The Ryland Group, Inc.

Dreier Supplemental Executive Retirement Plan II

 

TABLE OF CONTENTS

 

				Page
ARTICLE 1		Definitions		3
ARTICLE 2		Vesting		5
2.1		Vesting in Benefits		5
ARTICLE 3		Benefits		6
3.1		Eligibility for Benefits		6
3.2		Death Benefit		6
3.3		Forms of Payment; Elections		7
3.4		Withholding and Payroll Taxes		7
3.5		Delays		7
ARTICLE 4		Termination, Amendment or Modification of the Agreement		7
4.1		Termination or Amendment		8
4.2		Termination of Agreement		8
ARTICLE 5		Other Benefits and Agreements		8
5.1		Coordination with Other Benefits		8
ARTICLE 6		Administration of this Agreement		8
6.1		Committee Duties		8
6.2		Administration Upon Change In Control		8
6.3		Agents		9
6.4		Binding Effect of Decisions		9
6.5		Indemnity of Committee		9
6.6		Company Information		9
ARTICLE 7		Claims Procedures		9
7.1		Presentation of Claim		10
7.2		Notification of Decision		10
7.3		Review of a Denied Claim		10
7.4		Decision on Review		11
7.5		Legal Action		11
7.6		Named Fiduciary		11
ARTICLE 8		Beneficiary Designation		11

 

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The Ryland Group, Inc.

Dreier Supplemental Executive Retirement Plan II

 

8.1		Beneficiary		11
8.2		Beneficiary Designation; Change; Spousal Consent		11
8.3		Acknowledgement		12
8.4		No Beneficiary Designation		12
8.5		Doubt as to Beneficiary		12
8.6		Discharge of Obligations		12
ARTICLE 9		Trust		12
9.1		Establishment of the Trust		12
9.2		Interrelationship of the Agreement and the Trust		12
9.3		Deposits to the Trust		13
ARTICLE 10		Miscellaneous		14
10.1		Status of Agreement		14
10.2		Unsecured General Creditor		14
10.3		Company’s Liability		14
10.4		Nonassignability		14
10.5		Furnishing Information		14
10.6		Terms		14
10.7		Captions		14
10.8		Governing Law		15
10.9		Validity		15
10.10		Notice		15
10.11		Successors		15
10.12		Spouse’s Interest		15
10.13		Incompetent		15
10.14		Court Order		16
10.15		Distribution in the Event of Taxation		16
10.16		Legal Fees To Enforce Rights After Change in Control		16
10.17		Aggregation of Employers		16
10.18		Aggregation of Plans		17

 

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The Ryland Group, Inc.

Dreier Supplemental Executive Retirement Plan II

 

THE RYLAND GROUP, INC.

DREIER SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN II

 

THIS DREIER SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN II (this “Agreement”) is amended and restated  as of January 1, 2005 between the Ryland Group, Inc. (the “Company”) and R. Chad Dreier (the “Participant”).

 

RECITALS

 

A.                                  The Participant is the Chief Executive Officer of the Company, and the Company desires to have the continued services and counsel of the Participant.

 

B.                                    The purpose of this Agreement is to provide specified benefits to the Participant as more fully described below.

 

AGREEMENT

 

NOW THEREFORE, it is mutually agreed as follows:

 

ARTICLE 1
Definitions

 

For purposes hereof, unless otherwise clearly apparent from the context, the following phrases or terms shall have the following indicated meanings:

 

1.1                                “Beneficiary” shall mean one or more persons, trusts, estates or other entities, designated, in accordance with Article 8, that are entitled to receive the Participant’s benefits under this Agreement upon the Participant’s death.

 

1.2                                “Beneficiary Designation Form” shall mean the form established from time to time by the Committee that the Participant completes, signs and returns to the Committee to designate a Beneficiary.

 

1.3                                “Change in Control” shall mean the first to occur of any of the following events:

 

(a)                                 The acquisition by any person other than the Company or any employee benefit plan of the Company, or more than one person acting as a group, together with stock held by such person or group, of beneficial ownership of more than 50% of the total fair market value or total voting power of the Company’s then outstanding voting securities;

 

(b)                                Any one person or more than one person acting as a group acquires, or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or group, beneficial ownership of 35% or more of the total voting power of the Company’s then outstanding voting securities;

 

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The Ryland Group, Inc.

Dreier Supplemental Executive Retirement Plan II

 

(c)                                 A majority of the members of the Company’s Board of Directors is replaced during any 12-month period by Directors whose appointment or election is not endorsed or approved by a majority of the members of the Board of Directors who were members of the Board of Directors prior to the initiation of the replacement; or

 

(d)                                Any one person or more than one person acting as a group acquires, or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or group, assets of the Company that have a total gross fair market value of 40% or more of the total gross fair market value of all of the assets of the Company immediately prior to the initiation of the acquisition.

 

1.4                                “Claimant” shall have the meaning set forth in Section 7.1.

 

1.5                                “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

 

1.6                                “Committee” shall mean the committee described in Article 6.

 

1.7                                “Company” shall mean The Ryland Group, Inc., a Maryland corporation.

 

1.8                                “Compensation Committee” shall mean the Compensation Committee of the Board of Directors of the Company.

 

1.9                                “Death Benefit” shall mean the Participant’s unpaid Vested SERP II Benefit (i) payable in equal annual installments over the remaining number of years and in the same amounts as such benefit would have been paid to the Participant had the Participant survived, or (ii) the present value equivalent of such benefit stream payable in a lump sum, calculated using an 8% discount rate and an end of the year payment convention for the purpose of calculating the lump sum payment.

 

1.10                          “Election Form” shall mean the form upon which the Participant elects the manner of distribution of his SERP II Benefit and Death Benefit, and shall be made in such form as the Committee may require, including thereon a power of attorney from the Participant’s community property spouse, if any, authorizing the Participant to act on behalf of such spouse in making the election and agreeing to be irrevocably bound by any such act with respect to any community property interest under this Agreement.

 

1.11                          “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time.

 

1.12                          “Retirement” shall mean the Participant’s voluntary or involuntary separation of service from the Company for any reason other than death.

 

1.13                          “Separation from Service” shall mean the Participant’s “separation from service” within the meaning of Code section 409A, treating as a Separation from Service an anticipated permanent reduction in the level of bona fide services to be performed by the Participant to 20% or less of the average level of bona fide services performed by the Participant over the immediately preceding 36

 

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The Ryland Group, Inc.

Dreier Supplemental Executive Retirement Plan II

 

month period (or the full period during which the Participant performed services for the Company, if that is less than 36 months).  Separation from Service includes Retirement.

 

1.14                          “SERP I” shall mean the Dreier Supplemental Executive Retirement Plan entered as of July 1, 2002 between the Company and the Participant.

 

1.15                          “SERP Benefit” shall have the meaning set forth in Section 1.13 of the SERP I.

 

1.16                          “SERP II Benefit” shall mean a benefit in the amount that is the sum of subparagraphs (a) and (b) below:

 

(a) (i) an amount per annum that when added to the SERP Benefit equals $2,400,000 per annum, payable in annual installments for a period of fifteen (15) years, or (ii) the present value of the benefit stream in this Section 1.15 (a)(i) payable in a lump sum, calculated using an 8% discount rate and an end of the year payment convention for the purpose of calculating the lump sum payment.

 

(b)(i) $1,440,000 per annum, payable in annual installments for a period of fifteen (15) years, or (ii) the present value of the benefit stream in this Section 1.15(b)(i) payable in a lump sum, calculated using an 8% discount rate and an end of the year payment convention for the purpose of calculating the lump sum payment.

 

1.17                          “Termination of Employment Without Cause” shall mean the Participant’s involuntary separation of service with the Company other than by reason of the Participant’s (i) willful and continued failure to perform the material duties of his position after receiving notice of such failure and being given reasonable opportunity to cure such failure; (ii) willful misconduct which is demonstrably and materially injurious to the Company; or (iii) conviction of a felony.  No act or failure to act on the part of the Participant shall be considered “willful” unless it is done or omitted to be done in bad faith or without reasonable belief that the action or omission was in the best interest of the Company.

 

1.18                          “Trust” shall mean the trust established pursuant to that certain Master Trust Agreement, dated as of June 27, 2002, between the Company and the trustee named therein, as amended from time to time.

 

1.19                          “Vested SERP II Benefit” shall mean the Participant’s SERP II Benefit multiplied by the applicable vesting percentage set forth in Article 2 of this Agreement.

 

ARTICLE 2
Vesting

 

2.1                                Vesting in Benefits .

 

(a)                                 General .   The Participant shall vest in his SERP II Benefit according to the following vesting schedules, provided that the Participant is continuously employed with the Company through the specified date of vesting:

 

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The Ryland Group, Inc.

Dreier Supplemental Executive Retirement Plan II

 

(i)                                      With respect to the SERP II Benefit set forth in Section 1.15 (a):

 

Date of Vesting		Vesting Percentage
As of December 30, 2004		40%
December 30, 2005		60%
December 30, 2006		80%
December 30, 2007		100%

 

(ii)                                   With respect to the SERP II Benefit set forth in Section 1.15(b):

 

Date of Vesting		Vesting Percentage
December 30, 2005 through December 30, 2007		0%
December 30, 2008		33 1/3%
December 30, 2009		66 2/3%
December 30, 2010		100%

 

(b)                                Accelerated Vesting .  Notwithstanding anything to the contrary in this Section 2.1, the Participant shall immediately become 100% vested in the SERP II Benefit upon the occurrence of a Change in Control or a Termination of Employment Without Cause.

 

ARTICLE 3
Benefits

 

3.1                                Eligibility for Benefits .

 

(a)                                 SERP II Benefit .  Upon the first to occur of a Change in Control or Separation from Service, the Participant is eligible to receive his Vested SERP II Benefit.

 

(b)                                Commencement of Payment of the SERP II Benefit . The payment of the Participant’s Vested SERP II Benefit shall commence on the earlier of the date of a Change in Control or six (6) months after the date of the Participant’s Separation from Service.

 

3.2                                Death Benefit .

 

(a)                                 Death Benefit .  In the event of the Participant’s death at any time before the Participant’s Vested SERP II Benefit has been paid in full, the Participant’s Beneficiary shall receive a Death Benefit.

 

(b)                                Commencement of Death Benefit .  The Death Benefit shall commence or be paid in full, depending on the Participant’s Election Form, to the Participant’s Beneficiary on the

 

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The Ryland Group, Inc.

Dreier Supplemental Executive Retirement Plan II

 

date the Participant would have otherwise received the next SERP II Benefit payment had he lived (or within 60 days thereafter)

 

3.3                                Forms of Payment; Elections .   At the time the Participant initially is eligible to participate in the Plan (or as otherwise permitted by Code section 409A), the Participant shall elect on an Election Form to have his (i) SERP II Benefit paid in a lump sum or in equal annual installments for fifteen (15) years, and (ii) Death Benefit paid in a lump sum or in equal annual installments over the remaining number of years, at the same time and in the same amounts, as such benefit would have been paid to the Participant had the Participant survived.  The Participant may change his initial elections once during calendar year 2005 by submitting a new Election Form to the Committee by December 31, 2005.  Additionally, to the extent permitted under Code section 409A and by the Company, the Participant may elect the form and timing of payment of his SERP II Benefit or Death Benefit during 2008 (except that a Participant cannot change payment elections with respect to payments that the Participant would otherwise receive in 2008, or make an election that causes payments scheduled for subsequent years to be made in 2008), and such election shall not be treated as a change in the form and timing of payment or an acceleration of payment.

 

Thereafter, a new election can be made once if the Participant submits the new election on an Election Form to the Committee and that election meets the following requirements: (i) the election cannot take effect until at least twelve (12) months after the date on which the election is made, (ii) in the case of the SERP II Benefit only, the payment with respect to which such election is made must be deferred for a period of five (5) years from the date such payment would otherwise have been made, and (iii) the election is accepted by the Committee in its sole discretion.  The Election Forms most recently accepted by the Committee in accordance with the rules described above shall govern the payout of the Participant’s SERP II Benefit and Death Benefit.  If the Participant does not make an election with respect to the form of payment of his SERP II Benefit, then such benefit shall be paid in a lump sum.  Similarly, if the Participant does not make an election with respect to the form of payment of his Death Benefit, then such benefit shall be paid in a lump sum. Notwithstanding anything in the Agreement to the contrary, no change submitted on an Election Form shall be accepted by the Committee, and the Committee shall deny any change made on an Election Form, if the Committee determines that the change violates the requirements under Code section 409A.

 

3.4                                Withholding and Payroll Taxes .  The Company shall withhold from any and all benefits made under this Article 3, all federal, state and local income, employment and other taxes required to be withheld by the Company in connection with the benefits hereunder.

 

ARTICLE 4
Termination, Amendment or Modification of the Agreement

 

4.1                                Termination or Amendment .  This Agreement may be terminated or amended only by a written agreement executed by the Company and the Participant. Notwithstanding the preceding, the

 

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The Ryland Group, Inc.

Dreier Supplemental Executive Retirement Plan II

 

Agreement may be amended by the Company at any time, retroactively if required in the opinion of the Company, in order to ensure that the Agreement is characterized as a “top-hat” plan as described under ERISA Sections 201(2), 301(a)(3), and 401(a)(1) to conform with the Plan to the requirements of Code Section 409A, and to conform the Plan to the provisions and requirements of any applicable law (including ERISA and the Code).  No such amendment shall be considered prejudicial to any interest of the Participant or a Beneficiary hereunder.    Upon a termination of the Plan pursuant to this Section 4.1, Vested SERP II Benefits shall be paid to the Participant in accordance with Article 3.  Notwithstanding the preceding, the Company, in its discretion, reserves the right, by action of the Board, to terminate the Plan and distribute to the Participant his Vested SERP II Benefit as permitted in accordance with the Code (e.g., Treas. Reg. 1.409A-3(j)(4)(ix)).

 

4.2                                Termination of Agreement .  Unless otherwise modified pursuant to Section 4.1 above, this Agreement shall terminate upon the full payment of the Participant’s Vested SERP II Benefit or Death Benefit in accordance with Article 3.

 

ARTICLE 5
Other Benefits and Agreements

 

5.1                                Coordination with Other Benefits .  The benefits provided for the Participant under this Agreement are in addition to any other benefits available to such Participant under any other plan or program for employees of the Company.  This Agreement shall supplement and shall not supersede, modify or amend any other such plan or program except as may otherwise be expressly provided.

 

ARTICLE 6
Administration of the Agreement

 

6.1                                Committee Duties .  This Agreement shall be administered by a Committee, which shall consist of the Compensation Committee, or such committee as the Compensation Committee shall appoint.  The Committee shall have the discretion and authority to (i) make, amend, interpret and enforce all appropriate rules and regulations for the administration of this Agreement, (ii) make benefit entitlem