SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Materials Pursuant to sec.240.14a-11(c) or sec.240.14a-12
THE RYLAND GROUP, INC.
---------------------
(Name of Registrant as Specified in Charter)
THE RYLAND GROUP, INC.
---------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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persuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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Rule 0-11(a)(2) and indentify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule adn the date of its filing.
(1) Amount Previously Paid:
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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 21, 1999, at 8:00 a.m.,
Eastern Daylight Time, for the following purposes:
1. To elect nine directors to serve until the next Annual Meeting of
Stockholders or 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, 1999, are
entitled to vote at the meeting or any adjournment thereof. Please date and
sign the enclosed proxy or proxies and return it or them 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, 1999
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 21,
1999. This Proxy Statement and proxy are first being distributed to
stockholders on approximately March 10, 1999. The Annual Report of the
Corporation for the year ended December 31, 1998, 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, 1999,
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 14,836,113 shares of Common Stock
outstanding as of the close of business on February 18, 1999. There were
408,732 shares of Preferred Stock outstanding as of the close of business on
February 18, 1999. 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.
1
<TABLE>
<CAPTION>
ELECTION OF DIRECTORS
All Directors (nine in number) are proposed for election to hold office until the next Annual Meeting of Stockholders or 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
a Director Principal Occupation for Five Prior Years and Other Information
- ------------- ----------------------------------------------------------------------------------------------
<S> <C> <C>
R. Chad Dreier Chairman of the Board of Directors, President and Chief Executive Officer of the Corporation.
51 (1993)
James A. Flick, Jr. President, Chief Executive Officer and Director of Dome Corporation (real estate development
64 (1990) and management services); Executive Vice President of Legg Mason Wood Walker, Inc. (investment
firm) until 1994; Director of FTI Consulting, Inc., Capital One Financial Corporation,
Bethlehem Steel Credit Affiliates, and Youth Services International, Inc.
Leslie M. Frecon President of L Frecon Enterprises; Senior Vice President, Corporate Finance, of General Mills,
45 (1998) Inc. until 1998; Director of The Resource Companies.
Robert J. Gaw Executive Vice President of the Corporation and President of Ryland Mortgage Company until
65 (1967) 1996; Director of The Columbia Bank, Howard Business Ventures, and Mac-O-Cheek, Inc.
Leonard M. Harlan President of Castle Harlan, Inc. (private merchant-banking firm), Castle Harlan Partners II,
62 (1984) G.P., Inc. (corporate buyout fund) and Castle Harlan Partners III, G.P., Inc.; Chairman of the
Harlan Company until 1996; Director of Matrix Global Investments, Inc., and StackTeck Systems,
Inc.
William L. Jews President and Chief Executive Officer of CareFirst, Inc.; President and Chief Executive
47 (1994) Officer of Blue Cross Blue Shield of Maryland, Inc., until 1998; Director of National Blue
Cross/Blue Shield Association, Crown Central Petroleum Corp., Federal Reserve Bank of
Richmond, MuniMae, and Ecolab, Inc.
William G. Kagler Chairman of the Executive Committee and member of the Board of Directors of Skyline Chili,
66 (1985) Inc., until 1995; Chairman of the Board of Directors and Chief Executive Officer of Skyline
Chili, Inc., until 1994; Director of Fifth Third Bancorp and Union Central Life Insurance Co.
Charlotte St. Martin Executive Vice President of Loews Hotels; President and Chief Executive Officer of Loews
53 (1996) Anatole Hotel until 1995; Director of Gibson Greetings, Inc.
John O. Wilson Chairman of the Investment Policy Committee, SDR Capital Management Group, San Francisco; and
60 (1987) Senior Fellow, Berkeley Roundtable on International Economics, University of California-
Berkeley; Executive Vice President and Chief Economist of Bank of America Corporation until
1998; Director of Calpine Corporation, California Council on Science and Technology, and
Public Policy Institute of California.
</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.
2
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
To the knowledge of the Corporation, the only beneficial owner of more than 5
percent of the outstanding shares of Common Stock, as of February 18, 1999, is
as follows:
Amount and Nature
Name and Address of Beneficial Ownership Percent of Class
----------------- ----------------------- ----------------
The Prudential Insurance
Company of America 1,485,025 10.1
751 Broad Street
Newark, NJ 07102-3777
According to Schedule 13G dated January 27, 1999, filed with the
Securities and Exchange Commission, 4,600 of these shares are owned with sole
voting and dispositive power, and 1,480,425 of these shares are owned with
shared voting and dispositive power.
The Corporation's Retirement Savings Opportunity Plan is the beneficial
owner of 408,732 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.
The following table sets forth, as of February 18, 1999, 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 ----------------------------------------- 441,223
James A. Flick, Jr. ------------------------------------ 13,216
Leslie M. Frecon --------------------------------------- 233
Robert J. Gaw ------------------------------------------ 113,347
Leonard M. Harlan -------------------------------------- 7,566
William L. Jews ---------------------------------------- 6,469
William G. Kagler -------------------------------------- 16,569
Charlotte St. Martin ----------------------------------- 3,469
John O. Wilson ----------------------------------------- 10,566
Michael D. Mangan -------------------------------------- 94,887
John M. Garrity ---------------------------------------- 43,327
Frank J. Scardina -------------------------------------- 56,921
Kipling W. Scott --------------------------------------- 54,060
Directors and executive officers as a group (16 persons) 921,707
- ----------------------------------------------------------------------------
(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 3.0 percent of the outstanding Common Stock of the Corporation
Directors, nominees and executive officers as a group beneficially own
6.2 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, 1999, as follows: Mr. Dreier, 336,400 shares;
Mr. Flick, 6,100 shares; Mr. Gaw, 63,500 shares; Mr. Harlan, 6,100 shares;
Mr. Jews, 5,000 shares; Mr. Kagler, 6,100 shares; Ms. St. Martin, 3,000
shares; Mr. Wilson, 6,100 shares; Mr. Mangan, 84,800 shares; Mr. Garrity,
36,500 shares; Mr. Scardina, 47,700 shares; Mr. Scott, 47,100 shares; and
Directors and executive officers as a group, 698,500 shares.
Includes shares subject to restricted stock units as follows: Mr. Dreier,
57,339 shares; Mr. Mangan, 4,608 shares; Mr. Garrity, 2,850 shares; Mr.
Scardina, 3,101 shares; Mr. Scott, 2,795 shares; and executive officers as
a group, 76,109 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, 4,580 shares.
3
INFORMATION CONCERNING THE BOARD OF DIRECTORS
During 1998, 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 1998.
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.
Flick and Gaw and Madames Frecon and 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 1998, 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, Jews
and Kagler and Ms. St. Martin serve as its members. During 1998, the
Compensation Committee held four meetings.
The Finance Committee of the Board of Directors is composed of Messrs.
Gaw, Harlan and Wilson and Ms. Frecon. The Finance Committee reviews and
monitors the financial plans and capital structure of the Corporation. There
were four meetings of the Finance Committee during 1998.
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. Harlan, Jews and
Kagler are the members of the Nominating and Governance Committee, which held
four meetings during 1998. 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 1998,
the Corporation donated $15,000 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, 1998, the
Corporation granted each non-employee Director an option to purchase 1,000
shares of Common Stock at an exercise price of $28.875 per share, with the
exception of Ms. Frecon, who received her initial option to purchase 2,000
shares of Common Stock at an exercise price of $28.875 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.
4
1998 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, 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 21, 1998, Mr. Dreier, Chairman of the Board of
Directors, President and Chief Executive Officer of the Corporation, received
a 7.14 percent increase in base salary from $700,000 to $750,000 in
recognition of the progress made by the Corporation during 1998 toward
strengthening its financial condition and improving its profitability.
5
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 1998, 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.
Eligible executives on the corporate staff are assigned target 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.
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 1998, 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 1998, which exceeded the targeted
return on equity, the Compensation Committee determined the TRG Incentive Plan
awards for 1998 would be paid at 120.5 percent.
A target award value of 100 percent of base salary was established by the
Compensation Committee for Mr. Dreier for 1998. Based on the Corporation's
performance in 1998, which exceeded the targeted return on equity, Mr. Dreier
received an award of restricted stock units and cash valued at $843,500 or
120.5 percent of base salary.
6
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 1998, earnings credited to deferrals under the Executive and Director
Deferred Compensation Plan were based on the nine investment choices offered
pursuant to the Plan.
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 Section 162(m) of the Internal Revenue Code
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
James A. Flick, Jr.
William L. Jews
William G. Kagler
Charlotte St. Martin
7
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
-------------------- ----------------------
Awards
------
Other Restricted Securities
Annual Stock Underlying All Other
Name and Principal Position Year Salary Bonus(a) Compensation(b) Awards(c) Options Compensation(d)
--------------------------- ---- ------ -------- --------------- -------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mr. Dreier - Chairman of the 1998 $700,000 $1,119,773 $ 10,147 $281,185 0 $361,898
Board of Directors, 1997 $655,000 $ 586,943 $ 7,291 $701,646 190,000 $199,642
President and Chief Executive 1996 $630,000 $ 197,978 $ 71,182 $ 0 40,000 $ 44,542
Officer of The Ryland Group, Inc.
Mr. Mangan - Executive Vice President 1998 $325,000 $ 409,106 $ 0 $104,441 35,000 $141,490
and Chief Financial Officer of 1997 $312,000 $ 280,590 $ 0 $ 46,577 20,000 $ 78,119
The Ryland Group, Inc. 1996 $300,000 $ 123,525 $ 66,635 $ 0 20,000 $ 21,305
Mr. Garrity - Senior Vice President 1998 $230,000 $ 483,485 $ 0 $ 64,651 35,000 $ 95,688
of The Ryland Group, Inc.; 1997 $220,000 $ 271,994 $ 0 $ 28,741 15,000 $ 47,401
President of the South Region 1996 $210,000 $ 77,181 $ 0 0 10,000 $ 17,321
Mr. Scardina - Senior Vice President 1998 $250,000 $ 713,618 $ 0 $ 70,282 35,000 $ 95,165
of The Ryland Group, Inc.; 1997 $240,000 $ 393,747 $ 0 $ 31,349 15,000 $ 54,097
President of the West Region 1996 $230,000 $ 126,278 $ 0 $ 0 10,000 $ 22,698
Mr. Scott - Senior Vice President 1998 $230,000 $ 480,624 $ 0 $ 64,651 35,000 $ 92,719
of The Ryland Group Inc.; 1997 $209,231 $ 224,193 $ 16,960 $ 26,132 15,000 $ 93,895
President of the North Region 1996 $190,000 $ 128,100 $ 0 $ 0 10,000 $ 11,526
- ------------------------
</TABLE>
(a) Includes bonuses for 1998, 1997 and 1996 which were paid in 1999, 1998
and 1997, respectively.
Includes for 1998 and 1997, the dollar value of the initial vested
portion of cash and restricted stock unit awards under the TRG Incentive
Plan as follows: Mr. Dreier 1998 - $281,133, 1997 - $122,253; Mr.
Mangan 1998 - $104,418, 1997 - $46,590; Mr. Garrity 1998 - $64,675, 1997
$28,737; Mr. Scardina 1998 - $70,288, 1997 - $31,358; and Mr. Scott
1998 - $64,675, 1997 - $26,132.
(b) Includes gross-up adjustments for taxes on relocation reimbursements as
follows: Mr. Dreier 1996 - $66,083; Mr. Mangan 1996 - $66,635; and Mr.
Scott 1997 - $16,960. Also includes Medicaid taxes and gross-up
adjustments paid to Mr. Dreier for vested restricted stock units as
follows: 1998 - $10,147; 1997 - $7,291; 1996 - $5,099.
(c) Amounts for 1998 and 1997 include restricted stock units awarded under
the TRG Incentive Plan. The value of the restricted stock units for
1998 is based on the $28.875 closing price of the Corporation's Common
Stock on the determination date of December 31, 1998. 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 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, 1998, the number and value of restricted stock units
held by named executive officers were as follows: Mr. Dreier - 57,339
units, $1,655,664; Mr. Mangan - 4,608 units, $133,056; Mr. Garrity -
2,850 units, $82,294; Mr. Scardina - 3,101 units, $89,541; and Mr. Scott
- 2,795 units, $80,706.
(d) Includes the Corporation's contributions to the Retirement Savings
Opportunity Plan and the Executive and Director Deferred Compensation
Plan: Mr. Dreier 1998 - $71,497, 1997 - $51,178, 1996 - $43,923; Mr.
Mangan 1998 - $34,325, 1997 - $26,092, 1996 - $20,999; Mr. Garrity 1998
$28,949, 1997 - $17,831, 1996 - $17,100; Mr. Scardina 1998 - $22,638,
1997 - $21,977, 1996 - $22,480; and Mr. Scott 1998 - $26,238, 1997 -
$20,240, 1996 - $11,400; earnings on the Executive and Director Deferred
Compensation Plan: Mr. Dreier 1997 - $23,056; 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 1998 $4,009,
1997 - $1,905, 1996 - $619; Mr. Mangan 1998 - $738, 1997 - $354, 1996 -
$174; Mr. Garrity 1998 - $834, 1997 - $563, 1996 - $221; Mr. Scardina
1998 - $885, 1997 - $532, 1996 - $218; and Mr. Scott 1998 - $689, 1997 -
$283, 1996 - $126; deferred cash and earnings under the TRG Incentive
Plan: Mr. Dreier 1998 - $286,392, 1997 - $123,503; Mr. Mangan 1998 -
$106,427, 1997 - $47,059; Mr. Garrity 1998 - $65,905, 1997 - $29,007;
Mr. Scardina 1998 - $71,642, 1997 - $31,588; and Mr. Scott 1998 -
$65,792, 1997 - $26,332; and reimbursements for relocation expenses of
Mr. Scott for 1997 in the amount of $47,040.
8
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 an
exercise price of $12.75 per share. 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. This agreement was
amended and restated as of January 28, 1997. The agreement provides for
automatic 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 $312,000 per year
and an annual cash bonus with a target award of 75 percent of his base salary.
If Mr. Mangan's employment is terminated without "cause," Mr. Mangan receives
salary and benefits for the remaining term of the agreement or 18 months,
whichever is greater, and a prorated bonus payment for the year of
termination. In the event of a termination of Mr. Mangan's employment within
three years of a "change-in-control" of the Corporation, he receives a payment
equal to three times his highest annual salary and bonus, accelerated vesting
under benefit plans of the Corporation, and relocation and outplacement
assistance.
The Corporation has senior executive severance agreements pursuant to
which, upon termination of employment within three years of a "change-in-
control" of the Corporation, certain executive officers, including Messrs.
Garrity, Scardina, and Scott, receive a cash payment equal to two times the
highest annual compensation, as defined in the agreement, paid during the
three years prior to termination, accelerated vesting under benefit plans of
the Corporation, and relocation and outplacement assistance.
9
<TABLE>
<CAPTION>
STOCK OPTION GRANTS IN 1998
Potential Realizable Value at
Assumed Annual Rates of Stock Price
Number of Percent of Total Appreciation for 10-Year Option Term
Securities Underlying Options Granted to Exercise Price Expiration
Name Options Granted(a) Employees in 1998 ($/Share) Date 5% 10%
- ------- --------------------- ------------------ -------------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Mr. Mangan 20,000 3.1 $23.50 01/02/08 $285,400 $732,848
15,000 2.4 $25.19 09/17/08 $237,604 $602,136
Mr. Garrity 20,000 3.1 $23.50 01/02/08 $285,400 $732,848
15,000 2.4 $25.19 09/17/08 $237,604 $602,136
Mr. Scardina 20,000 3.1 $23.50 01/02/08 $285,400 $732,848
15,000 2.4 $25.19 09/17/08 $237,604 $602,136
Mr. Scott 20,000 3.1 $23.50 01/02/08 $285,400 $732,848
15,000 2.4 $25.19 09/17/08 $237,604 $602,136
(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.
</TABLE>
<TABLE>
<CAPTION>
AGGREGATED STOCK OPTION EXERCISES IN 1998
AND YEAR-END STOCK OPTION VALUES
Number of Securities Underlying Value of Unexercised In-the-
Unexercised Options at Year End Money Options at Year End
Shares Acquired Value ------------------------------- ---------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
------------ --------------- -------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Dreier 0 $ 0 259,600 140,400 $3,188,800 $2,214,950
Mr. Mangan 0 $ 0 64,800 55,200 $ 948,150 $ 464,038
Mr. Garrity 10,000 $135,000 21,550 48,450 $ 307,256 $ 364,931
Mr. Scardina 0 $ 0 32,750 48,450 $ 427,906 $ 364,931
Mr. Scott 10,000 $127,175 32,150 48,450 $ 387,906 $ 364,931
</TABLE>
10
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; Walter Industries, Inc.; and Toll Brothers, Inc.
[Performance Graph Appears Here]
In the printed version of the document, a line graph appears which depicts the
following plot points:
12/93 12/94 12/95 12/96 12/97 12/98
The Ryland Group, Inc. 100 77 75 76 135 167
S&P 500 100 101 139 171 229 294
Dow/Home Construction Index 100 68 101 97 150 160
(a) Assumes that the value of the Common Stock of the Corporation and the
Indices were $100 on January 1, 1994, and that all dividends were
reinvested.
11
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 1998 for any person subject to
Section 16 of the Securities Exchange Act of 1934 (The Exchange Act), there
were no persons who failed to file on a timely basis during 1998 reports
required by Section 16(a) of The Exchange Act.
STOCKHOLDERS' PROPOSALS
Proposals of stockholders intended to be presented at the next Annual
Meeting of Stockholders of the Corporation must be received by the Corporation
on or before November 10, 1999, 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 2000 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 Meeting of Stockholders 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 2000 Annual Meeting of Stockholders is
expected to be held on the third Wednesday of April in 2000, 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.
12
PARTICIPANT INSTRUCTION CARD
THE RYLAND GROUP, INC.
Participant Proxy Solicited on Behalf of the Board of Directors
Annual Meeting of Stockholders - April 21, 1999
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, 1999, and hereby instructs
Vangaurd 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 21, 1999
at 8:00 A.M., Eastern Daylight Time, and at any adjornments 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, Ms. Frecon,
Mr. Gaw, Mr. Harlan, 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 21, 1999
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, 1999, 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 21, 1999, at 8:00 A.M., Eastern Daylight Time,
and at any adjornments 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 othe 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, Ms. Frecon,
Mr. Gaw, Mr. Harlan, 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 promply 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, gaurdian or corporate officer, please
give your full title as such.
