Exhibit 10.1

 

CEO SEVERANCE AGREEMENT

 

 

CEO SEVERANCE AGREEMENT dated as of the 17th day of December 2009, by and
between The Ryland Group, Inc., a Maryland corporation (the “Company”), and
Larry T. Nicholson (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.                                    Position and Responsibilities.  The
Executive shall serve as the President and Chief Executive Officer of the
Company.  In his capacity as 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.

 

2.                                    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.  In accordance with the “Guidelines on Significant
Corporate Governance Issues,” the Executive “will advise the Chairperson of the
Nominating and Governance Committee in advance of accepting any directorship
with a for-profit entity, to allow for a review of potential conflicts” and to
allow for an assessment that service as a director will not interfere with the
performance of the Executive’s duties with the Company.  The Nominating and
Governance Committee will continue to monitor and assess the appropriateness of
the Executive’s service as a director with other for-profit entities in light of
the Executive’s duties with the Company.

 

3.                                    Employment Termination.

 

3.1                            Termination Due to Death.  In the event the
Executive’s employment is terminated by reason of death, the Executive’s
benefits shall be determined in accordance with the Company’s Retirement, SERP,
insurance or other applicable program then in effect.  In addition, the Company
shall pay to the Executive’s beneficiaries or estate a pro rata share of the
Bonus for the year in which the termination occurs based on the Executive’s
Bonus program and 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 in a
lump sum within sixty (60) days after the end of the applicable fiscal year,
unless Section 3.6 is applicable to this payment.

 

3.2                            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 compensation shall
expire, except 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 Executive’s
Bonus program and the results of the Company for that fiscal year determined as
provided in Section 3.1.  The pro rata Bonus shall be paid in a lump sum within
sixty (60) days after the end of the applicable fiscal year, unless Section 3.6
is applicable to this payment.  The Company shall pay the Executive his base
salary through the effective date of termination and shall pay all benefits to
which the Executive has a vested right at that time in accordance with the terms
of the plan, document or agreement governing such benefits.

 

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

 

1

--------------------------------------------------------------------------------

 

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, as well as any individuals who are involved with the treatment and
assessment of the Executive’s Disability and who are qualified to give
professional medical advice.  These individuals may also assist the Board of
Directors in its determination of the period of time during which the Disability
will exist and its impact on the Executive’s performance in accordance with the
prior paragraph of this Section 3.2.

 

3.3                            Voluntary Termination by the Executive.  The
Executive may terminate his employment with the Company 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 and shall pay all benefits to which
the Executive has a vested right at that time in accordance with the terms of
the plan, document or agreement governing such benefits. The Executive shall not
receive a Bonus for the fiscal year in which voluntary termination occurs.

 

3.4                            Termination by the Company Without Cause.  The
Board of Directors may terminate the Executive’s employment for reasons other
than death, Disability or for Cause (as defined in Section 3.5) by notifying the
Executive in writing at least sixty (60) days prior to the effective date of
termination.  Upon the expiration of this sixty (60) day period, the termination
by the Company is effective.  Within thirty (30) days after the date of
termination, unless Section 3.6 is applicable to this payment, the Company shall
pay to the Executive a lump sum cash payment equal to the aggregate amount of
twenty-four (24) months of the base salary as in effect prior to the date of
notice of termination.  The Executive’s participation in the life, medical,
dental, vision, AD&D, prescription drug, long-term disability and executive
medical reimbursement programs provided to the Executive prior to the date of
notice of termination shall be continued or equivalent benefits provided by the
Company, at the Company’s expense, for a period of two (2) years from the date
of the Executive’s Separation from Service.  Also, within thirty (30) days after
the date of termination, unless Section 3.6 is applicable to this payment, the
Company shall pay to the Executive a lump sum cash payment equal to the value of
coverage under the Company’s executive life insurance program, personal health
services allowance and health club benefit program for a period equal to
twenty-four (24) months.  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
Executive’s Bonus program and the results of the Company for that fiscal year
determined as provided in Section 3.1.  The pro rata Bonus shall be paid in a
lump sum within sixty (60) days after the end of the applicable fiscal year,
unless Section 3.6 is applicable to this payment. The Company shall also pay to
the Executive all benefits to which the Executive has a vested right at the time
of termination in accordance with the terms of the plans, documents or
agreements governing those benefits.  The Executive shall be fully vested in any
unvested grants of equity, stock option or restricted stock unit awards
previously received and shall be fully vested in any prior year awards that
remain unvested or any awards made for the fiscal year in which termination
occurs under the TRG Incentive Plan or any successor plan.  All vested awards
under any equity incentive or other incentive programs shall be paid in
accordance with the terms of the governing plan or program, notwithstanding any
provision of the governing plan or program calling for forfeiture of benefits
upon termination. Within thirty (30) days after the date of termination, unless
Section 3.6 is applicable, the Company shall also pay the Executive a separation
from service lump sum cash payment for the year in which termination occurs
equal to twice the highest amount of the Bonus paid or payable in respect of the
three previous fiscal years prior to the year in which termination occurs as
well as a separation from service equity award equal to the highest restricted
stock award granted during the three previous fiscal years prior to the year in
which termination occurs.  The separation from service equity award described
above shall be paid in the form of a grant of unrestricted shares of common
stock of the Company; provided, however, that if

 

2

--------------------------------------------------------------------------------

 

for any reason a grant of such shares cannot be made to the Executive, then the
separation from service equity award shall be paid in the form of a lump sum
cash payment in an amount determined by multiplying (i) the closing price for
the common stock of the Company, as reported on the New York Stock Exchange, as
of the day immediately preceding the payment date, times (ii) the number of
shares that otherwise would have been granted under the separation from service
equity award.  In accordance with the “Policy Regarding Stockholder Approval of
Severance Agreements,” which was adopted by the Board of Directors on
December 6, 2006 (the “Severance Policy”), all payments and Benefits (as such
term is defined in the Severance Policy) provided pursuant to this Section 3.4
are subject to and shall not exceed the Severance Benefits Limitation set forth
in the Severance Policy.  In the event that the aggregate present value of all
payments and Benefits (as such term is defined in the Severance Policy) to be
provided under this Section 3.4 would, but for the preceding sentence, exceed
the Benefits Threshold (as such term is defined in the Severance Policy), the
payments and Benefits shall be reduced or forgone to comply with the Severance
Benefits Limitation set forth in the Severance Policy by first reducing the pro
rata Bonus payment, next reducing any other lump sum cash payments and then
reducing the Benefits provided.

 

3.5                            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 Directors and is defined as the Executive’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 Executive 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.  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, but excluding any benefits in which he has a vested right.

 

3.6                            Delay of Payment Pursuant to Section 409A. 
Should any of the payments made to the Executive in accordance with Section 3 of
this Agreement be determined to be payments from a nonqualified deferred
compensation plan, as defined by Section 409A of the Internal Revenue Code of
1986 as amended (the “Code”), these payments, to the extent otherwise payable
within six (6) months after the Executive’s date of Separation from Service,
will be made on the date that is six (6) months after the Executive’s date of
Separation from Service.  For purposes of this Section 3, a “Separation from
Service” means an anticipated permanent reduction in the level of bona fide
services to twenty percent (20%) or less of the average level of bona fide
services performed over the immediately preceding thirty-six (36) month period. 
For purposes of Section 409A of the Code, the payments to be made to the
Executive in accordance with Section 3 of this Agreement shall be treated as a
right to a series of separate payments.

 

Also, should any of the payments to be made to the Executive in accordance with
Section 3 of this Agreement be determined to be an acceleration of payment from
a nonqualified deferred compensation plan in violation of Code Section 409A,
such payment shall not be made until the date determined in accordance with the
terms of the plan, document or agreement governing such deferred compensation.

 

4.                                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
or decision made by the arbitrators in any court having competent jurisdiction. 
To the extent that the Executive

 

3

--------------------------------------------------------------------------------

 

prevails in any litigation or arbitration seeking to enforce the provisions of
this Agreement, the Executive is entitled to reimbursement by the Company of all
expenses of such litigation or arbitration, including any legal fees and
expenses and any costs and disbursements.

 

The Executive shall be entitled to reimbursement of the fees and expenses
described under this Section 4 during the period commencing on the effective
date of this Agreement and ending on his death.  Any reimbursement of fees and
expenses under this Agreement shall be made on or before the last day of the
year following the year in which the expense is incurred.  The amount of fees
and expenses eligible for reimbursement during a year shall not affect the
expenses eligible for reimbursement in any other year except for any medical
reimbursement arrangement providing for the reimbursement of expenses referred
to in Section 105(b) of the Code.  The right to reimbursement or in-kind
benefits is not subject to liquidation or exchange for another benefit.

 

5.                                    Release of Claims and Obligations.  In
consideration of the payments and benefits to be provided as indicated in this
Agreement, it is agreed that you, on behalf of yourself, your heirs,
representatives and assigns, release the Company from any and all claims, causes
of action, demands, obligations, agreements, promises, liability, damages, costs
and/or fees arising out of or relating to your employment or your separation
from employment and any claim for equitable relief or recovery of monies or
damages, any contract, express or implied, any tort, or any federal, state or
local law relating to employment, including employment discrimination, such as a
fair employment practice law (e.g., The California Fair Employment and Housing
Act), and including, but not limited to, 42 U.S.C. §§ 1091, 1981 and 1983, Title
VII of the Civil Rights Act of 1964,  the Age Discrimination in Employment Act,
as amended, the Employee Retirement Income Security Act, the Rehabilitation Act,
the Americans with Disabilities Act, the Civil Rights Act of 1991, the Family
and Medical Leave Act, the Fair Labor Standards Act and any other local, state
or federal law.  By this paragraph, you are waiving any claims against the
Company which includes claims against the Company’s directors, officers,
employees, agents and all other related or affiliated persons.

 

6.                                    Miscellaneous.

 

6.1                            Mitigation.  The Executive shall not be obligated
to seek other employment in mitigation of the amounts payable or arrangements
made under this Agreement, and the obtaining of any other employment shall not
result in a reduction of the Company’s obligations to make the payments,
benefits and arrangements required to be made under this Agreement.

 

6.2.                        Entire Agreement.  Except as provided in the next
sentence, 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.  Nothing in this Agreement is intended to adversely effect any rights
the Executive may have under the Senior Executive Severance Agreement dated
July 7, 2004, as amended, in the event of a termination of employment.  In the
event of a Change of Control (as defined in the Senior Executive Severance
Agreement), the Executive has the right as determined by the Executive, to have
a termination of employment governed by the provisions of the Senior Executive
Severance Agreement and not by the provisions of this Agreement.

 

6.3                            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.

 

6.4                            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.

 

6.5                            Tax Withholding.  The Company may withhold all
Federal, state, city or other taxes required pursuant to any law or governmental
regulation or ruling.

 

4

--------------------------------------------------------------------------------

 

6.6                            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.

 

6.7                            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.

 

6.8                            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 California.

 

6.9                            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.

 

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/ William L. Jews

 

/s/ Larry T. Nicholson

 

William L. Jews, Chairman

 

Larry T. Nicholson

 

Compensation Committee of the

 

 

 

Board of Directors

 

 

 

 

 

 

 

 

Attest:

/s/ Timothy J. Geckle

 

 

 

Timothy J. Geckle, Secretary

 

 

 

5

--------------------------------------------------------------------------------