EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of the 21st day of April 1999, 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 supersedes the Employment Agreement dated as of January 28,
1997, 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 until
December 31, 2003. This Agreement shall automatically renew for a one
(1) year renewal period on December 31, 2003, or for a one (1) year
renewal period at the end of each renewal period until terminated in
accordance with the terms of this Agreement. Either party may
terminate this Agreement on December 31, 2003, 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
December 31, 2003, 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
the fixed amount of seven hundred fifty thousand dollars ($750,000)
per year for the term of this Employment Agreement. This Base Salary
is paid in installments consistent with the normal payroll practices
of the Company.
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 amount of
Ordinary Course Pre-Tax Income that equals or is less than the prior
fiscal year's Ordinary Course Pre-Tax Income and one and one-half
percent (1.5%) of the amount of Ordinary Course Pre-Tax Income that
exceeds the prior fiscal year's 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
non-recurring 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 the TRG
Incentive Plan and shall have an individual target performance award
equal to 120% of the Executive's Base Salary. The Executive shall
participate in any additional 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) Prior Grant of Stock Option (January 1997)
Pursuant to the terms and conditions of The Ryland Group, Inc.
1992 Equity Incentive Plan (the "Plan), the Company previously
granted to the Executive on January 28, 1997, the ability to
exercise during the period ending at the close of business on
January 28, 2007, the option to purchase 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.
The option may be exercised in whole or in part in accordance
with the following vesting schedule:
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The aggregate number of shares of Common Stock optioned by
this Agreement are divided into three (3) installments.
The first installment for 50,000 shares was exercisable in
whole or in part beginning 1/29/98. The second installment for
50,000 shares was exercisable in whole or in part beginning
1/29/99. The third installment for 50,000 shares is
exercisable in whole or in part beginning 1/29/00.
(b) Current Grant of Stock Option.
Pursuant to the terms and conditions of the Plan, the Company
grants to the Executive during the period ending at the close
of business on April 21, 2009, the option to purchase from the
Company at a price equal to the Fair Market Value per share,
which is the closing price on the New York Stock Exchange on
April 21, 1999, of the Company's Common Stock, up to 200,000
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.
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
pursuant to this Section 5.5(b) of this Agreement are divided
into three (3) installments.
The first installment for 70,000 shares is exercisable in
whole or in part beginning 4/21/00. The second installment for
70,000 shares is exercisable in whole or in part beginning
4/21/01. The third installment for 60,000 shares is
exercisable in whole or in part beginning 4/21/02.
(c) Exercise of Option.
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.
(d) 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).
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(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.
(e) Termination
The Options shall terminate upon the happening of the earliest
of the following events:
(i) In accordance with Sections 5.5 (a) and (b) above.
(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.
(f) Merger, Consolidation or Share Exchange
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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
(a) Prior Grant of Stock Units (January 1997)
Pursuant to the terms and conditions of the Plan, the Company
previously granted to the Executive an award of 45,000 Stock
Units pursuant to Section 10 of the Plan.
The Stock Units become vested and payable in accordance with
the following vesting schedule:
DATE VESTING
November 1, 1999 15,000 Stock Units
November 1, 2000 30,000 Stock Units
(b) Current Grant of Stock Units
Pursuant to the terms and conditions of the Plan, the Company
grants to the Executive an award of 45,000 Stock Units
pursuant to Section 10 of the Plan.
The Stock Units become vested and payable in accordance with
the following vesting schedule:
DATE VESTING
February 15, 2001 15,000 Stock Units
February 15, 2002 15,000 Stock Units
February 15, 2003 15,000 Stock Units
(c) Vesting of Stock Units.
If the Executive terminates employment with the Company for
any reason prior to any vesting date, all unvested Stock Units
are immediately forfeited and cancelled. Notwithstanding the
foregoing, all unvested Stock Units shall vest and be paid by
the Company to the Executive upon the occurrence of a Change
of Control (as defined in Section 7.2 below).
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(d) Payment of Stock Units.
Upon each vesting date on which the Executive is employed by
the Company, the number of Stock Units which become vested on
such date shall be paid to the Executive in an equal number of
shares of Common Stock of the Company and, upon payment, such
Stock Units are automatically fully paid and cancelled.
(e) Dividend Equivalents.
As of each dividend payment date with respect to Common Stock,
the Executive shall receive a cash dividend equivalent payment
equal to the product of (i) the per-share cash dividend amount
payable with respect to each share of Common Stock on that
date and (ii) the total number of Stock Units which have not
been vested, paid or cancelled as of the record date
corresponding to such dividend payment date.
(f) Delivery of Stock Certificates.
The stock certificate for shares of Common Stock issued to the
Executive in payment of any vested Stock Unit shall be
delivered to the Executive on the applicable vesting date.
(g) Tax Matters.
The Executive will pay to the Company, or make provision
satisfactory to the Company for payment of, any taxes required
by law to be withheld with respect to the payment of any Stock
Unit no later than the date of vesting of each Stock Unit. Tax
obligations may be paid in whole or in part in shares of
Common Stock, including shares retained from the payment of
the Stock Units, valued at their Fair Market Value (as defined
in the Plan) on the date of payment.
(h) Rights of Executive With Respect to Stock Units.
The Executive shall have no rights as a stockholder with
respect to any Stock Unit or any share of Common Stock to be
issued with respect to any Stock Unit until the date of
vesting and payment. The Executive's rights with respect to
Stock Units shall be the rights of a general unsecured
creditor of the Company until the Stock Units vest and shares
of Common Stock are actually issued to the Executive.
(i) Adjustments.
The number of Stock Units shall be appropriately adjusted, as
determined by the Board of Directors or Compensation Committee
of the Board of Directors pursuant to the Plan, in the event
of any stock split, combination or similar transaction.
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(j) Stock Units Subject to Terms and Conditions of the Plan.
The Stock Units and all shares of Common Stock issued with
respect to Stock Units shall be subject to the terms and
conditions of the Plan, which is incorporated herein by this
reference.
6. Employment Termination.
6.1 Termination Due to Retirement or Death. In the event the Executive's
employment is terminated by reason of retirement or death, the
Executive's benefits shall be determined in accordance with the
Company's retirement, survivor's benefits, insurance or other
applicable program then in effect. Upon the effective date of
termination, the Company's obligation to pay and provide the
compensation described in Section 5 shall expire, except to the
extent the benefits described in Section 5 continue after retirement
or death. In addition, the Company shall pay to the Executive or the
Executive's beneficiaries or estate a pro rata share of the Bonus
for the year in which the termination occurs based on the results of
the Company for that fiscal year. This pro rata Bonus shall be
determined by multiplying the Bonus for the applicable fiscal year
by a fraction, the numerator of which is the number of days in such
fiscal year prior to the date of 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 the
applicable fiscal year.
6.2 Termination Due to Disability. In the event the Executive becomes
Disabled (as defined below) and is unable to perform his duties for
more than one hundred twenty (120) days during any period of twelve
(12) months or, in the reasonable determination of the Board of
Directors, the Executive's Disability (as defined below) will exist
for more than one hundred twenty (120) days, the Company has the
right to terminate the Executive's employment and the Company's
obligation to pay and provide the compensation described in Section
5 shall expire, except to the extent the benefits described in
Section 5 continue after Disability. In addition, the Company shall
pay to the Executive a pro rata share of the Bonus for the year in
which the termination occurs based on the results of the Company for
that fiscal year determined as provided in Section 6.1. The pro rata
Bonus shall be paid within sixty (60) days of the end of the
applicable fiscal year.
The term "Disabled" or "Disability" means the incapacity of the
Executive, due to injury, illness, disease or bodily or mental
infirmity, to engage in the performance of his duties with the
Company. A Disability is determined by the Board of Directors upon
receipt of and in reliance on competent medical advice from one or
more individuals selected by the Board who are qualified to give
professional medical advice.
6.3 Voluntary Termination by the Executive. The Executive may terminate
this Agreement at any time by giving the Board of Directors written
notice of intent to terminate delivered at least ninety (90) days
prior to the effective date of such termination. Upon the expiration
of this ninety (90) day period, the termination by the Executive
shall become effective. The Company shall pay the Executive his Base
Salary through the effective date of termination plus all benefits
to which the Executive has a vested right at that time. The
Executive shall not receive a Bonus for the fiscal year in which
voluntary termination occurs. Upon the date of termination, the
Company and the Executive shall have no further obligations under
this Agreement except as set forth in Sections 8 and 9.
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6.4 Termination by the Company Without Cause. Other than during a Change
of Control Period (as defined in Section 7.2), the Board of
Directors may terminate the Executive's employment for reasons other
than death, Disability, retirement or for Cause (as defined in
Section 6.5) by notifying the Executive in writing at least thirty
(30) days prior to the effective date of termination. Upon the
expiration of this thirty (30) day period, the termination by the
Company is effective. Within thirty (30) days after the date of
termination, the Company shall pay to the Executive a lump sum cash
payment equal to the greater of (a) the Base Salary in effect for
the remaining term of this Agreement, or (b) twenty-four (24) months
of the Base Salary in effect as of the effective date of
termination, and shall provide to the Executive a continuation of
his health and welfare benefits for the greater of (a) such
remaining term of this Agreement or (b) twenty-four (24) months. If
the Company is unable to provide health and welfare benefits as
required by this Section 6.4, the Company shall 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. The Company shall pay the Executive an annual
Bonus for the year in which termination occurs based upon the
performance of the Company through the end of the fiscal year in
which the termination occurs. This annual Bonus shall be paid within
sixty (60) days of the end of the applicable fiscal year. The
Company shall also pay the Executive all benefits to which the
Executive has a vested right at the time of termination. For
purposes of this Section 6.4: (i) with respect to the fiscal year in
which termination occurs, the Executive shall be fully vested in any
prior year awards that remain unvested or awards made for the fiscal
year in which termination occurs under the TRG Incentive Plan or any
successor plan, and (ii) all vested awards under any incentive
programs shall be paid notwithstanding any provision of the
governing plan or program calling for forfeiture of benefits upon
termination. If for any reason the Company is unable to comply with
the preceding sentence, the Company shall pay the Executive a
lump-sum cash payment equal to the value of the benefits or awards
it is unable to vest, pay or give credit for. Upon the date of
termination, the Company and the Executive shall have no further
obligations under this Agreement except as set forth in Sections 8
and 9.
6.5 Termination for Cause. The Board of Directors may terminate the
Executive's employment at any time for "Cause". "Cause" is
determined by the Board of Directors and is 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 obligations under this Agreement for reasons other than the
Executive's death, Disability or retirement. In the event this
Agreement is terminated by the Board of Directors for Cause, the
Company shall pay the Executive his Base Salary through the date of
termination and the Executive shall forfeit all rights and benefits
he is entitled to receive 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 8 and 9.
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6.6 Termination for Good Reason. The Executive may terminate this
Agreement for Good Reason (as defined below) by giving the Board of
Directors thirty (30) days written notice of intent to terminate,
which notice sets forth the facts and circumstances for the
termination. Upon the expiration of this thirty (30) day period, the
termination by the Executive is effective and the Company shall pay
the Executive the benefits set forth in Section 6.4 unless the
provisions of Section 7 apply.
"Good Reason" means, without the Executive's written consent, the
occurrence of any of the following:
(a) The assignment of the Executive to duties materially
inconsistent with, or a reduction or alteration in the nature
or status of, the Executive's authorities, duties,
responsibilities or status as an executive officer of the
Company from those in effect during the preceding year;
(b) The Company requires the Executive to be based at a location
which is more than fifty (50) miles from the Executive's then
current primary residence;
(c) A reduction by the Company in the Executive's Base Salary; or
(d) The failure of the Company to obtain an agreement from any
successor to the Company to perform this Agreement.
7. Change in Control.
7.1 Termination After Change of Control. In lieu of the compensation and
benefits provided in Sections 5 or 6, which will be superseded and
replaced by the provisions of this Section 7, the following payments
and benefits will be provided to the Executive by the Company in the
event of a Termination of Employment (as defined below) during a
Change of Control Period (as defined below) of the Company:
(a) Lump Sum Cash Payment. On or before the Executive's last
day of employment with the Company, the Company will pay
the Executive an amount equal to the Executive's unpaid
Base Salary for the year in which the Termination of
Employment occurs and a pro rata Bonus through the date of
Termination of Employment determined in accordance with
Section 6.1. Also, on or before the Executive's last day
of employment with the Company, the Company will pay the
Executive a lump sum cash payment equal to three (3) times
the highest Annual Compensation (as defined below) paid to
the Executive in any of the three (3) calendar years
immediately preceding the date of Termination of Employment.
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(b) Accelerated Vesting and Supplemental Payments. All rights,
awards and benefits of the Executive provided pursuant to
this Agreement, the TRG Incentive Plan or other incentive
plan, Stock Units granted pursuant to this Agreement, the
deferred compensation plans (including the Retirement
Savings Opportunity Plan, Executive and Director Deferred
Compensation Plan and any successor or replacements plans)
and any stock option or other benefit plans of the Company
in which the Executive participates shall immediately vest
in full and the Executive shall be paid in a lump sum as
soon as practicable after the date of Termination of
Employment. To the extent that any of the plans of the
Company would not under applicable law permit accelerated
vesting, the Executive will be paid supplementally by the
Company the amount of additional benefits payable if full
vesting had taken place as of the date of Termination of
Employment. All supplemental payments are provided on an
unfunded basis, are not intended to meet the qualification
requirements of Section 401 of the Internal Revenue Code,
and shall be payable solely from the general assets of the
Company.
(c) Insurance and Other Special Benefits. The Executive's
participation in the life, accident and health insurance,
employee welfare benefit plans (as defined in the Employee
Retirement Income Security Act of 1974) and other fringe
benefits (the "Benefits") provided to the Executive prior
to the Change of Control or the Termination of Employment
shall be continued or equivalent benefits provided by the
Company at no cost to the Executive for a period of two (2)
years from the date of the Executive's Termination of
Employment. If for any reason the Company is unable to
continue the Benefits as required by the preceding
sentence, the Company shall pay to the Executive a lump sum
cash payment equal to the value of the Benefits which the
Company is unable to provide.
(d) Relocation Assistance. Should the Executive move his
primary residence in order to pursue other business
opportunities within two (2) years after the date of the
Executive's Termination of Employment, he will be
reimbursed for any expenses incurred in that relocation,
including taxes payable on the reimbursement, which are not
reimbursed by another employer. Benefits under this
paragraph will include assistance in selling the
Executive's home and all other assistance and benefits
which are provided by the Company under its relocation plan
as in effect immediately prior to the Change of Control
Period or the Termination of Employment.
(e) Stock Rights. All stock options, stock appreciation rights,
stock purchase rights, restricted stock rights and any similar
rights which the Executive holds shall become fully vested and
be exercisable on the date of Termination of Employment.
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(f) Outplacement Assistance. The Executive shall be reimbursed
by the Company for the cost of all outplacement services
obtained by the Executive within the two (2) year period
after the date of Termination of Employment provided the
total reimbursement shall be limited to an amount equal to
fifteen percent (15%) of the Executive's Annual
Compensation for the calendar year immediately preceding
the date of Termination of Employment.
7.2 Definitions.
(a) A "Change of Control" shall take place on the date of the
earlier to occur of any of the following events:
(i) The acquisition by any person, other than the Company or
any employee benefit plan of the Company, of beneficial
ownership of 20% or more of the combined voting power of
the Company's then outstanding voting securities;
(ii) The first purchase under a tender offer or exchange
offer, other than an offer by the Company or any
employee benefit plans of the Company, pursuant to which
shares of common stock have been purchased;
(iii) During any period of two consecutive years, individuals
who at the beginning of such period constitute the Board
of Directors of the Company cease for any reason to
constitute at least a majority thereof, unless the
election or the nomination for the election by
stockholders of the Company of each new director was
approved by a vote of at least two-thirds of the
directors then still in office who were directors at the
beginning of the period; or
(iv) Approval by stockholders of the Company of a merger,
consolidation, liquidation or dissolution of the
Company, or the sale of all or substantially all of the
assets of the Company.
(b) "Annual Compensation" shall mean the sum of the Base Salary
and the Bonus paid to the Executive and all vested amounts
credited to the Executive under any incentive compensation or
other benefit plans of the Company in which the Executive
participates during the applicable calendar year.
(c) A "Termination of Employment" shall take place in the event
that (a) the Executive's employment is terminated for any
reason other than as a consequence of death, disability or
normal retirement, (b) the Executive is assigned any duties
or responsibilities that are inconsistent in any respect
with his position, duties, responsibilities or status prior
to a Change of Control Period, (c) the Company requires the
Executive to be based at a location which is more than
fifty (50) miles from the Executive's then current primary
residence, (d) the Executive's Base Salary is reduced, (e)
the Executive experiences in any year a reduction in the
ratio of his incentive compensation, bonus or other such
payments to his base compensation which is greater than the
average reduction in the ratio of incentive compensation,
bonus or other such payments to base compensation
experienced by all of the Company's or the successor
company's executive officers or (f) the Company gives the
Executive notice of an intent not to renew or does not
renew the term of this Agreement at any time during a
Change of Control Period.
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(d) A "Change of Control Period" shall mean the period of time
commencing with the date of a Change of Control or on which
the Company becomes aware of or enters into any discussions
or negotiations that could involve a Change of Control or a
proposed transaction which could result in a Change of
Control, and ending on the first to occur of: (a) three
(3) years after the effective date of the Change of
Control, or (b) the date on which the proposed Change of
Control is no longer discussed or expected to occur.
7.3 Subsequent Imposition of Excise Tax. If 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, 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 7.3 is made.
8. Noncompetition and Proprietary Information.
8.1 Prohibition on Competition. During the term of this Agreement and
for twenty-four (24) months following the expiration or termination
of this Agreement as a result of notice of nonrenewal by Executive
pursuant to Section 2 or following the effective date of a
termination of this Agreement by the Executive pursuant to Section
6.3 (the "Restrictive Period"), the Executive shall not, as a
stockholder, partner, employee or officer, engage, directly or
indirectly, in any business or enterprise which is "in competition"
with the Company. For purposes of this Agreement, a business or
enterprise will be "in competition" if it is engaged in any
significant business activity of the Company or its subsidiaries
within the United States.
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The Executive shall be allowed to purchase and hold for investment
less than three percent (3%) of the shares of any corporation whose
shares are regularly traded on a national securities exchange or in
the over-the-counter market.
8.2 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.
8.3 Covenants Regarding Other Employees. During the term of this
Agreement and 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 interfere in a similar manner with the
business of the Company.
8.4 Specific Performance. The parties recognize that the Company will
have no adequate remedy at law for breach of the requirements of
this Section 8 and, in the event of such breach, the Company and the
Executive 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 these requirements.
9. Indemnification. The Company covenants and agrees to indemnify and
hold harmless the Executive fully, completely and absolutely against
any and all actions, suits, proceedings, claims, demands, judgments,
costs, expenses (including reasonable attorney's fees), losses and
damages resulting from the Executive's good faith performance of his
duties under this Agreement subject to the requirements and limitations
imposed by the Company's Articles of Incorporation and By-Laws and
applicable law.
10. Assignment.
10.1 Assignment by Company. This Agreement may be assigned or transferred
to, and shall be binding upon and inure to the benefit of, any
successor of the Company, and any 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 jointly
and severally liable for all obligations hereunder.
10.2 Assignment by Executive. The services to be provided by the
Executive to the Company are personal to the Executive and the
Executive's duties may not be assigned by the Executive. This
Agreement shall, however, inure to the benefit of and be enforceable
by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees. If the Executive dies while any amounts payable to the
Executive remain outstanding, all such amounts shall be paid to the
Executive's designee, estate or beneficiaries.
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11. 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 specifying the
nature of the dispute to be arbitrated. 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. 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 reasonable legal fees and
expenses and necessary costs and disbursements.
12. Miscellaneous.
12.1 Entire Agreement. This Agreement supersedes any prior agreements or
understandings, oral or written, between the Executive and the
Company with respect to the subject matter hereof, and constitutes
the entire agreement of the parties with respect thereto.
12.2 Modification. This Agreement shall not be varied, altered, modified,
cancelled, changed or in any way amended except by mutual agreement
of the parties in a written instrument executed by the parties or
their legal representatives.
12.3 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 and shall remain in full force and effect.
12.4 Tax Withholding. The Company may withhold all Federal, state, city
or other taxes required pursuant to any law or governmental
regulation or ruling.
12.5 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 a signed writing acceptable to the Board of Directors, the
Company or designees of the Board or Company. The Executive may
change such designation at any time.
12.6 Board Committee. Any action taken or determination made by the Board
of Directors under this Agreement may be taken or made by the
Compensation Committee or any other Committee of the Board of
Directors.
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12.7 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.
12.8 Notice. Any notices, requests, demands or other communications
required by or provided for in this Agreement shall be sufficient if
in writing and 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 office.
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/ Edward W. Gold /s/ R. Chad Dreier
------------------------------------- -----------------------------------
Edward W. Gold, Senior Vice President R. Chad Dreier
Attest: /s/ Timothy J. Geckle
----------------------------
Timothy J. Geckle, Secretary
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