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Exhibit 10.7
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
(AMENDED AND RESTATED ON SEPTEMBER 20, 2000)
AMENDED AND RESTATED EMPLOYMENT AGREEMENT dated as of the 21st day of April
1999, by and between The Ryland Group, Inc., a Maryland corporation (the
"Company"), and R. Chad Dreier (the "Executive").
In consideration of the mutual covenants and agreements of the parties set forth
in this Agreement, and other good and valuable consideration the receipt and
sufficiency of which are acknowledged, the parties agree as follows:
1. AMENDMENT AND RESTATEMENT OF EMPLOYMENT AGREEMENT. This Employment
Agreement amended and restated on September 20, 2000 the Employment
Agreement dated and effective as of April 21, 1999 between the Company
and the Executive.
2. TERM OF EMPLOYMENT. The Company agrees to employ the Executive until
December 31, 2003. This Agreement shall automatically renew for a one
(1) year renewal period on December 31, 2003, or for a one (1) year
renewal period at the end of each renewal period until terminated in
accordance with the terms of this Agreement. Either party may terminate
this Agreement on December 31, 2003, or at the end of each one (1) year
renewal period by giving the other party written notice of termination
delivered at least one hundred eighty (180) days prior to December 31,
2003, or any renewal period.
If at any time during the initial term or any renewal period, a Change
of Control of the Company occurs (as defined in Section 7.2 below), the
term of this Agreement shall be the longer of (a) three (3) years beyond
the effective date of the Change of Control or (b) the term as provided
in this Section 2.
3. POSITION AND RESPONSIBILITIES. The Executive shall serve as the Chairman
of the Board of Directors, President and Chief Executive Officer of the
Company. In his capacity as Chairman of the Board, President and Chief
Executive Officer, the Executive shall be the Company's highest ranking
executive officer and shall have full authority and responsibility for
formulating and administering the plans and policies of the Company
subject to the control of the Board of Directors,.
4. PERFORMANCE OF DUTIES. The Executive shall devote his full time
attention and energies to the Company's business and will not engage in
consulting work or any business for his own account or for any person,
firm or corporation. The Executive may serve as a director of other
companies so long as this service does not interfere with the
performance of his duties with the Company.
5. COMPENSATION. For all services to be rendered by the Executive during
the term of this Agreement, the Company shall pay and provide to the
Executive:
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5.1 BASE SALARY. The Company shall pay the Executive a Base Salary in
the fixed amount of seven hundred fifty thousand dollars
($750,000) per year for the term of this Employment Agreement.
This Base Salary is paid in installments consistent with the
normal payroll practices of the Company.
5.2 ANNUAL BONUS. The Executive is eligible to receive an annual cash
bonus (the "Bonus") in respect of each fiscal year during the
term of this Agreement equal to one and one-fifth percent (1.2%)
of the amount of Ordinary Course Pre-Tax Income that equals or is
less than the prior fiscal year's Ordinary Course Pre-Tax Income
and one and one-half percent (1.5%) of the amount of Ordinary
Course Pre-Tax Income that exceeds the prior fiscal year's
Ordinary Course Pre-Tax Income. "Ordinary Course Pre-Tax Income"
is the consolidated pre-tax income of the Company and its
subsidiaries as reflected in the audited consolidated financial
statements of the Company, as adjusted in good faith by the
Compensation Committee to eliminate the effect of non-recurring
gains and losses and other items not reflective of the ongoing
ordinary course of business and operating performance of the
Company. The Bonus shall be payable to the Executive in cash
within sixty (60) days after the end of each fiscal year during
the term of this Agreement.
5.3 INCENTIVE PLANS. The Executive shall participate in the TRG
Incentive Plan and shall have an individual target performance
award equal to 120% of the Executive's Base Salary. The Executive
shall participate in any additional incentive award programs
available to executive officers of the Company. This
participation is on a basis which is commensurate with the
Executive's position with the Company.
5.4 OTHER BENEFITS. The Executive is entitled to receive other
employee benefits, such as disability, group life, sickness,
accident and health insurance programs, split-dollar life
insurance programs and other perquisites that are available to
executive officers of the Company. This participation is on a
basis which is commensurate with the Executive's position with
the Company.
5.5 STOCK OPTION
(a) Prior Grant of Stock Option (January 1997)
Pursuant to the terms and conditions of The Ryland Group,
Inc. 1992 Equity Incentive Plan (the "Plan), the Company
previously granted to the Executive on January 28, 1997,
the ability to exercise during the period ending at the
close of business on January 28, 2007, the option to
purchase from the Company at a price of $12.75 per share
up to 150,000 shares of the Company's Common Stock. THE
OPTION GRANTED SHALL NOT BE TREATED AS AN "INCENTIVE STOCK
OPTION" WITHIN THE MEANING OF SECTION 422 OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED. The option is governed
and controlled by all terms of the Plan.
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The option may be exercised in whole or in part in
accordance with the following vesting schedule:
The aggregate number of shares of Common Stock optioned by
this Agreement are divided into three (3) installments.
<TABLE>
<S> <C> <C> <C> <C>
The first installment for 50,000 shares was exercisable in whole or in part beginning 1/29/98
The second installment for 50,000 shares was exercisable in whole or in part beginning 1/29/99
The third installment for 50,000 shares is exercisable in whole or in part beginning 1/29/00
</TABLE>
(b) Current Grant of Stock Option.
Pursuant to the terms and conditions of the Plan, the
Company grants to the Executive during the period ending
at the close of business on April 21, 2009, the option to
purchase from the Company at a price of $25.50 per share
up to 200,000 shares of the Company's Common Stock. THE
OPTION GRANTED SHALL NOT BE TREATED AS AN "INCENTIVE STOCK
OPTION" WITHIN THE MEANING OF SECTION 422 OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED. The option is governed
and controlled by all terms of the Plan.
The option may be exercised in whole or in part in
accordance with the following vesting schedule:
The aggregate number of shares of Common Stock optioned
pursuant to this Section 5.5(b) of this Agreement are
divided into three (3) installments.
<TABLE>
<S> <C> <C> <C> <C>
The first installment for 70,000 shares is exercisable in whole or in part beginning 4/21/00
The second installment for 70,000 shares is exercisable in whole or in part beginning 4/21/01
The third installment for 60,000 shares is exercisable in whole or in part beginning 4/21/02
</TABLE>
(c) Exercise of Option.
In case an installment is not immediately exercisable, the
Board of Directors or the Compensation Committee of the
Board may in its discretion accelerate the time at which
the installment may be exercised. To the extent not
exercised, installments shall accumulate and be
exercisable by the Executive during the Option Period.
Continued accrual and vesting of installments shall cease
immediately upon termination of employment for any reason
whatsoever, subject to acceleration by the Board of
Directors or the Compensation Committee.
(d) Payment of Exercise Price.
The Executive shall pay the exercise price in the
following ways:
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(i) cash payment (by certified check, bank draft or
money order payable to the order of the Company).
(ii) if approved by the Company, cash payment may be
made from the proceeds of an immediate sale of
Common Stock receivable upon the exercise of the
option; or
(iii) if approved by the Company, delivery of Common
Stock (including executed stock powers attached
thereto);
The payment of the exercise price shall be delivered with
a notice of exercise, which notice will be in a form
provided by the Company.
The Company shall, subject to the receipt of withholding
tax, issue to the Executive the stock certificate for the
number of shares of Common Stock with respect to which the
option is exercised.
The value of shares of Common Stock used as payment for
the exercise of an option shall be the closing price of
such shares on the New York Stock Exchange on the date of
exercise of an option or as otherwise determined by the
Company, the Board of Directors or the Compensation
Committee of the Board of Directors.
(e) Termination
The Options shall terminate upon the happening of the
earliest of the following events:
(i) In accordance with Sections 5.5 (a) and (b) above.
(ii) The expiration of 90 days after the date of
termination of the Executive's employment, except
in the case of death, Disability (defined below) or
retirement. During this period, the Executive shall
have the right to exercise the Option to the extent
it is exercisable on the termination date.
(iii) The expiration of three (3) years after the date of
death of the Executive if death occurs during the
term of this Agreement. During this period, the
Executive's estate, personal representative or
beneficiary shall have the right to exercise the
Option to the extent it is exercisable on the date
of death.
(iv) The expiration of three (3) years after the date
the Executive's employment is terminated due to
Disability or retirement. During this period, the
Executive shall have the right to exercise the
Option to the extent it is exercisable on the date
of termination.
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(f) Merger, Consolidation or Share Exchange
After any merger, consolidation or share exchange in which
the Company is the surviving or resulting corporation, the
Executive shall be entitled, upon the exercise of an
Option, to receive the number and class of shares of stock
or other consideration to which the Executive would have
been entitled, if, immediately prior to such merger,
consolidation or share exchange, the Executive had
exercised the Option in accordance with and subject to the
terms of this Agreement and the Plan. If the Company is
not the surviving or resulting corporation in any merger,
consolidation or share exchange, the surviving or
resulting corporation shall tender stock options to
purchase its shares on terms and conditions that
substantially preserve the rights and benefits under this
Option.
5.6 STOCK UNITS
(a) Prior Grant of Stock Units (January 1997)
Pursuant to the terms and conditions of the Plan, the
Company previously granted to the Executive an award of
45,000 Stock Units pursuant to Section 10 of the Plan.
The Stock Units become vested and payable in accordance
with the following vesting schedule:
VESTING DATE
------------
15,000 Stock Units November 1, 1999
30,000 Stock Units November 1, 2000
(b) Current Grant of Stock Units
Pursuant to the terms and conditions of the Plan, the
Company grants to the Executive an award of 90,000 Stock
Units pursuant to Section 10 of the Plan.
Subject to Subsection (c) below, the Stock Units become
vested and payable in accordance with the following
vesting schedule:
VESTING DATE
------------
30,000 Stock Units February 15, 2001
30,000 Stock Units February 15, 2002
unless the Company's Return on
Equity (ROE) for the year ended
December 31,
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2000 exceeds the average ROE for
fiscal years ending in the year
2000 for the homebuilding companies
listed below (the "Competitor
Group"), in which case this
"Vesting Date" is the earlier of
June 1, 2001 or when the
competitive data becomes available
and has been reviewed and approved
by the Compensation Committee.
30,000 Stock Units February 15, 2003
unless the Company's ROE for the
year ended December 31, 2001
exceeds the average ROE for fiscal
years ending in the year 2001 for
the Competitor Group, in which case
this "Vesting Date" is June 1, 2002
or when the competitive data
becomes available and has been
reviewed and approved by the
Compensation Committee.
The Company's ROE for the fiscal years used in the
determination of the "Vesting Dates" above is the
Company's consolidated net earnings after taxes and
extraordinary items and before the payment of dividends on
the Company's common and preferred stock divided by the
Company's beginning common stockholder's equity during
such fiscal year period, all of which is determined under
generally accepted accounting principles on a basis
consistent with the Company's audited consolidated
financial statements.
The following homebuilding companies are the "Competitor
Group" for the purpose of the foregoing determination of
the "Vesting Dates":
Beazer Homes Lennar
Centex M/I Schottenstein
DR Horton MDC Holdings
K. Hovnanian NVR
Kaufman & Broad Pulte
Toll Brothers
(c) Vesting of Stock Units.
If the Executive terminates employment with the Company
for any reason prior to any vesting date, all unvested
Stock Units are immediately forfeited and cancelled.
Notwithstanding the foregoing, all unvested Stock Units
shall vest and be paid by the Company to the Executive
upon the occurrence of a Change of Control (as defined in
Section 7.2 below).
(d) Payment of Stock Units.
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Upon each vesting date on which the Executive is employed
by the Company, the number of Stock Units which become
vested on such date shall be paid to the Executive in an
equal number of shares of Common Stock of the Company and,
upon payment, such Stock Units are automatically fully
paid and cancelled.
(e) Dividend Equivalents.
As of each dividend payment date with respect to Common
Stock, the Executive shall receive a cash dividend
equivalent payment equal to the product of (i) the
per-share cash dividend amount payable with respect to
each share of Common Stock on that date and (ii) the total
number of Stock Units which have not been vested, paid or
cancelled as of the record date corresponding to such
dividend payment date.
(f) Delivery of Stock Certificates.
The stock certificate for shares of Common Stock issued to
the Executive in payment of any vested Stock Unit shall be
delivered to the Executive on the applicable vesting date.
(g) Tax Matters.
If any taxes, including income taxes or withholding taxes,
result or become due and payable as a result of the Stock
Units, including the grant, vesting and payment of the
Stock Units to the Executive, the Executive shall receive
a payment sufficient to place the Executive in the same
net after-tax position that the Executive would have been
in had such tax not resulted or been imposed and had the
Executive not incurred any interest charges or penalties,
if any, with respect to the imposition of such tax.
(h) Rights of Executive With Respect to Stock Units.
The Executive shall have no rights as a stockholder with
respect to any Stock Unit or any share of Common Stock to
be issued with respect to any Stock Unit until the date of
vesting and payment. The Executive's rights with respect
to Stock Units shall be the rights of a general unsecured
creditor of the Company until the Stock Units vest and
shares of Common Stock are actually issued to the
Executive.
(i) Adjustments.
The number of Stock Units shall be appropriately adjusted,
as determined by the Board of Directors or Compensation
Committee of the Board of Directors pursuant to the Plan,
in the event of any stock split, combination or similar
transaction.
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(j) Stock Units Subject to Terms and Conditions of the Plan.
The Stock Units and all shares of Common Stock issued with
respect to Stock Units shall be subject to the terms and
conditions of the Plan, which is incorporated herein by
this reference.
6. EMPLOYMENT TERMINATION.
6.1 TERMINATION DUE TO RETIREMENT OR DEATH. In the event the
Executive's employment is terminated by reason of retirement or
death, the Executive's benefits shall be determined in accordance
with the Company's retirement, survivor's benefits, insurance or
other applicable program then in effect. Upon the effective date
of termination, the Company's obligation to pay and provide the
compensation described in Section 5 shall expire, except to the
extent the benefits described in Section 5 continue after
retirement or death. In addition, the Company shall pay to the
Executive or the Executive's beneficiaries or estate a pro rata
share of the Bonus for the year in which the termination occurs
based on the results of the Company for that fiscal year. This
pro rata Bonus shall be determined by multiplying the Bonus for
the applicable fiscal year by a fraction, the numerator of which
is the number of days in such fiscal year prior to the date of
termination and the denominator of which is the total number of
days in such fiscal year. The pro rata Bonus shall be paid within
sixty (60) days of the end of the applicable fiscal year.
6.2 TERMINATION DUE TO DISABILITY. In the event the Executive becomes
Disabled (as defined below) and is unable to perform his duties
for more than one hundred twenty (120) days during any period of
twelve (12) months or, in the reasonable determination of the
Board of Directors, the Executive's Disability (as defined below)
will exist for more than one hundred twenty (120) days, the
Company has the right to terminate the Executive's employment and
the Company's obligation to pay and provide the compensation
described in Section 5 shall expire, except to the extent the
benefits described in Section 5 continue after Disability. In
addition, the Company shall pay to the Executive a pro rata share
of the Bonus for the year in which the termination occurs based
on the results of the Company for
that fiscal year determined as provided in Section 6.1. The pro
rata Bonus shall be paid within sixty (60) days of the end of the
applicable fiscal year.
The term "Disabled" or "Disability" means the incapacity of the
Executive, due to injury, illness, disease or bodily or mental
infirmity, to engage in the performance of his duties with the
Company. A Disability is determined by the Board of Directors
upon receipt of and in reliance on competent medical advice from
one or more individuals selected by the Board who are qualified
to give professional medical advice.
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6.3 VOLUNTARY TERMINATION BY THE EXECUTIVE. The Executive may
terminate this Agreement at any time by giving the Board of
Directors written notice of intent to terminate delivered at
least ninety (90) days prior to the effective date of such
termination. Upon the expiration of this ninety (90) day period,
the termination by the Executive shall become effective. The
Company shall pay the Executive his Base Salary through the
effective date of termination plus all benefits to which the
Executive has a vested right at that time. The Executive shall
not receive a Bonus for the fiscal year in which voluntary
termination occurs. Upon the date of termination, the Company and
the Executive shall have no further obligations under this
Agreement except as set forth in Sections 8 and 9.
6.4 TERMINATION BY THE COMPANY WITHOUT CAUSE. Other than during a
Change of Control Period (as defined in Section 7.2), the Board
of Directors may terminate the Executive's employment for reasons
other than death, Disability, retirement or for Cause (as defined
in Section 6.5) by notifying the Executive in writing at least
thirty (30) days prior to the effective date of termination. Upon
the expiration of this thirty (30) day period, the termination by
the Company is effective. Within thirty (30) days after the date
of termination, the Company shall pay to the Executive a lump sum
cash payment equal to the greater of (a) the Base Salary in
effect for the remaining term of this Agreement, or (b)
twenty-four (24) months of the Base Salary in effect as of the
effective date of termination, and shall provide to the Executive
a continuation of his health and welfare benefits for the greater
of (a) such remaining term of this Agreement or (b) twenty-four
(24) months. If the Company is unable to provide health and
welfare benefits as required by this Section 6.4, the Company
shall provide equivalent benefits to the Executive or pay to the
Executive a lump sum cash payment equal to the value of the
benefits which the Company is unable to provide. The Company
shall pay the Executive an annual Bonus for the year in which
termination occurs based upon the performance of the Company
through the end of the fiscal year in which the termination
occurs. This annual Bonus shall be paid within sixty (60) days of
the end of the applicable fiscal year. The Company shall also pay
the Executive all benefits to which the Executive has a vested
right at the time of termination. For purposes of this Section
6.4: (i) with respect to the fiscal year in which termination
occurs, the Executive shall be fully vested in any prior year
awards that remain unvested or awards made for the fiscal year in
which termination occurs under the TRG Incentive Plan or any
successor plan, and (ii) all vested awards under any incentive
programs shall be paid notwithstanding any provision of the
governing plan or program calling for forfeiture of benefits upon
termination. If for any reason the Company is unable to comply
with the preceding sentence, the Company shall pay the Executive
a lump-sum cash payment equal to the value of the benefits or
awards it is unable to vest, pay or give credit for. Upon the
date of termination, the Company and the Executive shall have no
further obligations under this Agreement except as set forth in
Sections 8 and 9.
6.5 TERMINATION FOR CAUSE. The Board of Directors may terminate the
Executive's employment at any time for "Cause." "Cause" is
determined by the Board of
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Directors and is defined as fraud, embezzlement, theft or other
criminal act constituting a felony under U.S. laws, or the
failure of the Executive to perform any material obligations
under this Agreement for reasons other than the Executive's
death, Disability or retirement. In the event this Agreement is
terminated by the Board of Directors for Cause, the Company shall
pay the Executive his Base Salary through the date of termination
and the Executive shall forfeit all rights and benefits he is
entitled to receive including any right to a Bonus for the fiscal
year in which the termination occurs. The Company and the
Executive thereafter shall have no further obligations under this
Agreement except as set forth in Sections 8 and 9.
6.6 TERMINATION FOR GOOD REASON. The Executive may terminate this
Agreement for Good Reason (as defined below) by giving the Board
of Directors thirty (30) days written notice of intent to
terminate, which notice sets forth the facts and circumstances
for the termination. Upon the expiration of this thirty (30) day
period, the termination by the Executive is effective and the
Company shall pay the Executive the benefits set forth in Section
6.4 unless the provisions of Section 7 apply.
"Good Reason" means, without the Executive's written consent, the
occurrence of any of the following:
(a) The assignment of the Executive to duties materially
inconsistent with, or a reduction or alteration in the
nature or status of, the Executive's authorities, duties,
responsibilities or status as an executive officer of the
Company from those in effect during the preceding year;
(b) The Company requires the Executive to be based at a
location which is more than fifty (50) miles from the
Executive's then current primary residence;
(c) A reduction by the Company in the Executive's Base Salary;
or
(d) The failure of the Company to obtain an agreement from any
successor to the Company to perform this Agreement.
7. CHANGE IN CONTROL.
7.1 TERMINATION AFTER CHANGE OF CONTROL. In lieu of the compensation
and benefits provided in Sections 5 or 6, which will be
superseded and replaced by the provisions of this Section 7, the
following payments and benefits will be provided to the Executive
by the Company (in addition to any compensation or benefits to
which the Executive may otherwise be entitled under any other
agreement, plan or arrangement with the Corporation, other than a
plan, policy or other arrangement providing for payments due to
severance of employment) in the event of a Termination of
Employment (as defined below) during a Change of Control Period
(as defined below) of the Company:
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(a) Lump Sum Cash Payment. On or before the Executive's last
day of employment with the Company or any successor
corporation, the Company or any successor corporation will
pay the Executive an amount equal to the Executive's
unpaid Base Salary for the year in which the Termination
of Employment occurs and a pro rata Bonus through the date
of Termination of Employment determined in accordance with
Section 6.1. Also, on or before the Executive's last day
of employment with the Company or any successor
corporation, the Company or any successor corporation will
pay the Executive a lump sum cash payment equal to three
(3) times the highest Annual Compensation (as defined
below) for any of the three (3) calendar years immediately
preceding the date of Termination of Employment.
(b) Accelerated Vesting and Supplemental Payments. All rights,
awards and benefits of the Executive provided pursuant to
this Agreement, the TRG Incentive Plan or other incentive
plan, Stock Units granted pursuant to this Agreement, any
deferred compensation plans (including the Retirement
Savings Opportunity Plan, Executive and Director Deferred
Compensation Plan and any successor or replacements plans)
and any incentive, bonus, stock option, equity incentive,
restricted stock, insurance or split dollar insurance
program, relocation equity program, or other benefit plans
of the Company in which the Executive participates prior
to the Change of Control shall immediately vest in full
and the Executive shall receive the amount of these
rights, awards and benefits in a cash lump sum payment or
other form of compensation as provided in accordance with
the applicable benefit, document or plan within thirty
(30) days of the date of Termination of Employment. To the
extent that any of the plans of the Company would not
under applicable law permit accelerated vesting, the
Executive will be paid supplementally or receive
equivalent payments by the Company in the amount of
additional benefits or payments that would be payable if
full vesting had taken place under these plans as of the
date of Termination of Employment. All supplemental
payments are provided on an unfunded basis, are not
intended to meet the qualification requirements of Section
401 of the Internal Revenue Code, and shall be payable
solely from the general assets of the Company or any
successor corporation or affiliate of such successor
corporation.
(c) Insurance and Other Special Benefits. The Executive's
participation in the life, accident and health insurance,
employee welfare benefit plans (as defined in the Employee
Retirement Income Security Act of 1974) and supplemental
early retirement plan, split dollar insurance program,
personal health services allowance, health or social club
benefits, benefits outlined in the Executive's
Compensation Program and any other fringe benefits (the
"Benefits") provided to the Executive prior to the Change
of Control shall be continued or equivalent benefits
provided by the Company or any successor corporation or
affiliate of such successor
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corporation (the "Responsible Company") at no cost to the
Executive for a period of two (2) years from the date of
the Executive's Termination of Employment. If for any
reason the Responsible Company is unable to continue the
Benefits as required by the preceding sentence, the
Responsible Company shall pay to the Executive a lump sum
cash payment equal to the value of the Benefits which the
Responsible Company is unable to provide.
(d) Relocation Assistance. Should the Executive move his
residence in order to pursue professional or career
opportunities within two (2) years after the date of the
Executive's Termination of Employment, he will be
reimbursed by the Responsible Company for any expenses
incurred in that relocation, including taxes payable on
the reimbursement, as well as any reduction in value from
the original purchase price of the Executive's residence.
Benefits under this paragraph will include assistance in
and payment of all costs and commissions related to
selling the Executive's home, moving costs, as well as all
other assistance and benefits which are provided by the
Company under its relocation plan as in effect immediately
prior to the Change of Control.
(e) Stock Rights. All stock options, stock appreciation
rights, stock purchase rights, restricted stock rights and
any similar rights which the Executive holds shall become
fully vested and be exercisable on the date of Termination
of Employment.
(f) Outplacement Assistance. The Executive shall be reimbursed
by the Company for the cost of all outplacement services
obtained by the Executive within the two (2) year period
after the date of Termination of Employment provided the
total reimbursement shall be limited to an amount equal to
fifteen percent (15%) of the Executive's Annual
Compensation for the calendar year immediately preceding
the date of Termination of Employment. Alternatively, the
Executive, upon request, will receive, in lieu of the
foregoing reimbursement, a cash payment equal to ten
percent (10%) of the Executive's Annual Compensation for
the calendar year immediately preceding the date of the
Executive's Termination of Employment.
7.2 DEFINITIONS.
(a) A "Change of Control" shall take place on the date of the
earlier to occur of any of the following events:
(i) The acquisition by any person, other than the
Company or any employee benefit plan of the
Company, of beneficial ownership of 20% or more of
the combined voting power of the Company's then
outstanding voting securities;
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(ii) The first purchase under a tender offer or exchange
offer, other than an offer by the Company or any
employee benefit plans of the Company, pursuant to
which shares of common stock have been purchased;
(iii) During any period of two (2) consecutive years,
individuals who at the beginning of such period
constitute the Board of Directors of the Company
cease for any reason to constitute at least a
majority thereof, unless the election or the
nomination for the election by stockholders of the
Company of each new director was approved by a vote
of at least two-thirds (2/3) of the directors then
still in office who were directors at the beginning
of the period; or
(iv) Approval by stockholders of the Company of a
merger, consolidation, liquidation or dissolution
of the Company, or the sale of all or substantially
all of the assets of the Company.
(b) "Annual Compensation" shall mean the sum of the Base
Salary paid or earned and the Bonus paid or earned, even
though paid in a subsequent year, to the Executive, vested
or unvested, and all amounts credited to the Executive,
vested or unvested, under any incentive compensation or
other benefit or compensation plans of the Company in
which the Executive participates during a calendar year.
(c) A "Termination of Employment" shall take place in the
event that (a) the Executive's employment is terminated
for any reason other than as a consequence of death,
disability or normal retirement, (b) the Executive is
assigned any duties or responsibilities that are
inconsistent in any respect with his position, duties,
responsibilities or status prior to a Change of Control
Period, (c) the Company requires the Executive to be based
at a location which is more than fifty (50) miles from the
Executive's then current primary residence, (d) the
Executive's Base Salary, bonus or any other benefits,
incentive compensation or compensation plans are reduced,
(e) the Executive experiences in any year a reduction in
the ratio of his incentive compensation, bonus or other
such payments to his base compensation or (f) the Company
gives the Executive notice of an intent not to renew or
does not renew the term of this Agreement at any time
during a Change of Control Period.
(d) A "Change of Control Period" shall mean the period of time
commencing with the date of a Change of Control or on
which the Company becomes aware of or enters into any
discussions or negotiations that could involve a Change of
Control or a proposed transaction which could result in a
Change of Control, and ending on the first to occur of:
(a) two (2) years after the effective date of the Change
of Control, or (b) the date on which the proposed Change
of Control is no longer discussed or proposed to occur.
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7.3 SUBSEQUENT IMPOSITION OF EXCISE TAX. If it is ultimately
determined by a court or pursuant to a final determination by the
Internal Revenue Service that any portion of the payments to the
Executive is considered to be an "excess parachute payment,"
subject to the excise tax under Section 4999 of the Code, the
Executive shall be entitled to receive a lump sum cash payment
sufficient to place the Executive in the same net after-tax
position, computed by using the "Special Tax Rate" as such term
is defined below, that the Executive would have been in had such
payment not been subject to such excise tax, and had the
Executive not incurred any interest charges or penalties with
respect to the imposition of such excise tax. For purposes of
this Agreement, the "Special Tax Rate" shall be the highest
effective Federal and state marginal tax rates applicable to the
Executive in the year in which the payment contemplated under
this Section 7.3 is made.
8. NONCOMPETITION AND PROPRIETARY INFORMATION.
8.1 PROHIBITION ON COMPETITION. During the term of this Agreement and
for twenty-four (24) months following the expiration or
termination of this Agreement as a result of notice of nonrenewal
by Executive pursuant to Section 2 or following the effective
date of a termination of this Agreement by the Executive pursuant
to Section 6.3 (the "Restrictive Period"), the Executive shall
not, as a stockholder, partner, employee or officer, engage,
directly or indirectly, in any business or enterprise which is
"in competition" with the Company. For purposes of this
Agreement, a business or enterprise will be "in competition" if
it is engaged in any significant business activity of the Company
or its subsidiaries within the United States.
The Executive shall be allowed to purchase and hold for
investment less than three percent (3%) of the shares of any
corporation whose shares are regularly traded on a national
securities exchange or in the over-the-counter market.
8.2 DISCLOSURE OF INFORMATION. The Executive recognizes that he has
access to and knowledge of certain confidential and proprietary
information of the Company which is essential to the performance
of his duties under this Agreement. The Executive will not,
during or after the term of his employment by the Company, in
whole or in part, disclose such information to any person, firm,
corporation, association or other entity for any reason or
purpose whatsoever, nor shall he make use of any such information
for his own purposes.
8.3 COVENANTS REGARDING OTHER EMPLOYEES. During the term of this
Agreement and the Restrictive Period, the Executive agrees not to
attempt to induce any employee of the Company to terminate his or
her employment with the Company, accept employment with any
competitor of the Company, or interfere in a similar manner with
the business of the Company.
8.4 SPECIFIC PERFORMANCE. The parties recognize that the Company will
have no adequate remedy at law for breach of the requirements of
this Section 8 and, in the
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event of such breach, the Company and the Executive agree that,
in addition to the right to seek monetary damages, the Company
will be entitled to a decree of specific performance, mandamus,
or other appropriate remedy to enforce performance of these
requirements.
9. INDEMNIFICATION. The Company covenants and agrees to indemnify and hold
harmless the Executive fully, completely and absolutely against any and
all actions, suits, proceedings, claims, demands, judgments, costs,
expenses (including reasonable attorney's fees), losses and damages
resulting from the Executive's good faith performance of his duties
under this Agreement subject to the requirements and limitations imposed
by the Company's Articles of Incorporation and By-Laws and applicable
law.
10. ASSIGNMENT.
10.1 ASSIGNMENT BY COMPANY. This Agreement may be assigned or
transferred to, and shall be binding upon and inure to the
benefit of, any successor of the Company, and any successor shall
be deemed substituted for all purposes of the "Company" under the
terms of this Agreement. As used in this Agreement, the term
"successor" shall mean any person, firm, corporation or business
entity which at any time, whether by merger, purchase or
otherwise acquires all or substantially all of the assets or the
business of the Company. Notwithstanding such assignment, the
Company shall remain jointly and severally liable for all
obligations hereunder.
10.2 ASSIGNMENT BY EXECUTIVE. The services to be provided by the
Executive to the Company are personal to the Executive and the
Executive's duties may not be assigned by the Executive. This
Agreement shall, however, inure to the benefit of and be
enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive dies while any amounts
payable to the Executive remain outstanding, all such amounts
shall be paid to the Executive's designee, estate or
beneficiaries.
11. DISPUTE RESOLUTION. Either the Executive or the Company may elect to
have any good faith dispute or controversy arising under or in
connection with this Agreement settled by arbitration by providing
written notice of such election to the other party specifying the nature
of the dispute to be arbitrated. If arbitration is selected, such
proceeding shall be conducted before a panel of three (3) arbitrators
sitting in a location agreed to by the Company and the Executive within
fifty (50) miles from the location of the Executive's principal place of
employment in accordance with the rules of the American Arbitration
Association. Judgment may be entered on the award of the arbitrators in
any court having competent jurisdiction. To the extent that the
Executive prevails in any litigation or arbitration seeking to enforce
the provisions of this Agreement, the Executive shall be entitled to
reimbursement by the Company of all expenses of such litigation or
arbitration, including reasonable legal fees and expenses and necessary
costs and disbursements.
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12. MISCELLANEOUS.
12.1 ENTIRE AGREEMENT. This Agreement supersedes any prior agreements
or understandings, oral or written, between the Executive and the
Company with respect to the subject matter hereof, and
constitutes the entire agreement of the parties with respect
thereto.
12.2 MODIFICATION. This Agreement shall not be varied, altered,
modified, cancelled, changed or in any way amended except by
mutual agreement of the parties in a written instrument executed
by the parties or their legal representatives.
12.3 SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for
any reason, the remaining provisions of this Agreement shall be
unaffected and shall remain in full force and effect.
12.4 TAX WITHHOLDING. The Company may withhold all Federal, state,
city or other taxes required pursuant to any law or governmental
regulation or ruling.
12.5 BENEFICIARIES. The Executive may designate one or more persons or
entities as the primary and/or contingent beneficiaries of any
amounts to be received under this Agreement. Such designation
must be in a signed writing acceptable to the Board of Directors,
the Company or designees of the Board or Company. The Executive
may change such designation at any time.
12.6 BOARD COMMITTEE. Any action taken or determination made by the
Board of Directors under this Agreement may be taken or made by
the Compensation Committee or any other Committee of the Board of
Directors.
12.7 GOVERNING LAW. To the extent not preempted by Federal law, the
provisions of this Agreement shall be construed and enforced in
accordance with the laws of the State of Maryland.
12.8 NOTICE. Any notices, requests, demands or other communications
required by or provided for in this Agreement shall be sufficient
if in writing and sent by registered or certified mail to the
Executive at the last address he has filed in writing with the
Company or, in the case of the Company, at its principal office.
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IN WITNESS WHEREOF, the Executive and the Company have executed this Agreement
as of the date first above written.
THE RYLAND GROUP, INC. EXECUTIVE:
By: /s/ Robert J. Cunnion III /s/ R. Chad Dreier
-------------------------------------------- -------------------------
Robert J. Cunnion III, Senior Vice President R. Chad Dreier
Attest: /s/ Timothy J. Geckle
----------------------------------------
Timothy J. Geckle, Secretary
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