Exhibit 10.12



 


EXHIBIT 10.12


THE RYLAND GROUP, INC.

SENIOR EXECUTIVE PERFORMANCE PLAN



Purpose


The purpose of the Senior Executive Performance Plan (the “Plan”) is to set
forth the terms on which annual bonuses will be paid to participating senior
executives of The Ryland Group, Inc. and its subsidiaries (collectively the
“Corporation”). The Plan is intended to permit the Corporation to deduct fully
annual bonuses paid to senior executives in determining its federal income
taxes in accordance with Section 162(m) of the Internal Revenue Code of 1986,
as amended (“Section 162(m)”).


Administration


The Plan has been approved by and 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) and the regulations thereunder (the “Committee”). The
Committee shall interpret the Plan and shall have the authority and duties set
forth in the Plan.


Covered Officers


The Plan applies each fiscal year to those officers of the Corporation whose
compensation would be subject to the limitations of Section 162(m) or the
regulations thereunder for that year and such other officers of the Corporation
as the Committee shall determine (each, a “Covered Officer”).


Bonuses


Each Covered Officer who is employed by the Corporation during a fiscal year
while this Plan is in effect will be eligible to receive a bonus equal to a
stated percentage of either the Corporation’s or one or more business unit’s
earnings before taxes and extraordinary items as reflected in, or, in the case
of a business unit, as determined for purposes of preparing, the audited
consolidated financial statements of the Corporation for such fiscal year, as
adjusted to eliminate the effect of bonus and incentive compensation, corporate
overhead, changes in accounting methods and other non-recurring or unusual
expenses or charges as reflected in the Corporation’s financial statements, all
as determined by the Compensation Committee. The maximum bonus payable under
the Plan to any one Covered Officer in any year shall not exceed 3 percent of
the Corporation’s earnings before taxes and extraordinary items, as adjusted to
eliminate the effect of bonus and incentive compensation, corporate overhead,
changes in accounting methods and other non-recurring or unusual expenses or
charges as reflected in the Corporation’s financial statements, all as
determined by the Compensation Committee. The Committee may reduce or
eliminate bonuses for any reason in its sole discretion, but may not increase
the amount of bonus payable to any Covered Officer for a given year after the
formula for that year has been established.


The Committee will determine and set forth in writing, not later than 90 days
after the commencement of each fiscal year, (i) each Covered Officer who will
participate in the Plan for that year, (ii) the percentage of earnings before
taxes and extraordinary items that will be payable with respect to each
participating Covered Officer, (iii) whether such percentage of earnings shall
be determined based on the performance of the Corporation, as a whole, or of a
particular business unit(s) with respect to each participating Covered Officer,
and (iv) any other objective terms and conditions that must be satisfied for
the Covered Officer to become eligible to receive payment of the annual bonus.


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No bonus shall be paid pursuant to this Plan for any year until the performance
goals and any other material terms of bonus eligibility are satisfied. Annual
bonuses payable pursuant to the Plan shall be paid in cash.


Miscellaneous


The annual bonus payable for the 2003 fiscal year and each year thereafter
pursuant to the employment agreement of Mr. R. Chad Dreier, Chairman, Chief
Executive Officer and President of the Corporation, dated as of July 1, 2002,
is payable in accordance with the terms of this Plan.


No Covered Officer may assign the right to receive any benefit under the Plan.
The Committee may approve payment of any amount which a disabled or deceased
Covered Officer would have earned under the Plan to the Covered Officer’s
spouse or estate.


The Plan shall be submitted to the Corporation’s stockholders for approval in
accordance with Section 162(m).


The Committee may amend or change the Plan at any time and in any manner, and
may terminate the Plan at any time without obligation for payment of bonuses to
Covered Officers for the year in which termination occurs. After the Plan has
been approved by the Corporation’s stockholders, the Plan may not be amended or
changed without stockholder approval if the amendment or change would limit the
deductibility of bonuses paid pursuant to the Plan under Section 162(m).



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