<PAGE>
RYLAND
THE RYLAND GROUP, INC.
11000 Broken Land Parkway
Columbia, Maryland 21044
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS:
To the Stockholders:
Notice is hereby 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 19, 1995, at 9:30 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; and
3. To act upon such other business as may properly be brought before
the meeting.
Stockholders of record as of the close of business on February 20, 1995,
shall be entitled to vote at the meeting or any adjournment thereof. Whether
or not you plan to attend the meeting, please date and sign the enclosed proxy
and return it promptly 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
David Lesser
Secretary
March 10, 1995
<PAGE>
PROXY STATEMENT
The proxy enclosed with this Proxy Statement is being solicited by
the Ryland Group, Inc. (the Corporation) for use at the Annual Meeting of
Stockholders to be held on April 19, 1995. This Proxy Statement and proxy
are first being distributed to stockholders on approximately March 10, 1995.
The Annual Report of the Corporation, for the year ended December 31, 1994,
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 for the election of Directors. 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 ratification of the
selection of independent public accountants, abstentions are counted as
negative votes and broker non-votes are not counted in the stockholder vote
for this matter.
The Corporation may solicit proxies by mail, personal interview, tele-
phone or telegraph 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 20,
1995, 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 15,503,019 shares of
Common Stock outstanding as of the close of business on February 20, 1995.
There were 1,058,158 shares of Preferred Stock outstanding as of the close
of business on February 20, 1995. Common Stock and Preferred Stock do not
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 election and qualification of their successors. The proxies
solicited hereby, 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.
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE AND YEAR IN
WHICH FIRST ELECTED A PRINCIPAL OCCUPATION
DIRECTOR FOR FIVE PRIOR YEARS
AND OTHER INFORMATION
- -------------- ----------------------------------------
<S> <C>
R. Chad Dreier Chairman of the Board of Directors of
47 (1993) the Corporation since December
1994; President and Chief Executive
Officer of the Corporation since
November 1993; Executive Vice
President and Chief Financial
Officer of Kaufman and Broad Home
Corporation from 1986 until 1993.
Andre' W. Brewster Chairman of the Board of Directors of the
69 (1977) Corporation from 1993 through 1994; Chief
(Note a) Executive Officer of the Corporation from
July 1993 through November 1993;
General Partner of Piper &
Marbury (law firm); Chairman of the
Board of Triad Investors Corporation;
Director of Alex. Brown Incorporated, AEGON
USA, Inc., Fidelity and Deposit
Company of Maryland.
James A. Flick, Jr. President, Chief Executive Officer and
60 (1990) Director of Dome Corporation; (real
estate development and management
services); Executive Vice President
of Legg Mason Walker Wood, Inc.
(investment firm) from 1991 until
1994; Executive Vice President and
Chief Financial Officer of USF&G
Corporation (insurance holding company)
from 1988 until 1991; Director of Forensic
Technologies International Corporation
and Capital One Financial Corporation.
Robert J. Gaw Executive Vice President of the
61 (1967) Corporation and President of Ryland
Mortgage Company; Director of Health
Services, Inc. and Columbia Bank.
Leonard M. Harlan Chairman of The Harlan Company,
58 (1984) Inc. (real estate investment-banking
company); President of Castle
Harlan, Inc. (private merchant banking
firm); President of Castle Harlan Partners
II, G.P., Inc. (corporate buyout
fund); Chairman of the Board of Directors of
Long John Silver's Holdings,
Inc. from 1990 until 1992;
General Partner of Legend
Capital Group, L.P. (corpo-
rate buyout fund); Director
of Delaware Management
Holdings, Inc., the Delaware
Group of Mutual Funds, Long
John Silver's Restaurants,
Inc., Smarte Carte Corporation,
MAG Aerospace Industries, Inc.
and Strawberries, Inc.
L. C. Heist President, Chief Operating Officer
63 (1989) and Director of Champion International
Corporation (forest products); Director
of Lyman Farm, Inc.
William L. Jews President and Chief Executive Officer
43 (1994) of Blue Cross Blue Shield of Maryland,
Inc.; President and Chief Executive
Officer of Dimensions Health Care
from 1990 until 1993; Director
of Crown Central Petroleum
Corp., NationsBank, Inc. and
Shelter Advisory Group.
William G. Kagler Chairman of the Executive Committee
62 (1985) and member of the Board of Directors
of Skyline Chili, Inc.; Chairman of the
Board of Directors of Skyline Chili,
Inc., from 1992 until 1994;
President of Skyline Chili, Inc. from
1989 until 1992; Director of Fifth
Third Bancorp, Union Central Life
Insurance Company and The Future
Now Corporation.
John H. Mullin, III Chairman of Ridgeway Farm, Inc.
53 (1982) (wholesale nursery); Director of The
(Note b) Liberty Corp., Dillon, Read & Co.
Inc. and ACX Technologies, Inc.
John O. Wilson Executive Vice President and Chief
56 (1987) Economist of Bank of America
Corporation.
<FN>
(a) Piper & Marbury performed legal services for the Corporation during 1994
and is expected to perform legal services for the Corporation in 1995.
(b) Dillon, Read & Co. Inc. provided financial advisory services for the
Corporation during 1994 and is expected to provide financial advisory
Services for the Corporation in 1995.
</TABLE>
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.
<PAGE>
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 20,
1995, were:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
- -----------------------------------------------------------------------------
<S> <C> <C>
INVESCO PLC and 1,964,400 (1) 12.7
INVESCO Capital Manage-
ment, Inc.
11 Devonshire Square
London EC211 4YR
England
Wellington Management
Company 1,872,400 (2) 12.1
75 State Street
Boston, MA 02109
NationsBank Corporation 918,403 (3) 5.9
NationsBank Plaza
Charlotte, NC 28255
<FN>
(1) According to Schedule 13G dated February 10, 1995, filed with the
Securities and Exchange Commission, all of these shares are owned with
shared voting and shared dispositive power.
(2) According to Schedule 13G dated January 30, 1995, filed with the
Securities and Exchange Commission, 756,100 of these shares are
owned with shared voting power and 1,872,400 of these shares are
owned with shared dispositive power. According to Schedule 13G dated
February 10, 1995, filed with the Securities and Exchange Commission,
935,200 of these shares are owned by Vanguard/Windsor Fund, Inc.,
with sole voting and shared dispositive power.
(3) According to Schedule 13G dated February 10, 1995, filed with the
Securities and Exchange Commission, 904,303 of these shares are owned
with sole voting power, 888,375 of these shares are owned with sole
dispositive power, and 5,000 of these shares are owned
with shared dispositive power.
The Corporation's Retirement and Stock Ownership Plan is the
beneficial owner of 1,058,158 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.
</TABLE>
<PAGE>
The following table sets forth, as of February 20, 1995, 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:
<TABLE>
<CAPTION>
Number of Shares
Name Beneficially Owned (1)(2)(3)
- ------------------------- -----------------------------
<S> <C>
R. Chad Dreier 118,113
Andre' W. Brewster 95,960 (4)
James A. Flick, Jr. 3,960
Robert J. Gaw 173,929 (5)
Leonard M. Harlan 1,960
L. C. Heist 7,460
William L. Jews 500
William G. Kagler 10,960
John H. Mullin, III 34,560 (6)
John O. Wilson 4,960
Timothy R. Doyle 35,782 (5)
J. Sidney Davenport 84,272 (5)
Alan P. Hoblitzell, Jr. 57,923 (5)
Directors and executive officers
as a group (22 persons) 775,935 (5)
<FN>
(1) With the exception of Mr. Gaw, no other Director, nominee or
executive officer beneficially owns more than 1 percent of the
Corporation's outstanding Common Stock. Mr. Gaw beneficially
owns 1.1 percent of the outstanding Common Stock of the Corporation.
Directors and executive officers as a group beneficially own 5.0
percent of the outstanding Common Stock of the Corporation. Except as
otherwise indicated in the Notes to the table, all of the shares in
the table are owned individually with sole voting and sole
dispositive power.
(2) Includes shares subject to stock options which may be exercised within 60
days of February 20, 1995, as follows: Mr. Dreier, 33,000 Shares; Mr.
Brewster, 60,960 shares; Mr. Flick, 960 shares; Mr. Gaw, 91,091 shares;
Mr. Harlan, 960 shares; Mr. Heist, 960 shares; Mr. Kagler, 960 shares;
Mr. Mullin, 960 shares; Mr. Wilson, 960 shares; Mr. Doyle, 27,721
shares; Mr. Davenport, 36,019 shares; Mr. Hoblitzell, 42,500 shares;
and Directors and executive officers as a group, 394,523 shares.
(3) Includes shares subject to restricted stock units as follows: Mr. Dreier,
70,113 shares; Mr. Gaw, 10,966 shares; Mr. Doyle 4,471 shares; Mr.
Davenport, 5,270 shares; Mr. Hoblitzell, 11,623 shares; and Directors and
executive officers as a group, 124,524 shares.
(4) Does not include 3,200 shares owned by Mr. Brewster's wife as to which he
disclaims beneficial ownership.
<PAGE>
(5) 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. Gaw, 2,016
shares; Mr. Doyle, 1,670 shares; Mr. Davenport, 1,765 shares;
Mr. Hoblitzell, 840 shares; and Directors and executive officers as a
group, 11,388 shares.
(6) 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 1,300 shares owned by
Mr. Mullin's sons or 2,500 shares owned by his wife. Mr. Mullin dis-
claims beneficial ownership of these shares.
</TABLE>
INFORMATION CONCERNING THE BOARD OF DIRECTORS
During 1994, the Board of Directors held six meetings. All of the
Corporation's 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 1994. The Board of Directors of the Corporation has an
Audit Committee, Compensation Committee, Finance Committee and Nominating
Committee.
The Audit Committee of the Board of Directors is composed of Messrs.
Flick, Heist and Kagler, and, effective for 1995, Jews. The Audit Committee
reviews the Corporation's financial statements and reports and audit services
provided by the Corporation's independent public accountants as well as the
duties, responsibilities and reports of the Corporation's internal auditors.
During 1994, seven 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 a well as awards and distributions
under the Corporation's various employee compensation plans. Messrs. Flick,
Heist, Kagler and, effective for 1995, Jews serve as its members. In 1994,
the Compensation Committee held seven meetings.
The Finance Committee of the Board of Directors is composed of Messrs.
Brewster, Gaw, Harlan, Mullin and Wilson. The Finance Committee reviews the
financing activities of the Corporation. There were five meetings of the
Finance, Committee during 1994.
The Nominating Committee is responsible for the selection and submission
of qualified candidates to fill vacancies on the Board of Directors. Messrs.
Harlan, Flick and Bewster are members of the Nominating Committee, which held
two meetings during 1994. The Nominating Committee will consider nominees
suggested by stockholders for election to the Board of Directors. Recommen-
dations by stockholders should be forwarded to the Secretary of the
Corporation and should identify the nominee by name and provide information
about the nominees' background and experience.
<PAGE>
COMPENSATION OF DIRECTORS
Each Director who is not an employee receives an annual fee of $19,500.
Each non-employee Director was paid an additional $850 for each meeting
attended of the Board of Directors and of committees of the Board of Directors
of which he is a member. In 1995, each non-employee Director will receive
$1,000 for each meeting attended of the Board of Directors and for each
committee meeting attended of which he is a member. A Director may elect to
have all or any part of his annual fee and meeting fees deferred under the
Corporation's Deferred Director Fee Plan. Under this Plan, amounts elected
to be deferred are not included in a Director's gross income for tax purposes
until actually distributed to the Director.
The Corporation maintains a Non-Employee Director Equity Plan pursuant to
which non-employee Directors receive stock options. On December 31, 1994,
the Corporation granted each non-employee Director an option to purchase 1,000
shares of Common Stock at an exercise price of $15.00 per share except for
Mr. Jews who, as a newly elected Director, received a stock option to purchase
2,000 shares of Common Stock at an exercise price of $15.00 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, unless a Director's service on the Board of Directors ceases, in
which case all stock options fully vest and are excercisable. Options are not
excercisable after 10 years from the date of grant or three years after the
date of termination of service on the Board of Directors regardless of their
stated expiration dates.
On December 21, 1994, the Board of Directors granted Mr. Brewster an
option to purchase 10,000 shares of Common Stock at an exercise price of
$14.25 per share in recognition of his service as Chairman of the Board of
Directors from 1993 to 1994. The exercise price was the market price of the
Common Stock on the date of grant.
During 1994, the Corporation donated $5,000 to a charitable organization
designated by each Director.
1994 COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is comprised of three 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 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,
total 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 executives a close identification
with the Corporation and aligns their interests with those of
stockholders. This promotes a continuing focus on building
profitability and stockholder value.
<PAGE>
- 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 depends.
COMPONENTS OF COMPENSATION
The 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. The Compensation Committee reviews
and approves the selection of companies used for compensation comparison
purposes.
The peer group companies used for compensation purposes 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 direct 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.
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.
<PAGE>
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 Committee to recognize varying levels of responsibility, experience,
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 sustained levels of
individual contribution to the Corporation.
Effective December 21, 1994, Mr. Dreier, President and Chief Executive
Officer of the Corporation, was appointed to the additional position of
Chairman of the Board of Directors. His salary was increased on December 26,
1994, from $450,000 to $600,000 to reflect this increase in responsibility and
to bring his base salary to the median point for comparable officers in the
peer group companies. Salaries of the other executive officers were increased
at rates comparable to other peer group companies and are near median
competitive levels.
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 motivate executives to achieve these goals.
At the beginning of 1994, the Compensation Committee established
corporate and business unit specific goals relating to each executive's bonus
opportunity. Corporate goals were based on pretax income for the year.
Business unit goals were primarily based on operating income. Eligible
executives were assigned threshold, target and maximum bonus levels based on a
percentage of base salary.
Target bonus awards are set at median competitive levels. Targets are
considered by the Compensation Committee to be achievable but require above-
average performance from each of the executives and their business units.
For 1994, the Compensation Committee did not adjust any executive officer's
annual incentive payout based on a subjective judgment of executive
performance.
In 1994, the Compesation Committee introduced a deferred bonus program
for certain executive officers whose performances have a direct and immediate
impact on the financial results of the Corporation. Payments are earned upon
achievement of 100 percent of the executive's predetermined goals. For each
percent achieved above the predetermined goals, the executive may earn one
additional percent bonus up to a predefined maximum percent of base salary.
Payment of amounts earned under the deferred bonus program is deferred for one
year with earnings credited during the deferral period. Executives must be
employed by the Corporation at time of payment.
An annual incentive award maximum of 100 percent of base salary was
established by the Committee for Mr. Drier in 1994. This bonus opportunity is
measured by predetermined pretax income goals for the Corporation. Based on
the Coporation's 1994 performance, Mr. Dreier received a bonus of $321,750.
Under the terms of Mr. Dreier's employment agreement, entered into in December
1994, Mr. Dreier is eligible for an annual bonus for 1995 and each year during
the term of this agreement equal to 0.75 percent of the consolidated pretax
income of the Corporation. See "Employment Agreements" on page 12 of this
Proxy Statement.
LONG TERM INCENTIVES
In keeping with the Corporation's commitment to provide a total
compensation package which includes at-risk components of pay, long-term
incentive compensation comprises a significant portion of the value of an
executive's total compensation package.
<PAGE>
When awarding long-term grants, 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
and restricted stock unit awards.
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 stock option grants is based primarily on competitive practice and
is generally targeted to be at the median of option values granted by the peer
group companies. The size of the award can be adjusted based on individual
factors and historical award data.
On June 20, 1994, Mr. Dreier received options to purchase 30,000 shares
of the Common Stock of the Corporation at an exercise price of $17.875 per
share. This stock option grant is within median competitive levels for other
chief executive officers of peer group companies.
RESTRICTED STOCK UNITS
Pursuant to the Corporation's Long-Term Retirement and Incentive Plan,
restricted stock units, which vest in five years, may be granted to
executives. Except for death, disability, retirement, a change in control or
with the approval of the Compensation Committee, restricted stock units are
forfeited upon termination of employment. Because of the vesting requirement,
restricted stock units enhance the Corporation's ability to maintain a stable
executive team focused on the Corporation's long-term success. Restricted
stock units also provide executives with an immediate link to the interest of
stockholders.
Each year the Compensation Committee establishes goals relating to each
executive's opportunity to earn restricted stock units under the Corporation's
Long-Term Retirement and Incentive Plan and establishes award levels for each
executive officer based upon a percentage of the officer's base salary.
Executives earn restricted stock units to the extent to which pre-established
goals are achieved. As a result, the number of restricted stock units awarded
varies and is dependent on the achievement of financial performance targets.
A restricted stock unit award maximum value of 50 percent of base
salary was established by the Committee for Mr. Dreier in 1994. The
Committee designated return on equity as the sole performance measure for
earning restricted stock units in 1994. Based upon the Corporation's
performance in 1994, Mr. Dreier received 10,113 restricted stock units valued
at $151,695.
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 the statutory limits, the Corporation also offers executive
officers the ability to defer additional pay and receive corresponding
company-matching contributions through the Deferred Compensation Savings Plan.
The Salary Deferral Plan also enables executives to defer receipt of salary
but without company-matching contributions. Earnings credited on deferrals
under the Salary Deferral Plan are based on the Corporation's monthly return
on equity. Executive officers have the ability to earn deferred cash
retirement amounts based on the achievement of predetermined goals under the
Corporation's Long-Term Retirement and Incentive Plan. A maximum award
of 50 percent of base salary was established by the Committee for
<PAGE>
Mr. Dreier in 1994. The Committee designated return on equity as
the sole performance measure for awards in 1994. Based upon the
Corporation's performance for 1994, a contribution of $151,713 was made
for Mr. Dreier to the Long-Term Retirement and Incentive Plan.
POLICY WITH RESPECT TO THE $1 MILLION DEDUCTION LIMIT
It is the policy of the Compensation Committee to qualify 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 best interest of the Corporation and its stockholders but 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.
We 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 G. Kagler
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
---------------------------
NAME AND PRINCIPAL POSITION Year Salary Bonus (c)
- -----------------------------------------------------------
<S> <C> <C> <C>
Mr. Dreier - Chairman 1994 $450,000 $321,750
of the Board of Directors, 1993 $ 30,768 $ 0
President and Chief 1992 $ -- $ --
Executive Officer of The
Ryland Group, Inc. (a)
Mr. Gaw - Executive Vice 1994 $351,923 $353.004
President of The Ryland 1993 $340,283 $147,375
Group, Inc.; President of 1992 $327,500 $294,750
Ryland Mortgage Company
Mr. Hoblitzell-Former 1994 $420,000 $270,270
Executive Vice President 1993 $348,446 $ 0
and Chief Financial Officer 1992 $281,281 $252,000
of The Ryland Group, Inc. (b)
Mr. Doyle - Senior Vice 1994 $211,538 $211,539
President of The Ryland 1993 $183,076 $ 39,900
Group, Inc.; President of 1992 $173,878 $149,000
the Mid-Atlantic Region of
Ryland Homes.
Mr. Davenport - Vice President 1994 $231,923 $257,198
of The Ryland Group, Inc.; 1993 $219,615 $164,000
Executive Vice President of 1992 $205,000 $205,000
Ryland Mortgage Company
==============================
</TABLE>
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------
AWARDS PAYOUTS
---------------------- -----------
Securities
Under-
Restricted lying All Other
Stock Options LTIP Compensa-
NAME AND PRINCIPAL POSITION Awards(d) /SARS Payouts (e) tion(f)
==============================================================================
<S> <C> <C> <C> <C> <C>
Mr. Dreier - Chairman 1994 $ 151,695 30,000 $ 0 $186,596
of the Board of Directors, 1993 $1,471,875 100,000 0 $151,234
President and Chief 1992 -- -- -- $ - $ --
Executive Officer of The
Ryland Group, Inc. (a)
Mr. Gaw - Executive Vice 1994 $ 93,045 15,000 $ 0 $127,022
President of The Ryland 1993 $ 0 4,500 $520,575 $ 38,900
Group, Inc.; President of 1992 $ 98,832 4,100 $911,764 $130,240
Ryland Mortgage Company
Mr. Hoblitzell-Former 1994 $ 113,265 0 $ 0 $139,599
Executive Vice President 1993 0 5,500 $ 12,900 $ 33,364
and Chief Financial Officer 1992 84,494 3,800 $ 0 $ 96,897
of The Ryland Group, Inc. (b)
<PAGE>
Mr. Doyle - Senior Vice 1994 $ 38,430 20,000 $ 0 $126,467
President of The Ryland 1993 0 1,100 $ 44,885 $ 25,061
Group, Inc.; President of 1992 39,612 1,300 $ 28,760 $128,901
the Mid-Atlantic Region of
Ryland Homes
Mr. Davenport - Vice 1994 $ 45,510 10,000 $ 0 $ 71,233
President of The 1993 $ 0 1,300 $300,577 $ 25,189
Ryland Group, Inc.; 1992 $ 46,397 1,500 $387,121 $ 71,482
Executive Vice President
of Ryland Mortgage Company
============================================================================
</TABLE>
[FN]
(a) Mr. Dreier joined the Corporation in November 1993. In December 1994,
the Corporation entered into an employment agrement with Mr. Dreier,
the terms of which are discussed under "Employment Agreements" on page
12 of this Proxy Statement.
(b) Mr. Hoblitzell retired from the Corporation effective January 6, 1995.
The Corporation paid $450,000 to Mr. Hoblitzell on January 6, 1995, in
satisfaction of all remaining obligations under his employment
agreement. See "Employment Agreements" on page 12 of this Proxy
Statement.
(c) Bonuses for the years of 1994, 1993 and 1992 were
paid in 1995, 1994 and 1993, respectively.
Beginning 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. Gaw earned a deferred bonus of $69,000 and Mr. Davenport
earned a deferred bonus of $45,000, both of which are payable
in 1996.
(d) Amounts represent restricted stock units earned based upon the
achievement of predetermined goals established in 1992 and 1994
for the Long-Term Retirement and Incentive Plan. The value of the
restricted stock units for 1992 was based upon the $20.75 closing
price of the Corporation's Common Stock on the date of grant, December
31, 1992. The value of the restricted stock units for 1994 was
based upon the $15.00 closing price of the Corporation's Common
Stock on the date of grant, December 31, 1994. The restricted stock
units will be fully vested at the end of five years at which time
the Corporation will distribute an equal number of shares of the
Corporation's Common Stock, and the vested restricted stock units
will be considered fully paid and canceled. Participants are entitled
to all regular quarterly dividend equivalent payments on the
restricted stock units in the amount and to the extent dividends
are paid by the Corporation on its Common Stock. At December 31,
1994, the number and value of restricted stock units held under the
Long-Term Retirement and Incentive Plan were as follows: Mr. Dreier-
10,113 units, $151,695; Mr. Gaw-10,966 units, $164,490;
Mr. Hoblitzell-11,623 units, $174,345; Mr. Doyle-4,471 units
$67,065; and Mr. Davenport-5,270 units, $79,050.
Mr. Dreier was awarded 75,000 restricted stock units upon his
employment by the Corporation in 1993. The value of the restricted
stock units was based upon the $19.625 closing price of the
Corporation's Common Stock on the date of grant. The units
vest and shares of Common Stock are delivered to Mr. Dreier in
five annual installments of 15,000 shares each beginning
November 1, 1994. Mr. Dreier is entitled to all regular
quarterly dividend equivalent payments on the restricted stock
units in the amount and to the extent dividends are paid by the
Corporation on its Common Stock. At December 31, 1994, Mr.
Dreier held 60,000 restricted stock units valued at $900,000 in
connection with this award.
<PAGE>
(e) Amounts in this column represent payouts in cash and Common
Stock under the 1979 and 1985 Compensation Unit Plans. Both
Plans were terminated in 1993. Amounts paid for the 1979
Compensation Unit Plan were as follows: Mr. Gaw 1993-$8,971,
1992-$32,549; Mr. Hoblitzell 1993-$12,900; Mr. Doyle 1993-$10,620,
1992-$4,632; and Mr. Davenport 1992-$11,369. Amounts paid for
the 1995 Compensation Unit Plan were as follows: Mr. Gaw 1993-
$511,604, 1992-$879,215; Mr. Doyle 1993-$34,265, 1992-$24,128; and
Mr. Davenport 1993-$300,577, 1992-$375,752.
(f) Amounts in this column represent the Corporation's contributions
to the Retirement and Stock Ownership Plan and Deferred
Compensation Savings Plan: Mr. Dreier 1994-$8,399; Mr. Gaw 1994-
$27,081, 1993-$38,090, 1992-$30,591; Mr. Hoblitzell 1994-$22,668,
1993 - $32,519, 1992-$11,929; Mr. Doyle 1994-$14,997, 1993-$19,916,
1992-$19,844; and Mr. Davenport 1994-$21,879, 1993-$24,923, 1992-
$24,716; earnings on the Corporation's Salary Deferral Plan: Mr. Dreier
1994- $333; Mr. Gaw 1994-$5,168, 1992-$374; Mr. Hoblitzell 1994-$1,751,
1992-$18; and Mr. Davenport 1994-$3,105, 1992-$223; the value of term
life insurance paid under the Corporation's split dollar life insurance:
Mr. Dreier 1994-$236; Mr. Gaw 1994-$906, 1993- $810, 1992-$435;
Mr. Hoblitzell 1994-$1,197, 1993-$845, 1992-$446; Mr. Doyle 1994
-$147, 1993-$119, 1992-$67; and Mr. Davenport 1994-$351, 1993-
$266, 1992-$141; deferred cash and earnings earned under the
Corporation's Long-Term Retirement and Incentive Plan: Mr. Dreier 1994-
$151,713; Mr. Gaw 1994-$93,867, 1992-$98,840; Mr. Hoblitzell 1994-
$113,983, 1992-$84,504; Mr. Doyle 1994-$38,762, 1992-$39,611;
and Mr. Davenport 1994-$45,898, 1992-$46,402.
The Corporation reimbursed Mr. Dreier for relocation expenses
totaling $25,915 in 1994, and $151,234 in 1993, of which $129,066
represents actual moving expenses and $48,083 represents the
gross-up adjustment for taxes. The Corporation reimbursed
Mr. Doyle for relocation expenses totaling $72,561 in 1994,
$5,026 in 1993, and $69,379 in 1992, of which $126,798 represents
actual moving expenses and $20,168 represents the gross-up
adjustment for taxes.
EMPLOYMENT AGREEMENTS
In December 1994, the Corporation entered into an employment agreement
with Mr. Dreier for an initial period of three years beginning January 1,
1995. The agreement provides for one-year extensions subject to the right of
either party to terminate the agreement upon 180 days prior notice. In the
event of a "change in control" of the Corporation, as defined in the
agreement, the term of the agreement is the longer of two years or the
remaining term thereunder. Under this agreement, Mr. Dreier will receive a
base salary of $600,000 per year and an annual cash bonus equal to 0.75
percent of the consolidated pretax income of the Corporation. If Mr. Dreier's
employment is terminated by the Corporation without "cause", as defined in the
agreement, Mr. Dreier will receive his salary and benefits for the remaining
term of the agreement or 18 months, whichever is greater, as well as a
prorated bonus payment. In the event of an actual or constructive termination
of Mr. Dreier's employment within two years after a "change in control" of the
Corporation, Mr. Dreier will receive a payment equal to three times his
highest annual base salary plus three times the higher of his prior year's
bonus or the average annual bonus for the prior three years.
In 1993, the Corporation entered into an employment agreement with Mr.
Hoblitzell. Under this agreement, the Corporation paid Mr. Hoblitzell an
annual base salary of $420,000 for the year ended December 31, 1994. From
January 1, 1995, until the termination date of the agreement, June 30,
1996, the Corporation was obligated to pay Mr. Hoblitzell a minimum
annual base salary of $300,000. Effective January 6, 1995, Mr. Hoblitzell
retired from his employment, and the Corporation paid him $450,000 in
satisfaction of all remaining salary obligations under this agreement.
<PAGE>
The Corporation has senior executive severance agreements pursuant to
which certain executive officers would be entitled to receive a lump sum
cash payment representing one and one-half times the highest annual
compensation paid during the three years prior to termination of employment
and accelerated vesting under incentive compensation, stock option and benefit
plans of the Corporation upon termination of employment within two years after
a "change in control" of the Corporation, as defined in the agreements.
Currently, the Corporation has senior executive severance agreements with
Messrs. Gaw and Davenport.
STOCK OPTION GRANTS IN 1994
<TABLE>
<CAPTION>
Number of
Securities Percent of Total
Underlying Options Granted to Exercise Price
Name Options Granted (a) Employees in 1994 ($/Share)
=====================================================================
<S> <C> <C> <C>
Mr. Dreier 30,000 6.1 $ 17.875
Mr. Gaw 15,000 3.1 $ 17.875
Mr. Hoblitzell 0 -- $ --
Mr. Doyle 20,000 4.1 $ 17.875
Mr. Davenport 10,000 2.0 $ 17.875
All Stockholders (b)
====================
</TABLE>
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock Price
Appreciation for 10-Year Option Term
Expiration =======================================
Date 5% 10%
============================================================================
<S> <C> <C> <C>
Mr. Dreier 6/20/04 $ 337,245 $ 854,644
Mr. Gaw 6/20/04 168,622 $ 427,322
Mr. Hoblitzell -- -- --
Mr. Doyle 6/20/04 224,830 $ 569,763
Mr. Davenport 6/20/04 112,415 $ 284,881
All Stockholders (b) $145,984,448 $369,953,254
====================
<FN>
(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.
(b) Calculated on 15,475,242 outstanding shares of Common Stock
with a closing price of $15.00 per share as of December 31, 1994.
<PAGE>
AGGREGATED STOCK OPTION EXERCISES IN 1994
AND YEAR-END STOCK OPTION VALUES
</TABLE>
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised
Options at Year End
Shares Acquired Value ===========================
Name on Exercise Realized (a) Exercisable Unexercisable
===========================================================================
<S> <C> <C> <C> <C>
Mr. Dreier -- -- 33,000 97,000
Mr. Gaw -- -- 81,991 28,509
Mr. Hoblitzell -- -- 37,523 4,977
Mr. Doyle 750(b) $10,875 26,721 24,179
Mr. Davenport -- -- 28,519 22,881
===============
</TABLE>
<TABLE>
<CAPTION>
Value of Unexercised In-the-
Money Options at Year End
=============================
Name Exercisable Unexercisable
===========================================================================
<S> <C> <C>
Mr. Dreier $ 0 $ 0
Mr. Gaw $ 48,750 $ 0
Mr. Hoblitzell $ 0 $ 0
Mr. Doyle $ 8,125 $ 0
Mr. Davenport $ 16,250 $ 0
<FN>
(a) Market price at exercise less exercise price.
(b) Mr. Doyle continues to hold all 750 shares acquired upon exercise.
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
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
===========================================
<S> <C> <C> <C> <C>
(a) 100 100 100
Year Ending December 31
1990 88 97 69
1991 132 126 120
1992 121 136 155
1993 120 150 197
1994 93 152 134
<FN>
(a) Assumes that the value of the Common Stock of the Corporation and the
indices was $100 on January 1, 1990, and that all dividends were reinvested.
</TABLE>
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 1995. The affirmative vote of the holders
of a majority of the shares of stock of the Corporation 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 are expected to be present at the
meeting to respond to stockholders' questions and to make a statement if they
so desire.
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, 1995, 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 1996 Annual Meeting of
Stockholders.
OTHER MATTERS
The Board of Directors knows of no other business to be presented for
action at the meeting. If any other business should properly come before the
meeting, the proxy holders will vote upon such matters according to their
discretion.
By Order of the Board of Directors
\s\ David Lesser
----------------------
David Lesser
Secretary
<PAGE>
THE RYLAND GROUP, INC.
Participant Proxy Solicited on Behalf of the Board of Directors
Annual Meeting of Stockholders - April 19, 1995
The undersigned participant in The Ryland Group, Inc. Retirement
and Stock Ownership Plan (RSOP) and/or Deferred Compensation Savings
Plan (DCSP), acknowledges receipt of the Proxy Statement and Notice
of Annual Meeting of Stockholders, dated March 10, 1995, 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 19, 1995, at 9:30 A.M., Eastern Daylight
Time, and at any adjournments thereof.
(Continued and to be signed on reverse side)
<PAGE>
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 Ernst & Young, LLP
as the Corporation's independent public accountants, and in the discretion of
the proxies upon such other business as may properly come before the meeting.
Please mark
/X/ your vote
as this.
- ----------------- ---------------- ------------
RSOP PREFERRED RSOP COMMON DCSP COMMON
1. ELECTION OF DIRECTORS For all WITHHOLD AUTHORITY
nominees for all nominees
Nominees: Mr. Dreier /_/ /_/
Mr. Brewster
Mr. Flick
Mr. Gaw INSTRUCTION: To withhold authority
Mr. Harlan to vote for any individual nominee,
Mr. Heist write that nominee's name in the
Mr. Jews space provided below.
Mr. Kagler -----------------------------------
Mr. Mullin
Mr. Wilson
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.
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 your full title as such.
-------------------------------------
-------------------------------------
Signature
Date: ------------------------, 1995.
Please sign, date and return this proxy promptly in the enclosed
postage paid envelope.
<PAGE>
THE RYLAND GROUP, INC.
Proxy Solicited on Behalf of the Board of Directors
Annual Meeting of Stockholders - April 19, 1995
The undersigned stockholder of The Ryland Group, Inc. (the Corporation),
acknowledges receipt of the Proxy Statement and Notice of Annual Meeting
of Stockholders, dated March 10, 1995, and hereby constitutes and appoints
R. CHAD DREIER, Chairman of the Board of Directors and ROBERT J. GAW,
Executive Vice President of the Corporation and President of Ryland Mortgage
Company, 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 19, 1995, at 9:30 A.M., Eastern
Daylight Time, and at any adjournments thereof.
(Continued and to be signed on reverse side)
<PAGE>
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 such other business as may properly come before
the meeting.
Please mark
/X/ your vote
as this.
- ----------------- --------------
REGISTERED SHARES ESPP SHARES
1. ELECTION OF DIRECTORS FOR all WITHHOLD AUTHORITY
nominees for all nominees
Nominees: Mr. Dreier /_/ /_/
Mr. Brewster
Mr. Flick
Mr. Gaw INSTRUCTION: To withhold authority
Mr. Harlan to vote for any individual nominee,
Mr. Heist write that nominee's name in the
Mr. Jews space provided below.
Mr. Kagler -
Mr. Mullin
Mr. Wilson
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.
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 your full title as such.
-------------------------------------
-------------------------------------
Signature(s)
Date: ------------------------, 1995.
Please sign, date and return this proxy promptly in the enclosed
postage paid envelope.
