SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (Amendment No. )
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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.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
NVR, Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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[_] Fee computed on table below per Exchange Act Rule 14a-6(i)(4) and 0-11
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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previously. Identify the previous filing by registration statement number,
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Notes:
LOGO
NVR, INC.
7601 LEWINSVILLE ROAD
MCLEAN, VA 22102
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, MAY 5, 1998
The Annual Meeting (the "Meeting") of Shareholders of NVR, Inc. (the
"Company") will be held at the Company's headquarters at 7601 Lewinsville Rd.,
Suite 300, McLean, Virginia on Tuesday, May 5, 1998, at 11:30 A.M., Eastern
Time, for the purpose of considering and acting upon the following matters:
1. The election of three (3) directors to serve three (3) year terms and
until their successors are duly qualified and elected;
2. Ratification of appointment of independent auditors for the year
ending December 31, 1998; 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 2,
1998 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.
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
April 3, 1998
NVR, INC.
7601 LEWINSVILLE ROAD
MCLEAN, VA 22102
PROXY STATEMENT
This Proxy Statement is being mailed on or about April 3, 1998 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 Tuesday, May 5,
1998, 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.
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, telecopy or personally. The
Company has retained Corporate Investor Communications, Inc. to assist in the
solicitation of brokers, bank nominees and institutional holders for a fee of
$3,000 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 2, 1998 (the "Record Date") are
entitled to receive notice of and to vote at the Annual Meeting.
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 in favor of the election of those
three persons designated hereinafter as nominees for Class II directors of the
Company, in favor of the ratification of KPMG Peat Marwick LLP as the
Company's Independent Auditors for 1998, 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
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, 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.
As of the Record Date, the Company had outstanding a total of 11,515,562
shares of Common Stock, 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.
ELECTION OF DIRECTORS
(PROPOSAL 1)
The Company's Board of Directors is divided into three classes. At the 1998
Annual Meeting, the following persons constituting Class II of the directors
are to be elected to hold office for a three year term and until their
successors are duly qualified and elected:
Manuel H. Johnson
David A. Preiser
John M. Toups
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. 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.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR"
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)........ 56 1993/1999
C. Scott Bartlett, Jr.(1)(4).... 65 1993/2000
Manuel H. Johnson(1)(4)......... 49 1993/1998
William A. Moran(2)(3).......... 51 1993/2000
Richard H. Norair, Sr.(1)(4).... 69 1993/2000
David A. Preiser(2)(4).......... 41 1993/1998
George E. Slye(1)(3)............ 67 1993/1999
John M. Toups(2)(3)............. 72 1993/1998
- --------
(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, as well as chairman of the board of NVR Homes, Inc.
("Homes") and NVR Financial Services, Inc. ("NVRFS"), since September 30,
1993.
C. Scott Bartlett, Jr. has been a director of NVR since September 30, 1993.
Mr. Bartlett is self-employed as a consultant, working with financial
institutions in the areas of credit policy, loan approval, and loan workouts.
In conjunction with such activities, he served as senior vice president and
chief credit officer of MTB Bank from 1992 to 1994. Mr. Bartlett is also a
director of The Bibb Company, Harvard Industries, Inc., Janus American Group,
Inc., MTB Bank and Data Services and Solutions, Inc.
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,
2
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. He was also Koch Professor of International
Economics and Director of the Center for Global Market Studies at George Mason
University from September 1990 to September 1994. 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 Dean Witter Intercapital Funds Group, Trust Company of the
West/Dean Witter Funds, Greenwich Capital Markets, Inc., and the NASDAQ Stock
Market, 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 Crafstar, Inc. which
develops, invests in and periodically sells apartments, condominiums and
townhomes in Virginia and Maryland.
Richard H. Norair, Sr. has been a director of NVR since September 30, 1993.
Mr. Norair has been involved in the Norair Companies for 47 years. The Norair
Companies are engaged in real estate development, prime construction
contracting, nursing home development, and manufacturing of specialized
equipment and parts for the power generating industry, worldwide. Mr. Norair
is chairman of the board of Norair Engineering Corporation, the parent company
of the Norair Companies, and also chairman of NorCare, Inc. and Mericare
Associates. He is president of Norair Corporation and Norair International.
Mr. Norair has been president of various trade groups, including Master
Builders Association, Construction Contractors Council, Sheetmetal Contractors
Association, and Joint Carpentry Apprentice Council.
David A. Preiser has been a director of NVR since September 30, 1993. Mr.
Preiser is a managing director of the investment banking firm of Houlihan
Lokey Howard & Zukin ("Houlihan Lokey"), where he has been employed in
coordinating the firm's real estate and financial restructuring activities
since September 1990. Mr. Preiser is a director of Jos. A Bank Clothiers, 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.
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 the George Mason
University Foundation, INOVA Health System Foundation, Halifax Corporation,
CACI International, Telepad Corporation, Thermatrix, Inc and GTSI.
The Board of Directors has an Audit, Compensation, Executive and Nominating
Committee. The primary functions of these committees are as follows:
The Audit Committee provides guidance on financial reporting and makes
recommendations concerning the appointment of the Company's independent
public accountants. The Committee reviews the audit services and the scope
of the annual audit performed by the Company's independent auditors. The
Committee also reviews the adequacy of the Company's internal controls and
reviews the scope and activities of the Company's Internal Audit
Department.
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.
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
3
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 eight times in 1997. Also, during 1997 the
Compensation Committee met three times, the Audit Committee met four times,
and the Nominating Committee met once.
Each outside director of the Board is paid $6,250 per quarter for serving as
a director and fees of $1,250 for each meeting attended.
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 2, 1998. Except as otherwise
indicated, all shares are owned directly and the owner has sole voting and
investment power with respect thereto.
CERTAIN BENEFICIAL OWNERS
NAME AND ADDRESS OF HOLDER NUMBER OF SHARES PERCENT OF CLASS
-------------------------- ---------------- ----------------
Sanford C. Bernstein & Co............... 1,063,177(1) 9.2%
One State Street Plaza
New York, NY 10004
Quaker Capital Management............... 722,800(2) 6.3%
401 Wood Street
Suite 1300
Pittsburgh, PA 15222-1824
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(1) Based upon information contained within a Schedule 13G filing by such
entity dated February 4, 1998.
(2) Based upon information contained within a Schedule 13G filing by such
entity dated February 12, 1998.
4
DIRECTORS AND MANAGEMENT
NAME NUMBER OF SHARES PERCENT OF CLASS
---- ---------------- ----------------
Dwight C. Schar.................... 915,050(1) 7.7%
C. Scott Bartlett, Jr.............. 22,750(2)
Manuel H. Johnson.................. 33,150(2) *
William A. Moran................... 22,750(2) *
Richard H. Norair, Sr.............. 22,750(2) *
David A. Preiser................... 23,750(2) *
George E. Slye..................... 22,750(2) *
John M. Toups...................... 30,900(3) *
Michael J. Cannizzo................ 142,591(4)(5) 1.2%
William J. Inman................... 176,751(4) 1.5%
James M. Sack...................... 1,114 *
Paul C. Saville.................... 224,486(4) 1.9%
Dennis M. Seremet.................. 44,827(6) *
---------
All directors and executive
officers as a group (13 persons)..... 1,683,619
- --------
* Less than 1%.
(1) Includes 313,000 vested options, 40,481 shares owned by his wife, 13,852
shares owned by his children, 1,591 vested shares held by the NVR Employee
Stock Ownership Plan in trust, and 31,045 vested shares held as a
discretionary investment in the NVR, Inc. Profit Sharing Plan in trust.
(2) Includes 22,750 options issued under the NVR Directors' Long Term
Incentive Plan.
(3) Includes 22,750 options issued under the NVR Director's Long Term
Incentive Plan, and 43 shares owned by his wife.
(4) Includes 75,000 vested options, and 1,591 vested shares held by the NVR
Employee Stock Ownership Plan in trust.
(5) As of September 30, 1997, Mr. Cannizzo ceased being an executive officer.
(6) Includes 14,900 vested options, and 1,591 vested shares held by the NVR
Employee Stock Ownership Plan in trust.
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 stock awards ("Performance Shares"). This
performance orientation is accomplished by placing a large portion of
executive compensation at risk, dependent upon the achievement of annual and
long-term financial objectives tied to the Company's business plan and is
intended to enhance shareholder value. From time to time, the Company retains
compensation consultants from KPMG Peat Marwick LLP, an independent and
nationally known public accounting and consulting firm, to review the
reasonableness and appropriateness of the executive compensation program.
After their latest analysis conducted in 1996, KPMG Peat Marwick LLP concluded
that the Company's executive compensation program, as more fully described
below, is consistent with the Company's philosophy of creating long-term
shareholder value and is strongly linked to performance based financial
objectives. There were no material changes to the Company's compensation
programs during 1997.
5
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. Three of the executive officers' 1998 base salaries were
increased over their 1997 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 achieved 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 pre-tax profit. For
1997, 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 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
encourage the retention of key executive personnel. In support of these
objectives, the Company's executive officers have historically participated in
long-term, stock-based incentive programs designed to award grants of stock
options or performance shares over a long-term vesting schedule if certain
cash flow, financial or employment objectives are met.
The named executive officers are eligible to earn for each of 1997, 1998 and
1999 Performance Shares granted in prior years under the NVR, Inc. 1994
Management Equity Incentive Plan (the "Equity Incentive Plan") if certain
earnings targets are met or exceeded. Because the Company exceeded its
earnings objectives for 1997, the named executive officers (including the
chief executive officer) earned an aggregate of 172,332 Performance Shares
under the Equity Incentive Plan. In addition, the named executive officers
participate in the Management Long-Term Stock Option Plan (see the summary
compensation table below). The last option grants under the Management Long-
Term Stock Option Plan were made in 1996, and will vest in one-third
increments in each of 2000, 2001 and 2002 based upon continued employment.
The named executive officers, as well as other key members of senior
management, also participate in the NVR, Inc. High Performance Compensation
Plan ("HP Plan"). The objective of the HP Plan is to reward the named
executive officers and members of senior management 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 by
ten percent over the same three year period. Eligible participants will be
allocated a specified percentage of a pool, the aggregate amount of which will
be equal to a percentage of earnings in excess of the threshold. Payments to
participants under the Plan will be made in three installments, with one-third
payable in 2000, 2001, and 2002. Full payment to participants of benefits
earned under the HP Plan is contingent upon continued employment by the
participants through 2001. Participants may elect to defer receipt of their
payments and instead accrue phantom stock units that would be paid on
specified future dates.
6
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 incentive compensation, stock options, and
performance shares. The Committee believes the compensation program for the
CEO is consistent with the Company's philosophy for compensating executive
officers and it encourages long-term shareholder value.
The CEO's 1997 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 1997,
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 received a non-qualified stock option grant of 500,000 stock options
during 1996 under the Management Long-Term Stock Option Plan. The CEO earned
85,666 Performance Shares (as described above) under the Equity Incentive Plan
during 1997, and is a participant in the NVR, Inc. High Performance
Compensation Plan as described above.
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 hold a specified minimum level of Common Stock
(the "Guidelines"). Under the Guidelines adopted by the Board, Management must
acquire and hold Shares 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 such persons directly
to those of the shareholders. Management must comply with the Guidelines by
December 31, 2000. In the event of non-compliance at December 31, 2000, or 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.
COMPENSATION COMMITTEE AND OPTION SUBCOMMITTEE
The Committee consists of the four 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. Preiser and Toups.
Frederick W. Zuckerman was a member of both the Compensation Committee and the
Option Subcommittee until his term ended due to death on September 20, 1997.
THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS:
John M. Toups, Chairman, William A. Moran, David A. Preiser, and Dwight C.
Schar.
7
EXECUTIVE COMPENSATION
Shown below is certain information concerning the compensation for services
in all capacities to NVR for the years ended December 31, 1997, 1996 and 1995
of those persons who were, at December 31, 1997, (i) the Chief Executive
Officer, (ii) the three other employee executive officers of NVR, and an
individual not serving as an executive officer as of December 31, 1997, but
who would have otherwise been included in the table below if not for that
fact.
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(2) PAYOUTS(3)(4) COMPENSATION(5)
- ------------------ ---- --------- --------------- ------------ ---------- ------------- ---------------
Dwight C. Schar......... 1997 $ 681,000 $ 681,000 $ -- -- $ 1,873,944 $ 8,000
Chairman of the Board 1996 681,000 681,000 -- 500,000 833,196 7,750
Board, Chief Executive 1995 642,500 642,500 -- -- 640,092 7,750
Officer and President
Michael J. Cannizzo..... 1997 $ 220,500 $ 220,500 $ -- -- $ 218,750 $ 8,000
Senior Vice President-- 1996 234,000 234,000 -- -- 208,000 7,750
Administration(6) 1995 229,500 229,500 -- -- 160,000 7,750
William J. Inman........ 1997 $ 289,000 $ 289,000 $ -- -- $ 765,625 $ 7,500
President of NVRFS 1996 289,000 289,000 -- 100,000 208,000 7,500
1995 277,800 277,800 -- -- 160,000 7,500
Paul C. Saville......... 1997 $ 244,000 $ 244,000 $ -- -- $ 765,625 $ 8,000
Senior Vice President, 1996 244,000 244,000 -- 175,000 208,000 7,750
Chief Financial Officer 1995 230,400 230,400 -- -- 160,000 7,750
and Treasurer
Dennis M. Seremet....... 1997 $ 130,000 $ 130,000 $ -- -- $ 145,819 $ 8,000
Vice President and 1996 130,000 130,000 -- 60,000 15,600 7,750
Controller 1995 119,800 119,800 -- -- 12,000 7,750
- --------
(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.
(2) 33 1/3% of the options vest on each of December 31, 2000, 2001 and 2002
with vesting based upon continued employment. The options expire in May
2006 and are exerciseable at $10.625 per share.
(3) For the years 1996 and 1995, the column represents the vested portion of
the 1993 Performance Shares awarded in the Management Equity Incentive
Plan. For this table, the 1993 Performance Shares were assigned values of
$13.00 per share and $10.00 per share for 1996 and 1995, respectively. The
values assigned represent the respective closing prices of NVR Common
Stock on December 31, 1996 and 1995.
(4) For the year 1997, the column represents the vested portion of the 1994
Performance Shares awarded in the 1994 Management Equity Incentive Plan.
For this table, the 1994 Performance Shares were assigned a value of
$21.875 per share for 1997. The value assigned represents the closing
price of NVR Common Stock on December 31, 1997.
(5) Amount contributed to the Profit Sharing Trust Plan and the Employee Stock
Ownership Plan.
(6) Mr. Cannizzo ceased being an executive officer as of September 30, 1997.
8
STOCK OPTION GRANTS, EXERCISES AND YEAR-END VALUES
Aggregated Stock Option Exercises in 1997 and Year-End Stock Option Values
VALUE OF UNEXERCISED IN-
NUMBER OF UNEXERCISED THE-
OPTIONS AT YEAR-END MONEY OPTIONS AT YEAR-END
SHARES ACQUIRED --------------------------- ---------------------------
NAME ON EXERCISE VALUE REALIZED EXERCISEABLE UNEXERCISEABLE EXERCISEABLE UNEXERCISEABLE
- ---- --------------- -------------- ------------ -------------- ------------ --------------
Dwight C. Schar(2)...... -- -- 380,381 500,000 $5,422,331 $5,625,000
Michael J. Cannizzo(1).. -- -- 75,000 -- 1,069,125 --
William J. Inman........ -- -- 75,000 100,000 1,069,125 1,125,000
Paul C. Saville......... -- -- 75,000 175,000 1,069,125 1,968,750
Dennis M. Seremet....... -- -- 14,900 60,000 212,400 675,000
- --------
(1) Mr. Cannizzo ceased being an executive officer on September 30, 1997.
(2) Mr. Schar exercised 67,381 options on January 2, 1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee is comprised of Mr. Schar, Mr. Moran, Mr. Toups,
and Mr. Preiser, all of whom, except Mr. Schar, are outside directors of the
Company. During the year ended December 31, 1997, NVR entered into new
agreements to purchase lots for a total purchase price of approximately
$14,000,000 with Elm Street Development which is controlled by Mr. Moran. As
required under the terms of the indenture governing NVR's 11% Senior Notes due
2003, these transactions were approved by a disinterested majority of the
Board of Directors. During 1997, NVR purchased developed lots at market prices
from Elm Street for approximately $8,100,000.
CERTAIN TRANSACTIONS
During the year ended December 31, 1997 the law firm of Sack & Associates
billed NVR approximately $375,000 in fees and expenses for legal services. Mr.
Sack, a non-employee executive officer of NVR, was a principal of Sack &
Associates during that period.
During the year ended December 31, 1997, the Company repurchased 1,381,306
shares of Common Stock at a total cost of $19,162,481 from Franklin Resources,
Inc., who at the time of the respective repurchase transactions held more than
a five percent beneficial ownership interest in the outstanding equity of the
Company. These transactions were conducted pursuant to various equity
repurchase programs adopted by the Board of Directors, and were specifically
approved by the Board. Further, the Company retained an investment banking
firm of national standing who concluded in a written opinion that the
aforementioned repurchase transactions were fair to the Company from a
financial point of view.
EMPLOYMENT ARRANGEMENTS
NVR has an employment agreement with Mr. Schar effective January 1, 1996 to
serve as Chairman, President and Chief Executive Officer. The agreement
continues through January 1, 2002. The agreement provides for an annual
minimum base salary of $681,000 and an annual bonus of up to 100% of base
salary. There has been a subsequent adjustment to Mr. Schar's salary made by
the Compensation Committee to reflect a merit increase. Mr. Schar's salary is
now $750,000. If Mr. Schar's employment is terminated without cause, as
defined in the agreement, prior to January 1, 2002, he would be entitled to
receive in twelve monthly installments an amount equal to 200% of his annual
base salary. If Mr. Schar terminates his employment in connection with or
within one year after a change in control of NVR, he would be entitled to 200%
of his annual base salary in effect for the year in which such termination
occurs, payable in 12 monthly installments. 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, without cause or within one year of a change in
control, or two years if he is terminated for cause, as defined below.
9
NVR has an employment agreement with Mr. Saville effective January 1, 1995
to serve as NVR's Senior Vice President, Chief Financial Officer and
Treasurer. The agreement continues through January 1, 2001. The agreement
provides for an annual minimum base salary of $225,800 and an annual bonus of
up to 100% of base salary. There have been subsequent adjustments to Mr.
Saville's salary made by the Compensation Committee to reflect merit
increases. Mr. Saville's base salary is now $270,000. If Mr. Saville's
employment is terminated without cause, as defined in the agreement, prior to
January 1, 2001, he would be entitled to receive in twelve monthly
installments an amount equal to 200% of his base salary. If Mr. Saville
voluntarily terminates his employment within one year after a change in
control of the Company accompanied by a significant reduction in Mr. Saville's
responsibilities, he would be entitled to 200% of his then annual base salary
payable in twelve equal monthly installments. 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.
NVR has an employment agreement effective November 13, 1995 with Mr. Inman
to serve as president of NVRFS. The agreement continues until January 1, 2002.
The agreement provides for an annual minimum base salary of $277,800 and an
annual bonus of up to 100% of base salary. There has been a subsequent
adjustment to Mr. Inman's salary made by the Compensation Committee to reflect
a merit increase. Mr. Inman's base salary is now $289,000. If Mr. Inman's
employment is terminated without cause, as defined in the agreement, prior to
January 1, 2002, he would be entitled to receive in twelve monthly
installments an amount equal to 200% of his base salary. If Mr. Inman
voluntarily terminates his employment within one year after a change in
control of the Company accompanied by a significant reduction in Mr. Inman's
responsibilities, he would be entitled to 200% of his then annual base salary
payable in twelve equal monthly installments. 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.
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 breeches affirmative or
negative covenants or undertakings set forth in his respective employment
agreement.
10
STOCK PERFORMANCE GRAPH
COMPARISON OF CUMULATIVE TOTAL EQUITYHOLDER RETURN ON EQUITY
The following chart graphs NVR's performance in the form of cumulative total
return to equityholders since NVR completed its restructuring on September 30,
1993 in comparison to the Dow/Home Construction Index and the Dow Jones
Industrial Index for that same period. The Dow/Home Construction Index
includes Pulte Homes, Walter Industries, Inc., Centex, Clayton Homes, Kaufman
and Broad, Champion Enterprises, Inc., Lennar Corp., and Oakwood Homes, Corp.
[LINE GRAPH APPEARS HERE]
- --------------------------------------------------------------------------------------------------------------------------------
Sept. 30, 1993(a) Dec. 30, 1993 Dec. 31, 1994 Dec. 29, 1995 Dec. 31, 1996 Dec. 31, 1997
- --------------------------------------------------------------------------------------------------------------------------------
NVR $100 $ 95.12 $ 53.66 $ 97.56 $126.83 $213.41
Dow Homes $100 $106.88 $ 72.67 $107.96 $103.89 $161.90
Industrial Average $100 $105.53 $110.85 $151.80 $195.38 $243.98
(a) Assumes that $100 was invested in NVR stock and the indices on September
30, 1993, the day NVR, Inc. completed its restructuring and issued a new class
of equity securities.
(1) The values assigned to the Dow Homes and the Dow Jones Industrial
Average were $106.88 and $105.53, respectively, at December 30, 1993.
11
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 Peat Marwick LLP as
independent auditors for the Company for the year 1998. Representatives of
KPMG Peat Marwick LLP are expected to be present at the meeting to respond to
shareholders' questions and will have an opportunity to make a statement.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR"
THE APPROVAL OF KPMG PEAT MARWICK LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR 1998.
SHAREHOLDER PROPOSALS
Proposals of holders of Common Stock intended to be presented at the next
annual meeting of shareholders of the Company must be received by the Company
on or before December 15, 1998, and must comply with applicable rules of the
Securities and Exchange Commission in order to be included in the Company's
Proxy Statement and form of proxy relating to the 1999 annual meeting of
shareholders.
OTHER MATTERS
Management knows of no other business to be presented for action at the
meeting; but if any other business should properly come before the meeting, it
is intended that the proxies will be voted in accordance with the best
judgment of the persons acting thereunder.
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 SECURITIES AND EXCHANGE COMMISSION, WILL BE PROVIDED WITHOUT
CHARGE UPON THE WRITTEN REQUEST OF ANY SHAREHOLDER. SUCH REQUESTS MAY BE SENT
TO INVESTOR RELATIONS, NVR, INC., 7601 LEWINSVILLE ROAD, MCLEAN, VIRGINIA,
22102.
By Order of the Board of Directors,
/s/ James M. Sack
James M. Sack
Vice President, Secretary and
General Counsel
McLean, Virginia
April 3, 1998
12
SKU #3570-PS-98
NVR, INC.
Proxy for Annual Meeting of Shareholders
May 5, 1998
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 each with the power to appoint his
substitute, and hereby authorizes each of them to represent and vote, as
designated on the reverse side, all of the shares of common stock of NVR, INC.
held of record by the undersigned on March 2, 1998 at the Annual Meeting of
Shareholders to be held at NVR Corporate Headquarters, 7601 Lewinsville Road,
Suite 300, McLean, Virginia, 22102, on Tuesday, May 5, 1998, at 11:30 A.M., or
at any adjournment or adjournments thereof.
- --------------------------------------------------------------------------------
(Reverse)
If no choice is indicated, this proxy shall be deemed to grant authority to vote
FOR the election of director nominees, to vote FOR the proposal to ratify the
appointment of KPMG Peat Marwick LLP as independent auditors for the year 1998,
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: Manuel H. Johnson, David A. Preiser and John M. Toups
FOR WITHHELD
[________] [________]
[_____] _____________________________________________________________
(To withhold authority to vote for any individual nominee(s),
print the name(s) in the space above.)
2. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT
AUDITORS FOR THE YEAR 1998.
FOR AGAINST ABSTAIN
[________] [________] [________]
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 ______