Exhibit 10.11



 



EXHIBIT 10.11



THE RYLAND GROUP, INC.

PERFORMANCE AWARD PROGRAM



Established Pursuant to

THE RYLAND GROUP, INC. 2002 EQUITY INCENTIVE PLAN



Establishment



The Compensation Committee of the Board of Directors of The Ryland Group, Inc.
(the “Corporation”), pursuant to its power and authority to establish programs
for granting awards under the Corporation’s 2002 Equity Incentive Plan (the
“Incentive Plan”), establishes this Performance Award Program (“Award Program”)
effective as of July 1, 2002.


Purpose and Type of Awards


The purpose of the Award Program is to provide for the granting of performance
awards, in the form of common stock of the Corporation or stock units (as
defined in the Incentive Plan), either alone or in combination with cash, as
long-term incentives for participants to strive to influence the financial
growth and success of the Corporation in a positive manner. Performance awards
may be granted upon achievement of specified performance objectives or which
vest and/or become distributable upon such achievement. Shares of common stock
and stock units granted in connection with performance awards under this Award
Program shall be issued under the Incentive Plan.


Administration


The Award Program shall be administered by the Compensation Committee of the
Board of Directors of the Corporation or a subcommittee of the Compensation
Committee composed of two or more “outside directors” as defined in Section
162(m) of the Internal Revenue Code and the regulations thereunder (the
“Committee”). The Committee shall interpret the Award Program and shall have
the authority and duties set forth in the Award Program. All determinations by
the Committee shall be final and conclusive.


Eligibility


The Committee shall select the individuals who shall participate in and receive
grants of performance awards under the Award Program. All executive officers
of the Corporation and its affiliated entities are eligible to participate.


Granting of Performance Awards


The Committee shall determine the specific performance objectives and the
period over which such performance objectives will be measured (the
“Performance Period”) in connection with each performance award granted under
the Award Program.


The Committee will determine and set forth in writing, not later than 90 days
after the commencement of each Performance Period and in no event later than
the point in time when 25 percent of the Performance Period has elapsed or the
outcome of the performance objectives is no longer substantially uncertain:
(i) the officer or officers who will participate in the Award Program for that
Performance Period, (ii) the


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nature and the amount (or the objective formula for determining the amount) of
the performance award that will be earned if specified performance objectives
are met, (iii) the applicable performance objectives, and (iv) any other
objective terms and conditions that must be satisfied by the officer in order
to earn the performance award. The performance objectives are objective
financial targets based upon the Corporation’s return on stockholders’ equity.
The Committee, in its discretion, may decrease the amount of any performance
award that is, or is to be, earned, but may not increase such amount for a
Performance Period after the performance objectives for that Performance Period
have been established.


Distribution of Performance Awards


Within 120 days after the end of each Performance Period, the Committee shall
determine whether, or the extent to which, the performance objectives and other
terms and conditions have been met. Performance awards shall be granted or
vested and distributed in accordance with the formula and terms and conditions
approved by the Committee at the beginning of the applicable Performance
Period.


Miscellaneous


This Award Program is established pursuant to The Ryland Group, Inc. 2002
Equity Incentive Plan, the terms of which are incorporated herein by reference.
In the event of any conflict between the Award Program and the Incentive Plan,
the terms of the Incentive Plan shall govern.


No single participant shall be eligible to receive more than 260,000 shares of
common stock and/or stock units, in any combination, with respect to a
Performance Period. The maximum cash amount payable as a performance award in
combination with any performance award distributable in common stock or stock
units is the cash amount equal to the federal and state income and Medicare
taxes, assuming highest marginal tax rates, associated with the distribution of
the related common stock or stock units.


This Award Program shall be submitted to the Corporation’s stockholders for
approval in accordance with Internal Revenue Code Section 162(m).


The stock units awarded (together with the tax gross-up payments due in
connection therewith) pursuant to the employment agreement dated as of July 1,
2002, between the Corporation and R. Chad Dreier are granted pursuant to this
Award Program.


No participant may assign the right to receive any performance award under this
Award Program. The Committee may approve distribution of any performance award
which a disabled or deceased participant would have earned under this Award
Program to the participant’s spouse or estate.


The Committee may amend or change this Award Program at any time and in any
manner, and may terminate this Award Program at any time without obligation for
payment of performance awards to participants for the Performance Period in
which termination occurs. After this Award Program has been approved by the
Corporation’s stockholders, this Award Program may not be amended or changed
without stockholder approval if the amendment or change would limit the
deductibility of performance awards paid or distributed pursuant to the Award
Program under Internal Revenue Code Section 162(m).



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