SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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/ / Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
THE RYLAND GROUP, INC.
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(Name of Registrant as Specified in Charter)
THE RYLAND GROUP, INC.
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THE RYLAND GROUP, INC.
11000 Broken Land Parkway
Columbia, Maryland 21044
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders:
Notice is given that the Annual Meeting of Stockholders of The Ryland Group,
Inc. will be held at Ryland's corporate headquarters, Fourth Floor, 11000
Broken Land Parkway, Columbia, Maryland, on April 29, 1998, at 9:00 a.m.,
Eastern Daylight Time, for the following purposes:
1. To elect nine directors to serve until the next Annual Meeting of
Stockholders and until their successors are elected and shall qualify.
2. To act upon other business properly brought before the meeting.
Stockholders of record at the close of business on February 18, 1998, are
entitled to vote at the meeting or any adjournment thereof. Please date and
sign the enclosed proxy and return it in the accompanying postage-paid return
envelope. You may revoke your proxy at any time prior to its exercise by
filing with the Secretary of the Corporation an instrument of revocation or a
duly executed proxy bearing a later date. Your proxy may also be revoked by
attending the meeting and voting in person.
By Order of the Board of Directors
/s/Timothy J. Geckle
Timothy J. Geckle
Secretary
March 10, 1998
PROXY STATEMENT
The enclosed proxy is being solicited by The Ryland Group, Inc. (the
"Corporation") for use at the Annual Meeting of Stockholders on April 29,
1998. This Proxy Statement and proxy are first being distributed to
stockholders on approximately March 10, 1998. The Annual Report of the
Corporation for the year ended December 31, 1997, 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 the election of Directors, abstentions and broker non-
votes are not votes cast and have no effect on the plurality vote required.
The Corporation may solicit proxies by mail, personal interview or telephone
by officers and other management employees of the Corporation, who will
receive no additional compensation for their services. The cost of
solicitation of proxies is 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 18, 1998,
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 14,790,877 shares of Common Stock
outstanding as of the close of business on February 18, 1998. There were
502,833 shares of Preferred Stock outstanding as of the close of business on
February 18, 1998. 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.
2
ELECTION OF DIRECTORS
All Directors (nine in number) are proposed for election to hold office
until the next Annual Meeting of Stockholders and until the election and
qualification of their successors. The proxies solicited, unless directed to
the contrary, will be voted FOR the nine persons named below.
Management has no reason to believe that any nominee is 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.
Name, Age and
Year in which
First Elected Principal Occupation for Five Prior Years
a Director and Other Information
- -------------- -----------------------------------------
R. Chad Dreier Chairman of the Board of Directors, President and
50 (1993) Chief Executive Officer of the Corporation;
Executive Vice President and Chief Financial Officer
of Kaufman and Broad Home Corporation until 1993.
James A. Flick, Jr. President, Chief Executive Officer and Director of
63 (1990) Dome Corporation (real estate development and
management services); Executive Vice President of
Legg Mason Wood Walker, Inc. (investment firm) until
1994; Director of Forensic Technologies
International Corporation; Capital One Financial
Corporation; Bethlehem Steel Credit Affiliates; and
Youth Services International, Inc.
Robert J. Gaw Executive Vice President of the Corporation and
64 (1967) President of Ryland Mortgage Company until 1996;
Director of Columbia Bank; Howard Business Ventures;
and Mac-O-Cheek, Inc.
Leonard M. Harlan President of Castle Harlan, Inc. (private merchant-
61 (1984) banking firm); President of Castle Harlan Partners
II, G.P., Inc. (corporate buyout fund); President of
Castle Harlan Partners III, G.P., Inc.; General
Partner of Legend Capital Group, L.P. (corporate
buyout fund); Chairman of the Harlan Company until
1996; Director of Matrix Global Investments, Inc.;
and Tradesco Molding, Ltd.
L. C. Heist President and Chief Operating Officer of Champion
66 (1989) International Corporation (forest products) until
1996; Director of Champion International
Corporation; Greenwich Bank and Trust Co.; and The
Lyman Farm, Inc.
William L. Jews President and Chief Executive Officer of CareFirst,
46 (1994) Inc.; President and Chief Executive Officer of Blue
Cross Blue Shield of Maryland, Inc., until 1998;
President and Chief Executive Officer of Dimensions
Health Care until 1993; Director of Crown Central
Petroleum Corp.; Federal Reserve Bank of Richmond;
and MuniMae.
William G. Kagler Chairman of the Executive Committee and member of
65 (1985) the Board of Directors of Skyline Chili, Inc., until
1995; Chairman of the Board of Directors and Chief
Executive Officer of Skyline Chili, Inc., until
1994; Director of Fifth Third Bankcorp and Union
Central Life Insurance Co.
Charlotte St. Martin Executive Vice President of Loews Hotels; President
52 (1996) and Chief Executive Officer of Loews Anatole Hotel
until 1995; Director of Gibson Greetings, Inc.
John O. Wilson Executive Vice President and Chief Economist of
59 (1987) Bank of America Corporation; Director of Calpine
Corporation.
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.
3
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 18, 1998,
were:
Amount and Nature
Name and Address of Beneficial Ownership Percent of Class
- ---------------- ----------------------- ----------------
The Prudential Insurance Company 1,518,525 (1) 10.3
of America
751 Broad Street
Newark, NJ 07102-3777
Tweedy, Browne Company L.P. 1,505,676 (2) 10.2
52 Vanderbilt Avenue
New York, NY 10017
Franklin Resources, Inc. 1,112,000 (3) 7.5
777 Mariners Island Boulevard
San Mateo, CA 94404
Dimensional Fund Advisors Inc. 924,764 (4) 6.3
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Barclays Global Investors, N.A. 748,721 (5) 5.1
45 Fremont Street
San Francisco, CA 94105
(1) According to Schedule 13G dated February 10, 1998, filed with the
Securities and Exchange Commission, 4,500 of these shares are owned with sole
voting and dispositive power, and 1,514,025 of these shares are owned with
shared voting and dispositive power.
(2) According to Schedule 13D dated April 11, 1997, filed with the
Securities and Exchange Commission, 1,374,780 of these shares are owned with
sole voting power, and 1,505,676 of these shares are owned with shared
dispositive power.
(3) According to Schedule 13G dated January 30, 1998, filed with the
Securities and Exchange Commission, 878,000 of these shares are owned with
sole voting power and 1,112,000 of these shares are owned with sole
dispositive power.
(4) According to Schedule 13G dated February 6, 1998, filed with the
Securities and Exchange Commission, 637,800 of these shares are owned with
sole voting power and 924,764 of these shares are owned with sole dispositive
power.
(5) According to Schedule 13G dated February 13, 1998, filed with the
Securities and Exchange Commission, 745,621 of these shares are owned with
sole voting power, and 748,721 of these shares are owned with sole dispositive
power.
The Corporation's Retirement Savings Opportunity Plan is the beneficial owner
of 502,833 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 Savings Opportunity Plan is c/o Vanguard
Fiduciary Trust Company, 100 Vanguard Boulevard, Malvern, PA 19355.
4
The following table sets forth, as of February 18, 1998, the number of shares
of Common Stock of the Corporation beneficially owned by the Directors of the
Corporation, nominees for Director, each of the executive officers named in
the Summary Compensation Table, and by the Directors and executive officers as
a group:
Number of Shares
Name Beneficially Owned (1)
- ---------------- -----------------------
R. Chad Dreier 391,684
James A. Flick, Jr. 11,750
Robert J. Gaw 142,301
Leonard M. Harlan 6,100
L. C. Heist 13,600
William L. Jews 5,000
William G. Kagler 15,100
Charlotte St. Martin 2,000
John O. Wilson 9,100
Michael D. Mangan 70,596
John M. Garrity 24,018
Frank J. Scardina 38,320
Kipling W. Scott 36,109
Directors and executive officers as a group (15 persons) 798,248
(1)With the exception of Mr. Dreier, no other Director, nominee or executive
officer beneficially owns more than 1 percent of the Corporation's
outstanding Common Stock. Mr. Dreier beneficially owns 2.6 percent of the
outstanding Common Stock of the Corporation. Directors, nominees and
executive officers as a group beneficially own 5.4 percent of the
outstanding Common Stock of the Corporation. 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 18, 1998, as follows: Mr. Dreier, 259,600 shares; Mr.
Flick, 5,100 shares; Mr. Gaw, 72,500 shares; Mr. Harlan, 5,100 shares; Mr.
Heist, 5,100 shares; Mr. Jews, 4,000 shares; Mr. Kagler, 5,100 shares; Ms.
St. Martin, 2,000 shares; Mr. Wilson, 5,100 shares; Mr. Mangan, 64,800
shares; Mr. Garrity, 21,550 shares; Mr. Scardina, 32,750 shares; Mr. Scott,
32,150 shares; and Directors and executive officers as a group, 542,625
shares.
Includes shares subject to restricted stock units as follows: Mr. Dreier,
65,203 shares; Mr. Mangan, 1,982 shares; Mr. Garrity, 1,223 shares; Mr.
Scardina, 1,334 shares; Mr. Scott, 1,112 shares; and executive officers as
a group, 72,800 shares.
Does not include shares of ESOP Series A Convertible Preferred Stock which
have been allocated to participants' accounts under the Corporation's
Retirement Savings Opportunity Plan as follows: Mr. Dreier, 733 shares;
Mr. Mangan, 686 shares; Mr. Garrity, 610 shares; Mr. Scardina, 735 shares;
Mr. Scott, 604 shares; and executive officers as a group, 4,577 shares.
5
INFORMATION CONCERNING THE BOARD OF DIRECTORS
During 1997, the Board of Directors held five meetings. All Directors
attended at least 75 percent of the meetings of the Board of Directors and of
the committees of the Board of Directors on which they served during 1997,
with the exception of Mr. Kagler. The Board of Directors of the Corporation
has Audit, Compensation, Finance and Nominating and Governance Committees.
The Audit Committee of the Board of Directors is composed of Messrs. Gaw,
Jews and Ms. St. Martin. The Audit Committee reviews the Corporation's
financial statements and reports, the audit services provided by the
Corporation's independent public accountants and the reports of the
Corporation's internal auditors. During 1997, three meetings of the Audit
Committee were held.
The Compensation Committee of the Board of Directors determines or
recommends the amount and form of compensation awarded and paid to executive
officers and key employees of the Corporation as well as awards and
distributions under the Corporation's compensation plans. Messrs. Flick,
Heist, Jews, Kagler and Ms. St. Martin serve as its members. During 1997, the
Compensation Committee held four meetings.
The Finance Committee of the Board of Directors is composed of Messrs. Gaw,
Harlan and Wilson. The Finance Committee reviews and monitors the financial
plans and capital structure of the Corporation. There were three meetings of
the Finance Committee during 1997.
The Nominating and Governance Committee recommends to the Board of Directors
candidates to fill vacancies on the Board and makes recommendations about the
composition of the Board's committees. Messrs. Flick, Harlan, Heist and
Kagler are the members of the Nominating and Governance Committee, which held
four meetings during 1997. The Nominating and Governance Committee will
consider nominees suggested by stockholders for election to the Board of
Directors. Recommendations by stockholders are 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 $25,000; half
of this amount is paid in cash and half is paid in the Corporation's Common
Stock. Each non-employee Director is paid an additional $1,000 in cash for
each meeting attended of the Board of Directors and of committees of the Board
of Directors, with the exception of the Committee Chairperson who is paid
$1,250 in cash. A Director may elect to have all or any part of the fees
deferred under the Corporation's Executive and Director Deferred Compensation
Plan. Under this Plan, amounts elected to be deferred are not included in a
Director's gross income for income tax purposes until actually distributed to
the Director. Directors who are employees of the Corporation do not receive
additional compensation for service on the Board of Directors. During 1997,
the Corporation donated $5,000 to charitable organizations designated by each
Director.
The Corporation maintains a Non-Employee Director Equity Plan pursuant to
which non-employee Directors receive stock options. On December 31, 1997, the
Corporation granted each non-employee Director an option to purchase 1,000
shares of Common Stock at an exercise price of $23.50 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.
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.
6
1997 COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is comprised of five independent, non-employee
directors. The Compensation Committee approves the design of, assesses the
effectiveness of, and administers executive compensation programs in support
of stockholder interests. The Compensation Committee also reviews and
approves all salary arrangements and other compensation for executive
officers, including the Chief Executive Officer, evaluates executive
performance and considers related matters.
The Corporation's mission is to become a leader in the homebuilding
industry, optimize the strength of its mortgage operations and maximize
stockholder value. To accomplish these objectives, the Corporation is
pursuing a comprehensive business strategy that emphasizes earnings per share
and return on stockholders' equity. The Compensation Committee is committed
to implementing a compensation program which furthers the Corporation's
mission. This program adheres to the following compensation policies which
are intended to facilitate the achievement of the Corporation's business
strategies:
-All executive officers', including the Chief Executive Officer's,
compensation programs should emphasize the relationship between pay and
performance by including variable, at-risk compensation that is dependent upon
the level of success in meeting specified financial and operational goals.
-A significant portion of total compensation should be comprised of
equity-based pay opportunities. Encouraging a personal proprietary interest
provides a close identification with the Corporation and aligns executive
officers' interests with those of stockholders. This promotes a continuing
focus on building profitability and stockholder value.
-Compensation opportunities should enhance the Corporation's ability to
attract, retain and encourage the development of exceptionally knowledgeable
and experienced executives upon whom the successful operation and management
of the Corporation depend.
COMPONENTS OF COMPENSATION
The Compensation Committee relates total compensation levels for the
Corporation's Chief Executive Officer and other executive officers to the
compensation paid to executives of a peer group of companies. This peer group
is comprised of large national homebuilding companies, which include many of
the same companies which comprise the Dow/Home Construction Index in the
Performance Graph included in this Proxy Statement. However, the Compensation
Committee believes that the Corporation's competitors for executive talent
also include other companies not included in this Index. Therefore, the
Committee also reviews general industry survey data on companies of comparable
revenue size and reviews and approves the selection of companies used for
compensation comparison purposes.
The key elements of the Corporation's executive compensation program are
base salary, annual incentives and long-term incentive compensation. These
key elements are addressed separately below. In determining each component of
compensation, the Compensation Committee considers all elements of an
executive's total compensation package.
BASE SALARY
The Compensation Committee regularly reviews each executive's base salary.
Base salaries are targeted at median competitive levels and are adjusted by
the Compensation Committee to recognize varying levels of responsibility,
experience and breadth of knowledge, internal equity issues, as well as
external pay practices. Increases to base salaries are driven primarily by
individual performance. Individual performance is evaluated based on the
Compensation Committee's judgement of sustained levels of individual
contribution to the Corporation.
Effective December 22, 1997, Mr. Dreier, Chairman of the Board of Directors,
President and Chief Executive Officer of the Corporation, received a 6.87
percent increase in base salary from $655,000 to $700,000 in recognition of
the progress made by the Corporation during 1997 toward strengthening its
financial condition and improving its profitability.
7
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.
Under the terms of his employment agreement, as in effect for 1997, Mr.
Dreier was eligible for an annual bonus equal to 1.0 percent of the
consolidated pretax income of the Corporation, as adjusted by the Compensation
Committee to eliminate the effect of unusual items. For 1997, the
Compensation Committee increased Mr. Dreier's annual incentive payout by
$100,000 based on a subjective judgment of executive performance.
Eligible executives on the corporate staff are assigned maximum bonus levels
ranging from 50 to 75 percent of base salary. Bonuses are earned based on the
extent to which pretax income goals established at the beginning of the year
are achieved. Executives in the Corporation's homebuilding and mortgage
operations receive bonuses based on a percentage of the pretax earnings of
their business units, with no minimum or maximum bonus amounts.
LONG-TERM INCENTIVES
In keeping with the Corporation's commitment to provide a total compensation
package which includes at-risk components, long-term incentive compensation
comprises a significant portion of the value of an executive's total
compensation package.
When awarding long-term incentives, the Compensation Committee considers an
executive's level of responsibility, prior compensation experience, historical
award data, individual performance criteria and the compensation practices at
peer group companies. Long-term incentives are in the form of stock options,
restricted stock units and cash.
STOCK OPTIONS
Stock options are granted at an option price which is the fair market value
of the Common Stock on the date of grant. Accordingly, stock options have
value only if the stock price appreciates. This design focuses executives on
the creation of stockholder value over the long term. The size of the award
can be adjusted based on individual factors and historical award data.
On January 2, 1997, Mr. Dreier received options to purchase 40,000 shares of
the Common Stock of the Corporation at an exercise price of $13.50 per share
and on January 29, 1997, he received options to purchase 150,000 shares at an
exercise price of $12.75 per share. This stock option grant was determined
based on the median competitive levels for chief executive officers of peer
group companies.
TRG INCENTIVE PLAN
The TRG Incentive Plan provides for awards of cash and restricted stock
units based on the Corporation's financial performance during the year. Each
year, the Compensation Committee establishes maximum award levels for each
executive officer based on a percentage of the executive's base salary.
Executives earn restricted stock units and cash based on the extent to which
pre-established financial goals are achieved by the Corporation. Awards are
payable one-half in restricted stock units and one-half in cash, with vesting
occurring over three years.
The Compensation Committee believes that the TRG Incentive Plan provides
executives with an immediate link to the interest of stockholders, focuses
them on company-wide performance and provides incentives that are longer-term
than annual bonuses but less remote than retirement benefits. The
Compensation Committee believes that the TRG Incentive Plan will enhance the
Corporation's ability to maintain a stable executive team focused on the
Corporation's long-term success.
For 1997, the Compensation Committee designated return on stockholders'
equity as the performance measure for purposes of the TRG Incentive Plan.
Based on the Corporation's performance in 1997, the Compensation Committee
determined the TRG Incentive Plan awards for 1997 would be paid at 56 percent.
A target award value of 100 percent of base salary was established by the
Compensation Committee for Mr. Dreier for 1997. Based on the Corporation's
performance in 1997, Mr. Dreier received an award of restricted stock units
and cash valued at $366,800 or 56 percent of base salary.
8
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 Savings Opportunity Plan up to the statutory limits.
Because of these statutory limits, the Corporation also offers executive
officers the ability to defer additional pay and receive corresponding
company-matching contributions through the Executive and Director Deferred
Compensation Plan.
For 1997, earnings credited to deferrals under the Executive and Director
Deferred Compensation Plan were based on the six investment choices offered
pursuant to the Plan or the Corporation's interest rate on senior subordinated
debt plus 1 percent.
POLICY WITH RESPECT TO THE $1 MILLION DEDUCTION LIMIT
It is the policy of the Compensation Committee to continually evaluate the
qualification of compensation for exclusion from the $1 million limitation on
corporate tax deductions under Internal Revenue Code 162(m) as well as other
sections of the Internal Revenue Code, while maintaining flexibility to take
actions which it deems to be in the interest of the Corporation and its
stockholders which may not qualify for tax deductibility.
CONCLUSION
The Compensation Committee believes these executive compensation policies
and programs serve the interests of stockholders and the Corporation
effectively. The various compensation vehicles offered are appropriately
balanced to provide increased motivation for executives to contribute to the
Corporation's overall future success, thereby enhancing the value of the
Corporation for the stockholders' benefit.
The Compensation Committee will continue to monitor the effectiveness of the
Corporation's total compensation program to meet the current and future needs
of the Corporation.
Compensation Committee of the Board of Directors
L.C. Heist, Chairman
James A. Flick, Jr.
William L. Jews
William G. Kagler
Charlotte St. Martin
9
SUMMARY COMPENSATION TABLE
Annual Compensation
--------------------
Other
Annual
Name and Principal Position Year Salary Bonus(a) Compensation(b)
- --------------------------- ---- ------ -------- ---------------
Mr. Dreier - 1997 $655,000 $586,943 $ 7,291
Chairman of the Board of 1996 $630,000 $197,978 $ 71,182
Directors, President and Chief 1995 $600,000 $166,577 $ 6,082
Executive Officer of The
Ryland Group, Inc.
Mr. Mangan - 1997 $312,000 $280,590 $ 0
Executive Vice President and 1996 $300,000 $123,525 $ 66,635
Chief Financial Officer of 1995 $275,000 $ 73,666 $195,814
The Ryland Group, Inc.
Mr. Garrity - 1997 $220,000 $271,994 $ 0
Senior Vice President of The 1996 $210,000 $ 77,181 $ 0
Ryland Group, Inc.; President 1995 $200,000 $ 87,911 $ 9,100
of the South Region
Mr. Scardina - 1997 $240,000 $393,747 $ 0
Senior Vice President of The 1996 $230,000 $126,278 $ 0
Ryland Group, Inc.; President 1995 $198,654 $155,968 $ 0
of the West Region
Mr. Scott - 1997 $209,231 $224,193 $ 16,960
Senior Vice President of The 1996 $190,000 $128,100 $ 0
Ryland Group, Inc.; President 1995 $172,308 $ 10,334 $ 0
of the North Region
Long-Term Compensation
----------------------
Awards
-----------------------
Restricted Securities
Stock Underlying All Other
Name and Principal Position Year Awardsc Options Compensation(d)
- --------------------------- ---- ------ -------- ----------------
Mr. Dreier - 1997 $701,646 190,000 $199,642
Chairman of the Board of 1996 $ 0 40,000 $ 44,542
Directors, President and Chief 1995 $ 64,554 40,000 $124,618
Executive Officer of The
Ryland Group, Inc.
Mr. Mangan - 1997 $ 46,577 20,000 $ 78,119
Executive Vice President and 1996 $ 0 20,000 $ 21,305
Chief Financial Officer of 1995 $ 23,674 20,000 $166,715
The Ryland Group, Inc.
Mr. Garrity - 1997 $ 28,741 15,000 $ 47,401
Senior Vice President of The 1996 $ 0 10,000 $ 17,321
Ryland Group, Inc.; President 1995 $ 12,908 10,000 $ 76,337
of the South Region
Mr. Scardina - 1997 $ 31,349 15,000 $ 54,097
Senior Vice President of The 1996 $ 0 10,000 $ 22,698
Ryland Group, Inc.; President 1995 $ 11,294 10,000 $ 31,161
of the West Region
Mr. Scott - 1997 $ 26,132 15,000 $ 93,895
Senior Vice President of The 1996 $ 0 10,000 $ 11,526
Ryland Group, Inc.; President 1995 $ 10,318 10,000 $ 23,948
of the North Region
(a) Includes bonuses for 1997, 1996 and 1995 which were paid in 1998, 1997
and 1996, respectively.
Includes for 1997 and 1995, the dollar value of the initial vested
portion of cash and restricted stock unit awards under the TRG Incentive Plan
as follows: Mr. Dreier 1997 - $122,253, 1995 - $64,547; Mr. Mangan 1997 -
$46,590, 1995 - $23,666; Mr. Garrity 1997 - $28,737, 1995 - $12,911; Mr.
Scardina 1997 - $31,358, 1995 - $11,298; and Mr. Scott 1997 - $26,132, 1995 -
$10,334.
(b) Includes gross-up adjustments for taxes on relocation reimbursements as
follows: Mr. Dreier 1996 - $66,083; Mr. Mangan 1996 - $66,635, 1995 -
$45,814; Mr. Garrity 1995 - $9,100; and Mr. Scott 1997 - $16,960. Mr. Mangan
was paid a bonus of $150,000 in 1995 to compensate him for benefits lost upon
resignation from his previous employment to join the Corporation. Also
includes Medicaid taxes and gross-up adjustments paid to Mr. Dreier for vested
restricted stock units as follows: 1997 - $7,291, 1996 - $5,099, 1995 -
$6,082.
(c) Amounts for 1997 and 1995 include restricted stock units awarded under
the TRG Incentive Plan. The value of the restricted stock units for 1997 is
based on the $23.50 closing price of the Corporation's Common Stock on the
determination date of December 31, 1997. The value of the restricted stock
units for 1995 is based on the $14.00 closing price of the Corporation's
Common Stock on the determination date of December 31, 1995. The restricted
stock units awarded under the TRG Incentive Plan vest one-third per year over
three years. Holders of restricted stock units are entitled to quarterly
dividend equivalent payments if the Corporation pays dividends on its Common
Stock.
Mr. Dreier was awarded 45,000 restricted stock units by the Corporation
in 1997. The value of the restricted stock units, which is included as 1997
compensation, was based upon the $12.875 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 two annual installments of 15,000 and 30,000
shares on November 1, 1999, and November 1, 2000, respectively. 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, 1997, the number and value of restricted stock units
held by named executive officers were as follows: Mr. Dreier - 65,203 units,
$1,532,271; Mr. Mangan - 1,982 units, $46,577; Mr. Garrity - 1,223 units,
$28,741; Mr. Scardina - 1,334 units, $31,349; and Mr. Scott - 1,112 units,
$26,132.
(d) Includes the Corporation's contributions to the Retirement Savings
Opportunity Plan and the Executive and Director Deferred Compensation Plan:
Mr. Dreier 1997 - $51,178, 1996 - $43,923, 1995 - $55,166; Mr. Mangan 1997 -
$26,092, 1996 - $20,999, 1995 - $17,325; Mr. Garrity 1997 - $17,831, 1996 -
$17,100, 1995 - $11,999; Mr. Scardina 1997 - $21,977, 1996 - $22,480, 1995 -
$19,187; and Mr. Scott 1997 - $20,240, 1996 - $11,400, 1995 - 13,185; earnings
on the Executive and Director Deferred Compensation Plan: Mr. Dreier 1997 -
$23,056, 1995 - $2,298; and Mr. Mangan 1997 - $4,614, 1996 - $132; the value
of term life insurance paid under the Corporation's split dollar life
insurance plan: Mr. Dreier 1997 - $1,905, 1996 - $619, 1995 - $505; Mr.
Mangan 1997 - $354, 1996 - $174, 1995 - $96; Mr. Garrity 1997 - $563, 1996 -
$221, 1995 - $120; Mr. Scardina 1997 - $532, 1996 - $218, 1995 - $177; and Mr.
Scott 1997 - $283, 1996 - $126, 1995 - $96; deferred cash and earnings under
the TRG Incentive Plan: Mr. Dreier 1997 - $123,503, 1995 - $66,649; Mr. Mangan
1997 - $47,059, 1995 - $23,736; Mr. Garrity 1997 - $29,007, 1995 - $12,970;
Mr. Scardina 1997 - $31,588, 1995 - $11,797; and Mr. Scott 1997 - $26,332,
1995 - $10,667; and reimbursements for relocation expenses: Mr. Mangan 1995 -
$125,558; Mr. Garrity 1995 - $51,248; and Mr. Scott 1997 - $47,040.
10
EMPLOYMENT AGREEMENTS
On January 28, 1997, the Corporation entered into an employment agreement
with Mr. Dreier for a period of four years beginning January 1, 1997. It
provides for one-year extensions subject to a right of termination upon notice
at least 180 days prior to the end of the agreement's term. Under the
agreement, Mr. Dreier will receive a base salary of at least $655,000 per year
and is eligible for an annual cash bonus equal to 1.0 percent of the adjusted
consolidated pretax income of the Corporation. Mr. Dreier also received a
stock option grant of 150,000 shares of the Corporation's Common Stock at
$12.75 per share, vesting in three annual installments of 50,000 shares
beginning January 29, 1998. Mr. Dreier was also granted 45,000 restricted
stock units that vest and are paid in the amount of 15,000 shares of Common
Stock on November 1, 1999, and 30,000 shares of Common Stock on November 1,
2000. If Mr. Dreier's employment is terminated without "cause," Mr. Dreier
receives salary and benefits for the remaining term of the agreement or 18
months, whichever is greater, and a bonus payment for the year of termination.
In the event of a termination of Mr. Dreier's employment within three years of
a "change-in-control" of the Corporation, he receives a payment equal to three
times his highest annual salary and bonus, accelerated vesting under benefit
plans of the Corporation, and relocation and outplacement assistance.
In September 1995, the Corporation entered into an employment agreement with
Mr. Mangan for an initial period of three years beginning September 18, 1995.
The agreement provides for one-year extensions subject to a right of
termination upon notice at least three months prior to the end of the
agreement's term. Under the agreement, Mr. Mangan will receive a base salary
of at least $312,000 per year and an annual cash bonus with a target award of
75 percent of his base salary. If Mr. Mangan's employment is terminated
without "cause," Mr. Mangan receives salary and benefits for the remaining
term of the agreement or 18 months, whichever is greater, and a prorated bonus
payment for the year of termination. In the event of a termination of Mr.
Mangan's employment within three years of a "change-in-control" of the
Corporation, he receives a payment equal to three times his highest annual
salary and bonus, accelerated vesting under benefit plans of the Corporation,
and relocation and outplacement assistance.
The Corporation has senior executive severance agreements pursuant to which,
upon termination of employment within three years of a "change-in-control" of
the Corporation, certain executive officers, including Messrs. Garrity,
Scardina, and Scott, receive a cash payment equal to two times the highest
annual compensation paid during the three years prior to termination,
accelerated vesting under benefit plans of the Corporation, and relocation and
outplacement assistance.
11
STOCK OPTION GRANTS IN 1997
Number of Percent of Total Exercise
Securities Underlying Options Granted to Price
Name Options Granted(a) Employees in 1997 ($/Share)
- ---------- --------------------- ------------------ ---------
Mr. Dreier 40,000 6.5 $13.50
150,000 24.2 $12.75
Mr. Mangan 20,000 3.2 $13.50
Mr. Garrity 15,000 2.4 $13.50
Mr. Scardina 15,000 2.4 $13.50
Mr. Scott 15,000 2.4 $13.50
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation
for 10-Year Option Term
Expiration
Name Date 5% 10%
- ---------- ----------- ----------- -----------
Mr. Dreier 1/02/07 $ 339,603 $ 860,621
1/29/07 $1,202,761 $3,048,032
Mr. Mangan 1/02/07 $ 169,802 $ 430,310
Mr. Garrity 1/02/07 $ 127,351 $ 322,733
Mr. Scardina 1/02/07 $ 127,351 $ 322,733
Mr. Scott 1/02/07 $ 127,351 $ 322,733
(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.
AGGREGATED STOCK OPTION EXERCISES IN 1997
AND YEAR-END STOCK OPTION VALUES
Shares Acquired Value
Name on Exercise Realized
- ------------ ---------------- ---------
Mr. Dreier 0 $0
Mr. Mangan 0 $0
Mr. Garrity 0 $0
Mr. Scardina 0 $0
Mr. Scott 0 $0
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Year End at Year End
--------------------------- ---------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------ ----------- ------------- ----------- -------------
Mr. Dreier 169,600 230,400 $894,500 $2,359,250
Mr. Mangan 44,800 40,200 $419,125 $ 373,375
Mr. Garrity 19,900 25,100 $184,562 $ 236,687
Mr. Scardina 21,100 25,100 $145,012 $ 236,687
Mr. Scott 30,500 25,100 $199,162 $ 236,687
12
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; Centex Corporation; Clayton Homes, Inc.; Kaufman and Broad Home
Corporation; Oakwood Homes Corporation; Champion Enterprises, Inc.; Lennar
Corporation; and Walter Industries, Inc.
Ryland S&P 500 Dow Home
Year ended December 31,
1992 (a) $100 $100 $100
1993 99 110 127
1994 77 112 87
1995 75 153 129
1996 76 188 124
1997 135 251 191
(a) Assumes that the value of the Common Stock of the Corporation and the
Indices were $100 on January 1, 1993, and that all dividends were reinvested.
13
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon the Corporation's review of Forms 3, 4 and 5, as well as any
amendments submitted to the Corporation during 1997 for any person subject to
Section 16 of the Securities Exchange Act of 1934 (The Exchange Act), Mr.
Heist failed to file on a timely basis during 1997 one report required by
Section 16(a) of The Exchange Act for one transaction.
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 12, 1998, 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 1999 Annual Meeting of
Stockholders. In addition, under the Corporation's bylaws, in order for a
shareholder proposal or director nomination to come before the Annual Meeting
of Stockholders, proposals and nominations, made in accordance with the bylaws
of the Corporation, require appropriate notice to the Corporation of the
proposal or nomination not less than 75 days prior to the date of the Annual
Stockholders' Meeting. If less than 100 days' notice of the date of the
Annual Stockholders' Meeting is given by the Corporation, then the Corporation
must receive the notice of nomination or the proposal not later than the close
of business on the 10th day following the date the Corporation first mailed
the notice or made public disclosure of the meeting. In this regard, notice
is given that the 1999 Annual Meeting of Stockholders is expected to be held
on the third Wednesday of April in 1999, or on or before the 30th day
thereafter, as determined by the Board of Directors in accordance with the
Corporation's bylaws.
OTHER MATTERS
If any other business should come before the meeting, the proxy holders will
vote according to their discretion.
14
PARTICIPANT INSTRUCTION CARD
THE RYLAND GROUP, INC.
Participant Proxy Solicited on Behalf of the Board of Directors
Annual Meeting of Stockholders - April 29, 1998
The undersigned participant in The Ryland Group, Inc. Retirement Savings
Opportunity Plan acknowledges receipt of the Proxy Statement and Notice of
Annual Meeting of Stockholders, dated March 10, 1998, and hereby instructs
Vanguard Fidelity Trust Company, 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 29, 1998,
at 9:00 A.M., Eastern Daylight Time, and at any adjournments thereof.
(Continued and signed on reverse side)
The shares represented by this instruction card, when properly executed, will
be voted in accordance with the instructions herein. In the absence of
specific instructions, this proxy will be voted FOR the nominees listed below,
and in the discretion of the proxies upon other business properly brought
before the meeting.
Please mark your votes as indicated in this example /X/
1. ELECTION OF DIRECTORS FOR all WITHHOLD AUTHORITY
nominees for all nominees
/ / / /
Nominees: Mr. Dreier, Mr. Flick,
Mr. Gaw, Mr. Harlan, Mr. Heist,
Mr. Jews, Mr. Kagler, 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. In their discretion upon 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
your full title as such.
THE RYLAND GROUP, INC.
Proxy Solicited on Behalf of the Board of Directors
Annual Meeting of Stockholders - April 29, 1998
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, 1998, 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 29, 1998, at 9:00 A.M., Eastern Daylight Time, and at any
adjournments thereof.
(Continued and signed on reverse side)
This proxy, when properly executed, will be voted in accordance with the
instructions herein. In the absence of specific instructions, this proxy will
be voted FOR the nominees listed below, and in the discretion of the proxies
upon other business properly brought before the meeting.
Please mark your votes as indicated in this example /X/
1. ELECTION OF DIRECTORS FOR all WITHHOLD AUTHORITY
nominees for all nominees
/ / / /
Nominees: Mr. Dreier, Mr. Flick,
Mr. Gaw, Mr. Harlan, Mr. Heist,
Mr. Jews, Mr. Kagler, 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. In their discretion upon 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
your full title as such.
