia Trust Services, 301 N. Main Street, Winston-Salem, North Carolina
27150.
5
The following table sets forth, as of February 19, 1997, the number of
shares of Common Stock of the Corporation beneficially owned by the Directors
of the Corporation, nominees for Director, each of the executive officers
named in the Summary Compensation Table, and by the Directors and executive
officers as a group:
Number of Shares
Name Beneficially Owned (1)
- - ---- ----------------------
R. Chad Dreier 290,430
James A. Flick, Jr. 10,750
Robert J. Gaw 200,517 (2)
Leonard M. Harlan 5,100
L. C. Heist 11,600
William L. Jews 4,000
William G. Kagler 14,100
John H. Mullin, III 47,200 (3)
Charlotte St. Martin 0
John O. Wilson 8,100
Michael D. Mangan 39,123
Michael C. Brown 29,954
J. Sidney Davenport 91,694
Frank J. Scardina 21,269
Directors and executive officers as a group (18 persons) 827,322
(1) With the exception of Messrs. Dreier and Gaw, no other Director, nominee
or executive officer beneficially owns more than 1 percent of the
Corporation's outstanding Common Stock. Mr. Dreier beneficially owns 1.8
percent, and Mr. Gaw beneficially owns 1.3 percent of the outstanding Common
Stock of the Corporation. Directors, nominees and executive officers as a
group beneficially own 5.2 percent of the outstanding Common Stock of the
Corporation. Except as otherwise indicated, all of the shares in the table
are owned individually with sole voting and sole dispositive power.
Includes shares subject to stock options which may be exercised within 60
days of February 19, 1997, as follows: Mr. Dreier, 159,400 shares; Mr. Flick,
4,100 shares; Mr. Gaw, 101,600 shares; Mr. Harlan, 4,100 shares; Mr. Heist,
4,100 shares; Mr. Jews, 3,000 shares; Mr. Kagler, 4,100 shares; Mr. Mullin,
4,100 shares; Mr. Wilson, 4,100 shares; Mr. Mangan, 36,300 shares; Mr. Brown,
27,290 shares; Mr. Davenport, 42,400 shares; Mr. Scardina, 17,700 shares; and
Directors and executive officers as a group, 461,340 shares.
Includes shares subject to restricted stock units as follows: Mr. Dreier,
77,306 shares; Mr. Mangan, 845 shares; Mr. Brown, 353 shares; Mr. Davenport,
564 shares; Mr. Scardina, 403 shares; and executive officers as a group,
80,434 shares.
Does not include shares of ESOP Series A Convertible Preferred Stock which
have been allocated to participants' accounts under the Corporation's
Retirement and Stock Ownership Plan as follows: Mr. Dreier, 485 shares; Mr.
Mangan, 439 shares; Mr. Brown, 1,531 shares; Mr. Davenport, 2,461 shares; Mr.
Scardina, 486 shares; and executive officers as a group, 7,352 shares.
(2) Does not include 1,000 shares owned by the Gaw Investment Group, as to
which Mr. Gaw disclaims beneficial ownership.
(3) Does not include 5,000 shares held in the John H. Mullin, Jr. Trust, of
which Mr. Mullin is co-trustee, nor 2,500 shares held in Pierrepont Partners,
of which Mr. Mullin is a partner, both of which are for the benefit of his
children. Does not include 2,500 shares owned by Mr. Mullin's wife, as to
which he disclaims beneficial ownership.
6
INFORMATION CONCERNING THE BOARD OF DIRECTORS
During 1996, the Board of Directors held six meetings. All Directors
attended at least 75 percent of the meetings of the Board of Directors and of
the committees of the Board of Directors on which they served during 1996.
The Board of Directors of the Corporation has Audit, Compensation, Finance and
Nominating Committees.
The Audit Committee of the Board of Directors is composed of Messrs. Gaw,
Heist and Jews. The Audit Committee reviews the Corporation's financial
statements and reports, the audit services provided by the Corporation's
independent public accountants and the reports of the Corporation's internal
auditors. During 1996, three meetings of the Audit Committee were held.
The Compensation Committee of the Board of Directors determines or
recommends the amount and form of compensation awarded to executive officers
and key employees of the Corporation as well as awards and distributions under
the Corporation's compensation plans. Messrs. Flick, Heist, Jews and Kagler
serve as its members. During 1996, the Compensation Committee held three
meetings.
The Finance Committee of the Board of Directors is composed of Messrs.
Gaw, Harlan, Mullin and Wilson. The Finance Committee reviews and monitors
the financial plans and structure as well as the dividend and risk management
policies of the Corporation. There were three meetings of the Finance
Committee during 1996.
The Nominating Committee is responsible for recommending to the Board of
Directors candidates to fill vacancies on the Board and making recommendations
with respect to the composition of the committees of the Board. Messrs.
Flick, Harlan, Jews and Kagler are the members of the Nominating Committee,
which held five meetings during 1996. The Nominating Committee will consider
nominees suggested by stockholders for election to the Board of Directors.
Recommendations by stockholders should be forwarded to the Secretary of the
Corporation and should identify the nominee by name and provide information
about the nominee's background and experience.
COMPENSATION OF DIRECTORS
Each Director who is not an employee receives an annual fee of $19,500.
Each non-employee Director is paid an additional $1,000 for each meeting
attended of the Board of Directors and of committees of the Board of
Directors. A Director may elect to have all or any part of the fees deferred
under the Corporation's Executive and Director Deferred Compensation Plan.
Under this Plan, amounts elected to be deferred are not included in a
Director's gross income for income tax purposes until actually distributed to
the Director. Directors who are employees of the Corporation do not receive
additional compensation for service on the Board of Directors. During 1996,
the Corporation donated $5,000 to charitable organizations designated by each
Director.
The Corporation maintains a Non-Employee Director Equity Plan pursuant to
which non-employee Directors receive stock options. On December 31, 1996, the
Corporation granted each non-employee Director an option to purchase 1,000
shares of Common Stock at an exercise price of $13.625 per share, with the
exception of Mr. Gaw and Ms. St. Martin who received their initial option to
purchase 2,000 shares at an exercise price of $13.625 per share. The exercise
price was the market price of the Common Stock on the date of grant. Stock
options fully vest and become exercisable six months after the date of grant.
If a Director's service on the Board of Directors ceases, all stock options
fully vest and are exercisable. Options are not exercisable after 10 years
from the date of grant or three years after the date of termination of service
on the Board of Directors.
7
1996 COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is comprised of four independent, non-employee
directors. The Compensation Committee approves the design of, assesses the
effectiveness of, and administers executive compensation programs in support
of stockholder interests. The Compensation Committee also reviews and
approves all salary arrangements and other compensation for executive
officers, including the Chief Executive Officer, evaluates executive
performance and considers related matters.
The Corporation's mission is to become a leader in the homebuilding
industry, optimize the strength of its mortgage operations and maximize
stockholder value. To accomplish these objectives, the Corporation is
pursuing a comprehensive business strategy that emphasizes earnings per share
and return on stockholders' equity. The Compensation Committee is committed
to implementing a compensation program which furthers the Corporation's
mission. This program adheres to the following compensation policies which
are intended to facilitate the achievement of the Corporation's business
strategies:
- All executive officers', including the Chief Executive Officer's,
compensation programs should emphasize the relationship between pay and
performance by including variable, at-risk compensation that is dependent upon
the level of success in meeting specified financial and operational goals.
- A significant portion of total compensation should be comprised of
equity-based pay opportunities. Encouraging a personal proprietary interest
provides a close identification with the Corporation and aligns executive
officers' interests with those of stockholders. This promotes a continuing
focus on building profitability and stockholder value.
- Compensation opportunities should enhance the Corporation's ability to
attract, retain and encourage the development of exceptionally knowledgeable
and experienced executives upon whom the successful operation and management
of the Corporation depend.
COMPONENTS OF COMPENSATION
The Compensation Committee relates total compensation levels for the
Corporation's Chief Executive Officer and other executive officers to the
compensation paid to executives of a peer group of companies. This peer group
is comprised of large national homebuilding companies, which include many of
the same companies which comprise the Dow/Home Construction Index in the
Performance Graph included in this Proxy Statement. However, the Compensation
Committee believes that the Corporation's competitors for executive talent
also include other companies not included in this Index. Therefore, the
Committee also reviews general industry survey data on companies of comparable
revenue size and reviews and approves the selection of companies used for
compensation comparison purposes.
The key elements of the Corporation's executive compensation program are base
salary, annual incentives and long-term incentive compensation. These key
elements are addressed separately below. In determining each component of
compensation, the Compensation Committee considers all elements of an
executive's total compensation package.
BASE SALARY
The Compensation Committee regularly reviews each executive's base salary.
Base salaries are targeted at median competitive levels and are adjusted by
the Compensation Committee to recognize varying levels of responsibility,
experience and breadth of knowledge, internal equity issues, as well as
external pay practices. Increases to base salaries are driven primarily by
individual performance. Individual performance is evaluated based on the
Compensation Committee's judgement of sustained levels of individual
contribution to the Corporation.
Effective December 23, 1996, Mr. Dreier, Chairman of the Board of Directors,
President and Chief Executive Officer of the Corporation, received a 4 percent
increase in base salary from $630,000 to $655,000 in recognition of the
progress made by the Corporation during 1996 toward strengthening its
financial condition and improving its profitability.
8
ANNUAL INCENTIVES
The annual incentive program promotes the Corporation's pay-for-
performance philosophy by providing the Chief Executive Officer and other
executive officers with direct financial incentives in the form of annual cash
bonuses to achieve corporate, business unit and, in some cases, individual
performance goals. Annual bonus opportunities allow the Corporation to
communicate specific goals that are of primary importance during the coming
year and to motivate executives to achieve these goals.
Bonus opportunities are set at median competitive levels for the peer
group of companies. The various bonus plans are designed to incent and reward
above-average performance from the executives and their business units. For
1996, the Compensation Committee did not adjust any executive officer's annual
incentive payout based on a subjective judgment of executive performance.
Under the terms of his employment agreement, as in effect for 1996, Mr.
Dreier was eligible for an annual bonus equal to 0.75 percent of the
consolidated pretax income of the Corporation, as adjusted by the Compensation
Committee to eliminate the effect of unusual items.
Eligible executives on the corporate staff are assigned maximum bonus
levels ranging from 50 to 75 percent of base salary. Bonuses are earned based
on the extent to which pretax income goals established at the beginning of the
year are achieved. Executives in the Corporation's homebuilding and mortgage
operations receive bonuses based on a percentage of the pretax earnings of
their business units, with no minimum or maximum bonus amounts.
LONG-TERM INCENTIVES
In keeping with the Corporation's commitment to provide a total
compensation package which includes at-risk components, long-term incentive
compensation comprises a significant portion of the value of an executive's
total compensation package.
When awarding long-term incentives, the Compensation Committee considers
an executive's level of responsibility, prior compensation experience,
historical award data, individual performance criteria and the compensation
practices at peer group companies. Long-term incentives are in the form of
stock options, restricted stock units and cash.
STOCK OPTIONS
Stock options are granted at an option price which is the fair market
value of the Common Stock on the date of grant. Accordingly, stock options
have value only if the stock price appreciates. This design focuses
executives on the creation of stockholder value over the long term. The size
of the award can be adjusted based on individual factors and historical award
data.
On February 6, 1996, Mr. Dreier received options to purchase 40,000
shares of the Common Stock of the Corporation at an exercise price of $14.875
per share. This stock option grant was determined based on the median
competitive levels for chief executive officers of peer group companies.
TRG INCENTIVE PLAN
The TRG Incentive Plan provides for awards of cash and restricted stock
units based on the Corporation's financial performance during the year. Each
year, the Compensation Committee establishes maximum award levels for each
executive officer based on a percentage of the executive's base salary.
Executives earn restricted stock units and cash based on the extent to which
pre-established financial goals are achieved by the Corporation. Awards are
payable one-half in restricted stock units and one-half in cash, with vesting
occurring over three years.
The Compensation Committee believes that the TRG Incentive Plan provides
executives with an immediate link to the interest of stockholders, focuses
them on company-wide performance and provides incentives that are longer-term
than annual bonuses but less remote than retirement benefits. The
Compensation Committee believes that the TRG Incentive Plan will enhance the
Corporation's ability to maintain a stable executive team focused on the
Corporation's long-term success.
For 1996, the Compensation Committee designated return on stockholders'
equity as the performance measure for purposes of the TRG Incentive Plan.
Since the minimum threshold for a TRG Incentive Plan award was not achieved,
no awards were granted for 1996.
A maximum award value of 100 percent of base salary was established by the
Compensation Committee for Mr. Dreier for 1996. Based on the Corporation's
performance in 1996, Mr. Dreier was not granted an award for 1996.
9
RETIREMENT PLANS
The Corporation does not sponsor a defined benefit retirement plan but
does provide executives with the ability to accumulate retirement assets
through defined contribution plans. Executive officers participate in the
Corporation's Retirement and Stock Ownership Plan up to the statutory limits.
Because of these statutory limits, the Corporation also offers executive
officers the ability to defer additional pay and receive corresponding
company-matching contributions through the Executive and Director Deferred
Compensation Plan.
For 1996, earnings credited to deferrals under a predecessor plan of the
Executive and Director Deferred Compensation Plan were based on the
Corporation's interest rate on senior subordinated debt plus 1 percent.
POLICY WITH RESPECT TO THE $1 MILLION DEDUCTION LIMIT
It is the policy of the Compensation Committee to continually evaluate
the qualification of compensation for exclusion from the $1 million limitation
on corporate tax deductions under Internal Revenue Code 162(m) as well as
other sections of the Internal Revenue Code, while maintaining flexibility to
take actions which it deems to be in the interest of the Corporation and its
stockholders which may not qualify for tax deductibility.
CONCLUSION
The Compensation Committee believes these executive compensation policies
and programs serve the interests of stockholders and the Corporation
effectively. The various compensation vehicles offered are appropriately
balanced to provide increased motivation for executives to contribute to the
Corporation's overall future success, thereby enhancing the value of the
Corporation for the stockholders' benefit.
The Compensation Committee will continue to monitor the effectiveness of
the Corporation's total compensation program to meet the current and future
needs of the Corporation.
Compensation Committee of the Board of Directors
L.C. Heist, Chairman
James A. Flick, Jr.
William L. Jews
William G. Kagler
10
SUMMARY COMPENSATION TABLE
Annual Compensation
---------------------------------
Other
Annual
Name and Principal Position Year Salary Bonus(b) Compensation(c)
- - --------------------------- ---- ------ -------- ---------------
Mr. Dreier -
Chairman of the Board 1996 $630,000 $197,978 $ 71,182
of Directors, 1995 $600,000 $166,577 $ 6,082
President and 1994 $450,000 $321,750 $ 13,489
Chief Executive
Officer of
The Ryland Group, Inc.
Mr. Mangan -
Executive Vice President 1996 $300,000 $123,525 $ 66,635
and Chief Financial 1995 $275,000 $ 73,666 $195,814
Officer of 1994 $ 21,152 $ 13,737 $ 819
The Ryland Group, Inc.
Mr. Brown -
Senior Vice President of 1996 $225,000 $130,754 $ 0
The Ryland Group, Inc.; 1995 $152,605 $369,000 $ 0
President of Ryland Mortgage
Company (a)
Mr. Davenport -
Vice President of 1996 $245,000 $112,462 $ 0
The Ryland Group, Inc.; 1995 $245,000 $224,385 $ 0
Executive Vice President 1994 $231,923 $257,198 $ 0
President of
Ryland Mortgage Company
Mr. Scardina -
Senior Vice President of 1996 $230,000 $126,278 $ 0
The Ryland Group, Inc.; 1995 $198,654 $155,968 $ 0
President of the West Region 1994 $170,308 $121,118 $ 8,305
of Ryland Homes
Long-Term Compensation
----------------------------------
Awards
-----------------------
Restricted Securities All Other
Name and Stock Underlying Compen-
Principal Position Year Awards(d) Options/SARS sation (e)
- - ------------------- ---- ------ ------------ ----------
Mr. Dreier -
Chairman of the Board 1996 $ 0 40,000 $ 44,542
of Directors, 1995 $ 64,554 40,000 $124,618
President and 1994 $151,695 30,000 $179,411
Chief Executive
Officer of
The Ryland Group, Inc.
Mr. Mangan -
Executive Vice President 1996 $ 0 20,000 $ 21,305
and Chief Financial 1995 $ 23,674 20,000 $166,715
Officer of 1994 $ 4,305 25,000 $ 6,251
The Ryland Group, Inc.
Mr. Brown -
Senior Vice President of 1996 $ 0 15,000 $ 23,523
The Ryland Group, Inc.; 1995 $ 9,898 20,000 $ 26,978
President of Ryland
Mortgage Company (a)
Mr. Davenport -
Vice President of 1996 $ 0 10,000 $ 27,296
The Ryland Group, Inc.; 1995 $ 15,806 10,000 $ 49,546
Executive Vice 1994 $ 45,510 10,000 $ 67,742
President of
Ryland Mortgage Company
Mr. Scardina -
Senior Vice President 1996 $ 0 10,000 $ 22,698
of The Ryland Group, 1995 $ 11,294 10,000 $ 31,161
Inc.; President of the 1994 $ 35,385 10,000 $ 95,307
West Region of
Ryland Homes
(a) Mr. Brown was elected President of Ryland Mortgage Company in January
1996. Prior to his election, Mr. Brown held the offices of Senior Vice
President and Chief Operating Officer of Ryland Mortgage Company.
(b) Includes bonuses for 1996, 1995 and 1994 which were paid in 1997, 1996
and 1995, respectively.
Includes for 1995, the dollar value of the initial vested portion of cash
and restricted stock unit awards under the TRG Incentive Plan as follows: Mr.
Dreier - $64,547; Mr. Mangan - $23,666; Mr. Brown - $9,907; Mr. Davenport -
$15,821; and Mr. Scardina - $11,298.
In 1995, Mr. Brown and Mr. Davenport were paid bonuses of $220,000 and
$50,000, respectively, in connection with the sale of the institutional
mortgage-securities administration business of Ryland Mortgage Company.
In 1994, the Corporation introduced a deferred bonus program for certain
executives whose positions have a direct and immediate impact on the financial
results of the Corporation. For 1994, Mr. Davenport earned a deferred bonus
of $45,000. This program no longer exists.
(c) Includes gross-up adjustments for taxes on relocation reimbursements
as follows: Mr. Dreier 1996 - $66,083, 1994 - $6,852; Mr. Mangan 1996 -
$66,635, 1995 - $45,814, 1994 - $819; and Mr. Scardina 1994 - $8,305. Mr.
Mangan was paid a bonus of $150,000 in 1995 to compensate him for benefits
lost upon resignation from his previous employment to join the Corporation.
Also includes Medicaid taxes and gross-up adjustments paid to Mr. Dreier for
vested restricted stock units as follows: 1996 - $5,099, 1995 - $6,082, 1994 -
$6,637.
(d) Amounts for 1995 include restricted stock units awarded under the TRG
Incentive Plan. The value of the restricted stock units for 1995 is based on
the $14.00 closing price of the Corporation's Common Stock on the
determination date of December 31, 1995. The restricted stock units awarded
under the TRG Incentive Plan vest one-third per year over three years.
Amounts reported for 1994 include restricted stock units awarded under the
Long-Term Retirement and Incentive Plan ("LTRIP"). The value of the
restricted stock units for 1994 is based on the $15.00 closing price of the
Corporation's Common Stock on the determination date of December 31, 1994.
Two-thirds of the 1994 award was paid in 1996, and the remaining one-third was
paid in 1997. Holders of restricted stock units are entitled to quarterly
dividend equivalent payments if the Corporation pays dividends on its Common
Stock.
At December 31, 1996, the number and value of restricted stock units held
by named executive officers were as follows: Mr. Dreier - 32,306 units,
$440,169; Mr. Mangan - 845 units, $11,513; Mr. Brown - 353 units, $4,810; Mr.
Davenport - 564 units, $7,685; and Mr. Scardina - 403 units, $5,491.
(e) Includes the Corporation's contributions to the Retirement and Stock
Ownership Plan and the Executive and Director Deferred Compensation Plan: Mr.
Dreier 1996 - $43,923, 1995 - $55,166, 1994 - $8,399; Mr. Mangan 1996 -
$20,999, 1995 - $17,325; Mr. Brown 1996 - $23,406, 1995 - $16,513; Mr.
Davenport 1996 - $26,914, 1995 - $28,303, 1994 - $21,879; and Mr. Scardina
1996 - $22,480, 1995 - $19,187, 1994 - $4,437; earnings on the Corporation's
Salary Deferral Plan: Mr. Dreier 1995 - $2,298; Mr. Mangan 1996 - $132; and
Mr. Davenport 1995 - $3,751; the value of term life insurance paid under the
Corporation's split dollar life insurance plan: Mr. Dreier 1996 - $619, 1995
- - - $505, 1994 - $236; Mr. Mangan 1996 - $174, 1995 - $96; Mr. Brown 1996 -
$117, 1995 - $78; Mr. Davenport 1996 - $382, 1995 - $334, 1994 - $351; and Mr.
Scardina 1996 - $218, 1995 - $177, 1994 - $215; deferred cash and earnings
under the LTRIP and TRG Incentive Plan: Mr. Dreier 1995 - $66,649, 1994 -
$151,713; Mr. Mangan 1995 - $23,736, 1994 - $4,331; Mr. Brown 1995 - $10,387;
Mr. Davenport 1995 - $17,158, 1994 - $45,512; and Mr. Scardina 1995 - $11,797,
1994 - $35,410; and reimbursements for relocation expenses: Mr. Dreier 1994 -
$19,063; Mr. Mangan 1995 - $125,558, 1994 - $1,920; and Mr. Scardina 1994 -
$55,245.
11
EMPLOYMENT AGREEMENTS
On January 28, 1997, the Corporation entered into an employment agreement
with Mr. Dreier for a period of four years beginning January 1, 1997. This
agreement superceded and replaced Mr. Dreier's employment agreement of
December 1994. It provides for one-year extensions subject to a right of
termination upon notice at least 180 days prior to the end of the agreement's
term. Under the agreement, Mr. Dreier will receive a base salary of at least
$655,000 per year and is eligible for an annual cash bonus equal to 1.0
percent of the adjusted consolidated pretax income of the Corporation. Mr.
Dreier also received a stock option grant of 150,000 shares of the
Corporation's Common Stock at $12.75 per share, vesting in three annual
installments of 50,000 shares beginning January 29, 1998. Mr. Dreier was also
granted 45,000 restricted stock units that vest and are paid in the amount of
15,000 shares of Common Stock on November 1, 1999, and 30,000 shares of Common
Stock on November 1, 2000. If Mr. Dreier's employment is terminated without
"cause," Mr. Dreier receives salary and benefits for the remaining term of the
agreement or 18 months, whichever is greater, and a bonus payment for the year
of termination. In the event of a termination of Mr. Dreier's employment
within three years of a "change-in-control" of the Corporation, he receives a
payment equal to three times his highest annual salary and bonus, accelerated
vesting under benefit plans of the Corporation, and relocation and
outplacement assistance.
In September 1995, the Corporation entered into an employment agreement
with Mr. Mangan for an initial period of three years beginning September 18,
1995. The agreement provides for one-year extensions subject to a right of
termination upon notice at least three months prior to the end of the
agreement's term. Under the agreement, Mr. Mangan will receive a base salary
of at least $275,000 per year and an annual cash bonus of at least 75 percent
of his base salary. If Mr. Mangan's employment is terminated without "cause,"
Mr. Mangan receives salary and benefits for the remaining term of the
agreement or 18 months, whichever is greater, and a prorated bonus payment for
the year of termination. In the event of a termination of Mr. Mangan's
employment within three years of a "change-in-control" of the Corporation, he
receives a payment equal to three times his highest annual salary and bonus,
accelerated vesting under benefit plans of the Corporation, and relocation and
outplacement assistance.
The Corporation has senior executive severance agreements pursuant to
which, upon termination of employment within three years of a "change-in-
control" of the Corporation, certain executive officers, including Messrs.
Brown, Davenport and Scardina, receive a cash payment equal to two times the
highest annual compensation paid during the three years prior to termination,
accelerated vesting under benefit plans of the Corporation, and relocation and
outplacement assistance.
12
STOCK OPTION GRANTS IN 1996
Number of Percent of Total Exercise
Securities Underlying Options Granted to Price
Name Options Granted (a) Employees in 1996 ($/Share)
- - ------------ --------------------- ------------------ ---------
Mr. Dreier 40,000 7.4 $14.875
Mr. Mangan 20,000 3.7 $14.875
Mr. Brown 15,000 2.8 $14.875
Mr. Davenport 10,000 1.9 $14.875
Mr. Scardina 10,000 1.9 $14,875
(a) These stock options are exercisable at a rate of 33, 33 and 34 percent
per year beginning on the first anniversary of the date of grant.
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation
for 10-Year Option Term
Expiration
Name Date 5% 10%
- - ------------- ---------- ---------- ----------
Mr. Dreier 2/6/06 $374,192 $948,277
Mr. Mangan 2/6/06 $187,096 $474,138
Mr. Brown 2/6/06 $140,322 $355,604
Mr. Davenport 2/6/06 $ 93,548 $237,069
Mr. Scardina 2/6/06 $ 93,548 $237,069
AGGREGATED STOCK OPTION EXERCISES IN 1996
AND YEAR-END STOCK OPTION VALUES
Shares Acquired Value
Name on Exercise Realized
- - ------------- --------------- ------------
Mr. Dreier 0 $ 0
Mr. Mangan 0 $ 0
Mr. Brown 0 $ 0
Mr. Davenport 0 $ 0
Mr. Scardina 0 $ 0
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Year End at Year End
--------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- - ------------- ----------- ------------- ----------- -------------
Mr. Dreier 133,000 77,000 $ 0 $ 0
Mr. Mangan 23,100 41,900 $2,063 $1,062
Mr. Brown 19,040 31,800 $ 0 $ 0
Mr. Davenport 35,800 20,100 $ 0 $ 0
Mr. Scardina 11,100 20,100 $ 0 $ 0
13
COMPARISON OF CUMULATIVE TOTAL STOCKHOLDER RETURN ON COMMON STOCK
(Stock Price Appreciation Plus Dividends)
This chart graphs the Corporation's performance in the form of cumulative
total return to stockholders during the previous five years in comparison to
the Standard and Poor's 500 Index and the Dow/Home Construction Index. The
Dow/Home Construction Index includes the following companies: Pulte
Corporation; Standard Pacific Corp.; Centex Corporation; Clayton Homes, Inc.;
Kaufman and Broad Home Corporation; Oakwood Homes Corporation; and the
Corporation.
Ryland S & P 500 Dow Home
Year ended December 31,
1991 (a) $100 $100 $100
1992 92 108 129
1993 91 118 164
1994 71 120 111
1995 69 165 166
1996 70 203 159
(a) Assumes that the value of the Common Stock of the Corporation and the
Indices were $100 on January 1, 1992, and that all dividends were reinvested.
14
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
At the meeting, the Board of Directors of the Corporation will recommend
ratification of the selection of Ernst & Young LLP as independent public
accountants of the Corporation for 1997. The affirmative vote of the holders
of a majority of the shares present in person or by proxy at the Annual
Meeting of Stockholders is required for ratification of the selection of
independent public accountants of the Corporation. Representatives of Ernst &
Young LLP will be present at the meeting to respond to stockholders' questions
and to make a statement if they desire.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon the Corporation's review of Forms 3, 4 and 5, as well as any
amendments submitted to the Corporation during 1996 for any person subject to
Section 16 of the Securities Exchange Act of 1934 (The Exchange Act), there
were no persons who failed to file on a timely basis during 1996 or for prior
years' reports required by Section 16(a) of The Exchange Act.
STOCKHOLDERS' PROPOSALS
Proposals of stockholders intended to be presented at the next Annual
Meeting of Stockholders of the Corporation must be received by the Corporation
on or before November 10, 1997, and must comply with the applicable rules of
the Securities and Exchange Commission in order to be included in the
Corporation's Proxy Statement and proxy relating to the 1998 Annual Meeting of
Stockholders. In addition, under the Corporation's bylaws, in order for a
shareholder proposal or director nomination to come before the Annual Meeting
of Stockholders, proposals and nominations, made in accordance with the bylaws
of the Corporation, require appropriate notice to the Corporation of the
proposal or nomination not less than 75 days prior to the date of the Annual
Stockholders' Meeting. If less than 100 days' notice of the date of the
Annual Stockholders' Meeting is given by the Corporation, then the Corporation
must receive the notice of nomination or the proposal not later than the close
of business on the 10th day following the date the Corporation first mailed
the notice or made public disclosure of the meeting. In this regard, notice
is given that the 1998 Annual Meeting of Stockholders is expected to be held
on the third Wednesday of April in 1998, or on or before the 30th day
thereafter, as determined by the Board of Directors in accordance with the
Corporation's bylaws.
OTHER MATTERS
If any other business should come before the meeting, the proxy holders
will vote according to their discretion.
15
PARTICIPANT INSTRUCTION CARD
THE RYLAND GROUP, INC.
Participant Proxy Solicited on Behalf of the Board of Directors
Annual Meeting of Stockholders - April 30, 1997
The undersigned participant in The Ryland Group, Inc. Retirement and
Stock Ownership Plan and/or Deferred Compensation Savings Plan, acknowledges
receipt of the Proxy Statement and Notice of Annual Meeting of Stockholders,
dated March 12, 1997, and hereby instructs Wachovia Bank of North Carolina,
N.A., the Trustee, to vote all shares which the undersigned may be entitled to
vote at the Annual Meeting of Stockholders of the Corporation to be held at
Ryland's corporate headquarters, 4th Floor, 11000 Broken Land Parkway,
Columbia, Maryland, on Wednesday, April 30, 1997, at 9:00 A.M., Eastern
Daylight Time, and at any adjournments thereof.
(Continued and to be signed on reverse side)
The shares represented by this instruction card, when properly executed, will
be voted in accordance with the instructions herein. In the absence of
specific instructions, the shares represented by this instruction card will be
voted FOR the nominees listed below, FOR ratification of selection of Ernst &
Young LLP as the Corporation's independent public accountants, and in the
discretion of the proxies upon other business properly brought before the
meeting.
Please mark your votes as indicated in this example /X/
1. ELECTION OF DIRECTORS FOR all WITHHOLD AUTHORITY
nominees for all nominees
/ / / /
Nominees: Mr. Dreier, Mr. Flick, Mr. Gaw
Mr. Harlan, Mr. Heist, Mr. Jews, Mr. Kagler,
Mr. Mullin, Ms. St. Martin, Mr. Wilson
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.
- - ---------------------------------------
2. Ratification of selection of Ernst & Young LLP as the independent public
accountants for the Corporation.
FOR AGAINST ABSTAIN
/ / / / / /
3. In their discretion upon such other business as may properly come before
the meeting.
Please sign, date and return this proxy promptly in the enclosed postage paid
envelope.
Signature Signature Date
---------------------- --------------------- ------------
NOTE: Please sign your name exactly as it appears hereon. If stock is
registered in more than one name, each joint owner must sign. When signing as
attorney, executor, administrator, guardian or corporate officer, please give
you full title as such.
THE RYLAND GROUP, INC.
Proxy Solicited on Behalf of the Board of Directors
Annual Meeting of Stockholders - April 30, 1997
The undersigned stockholder in The Ryland Group, Inc. (the
"Corporation"), acknowledges receipt of the Proxy Statement and Notice of
Annual Meeting of Stockholders, dated March 12, 1997, and hereby constitutes
and appoints R. CHAD DREIER, Chairman of the Board of Directors, and ROBERT J.
GAW, and each of them, as true and lawful proxies with full power of
substitution, to vote all shares which the undersigned may be entitled to vote
at the Annual Meeting of Stockholders of the Corporation to be held at
Ryland's corporate headquarters, 4th Floor, 11000 Broken Land Parkway,
Columbia, Maryland, on Wednesday, April 30, 1997, at 9:00 A.M., Eastern
Daylight Time, and at any adjournments thereof.
(Continued and to be signed on reverse side)
This proxy, when properly executed, will be voted in accordance with the
instructions herein. In the absence of specific instructions, this proxy will
be voted FOR the nominees listed below, FOR ratification of selection of Ernst
& Young LLP as the Corporation's independent public accountants, and in the
discretion of the proxies upon other business properly brought before the
meeting.
Please mark your votes as indicated in this example /X/
1. ELECTION OF DIRECTORS FOR all WITHHOLD AUTHORITY
nominees for all nominees
/ / / /
Nominees: Mr. Dreier, Mr. Flick, Mr. Gaw
Mr. Harlan, Mr. Heist, Mr. Jews, Mr. Kagler,
Mr. Mullin, Ms. St. Martin, Mr. Wilson
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.
- - ---------------------------------------
2. Ratification of selection of Ernst & Young LLP as the independent public
accountants for the Corporation.
FOR AGAINST ABSTAIN
/ / / / / /
3. In their discretion upon such other business as may properly come before
the meeting.
Please sign, date and return this proxy promptly in the enclosed postage paid
envelope.
Signature Signature Date
---------------------- --------------------- ------------
NOTE: Please sign your name exactly as it appears hereon. If stock is
registered in more than one name, each joint owner must sign. When signing as
attorney, executor, administrator, guardian or corporate officer, please give
you full title as such.