<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 17, 1996, at 9:00 a.m., Eastern Daylight Time, for the following
purposes:
1. To elect 10 directors to serve until the next Annual Meeting of
Stockholders and until their successors are elected and shall qualify;
2. To ratify the selection of independent public accountants for the
Corporation; 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 19, 1996, 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
/s/ David Lesser
- ----------------
David Lesser
Secretary
March 15, 1996
<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 17, 1996. This Proxy Statement and proxy are first being
distributed to stockholders on approximately March 15, 1996. The Annual
Report of the Corporation for the year ended December 31, 1995, 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 vote with respect to
the ratification of the selection of independent public accountants,
abstentions are counted as negative votes and broker non-votes are not
counted.
The Corporation may solicit proxies by mail, personal interview, telephone 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 19, 1996, 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 15,688,508 shares of Common Stock
outstanding as of the close of business on February 19, 1996. There were
939,172 shares of Preferred Stock outstanding as of the close of business on
February 19, 1996. Neither Common Stock nor Preferred Stock have cumulative
voting rights. Holders of Common Stock and Preferred Stock are entitled to
one vote per share on all matters.
ELECTION OF DIRECTORS
All Directors (10 in number) are proposed to be elected to hold office until
the next Annual Meeting of Stockholders and until the election and
qualification of their successors. The proxies solicited 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 Principal Occupation for Five
a Director Prior Years and Other Information
- ------------- ---------------------------------
<S> <C>
R. Chad Dreier Chairman of the Board of Directors of the
48 (1993) 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.
James A. Flick, Jr. President, Chief Executive Officer and Director
61 (1990) of Dome Corporation (real estate development
and management services) since 1994; 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; Capital One Financial
Corporation; and Bethlehem Steel Credit Affiliates.
Robert J. Gaw Retired as Executive Vice President of the
62 (1967) Corporation and President of Ryland Mortgage
Company in January 1996. Director of Health
Services, Inc.; Mac-O-Cheek Farm, Inc.; and
Columbia Bank.
Leonard M. Harlan President of Castle Harlan, Inc. (private merchant-
59 (1984) banking firm); President of Castle Harlan Partners
II, G.P., Inc. (corporate buyout fund); General
Partner of Legend Capital Group, L.P. (corporate
buyout fund); Director of Smarte Carte Corporation;
MAG Aerospace Industries, Inc.; and
Strawberries, Inc.
L.C. Heist President, Chief Operating Officer and Director of
64 (1989) Champion International Corporation (forest
products); Director of The Lyman Farm, Inc.
William L. Jews President and Chief Executive Officer of Blue Cross
44 (1994) Blue Shield of Maryland, Inc. since 1993; President
and Chief Executive Officer of Dimensions Health
Care from 1990 until 1993; Director of Crown
Central Petroleum Corp.; NationsBank, Inc.; and The
Shelter Advisory Group.
William G. Kagler Chairman of the Executive Committee and member of
63 (1985) the Board of Directors of Skyline Chili, Inc. from
1994 until 1995; 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 Bankcorp, Union
Central Life Insurance Co. and Grand Union Co.
John H. Mullin, III Chairman of Ridgeway Farm, Inc. (wholesale
54 (1982) nursery); Director of The Liberty Corp.; Dillon,
(Note 1) Read & Co. Inc.; and ACX Technologies, Inc.
Charlotte St. Martin Executive Vice President of Operations and
50 (1996) Marketing of Loews Hotels; President and Chief
Executive Officer of Loews Anatole Hotel from 1989
until 1995; Director of Gibson Greetings, Inc.
John O. Wilson Executive Vice President and Chief Economist of
57 (1987) Bank of America Corporation.
<FN>
(1) Dillon, Read & Co. Inc. provided financial advisory services for the
Corporation during 1995 and is expected to provide such services in 1996.
</FN>
</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 19, 1996,
were:
<TABLE>
<CAPTION>
Amount and Nature Percent
Name and Address of Beneficial Ownership of Class
- ---------------- ----------------------- --------
<S> <C> <C>
Invesco PLC and 1,891,800 (1) 12.06
Invesco Capital Management, Inc.
11 Devonshire Square
London EC2M 4YR
England
Wellington Management Company 1,791,900 (2) 11.42
75 State Street
Boston, MA 02109
FMR Corp. 1,524,300 (3) 9.72
82 Devonshire Street
Boston, MA 02109
<FN>
(1) According to Schedule 13G dated February 2, 1996, 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 31, 1996, filed with the
Securities and Exchange Commission, 541,800 of these shares are owned with
shared voting power and 1,791,900 of these shares are owned with shared
dispositive power. According to Schedule 13G dated February 2, 1996, filed
with the Securities and Exchange Commission, 925,200 of these shares are owned
by Vanguard/Windsor Fund, Inc., with shared dispositive power.
(3) According to Schedule 13G dated February 14, 1996, filed with the
Securities and Exchange Commission, 108,900 of these shares are owned with
sole voting power and all of these shares are owned with sole dispositive
power.
</FN>
</TABLE>
The Corporation's Retirement and Stock Ownership Plan is the beneficial owner
of 939,172 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.
<PAGE>
The following table sets forth, as of February 19, 1996, 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, nominees and executive
officers as a group:
<TABLE>
<CAPTION>
Number of Shares
Name Beneficially Owned (1)
- ------------------- ----------------------
<S> <C>
R. Chad Dreier 181,130
Andre' W. Brewster 97,380 (2)
James A. Flick, Jr. 6,530
Robert J. Gaw 216,704 (3)
Leonard M. Harlan 3,380
L. C. Heist 9,880
William L. Jews 2,500
William G. Kagler 12,380
John H. Mullin, III 35,980 (4)
Charlotte St. Martin 0 (5)
John O. Wilson 6,380
Michael D. Mangan 17,673
Michael C. Brown 14,866
J. Sidney Davenport 92,682
Directors and executive officers
as a group (21 persons) 837,680
<FN>
(1) With the exception of Messrs. Dreier and Gaw, no other Director, nominee
or executive officer beneficially owns more than 1 percent of the
Corporation's outstanding Common Stock. Mr. Dreier beneficially owns 1.2
percent of the outstanding Common Stock of the Corporation, and Mr. Gaw
beneficially owns 1.4 percent of the outstanding Common Stock of the
Corporation. Directors, nominees and executive officers as a group
beneficially own 5.3 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.
Includes shares subject to stock options which may be exercised within 60 days
of February 19, 1996, as follows: Mr. Dreier, 89,100 shares; Mr. Brewster,
62,380 shares; Mr. Flick, 2,380 shares; Mr. Gaw, 118,500 shares; Mr. Harlan,
2,380 shares; Mr. Heist, 2,380 shares; Mr. Jews, 2,000 shares; Mr. Kagler,
2,380 shares; Mr. Mullin, 2,380 shares; Mr. Wilson, 2,380 shares; Mr. Mangan,
14,850 shares; Mr. Brown, 12,202 shares; Mr. Davenport, 43,558 shares; and
Directors and executive officers as a group, 467,604 shares.
Includes shares subject to restricted stock units as follows: Mr. Dreier,
52,984 shares; Mr. Gaw, 4,312 shares; Mr. Mangan, 1,787 shares; Mr. Brown,
1,291 shares; Mr. Davenport, 2,141 shares; and executive officers as a group,
72,745 shares.
Does not include shares of ESOP Series A Convertible Preferred Stock which
have been allocated to participants' accounts under the Corporation's
Retirement and Stock Ownership Plan as follows: Mr. Dreier, 142 shares; Mr.
Mangan, 166 shares; Mr. Brown, 1,224 shares; Mr. Davenport, 2,065 shares; and
executive officers as a group, 8,140 shares.
(2) In accordance with the Corporation's bylaws, Mr. Brewster is not standing
for re-election, as he attained the age of 70 prior to the 1996 Annual Meeting
of Stockholders. Does not include 3,200 shares owned by Mr. Brewster's wife,
as to which he disclaims beneficial ownership.
(3) Does not include 1,000 shares owned by the Gaw Investment Group, as to
which Mr. Gaw disclaims beneficial ownership.
(4) Does not include 5,000 shares held in the John H. Mullin, Jr. Trust, of
which Mr. Mullin is co-trustee, nor 2,500 shares held in Pierrepont Partners,
of which Mr. Mullin is a partner, both of which are for the benefit of his
children. Does not include 2,500 shares owned by Mr. Mullin's wife, as to
which he disclaims beneficial ownership.
(5) Ms. St. Martin was elected to the Board of Directors on February 21,
1996.
</FN>
</TABLE>
<PAGE>
INFORMATION CONCERNING THE BOARD OF DIRECTORS
During 1995, the Board of Directors held seven 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 1995 with the exception of Mr. Kagler. 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, Jews and Kagler. 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
1995, four meetings of the Audit Committee were held.
The Compensation Committee of the Board of Directors determines or recommends
the amount and form of compensation awarded to executive officers and key
employees of the Corporation as well as awards and distributions under the
Corporation's various employee compensation plans. Messrs. Flick, Heist, Jews
and Kagler serve as its members. During 1995, the Compensation Committee held
three 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 1995.
The Nominating Committee is responsible for recommending to the Board of
Directors candidates to fill vacancies on the Board and making recommendations
with respect to the composition of the committees of the Board. Messrs.
Brewster, Flick, and Harlan are the members of the Nominating Committee, which
held seven meetings during 1995. The Nominating Committee will consider
nominees suggested by stockholders for election to the Board of Directors.
Recommendations by stockholders should be forwarded to the Secretary of the
Corporation and should identify the nominee by name and provide information
about the nominee's background and experience.
COMPENSATION OF DIRECTORS
Each Director who is not an employee receives an annual fee of $19,500. Each
non-employee Director is paid an additional $1,000 for each meeting attended
of the Board of Directors and of committees of the Board of Directors of which
he or she is a member. A Director may elect to have all or any part of his or
her 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. Directors who are also employees of the
Corporation receive no additional compensation for their service on the Board
of Directors.
The Corporation maintains a Non-Employee Director Equity Plan pursuant to
which non-employee Directors receive stock options. On December 31, 1995, the
Corporation granted each non-employee Director an option to purchase 1,000
shares of Common Stock at an exercise price of $14.00 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 exercisable. Options are not
exercisable after 10 years from the date of grant or three years after the
date of termination of service on the Board of Directors regardless of their
stated expiration dates.
During 1995, the Corporation donated $5,000 to charitable organizations
designated by each Director.
<PAGE>
1995 COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is comprised of four independent, non-employee
directors. The Compensation Committee approves the design of, assesses the
effectiveness of, and administers executive compensation programs in support
of stockholder interests. The Compensation Committee also reviews and
approves all salary arrangements and other compensation for executive
officers, including the Chief Executive Officer, evaluates executive
performance and considers related matters.
The Corporation's mission is to become a leader in the homebuilding industry,
optimize the strength of its mortgage operations and maximize stockholder
value. To accomplish these objectives, the Corporation is pursuing a
comprehensive business strategy that emphasizes earnings per share and return
on stockholders' equity. The Compensation Committee is committed to
implementing a compensation program which furthers the Corporation's mission.
This program adheres to the following compensation policies which are intended
to facilitate the achievement of the Corporation's business strategies:
All executive officers', including the Chief Executive Officer's,
compensation programs should emphasize the relationship between pay and
performance by including variable, at-risk compensation that is dependent upon
the level of success in meeting specified financial and operational goals.
A significant portion of total compensation should be comprised of equity-
based pay opportunities. Encouraging a personal proprietary interest provides
a close identification with the Corporation and aligns executive officers'
interests with those of stockholders. This promotes a continuing focus on
building profitability and stockholder value.
Compensation opportunities should enhance the Corporation's ability to
attract, retain and encourage the development of exceptionally knowledgeable
and experienced executives upon whom the successful operation and management
of the Corporation depend.
Components of Compensation
The Compensation Committee relates total compensation levels for the
Corporation's Chief Executive Officer and other executive officers to the
compensation paid to executives of a peer group of companies. This peer group
is comprised of large national homebuilding companies. 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 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.
Base Salary
The Compensation Committee regularly reviews each executive's base salary.
Base salaries are targeted at median competitive levels and are adjusted by
the Compensation Committee to recognize varying levels of responsibility,
experience and breadth of knowledge, internal equity issues, as well as
external pay practices. Increases to base salaries are driven primarily by
individual performance. Individual performance is evaluated based on the
Compensation Committee's judgment of sustained levels of individual
contribution to the Corporation.
Effective December 25, 1995, Mr. Dreier, Chairman of the Board of Directors,
President and Chief Executive Officer of the Corporation, received a 5 percent
increase in base salary from $600,000 to $630,000 in recognition of the
progress made by the Corporation during 1995 to strengthen its financial
condition and position it for improved profitability.
<PAGE>
Annual Incentives
The annual incentive program promotes the Corporation's pay-for-performance
philosophy by providing the Chief Executive Officer and other executive
officers with direct financial incentives in the form of annual cash bonuses
to achieve corporate, business unit and, in some cases, individual performance
goals. Annual bonus opportunities allow the Corporation to communicate
specific goals that are of primary importance during the coming year and to
motivate executives to achieve these goals.
Bonus opportunities are set at median competitive levels for the peer group of
companies. The various bonus plans are designed to incent and reward above-
average performance from the executives and their business units. For 1995,
the Compensation Committee did not adjust any executive officer's annual
incentive payout based on a subjective judgment of executive performance.
Under the terms of his employment agreement, Mr. Dreier is eligible for an
annual bonus each year during the term of this agreement equal to 0.75 percent
of the consolidated pretax income of the Corporation, as adjusted by the
Compensation Committee to eliminate the effect of unusual items. See
"Employment Agreements" on page 12 of this Proxy Statement. Although the
Corporation reported a loss for 1995, for purposes of calculating Mr. Dreier's
1995 bonus, the Compensation Committee determined that it was appropriate to
exclude the impact of a fourth-quarter non-cash charge primarily related to
the early adoption of an accounting pronouncement and the impact of the
second-quarter sale of the Corporation's institutional mortgage-securities
administration business, and to include an amount representing an estimate of
what the institutional mortgage-securities administration business would have
earned in the third and fourth quarters of 1995 had it not been sold.
Eligible executives on the corporate staff and at Ryland Mortgage Company are
assigned maximum bonus levels ranging from 50 to 100 percent of base salary.
Bonuses are earned based on the extent to which pretax income goals
established at the beginning of the year are achieved. Executives in the
Corporation's homebuilding operations receive bonuses based on a percentage of
the pretax earnings of their business units, with no minimum or maximum bonus
amounts.
The Corporation also has 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
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 the time of payment. For 1995, the predetermined goals were
not met, and no deferred bonuses were earned.
Long-Term Incentives
In keeping with the Corporation's commitment to provide a total compensation
package which includes at-risk components, long-term incentive compensation
comprises a significant portion of the value of an executive's total
compensation package.
When awarding long-term incentives, the Compensation Committee considers an
executive's level of responsibility, prior compensation experience, historical
award data, individual performance criteria and the compensation practices at
peer group companies. Long-term incentives are in the form of stock options,
restricted stock units and cash.
Stock Options
Stock options are granted at an option price which is the fair market value of
the Common Stock on the date of grant. Accordingly, stock options have value
only if the stock price appreciates. This design focuses executives on the
creation of stockholder value over the long term. The size of the award can
be adjusted based on individual factors and historical award data.
On January 3, 1995, Mr. Dreier received options to purchase 40,000 shares of
the Common Stock of the Corporation at an exercise price of $15.00 per share.
This size of the stock option grant was determined based on median competitive
levels for other chief executive officers of peer group companies.
TRG Incentive Plan
The TRG Incentive Plan provides for awards of cash and restricted stock units
based on the Corporation's financial performance during the year. Each year,
the Compensation Committee establishes maximum award levels for each executive
officer based upon a percentage of the executive's base salary. Executives
earn restricted stock units and cash based on the extent to which pre-
established financial goals are achieved by the Corporation. Awards are
payable one-half in restricted stock units and one-half in cash, with vesting
occurring over three years (including the one-year performance period).
<PAGE>
Adopted in 1995, the TRG Incentive Plan replaced the Corporation's Long-Term
Retirement and Incentive Plan (the "LTRIP"). The LTRIP combined elements of a
long-term incentive program with those of a retirement program by vesting
stock and cash awards over five years and deferring the payment of cash awards
until the executive's separation from the Corporation. The Compensation
Committee believed that the cross purposes of the LTRIP created confusion over
the intended objectives and benefits of the plan. Consequently, when it
adopted the TRG Incentive Plan, the Compensation Committee shortened the
payout period for both cash and restricted stock unit awards to three years,
but retained the other features of the LTRIP. The Compensation Committee
believes that the TRG Incentive Plan provides executives with an immediate
link to the interest of stockholders, focuses them on company-wide performance
and provides incentives that are longer-term than annual bonuses but less
remote than retirement benefits. The Compensation Committee believes that the
TRG Incentive Plan will enhance the Corporation's ability to maintain a stable
executive team focused on the Corporation's long-term success.
For 1995, the Compensation Committee designated return on stockholders' equity
as the performance measure for purposes of the TRG Incentive Plan. Since the
Corporation reported a loss for 1995, including a $27 million after-tax non-
cash charge primarily related to the early adoption of an accounting
pronouncement, the financial goals for 1995 were not met. However, in view of
the non-cash and unusual nature of the charge, the Compensation Committee
determined that TRG Incentive Plan awards for 1995 would be paid at 32.3
percent, or one-half of what they would have been had the charge not been
taken in 1995.
A maximum award value of 100 percent of base salary was established by the
Compensation Committee for Mr. Dreier for 1995. Based upon the Corporation's
performance in 1995 (adjusted as described above for the non-cash charge), Mr.
Dreier received an award of restricted stock units and cash valued at $193,680
or 32.3 percent of base salary.
Retirement Plans
The Corporation does not sponsor a defined benefit retirement plan but does
provide executives with the ability to accumulate retirement assets through
defined contribution plans. Executive officers participate in the
Corporation's Retirement and Stock Ownership Plan up to the statutory limits.
Because of these statutory limits, the Corporation also offers executive
officers the ability to defer additional pay and receive corresponding
company-matching contributions through the Deferred Compensation Savings Plan.
The Salary Deferral Plan also enables executives to defer receipt of salary
and annual bonus, but without company-matching contributions. Earnings
credited to deferrals under the Salary Deferral Plan are based on the
Corporation's previous year's return on stockholders' equity.
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 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.
The Compensation Committee will continue to monitor the effectiveness of the
Corporation's total compensation program to meet the current and future needs
of the Corporation.
Compensation Committee of the Board of Directors
L.C. Heist, Chairman
James A. Flick, Jr.
William L. Jews
William G. Kagler
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
---------------------------------
Other
Annual
Name and Principal Position Year Salary Bonus(e) Compensation(f)
- --------------------------- ---- ------ -------- ---------------
<S> <C> <C> <C> <C>
Mr. Dreier -
Chairman of the Board 1995 $600,000 $166,577 $ 6,082
of Directors, 1994 $450,000 $321,750 $ 13,489
President and 1993 $ 30,768 $ 0 $ 41,231
Chief Executive
Officer of
The Ryland Group, Inc. (a)
Mr. Gaw -
Former Executive 1995 $365,000 $277,793 $ 0
Vice President of 1994 $351,923 $353,004 $ 0
The Ryland Group, Inc.; 1993 $340,283 $147,375 $ 0
Former President of
Ryland Mortgage Company (b)
Mr. Mangan -
Executive Vice President 1995 $275,000 $73,666 $195,814
and Chief Financial 1994 $ 21,152 $13,737 $ 819
Officer of
The Ryland Group, Inc. (c)
Mr. Brown -
President of Ryland 1995 $152,605 $369,000 $ 0
Mortgage Company (d)
Mr. Davenport -
Vice President of 1995 $245,000 $224,385 $ 0
The Ryland Group, Inc.; 1994 $231,923 $257,198 $ 0
Executive Vice President 1993 $219,615 $164,000 $ 0
President of
Ryland Mortgage Company
</TABLE>
<TABLE>
<CAPTION>
Long-Term Compensation
----------------------------------
Awards Payouts
----------------------- -------
Restricted Securities All Other
Name and Stock Underlying LTRIP Compen-
Principal Position Year Awards(g) Options/SARS Payouts(h) sation (i)
- ------------------- ---- ------ ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Mr. Dreier -
Chairman of the Board 1995 $ 64,554 40,000 $ 0 $124,618
of Directors, 1994 $ 151,695 30,000 $ 0 $179,411
President and 1993 $1,471,875 100,000 $ 0 $110,003
Chief Executive
Officer of
The Ryland Group, Inc.(a)
Mr. Gaw -
Former Executive 1995 $ 31,416 20,000 $ 0 $ 74,523
Vice President of 1994 $ 93,045 15,000 $ 0 $121,032
The Ryland Group, Inc.; 1993 $ 0 4,500 $520,575 $ 38,900
Former President of
Ryland Mortgage Company (b)
Mr. Mangan -
Executive Vice President 1995 $ 23,674 20,000 $ 0 $166,715
and Chief Financial 1994 $ 4,305 25,000 $ 0 $ 6,251
Officer of
The Ryland Group, Inc. (c)
Mr. Brown -
President of Ryland 1995 $ 9,898 20,000 $ 0 $ 26,978
Mortgage Company (d)
Mr. Davenport -
Vice President of 1995 $ 15,806 10,000 $ 0 $ 49,546
The Ryland Group, Inc.; 1994 $ 45,510 10,000 $ 0 $ 67,742
Executive Vice 1993 $ 0 1,300 $300,577 $ 25,189
President of
Ryland Mortgage Company
<FN>
(a) Mr. Dreier joined the Corporation in November 1993. In December 1994,
the Corporation entered into an employment agreement with Mr. Dreier, the
terms of which are discussed under "Employment Agreements" on page 12 of this
Proxy Statement.
(b) Mr. Gaw retired from the Corporation effective January 7, 1996.
(c) Mr. Mangan joined the Corporation in November 1994. In September 1995,
the Corporation entered into an employment agreement with Mr. Mangan, the
terms of which are discussed under "Employment Agreements" on page 12 of this
Proxy Statement.
(d) Mr. Brown was elected President of Ryland Mortgage Company in January
1996. Prior to his election, Mr. Brown held the offices of Senior Vice
President and Chief Operating Officer of Ryland Mortgage Company.
(e) Includes performance bonuses for 1995, 1994 and 1993 which were paid in
1996, 1995 and 1994, respectively. For 1995, Mr. Dreier earned $102,030, Mr.
Gaw earned $246,375, Mr. Mangan earned $50,000, Mr. Brown earned $139,093 and
Mr. Davenport earned $158,564.
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. These amounts are included in the amounts
reported for 1994. No deferred bonuses were earned in 1995.
Includes the dollar value of the vested portion (33 1/3 percent) of cash and
restricted stock unit awards for 1995 under the TRG Incentive Plan which were
paid in 1996 as follows: Mr. Dreier - $64,547; Mr. Gaw - $31,418; Mr. Mangan
- - $23,666; Mr. Brown - $9,907; and Mr. Davenport - $15,821.
Mr. Brown and Mr. Davenport were paid bonuses of $220,000 and $50,000,
respectively, in connection with the successful sale of the institutional
mortgage-securities administration business of Ryland Mortgage Company.
(f) The Corporation reimbursed Mr. Dreier for Medicaid taxes paid on the
restricted stock units released to him in November 1995 and 1994. The
amounts, including gross-up adjustments, were $6,082 in 1995 and $6,637 in
1994. Amounts for 1995 and 1994 include gross-up adjustments for taxes on
reimbursements for relocation expenses (see Note i) as follows: Mr. Dreier
1994 - $6,852, 1993 - $41,231; Mr. Mangan 1995 - $45,814, 1994 - $819. Mr.
Mangan was paid a one-time sign-on bonus of $150,000 in 1995 to compensate him
for benefits that were lost when he resigned from his previous employment to
join Ryland.
(g) Amounts for 1995 include 66 2/3 percent of the restricted stock units
awarded under the TRG Incentive Plan; the remaining 33 1/3 percent of the 1995
award was paid out in early 1996 and, together with 33 1/3 percent of the cash
award for 1995, is reported as "Bonus" for 1995. The value of the restricted
stock units for 1995 was based upon the $14.00 closing price of the
Corporation's Common Stock on December 31, 1995. The restricted stock units
awarded for 1995 under the TRG Incentive Plan vest one-third per year over
three years (including 1995). Amounts reported for 1994 include 100 percent
of the restricted stock units awarded under the Long-Term Retirement and
Incentive Plan ("LTRIP") for 1994. The value of the restricted stock units
awarded for 1994 was based upon the $15.00 closing price of the Corporation's
Common Stock on December 31, 1994. In 1995, the Compensation Committee
amended the LTRIP to shorten the vesting and payout period for 1994 awards to
three years. As a result, 66 2/3 percent of the 1994 award was paid out in
early 1996, and the remaining 33 1/3 percent will be paid out in early 1997.
Under both the LTRIP and the TRG Incentive Plan, following the end of each
year, the Corporation distributes shares of Common Stock equal to the number
of vested restricted stock units at which time these shares are considered
fully paid. Participants in the LTRIP and the TRG Incentive Plan 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.
</FN>
</TABLE>
<PAGE>
Mr. Dreier was awarded 75,000 restricted stock units upon his employment by
the Corporation in 1993. The value of the restricted stock units, which is
included as 1993 compensation, 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, 1995, the total number and value of all restricted stock units
were as follows: Mr. Dreier - 59,724 units, $836,136; Mr. Gaw - 13,210 units,
$184,940; Mr. Mangan - 1,978 units, $27,692; Mr. Brown - 2,851 units, $39,914;
and Mr. Davenport - 6,399 units, $89,586.
(h) 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. In 1993, Mr. Gaw received $8,971 under the 1979 Compensation Unit Plan
and $511,604 under the 1985 Compensation Unit Plan, and Mr. Davenport received
$300,577 under the 1985 Compensation Unit Plan.
(i) Amounts in this column represent the Corporation's contributions to the
Retirement and Stock Ownership Plan and the Deferred Compensation Savings
Plan: Mr. Dreier 1995 - $55,166, 1994 - $8,399; Mr. Gaw 1995 - $34,847, 1994
- - $27,081, 1993 - $38,090; Mr. Mangan 1995 - $17,325; Mr. Brown 1995 -
$16,513; and Mr. Davenport 1995 - $28,303, 1994 - $21,879, 1993 - $24,923;
interest earned on balances in the Corporation's Salary Deferral Plan, at a
rate in excess of 120 percent of the applicable federal rate: Mr. Dreier 1995
- - $2,298; Mr. Gaw 1995 - $4,433; and Mr. Davenport 1995 - $3,751; the value of
term life insurance paid under the Corporation's split dollar life insurance
plan: Mr. Dreier 1995 - $505, 1994 - $236; Mr. Gaw 1995 - $1,034, 1994 -
$906, 1993 - $810; Mr. Mangan 1995 - $96; Mr. Brown 1995 - $78; and Mr.
Davenport 1995 - $334, 1994 - $351, 1993 - $266; the full amount of cash
awards for 1994 under the LTRIP and 66 2/3 percent of the 1995 cash awards
under the TRG Incentive Plan: Mr. Dreier 1995 - $64,579, 1994 - $151,713; Mr.
Gaw 1995 - $31,424, 1994 - $93,045; Mr. Mangan 1995 - $23,676, 1994 - $4,331;
Mr. Brown 1995 - $9,903; and Mr. Davenport 1995 - $15,825, 1994 - $45,512;
interest earned on cash awards under the LTRIP, at a rate in excess of 120
percent of the applicable federal rate: Mr. Dreier 1995 - $2,070; Mr. Gaw
1995 - $2,785; Mr. Mangan 1995 - $60; Mr. Brown 1995 - $484; and Mr. Davenport
1995 - $1,333; and reimbursements for relocation expenses: Mr. Dreier 1994 -
$19,063, 1993 - $110,003; and Mr. Mangan 1995 - $125,558, 1994 - $1,920.
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 written notice given at least 180 days
prior to the end of such initial period or successive term. 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 at least
$600,000 per year and is eligible for an annual cash bonus equal to 0.75
percent of the consolidated pretax income of the Corporation, as adjusted by
the Compensation Committee to eliminate the effect of nonrecurring gains and
losses and other items not reflective of the ongoing ordinary course of
business operating performance of the Corporation. If Mr. Dreier's employment
were terminated by the Corporation without "cause," as defined in the
agreement, Mr. Dreier would 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 a "qualifying termination" of Mr.
Dreier during a "change-in-control period," as defined in the agreement, he
would 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 September 1995, the Corporation entered into an employment agreement with
Mr. Mangan for an initial period of three years beginning September 18, 1995.
The agreement provides for one-year extensions subject to the right of either
party to terminate the agreement upon written notice delivered at least three
months prior to the end of such initial period or successive term. 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. Mangan will receive a
base salary of at least $275,000 per year and an annual targeted cash bonus
opportunity of not less than 75 percent of his base salary, with a $50,000
bonus guaranteed for 1995. If Mr. Mangan's employment were terminated by the
Corporation without "cause," as defined in the agreement, he would receive his
salary and benefits for the remaining term of the agreement or 18 months,
whichever is greater, as well as a prorated bonus payment and prorata vesting
under the LTRIP and the TRG Incentive Plan. In the event of a "qualifying
termination" of Mr. Mangan during a "change-in-control period," as defined in
the agreement, he would receive a payment equal to three times his highest
annual base salary plus three times the higher of his prior year's bonus or
the average annual bonus for the prior three years.
The Corporation has a senior executive severance agreement with Mr. Davenport
pursuant to which he would be entitled to receive a lump sum cash payment
representing one and one-half times the highest annual compensation paid
during the three years prior to termination of employment and accelerated
vesting under incentive compensation, stock option and benefit plans of the
Corporation upon termination of employment within two years after a "change in
control" of the Corporation, as defined in the agreement.
<PAGE>
STOCK OPTION GRANTS IN 1995
<TABLE>
<CAPTION>
Number of Percent of Total Exercise
Securities Underlying Options Granted to Price
Name Options Granted (a) Employees in 1995 ($/Share)
- ------------ --------------------- ------------------ ---------
<S> <C> <C> <C>
Mr. Dreier 40,000 6.5 $15.00
Mr. Gaw 20,000 3.2 $15.00
Mr. Mangan 20,000 3.2 $15.00
Mr. Brown 10,000 1.6 $15.00
10,000 1.6 $14.00
Mr. Davenport 10,000 1.6 $15.00
<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.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation
for 10-Year Option Term
Expiration
Name Date 5% 10%
- ------------- ---------- ---------- ----------
<S> <C> <C> <C>
Mr. Dreier 1/3/05 $377,337 $956,245
Mr. Gaw 1/3/05 $188,668 $478,123
Mr. Mangan 1/3/05 $188,668 $478,123
Mr. Brown 1/3/05 $ 94,334 $239,061
12/29/05 $ 88,045 $223,124
Mr. Davenport 1/3/05 $ 94,334 $239,061
</TABLE>
AGGREGATED STOCK OPTION EXERCISES IN 1995
AND YEAR-END STOCK OPTION VALUES
<TABLE>
<CAPTION>
Shares Acquired Value
Name on Exercise Realized (a)
- ------------- --------------- ------------
<S> <C> <C>
Mr. Dreier 0 $ 0
Mr. Gaw 12,000 $39,750
Mr. Mangan 0 $ 0
Mr. Brown 0 $ 0
Mr. Davenport 4,000 $15,250
<FN>
(a) Market price at exercise less exercise price.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Year End at Year End
--------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Mr. Dreier 75,900 94,100 $ 0 $ 0
Mr. Gaw 86,920 31,580 $ 0 $ 0
Mr. Mangan 8,250 36,750 $4,125 $8,375
Mr. Brown 8,902 26,938 $ 0 $ 0
Mr. Davenport 40,258 17,142 $ 0 $ 0
</TABLE>
<PAGE>
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.
<TABLE>
<CAPTION>
Ryland S & P 500 Dow Home
Year ended December 31,
<S> <C> <C> <C>
1990 (a) $100 $100 $100
1991 149 130 174
1992 137 140 224
1993 136 154 285
1994 106 156 194
1995 103 213 288
<FN>
(a) Assumes that the value of the Common Stock of the Corporation and the
Indices were $100 on January 1, 1991, and that all dividends were reinvested.
</FN>
</TABLE>
<PAGE>
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 1996. 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 14, 1996, 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 1997 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>
PARTICIPANT INSTRUCTION CARD
THE RYLAND GROUP, INC.
Participant Proxy Solicited on Behalf of the Board of Directors
Annual Meeting of Stockholders - April 17, 1996
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 15, 1996, 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 17, 1996, at 9:00
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 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 your votes as indicated in this example /X/
1. ELECTION OF DIRECTORS FOR all WITHHOLD AUTHORITY
nominees for all nominees
/ / / /
Nominees: Mr. Dreier, Mr. Flick, Mr. Gaw
Mr. Harlan, Mr. Heist, Mr. Jews, Mr. Kagler,
Mr. Mullin, Ms. St. Martin, Mr. Wilson
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.
- ---------------------------------------
2. Ratification of selection of Ernst & Young LLP as the independent public
accountants for the Corporation.
FOR AGAINST ABSTAIN
/ / / / / /
3. In their discretion upon such other business as may properly come before
the meeting.
Please sign, date and return this proxy promptly in the enclosed postage paid
envelope.
Signature Signature Date
---------------------- --------------------- ------------
NOTE: Please sign your name exactly as it appears hereon. If stock is
registered in more than one name, each joint owner must sign. When signing as
attorney, executor, administrator, guardian or corporate officer, please give
you full title as such.
<PAGE>
THE RYLAND GROUP, INC.
Proxy Solicited on Behalf of the Board of Directors
Annual Meeting of Stockholders - April 17, 1996
The undersigned stockholder in The Ryland Group, Inc. (the "Corporation"),
acknowledges receipt of the Proxy Statement and Notice of Annual Meeting of
Stockholders, dated March 15, 1996, and hereby constitutes and appoints R.
CHAD DREIER, Chairman of the Board of Directors, and ROBERT J. GAW, and each
of them, as true and lawful proxies with full power of substitution, to vote
all shares which the undersigned may be entitled to vote at the Annual Meeting
of Stockholders of the Corporation to be held at Ryland's corporate
headquarters, 4th Floor, 11000 Broken Land Parkway, Columbia, Maryland, on
Wednesday, April 17, 1996, at 9:00 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 your votes as indicated in this example /X/
1. ELECTION OF DIRECTORS FOR all WITHHOLD AUTHORITY
nominees for all nominees
/ / / /
Nominees: Mr. Dreier, Mr. Flick, Mr. Gaw
Mr. Harlan, Mr. Heist, Mr. Jews, Mr. Kagler,
Mr. Mullin, Ms. St. Martin, Mr. Wilson
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.
- ---------------------------------------
2. Ratification of selection of Ernst & Young LLP as the independent public
accountants for the Corporation.
FOR AGAINST ABSTAIN
/ / / / / /
3. In their discretion upon such other business as may properly come before
the meeting.
Please sign, date and return this proxy promptly in the enclosed postage paid
envelope.
Signature Signature Date
---------------------- --------------------- ------------
NOTE: Please sign your name exactly as it appears hereon. If stock is
registered in more than one name, each joint owner must sign. When signing as
attorney, executor, administrator, guardian or corporate officer, please give
you full title as such.
