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EXHIBIT 10.8
SENIOR EXECUTIVE SEVERANCE AGREEMENT
AGREEMENT dated as of ___________ between The Ryland Group, Inc., a Maryland
corporation (the "Corporation"), and ______________________________ (the
"Executive").
The purpose of this Agreement is to ensure that the Corporation will receive the
continued dedication, loyalty, and service of, and the availability of objective
advice and counsel from, the Executive notwithstanding the possibility, threat
or occurrence of a bid or other action to take over control of the Corporation.
In consideration of the services provided by the Executive and the covenants and
agreements contained herein, and for other good and valuable consideration the
sufficiency of which is acknowledged, the Corporation and the Executive agree as
follows:
1. Termination After a Change of Control. The following payments and
benefits will be provided to the Executive by the Corporation (in
addition to any compensation or benefits to which the Executive may
otherwise be entitled under any other agreement, plan or arrangement
with the Corporation, other than a plan, policy or other arrangement
providing for payments due to severance of employment) in the event of a
Termination of Employment (as hereinafter defined) of the Executive
during a Change of Control Period (as hereinafter defined) of the
Corporation:
1.1 Lump Sum Cash Payment. On or before the Executive's last day of
employment with the Corporation or any successor corporation, the
Corporation or any successor corporation will pay the Executive
an amount equal to the Executive's unpaid, annualized base salary
for the remainder of the year in which the Termination of
Employment occurs and a pro rata bonus through the date of
Termination of Employment. Also, on or before the Executive's
last day of employment with the Corporation or any successor
corporation, the Corporation or any successor corporation will
pay the Executive a lump sum cash payment equal to two (2) times
the highest Annual Compensation (as hereinafter defined) for any
of the three (3) calendar years immediately preceding the date of
Termination of Employment. For purposes of this Section 1.1, the
pro-rata bonus shall be an amount equal to the highest bonus
earned by the Executive within the three (3) calendar years
immediately preceding the date of Termination of Employment, pro
rated for the period served during the year in which the
Termination of Employment occurs.
1.2 Accelerated Vesting and Supplemental Payments. All rights, awards
and benefits of the Executive provided pursuant to this
Agreement, the TRG Incentive Plan, any deferred compensation
plans (including the Retirement Savings Opportunity Plan,
Executive and Director Deferred Compensation Plan and any
successor or
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replacement plans) and any incentive, bonus, stock option, equity
incentive, restricted stock, insurance or split dollar insurance
program, relocation equity program, or other benefit plans of the
Corporation in which the Executive participates prior to the
Change of Control shall immediately vest in full and the
Executive shall receive the amount of these rights, awards and
benefits in a cash lump sum payment or other form of compensation
as provided in accordance with the applicable benefit, document
or plan within thirty (30) days of the date of Termination of
Employment. To the extent that any of the plans of the
Corporation would not under applicable law permit accelerated
vesting, the Executive will be paid supplementally or receive
equivalent payments by the Corporation in the amount of
additional benefits or payments that would be payable if full
vesting had taken place under these plans 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
Corporation or any successor corporation or affiliate of such
successor corporation.
1.3 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 supplemental early
retirement plan, split dollar insurance program, personal health
services allowance, health or social club benefits, benefits
outlined in the Executive's Compensation Program and any other
benefits (the "Benefits") provided to the Executive prior to the
Change of Control shall be continued or equivalent benefits
provided by the Corporation or any successor corporation or
affiliate of such successor corporation (the "Responsible
Corporation"), 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 Responsible Corporation is
unable to continue the Benefits, as required by the preceding
sentence, the Responsible Corporation shall pay to the Executive
a lump sum cash payment equal to the value of the Benefits which
the Responsible Corporation is unable to provide.
1.4 Relocation Assistance. Should the Executive move his residence in
order to pursue professional or career opportunities within two
(2) years after the date of the Executive's Termination of
Employment, he will be reimbursed by the Responsible Corporation
for any expenses incurred in that relocation, including taxes
payable on the reimbursement, as well as any reduction in value
from the original purchase price of the Executive's residence.
Benefits under this paragraph will include assistance in and
payment of all costs and commissions related to selling the
Executive's home, moving costs and all other assistance and
benefits which are provided by the Corporation under its
relocation plan as in effect immediately prior to the Change of
Control Period.
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1.5 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.
1.6 Outplacement Assistance. The Executive shall be reimbursed by the
Responsible Corporation for the costs of all outplacement
services obtained by the Executive within the two (2) year period
after the date of the Executive's Termination of Employment
provided the total reimbursement shall be limited to an amount
equal to twenty-five percent (25%) of the Executive's Annual
Compensation for the calendar year immediately preceding the date
of the Executive's Termination of Employment. Alternatively, the
Executive, upon request, will receive, in lieu of the foregoing
reimbursement, a cash payment equal to ten percent (10%) of the
Executive's Annual Compensation for the calendar year immediately
preceding the date of the Executive's Termination of Employment.
1.7 Definitions.
(i) A "Change of Control" shall take place on the date of the
earlier to occur of any of the following events:
(a) The acquisition by any person, other than the
Corporation or any employee benefit plan of the
Corporation, of beneficial ownership of twenty
percent (20%) or more of the combined voting power
of the Corporation's then outstanding voting
securities;
(b) The first purchase under a tender offer or exchange
offer, other than an offer by the Corporation or
any employee benefit plans of the Corporation,
pursuant to which shares of common stock have been
purchased;
(c) During any period of two (2) consecutive years,
individuals who at the beginning of such period
constitute the Board of Directors of the
Corporation cease for any reason to constitute at
least a majority thereof, unless the election or
the nomination for the election by stockholders of
the Corporation of each new director was approved
by a vote of at least two-thirds (2/3) of the
directors then still in office who were directors
at the beginning of the period; or
(d) Approval by stockholders of the Corporation of a
merger, consolidation, liquidation or dissolution
of the Corporation, or the sale of all or
substantially all of the assets of the Corporation.
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(ii) "Annual Compensation" shall mean the sum of the annual
base salary paid or earned and annual bonus paid or
earned, even though paid in a subsequent year, by the
Executive and all amounts credited to the Executive,
vested and unvested, under any incentive compensation or
other benefit or compensation plans in which the Executive
participates during a calendar year. In the event the
Executive has not been employed by the Corporation for a
complete calendar year, the determination of Annual
Compensation shall involve a pro forma projection of
annual base salary, annual bonus and amounts that are
projected to be credited, vested and unvested, under any
incentive compensation or other benefit or compensation
plans in which the Executive participates.
(iii) A "Termination of Employment" shall take place in the
event that the Executive's employment is terminated (a) by
the Corporation without Cause (as hereinafter defined) or
(b) by the Executive with Good Reason (as hereinafter
defined).
(iv) "Cause" shall mean (a) the Executive's willful and
continued failure substantially to perform the material
duties of his or her position (other than as a result of
disability, as defined in Section 22(e)(3) of the Internal
Revenue Code, or as a result of termination by the
Executive for Good Reason) after written notice to the
Executive by the Board specifying such failure, provided
that such "Cause" shall have been found by a majority vote
of the Board after at least ten (10) days' written notice
to the Executive specifying the failure on the part of the
Executive and after an opportunity for the Executive to be
heard at a meeting of the Board and take corrective action
to remedy or eliminate such failure; (b) any willful act
or omission by the Executive constituting dishonesty,
fraud or other malfeasance, and any act or omission by the
Executive constituting immoral conduct, which in any such
case is injurious to the financial condition or business
reputation of the Corporation and so proven by
independently verified evidence of such conduct; or (c)
the Executive's conviction of a felony under the laws of
the United States or any state thereof or any other
jurisdiction in which the Corporation conducts business.
(v) "Good Reason" shall mean (a) 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, (b) the
Corporation requires the Executive, without his or her
consent, to be based at a location which is more than
fifty (50) miles from the Executive's then current primary
residence, (c) the Executive's base salary, bonus or any
other benefits, incentive compensation or compensation
plans are reduced, or (d) the Executive experiences in any
year a reduction in the ratio of the Executive's incentive
compensation,
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bonus or other such payments to his base compensation, or
a reduction in the method of calculation of the
Executive's incentive compensation, bonus or other such
payments if these benefits or payments are calculated
other than as a percentage of base salary. An isolated,
insubstantial and inadvertent action not taken in bad
faith and which is remedied by the Corporation promptly
after receipt of notice thereof given by the Executive
shall be excluded.
(vi) 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) two (2) 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 proposed to occur.
1.8 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 Internal
Revenue 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 1.8 is made.
2. General.
2.1. Indemnification. If litigation shall be brought to enforce or
interpret any provision contained herein, then, provided that the
Executive prevails to any extent, the Corporation shall reimburse
or indemnify the Executive for the Executive's reasonable
attorneys' fees, expenses and disbursements incurred in such
litigation, including costs of enforcement.
2.2 Dispute Resolution. Either the Executive or the Corporation may
elect to have any good faith dispute or controversy arising under
or in connection with this Agreement settled by binding
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 Corporation and the Executive
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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. If the Executive prevails to any extent in any
arbitration seeking to enforce the provisions of this Agreement,
the Executive shall be entitled to reimbursement by the
Corporation of all expenses, including reasonable legal fees and
expenses, and costs and disbursements incurred as a result of
such dispute or legal proceeding, including costs of enforcement.
2.3 Payment of Obligations Absolute. The Responsible Corporation's
obligation to pay the compensation and to make the arrangements
provided in this Agreement shall be absolute and unconditional
and shall not be affected by any circumstances, including any
offset, counterclaim, recoupment, defense or other right which
the Responsible Corporation may have against the Executive or
anyone else, provided, however, that as a condition to payment of
amounts under this Agreement, the Executive shall execute a
general release and waiver, in form and substance reasonably
satisfactory to the Responsible Corporation, of all claims
relating to the Executive's employment by the Corporation and the
termination of such employment, including, but not limited to,
discrimination claims, employment-related tort claims, contract
claims and claims under this Agreement (other than claims with
respect to benefits under the Corporation's tax-qualified
retirement plans or continuation of coverage or benefits solely
as required by Part 6 of Title I of the Employee Retirement
Income Security Act of 1974). All amounts payable by the
Responsible Corporation shall be paid without notice or demand.
Each and every payment made by the Responsible Corporation shall
be final, and the Responsible Corporation will not seek to
recover all or any part of such payment. The Executive shall not
be obligated to seek other employment in mitigation of the
amounts payable or arrangements made under this Agreement, and
the obtaining of any other employment shall not result in a
reduction of the Responsible Corporation's obligations to make
the payments, benefits and arrangements required to be made under
this Agreement.
2.4 Continuing Obligations. The Executive shall retain in confidence
any confidential information known to him concerning the
Corporation, its subsidiaries and their respective businesses so
long as such information is not publicly disclosed.
2.5 Successors. This Agreement shall be binding upon and inure to the
benefit of the Executive and his estate, and the Corporation and
any successor of the Corporation or affiliate of a successor to
the Corporation, but neither this Agreement nor any rights
arising hereunder may be assigned or pledged by the Executive.
All references in this Agreement to the Corporation shall include
its subsidiaries and affiliates and any successors, affiliates of
successors or assigns of the Corporation. Any successor of the
Corporation shall be deemed substituted for all purposes of the
"Corporation" under the terms of this Agreement. As used in
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this Agreement, the term "successor" shall mean any person, firm,
corporation or business entity or affiliate thereof which at any
time, whether by merger, purchase or otherwise, directly or
indirectly acquires all or substantially all of the assets or the
business of the Corporation, including any entity that shall be
the surviving corporation in a merger with the Corporation or the
acquiring person or affiliate of the acquiring person in an
acquisition of the Corporation and/or of all or substantially all
of its business or assets, regardless of whether such transaction
constitutes a Change of Control. In all cases, the Corporation,
Responsible Corporation or successor shall remain jointly and
severally liable for all obligations hereunder.
2.6 Severability. Any provisions in this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective only to the extent of such
jurisdiction, be ineffective only to the extent of such
prohibition or unenforceability, without invalidating or
affecting the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
2.7 Controlling Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Maryland.
2.8 Modification. This Agreement shall not be varied, altered,
modified, canceled, changed or in any way amended except by
mutual agreement of the Executive and the Corporation in a
written instrument executed by the Executive and the Corporation.
2.9 Entire Agreement. This Agreement contains the entire agreement
between the parties with respect to the subject matter described
herein and supercedes any prior written agreement between the
parties regarding such subject matter. Any oral or written
agreements, representations, warranties, written inducements, or
other communications made prior to the execution of this
Agreement with respect to the subject matter described herein
shall be void and ineffective for all purposes.
2.10 Tax Withholding. The Corporation may withhold all federal, state,
city or other taxes required pursuant to any law or governmental
regulation or ruling.
2.11 Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or unenforceability
of any other provision of this Agreement, which shall remain in
full force and effect and be interpreted so as to effect the
original intent of the parties to this Agreement to the end that
the obligations and agreements contained herein are fulfilled.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
THE RYLAND GROUP, INC. EXECUTIVE
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R. Chad Dreier, President and Chief [Executive]
Executive Officer
ATTEST:
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Timothy J. Geckle, Secretary
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