8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

September 27, 2012

Date of Report

(Date of earliest event reported)

THE RYLAND GROUP, INC.

(Exact Name of Registrant as Specified in Charter)

Maryland	001-08029	52-0849948
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

3011 Townsgate Road, Suite 200, Westlake Village, California 91361-3027

       (Address of Principal Executive Offices)                               (ZIP Code)

Registrant’s telephone number, including area code: (805) 367-3800

                           Not Applicable                           

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:

[ ] Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 5.02               Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

(e)Compensatory Arrangements of Certain Officers

On September 27, 2012, the Board of Directors (the “Board”) of The Ryland Group, Inc. (the “Corporation”) approved Amendment No. 3 to the Senior Executive Severance Agreement (the “Severance Agreement”) between the Corporation and its executive officers (“Amendment No. 3”).  Amendment No. 3 amends Section 1.8 of the Severance Agreement to eliminate the “tax gross-up” benefits that previously provided for a lump sum cash payment to executive officers in the event they have an “excess parachute payment” that is subject to the excise tax under Section 4999 of the Internal Revenue Code.  Section 1.8 of the Severance Agreement now provides that an executive will receive either an “excess parachute payment” and pay any applicable excise tax or reduce the severance payment such that no portion of the payments are subject to the excise tax, depending on which amount results in the executive’s receipt of the greatest amount of net benefits.  All computations and determinations are made by an accounting firm or tax counsel chosen by the executive and paid for by the Corporation.

On September 27, 2012, the Compensation Committee of the Board (the “Committee”) approved an amendment to the Corporation’s form of Non-Qualified Stock Option Agreement for grants made to executive officers in 2012 (the “2012 Amended Executive Officer Non-Qualified Stock Option Agreement”).  In order to encourage a significant level of appreciation in stockholder value, the 2012 Amended Executive Officer Non-Qualified Stock Option Agreement adds a condition to the exercisability of stock options which requires that the stock option may only be exercised if and when the Corporation’s stock price is greater than or equal to 150% of the grant price.

On September 27, 2012, the Committee also approved the Corporation’s 2012 Executive Officer Long-Term Incentive Plan (the “LTIP”).  For executive officers of the Corporation, the LTIP replaces the retention incentive plan in which they previously participated.  Under the terms of the LTIP, the Committee granted performance awards to executive officers contingent upon the achievement of long-term performance goals.  The payment and vesting of each performance award will be determined after a three-year performance period, ending on December 31, 2014, based on the Corporation’s Total Stockholder Return (“TSR”) performance over the performance period in comparison to the TSR performance of a comparative peer group selected by the Committee.  The Corporation’s TSR performance must meet or exceed the 50th percentile of the performance of the peer group to receive the performance award value.  If the Corporation’s performance falls below the 50th percentile level, the payment potential is reduced.  If executive’s employment with the Corporation is terminated prior to December 31, 2014 for any reason other than the executive’s death, disability or retirement, the executive’s performance award will be forfeited and terminated in full.  The executive’s performance award will immediately vest in full upon the executive’s death, disability or retirement and upon the occurrence of a change of control.

The foregoing actions by the Board and Committee were taken in response to questions and comments raised by stockholders in connection with the Corporation’s “say-on-pay” vote received at the 2012 Annual Meeting of Stockholders.

Other actions taken by the Board and Committee include the following:

New Compensation Consultant – The Committee retained Exequity as an independent compensation consultant.  Exequity has no relationship with the Corporation other than as the Committee’s independent compensation consultant.

Stock Ownership Guidelines –The Committee approved Stock Ownership Guidelines for its executive officers.  These Guidelines mandate that executive officers shall own the fair market value of the Corporation’s common stock that equals or exceeds the multiple of the executive’s then base salary as set forth below:

Position Title		Multiple of Annualized Base Salary
	Chief Executive Officer	6x base salary
	Executive Vice President	3x base salary
	Other Executive Officers	2x base salary

Share ownership is calculated at the end of the year, based on the average share price for that year.

Elimination of Tax Gross-Ups – The executive officers agreed to give up the tax gross-ups they were receiving related to the value of term life insurance received under the Corporation’s executive life insurance plan as well as related to reimbursements for taxes related to executive health and fitness costs.  As discussed above, in agreeing to Amendment No. 3 to the Severance Agreement, executive officers agreed to eliminate the excise tax gross-up from their “change of control” agreements.  As a result, the Corporation no longer provides tax gross-up payments.

Expanded Peer Group – The Committee is revising the peer group of companies used to benchmark the Corporation’s performance and executive compensation.  The Committee is seeking to expand the potential group of peer group companies beyond comparable homebuilding companies to include companies in the building product and real estate development industries.  These companies will be evaluated based on their revenues and market capitalization to select companies that more closely align with the size of the Corporation.  The Committee will eliminate three homebuilding companies that were included in the prior homebuilding peer group given that these companies had significantly larger revenues and market capitalization.

The descriptions set forth in this Current Report on Form 8-K are summaries and are therefore qualified in their entirety by the complete text of Amendment No. 3, the Amended Executive Officer Non-Qualified Stock Option Agreement and the LTIP, attached hereto as Exhibits 10.1, 10.2 and 10.3, respectively and incorporated herein by reference.

Item 9.01               Financial Statements and Exhibits

(d)  Exhibits
Exhibit 10.1	Amendment No. 3 to Senior Executive Severance Agreement between the Ryland Group, Inc. and executive officers of the Corporation
Exhibit 10.2	2012 Amended Executive Officer Non-Qualified Stock Option Agreement
Exhibit 10.3	The Ryland Group, Inc. 2012 Executive Officer Long-Term Incentive Plan

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	THE RYLAND GROUP, INC.
Date: September 27, 2012	By:	/s/ Timothy J. Geckle
		Timothy J. Geckle
		Senior Vice President, General Counsel
		and Secretary

EXHIBIT INDEX

Exhibit 10.1	Amendment No. 3 to Senior Executive Severance Agreement between the Ryland Group, Inc. and executive officers of the Corporation
Exhibit 10.2	2012 Amended Executive Officer Non-Qualified Stock Option Agreement
Exhibit 10.3	The Ryland Group, Inc. 2012 Executive Officer Long-Term Incentive Plan

EX-10.1

Exhibit 10.1

AMENDMENT NO. 3

TO

SENIOR EXECUTIVE SEVERANCE AGREEMENT.

The Ryland Group, Inc. (the “Company”) and                                    (the “Executive”) amend the Senior Executive Severance Agreement dated as of                          (the “Agreement”) to modify Section 1.8, “Subsequent Imposition of Excise Tax” to eliminate the “tax gross-up” benefit it provides to the Executive.

Accordingly, the Agreement is amended, effective October 1, 2012 to delete Section 1.8 in its entirety and substitute the following new Section 1.8:

1.Section 1.8 is amended in its entirety, as follows:

“1.8 Golden Parachute Limitation.  Notwithstanding any other provision of this Agreement, in the event that it shall be determined that the aggregate payments or distributions to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the “Payments”), constitute “excess parachute payments” (as such term is defined under Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) or any successor provision, and the regulations promulgated thereunder (collectively, “Section 280G”)) that would be subject to the excise tax imposed by Section 4999 of the Code or any successor provision (collectively, “Section 4999”) or any interest or penalties with respect to such excise tax (the total excise tax, together with any interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then the Payments shall be either (a) delivered in full, or (b) delivered to such lesser extent that would result in no portion of the Payments being subject to the Excise Tax (the “Capped Payment”), whichever of the foregoing amounts, taking into account the applicable Federal, state or local income and employment taxes and the Excise Tax, results in the receipt by the Executive, on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be subject to the Excise Tax.  If a reduction in the Payments is required so that the amount of the Payments equals the Capped Payment, the Payments shall be reduced in the following order: (1) reduction of cash Payments otherwise payable to Executive that are exempt from Code Section 409A; (2) reduction of any other payments and benefits otherwise payable to Executive that are exempt from Code Section 409A; (3) cancellation of accelerated vesting of equity awards (other than stock options) that are exempt from Code Section 409A; (4) cancellation of accelerated vesting of stock options that are exempt from Code Section 409A; and (5) reduction of any other payments and benefits otherwise payable to Executive on a pro-rata basis or such other manner that complies with Code Section 409A, as determined by the Company.  If acceleration of vesting of Executives stock options or other equity awards is to be cancelled pursuant to clauses (3)

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or (4) of the immediately preceding sentence, such cancellation of the acceleration of vesting shall be accomplished by first canceling such acceleration for the vesting installment that will vest last and continuing to the extent necessary by canceling such acceleration for the next vesting installment with the latest vesting.  All computations and determinations called for by this Section 1.8 shall be made and reported in writing to the Company and Executive by an independent accounting firm or independent tax counsel selected by the Executive subject to approval by the Company, which approval shall not be unreasonably withheld (the “Tax Advisor”).  The Company shall pay all fees and expenses charged by the Tax Advisor in connection with its services.  In no event shall any reduction or cancellation of Payments pursuant to this Section 1.8 result in an impermissible change in the form or timing of payments, or an impermissible acceleration of payments, in violation of Code Section 409A.”

IN WITNESS WHEREOF, the parties have executed this Amendment as of                       , 2012.

THE RYLAND GROUP, INC.			EXECUTIVE:
By:
	William L. Jews
	Chairman of the Board of Directors
Attest:
		Timothy J. Geckle
		Secretary

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EX-10.2

Exhibit 10.2

2012 Amended Executive Officer
Non-Qualified Stock Option Agreement
pursuant to
The Ryland Group, Inc.
2011 Equity and Incentive Plan

AGREEMENT, dated 3/1/2012, between THE RYLAND GROUP, INC. (the “Corporation”) and                     (the “Optionee”).

WHEREAS, pursuant to The Ryland Group, Inc. 2011 Equity and Incentive Plan (the “Plan”), which is amended effective October 1, 2012, the Board of Directors wishes to provide participation in the appreciated equity value of the Corporation by providing the Optionee with a grant of non-qualified stock options related to Ryland Common Stock (“Common Stock”), and thereby increase the Optionee’s proprietary interest in the success of the Corporation; and

WHEREAS, the Optionee desires to accept said grant in accordance with the terms and provisions of the Plan and this Agreement.

NOW THEREFORE, in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, the Corporation and the Optionee agree as follows:

1.Grant of Option

Subject to the terms and conditions set forth herein, the Corporation hereby grants to the Optionee during the period ending at the close of business five years from the date hereof (the “Option Period”), the option to purchase (the “Option”) from the Corporation at a price of $18.22 per share up to but not exceeding in the aggregate 10,000 shares of the Corporation’s Common Stock. THE OPTION GRANTED UNDER THIS AGREEMENT SHALL NOT BE TREATED AS AN “INCENTIVE STOCK OPTION” WITHIN THE MEANING OF SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.

2.Exercise of Option

The Option granted in paragraph 1 may be exercised in whole or in part in accordance with the following vesting schedule provided that the price of the Corporation’s Common Stock must equal or exceed $27.33 when this Option is exercised.

The aggregate number of shares of Common Stock optioned by this Agreement shall be divided into three installments.

The first installment for 3,334 shares may be exercised in whole or in part beginning 03/01/2013.

The second installment for 3,333 shares may be exercised in whole or in part beginning 03/01/2014.

The third installment for 3,333 shares may be exercised in whole or in part beginning 03/01/2015.

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 Optionee during the Option Period. Continued accrual 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.

3.Method of Exercising Option and Payment of Exercise Price

The Option shall be exercised by delivery of a written Notice of Exercise stating the number of shares the Optionee desires to purchase. The form of Notice of Exercise is attached to this Agreement as Exhibit A. Notice(s) should be delivered to Marti Darnall, The Ryland Group, Inc., 3011 Townsgate Road, Suite 200, Westlake Village, CA 91361; Telephone No. (805) 367-3777; Facsimile No. (805) 367-3806.

The Optionee shall pay the exercise price in the following ways:

(a)cash payment (by certified check, bank draft or money order payable to the order of the Corporation);

(b)if approved by the Corporation, cash payment may be made from the proceeds of an immediate sale of Common Stock receivable upon the exercise of the Option; or

(c)if approved by the Corporation, delivery of Common Stock (including executed stock powers attached thereto).

The payment of the exercise price shall be delivered to Marti Darnall together with the Notice of Exercise.

The Corporation shall, subject to the receipt of withholding tax, issue to the Optionee 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 if no longer listed on such exchange, as otherwise determined by the Corporation, the Board of Directors or the Compensation Committee of the Board.

4.Certain Tax Matters

Optionee agrees that the Corporation may withhold any federal, state or local taxes upon exercise of an Option, at such time and upon such terms and conditions as required by law or determined by the Corporation.

5.Termination

The Option granted hereby shall terminate upon the happening of the earliest of the following events:

(a)The expiration of seven years from the date of this Agreement;

(b)The expiration of 90 days after the date of termination of the Optionee’s employment, except in the case of death, disability or retirement. During this period, the Optionee shall have the right to exercise the Option to the extent it is exercisable on the termination date.

(c)The expiration of three years after the date of death of the Optionee if death occurs while the Optionee is in the employ of the Corporation. During this period, the Optionee’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.

(d)The expiration of three years after the date the Optionee’s employment is terminated due to disability or retirement. During this period, the Optionee shall have the right to exercise the Option to the extent it is exercisable on the date of termination due to disability or retirement.

The Board of Directors or the Compensation Committee of the Board shall have absolute discretion to determine whether any other termination of Optionee’s employment is to be considered as retirement for the purposes of this Agreement and whether an authorized leave of absence or otherwise shall constitute a termination of employment for the purposes of this Agreement. Any determination made by the Board of Directors or the Compensation Committee of the Board with respect to any matter referred to in this paragraph 5 shall be final and conclusive on all persons affected thereby.

6.Assignability

The Option is not assignable or transferable except by will or the laws of descent and distribution. The Option is exercisable during the Optionee’s lifetime only by the Optionee or the Optionee’s guardian or legal representative.

7.Rights as a Stockholder

The Optionee shall have no rights as a stockholder with respect to any shares covered by the Option until the date of issuance of the shares to the Optionee, and the Corporation has receipt of payment for the full exercise price of the Option shares. No adjustment will be made for dividends, distributions or other rights for which the record date is prior to the date of issuance of the shares of Common Stock related to the exercise of an Option.

8.Merger, Consolidation or Share Exchange

After any merger, consolidation or share exchange in which the Corporation is the surviving or resulting corporation, the Optionee 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 Optionee would have been entitled, if, immediately prior to such merger, consolidation or share exchange, the Optionee had exercised the Option in accordance with and subject to the terms of this Agreement. If the Corporation 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.

9.No Employment Agreement

Nothing in this Agreement or in the Plan shall confer any right to continued employment with the Corporation or its subsidiaries nor restrict the termination of the employment relationship with the Optionee at any time.

10.Employee’s Agreement

Notwithstanding any other provision of this Agreement, Optionee agrees that Optionee will not exercise any Option and the Corporation shall not be obligated to deliver any shares of Common Stock or make any cash payment if counsel to the Corporation determines such exercise, delivery or payment would violate any law or regulation of any governmental authority or agreement to which the Corporation is subject.

11.Resolution of Disputes

Any dispute or disagreement which shall arise under, or as a result of, or pursuant to, this Agreement shall be determined by the Board of Directors of the Corporation or the Compensation Committee of the Board of Directors in its absolute discretion, and any determination by the Board of Directors or the Compensation Committee under or pursuant to this Agreement and any interpretation by the Board of Directors or the Compensation Committee of the terms of this Agreement or the Plan shall be final, binding and conclusive on all persons affected thereby.

12.Amendments

The Board of Directors of the Corporation or the Compensation Committee of the Board of Directors shall have the right, in its absolute discretion, to alter or amend this Agreement in any manner, and any alteration or amendment of this Agreement by the Board of Directors or the Compensation Committee shall, upon adoption thereof by the Board of Directors or the Compensation Committee, become and be binding and conclusive on all persons affected thereby without requirement of consent or other action with respect thereto. The Corporation shall give written notice to the Optionee of any alteration or amendment of this Agreement by the Board or the Compensation Committee as promptly as practical after the adoption thereof.

13.Construction

This Agreement has been entered into in accordance with the terms of the Plan, and wherever a conflict may arise between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall control.

The Optionee hereby agrees by acceptance of the Option that the terms, conditions and provisions of this Agreement and the Plan shall determine the rights and obligations of the Corporation and the Optionee in connection with the Option.

THE RYLAND GROUP, INC.

By:

EX-10.3

Exhibit 10.3

THE RYLAND GROUP, INC.

2012 EXECUTIVE OFFICER LONG-TERM INCENTIVE PLAN

PURSUANT TO THE 2011 EQUITY AND INCENTIVE PLAN

The Ryland Group, Inc. (the “Company”) has established the 2012 Executive Officer Long-Term Incentive Plan pursuant to the 2011 Equity and Incentive Plan (the “Plan”) to provide long-term performance driven incentive compensation to its executive officers.

1.Definitions

The terms below shall have the following meanings:

(a)“Board” shall mean the Board of Directors of the Company.

(b)“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time and any successor to such Code.

(c)“Committee” shall mean the Compensation Committee of the Board or a subcommittee of the Compensation Committee composed of two or more “outside directors” as defined in Code Section 162(m) and the regulations thereunder.

(d)“Company” shall mean The Ryland Group, Inc., its subsidiaries, partnerships and other related entities and affiliates, except where the context applies solely to The Ryland Group, Inc. as determined by the Committee.

(e)“Disability” shall mean a period during which a Participant (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Employer, or (iii) is determined to be totally disabled by the Social Security Administration.

(f)“Industry Peer Group” shall mean the companies selected by the Compensation Committee as the peer group companies for the purpose of determining the Company’s relative TSR (total stockholder return) in comparison to this Group over the Long-Term Performance Period.

(g)“Long-Term Performance Goals” shall mean the long-term performance measurement criteria selected by the Committee to determine the amount of the Performance Award earned and payable to a Participant at the end of the Long-Term Performance Period.

(h)“Long-Term Performance Period” shall mean the three-year period encompassing the 2012, 2013 and 2014 fiscal years of the Company over which the Long-Term Performance Goals are measured for determining the amount of the earned payment of the Performance Award.

(i)“Participant” shall mean an Executive Officer of the Company pursuant to Section 2.

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(j)“Performance Award” shall mean the amount established by the Committee pursuant to Section 4(a) for each Participant that can be earned by a Participant under the Plan conditioned on the achievement of Long-Term Performance Goals as measured at the end of the Long-Term Performance Period.

(k)“Relative Performance Multiplier” shall mean the multiplier that is applied to the Performance Award as determined pursuant to Section 5(a) in order to calculate the actual amount of the Performance Award that vests and is payable to a Participant at the end of the Long-Term Performance Period.

(l)“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 month period (or the full period during which the Participant performed services for the Employer, if that is less than 36 months).

(m)“Total Stockholder Return” shall mean the total return of a stock to an investor (capital gain plus dividends).

2.Participants

The Committee has determined that the current Executive Officers of the Company, consisting of Larry T. Nicholson, Gordon A. Milne, Robert J. Cunnion, III, David L. Fristoe, Timothy J. Geckle and Peter G. Skelly, are eligible and selected to participate in the Plan.

3.Administration

The Plan is administered by the Committee. The Committee has approved the Performance Awards for Participants, established the Long-Term Performance Goals for measuring performance over the Long-Term Performance Period, will review the Company’s actual performance results to assess the extent to which the Performance Goals have been met and Performance Awards have been earned, and make any other determinations, interpretations or decisions required in connection with the Plan. The Committee shall have the authority to amend, modify and interpret the Plan and make all determinations relating to the Plan and the Participants. Decisions of the Committee on all matters relating to the Plan are conclusive and binding on all parties, including the Company and the Participants. No member of the Committee is liable for any act done or determination made in good faith in administering, construing or interpreting the Plan.

4.Performance Awards

(a)Determination of Performance Awards.

The Committee has determined the Performance Award for each Participant in the following amounts:

Larry T. Nicholson	$844,000
Gordon A. Milne	$481,000
Robert J. Cunnion, III	$189,000
David L. Fristoe	$203,000
Timothy J. Geckle	$203,000
Peter G. Skelly	$250,000

(b)Earnings on Performance Awards.  Earnings can be credited to a Performance Award on a basis, in a manner, and at the rate established from time to time by the Committee that is reasonable under Section 162(m) of the Internal Revenue Code.

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5.Vesting and Payment of Performance Awards

(a)(i)   At the end of the Long-Term Performance Period, the Relative Performance Multiplier will be determined by comparing the Company’s Total Stockholder Return to the Total Stockholder Return of each of the companies in the Industry Peer Group over the Long-Term Performance Period (which is the three-year period from January 1, 2012 to December 31, 2014).  For purposes of computing Total Stockholder Return, the beginning stock price is the opening stock price on the first trading day following January 1, 2012 and the ending stock price is the closing stock price on the last trading day prior to December 31, 2014.  Any dividend payments over the Long-Term Performance Period by a company are deemed received by a stockholder and added to the value received by the stockholder over the Long-Term Performance Period.  Total Stockholder Return is calculated by measuring the difference between the beginning stock price and the ending stock price plus any dividends paid by a company over the Long-Term Performance Period and dividing that amount by the beginning stock price.  If the Company’s Total Stockholder Return over the Long-Term Performance Period is at or above the 50th percentile when ranked against the Total Stockholder Return over the Long-Term Performance Period of each of the companies in the Industry Peer Group, the Relative Performance Multiplier is one (1).  If the Company’s Total Stockholder Return over the Long-Term Performance Period is between the 50th and zero (0) percentiles when ranked against the Total Stockholder Return over the Long-Term Performance Period of each of the companies in the Industry Peer Group, the Relative Performance Multiplier is determined using straight line interpolation (between zero and one) based on the actual percentile ranking of the Company relative to the Industry Peer Group, such that for each percentile of the ranking of the Company’s Total Stockholder Return performance below the 50th percentile in comparison to the Industry Peer Group performance, there is a reduction of two percent (2%) of the maximum Relative Performance Multiplier of one (1).  By way of example, a ranking at the 38th percentile of relative total stockholder performance would result in a Relative Performance Multiplier of 0.76.

(ii)At the end of the Long-Term Performance Period, the Relative Performance Multiplier will be calculated in accordance with Section 5(a)(i) and multiplied by the Participant’s Performance Award (including any earnings pursuant to Section 4(b), if any) in order to determine the Participant’s earned and payable Performance Award which vests and is payable to a Participant in the form of a lump sum cash payment on December 31, 2014 in accordance with Section 7(f).

(iii)Notwithstanding any of the terms of this Plan, upon the death, Disability or retirement (as defined by the Company, in its discretion) of a Participant, the full amount of the Performance Award is immediately vested and payable to a Participant, or the Participant’s estate or beneficiary, on the first to occur of the Participant’s death, Disability, or six months following the Participant’s Separation from Service (coincident with or following the Company’s determination of retirement).

(iv)Upon a Participant’s voluntary termination of employment with the Company prior to retirement (as defined by the Company, in its discretion), the Performance Award is forfeited and terminated.

(v)Upon a Participant’s involuntary termination of employment by the Company without cause, the Performance Award is forfeited and terminated.

(vi)Upon a Participant’s termination of employment by the Company “for cause,” the Performance Award is forfeited and terminated. A termination “for cause” is a termination pursuant to a finding or determination by the Company of theft, fraud, embezzlement or any act which is detrimental or damaging to the business, operation or reputation of the Company.

6.Change of Control

(a)For purposes of this Plan, a Change of Control shall mean the first to occur of any of the following events:

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(i)The acquisition by any person other than 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;

(ii)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;

(iii)A majority of the members of the Company’s Board 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 who were members of the Board prior to the initiation of the replacement; or

(iv)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.

(b)Upon the occurrence of a Change of Control, all Performance Awards shall immediately vest and be paid to Participants within 30 days of the date on which the Change of Control occurs.

7.Miscellaneous

(a)Tax Withholding.  The Company shall have the right to deduct from any payments made or benefits accrued under the Plan, any Federal, state, or local taxes required by law to be withheld.

(b)Employment Rights.Neither the Plan nor any action taken hereunder shall be construed as giving an Employee or Participant any right to be retained in the employ of the Company nor shall any action taken hereunder be construed as entitling the Company to the services of any Employee or Participant for any period of time.  Nothing in the Plan shall be construed as a limitation of the right of the Company to discharge a Participant at any time with or without cause or notice and whether or not such discharge results in the forfeiture of any amount under the Plan.

(c)Beneficiaries.  Each Participant shall have the right, at any time, to designate a beneficiary or beneficiaries (both primary and contingent) to whom payments under this Plan shall be made if the Participant dies and amounts under this Plan are payable following the Participant’s death.  Any beneficiary designation shall be made in writing and filed with the Company and shall become effective only when received and accepted by the Company.  A Participant may change his beneficiary designation by filing a new designation with the Company.  The filing of a new beneficiary designation will cancel any and all beneficiary designations previously filed.  If a Participant fails to designate a beneficiary, or if all designated beneficiaries predecease the Participant or die prior to complete distribution of the Participant’s benefits, the payments under this Plan shall be made to the Participant’s estate.

(d)Nontransferability.  A person’s rights and interest under this Plan, including amounts payable, shall be solely the rights of a general unsecured creditor of the Company and such rights may not be assigned, pledged or transferred except to a designated beneficiary as provided above.

(e)409A.  This Plan is intended to comply with, or otherwise be exempt from, Code section 409A and any regulations and Treasury guidance promulgated thereunder.  The Company shall undertake to administer, interpret, and construe this Plan in a manner that does not result in the imposition on any Participant of any additional tax, penalty, or interest under Code section 409A.  Notwithstanding anything

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herein to the contrary, the Company may accelerate the timing of payments to the extent permitted by, and in accordance with, Treasury Regulation Section 1.409A-3(j)(4) or any successor provision.  No Participant shall have any right to, directly or indirectly, specify or elect the taxable year in which any payment that becomes due and owing under this Plan shall be made.

(f)Timing of Payments.  Notwithstanding anything herein to the contrary, a payment under this Plan that is to be made as of a specified date (i.e., December 31, 2014) shall be treated by the parties as having been paid on such specified date provided that the payment is made by no later than the 15th day of the third calendar month following the specified date.  Subject to the preceding and Section 6(b), any payment under this Plan shall be treated by the parties as having been paid on the specified event (i.e., death, Disability, or six months after Separation from Service) provided that the payment is made on the date of the event, or on a later date within the same calendar year or, if later, by the 15th day of the third calendar month following the date of the event.

(g)Governing Law.  All matters relating to the Plan shall be governed by the laws of the State of Maryland.

(h)Unfunded Benefit.  A Participant, his or her heirs, successors and assigns shall have no legal or equitable rights, interests or claims in any property or assets of the Company resulting from this Plan or any Performance Award(s).  For purposes of the payment of benefits under this Plan, any and all of the Company’s assets shall be, and remain, the general, unpledged unrestricted assets of the Company.  The Company’s obligation under this Plan shall be merely that of an unfunded and unsecured promise to pay money in the future.

8.Amendments

The Committee may, in its sole and absolute discretion, amend, suspend or terminate the Plan or any portion of the Plan at any time provided, however, that no such amendment, suspension or termination shall accelerate the payment of any Performance Award in contravention of Section 409A of the Code.

9.Aggregation of Employers

If the Company is a member of a controlled group of corporations or a group of trades or business under common control (as described in Code section 414(b) or (c), but substituting a 50% ownership level for the 80% level set forth in those Code Sections), all members of the group shall be treated as a single employer for any purposes under the Plan as Code section 409A shall require.

10.Aggregation of Plans

If the Company offers other deferred compensation plans in addition to this Plan, those plans together with this Plan shall be treated as a single plan to the extent required under Code section 409A.

11.Nature of Plan and Awards

The Plan is established as a sub-plan of The Ryland Group, Inc. 2011 Equity and Incentive Plan, the terms of which are incorporated herein, and the Performance Awards constitute performance-based cash incentive awards granted thereunder.

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