<PAGE>
================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
NVR, Inc.
- --------------------------------------------------------------------------------
(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.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[NVR, INC. LOGO APPEARS HERE]
NVR, INC.
7601 Lewinsville Road
McLean, VA 22102
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Tuesday, May 4, 1999
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 4, 1999, at 11:30 A.M., Eastern
Time, for the purpose of considering and acting upon the following matters:
1. The election of two (2) directors to serve three (3) year terms and
until their successors are duly qualified and elected;
2. The proposal to adopt the NVR, Inc. 1998 Management Long-Term Stock
Option Plan, which authorizes the granting of options to purchase an
aggregate of 1,000,000 shares of the Company's Common Stock.
3. The proposal to adopt the NVR, Inc. 1998 Directors' Long-Term Stock
Option Plan, which authorizes the granting of options to purchase an
aggregate of 150,000 shares of the Company's Common Stock.
4. Ratification of appointment of independent auditors for the year
ending December 31, 1999; and
5. 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,
1999 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 5, 1999
<PAGE>
NVR, INC.
7601 Lewinsville Road
McLean, VA 22102
PROXY STATEMENT
This Proxy Statement and the Annual Report for the year ended December 31,
1998 are being mailed on or about April 5, 1999 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 4, 1999, 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
$4,250 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, 1999 (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 two
persons designated hereinafter as nominees for Class III directors of the
Company, in favor of adoption of the NVR, Inc. 1998 Management Long-Term Stock
Option Plan, in favor of adoption of the NVR, Inc. 1998 Directors' Long-Term
Stock Option Plan, in favor of the ratification of KPMG LLP as the Company's
Independent Auditors for 1999, 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.
As of the Record Date, the Company had a total of 10,973,227 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.
1
<PAGE>
ELECTION OF DIRECTORS
(Proposal 1)
The Company's Board of Directors is divided into three classes. At the 1999
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 qualified and elected:
Dwight C. Schar
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 two
nominees named above. Unless marked otherwise, proxies received will be voted
for the election of each of the two 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" 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.
<TABLE>
<CAPTION>
Year First Elected/
Name Age Term Expires
---- --- -------------------
<S> <C> <C>
Dwight C. Schar (2) (3) (4)..... 57 1993/1999
C. Scott Bartlett, Jr. (1) (4).. 66 1993/2000
Manuel H. Johnson (1) (2) (4)... 50 1993/2001
William A. Moran (2) (3)........ 52 1993/2000
Richard H. Norair, Sr. (1) (4).. 70 1993/2000
David A. Preiser (2) (4)........ 42 1993/2001
George E. Slye (1) (3).......... 68 1993/1999
John M. Toups (2) (3)........... 73 1993/2001
</TABLE>
- --------
(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 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 Janus American Group, Inc., MTB Bank, Data Services and Solutions,
Inc. and Allstate Financial Corporation.
2
<PAGE>
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 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"), 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 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.
3
<PAGE>
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 seven times in 1998. Also, during 1998 the
Compensation Committee met three times, the Audit Committee met four times,
and the Nominating Committee met once. The Executive Committee did not meet
during 1998.
Each outside director of the Board was paid $6,250 per quarter for serving
as a director and fees of $1,250 for each meeting attended during 1998.
Beginning in 1999, the quarterly fee paid to directors increased to $6,500,
and the meeting fee was increased to $1,600 for each meeting attended.
Incidental travel and out-of-pocket expenses are reimbursed as incurred.
Directors who are also officers of the Company receive no additional
compensation for their services as directors.
4
<PAGE>
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, 1999. Except as otherwise
indicated, all shares are owned directly and the owner has sole voting and
investment power with respect thereto.
Certain Beneficial Owners
<TABLE>
<CAPTION>
Name and Address of Holder Number of Shares Percent of Class
-------------------------- ---------------- ----------------
<S> <C> <C>
Quaker Capital Management............... 665,400(1) 6.1%
401 Wood Street
Suite 1300
Pittsburgh, PA 15222-1824
</TABLE>
- --------
(1) Based upon information contained within a Schedule 13G filing by such
entity dated February 16, 1999.
Directors and Management
<TABLE>
<CAPTION>
Name Number of Shares Percent of Class
---- ---------------- ----------------
<S> <C> <C>
Dwight C. Schar....................... 807,974(1) 7.4%
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 *
David A. Preiser...................... 3,000 *
George E. Slye........................ 22,750(2) *
John M. Toups......................... 30,900(3) *
William J. Inman...................... 177,533(4) 1.6%
James M. Sack......................... 1,114 *
Paul C. Saville....................... 235,339(5) 2.1%
Dennis M. Seremet..................... 34,204(6) *
---------
All directors and executive officers
as a group (12 persons).............. 1,414,214
</TABLE>
- --------
* Less than 1%.
(1) Includes 40,481 shares owned by his wife, 13,852 shares owned by his
children, 2,445 vested shares held by the NVR Employee Stock Ownership
Plan in trust, and 30,681 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 2,373 vested shares held by the NVR
Employee Stock Ownership Plan in trust.
(5) Includes 75,000 vested options, 2,000 shares owned by his children, and
2,444 vested shares held by the NVR Employee Stock Ownership Plan in
trust.
(6) Includes 14,900 vested options, and 2,301 vested shares held by the NVR
Employee Stock Ownership Plan in trust.
5
<PAGE>
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, 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 Securities and Exchange Commission
(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.
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 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 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 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 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 have been no material
changes to the Company's compensation programs during 1998.
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 employee executive officers' 1999 base salaries
were increased over their 1998 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
6
<PAGE>
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 1998, 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 1998, the named executive officers (including the
chief executive officer) earned an aggregate of 162,334 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 to the named executive
officers 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 is
equal to a percentage of earnings in excess of the threshold. The aggregate
value of the pool was established on December 31, 1998 (see the summary
compensation table below for amounts allocated to the named executive
officers). 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.
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 1998 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 1998,
the pre-tax profit objectives for the Company were substantially exceeded and
the CEO received
7
<PAGE>
the maximum award of 100% of his base salary. The CEO also earned 85,667
Performance Shares (as described above) under the Equity Incentive Plan during
1998, and is a participant in the NVR, Inc. HP 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 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.
8
<PAGE>
EXECUTIVE COMPENSATION
Shown below is certain information concerning the compensation for services
in all capacities to NVR for the years ended December 31, 1998, 1997 and 1996
of those persons who were, at December 31, 1998, (i) the Chief Executive
Officer, and (ii) the three other employee executive officers of NVR.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
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)
- ------------------ ---- --------- --------------- ------------ ---------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dwight C. Schar......... 1998 $ 750,000 $ 750,000 $ -- -- $ 4,976,943 $ 8,500
Chairman of the Board 1997 681,000 681,000 -- -- 1,873,944 8,000
Chief Executive 1996 681,000 681,000 -- 500,000 833,196 7,750
Officer and President
William J. Inman........ 1998 $ 289,000 $ 289,000 $ -- -- $ 2,293,613 $ 8,000
President of NVR 1997 289,000 289,000 -- -- 765,625 7,750
Mortgage Finance, Inc. 1996 289,000 289,000 -- 100,000 208,000 7,750
Paul C. Saville......... 1998 $ 270,000 $ 270,000 $ -- -- $ 2,649,360 $ 8,500
Senior Vice President, 1997 244,000 244,000 -- -- 765,625 8,000
Chief Financial Officer 1996 244,000 244,000 -- 175,000 208,000 7,750
and Treasurer
Dennis M. Seremet....... 1998 $ 144,000 $ 144,000 $ -- -- $ 1,019,634 $ 8,500
Vice President and 1997 130,000 130,000 -- -- 145,819 8,000
Controller 1996 130,000 130,000 -- 60,000 15,600 7,750
</TABLE>
- --------
(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 exercisable at $10.625 per share.
(3) For the years ended December 31, 1997 and 1996, the column represents the
vested portion of the performance shares awarded pursuant to the 1994
Management Equity Incentive Plan (1997) and the Management Equity
Incentive Plan (1996). For this table, the performance shares were
assigned a value of $21.875 per share and $13.00 per share for 1997 and
1996, respectively, which equaled the closing price of NVR's common stock
as listed on the American Stock Exchange on the vesting determination
date.
(4) For the year ended December 31, 1998, the column includes amounts for both
the vested portion of performance shares, valued at $24.875 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 to earned
benefits pursuant to the HP Plan. The amounts pertaining to the 1994
Management Equity Incentive equal $2,130,967; $870,625; $870,625 and
$165,842 for Messrs. Schar, Inman, Saville and Seremet, respectively. The
amounts pertaining to the HP Plan equal $2,845,976; $1,422,988; $1,778,735
and $853,792 for Messrs. Schar, Inman, Saville and Seremet, respectively.
Amounts earned under the HP Plan will be paid out in one-third increments
on each of January 2, 2000, 2001 and 2002 for Messrs. Schar and Seremet,
and will be paid out in one-third increments on each of March 16, 2000,
2001 and 2002 for Messrs. Inman and Saville, as long as the respective
executive officer remains in the Company's employ through December 31,
2001. Termination of employment with the Company prior to December 31,
2001 will result in the forfeiture of any unpaid benefits at the time of
termination.
(5) Amount contributed to the Profit Sharing Trust Plan and the Employee Stock
Ownership Plan.
9
<PAGE>
Stock Option Grants, Exercises and Year-End Values
Aggregated Stock Option Exercises In 1998 And Year-end Stock Option Values
<TABLE>
<CAPTION>
Value of Unexercised In-
Number of Unexercised Stock the-Money Options at Year-
Options at Year-End End
---------------------------- --------------------------
Shares Acquired
Name on Exercise Value Realized Exerciseable Unexerciseable Exercisable Unexerciseable
- ---- --------------- -------------- ------------ -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Dwight C. Schar......... 67,381 $960,516 313,000(1) 500,000 $12,541,128 $18,531,250
William J. Inman........ -- -- 75,000 100,000 3,005,063 3,706,250
Paul C. Saville......... -- -- 75,000 175,000 3,005,063 6,485,938
Dennis M. Seremet....... -- -- 14,900 60,000 597,006 2,223,750
</TABLE>
- --------
(1) Mr. Schar exercised 313,000 options on January 6, 1999.
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 proxy rules of the Securities and Exchange Commission
during 1998. During the year ended December 31, 1998, NVR entered into new
agreements to purchase lots for a total purchase price of approximately
$16,000,000 with Elm Street Development, which is controlled by Mr. Moran.
These transactions were approved by a disinterested majority of the Board of
Directors. During 1998, NVR purchased developed lots at market prices from Elm
Street for approximately $13,000,000.
Certain Transactions
During the year ended December 31, 1998 the law firm of Sack & Associates
billed NVR approximately $441,500 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.
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 have been subsequent adjustments to Mr. Schar's salary made by
the Compensation Committee to reflect merit increases. Mr. Schar's salary is
now $850,000. 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.
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 $300,000. 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
10
<PAGE>
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 NVR Mortgage Finance, Inc. 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
have been subsequent adjustments to Mr. Inman's salary made by the
Compensation Committee to reflect merit increases. Mr. Inman's base salary is
now $304,000. 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.
11
<PAGE>
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 equityholders of NVR's common stock since December 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 Corp., Clayton Homes, Kaufman and Broad
Home Corp., Champion Enterprises, Inc., Lennar Corp., and Oakwood Homes, Corp.
[LINE GRAPH APPEARS HERE]
12/30/93 12/31/94 12/29/95 12/31/96 12/31/97 12/31/98
NVR 100 56 103 133 224 489
Dow/Homes 100 68 101 97 151 161
Dow Jones Ind. Avg. 100 105 144 185 231 273
(a) Assumes that $100 was invested in NVR stock and the indices on December
30, 1993.
12
<PAGE>
ADOPTION OF THE NVR, INC. 1998 MANAGEMENT LONG-TERM STOCK OPTION PLAN
(Proposal 2)
The Board of Directors (the "Board") proposes that the Shareholders approve
the NVR, Inc. 1998 Management Long-Term Stock Option Plan (the "Stock Option
Plan"). Under the Stock Option Plan, awards of non-qualified stock options
("Options") to purchase 1,000,000 Shares of the Company's Common Stock
("Shares") may be granted to certain executive officers and other key
management employees ("Participants") of the Company and its Affiliates (as
defined in the Stock Option Plan), but in no event will an Option become
vested and exercisable by a Participant prior to January 1, 2003, except upon
certain significant change of control events (as described below). The Board
intends that the vesting of Options awarded under the Stock Option Plan will
occur as to one-third of the underlying Shares subject to the Option on each
of December 31, 2003, 2004, and 2005.
The Board believes that it is in the best interest of the Company and its
Shareholders to approve the Stock Option Plan because it directly enhances
shareholder value. Stock option plans approved in prior years by NVR
Shareholders have significantly aided the Company in the retention of its key
management personnel. NVR believes its greatest asset is its employees. The
stock option plans offered by the Company have allowed the Company to continue
its strategy of retaining a loyal and experienced management team by providing
substantial at-risk incentives for key management personnel. Each stock option
agreement contains non-compete covenants to further incentivize employees to
remain in the Company's employ. The Company's experience has been that this
type of incentive structure works as designed; NVR's top seven executives
average over 19 years with the Company, and our homebuilding profit center
managers average slightly more than 15 years with the Company. It is equally
important to provide stock option grants to new managers as NVR continues to
grow the business. The length of the vesting period (through 2005) of the
Stock Option Plan is uniquely suited to assist in providing incentives for new
management to grow expansion markets to maturity.
By placing a large portion of management's compensation at risk through
equity benefit plans, the future economic interests of key members of
management are linked directly to those of the Company's Shareholders. Since
the first stock option plan was adopted by Shareholders in 1993, the Company's
market value per share has risen dramatically. As shown in the above stock
performance graph, from the period December 30, 1993 to December 31, 1998,
NVR's market value per share has grown by approximately 490%. To solidify the
direct link between management and our Shareholders, the Board has taken
additional steps by mandating NVR Share ownership guidelines. Under the Stock
Ownership Guidelines (the "Guidelines") adopted by the Board in 1996, the
Chief Executive Officer, Executive Officers and certain other key management
personnel ("Management") must acquire and hold Shares with a total fair market
value ranging from one (1) to eight (8) times their annual base salaries
depending upon their respective level of responsibility. The Stock Option Plan
will also assist Management in complying with the Guideline requirements.
The Company recognizes that the number of options proposed for the Stock
Option Plan, combined with the options outstanding under existing plans, may
exceed the industry norms for employee equity benefit plans. However, because
a main component of the Company's overall business strategy involves the long-
term retention of the Company's core executive and profit center management
group, it is important that the Company have available the means with which to
focus this management group on the long-term goals of the Company. It is in
the best interests of our Shareholders for our key managers to be focused on
providing for the long-term growth of our business. The grants under the
proposed Stock Option Plan do not commence vesting until 2003 and are not
fully vested until 2005. This vesting schedule supports the Company's efforts
in retaining a quality management group focused on long-term results.
The Option price of the Shares covered by each Option granted under the
Stock Option Plan must be equal to the fair market value (as defined below) of
the underlying Shares at the time the Option is granted. Shareholder approval
is required to re-price any Options at an Option price less than the Option
price specified at an original date of grant.
13
<PAGE>
The Board of Directors approved and adopted the Stock Option Plan on August
4, 1998, subject to Shareholder approval. Assuming the presence of a quorum,
the affirmative vote of the holders of a majority of the votes cast in person
or by proxy at the Annual Meeting of Shareholders is required for approval of
the Stock Option Plan. A general description of the principal terms and
purpose of the Stock Option Plan is set forth below.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE PROPOSAL FOR
ADOPTION OF THE NVR, INC. 1998 MANAGEMENT LONG- TERM STOCK OPTION PLAN
General
The aggregate number of Shares, which may be covered by Options granted
pursuant to the Stock Option Plan, is 1,000,000 (subject to adjustment in the
event of stock dividends, stock splits, recapitalizations or a similar change
in the outstanding Shares). The maximum number of Shares subject to Options
that can be granted under the Stock Option Plan to any executive officer or
other employee of the Company is 250,000. Approximately one hundred Company
employees will be subject to the Stock Option Plan. Unexercised Options that
terminate prior to the expiration of the Stock Option Plan will again be
available for grant under the Stock Option Plan. The Stock Option Plan will be
administered by a committee of the Board of Directors (the "Committee"). No
member of the Committee is eligible for an award or grant of Options under the
Stock Option Plan or any other plan except as permitted under Rule 16b-
3(c)(2)(ii) under the Securities Exchange Act of 1934. Options granted
pursuant to the Stock Option Plan are not intended to qualify as "incentive
stock options" under Section 422 of the Internal Revenue Code. See "Federal
Income Tax Consequences."
An Option may be exercised to the extent that Shares have vested under the
Option (as described below), in whole or in part, and at any time prior to
expiration or termination of the Option. Payment may be made in cash or by the
assignment and delivery to the Company of Shares which have been held by the
surrendering participant for at least six months, are not subject to
restriction and have a fair market value equal to the applicable Option Price
less any portion thereof paid in cash.
Options will be granted at an Option price equal to the fair market value of
the underlying Shares at the time the Option is granted. Fair market value of
the Company's Shares is generally determined by the closing price of the
underlying Shares as reported by a national or regional stock exchange or
other established securities market for publicly traded stock on the date
immediately preceding the date of grant. The closing price of the Company's
Shares on March 1, 1999, as reported by the American Stock Exchange, was
$43.00 per share. Pursuant to the Stock Option Plan, Shareholder approval is
required to re-price any Options at an Option price less than the Option Price
specified at an original date of grant.
Each Option shall be granted for a period of ten (10) years from the date of
grant, subject to the limitations below; however, no Option shall be
exercisable, in whole or in part, prior to January 1, 2003, except upon
certain change of control events (as described below). It is further intended
that the Options granted pursuant to Option Agreements under the Stock Option
Plan will become exercisable, in whole or in part, as to one-third of the
underlying Shares on each of December 31, 2003, 2004, and 2005, respectively,
subject to the limitations set forth below. To date, there have been no grants
of Options under the Stock Option Plan.
An Option will terminate immediately and may no longer be exercised if the
Optionee ceases to be an employee of the Company or its Affiliates as a result
of a termination for "cause" as defined in the Stock Option Plan document,
and, except as otherwise provided at the grant date, may be exercised for a
period of up to three months following a termination of employment other than
for cause. In the event of an involuntary termination of employment, death,
disability or retirement, the Optionee will be given additional pro rata
vesting for the portion of the year prior to termination for determining
exercisability. Any limitation on the exercise of an Option contained in any
Option Agreement may be rescinded, modified or waived by the Option
Subcommittee, in its sole discretion, at any time after the date of grant of
such Option. Notwithstanding the forgoing, no rescission,
14
<PAGE>
modification, or waiver to an Option Agreement shall improve a Participant's
benefits under the Stock Option Plan from those benefits approved by the
Shareholders.
If a change of control (as defined in the Stock Option Plan) of the Company
occurs, vesting of previously unvested Options will be accelerated to the date
of the change of control. In the event of any change of control, each
individual holding an Option will have the right at certain times to exercise
an Option, in whole or in part, whether or not such Option was otherwise
exercisable at the time of the change of control and without regard to any
installment limitation on exercise.
The Company may from time to time amend the Stock Option Plan except that,
without shareholder approval, no amendment may change the aggregate number of
Shares subject to the Stock Option Plan or extend the term of the Stock Option
Plan. Further, Shareholder approval is required to re-price any Options at an
Option price less than the Option price specified at an original date of
grant. The Board may from time to time suspend or at any time terminate the
Stock Option Plan.
Federal Income Tax Consequences
The grant of a non-qualified Option under the Stock Option Plan will result
in no Federal income tax consequences to the Company or the Optionee at the
grant date. Upon the exercise of an Option granted under the Stock Option
Plan, an Optionee will recognize ordinary income in an amount equal to the
difference between the exercise price and the fair market value of the Shares
on the date of exercise. If the Company complies with applicable reporting
requirements, the Company will be entitled to a business expense deduction in
the same amount and at the same time as the Optionee recognizes ordinary
income. Upon a subsequent sale or exchange of Shares acquired pursuant to the
exercise of an Option, the Optionee will have a taxable gain or loss, measured
by the difference between the amount realized on the disposition and the tax
basis of the shares (generally, the amount paid for the Shares plus the amount
treated as ordinary income at the time the Option was exercised).
If an Optionee surrenders Shares in payment of part or all of the exercise
price for an Option, no gain or loss will be recognized with respect to the
Shares surrendered and the Optionee will be treated as receiving an equivalent
number of Shares pursuant to the exercise of the Option in a nontaxable
exchange. The basis of the Shares surrendered will be treated as the
substituted tax basis for an equivalent number of Option Shares received, and
the new Shares will be treated as having been held for the same holding period
as had expired with respect to the transferred Shares. The difference between
the aggregate Option exercise price and the aggregate fair market value of the
Shares received pursuant to the exercise of the Option will be taxed as
ordinary income.
15
<PAGE>
ADOPTION OF THE NVR, INC. 1998 DIRECTORS' LONG-TERM STOCK OPTION PLAN
(Proposal 3)
The Board of Directors also proposes that Shareholders approve the adoption
of the NVR, Inc. 1998 Directors' Long-Term Stock Option Plan (the "Directors'
Plan"). A maximum of 150,000 Shares of the Company's Common Stock ("Shares")
will be granted for a period of ten years from the grant date pursuant to the
Directors' Plan. Options granted pursuant to the Directors' Plan will have an
Option price equal to the fair market value (as defined below) of the
underlying Shares on the date of grant, and will vest as to twenty-five
percent (25%) of the underlying Shares subject to the Option on each of
December 31, 2002, 2003, 2004 and 2005, or earlier, upon certain significant
change of control events or other limited circumstances as described below.
Shareholder approval is required to re-price any Options at an Option price
less than the Option price specified at an original date of grant. Eligibility
under the Directors' Plan is limited to non-employee directors. A general
description of the purpose and the principal terms of the Directors' Plan are
set forth below. The Board of Directors approved and adopted the Directors'
Plan on August 4, 1998, subject to Shareholder approval. Assuming the presence
of a quorum, the affirmative vote of the holders of a majority of the votes
cast in person or by proxy at the Annual Meeting of Shareholders is required
for approval of the Directors' Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE PROPOSAL FOR
ADOPTION OF THE NVR, INC. 1998 DIRECTORS' LONG-TERM STOCK OPTION PLAN
Purpose
The purposes of the Directors' Plan are to enhance the Company's ability to
attract and retain highly qualified individuals to serve as members of the
Company's Board of Directors and to provide additional incentives to Directors
to promote the success of the Company. The Directors' Plan provides Directors
of the Company an opportunity to purchase Shares pursuant to Options. Options
granted under the Directors' Plan will not constitute "incentive stock
options" within the meaning of Section 422 of the Internal Revenue Code. See
"Federal Income Tax Consequences."
General
The aggregate number of Shares, which may be covered by Options, granted
pursuant to the Directors' Plan is 150,000 (subject to adjustment in the event
of stock dividends, stock splits, recapitalizations or a similar change in the
outstanding Shares). Unexercised Options that terminate prior to the
expiration of the Directors' Plan shall again be available for grant under the
Directors' Plan. The Board administers the Directors' Plan.
Eligibility under the Directors' Plan is limited to outside directors who
are not officers or employees of the Company or any of its Subsidiaries ( an
"Eligible Director"). Each Eligible Director serving on the Board shall be
granted an Option to purchase 12,500 Shares immediately upon shareholder
approval of the Directors' Plan.
The Option price of the Shares covered by each Option granted under the
Directors' Plan will be equal to the fair market value of the underlying
Shares at the time the Option is granted. The fair market value of the
Company's Shares is generally determined by the closing price of the
underlying Shares as reported by a national or regional stock exchange or
other established securities market for publicly traded stock on the date
immediately preceding the date of grant. The closing price of the Company's
Shares on March 1, 1999, as reported by the American Stock Exchange, was
$43.00 per share. Pursuant to the Directors' Plan, Shareholder approval is
required to re-price any Options at an Option price less than the Option price
specified at an original date of grant.
Subject to the limitations described below, an Optionee may, at any time,
exercise an Option with respect to all or any part of the Shares then subject
to such Option by giving the Company written notice of exercise. Payment may
be made in cash or by the assignment and delivery to the Company of Shares
which have been held by the surrendering participant for at least six months,
are not subject to restriction and have a fair market value equal to the
applicable Option Price less any portion thereof paid in cash.
16
<PAGE>
Each Option granted pursuant to the Directors' Plan shall terminate and all
rights to purchase Shares thereunder shall cease upon the expiration of ten
years from the date such Option is granted. Options granted pursuant to the
Directors' Plan will become exercisable, in whole or in part, as to twenty-
five percent (25%) of the underlying Shares on each of December 31, 2002,
2003, 2004 and 2005, respectively, subject to the limitations set forth below.
To date, there have been no grants of Options under the Directors' Plan.
An Option will terminate immediately and may no longer be exercised if the
Eligible Director terminates service as an Eligible Director of the Company or
its Affiliates as a result of a termination for "cause" as defined in the
Stock Option Plan document. In the event of the termination of the Eligible
Director's relationship with the Company prior to January 1, 2003, other than
for "cause", the Eligible Director will be credited with vesting in respect of
twenty-five percent (25%) of the number of Shares initially subject to the
Option and seventy-five percent (75%) of the Option will terminate
immediately. In the event of the termination of the Eligible Director's
relationship with the Company during any year after December 31, 2002 and
prior to January 1, 2006, other than for "cause", the Eligible Director shall
be credited with vesting in respect of twenty-five percent (25%) of the number
of Shares initially subject to the Option, in addition to the portion of the
Option already vested, and the portion of the Option that has not vested shall
terminate immediately. Vested options may be exercised, in whole or in part,
at any time subsequent to a termination of service, subject to the original
term of the Option.
If a change of control (as defined in the Directors' Plan) of the Company
occurs, vesting of previously unvested Options will be accelerated to the date
of the change of control. In the event of any change of control, each
individual holding an Option will have the right at certain times to exercise
an Option, in whole or in part, whether or not such Option was otherwise
exercisable at the time of the change of control and without regard to any
installment limitation on exercise.
The Board may from time to time amend the Directors' Plan in such respects
as the Board may deem advisable, which approval may be made subject to
approval by the Company's Shareholders. However, the Company's Shareholders
must approve any amendment that would materially increase the benefits under
the Directors' Plan. Further, Shareholder approval is required to re-price any
Options at an Option price less than the Option price specified at an original
date of grant. The Board may from time to time suspend or at any time
terminate the Directors' Plan.
Federal Income Tax Consequences
The grant of a non-qualified Option under the Directors' Plan will result in
no Federal income tax consequences to the Company or the Optionee at the grant
date. Upon the exercise of an Option granted under the Directors' Plan, an
Optionee will recognize ordinary income in an amount equal to the difference
between the exercise price and the fair market value of the shares on the date
of exercise. If the Company complies with applicable reporting requirements,
the Company will be entitled to a business expense deduction in the same
amount and at the same time as the Optionee recognizes ordinary income. Upon a
subsequent sale or exchange of shares acquired pursuant to the exercise of an
Option, the Optionee will have a taxable gain or loss, measured by the
difference between the amount realized on the disposition and the tax basis of
the shares (generally, the amount paid for the shares plus the amount treated
as ordinary income at the time the Option was exercised).
If an Optionee surrenders Shares in payment of part or all of the exercise
price for an Option, no gain or loss will be recognized with respect to the
Shares surrendered and the Optionee will be treated as receiving an equivalent
number of Shares pursuant to the exercise of the Option in a nontaxable
exchange. The basis of the Shares surrendered will be treated as the
substituted tax basis for an equivalent number of Option Shares received, and
the new Shares will be treated as having been held for the same holding period
as had expired with respect to the transferred Shares. The difference between
the aggregate Option exercise price and the aggregate fair market value of the
Shares received pursuant to the exercise of the Option will be taxed as
ordinary income.
17
<PAGE>
APPROVAL OF INDEPENDENT AUDITORS
(Proposal 4)
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 1999. 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.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE APPROVAL OF
KPMG LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR 1999.
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 November 23, 1999, 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 2000 annual meeting of
Shareholders. In addition, management intends to exercise discretionary
authority with respect to any proposal made by holders of Common Stock that
does not comply with applicable rules of the Securities and Exchange
Commission of which NVR does not have notice on or before February 7, 2000
that is intended to be presented at the next annual meeting of Shareholders of
the Company.
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.
NVR's Annual Report on Form 10-K for 1998, 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
Shareholders of record entitled to vote at the Annual Meeting will be open and
available for examination by any Shareholder, 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 23, 1999 through May 3,
1999 and at the time and place of the Annual Meeting.
18
<PAGE>
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, 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
April 5, 1999
19
<PAGE>
SKU # 3570-PR-99
<PAGE>
[3670 - NVR, INC.] [FILE: NVR78B.ELX] [VERSION - 1] [2/18/99]
DETACH HERE
- --------------------------------------------------------------------------------
PROXY
NVR, INC.
Proxy for Annual Meeting of Shareholders
May 4, 1999
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 1, 1999 at the Annual Meeting of
Shareholders to be held at NVR Corporate Headquarters, 7601 Lewinsville Road,
McLean, Virginia, 22102, on Tuesday May 4, 1999 at 11:30 A.M. or at any
adjournment thereof.
- --------------- ---------------
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
- --------------- ---------------
<PAGE>
NVR, INC.
c/o EquiServe
P.O. Box 8040
Boston, MA 02266-8040
[3670 - NVR INC.] [FILE NAME: NVR78A.ELX] [VERSION - 3] [3/08/99]
DETACH HERE
- --------------------------------------------------------------------------------
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE.
If no choice is indicated, this proxy will be deemed to grant authority to
vote FOR the election of director nominees, to vote FOR the adoption of the
1998 Management Long-Term Stock Option Plan, to vote FOR the adoption of the
1998 Directors' Long-Term Stock Option Plan, to vote FOR the proposal to
ratify the appointment of KPMG LLP as Independent auditors for the year 1999
and to vote in the discretion of the named proxies as to any other matters
that come before the meeting.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C>
1. Election of Directors. (For a term of 3 years) 2. Proposal to approve the adoption of [_] [_] [_]
NOMINEES: Dwight C. Schar and George E. Slye the 1998 Management Long-Term
FOR WITHHELD Stock Option Plan.
[_] [_]
3. Proposal to approve the adoption of [_] [_] [_]
the 1998 Directors' Long-Term
Stock Option Plan.
[_] 4. Proposal to ratify the appointment of [_] [_] [_]
______________________________________ KPMG LLP as independent auditors for the
For all nominees except as noted above year 1999.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [_]
</TABLE>
The shares represented by this proxy card will be voted in the discretion of
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
