UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
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Check the appropriate box:
[_] Preliminary Proxy Statement
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COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
NVR, Inc.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
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(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
[LOGO] NVR
NVR, Inc.
7601 Lewinsville Road
McLean, VA 22102
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on Wednesday, May 1, 2002
The Annual Meeting of Shareholders (the "Meeting") of NVR, Inc. (the
"Company") will be held at the Company's headquarters at 7601 Lewinsville Rd.,
Suite 300, McLean, Virginia on Wednesday, May 1, 2002, at 11:30 A.M., Eastern
Time, for the purpose of considering and acting upon the following matters:
1. The election of the three (3) nominees for director to serve three (3)
year terms and until their successors are duly elected and qualified;
2. Ratification of appointment of KPMG LLP as independent auditors for the year
ending December 31, 2002; and
3. Such other business as may properly be brought before the Meeting or any
adjournment thereof.
The Board of Directors has established the close of business on March 1,
2002 as the record date for the Meeting. Only shareholders of record as of that
date shall be entitled to notice of and to vote at the Meeting or any
adjournment thereof.
Whether or not you plan to attend the Meeting, you are urged to date and
sign the enclosed proxy card and return it promptly in the accompanying
envelope. You are invited to attend the Meeting in person. If you do attend the
Meeting, you may withdraw your proxy and vote in person.
By order of the Board of Directors,
/s/ James M. Sack
James M. Sack
Vice President, Secretary and General
Counsel
March 21, 2002
NVR, INC.
7601 Lewinsville Road
Suite 300
McLean, VA 22102
PROXY STATEMENT
This Proxy Statement, Proxy Card and the Annual Report for the year ended
December 31, 2001 are being mailed on or about March 21, 2002 in connection
with the solicitation on behalf of the Board of Directors of NVR, Inc., a
Virginia corporation ("NVR" or the "Company"), of proxies for use at the Annual
Meeting of Shareholders of the Company to be held on Wednesday, May 1, 2002, at
the Company's headquarters at 7601 Lewinsville Rd., Suite 300, McLean, Virginia
22102, at 11:30 A.M., Eastern Time, and at any and all postponements and
adjournments thereof. Except to the extent specifically incorporated by
reference, the Annual Report does not constitute "soliciting material" and is
not to be deemed "filed" with the Securities and Exchange Commission (the
"SEC").
The cost of solicitation of proxies will be borne by NVR, including expenses
in connection with preparing, assembling and mailing the proxy solicitation
materials and all papers accompanying them. The Company may reimburse brokers
or persons holding shares in their names or in the names of their nominees for
their expenses in sending proxies and proxy material to beneficial owners. In
addition to solicitation by mail, certain officers, directors and regular
employees of the Company, who will receive no extra compensation for their
services, may solicit proxies by telephone, facsimile transmission, internet or
personally. The Company has retained Georgeson Shareholder Communications Inc.
to assist in the solicitation of brokers, bank nominees and institutional
holders for a fee of approximately $4,500 plus out-of-pocket expenses.
All voting rights are vested exclusively in the holders of the Company's
common stock, par value $.01 per share (the "Common Stock"). Only Shareholders
of record as of the close of business on March 1, 2002 (the "Record Date") are
entitled to receive notice of and to vote at the Annual Meeting. Shareholders
of record include holders (the "Participants") owning stock in the Company's
Profit Sharing Trust Plan and Employee Stock Ownership Plan (the "Plans").
The accompanying proxy card should be used to instruct the person named as
the proxy to vote the Shareholder's shares in accordance with the Shareholder's
directions. The persons named in the accompanying proxy card will vote shares
of Common Stock represented by all valid proxies in accordance with the
instructions contained thereon. In the absence of instructions, shares
represented by properly executed proxies will be voted for the election of
those three persons designated hereinafter as nominees for Class III directors
of the Company, for the ratification of KPMG LLP as the Company's Independent
Auditors for 2002, and in the discretion of the named proxies with respect to
any other matters presented at the Annual Meeting. With respect to the
tabulation of proxies, abstentions and broker non-votes will be counted for
purposes of constituting a quorum but have no effect on the vote. Any
shareholder may revoke his or her proxy at any time prior to its use by filing
with the Secretary of the Company, at 7601 Lewinsville Road, Suite 300, McLean,
Virginia 22102, written notice of revocation or a duly executed proxy bearing a
later date or by attending the Annual Meeting and voting in person. Execution
of the enclosed proxy will not affect your right to vote in person if you
should later decide to attend the Annual Meeting.
The proxy card also should be used by Participants to instruct the trustee
of the Plans how to vote shares of Common Stock held on their behalf. The
trustee is required under the applicable trust agreement to establish
procedures to ensure that the instructions received from Participants are held
in confidence and not divulged, released or otherwise utilized in a manner that
might influence the Participants' free exercise of their voting rights. Proxy
cards representing shares held by Participants must be returned to the
tabulator using the enclosed return envelope and should not be returned to the
Company. If shares are owned through the Plans and voting
1
instructions are not submitted by the Participant, the trustee of the Plans
will vote such shares in the same proportion as the voting instructions
received from the other Participants. Participants who wish to revoke a proxy
card will need to contact the trustee and follow its instructions.
As of the Record Date, the Company had a total of 7,524,255 shares of Common
Stock outstanding, each share of which is entitled to one vote. The presence,
either in person or by proxy, of persons entitled to vote a majority of the
outstanding Common Stock is necessary to constitute a quorum for the
transaction of business at the Annual Meeting. Under the Company's Restated
Articles of Incorporation and Bylaws, holders of Common Stock are not entitled
to vote such shares on a cumulative basis.
2
ELECTION OF DIRECTORS
(Proposal 1)
The Company's Board of Directors is divided into three classes, each
composed of three directors. At the 2002 Annual Meeting, the following persons
constituting Class III of the directors have been nominated by the Board of
Directors to be elected to hold office for a three year term and until their
successors are duly elected and qualified:
Dwight C. Schar
Robert C. Butler
George E. Slye
Assuming the presence of a quorum, the affirmative vote of the holders of a
plurality of the votes cast by the shares entitled to vote in person or by
proxy at the Annual Meeting is required for the election of each of the three
nominees named above. Unless marked otherwise, proxies received will be voted
for the election of each of the three nominees named above. Each nominee has
consented to serve as a director of the Company if elected. The Board of
Directors of the Company does not contemplate that any of its proposed nominees
listed above will become unavailable for any reason, but if any such
unavailability should occur before the Annual Meeting, proxies may be voted for
another nominee selected by the Board of Directors. Shareholders may withhold
their votes from the entire slate of nominees or from any particular nominee by
so indicating in the space provided on the attached proxy card.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" ALL THE FOREGOING
NOMINEES AS DIRECTORS OF THE COMPANY.
The following sets forth certain pertinent information with respect to the
current directors of the Company, including the nominees listed above.
Year First Elected/
Name Age Term Expires
---- --- -------------------
Dwight C. Schar(2)(3)(4).... 60 1993/2002
C. Scott Bartlett, Jr.(1)(4) 69 1993/2003
Robert C. Butler............ 71
Manuel H. Johnson(1)(2)(4).. 53 1993/2004
William A. Moran(2)(3)...... 55 1993/2003
David A. Preiser(2)(4)...... 45 1993/2004
George E. Slye(1)(3)........ 71 1993/2002
John M. Toups(2)(3)......... 76 1993/2004
- --------
(1) Member of Audit Committee
(2) Member of Compensation Committee
(3) Member of Executive Committee
(4) Member of Nominating Committee
Dwight C. Schar has been chairman of the board, president and Chief
Executive Officer of NVR since September 30, 1993.
C. Scott Bartlett, Jr. has been a director of NVR since September 30, 1993.
Mr. Bartlett retired as an Executive Vice President of National Westminster
Bank USA, now Fleet Bank. Mr. Bartlett is also a director of Janus Hotels and
Resorts, Inc., Abraxas Petroleum Corporation and New ICO Global Communications
(Holdings) Limited.
Robert C. Butler is being nominated for his first term as a director of NVR.
Mr. Butler served as Senior Vice President and Chief Financial Officer of
Celgene Corporation from 1996 through 1998. Additionally, Mr. Butler
3
was the Chairman of the Financial Accounting Standards Advisory Council from
1997 through 2001. Previously, Mr. Butler served as Chief Financial Officer of
the National Broadcast Co. and the International Paper Co. Mr. Butler is a
director of Carter Holt Harvey Ltd., Studio One Networks, Inc. and Schiffenhaus
Industries. He is also on the Board of Trustees of the United Way of North
Essex and the Montclair Foundation.
Manuel H. Johnson has been a director of NVR since September 30, 1993. Dr.
Johnson is co-chairman and senior partner in Johnson Smick International, Inc.,
an international financial policy-consulting firm. Effective August 1, 1997,
Dr. Johnson was elected chairman of the Board of Trustees and president of the
Financial Accounting Foundation, which oversees the Financial Accounting
Standards Board. Also during 1997, Dr. Johnson was named a member of the
Independence Standards Board formed jointly by the Securities and Exchange
Commission and the American Institute of Certified Public Accountants. Dr.
Johnson is a founder and co-chairman of the Group of Seven Council, an
international commission supporting economic cooperation among the major
industrial nations. He is a director of Morgan Stanley Dean Witter Funds, Trust
Company of the West/Morgan Stanley Dean Witter Funds, and Greenwich Capital
Markets, Inc.
William A. Moran has been a director of NVR since September 30, 1993. In
addition, Mr. Moran is the chairman of Elm Street Development, Inc. ("Elm
Street"). Mr. Moran is also a director and shareholder of Craftmark, Inc., a
small homebuilder in Virginia and Maryland, and The Craftstar, Inc. which
develops, invests in and periodically sells apartments, condominiums, single
family homes and townhomes in Virginia and Maryland.
David A. Preiser has been a director of NVR since September 30, 1993. Mr.
Preiser is a managing director and a member of the Board of Directors of the
investment banking firm of Houlihan Lokey Howard & Zukin ("Houlihan Lokey"),
and serves as managing partner of Sunrise Capital Partners L.P., a distressed
private equity fund affiliated with Houlihan Lokey. Previously, Mr. Preiser had
been active in coordinating the firm's real estate and financial restructuring
activities since September 1990. Mr. Preiser is also a director of Jos. A Bank
Clothiers, Inc., Akrion, LLC, Airwalk International, LLC, and NEXIQ
Technologies, Inc.
George E. Slye has been a director of NVR since September 30, 1993. Mr. Slye
has been the chief executive officer and owner of GESCOM, Inc., a real estate
investment firm, since 1983. Mr. Slye was a co-founder and vice-chairman of
Spaulding and Slye Colliers, a major real estate development company with
offices in Boston and Washington, D.C. He has served as a trustee of Babson
College and University Hospital of Boston and as a director of Manufacturers
Advisor Corporation of Toronto. In addition, Mr. Slye was a two term president
of the Greater Boston Real Estate Board.
John M. Toups has been a director of NVR since September 30, 1993. Mr. Toups
held various management positions with Planning Research Corporation from 1970
through 1987, for which he was chief executive officer from 1978 to 1987 and
chairman from 1982 to 1987. He is also a director of INOVA Health System,
Halifax Corporation, CACI International, and GTSI, Inc.
The Board of Directors has an Audit, Compensation, Executive and Nominating
Committee. The primary functions of these committees are as follows:
The functions of the Audit Committee and its activities during fiscal
2001 are described below under the heading Report of the Audit Committee.
During the year, the Board confirmed that all members of the Audit Committee
are "independent" within the meaning of the American Stock Exchange's
independence rules.
The Compensation Committee determines the compensation of the Chief
Executive Officer and reviews the recommendation of compensation made by the
Chief Executive Officer for all other officers of the Company. The Option
Subcommittee of the Compensation Committee administers and interprets
incentive compensation and option plans for employees of the Company.
The Executive Committee has such powers, authority and responsibilities
as may be determined by a majority of the entire Board of Directors.
4
The Nominating Committee recommends to the Board of Directors candidates
for election as directors. Shareholders wishing to communicate with the
Nominating Committee concerning potential director candidates may do so by
corresponding with the Secretary of the Company and including the name and
biographical data of the individual being suggested.
The Board of Directors met six times in 2001. The Audit and Compensation
Committees each met four times during 2001, and the Nominating Committee met
once. The Executive Committee did not meet during 2001.
Each outside director of the Board was paid $6,500 per quarter for serving
as a director and fees of $1,600 for each meeting attended during 2001.
Incidental travel and out-of-pocket expenses are reimbursed as incurred. During
2001, each non-employee director was issued an option to purchase 17,000 shares
of NVR common stock at an exercise price of $189.00 per share, which was equal
to the fair market value of the underlying stock on the date of grant. The
options vest in twenty-five percent increments in each of 2006, 2007, 2008, and
2009, and expire in May 2011. Directors who are also officers of the Company
receive no additional compensation for their services as directors.
5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as to the beneficial
ownership of Common Stock by each person known by the Company to be the
beneficial owner of more than 5% of the outstanding Common Stock as of the
dates indicated and each director and executive officer and by all directors
and executive officers as a group as of March 1, 2002. Except as otherwise
indicated, all shares are owned directly and the owner has sole voting and
investment power with respect thereto.
Certain Beneficial Owners
Number of Percent of
Name and Address of Holder Shares(1) Class
-------------------------- --------- ----------
Capital Growth Management Limited Partnership 663,800 8.8%
One International Place
Boston, MA 02110...........................
Barclays Global Investors, N.A............... 410,008 5.5%
45 Fremont Street
San Francisco, CA 94105....................
- --------
(1) Based solely upon information contained within Schedule 13G's filed by such
entities dated February 11, 2002 and February 12, 2002, respectively.
Directors and Management
Number of Percent of
Name Shares Class
- ---- --------- ----------
Dwight C. Schar............................................. 1,043,187(1) 13.3%
C. Scott Bartlett, Jr....................................... 14,200(2) *
Robert C. Butler............................................ -- (3)
Manuel H. Johnson........................................... 34,465(4) *
William A. Moran............................................ 46,750 *
David A. Preiser............................................ 8,000(5) *
George E. Slye.............................................. 8,000 *
John M. Toups............................................... 30,400(6) *
William J. Inman............................................ 171,266(7) 2.3%
Paul C. Saville............................................. 351,410(8) 4.6%
Dennis M. Seremet........................................... 77,470(9) 1.0%
---------
All directors and executive officers as a group (11 persons) 1,785,148
- --------
* Less than 1%.
(1) Includes 333,333 vested options issued under the 1996 Management Long-Term
Stock Option Plan, 3,075 vested shares held by the NVR Employee Stock
Ownership Plan in trust and 31,536 shares held as a discretionary
investment in the NVR, Inc. Profit Sharing Plan. The total shares reported
does not include 70,405 shares held in a Deferred Compensation Rabbi Trust
that will vest in one-third increments on each of December 31, 2002, 2003,
and 2004.
(2) Includes 12,000 vested options issued under the 1996 Directors' Long Term
Stock Option Plan and 1,700 shares owned by his wife.
(3) Director nominee, no shares currently owned directly or indirectly.
(4) Includes 24,000 vested options issued under the 1996 Directors' Long Term
Stock Option Plan and 65 shares owned by his son.
(5) Includes 8,000 vested options issued under the 1996 Directors' Long Term
Stock Option Plan.
(6) Includes 24,000 vested options issued under the 1996 Directors' Long Term
Stock Option Plan and 43 shares owned by his wife.
(7) Includes 66,667 vested options issued under the 1996 Management Long-Term
Stock Option Plan and 2,987 vested shares held by the NVR Employee Stock
Ownership Plan in trust. The total shares reported does not include 35,202
shares held in a Deferred Compensation Rabbi Trust that will vest in
one-third increments on each of December 31, 2002, 2003, and 2004.
(8) Includes 75,000 vested options issued under the 1993 Management Equity
Incentive Plan, 116,667 vested options issued under the 1996 Management
Long-Term Stock Option Plan, 3,075 vested shares held by the NVR Employee
Stock Ownership Plan in trust, 4,055 shares held as a discretionary
investment in the NVR, Inc. Profit Sharing Plan, 60,000 shares held in a
family LLC and 2,000 shares owned by his children. The total shares
reported does not include 44,003 shares held in a Deferred Compensation
Rabbi Trust that will vest in one-third increments on each of December 31,
2002, 2003, and 2004.
(9) Includes 9,900 vested options issued under the 1993 Management Equity
Incentive Plan, 40,000 vested options issued under the 1996 Management
Long-Term Stock Option Plan, 2,931 vested shares held by the NVR Employee
Stock Ownership Plan in trust, 1,789 shares held as a discretionary
investment in the NVR, Inc. Profit Sharing Plan and 600 shares owned by his
children. The total shares reported does not include 21,122 shares held in
a Deferred Compensation Rabbi Trust that will vest in one-third increments
on each of December 31, 2002, 2003, and 2004.
6
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and executive officers and persons who own
more than 10% of the Company's Common Stock to file reports of ownership and
changes in ownership of such stock with the SEC and the American Stock
Exchange. Directors, executive officers and greater than 10% shareholders are
required by SEC regulations to furnish the Company with copies of all such
forms filed. To the Company's knowledge, based solely on a review of the copies
of such reports furnished to the Company and written representations that no
other reports were required, all directors, executive officers and greater than
10% shareholders complied with all applicable Section 16(a) filing requirements
during 2001.
THE FOLLOWING REPORT OF THE AUDIT COMMITTEE SHALL NOT BE DEEMED TO BE
"SOLICITING MATERIAL" OR TO BE "FILED" WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF
1934 OR INCORPORATED BY REFERENCE IN ANY DOCUMENT SO FILED.
REPORT OF THE AUDIT COMMITTEE
During 2001, the Audit Committee of the Board of Directors operated under a
charter for the Committee that was approved by the Board on May 3, 2000.
As set forth in more detail in the charter, the Audit Committee's primary
responsibilities fall into three broad categories:
. first, the Committee is charged with recommending to the Board whether to
include the audited financial statements in the Annual Report on Form 10-K
filed with the Securities and Exchange Commission, based upon discussions
with management and the Company's outside auditors about the draft annual
financial statements and key accounting and reporting matters;
. second, the Committee is responsible for matters concerning the
relationship between the Company and its outside auditors, including
recommending their appointment or removal; reviewing the scope of their
audit services and related fees, as well as any other services being
provided to the Company; and determining whether the outside auditors are
independent (based in part on the annual letter provided to the Company by
KPMG LLP pursuant to Independence Standards Board Standard No. 1); and
. third, the Committee oversees management's implementation of effective
systems of internal controls.
The Committee has implemented procedures to ensure that during the course of
each fiscal year it devotes the attention that it deems necessary or
appropriate to each of the matters assigned to it under the Committee's
charter. To carry out its responsibilities, the Committee met four times during
fiscal 2001.
In overseeing the preparation of the Company's financial statements, the
Committee met with both management and the Company's outside auditors to review
and discuss all financial statements prior to their issuance and to discuss
significant accounting issues. Management advised the Committee that all
financial statements were prepared in accordance with accounting principles
generally accepted in the United States of America, and the Committee discussed
the statements with both management and the outside auditors. The Committee's
review included discussion with the outside auditors of matters required to be
discussed pursuant to Statement on Auditing Standards No. 61 (Communication
with Audit Committees).
With respect to the Company's outside auditors, the Committee, among other
things, discussed with KPMG LLP matters relating to its independence, including
the disclosures made to the Committee as required by the Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committees).
Finally, the Committee continued to monitor the scope and adequacy of the
Company's internal auditing program.
7
On the basis of these reviews and discussions, the Committee recommended to
the Board of Directors that the Board approve the inclusion of the Company's
audited financial statements in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2001, for filing with the Securities and
Exchange Commission.
Members of the Audit Committee
Manuel H. Johnson (Chairman)
C. Scott Bartlett, Jr.
George E. Slye
8
THE FOLLOWING COMPENSATION COMMITTEE REPORT SHALL NOT BE DEEMED TO BE
"SOLICITING MATERIAL" OR TO BE "FILED" WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF
1934 OR INCORPORATED BY REFERENCE IN ANY DOCUMENT SO FILED.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation Philosophy
The Compensation Committee (the "Committee") of the NVR Board of Directors
is responsible for determining and periodically evaluating the various levels
and methods of compensating the Company's executive officers and directors. The
Committee's philosophy regarding executive compensation is to provide a total
compensation program for executive officers which is competitive with the
compensation packages of other companies in the homebuilding and mortgage
banking businesses and which includes performance based compensation which
effectively aligns the interests of management with those of the Company's
Shareholders. The Company's compensation package consists of base salary,
annual incentive compensation and long-term incentives consisting of
non-qualified stock options and long-term cash incentive plans. This
compensation package is performance based and places a large portion of
executive compensation at risk by making it dependent upon the achievement of
annual and long-term financial objectives, which are tied to the Company's
business plan and are intended to enhance shareholder value.
Base Salary
The base salary levels for the executive officers are reviewed annually by
the Committee. Salaries, including executive salaries, are generally
established at the average market rate of other companies of comparable size,
particularly major homebuilding and residential mortgage companies, some of
which are companies included in the Dow/Home Construction Index. In addition,
consideration is given to individual experience as well as individual
performance and the performance of those operations for which the executive is
responsible. All four of the executive officers' 2002 base salaries were
increased over their 2001 base salaries.
Annual Incentive Compensation
All of the executive officers participate in the Company's annual incentive
compensation plan. Each participant has a maximum potential payout, which is
limited to a fixed percentage of the executive's salary. Each executive officer
has an opportunity to earn an annual incentive award which is based on actual
financial results compared to the business plan approved by the Board of
Directors. The maximum incentive opportunity is earned only if certain business
objectives are met or exceeded. At the beginning of each year, financial
targets are established by the Committee for predetermined key result areas,
which are tied to the Company's annual business plan. These annual objectives
are consistent with the current year's portion of the Company's five-year
business plan. The key result areas used throughout the homebuilding operation
are earnings before interest and taxes, pre-tax profit and return on assets.
The primary key result areas used for the mortgage banking operation are
pre-tax profit and return on invested capital. The key result area for
corporate executives is predicated upon consolidated pre-tax profit. For 2001,
the executive officers substantially exceeded their financial objectives and
received the maximum incentive award (100% of base salary).
Long-Term Compensation
NVR's long-term incentive programs, administered by the Committee, are
designed to focus the attention of the executive officers on the Company's
long-term goals and link the interests of executive officers to those of the
shareholders. Awards under the Company's long-term incentive programs also
strongly encourage the retention of key executive personnel. Retention of a
loyal and experienced management team has been and continues to be a key
component of the Company's business strategy. In support of these objectives,
the
9
Company's executive officers have historically participated in long-term, cash
and stock-based incentive programs which have a long-term vesting schedule
based upon certain cash flow, financial or employment objectives.
The last option grants for the executive officers were made under the 2000
Broadly Based Stock Option Plan adopted by the Company's Board of Directors.
The options vest in twenty-five percent increments in each of 2006, 2007, 2008
and 2009 (see the Summary Compensation Table below).
The executive officers also participate in the NVR, Inc. High Performance
Compensation Plan ("HP Plan"). The objective of the HP Plan is to reward the
executive officers for superior performance by the Company, measured by the
three-year aggregate growth in earnings per share over a threshold equal to the
base year earnings per share compounded annually by a designated percentage
over the same three year period. Eligible participants will be allocated a
specified percentage of a pool, the aggregate amount of which is equal to a
percentage of earnings in excess of the threshold. Earnings for the measurement
period January 1, 1999 to December 31, 2001 exceeded the threshold and
therefore the participants earned allocations under the HP Plan as of December
31, 2001 (see the Summary Compensation Table below for amounts allocated to the
executive officers). Amounts earned under the HP Plan vest in one-third
increments on December 31, 2002, 2003, and 2004, based upon continued
employment, and payment of vested amounts is deferred until the executive
officer terminates employment with NVR. Amounts deferred are invested in NVR
Common Stock, and upon termination, the executive officer receives a
distribution of all vested shares. An additional measurement period began
January 1, 2002 and continues through December 31, 2004. Receipt of any amounts
earned under the new measurement period will vest in one-third increments on
December 31, 2005, 2006, and 2007.
Chief Executive Officer Compensation
Mr. Dwight C. Schar has been Chairman of the Board, President and Chief
Executive Officer of the Company since its inception. The compensation program
for the CEO is linked to the long-term strategic and financial goals of the
Company, and encourages the creation of shareholder value. A significant amount
of the CEO's compensation is tied to the Company's performance and is at risk,
in the form of annual and long-term cash incentive compensation and stock
options. Mr. Schar's long-term incentive compensation opportunities are mainly
dependent upon the Company attaining consistent annual growth in earnings per
share. The Committee believes that earnings per share-structured incentives
focus the CEO to grow the Company's operations while maintaining an efficient
capital structure. The Committee believes the compensation program for the CEO
is consistent with the Company's philosophy for compensating executive officers
and encourages long-term shareholder value.
The CEO's 2001 annual incentive compensation opportunity was based on
predetermined pre-tax profit objectives tied to the Company's business plan
which was approved by the Board of Directors. As previously noted, for 2001,
the pre-tax profit objectives for the Company were substantially exceeded and
the CEO received the maximum award of 100% of his base salary. The CEO is a
participant in the HP Plan described above. Mr. Schar earned an allocation of
the HP Plan pool measured from the period January 1, 1999 to December 31, 2001.
Mr. Schar's allocation was equal to five percent of the Company's aggregate
earnings over the measurement period in excess of the aggregate sum of the
Company's 1998 earnings compounded by 10% over the same period.
Stock Ownership Requirements of the Chief Executive Officer, Executive Officers
and Certain Members of Senior Management
The Committee has established and adopted guidelines that require the CEO,
other executive officers and certain members of senior management
("Management") to acquire and continuously hold a specified minimum level of
Common Stock (the "Guidelines"). Under the Guidelines, Management must acquire
and hold Common
10
Stock with a total fair market value ranging from one (1) to eight (8) times
their annual base salaries, with the CEO required to acquire and hold Common
Stock with a fair market value equal to a minimum of eight (8) times his annual
base salary. The Committee believes that the imposition of a long-term holding
requirement for Management provides for additional incentive to enhance
shareholder value by linking the interests of Management directly to those of
the shareholders. In the event of non-compliance at any date thereafter, a
Participant subject to the Guidelines will receive one-half of any earned
annual incentive compensation in restricted stock until compliance with the
Guidelines is attained. All members of Management met their specified holding
requirements at December 31, 2001 without the issuance of restricted stock in
lieu of cash payments for any earned annual incentive compensation.
Deductibility of Compensation
Section 162(m) of the Internal Revenue Code limits the corporate deduction
for compensation paid to the executive officers named in the Summary
Compensation Table to $1 million unless such compensation qualifies as
"performance-based compensation" which, among other things, requires approval
by the Company's stockholders. The Committee strives whenever possible to
structure compensation plans such that they are tax deductible by the Company.
To minimize the non-deductibility of executive compensation expense due to
the limitations of Section 162(m) and still maintain the ability to
competitively compensate the Company's named executive officers, the Company
established a deferred compensation plan (Deferred Comp Plan). The specific
purpose of the Deferred Comp Plan was to establish a vehicle whereby the
executive officers could defer the receipt of compensation that otherwise would
be nondeductible for tax purposes into a period where the Company would realize
a tax deduction for the amounts paid. The Company has amended the payout
provisions for the compensation earned pursuant to the HP Plan for the three
year measurement period that ended December 31, 2001 to require that those
compensation benefits be manditorily deferred until termination of employment.
The deferral of any other earned annual incentive is at the election of the
executive officer. To encourage the executive officers to defer any other
earned annual incentive into the Deferred Comp Plan, the Deferred Comp Plan
provides for a deferral incentive equal to twenty percent of the amounts
deferred. The executive officer must defer receipt of any other earned annual
incentive until separation of service to be eligible to receive the deferral
incentive. In the event that the executive officer amends his deferral election
to receive deferred compensation at a date earlier than separation of service,
the executive officer forfeits the deferral incentive. Amounts deferred into
the Deferred Comp Plan are invested in shares of NVR common stock, which are
distributed to the executive officer upon expiration of the deferral period.
See the Summary Compensation Table for the individual amounts deferred under
the Deferred Comp Plan.
Compensation Committee and Option Subcommittee
The Committee consists of the five individuals named below, all of whom,
except Mr. Dwight C. Schar, are outside directors of the Company.
The Option Subcommittee of the Compensation Committee administers and
interprets incentive compensation and option plans for employees of the
Company. The Option Subcommittee consists of Messrs. Johnson, Preiser and Toups.
The Compensation Committee of the Board of Directors:
John M. Toups, Chairman, Manuel H. Johnson, William A. Moran, David A. Preiser,
and Dwight C. Schar
11
EXECUTIVE COMPENSATION
Shown below is certain information concerning the compensation for services
in all capacities to NVR for the years ended December 31, 2001, 2000 and 1999
of those persons who were, at December 31, 2001, (i) the Chief Executive
Officer, and (ii) the three other executive officers of NVR.
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
--------------------------------------- -----------------------------------------
Name and Incentive Other Annual Stock LTIP All Other
Principal Position Year Salary Compensation(1) Compensation Options Payouts Compensation(7)
- ------------------ ---- ---------- --------------- ------------ ------- ----------- ---------------
Dwight C. Schar............ 2001 $1,100,000 $1,100,000 $ -- 400,000(2) $16,092,700(4) $ 9,000
Chairman of the Board, 2000 950,000 950,000 -- -- 190,000(5) 10,700
Chief Executive Officer 1999 850,000 850,000 -- 250,000(3) 4,855,177(6) 10,100
and President.............
William J. Inman........... 2001 $ 329,000 $ 329,000 $ -- 50,000(2) $ 7,936,350(4) $ 8,500
President of NVR 2000 316,000 316,000 -- -- -- 10,200
Mortgage Finance, Inc..... 1999 304,000 98,000 -- 50,000(3) 1,983,625(6) 9,600
Paul C. Saville............ 2001 $ 363,000 $ 363,000 $ -- 150,000(2) $ 9,993,037(4) $ 9,000
Executive Vice 2000 330,000 330,000 -- -- -- 10,700
President, Chief Financial 1999 300,000 300,000 -- 87,500(3) 1,983,625(6) 10,100
Officer and Treasurer.....
Dennis M. Seremet.......... 2001 $ 190,000 $ 190,000 $ -- 50,000(2) $ 4,799,810(4) $ 9,000
Vice President and 2000 176,000 176,000 -- -- 35,200(5) 10,700
Controller................ 1999 160,000 160,000 -- 30,000(3) 377,852(6) 10,100
- --------
(1) Incentive compensation is reflected in the year earned. All incentive
compensation earned for the periods presented was paid in March of the
subsequent calendar year, with the following exceptions: Messrs. Schar,
Saville and Seremet deferred their Year 2001 payments into the Deferred
Comp Plan, and Messrs. Schar and Seremet deferred their Year 2000 payments
into the Deferred Comp Plan.
(2) Twenty-five percent of the options vest on each of December 31, 2006, 2007,
2008, and 2009 with vesting based upon continued employment. The options
expire in May 2011 and are exercisable at $189.00 per share.
(3) One-third of the options vest on each of December 31, 2003, 2004 and 2005
with vesting based upon continued employment. The options expire in May
2009 and are exercisable at $47.625 per share.
(4) Includes amounts earned pursuant to the HP Plan, and a deferral incentive
earned for deferring otherwise nondeductible compensation into a period
where the amounts paid will be deductible for tax purposes. The amounts
pertaining to the deferral incentive equal $409,732, $94,866, $191,182 and
$94,920 for Messrs. Schar, Inman, Saville and Seremet, respectively, and
relate to the deferral of annual incentive compensation and the final
payment due under the HP Plan for the three year measurement period that
ended December 31, 1998. The amounts pertaining to the HP Plan for the
three year measurement period ending on December 31, 2001 equaled
$15,682,968, $7,841,484, $9,801,855 and $4,704,890 for Messrs. Schar,
Inman, Saville and Seremet, respectively. All amounts earned pursuant to
the HP Plan for the three year measurement period ending on December 31,
2001, were required to be deferred into the Deferred Comp Plan, with no
deferral incentive earned pursuant to the mandatory deferral.
(5) Includes a deferral incentive earned for deferring otherwise nondeductible
incentive compensation into a period where the amounts paid will be
deductible for tax purposes.
(6) Includes amounts for both the vested portion of performance shares, valued
at $47.25 per share (which equaled the closing price of NVR's common stock
as listed on the American Stock Exchange on the vesting determination
date), awarded pursuant to the 1994 Management Equity Incentive Plan, and a
deferral incentive earned for deferring otherwise nondeductible
compensation into a period where the amounts paid will be deductible for
tax purposes. The amounts pertaining to the 1994 Management Equity
Incentive equal $4,047,766; $1,653,750; $1,653,750 and $315,016 for Messrs.
Schar, Inman, Saville and Seremet, respectively. The amounts pertaining to
the deferral incentive equal $807,411; $329,875; $329,875 and $62,836 for
Messrs. Schar, Inman, Saville and Seremet, respectively.
(7) Amount contributed to the Profit Sharing Trust Plan and the Employee Stock
Ownership Plan for the respective plan years.
12
Stock Option Grants, Exercises and Year-End Values
Stock Option Grants in 2001
Percent of
Total Options Potential Realizable
Granted to Option Value Using the
Stock Employees Exercise Black-Scholes
Options For the Price Expiration Option Pricing
Name Granted (#) Fiscal Year ($/Share) Date Model(1)
- ---- ----------- ------------- --------- ---------- --------------------
Dwight C. Schar.. 400,000 21.9% $189.00 05/02/11 $47,648,000
William J. Inman. 50,000 2.7% 189.00 05/02/11 5,956,000
Paul C. Saville.. 150,000 8.2% 189.00 05/02/11 17,868,000
Dennis M. Seremet 50,000 2.7% 189.00 05/02/11 5,956,000
- --------
(1) The fair value per share was calculated under the following assumptions: i)
the estimated option life is equal to ten years, ii) the risk free interest
rate was 5.484% (based on a U.S. Treasury Strip due in a number of years
equal to the stock option term), iii) the expected volatility equals
42.42%, and iv) the estimated dividend yield is equal to 0%.
Aggregated Stock Option Exercises in 2001 and Year-End Stock Option Values
Number of Unexercised Value of Unexercised In-the-
Shares Stock Options at Year-End Money Options at Year-End
Acquired Value ------------------------- ----------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
Dwight C. Schar.. -- $-- 333,333 816,667 $64,458,333 $77,322,917
William J. Inman. -- -- 66,667 133,333 12,891,667 15,014,583
Paul C. Saville.. -- -- 191,667 295,833 37,288,917 27,213,021
Dennis M. Seremet -- -- 49,900 100,000 9,679,162 9,308,750
Compensation Committee Interlocks and Insider Participation
The compensation committee is comprised of Mr. Schar, Mr. Johnson, Mr.
Moran, Mr. Toups, and Mr. Preiser, all of whom, except Mr. Schar, are outside
directors of the Company. No executive officer of NVR served as a member of the
board of directors or compensation committee of any entity that has one or more
executive officers serving as a member of the Board's Compensation Committee;
accordingly, there were no interlocks with other companies within the meaning
of the SEC's proxy rules during 2001.
Certain Transactions
During the year ended December 31, 2001, NVR entered into new agreements to
purchase lots for a total purchase price of approximately $15,000,000 with Elm
Street Development, which is controlled by Mr. Moran. These transactions were
approved by a majority of the disinterested members of the Board of Directors.
During 2001, NVR purchased developed lots at market prices from Elm Street for
approximately $19,000,000.
During the year ended December 31, 2001 the law firm of Sack & Harris, P.C.
billed NVR approximately $720,000 in fees and expenses for legal services. Mr.
Sack, NVR's secretary and general counsel, was a principal of Sack & Harris,
P.C. during that period.
NVR periodically sub-leases, at market rates, an airplane leased by Mr.
Schar for Company travel when the use of the airplane lends itself to travel
efficiencies. The Company paid approximately $74,000 for use of the airplane
during 2001.
13
Employment Arrangements
NVR has an employment agreement with Mr. Schar effective January 1, 2002 to
serve as Chairman, President and Chief Executive Officer. The agreement
continues through January 1, 2008. The agreement provides for an annual minimum
base salary of $1,500,000 and an annual bonus of up to 100% of base salary. If
Mr. Schar's employment is terminated without cause, as defined in the
agreement, including in connection with or within one year after a change in
control of NVR, prior to January 1, 2008, he would be entitled to receive in
twelve monthly installments an amount equal to 200% of his then annual base
salary. In the event that Mr. Schar terminates pursuant to retirement
(essentially a voluntary termination after attaining age 65), he would be
entitled to receive in twelve monthly installments an amount equal to 100% of
his then annual base salary. In the event that Mr. Schar voluntarily terminates
his employment, including a voluntary termination upon the election of a new
Chairman and/or Chief Executive Officer, he would not be entitled to receive
any severance payments. Mr. Schar agreed that he will not compete with NVR
during the term of his employment and for one year thereafter if termination is
voluntary, due to retirement, without cause or within one year after a change
in control, or two years if he is terminated for cause, as defined below. Mr.
Schar is not subject to a non-compete clause if he voluntarily terminates his
employment pursuant to the election of a new Chairman and/or Chief Executive
Officer.
NVR has an employment agreement with Mr. Saville effective January 1, 2002
to serve as NVR's Executive Vice President-Finance, Chief Financial Officer and
Treasurer. The agreement continues through January 1, 2008. The agreement
provides for an annual minimum base salary of $420,000 and an annual bonus of
up to 100% of base salary. If Mr. Saville's employment is terminated without
cause, as defined in the agreement, including in connection with or within one
year after a change in control of NVR, prior to January 1, 2008, he would be
entitled to receive in twelve monthly installments an amount equal to 200% of
his then annual base salary. In the event that Mr. Saville voluntarily
terminates his employment, including a voluntary termination upon the election
of a new Chairman and/or Chief Executive Officer, he would not be entitled to
receive any severance payments. Mr. Saville agreed that he will not compete
with NVR during the term of his employment and for one year thereafter if
termination is voluntary, without cause or within one year of a change of
control, or two years if he is terminated for cause, as defined below. Mr.
Saville is not subject to a non-compete clause if he voluntarily terminates his
employment pursuant to the election of a new Chairman and/or Chief Executive
Officer.
NVR has an employment agreement effective January 1, 2002 with Mr. Inman to
serve as president of NVR Mortgage Finance, Inc. The agreement continues until
January 1, 2008. The agreement provides for an annual minimum base salary of
$345,000 and an annual bonus of up to 100% of base salary. If Mr. Inman's
employment is terminated without cause, as defined in the agreement, including
in connection with or within one year after a change in control of NVR, prior
to January 1, 2008, he would be entitled to receive in twelve monthly
installments an amount equal to 200% of his base salary. In the event that Mr.
Inman voluntarily terminates his employment, including a voluntarily
termination upon the election of a new Chairman and/or Chief Executive Officer,
he would not be entitled to receive any severance payments. Mr. Inman agreed
that he will not compete with NVR during the term of his employment and for one
year thereafter if termination is voluntary, without cause or within one year
of a change of control, or two years if he is terminated for cause, as defined
below. Mr. Inman is not subject to a non-compete clause if he voluntarily
terminates his employment pursuant to the election of a new Chairman and/or
Chief Executive Officer.
In each of the above described employment agreements, termination for
"cause" may result if the executive officer subject to the respective
employment agreement is convicted of any felony, other crime involving moral
turpitude, or any crime or offense which results in his incarceration for more
than three months, is guilty of gross misconduct in connection with the
performance of his duties as described within the respective employment
agreement, or if the executive officer materially breaches affirmative or
negative covenants or undertakings set forth in his respective employment
agreement.
14
STOCK PERFORMANCE GRAPH
THE FOLLOWING STOCK PERFORMANCE GRAPH SHALL NOT BE DEEMED TO BE "SOLICITING
MATERIAL" OR TO BE "FILED" WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER
THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934 OR
INCORPORATED BY REFERENCE IN ANY DOCUMENT SO FILED.
COMPARISON OF CUMULATIVE TOTAL EQUITYHOLDER RETURN ON EQUITY
The following chart graphs NVR's performance in the form of cumulative total
return to holders of NVR's Common Stock since December 31, 1996 in comparison
to the Dow/Home Construction Index and the Dow Jones Industrial Index for that
same period. The Dow/Home Construction Index includes NVR, Inc., Pulte Corp.,
Centex Corp., K B Home, Champion Enterprises, Inc., Lennar Corp., DR Horton,
Inc., Clayton Homes, Inc., MDC Holdings, Inc. and Toll Brothers, Inc.
[CHART]
NVR Dow/Homes Dow Jones Ind. Avg.
------- ------- -------
Dec. 31, 1996 (a) $100 $100 $100
Dec. 31, 1997 168 147 125
Dec. 31, 1998 367 155 148
Dec. 31, 1999 367 103 188
Dec. 31, 2000 951 180 179
Dec. 31, 2001 1,569 242 169
(a) Assumes that $100 was invested in NVR stock and the indices on December 31,
1996.
15
APPROVAL OF INDEPENDENT AUDITORS
(Proposal 2)
At the Meeting, the Board of Directors of the Company will recommend
Shareholder ratification of the appointment of KPMG LLP as independent auditors
for the Company for the year 2002. Representatives of KPMG LLP are expected to
be present at the meeting to respond to Shareholders' questions and will have
an opportunity to make a statement if they so desire.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR"
THE APPROVAL OF KPMG LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR 2002.
DISCLOSURE OF FEES PAID TO KPMG LLP DURING THE
YEAR ENDED DECEMBER 31, 2001:
Audit fees.................................................. $263,300
Financial information systems design and implementation fees --
All other fees.............................................. 46,600
--------
Total fees............................................... $309,900
========
Consistent with its charter, the Audit Committee evaluates and considers
whether any financial information systems design and implementation services
and other non-audit services provided by KPMG LLP to NVR are compatible with
maintaining KPMG LLP's independence pursuant to Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees).
SHAREHOLDER PROPOSALS
Proposals of holders of Common Stock intended to be included in the
Company's proxy statement for the next annual meeting of Shareholders of the
Company, must be received by the Company on or before November 21, 2002, and
must comply with applicable rules of the Securities and Exchange Commission in
order to be included. In addition, management intends to exercise discretionary
voting authority with respect to any other proposal made by holders of Common
Stock at the next annual meeting of Shareholders of which NVR does not have
notice on or before February 20, 2003.
OTHER MATTERS
Management knows of no other business to be presented for action at the
meeting, other than those items listed in the notice of the Meeting referred to
herein. If any other business should properly come before the Meeting, or any
adjournment thereof, it is intended that the proxies will be voted in
accordance with the best judgment of the persons acting thereunder.
NVR's Annual Report on Form 10-K for 2001, including consolidated financial
statements and other information, accompanies this Proxy Statement but does not
form a part of the proxy soliciting material. A complete list of the
stockholders of record entitled to vote at the Annual Meeting will be open and
available for examination by any stockholder, for any purpose germane to the
Annual Meeting, between 9:00 a.m. and 5:00 p.m. at NVR's offices at 7601
Lewinsville Road, McLean, Virginia 22102, from April 18, 2002 through April 30,
2002 and at the time and place of the Annual Meeting.
Copies of the Company's most recent Annual Report on Form 10-K, including
the financial statements and schedules thereto, which the Company is required
to file with the SEC, will be provided
16
without charge upon the written request of any shareholder. Such requests may
be sent to Investor Relations, NVR, Inc., 7601 Lewinsville Road, Suite 300,
McLean, Virginia, 22102. The Company's SEC filings are also available to the
public from the SEC's World Wide Web site at http://www.sec.gov.
By Order of the Board of Directors,
/s/ James M. Sack
James M. Sack
Vice President, Secretary and General
Counsel
McLean, Virginia
March 21, 2002
17
SKU # 3570-PR-02
PROXY
NVR, Inc.
Proxy for Annual Meeting of Shareholders
May 1, 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James M. Sack, Paul C. Saville and Dennis
M. Seremet, or any of them, as proxies (and if the undersigned is a proxy, as
substitute proxies), each with the power to appoint his substitute, and hereby
authorizes each of them to represent and to vote, as designated on the reverse,
all of the shares of common stock of NVR, Inc. held of record by the undersigned
at the close of business on March 1, 2002 at the Annual Meeting of Shareholders
to be held at NVR Corporate Headquarters, 7601 Lewinsville Road, Suite 300,
McLean, Virginia, 22102, on Wednesday, May 1, 2002 at 11:30 A.M. or at any
adjournment thereof.
If there are shares allocated to the undersigned in the NVR, Inc. Profit
Sharing Trust Plan or the Employee Stock Ownership Plan, the undersigned hereby
directs the Trustee to vote all full and fractional shares as indicated on the
reverse of this card. Shares for which no voting instructions are received by
April 29th will be voted by the Trustee in the same proportion as all other
shares which have been voted.
- ------------- -------------
SEE REVERSE PLEASE VOTE, DATE AND SIGN ON THE REVERSE AND RETURN SEE REVERSE
SIDE PROMPTLY IN THE ENCLOSED ENVELOPE SIDE
- ------------- -------------
NVR, INC.
c/o EquiServe
P.O. Box 43068
Providence, RI 02940
DETACH HERE ZNVR11
Please mark
[X] votes as in
this example.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned. If no direction is given, this proxy will be deemed to grant
authority to vote FOR ALL director nominees, to vote FOR the proposal to ratify
the appointment of KPMG LLP as independent auditors for the year 2002 and to
vote in the discretion of the named proxies as to any other matters that come
before the meeting.
1. Election of Directors. (For a term of 3 years)
Nominees: (01) Dwight C. Schar, (02) George E. Slye
and (03) Robert C. Butler
FOR WITHHELD
ALL [_] [_] FROM ALL
NOMINEES NOMINEES
[_] _______________________________________________
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. Proposal to ratify the appointment of KPMG LLP [_] [_] [_]
as independent auditors for the year 2002.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [_]
The shares represented by this proxy card will be voted in the discretion of the
named proxies as to any other matters that come before the meeting or any
adjournment(s) thereof.
The shareholder's signature should be exactly as the name appears at left. When
shares are held by joint tenants, both should sign. When signing as attorney, as
executor, administrator, trustee or guardian, please give full title as such. If
a corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
Signature:____________ Date:___________ Signature:_____________ Date:___________