def14a
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934 (Amendment No. )
|
|
|
Filed by the
Registrantþ
|
|
|
Filed by a Party other than the
Registranto
|
|
|
|
|
|
|
Check the appropriate box:
|
|
|
|
o Preliminary
Proxy Statement
|
|
o Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
|
|
þ Definitive
Proxy Statement
|
|
|
|
o Definitive
Additional Materials
|
|
|
o Soliciting
Material Pursuant to Rule 14a-11(c) or Rule 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):
þ No fee required.
o Fee computed on table
below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction
applies:
|
|
|
|
(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): |
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|
|
|
|
o |
Fee paid previously with preliminary materials. |
|
|
o |
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:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
NVR,
INC.
11700 Plaza America Drive
Reston, VA 20190
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
To be held on Thursday,
May 4, 2006
11:30 A.M. Eastern Standard Time
NVR, Inc. (NVR) will hold its Annual Meeting of
Shareholders at 11:30 A.M. (Eastern Time) on Thursday,
May 4, 2006. We will hold the meeting at our corporate
headquarters located at 11700 Plaza America Dr., Suite 500,
Reston, Virginia.
We are holding the meeting for the following purposes:
1. To elect three (3) nominees for director to serve
three (3) year terms and until their successors are duly
elected and qualified;
2. To ratify the appointment of the accounting firm of KPMG
LLP as NVRs independent auditor for the year ending
December 31, 2006;
3. To transact other business that may properly come before
the Annual Meeting or any adjournment or postponement of the
Annual Meeting.
The above items are fully described within the proxy statement,
which is part of this notice. We have not received notice of
other matters that may properly be presented at the meeting.
Only shareholders of record at the close of business on
March 1, 2006 will be entitled to vote at the meeting.
Whether or not you plan to attend the meeting, you are urged to
date and sign the enclosed proxy card and return it promptly in
the accompanying envelope. You are invited to attend the meeting
in person. If you do attend the meeting, you may withdraw your
proxy and vote in person.
By order of the Board of Directors,
James M. Sack
Secretary and General Counsel
March 22, 2006
TABLE OF CONTENTS
NVR,
INC.
11700 Plaza America Drive
Suite 500
Reston, VA 20190
PROXY
STATEMENT
This Proxy Statement, Proxy Card and the Annual Report for the
year ended December 31, 2005 are being mailed on or about
March 22, 2006 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 NVR.
The Annual Meeting will be held on Thursday, May 4, 2006,
at NVRs headquarters at 11700 Plaza America Dr.,
Suite 500, Reston, Virginia, 20190, at 11:30 A.M.,
Eastern Time, and at any and all postponements and adjournments
thereof.
NVR bears the cost of proxy solicitation, including expenses in
connection with preparing, assembling and mailing the proxy
solicitation materials and all papers accompanying them. NVR 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 NVR, who will receive no extra compensation for
their services, may solicit proxies by telephone, facsimile
transmission, internet or personally. NVR has retained Georgeson
Shareholder Communications Inc. to assist in the solicitation of
brokers, bank nominees and institutional holders for a fee of
approximately $4,000 plus
out-of-pocket
expenses.
All voting rights are vested exclusively in the holders of
NVRs common stock, par value $.01 per share (the
Common Stock). Only shareholders of record as of the
close of business on March 1, 2006 (the Record
Date) are entitled to receive notice of and to vote at the
Annual Meeting. Shareholders include holders (the
Participants) owning stock in NVRs Profit
Sharing Trust Plan and Employee Stock Ownership Plan (the
Plans).
The accompanying proxy card should be used to instruct the
person named as the proxy to vote the shareholders shares
in accordance with the shareholders directions. The
persons named in the accompanying proxy card will vote shares of
Common Stock represented by all valid proxies in accordance with
the instructions contained thereon. In the absence of
instructions, shares represented by properly executed proxies
will be voted FOR the election of those three persons
designated hereinafter as nominees for Class I directors of
NVR, FOR the ratification of KPMG LLP as NVRs
Independent Auditor for 2006, 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, for the election of
directors and the ratification of the appointment of KPMG LLP as
NVRs independent auditor, abstentions and broker non-votes
are counted for the purpose of establishing a quorum, but are
not counted in the number of votes cast and will have no effect
on the result of the vote.
Any shareholder may revoke his or her proxy at any time prior to
its use by 1) filing with the Secretary of NVR, at 11700
Plaza America Drive, Suite 500, Reston, Virginia 20190,
written notice of revocation, 2) duly executing a proxy
bearing a later date than the date of the previously duly
executed proxy, or 3) by attending the Annual Meeting and
voting in person. Execution of the enclosed proxy will not
affect your right to vote in person if you should later decide
to attend the Annual Meeting.
The proxy card also should be used by Participants to instruct
the trustee of the Plans how to vote shares of Common Stock held
on their behalf. The trustee is required under the applicable
trust agreement to establish procedures to ensure that the
instructions received from Participants are held in confidence
and not divulged, released or otherwise utilized in a manner
that might influence the Participants free exercise of
their voting rights. Proxy cards representing shares held by
Participants must be returned to the tabulator by May 1,
2006 using the enclosed return envelope and should not be
returned to NVR. If shares are owned through the Plans and the
Participant does not submit voting instructions by May 1,
2006, the trustee of the Plans will vote such shares in the same
proportion as the voting instructions received from the other
Participants. Participants who wish to revoke a proxy card will
need to contact the trustee and follow its instructions.
1
As of the Record Date, NVR had a total of 5,663,631 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 NVRs 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)
NVRs Board of Directors, or the Board, is
divided into three classes, the classes being as equal in number
as possible. At the 2006 Annual Meeting, the following persons
constituting Class I of the directors have been nominated
by the Board of Directors to be elected to hold office for a
three year term and until their successors are duly elected and
qualified:
C. Scott Bartlett, Jr.
Timothy M. Donahue
William A. Moran
NVRs Restated Articles of Incorporation state that the
number of directors of NVR will be no less than seven and no
more than thirteen, as established from time to time by Board
resolution. Currently, the Board has established the size of the
Board as nine.
Mr. Bartlett and Mr. Moran are current directors
standing for reelection. Mr. Donahue was appointed as a
director on January 1, 2006 to fill a Board vacancy created
by the death of J. Carter Bacot, and is standing for election by
our shareholders for the first time. Mr. Schar, NVRs
Chairman, recommended Mr. Donahue to the Nominating
Committee for consideration as a director. Each nominee has
consented to serve as a director of NVR if elected. The Board of
Directors has affirmatively determined that none of the Board of
Directors proposed nominees have a material relationship
with NVR that would interfere with the exercise of independent
judgment, with the exception of Mr. Moran, who is the
chairman of Elm Street Development, Inc, an entity from which
NVR periodically purchases finished lots upon which to build
homes (see the section captioned Certain
Transactions). The Board 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.
Assuming the presence of a quorum, the affirmative vote of the
holders of a plurality of the votes cast by the shares entitled
to vote in person or by proxy at the Annual Meeting is required
for the election of each of the three nominees named above.
Unless marked otherwise, proxies received will be voted for the
election of each of the three nominees named above. Shareholders
may withhold their votes from the entire slate of nominees or
from any particular nominee by so indicating in the space
provided on the attached proxy card.
THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING FOR ALL
THE
FOREGOING NOMINEES AS DIRECTORS OF NVR.
Corporate
Governance Principles and Board Matters
NVR is committed to having sound corporate governance principles
and practices. Having and acting on that commitment is essential
to running NVRs business efficiently and to maintaining
NVRs integrity in the marketplace. NVRs primary
corporate governance documents, including its Corporate
Governance Guidelines, Code of Ethics and all of the Board of
Directors committee charters, are available to the public
on NVRs internet website at http://www.nvrinc.com.
Board
Independence
The Board has affirmatively determined that all current
directors of NVR, except Dwight C. Schar, NVRs Chairman,
and William A. Moran, an existing director whose term expires in
the current year, have no material relationship with NVR,
directly or indirectly, that would interfere with the exercise
of independent judgment, and
2
are independent within the meaning of the American
Stock Exchanges (AMEX) director independence
standards.
Board
Structure and Committee Composition
NVRs Restated Articles of Incorporation state that the
number of directors of NVR will be no less than seven and no
more than thirteen. As of the date of this Proxy Statement, the
Board has nine members.
Dwight C. Schar, NVRs executive chairman, leads the Board,
which meets at least quarterly. In addition, NVRs
Corporate Governance Guidelines requires that each year the
Board name an independent lead director to chair meetings of
NVRs independent directors. The independent directors of
the Board meet as a group at least annually. The independent
lead director position rotates annually between the Audit,
Compensation, Corporate Governance and Nominating Committee
chairmen. During 2005, John M. Toups, the Chairman of the
Compensation Committee, served as the independent lead director.
Robert C. Butler, the Chairman of the Corporate Governance
Committee, assumed the independent lead director role for the
2006 calendar year.
The Board has the following six committees: Audit, Compensation,
Corporate Governance, Executive, Nominating, and Qualified Legal
Compliance. Each committee, other than the Executive Committee,
meets at least annually to review its Committee Charter. During
2005, the full Board of Directors and the Compensation Committee
each met seven times, the Audit Committee met five times, the
Nominating Committee met four times, the Corporate Governance
Committee met twice, and the Qualified Legal Compliance
Committee met once. The independent directors met once during
2005 in executive session without the presence of
non-independent directors and management. The Executive
Committee did not meet during 2005. All of the Board members
attended all of the Board and their respective Committee
meetings during 2005, and each then-standing director attended
the last annual meeting of shareholders. The Board of Directors
requires that all current Board members and all nominees for
election to NVRs Board of Directors put forth in
NVRs proxy statement by the Board attend the annual
meeting of shareholders, unless personal circumstances affecting
such Board member or director nominee make such attendance
impracticable or inappropriate.
Board and
Committee Compensation
The Audit Committee Chairman is paid an annual retainer equal to
$36,000 per annum for serving as a director. All other
non-employee Board members are paid a $26,000 annual retainer.
Non-employee Board members are paid fees of $1,600 for each
meeting attended during 2005. Incidental travel and
out-of-pocket
business expenses are reimbursed as incurred. Directors who are
also officers of NVR receive no additional compensation for
their services as directors.
On July 28, 2005, each non-employee director, except
Timothy M. Donahue who was not a director as of that date, was
issued stock options under the 1998 Directors Stock
Option Plan (the plan) to
purchase 1,100 shares of NVR common stock at an
exercise price of $907.75 per share. On January 1,
2006, Timothy M. Donahue was issued stock options under the Plan
to purchase 1,355 shares of NVR common stock at an
exercise price of $702.00 per share. The exercise price of
the grants to the directors was equal to the market value of the
underlying stock on the date of the respective grants. The total
fair value per grant as measured by the Black-Scholes
option-pricing model was equal to approximately $500,000. The
options vest in twenty-five percent increments in each of 2010,
2011, 2012 and 2013, and expire in July 2015, except
Mr. Donahues options which expire in December 2015.
None of the Options granted under the Stock Option Plan will
become exercisable (other than in the case of a change in
control) unless NVR satisfies a performance target based on
growth in diluted earnings per share (the EPS
Target). The EPS Target has been set at a level that
reflects a growth rate in diluted earnings per share of ten
percent (10%) per year for four years, based on our 2004 diluted
earnings per share of $66.42. The aggregate EPS Target is
$339.00 per share, measured in 2009 based on the sum of the
actual diluted earnings per share results for the four annual
periods ending December 31, 2005 through 2008. The diluted
earnings per share for the EPS Target will be calculated based
on generally accepted accounting principles in effect at the end
of each of the respective four years. The EPS Target will not be
adjusted for accounting rule changes that subsequently become
effective.
3
Board
Member Information
The following sets forth certain pertinent information with
respect to the current directors of NVR, including the nominees
listed above.
|
|
|
|
|
|
|
|
|
|
|
|
|
Year First Elected or
Appointed/
|
Name
|
|
Age
|
|
Term Expires
|
|
Dwight C. Schar(3*)
|
|
|
64
|
|
|
|
1993/2008
|
|
C. Scott Bartlett, Jr.(1) (4)
(6)
|
|
|
73
|
|
|
|
1993/2006
|
|
Robert C. Butler(* *) (1) (4 )(5*)
(6)
|
|
|
75
|
|
|
|
2002/2008
|
|
Timothy M. Donahue(2) (4)
|
|
|
57
|
|
|
|
2006/2006
|
|
Manuel H. Johnson(1*) (2) (5) (6*)
|
|
|
57
|
|
|
|
1993/2007
|
|
William A. Moran(3)
|
|
|
59
|
|
|
|
1993/2006
|
|
David A. Preiser(2) (4*) (5)
|
|
|
49
|
|
|
|
1993/2007
|
|
George E. Slye(1) (3) (6)
|
|
|
75
|
|
|
|
1993/2008
|
|
John M. Toups(2*)(3) (5)
|
|
|
80
|
|
|
|
1993/2007
|
|
|
|
|
(1) |
|
Member of Audit Committee |
|
(2) |
|
Member of Compensation Committee |
|
(3) |
|
Member of Executive Committee |
|
(4) |
|
Member of Nominating Committee |
|
(5) |
|
Member of Corporate Governance Committee |
|
(6) |
|
Member of Qualified Legal Compliance Committee |
|
(*) |
|
Chairperson |
|
|
|
(**) |
|
Independent Lead Director |
Dwight C. Schar has been Chairman of the Board
since September 30, 1993. Mr. Schar served as the
President and Chief Executive Officer of NVR from
September 30, 1993 through June 30, 2005.
Mr. Schar is also a director of Six Flags, Inc.
C. Scott Bartlett, Jr. has been a
director of NVR since September 30, 1993. Mr. Bartlett
retired as an Executive Vice President of National Westminster
Bank USA, now Bank of America, Inc., in 1990. Mr. Bartlett
is also a director of Abraxas Petroleum Corporation where he
serves as the chairman of the audit committee and serves on the
nominating committee.
Robert C. Butler has been a director since
May 1, 2002. Prior to his retirement, Mr. Butler
served as Senior Vice President and Chief Financial Officer of
Celgene Corporation from 1996 through 1998. Previously,
Mr. Butler served as Chief Financial Officer of
International Paper Co. In addition, Mr. Butler was the
Chairman of the Financial Accounting Standards Advisory Council
from 1997 through 2001. Mr. Butler is a director of Studio
One Networks, Inc. He also serves as chairman of The Montclair
Foundation, a community foundation.
Timothy M. Donahue was appointed a director by the
Board on January 1, 2006 to fill the vacancy created by the
death of J. Carter Bacot. Mr. Donahue has been Executive
Chairman of Sprint Nextel Corporation since August 2005. He
previously served as president and chief executive officer of
Nextel Communications, Inc. He began his career with Nextel in
January 1996 as president and chief operating officer. Before
joining Nextel, Mr. Donahue served as northeast regional
president for AT&T Wireless Services operations from 1991 to
1996. Prior to that, he served as president for McCaw
Cellulars paging division in 1986 and was named
McCaws president for the U.S. central region in 1989.
He is also a director of Kodak and John Carroll University.
Manuel H. Johnson has been a director of NVR since
September 30, 1993. Dr. Johnson has been co-chairman
and senior partner in Johnson Smick International, Inc., an
international financial policy-consulting firm, since 1990. From
August 1, 1997 until December 2003, Dr. Johnson was
the 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 (which
was dissolved on
4
July 31, 2001), 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 Funds,
Greenwich Capital Markets, Inc. and KFX, Inc.
William A. Moran has been a director of NVR since
September 30, 1993. Mr. Moran has been the chairman of
Elm Street Development, Inc. (Elm Street) since
1996. Mr. Moran is also a director and shareholder of
Craftmark, Inc., a homebuilder in Virginia, Maryland,
Pennsylvania and Delaware; Craftstar, Inc., which develops,
invests in and periodically sells apartments, condominiums,
single family homes and townhomes in Virginia and Maryland; and
ESD, Inc.
David A. Preiser has been a director of NVR since
September 30, 1993. Mr. Preiser has been a senior
managing director and a member of the Board of Directors (now an
advisory member) of the investment banking firm of Houlihan
Lokey Howard & Zukin (Houlihan Lokey) since
2001. Prior to that date, Mr. Preiser was a managing
director of Houlihan Lokey. Since January 1, 2005,
Mr. Preiser has served as chairman of Houlihan Lokey Howard
and Zukin Europe, pursuant to which he leads
Houlihan Lokeys European investment banking activities.
Additionally, Mr. Preiser continues to hold the position of
managing partner of Sunrise Capital Partners L.P., a distressed
private equity fund affiliated with Houlihan Lokey since 1998,
the investment strategy of which is to invest in bankrupt
companies and turn-around situations. From 1990,
Mr. Preiser had been active in coordinating Houlihan
Lokeys real estate and financial restructuring activities
as a managing director. Mr. Preiser is also a director of
Jos. A Bank Clothiers, Inc.; Akrion, Inc.; Tremesis Energy
Investment Company; Collective Licensing International, LLC; and
AIT Holding Company, LLC.
George E. Slye has been a director of NVR since
September 30, 1993. Mr. Slye has been the chief
executive officer and owner of GESCOM, Inc., a real estate
investment firm, since 1983. Mr. Slye was a co-founder and
vice-chairman of Spaulding and Slye Colliers, a major real
estate development company with offices in Boston and
Washington, D.C. He has served as a trustee of Babson
College and University Hospital of Boston and as a director of
Manufacturers Advisor Corporation of Toronto. In addition,
Mr. Slye was a two-term president of the Greater Boston
Real Estate Board. Mr. Slye was previously a director of
two real estate trusts owned by Travellers Insurance Company,
which are now merged into other Travellers entities.
John M. Toups has been a director of NVR since
September 30, 1993. Prior to his retirement, 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 Halifax Corporation and GTSI, Inc.
Audit
Committee
NVR has, and will continue to have, a separately-designated
standing Audit Committee comprised of four members, each of whom
satisfies the independence standards specified in
Section 121A of the AMEX listing standards and
Rule 10A-3(b)(1)
under the Securities Exchange Act of 1934
(1934 Act). All current members of the Audit
Committee are financially literate and are able to read and
understand fundamental financial statements, including a balance
sheet, income statement and cash flow statement. The Board has
determined that Manuel H. Johnson, the current Audit Committee
Chairman, qualifies as an audit committee financial expert as
defined within
Section 229-401(h)
of the 1934 Act. This designation does not impose on
Mr. Johnson any duties, obligations or liability that are
any greater than are generally imposed on him as a member of the
Audit Committee and the Board, and his designation as an audit
committee financial expert pursuant to this Securities and
Exchange Commission (SEC) requirement does not
affect the duties, obligations or liability of any other member
of the Audit Committee or the Board.
The Audit Committee operates pursuant to a charter adopted by
the Board that is included herein as Appendix A and
that is also available at http://www.nvrinc.com. As
enumerated in the Charter, the Audit Committee was established
to assist the Boards oversight of (1) the integrity
of NVRs accounting and financial reporting processes,
(2) NVRs compliance with legal and regulatory
requirements, (3) the independent external auditors
qualifications and independence, and (4) the performance of
NVRs internal audit function and independent external
auditors. Among other things, the Audit Committee prepares the
Audit Committee report for inclusion in
5
NVRs proxy statement; annually reviews the Audit Committee
Charter and the Audit Committees performance; appoints,
evaluates and determines the compensation of NVRs
independent external auditors; and maintains written procedures
for the receipt, retention and treatment of complaints on
accounting, internal accounting controls or auditing matters, as
well as for the confidential, anonymous submissions by Company
employees of concerns regarding questionable accounting or
auditing matters. The Audit Committee has the authority and
available funding to engage any independent legal counsel and
any accounting or other expert advisors, as the Audit Committee
deems necessary to carry out its duties.
Compensation
Committee
NVR has a separately-designated standing Compensation Committee
comprised of four members, each of whom satisfies the
independence standards specified in Section 121A of the
AMEX listing standards. The Compensation Committee operates
pursuant to a charter adopted by the Board that is available at
http://www.nvrinc.com.
Among other things, the Compensation Committee
(1) determines the compensation of the Chairman and the
Chief Executive Officer and, based in part on the recommendation
of the Chairman and the Chief Executive Officer
(CEO), of all other executive officers of NVR;
(2) periodically reviews and makes recommendations to the
Board with respect to the compensation of directors; (3)
administers and interprets incentive compensation and stock
option plans for employees of NVR; (4) prepares a report on
executive compensation for inclusion in NVRs annual
meeting proxy statement in accordance with applicable rules and
regulations of the SEC; (5) makes recommendations to the
Board about succession planning for the CEO, and in conjunction
with the CEO, also considers succession planning for other key
positions within NVR; and (6) annually reviews the
Compensation Committee Charter and the Compensation
Committees performance. The Compensation Committee also
has the sole authority and appropriate funding to obtain advice
and assistance from compensation consultants, and internal or
outside legal, accounting or other advisors it determines
necessary to carry out its duties.
Nominating
Committee
NVR has a separately-designated standing Nominating Committee
comprised of four members, each of whom satisfies the
independence standards specified in Section 121A of the
AMEX listing standards. The Nominating Committee operates
pursuant to a charter adopted by the Board that is available at
http://www.nvrinc.com.
Among other things, the Nominating Committee (1) identifies
individuals qualified to become Board members;
(2) recommends that the Board select the director nominees
for the next annual meeting of shareholders; (3) recommends
to the Board names of individuals to fill any vacancies on the
Board that arise between annual meetings of shareholders;
(4) considers from time to time the Board committee
structure and makeup; and (5) annually reviews the
Nominating Committee Charter and the Nominating Committees
performance. The Nominating Committee also has the sole
authority and appropriate funding to obtain advice and
assistance from executive search firms, and internal or outside
legal, accounting or other advisors it determines necessary to
carry out its duties.
Attached as Appendix B are NVRs Policies and
Procedures for the Consideration of Board of Directors
Candidates, including nominations submitted by NVRs
security holders. Pursuant to Board authorization, NVR made
certain administrative changes to those procedures during 2005.
Corporate
Governance Committee
NVR has a separately-designated standing Corporate Governance
Committee comprised of four members, each of whom satisfies the
independence standards specified in Section 121A of the
AMEX listing standards. The Corporate Governance Committee
operates pursuant to a charter adopted by the Board that is
available at http://www.nvrinc.com. NVRs Corporate
Governance Guidelines are also available at
http://www.nvrinc.com.
Among other things, the Corporate Governance Committee
(1) develops and recommends to the Board a set of corporate
governance principles; (2) annually reviews and assesses
the adequacy of NVRs Corporate Governance Guidelines,
including ensuring that they reflect best practices where
appropriate; and (3) annually reviews the Corporate
Governance Committee Charter and the Corporate Governance
Committees performance. The
6
Corporate Governance Committee must obtain Board approval for
funding to obtain advice and assistance from internal or outside
legal, accounting or other advisors it determines necessary to
carry out its duties.
Qualified
Legal Compliance Committee
The Qualified Legal Compliance Committee (QLCC) is a
separately-designated standing committee, currently consisting
of all of the members of NVRs Audit Committee, that was
established to assist the Board in fulfilling its
responsibilities relating to oversight of legal compliance by
NVR and Company personnel and to meet the requirements for a
qualified legal compliance committee under Part 205 of the
rules of the SEC (the Part 205 Rules). The
composition of the QLCC is intended to comply with all
independence requirements under the Part 205 Rules. The
QLCC operates pursuant to a charter adopted by the Board that is
available at http://www.nvrinc.com. The QLCC annually
reviews the QLCC Charter and the QLCCs performance.
The QLCC has adopted written procedures for the confidential
receipt, retention and consideration of any report of evidence
of a material violation of securities laws or material breach of
fiduciary duty or similar material violation by NVR, its
directors, officers, employees or agents (Material
Violation) under the Part 205 Rules, and has the
authority and responsibility (1) to inform NVRs chief
legal officer (CLO), CEO and chief financial officer
(CFO) of any report of evidence of a Material
Violation; (2) to determine whether an investigation is
necessary regarding any report of evidence of a Material
Violation and; (3) if the QLCC determines an investigation
is necessary or appropriate, initiate such investigation;
(4) to obtain a written report from the CLO or outside
counsel conducting any such investigation at the
investigations conclusion; (5) recommend, by majority
vote, that NVR implement an appropriate response to evidence of
a Material Violation and inform the Board, CEO, CLO and CFO of
the results of any such investigation and the appropriate
remedial measures to be adopted; and (6) acting by majority
vote, to take all other appropriate action, including the
authority to notify the SEC in the event that NVR fails in any
material respect to implement an appropriate response that the
QLCC has recommended NVR to take. The QLCC has the authority and
available funding to engage any independent legal counsel,
accounting or other expert advisors as the QLCC deems necessary
to carry out its duties.
Executive
Committee
The Executive Committee was established pursuant to NVRs
Bylaws to have such powers, authority and responsibilities as
may be determined by a majority of the entire Board of
Directors. The Executive Committee has never met, nor has the
Board ever delegated any powers, authority or responsibilities
to the Executive Committee. NVRs Board of Directors
intends to continue the practice of considering corporate
matters outside the scope of NVRs other existing
committees at the full Board level.
Security
Holder Communications with the Board of Directors
See the Policies and Procedures Regarding Security Holder
Communications with the NVR, Inc. Board of Directors attached as
Appendix C herein, which are also available at
http://www.nvrinc.com.
7
Security
Ownership of Certain Beneficial Owners and Management
The following tables sets forth certain information as to the
beneficial ownership of Common Stock by each person known by NVR
to be the beneficial owner of more than 5% of the outstanding
Common Stock as of the dates indicated and each director,
director nominee and executive officer and by all directors and
executive officers as a group as of March 1, 2006. 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(1)
|
|
|
Percent of Class
|
|
|
Barclays Global Investors,
N.A.
|
|
|
926,066
|
|
|
|
16.4
|
%
|
45 Fremont Street
|
|
|
|
|
|
|
|
|
San Francisco, CA 94105
|
|
|
|
|
|
|
|
|
Putnam, LLC
|
|
|
653,764
|
|
|
|
11.5
|
%
|
One Post Office Square
|
|
|
|
|
|
|
|
|
Boston, MA 02109
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Based solely upon information contained within
Schedule 13Gs filed by such entities dated
January 26, 2006 and February 10, 2006 respectively. |
Directors
and Management
|
|
|
|
|
|
|
|
|
Name
|
|
Number of Shares
|
|
|
Percent of Class
|
|
|
Dwight C. Schar
|
|
|
478,400
|
(1)
|
|
|
8.4
|
%
|
C. Scott Bartlett, Jr.
|
|
|
9,400
|
(2)
|
|
|
*
|
|
Robert C. Butler
|
|
|
300
|
|
|
|
*
|
|
Timothy M. Donahue
|
|
|
200
|
|
|
|
*
|
|
Manuel H. Johnson
|
|
|
32,965
|
(3)
|
|
|
*
|
|
William A. Moran
|
|
|
20,500
|
(4)
|
|
|
*
|
|
David A. Preiser
|
|
|
4,050
|
(4)
|
|
|
*
|
|
George E. Slye
|
|
|
3,125
|
|
|
|
*
|
|
John M. Toups
|
|
|
14,468
|
(5)
|
|
|
*
|
|
William J. Inman
|
|
|
126,386
|
(6)
|
|
|
2.2
|
%
|
Paul C. Saville
|
|
|
275,229
|
(7)
|
|
|
4.8
|
%
|
Dennis M. Seremet
|
|
|
66,447
|
(8)
|
|
|
1.2
|
%
|
Robert W. Henley
|
|
|
3,742
|
(9)
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
All directors, director nominees
and executive officers as a
group (13 persons)
|
|
|
1,035,212
|
|
|
|
17.8
|
%
|
|
|
|
* |
|
Less than 1%. |
|
(1) |
|
Includes 3,209 vested shares held by the NVR, Inc. Employee
Stock Ownership Plan in trust, 242,950 vested shares held in a
Deferred Compensation Rabbi Trust and 31,714 shares held as
a discretionary investment in the NVR, Inc. Profit Sharing Plan. |
|
(2) |
|
Includes 7,875 vested options issued under the
1998 Directors Long Term Stock Option Plan and
1,025 shares owned by his wife. |
|
(3) |
|
Includes 10,000 vested options issued under the
1996 Directors Long Term Stock Option Plan, 12,500
vested options issued under the 1998 Directors Long
Term Stock Option Plan and 65 shares owned by his son. |
|
(4) |
|
Includes 3,125 vested options issued under the
1998 Directors Long Term Stock Option Plan. |
|
(5) |
|
Includes 12,500 vested options issued under the
1998 Directors Long Term Stock Option Plan and
43 shares owned by his wife. |
8
|
|
|
(6) |
|
Includes 6,667 vested options issued under the 1998 Management
Long Term Stock Option Plan, 86,384 vested shares held in a
Deferred Compensation Rabbi Trust and 3,117 vested shares held
by the NVR, Inc. Employee Stock Ownership Plan in trust. |
|
(7) |
|
Includes 87,500 vested options issued under the 1998 Management
Long Term Stock Option Plan, 3,209 vested shares held by the
NVR, Inc. Employee Stock Ownership Plan in trust,
4,150 shares held as a discretionary investment in the NVR,
Inc. Profit Sharing Plan, 60,000 shares held in a family
LLC, 105,883 vested shares held in a Deferred Compensation Rabbi
Trust and 2,000 shares owned by his children. |
|
(8) |
|
Includes 20,000 vested options issued under the 1998 Management
Long Term Stock Option Plan, 3,065 vested shares held by the
NVR, Inc. Employee Stock Ownership Plan in trust,
1,905 shares held as a discretionary investment in the NVR,
Inc. Profit Sharing Plan, 40,527 vested shares held in a
Deferred Compensation Rabbi Trust and 600 shares owned by
his children. |
|
(9) |
|
Includes 2,500 vested options issued under the 1996 Management
Long Term Stock Option Plan, 1,076 vested shares held by the
NVR, Inc. Employee Stock Ownership Plan in trust and
166 shares held as a discretionary investment in the NVR,
Inc. Profit Sharing Plan. |
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the 1934 Act requires NVRs
directors and executive officers and persons who own more than
10% of NVRs Common Stock to file reports of ownership and
changes in ownership of such stock with the SEC and the AMEX.
Directors, executive officers and greater than 10% shareholders
are required by SEC regulations to furnish NVR with copies of
all such forms filed. To NVRs knowledge, based solely on a
review of the copies of such reports furnished to NVR during
2005 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 REPORT OF THE AUDIT COMMITTEE SHALL NOT BE
DEEMED TO BE SOLICITING MATERIAL OR TO BE
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT
OF 1934 OR INCORPORATED BY REFERENCE IN ANY DOCUMENT SO
FILED.
Report
of the Audit Committee
NVRs Audit Committee is solely comprised of independent
directors, as defined in the applicable AMEX and SEC rules, and
operates pursuant to a charter adopted by the Board. As
described more fully in the Charter (attached as Appendix A
to the Proxy Statement), the Audit Committee has been
established to assist the Boards oversight of (1) the
integrity of NVRs accounting and financial reporting
processes, including the internal controls over financial
reporting, (2) NVRs compliance with legal and
regulatory requirements, (3) the independent external
auditors qualifications and independence, and (4) the
performance of NVRs internal audit function and
independent external auditors. The Audit Committee has the sole
legal authority to select, compensate, evaluate, and where
applicable, to replace NVRs independent auditor. The Audit
Committee also has the authority and necessary funding available
to obtain advice and assistance from outside legal, accounting
or other advisors as the Audit Committee deems necessary to
carry out its duties.
NVRs management has primary responsibility for preparing
NVRs financial statements and establishing financial
reporting systems and internal controls. NVR management also has
the responsibility of reporting on the effectiveness of
NVRs internal controls over financial reporting.
NVRs independent external auditor, KPMG LLP, is
responsible for expressing opinions on the conformity of
NVRs audited financial statements with accounting
principles generally accepted in the United States of America
and on managements report on the effectiveness of its
internal control over financial reporting. In this context, the
Audit Committee hereby reports as follows:
1. The Audit Committee has reviewed and discussed the
audited financial statements and managements assessment of
the effectiveness of NVRs internal controls over financial
reporting with NVRs management, and reviewed and discussed
KPMG LLPs audit opinions with KPMG LLP;
9
2. The Audit Committee has discussed with KPMG LLP the
matters required to be discussed by Statement on Auditing
Standards (SAS) 61 (Codification of Statements on
Auditing Standards, AU 380), SAS 99 (Consideration of
Fraud in a Financial Statement Audit) and SEC rules
discussed in Final Releases
33-8183 and
33-8183a;
3. The Audit Committee has received the written disclosures
and the letter from KPMG LLP required by Independence Standards
Board Standard No. 1 (Independence Discussions with
Audit Committee), and has discussed with KPMG LLP their
independence; and
4. Based on the reviews and discussions referred to in
paragraphs (1) through (3) above, the Audit
Committee recommended to the Board, and the Board has approved,
that the audited financial statements be included in NVRs
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2005, for filing
with the SEC.
The undersigned, constituting all of the members of the Audit
Committee, have submitted this report to the Board of Directors.
Manuel H. Johnson (Chairman), C. Scott Bartlett, Jr.,
Robert C. Butler, and George E. Slye
THE FOLLOWING COMPENSATION COMMITTEE REPORT SHALL NOT BE
DEEMED TO BE SOLICITING MATERIAL OR TO BE
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT
OF 1934 OR INCORPORATED BY REFERENCE IN ANY DOCUMENT SO
FILED.
Compensation
Committee Report On Executive Compensation
The Compensation Committee (the Committee)
administers NVRs executive compensation program. In this
regard, the role of the Committee is to oversee our compensation
plans and policies, annually review and approve all executive
officer compensation decisions, and administer NVRs stock
option plans (including approving stock option grants to
executive officers). The Committees Charter reflects these
various duties and responsibilities, among others. The Committee
is composed solely of independent directors.
General
Compensation Philosophy
General
The Committees philosophy regarding executive compensation
is to provide a total compensation program for executive
officers that is competitive with the compensation packages of
other companies in the homebuilding and mortgage banking
businesses, and which includes
pay-for-performance
based compensation that effectively aligns the interests of
management with those of NVRs shareholders. NVRs
executive officer compensation package consists of base salary,
annual incentive compensation and long-term incentives
consisting of non-qualified, fixed-price stock options issued at
fair value on the date of grant. The total compensation package
is structured to effectively achieve the mutually beneficial
goals of retaining experienced senior executives and aligning
senior executive compensation with the creation of long-term
shareholder value.
Base
Salary
The Committee sets the executive officers base salaries
after considering comparable industry salaries for similar
positions, and reviewing individual performance of the executive
officers duties in their respective areas of
responsibilities.
Annual
Incentive
The annual incentive portion of the total compensation package
is designed to focus the executive officers on the attainment of
annual goals necessary to achieve NVRs rolling five-year
business plan. NVRs entire management group participates
in the annual incentive plan. Payouts under this cash-based,
pay-for-performance
plan
10
are predicated upon the achievement of actual financial targets
that meet or exceed the annual business plan approved by the
Board.
Long-Term
Incentives Fixed Price Stock
Options
The potential single largest component of this total
compensation package is realized through the grant of
fixed-price stock options, in which most of NVRs
management group participates. The Committee believes that the
use of stock options is the best performance-based
equity vehicle for NVR with its continued focus on growth in
earnings per share, accomplished through both net income growth
and the efficient use of capital. It is the Committees
intent that the executive officers only be rewarded when
NVRs shareholders realize long-term growth in the price
appreciation of NVR stock. Unless NVRs financial
performance over the long-term period drives an increase in
NVRs stock price, the options granted provide little or no
value to the employee, and if the price of the stock falls below
the price at the grant date, the stock option provides no value.
Conversely, the Committee does not believe that restricted stock
plans meet its compensation philosophy because restricted stock
plans provide value to an employee regardless of a
companys performance, having value to an employee even if
the stock price drops from the date of grant (unless the stock
price falls to $0).
The Committee structures stock option plans to vest over a
long-term period. None of NVRs four most recently approved
equity plans had options scheduled to vest within the first four
and one-half year period from the grant date. The average length
of time for full vesting under these plans is over seven and one
half years from the date of grant.
Following is a summary of the material terms of the four most
recently approved stock option plans:
|
|
|
|
|
|
|
|
|
Term Description
|
|
1996 Plan
|
|
1998 Plan
|
|
2000 Plan
|
|
2005 Plan
|
|
Exercise price
|
|
Market value on
|
|
Market value on
|
|
Market value on
|
|
Market value on
|
|
|
date of grant
|
|
date of grant
|
|
date of grant
|
|
date of grant
|
Repricing requires
|
|
No
|
|
Yes
|
|
Yes
|
|
Yes
|
shareholder approval
|
|
|
|
|
|
|
|
|
Date options were granted to
executive
|
|
May 30, 1996
|
|
May 26, 1999
|
|
May 3, 2001
|
|
May 26, 2005
|
officers
|
|
|
|
|
|
|
|
|
Vesting Determination
|
|
Continued
employment at
|
|
Continued
employment at
|
|
Continued
employment at
|
|
Attainment of EPS
Target (defined
|
|
|
vesting dates
|
|
vesting dates
|
|
vesting dates
|
|
below), then
continued
employment at
vesting dates
|
Vesting period for
|
|
One-third on each of
|
|
One-third on each
|
|
One-quarter on each
|
|
One-quarter on each
|
executive officers
|
|
December 31, 2000,
|
|
of December 31,
|
|
of December 31,
|
|
of December 31,
|
|
|
2001 and 2002
|
|
2003, 2004 and
|
|
2006, 2007, 2008
|
|
2010, 2011, 2012,
|
|
|
|
|
2005
|
|
and 2009
|
|
and 2013
|
Period from grant
|
|
Six years and
|
|
Six years and seven
|
|
Eight years and
|
|
Eight years and
|
date to full vesting
|
|
seven months
|
|
months
|
|
eight months
|
|
seven months
|
The above chart illustrates the evolutionary nature of the
Committees equity compensation philosophy. All plans
implemented after the 1996 Plan require shareholder approval to
reprice options. This feature was added after NVR independently
recognized the importance of shareholder-controlled repricing,
and years before the AMEXs amended listing rules took
effect in 2003 mandating shareholder approval to reprice options
(no options granted under the 1996 Plan have ever been
repriced). For the 2000 and 2005 Plans, the period from grant
date to full vesting was increased by more than two years to
almost nine years from the original grant date. For the 2005
Plan, all options granted are also subject to significant
vesting conditions (both performance and time-related). No
option granted under the 2005 Plan will become exercisable
unless a performance target based on growth in diluted
11
earnings per share (the EPS Target) is met. The EPS
Target has been set at a level that reflects a growth rate in
diluted earnings per share of ten percent (10%) per year for
four years, based on our 2004 diluted earnings per share of
$66.42. The aggregate EPS Target is $339.00 per share,
measured in 2009 based on the sum of the actual diluted earnings
per share results for the four annual periods ending
December 31, 2005 through 2008. The second vesting
condition for the 2005 Plan is that the options will not
commence vesting until 2010, with the first twenty-five percent
(25%) installment vesting on December 31, 2010 and the
subsequent installments vesting on December 31, 2011, 2012,
and 2013. NVR has consistently sought improvements in its equity
compensation plans to ensure that the majority of the executive
officers potential compensation was effectively aligned
with NVRs shareholders.
The Committee recognizes that stock market gains can occur from
general market increases. However, the Committee believes that
NVRs attainment of its long-term goals (i.e., consistent
net income growth and efficiently employing capital to maintain
consistently high rates of return on capital and equity) has
been the principal driver of NVRs overall stock price
performance as indicated in the section captioned Stock
Performance Graph.
NVRs fixed-price option programs also aid in achieving one
of our key strategic goals of maintaining a loyal and
experienced management team through low turnover. Each option
agreement signed by an employee contains a non-competition
agreement, which NVR has actively enforced when necessary. The
tenure and experience of our management team has been a key
factor in the consistent net income growth and high rates of
return on capital and equity that NVR has achieved.
Stock
Holding Requirements
To complete the linkage between the interests of key NVR
employees and the shareholders, the Board has established and
adopted guidelines that require the members of the Board of
Directors, the Chairman, the CEO, and other executive officers
and certain members of senior management
(Management) to acquire and continuously hold a
specified minimum level of Common Stock (the
Guidelines). Under the Guidelines, (i) Board
members must acquire and hold Common Stock with a total fair
market value equal to five times the annual board retainer fee,
and (ii) Management must acquire and hold Common Stock with
a total fair market value ranging from one to eight times their
annual base salaries, with the Chairman and the CEO each
required to acquire and hold Common Stock with a fair market
value equal to at least eight times their annual base salary.
The Board believes that the imposition of a long-term holding
requirement for the Board of Directors and Management provides
for additional incentive to enhance shareholder value by linking
the interests of those parties directly to those of the
shareholders. Board members must satisfy the holding requirement
within three years of first becoming subject to the Guidelines,
and at a minimum, have satisfied one-third of the requirement
after one year, and two-thirds of the requirement after two
years. Any member of Senior Management that does not meet the
requirement must retain fifty percent of the net Common Stock
received from option exercises until the respective holding
requirement is attained. Net Common Stock received is defined as
the common stock received after the payment of the option price
and the taxes withheld related to the option exercise. All Board
members and employees subject to the Guidelines currently are in
compliance with the Guidelines.
Deductibility
of Compensation
Section 162(m) of the Internal Revenue Code limits the
corporate deduction for compensation paid to the executive
officers named in the Summary Compensation Table to
$1 million unless such compensation qualifies as
performance-based compensation which, among other
things, requires approval by NVRs stockholders. The
Committee strives whenever possible to structure compensation
plans such that they are tax deductible by NVR. However, to
maintain flexibility in compensating executive officers in a
manner designed to promote varying corporate goals, the
Committee has not adopted a policy that all compensation must be
deductible.
To minimize the non-deductibility of executive compensation
expense due to the limitations of Section 162(m) and still
maintain the ability to competitively compensate NVRs
executive officers, NVR established a deferred compensation plan
(Deferred Comp Plan). The specific purpose of the
Deferred Comp Plan is two-fold: i) it establishes a vehicle
whereby executive officers may defer the receipt of compensation
that otherwise would be nondeductible for tax purposes into a
period where NVR would realize a tax deduction for the amounts
paid and ii) it allows members of management subject to the
NVR stock holding requirement to acquire shares of NVR stock on
a
12
pre-tax basis to more quickly meet the required level of
holdings. Unless otherwise mandated by a specific compensation
plan, the deferral of any earned compensation was solely at the
election of the executive officer. Amounts deferred into the
Deferred Comp Plan are invested in a fixed number of shares of
NVR common stock, which are purchased on the open market at fair
market value. The shares of NVR common stock are distributed to
the executive officer upon expiration of the deferral period.
Base
Salary
The Committee reviews the base salary levels for the executive
officers annually. Executive officer salaries are generally
established around or higher than 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 of the
named executive officers 2006 base salaries were increased
over their 2005 base salaries, with the exception of
Mr. Schar, who requested and received a $500,000 reduction
to his base salary to reflect his relinquishment of the CEO role
to Mr. Saville.
Personal
Benefits
NVRs executive officers are entitled to and eligible only
for the same fringe benefits for which all NVR employees are
eligible. NVR does not have programs in place to provide
personal perquisites for any employee. NVRs healthcare and
other insurance programs are the same for all eligible
employees, including executive officers. The Boards annual
discretionary contribution to the NVR ESOP plan, expressed as a
percentage of eligible wages, and the NVR 401(k) matching
contribution, are also the same for all eligible employees,
subject to all applicable IRS contribution limits and formulas
for plans of these types. Further, NVR does not offer a
Supplemental Executive Retirement Plan to any of its employees.
Mr. Schar, Mr. Saville, Mr. Inman and
Mr. Seremet have employment agreements that provide for the
payment of severance benefits in limited circumstances of up to
one or two times their then annual salaries. None of the
employment agreements provide for post-termination consulting
arrangements. These employment agreements are more fully
described in the section captioned Employment
Arrangements.
Annual
Incentive Compensation
All of the executive officers participate in NVRs annual
incentive compensation plan. The executive officers have a
maximum potential payout, which is limited to 100% of their base
salary. The capped feature of the potential payout generally
results in the annual incentive opportunity being less than the
average available for executive officers at other major
homebuilders.
The annual incentive award is based on actual financial results
compared to the business plan approved by the Board of
Directors. At the beginning of each year, financial targets that
are tied to NVRs annual business plan are established by
the Committee. These annual objectives are consistent with the
current years portion of NVRs five-year business
plan. An executive officer begins to earn the annual incentive
award once the financial targets are at least 70% attained. The
full amount of the annual incentive award is earned ratably from
70% up to 100% of the financial target attainment. The executive
officers can earn no more than 100% of their base salary as an
incentive award, which is earned once 100% of the financial
targets are attained. Thus, attainment of greater than 100% of
the financial target has no impact on the amount of the
incentive award earned.
With respect to the annual incentive plan, the financial targets
used for the mortgage banking operation are pre-tax profit
(before annual incentive expense and certain corporate cost
allocations) and return on invested capital. The financial
targets used for the homebuilding operation are profit before
tax and annual incentive, but after a charge for the cost of
capital, and return on assets. The financial target for
corporate executives is predicated upon NVR, Inc. consolidated
pre-tax profit (before consolidated annual incentive and
stock-based compensation expense but after all other charges).
For 2005, Mr. Schar, Mr. Saville, Mr. Seremet and
Mr. Henley exceeded their financial objectives and received
the maximum incentive award (100% of base salary).
Mr. Inman earned approximately 84% of his maximum incentive
award.
13
Long-Term
Compensation
NVRs long-term incentive program currently consists of
fixed-price stock options and is designed to incent the
executive officers on NVRs long-term goals and link the
interests of executive officers to those of the shareholders.
Awards under the long-term incentive programs also strongly
encourage the retention of key executive personnel. Retention of
a loyal and experienced management team has been and continues
to be a key component of NVRs business strategy. In
support of these objectives, NVRs executive officers have
historically participated in long-term, stock-based and
cash-based incentive programs and non-qualified stock option
plans.
During 2005, the executive officers were granted stock options
under the 2005 Stock Option Plan adopted by NVRs Board of
Directors and approved by our shareholders. As noted above, the
stock options granted under the 2005 Plan are subject to the
attainment of a four-year EPS Target or they terminate
immediately. If the EPS Target is attained, the options vest in
twenty-five percent increments in each of 2010, 2011, 2012 and
2013, contingent on continued employment.
In 2003, the Committee discontinued the High Performance Plan
(HP Plan), a long-term cash incentive plan with
discrete three-year measurement periods, because the Committee
determined that the compensation benefits available through base
salary, annual incentive and stock option plans were adequate to
meet NVRs compensation objectives relative to executive
officers. NVRs practice for the last two years of the HP
Plan had been to require executive officers to defer any earned
amounts into the Deferred Comp Plan until separation of service
with NVR. NVR funded the amounts mandatorily deferred and the
funded amounts were invested into a fixed number of shares of
NVR common stock at then current market prices. The shares will
be distributed to the executive officer upon separation of
service. This practice effectively increased the stock holding
requirements for executive officers, and places the earned
compensation at risk for a period greater than the measurement
period under which the compensation was earned. All shares held
by the Deferred Comp Plan pursuant to the HP Plan mandatory
deferral are now vested, and are included in the preceding
beneficial ownership table.
Chairman
of the Board and Chief Executive Officer Compensation
Mr. Dwight C. Schar has served as Chairman of the Board,
President and Chief Executive Officer of NVR from its inception
through June 30, 2005. Effective July 1, 2005, the
roles of Chairman of the Board and Chief Executive Officer were
separated. From that time forth, Mr. Schar continued to
serve as Chairman of the Board and Paul C. Saville, formerly
NVRs Chief Financial Officer, was named President and
Chief Executive Officer. The compensation program for the
Chairman and the CEO follows the overall general compensation
philosophy discussed above, and is linked to the long-term
strategic and financial goals of NVR while encouraging the
creation of shareholder value. A significant amount of both the
Chairmans and the CEOs compensation is tied to
NVRs performance and is at risk, in the form of annual
incentive compensation, deferred long-term cash incentive
compensation (which is invested in shares of NVR common Stock)
and stock options. Through 2005, Mr. Schars and
Mr. Savilles long-term incentive compensation
opportunities were mainly dependent upon NVR attaining
consistent annual growth in earnings per share. The Committee
believes that earnings per share-structured compensation incent
the Chairman and the CEO to grow NVRs operations while
maintaining an efficient capital structure. The Committee
believes the compensation program for both of these executives
is consistent with NVRs philosophy for compensating
executive officers and encourages long-term shareholder value.
Mr. Schars salary remained the same after
July 1, 2005, as he transitioned certain responsibilities
to Mr. Saville. At Mr. Schars request to reflect
the change in his duties, the Committee reduced his annual base
salary by $500,000 effective January 1, 2006, with a
corresponding reduction in Mr. Schars 2006 bonus
opportunity. In establishing Mr. Savilles base salary
as CEO, the Committee considered his past performance, future
responsibilities upon completion of the transition period, and
industry comparatives.
Mr. Schar and Mr. Savilles 2005 annual incentive
compensation award was based on predetermined pre-tax profit
objectives tied to NVRs business plan, and was approved by
the Board of Directors. As previously noted, for 2005, the
pre-tax profit objectives for NVR were exceeded and both the
Chairman and the CEO received the maximum award of 100% of their
respective base salaries.
14
The undersigned, constituting all of the members of the
Compensation Committee during 2005, have submitted this Report
to the Board of Directors.
John M. Toups (Chairman), Manuel H. Johnson, David A. Preiser,
and George E. Slye
Executive
Compensation
Shown below is certain information concerning all of the
compensation for services in all capacities to NVR for the years
ended December 31, 2005, 2004 and 2003 of those persons who
were, at December 31, 2005, (i) the Chief Executive
Officer, and (ii) the four other executive officers of NVR.
SUMMARY
COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Compensation
|
|
|
Long-Term Compensation
|
|
Name and
|
|
|
|
|
|
|
|
Incentive
|
|
|
Other Annual
|
|
|
Stock
|
|
|
LTIP
|
|
|
All Other
|
|
Principal Position
|
|
Year
|
|
|
Salary
|
|
|
Compensation(1)
|
|
|
Compensation
|
|
|
Options(2)
|
|
|
Payouts
|
|
|
Compensation(3)
|
|
|
Dwight C. Schar
|
|
|
2005
|
|
|
$
|
2,000,000
|
|
|
$
|
2,000,000
|
|
|
$
|
|
|
|
|
25,000
|
|
|
$
|
|
|
|
$
|
11,000
|
|
Chairman of the
|
|
|
2004
|
|
|
|
1,700,000
|
|
|
|
1,700,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,500
|
|
Board(4)
|
|
|
2003
|
|
|
|
1,620,000
|
|
|
|
1,620,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,500
|
|
Paul C. Saville
|
|
|
2005
|
|
|
$
|
600,000
|
|
|
$
|
600,000
|
|
|
$
|
|
|
|
|
25,000
|
|
|
$
|
|
|
|
$
|
11,000
|
|
Chief Executive Officer
|
|
|
2004
|
|
|
|
470,000
|
|
|
|
470,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,500
|
|
and President(4)
|
|
|
2003
|
|
|
|
450,000
|
|
|
|
450,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,500
|
|
William J. Inman
|
|
|
2005
|
|
|
$
|
390,000
|
|
|
$
|
327,768
|
|
|
$
|
|
|
|
|
10,000
|
|
|
$
|
|
|
|
$
|
10,500
|
|
President of NVR
|
|
|
2004
|
|
|
|
375,000
|
|
|
|
169,707
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
Mortgage Finance, Inc.
|
|
|
2003
|
|
|
|
360,000
|
|
|
|
360,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
Dennis M. Seremet
|
|
|
2005
|
|
|
$
|
350,000
|
|
|
$
|
350,000
|
|
|
$
|
|
|
|
|
11,835
|
|
|
$
|
|
|
|
$
|
11,000
|
|
Chief Financial Officer
|
|
|
2004
|
|
|
|
235,000
|
|
|
|
235,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,500
|
|
and Treasurer(4)
|
|
|
2003
|
|
|
|
225,000
|
|
|
|
225,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,500
|
|
Robert W. Henley
|
|
|
2005
|
|
|
$
|
157,700
|
|
|
$
|
123,030
|
|
|
$
|
|
|
|
|
2,835
|
|
|
$
|
|
|
|
$
|
10,500
|
|
Vice President and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Controller(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Incentive compensation is reflected in the year earned. All
incentive compensation earned for the periods presented was paid
in March of the subsequent calendar year, with the exception of
Messrs. Schar and Saville who elected to defer receipt of
their respective 2005 payments pursuant to the Deferred
Compensation Plan. |
|
(2) |
|
If the EPS Target is met, 25% of the options issued from the
2005 Stock Option Plan vest on each of December 31, 2010,
2011, 2012 and 2013 with vesting contingent upon continued
employment. The options expire immediately if the EPS Target is
not attained (see the section above captioned Compensation
Committee Report on Executive Compensation for a more
detailed description of the 2005 Stock Option Plan and the EPS
Target). See the following table captioned Option Grants in
2005 for further information. |
|
(3) |
|
Amount contributed to the Employee Stock Ownership Plan for the
respective plan years. |
|
(4) |
|
Effective July 1, 2005, NVR affected changes to its
executive officer roles. Mr. Schar remained the
Companys Chairman, but ceded the Chief Executive Officer
role to Mr. Saville, formerly NVRs Chief Financial
Officer. Mr. Seremet, formerly NVRs Controller, was
named the Chief Financial Officer. Mr. Henley, who was not
previously an executive officer, was named the Controller to
succeed Mr. Seremet. Because Mr. Henley was not an
executive officer prior to July 1, 2005, only 2005
compensation is reported. |
15
Stock
Option Grants, Exercises and Year-End Values
STOCK
OPTION GRANTS IN 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted to
|
|
|
Option
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Employees
|
|
|
Exercise
|
|
|
|
|
|
Potential Realizable Value
|
|
|
|
Options
|
|
|
for the
|
|
|
Price
|
|
|
Expiration
|
|
|
Using the Black-Scholes
Option
|
|
Name
|
|
Granted (#)
|
|
|
Fiscal Year
|
|
|
($/Share)
|
|
|
Date
|
|
|
Pricing Model(1)
|
|
|
Dwight C. Schar
|
|
|
25,000
|
|
|
|
6.0%
|
|
|
$
|
737.00
|
|
|
|
05/25/15
|
|
|
$
|
9,071,250
|
(2)
|
Paul C. Saville
|
|
|
25,000
|
|
|
|
6.0%
|
|
|
|
737.00
|
|
|
|
05/25/15
|
|
|
|
9,071,250
|
(2)
|
William J. Inman
|
|
|
10,000
|
|
|
|
2.4%
|
|
|
|
737.00
|
|
|
|
05/25/15
|
|
|
|
3,628,500
|
(2)
|
Dennis M. Seremet
|
|
|
10,000
|
|
|
|
2.4%
|
|
|
|
737.00
|
|
|
|
05/25/15
|
|
|
|
3,628,500
|
(2)
|
Dennis M. Seremet
|
|
|
1,835
|
|
|
|
0.4%
|
|
|
|
810.00
|
|
|
|
06/30/15
|
|
|
|
737,321
|
(3)
|
Robert W. Henley
|
|
|
1,000
|
|
|
|
0.2%
|
|
|
|
737.00
|
|
|
|
05/25/15
|
|
|
|
362,850
|
(2)
|
Robert W. Henley
|
|
|
1,835
|
|
|
|
0.4%
|
|
|
|
810.00
|
|
|
|
06/30/15
|
|
|
|
737,321
|
(3)
|
|
|
|
(1) |
|
The exercise price of the grants was equal to the market value
of the underlying stock on the date of the respective grants.
The options vest in twenty-five percent increments in each of
2010, 2011, 2012 and 2013 if the EPS Target is achieved and
contingent on continued employment. None of the options granted
under the Stock Option Plan will become exercisable (other than
in the case of a change in control) unless NVR satisfies a
performance target based on growth in diluted earnings per share
(the EPS Target). The EPS Target is set at a level
that reflects a growth rate in diluted earnings per share of ten
percent (10%) per year for four years, based on our 2004 diluted
earnings per share of $66.42. The aggregate EPS Target is
$339.00 per share, measured in 2009 based on the sum of the
actual diluted earnings per share results for the four annual
periods ending December 31, 2005 through 2008. The diluted
earnings per share for the EPS Target will be calculated based
on generally accepted accounting principles in effect at the end
of each of the respective four years. The EPS Target will not be
adjusted for accounting rule changes that subsequently become
effective. |
|
(2) |
|
The fair value per share was calculated under the following
assumptions: i) the tranche-weighted estimated option life
is equal to 8.8 years, ii) the risk free interest rate
was 4.0% (based on a U.S. Treasury Strip due in a number of
years equal to the estimated option life), iii) the
expected volatility equals 34%, and iv) the estimated
dividend yield is equal to 0%. |
|
(3) |
|
The fair value per share was calculated under the following
assumptions: i) the tranche-weighted estimated option life
is equal to 8.8 years, ii) the risk free interest rate
was 4.1% (based on a U.S. Treasury Strip due in a number of
years equal to the estimated option life), iii) the
expected volatility equals 34%, and iv) the estimated
dividend yield is equal to 0%. |
AGGREGATED
STOCK OPTION EXERCISES IN 2005 AND YEAR-END STOCK OPTION
VALUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Unexercised Stock
|
|
|
Value of Unexercised
In-the-
|
|
|
|
Shares Acquired on
|
|
|
|
|
|
Options at Year-End
|
|
|
Money Options at
Year-End
|
|
Name
|
|
Exercise
|
|
|
Value Realized
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Dwight C. Schar
|
|
|
83,333
|
|
|
$
|
61,281,005
|
|
|
|
83,333
|
|
|
|
425,000
|
|
|
$
|
54,531,032
|
|
|
$
|
205,200,000
|
|
Paul C. Saville
|
|
|
24,300
|
|
|
|
19,019,903
|
|
|
|
89,200
|
|
|
|
175,000
|
|
|
|
58,433,150
|
|
|
|
76,950,000
|
|
William J. Inman
|
|
|
16,666
|
|
|
|
12,192,950
|
|
|
|
16,667
|
|
|
|
60,000
|
|
|
|
10,906,468
|
|
|
|
25,650,000
|
|
Dennis M. Seremet
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
61,835
|
|
|
|
13,087,500
|
|
|
|
25,650,000
|
|
Robert W. Henley
|
|
|
2,500
|
|
|
|
1,718,350
|
|
|
|
2,500
|
|
|
|
9,835
|
|
|
|
1,491,350
|
|
|
|
3,591,000
|
|
Compensation
Committee Interlocks and Insider Participation
During 2005, the compensation committee was comprised of
Mr. Toups, Mr. Slye, Mr. Johnson, and
Mr. Preiser, all of who are independent directors of NVR.
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
16
member of NVRs Board or the NVR Boards Compensation
Committee; accordingly, there were no interlocks with other
companies within the meaning of the SECs proxy rules
during 2005.
Certain
Transactions
During the year ended December 31, 2005, NVR entered into
forward lot purchase agreements to purchase finished building
lots for a total purchase price of approximately $41,000,000
with Elm Street Development, Inc., which is controlled by
Mr. Moran. These transactions were approved by a majority
of the independent members of the Board of Directors, and the
finished lots under these transactions are expected to be
purchased over the next three years at market prices. During
2005, NVR purchased 182 developed lots at market prices from Elm
Street for approximately $29,000,000.
NVR periodically leases, at market rates, an airplane owned by
Mr. Schar for business-related company travel when the use
of the airplane lends itself to business travel efficiencies.
NVRs independent directors annually review these
expenditures. During 2005, NVR paid approximately $323,000 for
business-related use of the airplane.
During 2005, NVR entered into various marketing and promotional
arrangements with certain entities controlled by or affiliated
with the Washington Redskins National Football League franchise
(the Redskins). Mr. Schar is a minority owner
of the Redskins. NVRs independent directors approved each
of these arrangements. In total, NVR incurred or committed to
incur approximately $960,000 under these marketing and
promotional arrangements.
Employment
Arrangements
On July 1, 2005, NVR entered into an employment agreement
with Mr. Schar to serve as Chairman of the Board. The
agreement continues through January 1, 2011 (unless
extended by both parties), and provides for an annual minimum
base salary of $2,000,000 and an annual bonus of up to 100% of
base salary. Mr. Schar voluntarily sought a 25% reduction
in his base salary, which effective January 1, 2006, was
reduced to $1,500,000. If Mr. Schars employment
terminates due to death or disability (in each case as defined
in his employment agreement), he would be entitled to receive
his then annual base salary and accrued annual bonus for the
period ending on the last calendar day of the second calendar
month following the month in which the death or disability
occurred. In the event that Mr. Schars employment
terminates pursuant to retirement (essentially a voluntary
termination after attaining age 65), he would be entitled
to receive in twelve monthly installments an amount equal to
100% of his then annual base salary. In the event that
Mr. Schar is terminated without cause, as defined in the
employment agreement, including in connection with or within one
year after a change in control of NVR, prior to January 1,
2011, he would be entitled to receive in twelve monthly
installments an amount equal to 200% of his then annual base
salary. In the event that Mr. Schar voluntarily terminates
his employment, including (under certain circumstances) a
voluntary termination upon the election or appointment, as
applicable, of a new Chairman
and/or Chief
Executive Officer, or is terminated for cause, as
described below, he would not be entitled to receive any
severance payments. Mr. Schar agreed that he would not
compete with NVR during the term of his employment and for two
years thereafter if termination is voluntary, due to retirement,
for cause, or without cause. Mr. Schar is not subject to a
post termination non-compete clause if he voluntarily terminates
his employment pursuant to a change of control or the election
or appointment, as applicable, of a new Chairman
and/or Chief
Executive Officer. Pursuant to Mr. Schars employment
agreement, he must acquire and hold at all times NVR common
stock with a total fair market value equal to eight times his
annual base salary.
On July 1, 2005, NVR entered into an employment agreement
with Mr. Saville to serve as the President and Chief
Executive Officer. The agreement continues through
January 1, 2011 (unless extended by both parties), and
provides for an annual minimum base salary of $650,000 and an
annual bonus of up to 100% of base salary.
Mr. Savilles base salary, effective January 1,
2006, was increased to $800,000. If Mr. Savilles
employment terminates due to death or disability (in each case,
as defined within his employment agreement), he would be
entitled to receive his then annual base salary and accrued
annual bonus for the period ending on the last calendar day of
the second calendar month following the month in which the death
or disability occurred. In the event that
Mr. Savilles employment terminates pursuant to
retirement (essentially a voluntary termination after attaining
17
age 65), he would be entitled to receive in twelve monthly
installments an amount equal to 100% of his then annual base
salary. In the event that Mr. Saville is terminated without
cause, as defined in the employment agreement, including in
connection with or within one year after a change in control of
NVR, prior to January 1, 2011, he would be entitled to
receive in twelve monthly installments an amount equal to 200%
of his then annual base salary. In the event that
Mr. Saville voluntarily terminates his employment,
including (under certain circumstances) a voluntary termination
upon the election or appointment, as applicable, of a new
Chairman
and/or Chief
Executive Officer, or is terminated for cause, as
described below, he would not be entitled to receive any
severance payments. Mr. Saville agreed that he would not
compete with NVR during the term of his employment and for two
years thereafter if termination is voluntary, due to retirement,
for cause, or without cause. Mr. Saville is not subject to
a post termination non-compete clause if he voluntarily
terminates his employment pursuant to a change of control or the
election or appointment, as applicable, of a new Chairman
and/or Chief
Executive Officer. Pursuant to Mr. Savilles
employment agreement, he must acquire and hold at all times NVR
common stock with a total fair market value equal to eight times
his annual base salary.
On July 1, 2005, NVR entered into an employment agreement
with Mr. Seremet to serve as the Chief Financial Officer.
The agreement continues through January 1, 2011 (unless
extended by both parties), and provides for an annual minimum
base salary of $400,000 and an annual bonus of up to 100% of
base salary. Mr. Seremets base salary, effective
January 1, 2006, was increased to $430,000. If
Mr. Seremets employment terminates due to death or
disability (in each case, as defined in the employment
agreement), he would be entitled to receive his then annual base
salary and accrued annual bonus for the period ending on the
last calendar day of the second calendar month following the
month in which the death or disability occurred. In the event
that Mr. Seremets employment terminates pursuant to
retirement (essentially a voluntary termination after attaining
age 65), he would be entitled to receive in twelve monthly
installments an amount equal to 100% of his then annual base
salary. In the event that Mr. Seremet is terminated without
cause, as defined in the employment agreement, including in
connection with or within one year after a change in control of
NVR, prior to January 1, 2011, he would be entitled to
receive in twelve monthly installments an amount equal to 200%
of his then annual base salary. In the event that
Mr. Seremet voluntarily terminates his employment,
including (under certain circumstances) a voluntary termination
upon the election or appointment, as applicable, of a new
Chairman
and/or Chief
Executive Officer, or is terminated for cause, as
described below, he would not be entitled to receive any
severance payments. Mr. Seremet agreed that he would not
compete with NVR during the term of his employment and for two
years thereafter if termination is voluntary, due to retirement,
for cause, or without cause. Mr. Seremet is not subject to
a post termination non-compete clause if he voluntarily
terminates his employment pursuant to a change of control or the
election or appointment, as applicable, of a new Chairman
and/or Chief
Executive Officer. Pursuant to Mr. Seremets
employment agreement, he must acquire and hold at all times NVR
common stock with a total fair market value equal to six times
his annual base salary.
On July 1, 2005, NVR entered into an employment agreement
with Mr. Inman to serve as the President of NVR Mortgage
Finance, Inc. The agreement continues through January 1,
2011 (unless extended by both parties), and provides for an
annual minimum base salary of $390,000 and an annual bonus of up
to 100% of base salary. Mr. Inmans base salary,
effective January 1, 2006, was increased to $410,000. If
Mr. Inmans employment terminates due to death or
disability (in each case, as defined in the employment
agreement), he would be entitled to receive his then annual base
salary and accrued annual bonus for the period ending on the
last calendar day of the second calendar month following the
month in which the death or disability occurred. In the event
that Mr. Inmans employment terminates pursuant to
retirement (essentially a voluntary termination after attaining
age 65), he would be entitled to receive in twelve monthly
installments an amount equal to 100% of his then annual base
salary. In the event that Mr. Inman is terminated without
cause, as defined in the employment agreement, including in
connection with or within one year after a change in control of
NVR, prior to January 1, 2011, he would be entitled to
receive in twelve monthly installments an amount equal to 200%
of his then annual base salary. In the event that Mr. Inman
voluntarily terminates his employment, including (under certain
circumstances) a voluntary termination upon the election or
appointment, as applicable, of a new Chairman
and/or Chief
Executive Officer, or is terminated for cause, as
described below, he would not be entitled to receive any
severance payments. Mr. Inman agreed that he would not
compete with NVR during the term of his employment and for two
years thereafter if termination is voluntary, due to retirement,
for cause, or without cause. Mr. Inman is not subject to a
post termination non-compete clause if he voluntarily terminates
his employment pursuant to a change of control or the election
or appointment, as
18
applicable, of a new Chairman
and/or Chief
Executive Officer. Pursuant to Mr. Inmans employment
agreement, he must acquire and hold at all times NVR common
stock with a total fair market value equal to four times his
annual base salary.
In each of the above described employment agreements,
termination for cause may result if the executive
officer subject to the respective employment agreement is
convicted of any felony, other crime involving moral turpitude,
or any crime or offense which results in his incarceration for
more than three months, is guilty of gross misconduct in
connection with the performance of his duties as described
within the respective employment agreement, or if the executive
officer materially breaches affirmative or negative covenants or
undertakings set forth in his respective employment agreement.
Each of the executive officers has been granted stock options
pursuant to individual option agreements entered into between
the respective executive officer and NVR. The agreements provide
for the acceleration of vesting of the granted stock options
upon a change in control of NVR as defined within
each of the respective agreements. The change of
control provisions within the executive officers
agreements are identical to the change of control
provisions within the agreements for all other participants of
the respective stock option plans. Generally, the change
of control provision is triggered upon (i) a merger,
consolidation, reorganization or other business combination of
NVR with one or more other entities in which NVR is not the
surviving entity, (ii) a sale of substantially all of the
assets of NVR to another entity, and (iii) any transaction
resulting in any person or entity owning 20% or more of the
total number of voting shares of NVR, or any person commencing a
tender or exchange offer to acquire beneficial ownership of 20%
or more of the total number of voting shares of NVR.
19
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 NVRs performance in the form of
cumulative total return to holders of NVRs Common Stock
since December 31, 2000 in comparison to the Dow/Home
Construction Index and the Dow Jones Industrial Index for that
same period. The Dow/Home Construction Index includes NVR, Inc.,
Pulte Homes, Inc., Beazer Homes USA, Inc., Ryland Group, Inc.,
Centex Corp., KB Home, Champion Enterprises, Inc., Lennar Corp.,
DR Horton, Inc., MDC Holdings, Inc., Hovnanian Enterprises,
Inc., Standard Pacific Corp., Meritage Homes Corp., WCI
Communities, Inc. and Toll Brothers, Inc.
(a) Assumes that $100 was invested in NVR stock and the
indices on December 31, 2000.
20
Approval
of Independent Auditors
(Proposal 2)
At the Annual Meeting, the Board of Directors of NVR will
recommend shareholder ratification of the appointment of KPMG
LLP as NVRs independent auditor for the year 2006. If the
appointment is not ratified, the Board will consider whether it
should select another independent auditor. Representatives of
KPMG LLP are expected to be present at the meeting to respond to
shareholders questions and will have an opportunity to
make a statement if they so desire.
THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING FOR THE
APPROVAL OF KPMG LLP AS NVRS INDEPENDENT AUDITORS FOR
2006.
DISCLOSURE
OF FEES PAID OR ACCRUED FOR KPMG LLP
DURING THE YEARS ENDED DECEMBER 31:
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
Audit fees:
|
|
|
|
|
|
|
|
|
Audit fees and quarterly reviews
|
|
$
|
327,000
|
|
|
$
|
261,500
|
|
Section 404 internal control
audit
|
|
|
270,000
|
|
|
|
300,000
|
|
Comfort letter/Consents
|
|
|
9,000
|
|
|
|
7,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
606,000
|
|
|
|
569,000
|
|
Audit-related fees:
|
|
|
|
|
|
|
|
|
Employee benefit plan audit
|
|
|
28,000
|
|
|
|
17,000
|
|
Tax fees:
|
|
|
|
|
|
|
|
|
State tax appeal assistance
|
|
|
11,794
|
|
|
|
|
|
All other fees:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fees
|
|
$
|
645,794
|
|
|
$
|
586,000
|
|
|
|
|
|
|
|
|
|
|
The Audit Committee annually evaluates what types of audit and
non-audit services (permitted by law), and subject to certain
limits, can be entered into with pre-approval authority granted
by the Audit Committee, and will grant that authority, if
applicable, pursuant to an Audit Committee resolution. During
2005, and for 2005 only, the Audit Committee delegated to the
Chairman of the Audit Committee (the Chairman), the
CEO and CFO of NVR, together or separately, in the name and on
behalf of NVR, the authority, subject to individual cost limits,
to engage KPMG LLP to perform 1) accounting guidance and
technical assistance for the implementation of newly issued
accounting pronouncements and standards, 2) accounting
guidance and technical assistance related to the application of
existing accounting pronouncements and standards to NVR
transactions, 3) assistance in the process of gathering
documentation for tax audits and management of them prior to
receipt of a potential assessment, 4) assistance in the
resolution of assessments from tax audits, 5) assistance in
the development and implementation of tax saving strategies and
6) SEC registration statement comfort letters and consents;
together in an aggregate amount for all services not to exceed
50% of the annual audit fee, provided that the Chairman, the CEO
and CFO reported any such audit-related or non-audit services to
the full Audit Committee at its next regularly scheduled
meeting. During 2005, only the $9,000 KPMG consent fee related
to NVRs 2005 Stock Option Plan and $3,294 of the $11,794
for state tax appeal assistance were paid pursuant to the
delegated authority granted by the Audit Committee.
During 2004, and for 2004 only, the Audit Committee delegated to
the Chairman, the CEO and CFO of NVR, together or separately, in
the name and on behalf of NVR, the authority, subject to
individual cost limits, to engage KPMG LLP to perform
1) Section 404 documentation assistance,
2) accounting guidance and technical assistance for the
implementation of newly issued accounting pronouncements and
standards, 3) accounting guidance and technical assistance
related to the application of existing accounting pronouncements
and standards to NVR transactions, 4) assistance in the
process of gathering documentation for tax audits and management
of them prior to receipt of a potential assessment,
5) assistance in the resolution of assessments from tax
audits, 6) assistance in the
21
development and implementation of tax saving strategies and
7) SEC registration statement comfort letters and consents;
together in an aggregate amount for all services not to exceed
50% of the annual audit fee, provided that the Chairman, the CEO
and CFO reported any such audit-related or non-audit services to
the full Audit Committee at its next regularly scheduled
meeting. During 2004, only the $7,500 KPMG consent fee related
to NVRs shelf registration statement was paid pursuant to
the delegated authority granted by the Audit Committee.
Shareholder
Proposals
NVRs bylaws were amended in 2005 by the Board to add
advance notice provisions for shareholder proposals to be
presented at any annual meeting, including director nominations.
Proposals of holders of Common Stock intended to be considered
for the next annual meeting of Shareholders of NVR, must be
received by NVR no earlier than November 22, 2006, and no
later than December 22, 2006, and must comply with
applicable rules of the Securities and Exchange Commission in
order to be considered. Proposals of holders of Common Stock
intended to be included in the Companys proxy statement
for the next annual meeting of Shareholders of NVR, must be
received by the Company on or before November 22, 2006.
Other
Matters
Management knows of no other business to be presented for action
at the Annual Meeting, other than those items listed in the
notice of the Annual Meeting referred to herein. If any other
business should properly come before the Annual Meeting, or any
adjournment thereof, it is intended that the proxies will be
voted in accordance with the best judgment of the persons acting
thereunder.
NVRs Annual Report on
Form 10-K
for 2005, including consolidated financial statements and other
information, accompanies this Proxy Statement but does not form
a part of the proxy soliciting material. A complete list of the
stockholders of record entitled to vote at the Annual Meeting
will be open and available for examination by any stockholder,
for any purpose germane to the Annual Meeting, between
9:00 a.m. and 5:00 p.m. at NVRs offices at 11700
Plaza America Drive, Reston, Virginia 20190, from April 20,
2006 through May 3, 2006 and at the time and place of the
Annual Meeting.
Copies of NVRs most recent Annual Report on
Form 10-K,
including the financial statements and schedules thereto, which
NVR is required to file with the SEC, will be provided without
charge upon the written request of any shareholder. Such
requests may be sent to Investor Relations, NVR, Inc., 11700
Plaza America Drive, Suite 500, Reston, Virginia, 20190.
NVRs SEC filings are also available to the public from
NVRs website at http://www.nvrinc.com, and the SECs
website at http://www.sec.gov.
By Order of the Board of Directors,
James M. Sack
Secretary and General Counsel
Reston, Virginia
March 22, 2006
22
Appendix A
CHARTER
OF THE
AUDIT COMMITTEE
OF NVR, INC. (NVR or the
Company)
The Board of Directors of NVR, Inc. (the Board) has
adopted and approved this amended Charter for the Audit
Committee of NVR, Inc. (the Audit Committee) by
resolution effective November 4, 2004.
1. The purpose of the Audit Committee is to:
1.01 Assist the Boards oversight of (1) the
integrity of the Companys accounting and financial
reporting processes, (2) the Companys compliance with
legal and regulatory requirements, (3) the independent
external auditors qualifications and independence, and
(4) the performance of the Companys internal audit
function and independent external auditors; and
1.02 Prepare the report required by the Securities and
Exchange Commissions (SEC) proxy rules to be
included in the Companys annual proxy statement, or, if
the Company does not file a proxy statement, in the
Companys annual report filed on
Form 10-K
with the SEC.
|
|
|
|
2.
|
Structure and Membership Requirements
|
2.01 The Audit Committee shall consist of at least four
independent directors. Each Audit Committee member
must meet the independent definition as contained
within Section 121(A) of the American Stock Exchange
listing standards, Section 303A.02 of the New York Stock
Exchange listing standards, and
Rule 10A-3(b)(1)
under the 1934 Exchange Act; and
2.02 Each member of the Audit Committee must be financially
literate, as such qualification is interpreted by the NVR Board
in its business judgment, but which standards will be no less
than the ability to read and understand fundamental financial
statements, including the balance sheet, income statement and
cash flow statement; and
2.03 At least one member of the Audit Committee must be
financially sophisticated. A financially sophisticated Audit
Committee member has accounting or related financial management
expertise, as the NVR Board interprets such qualification in its
business judgment, but which standard will at least require such
member to have past employment experience in finance or
accounting, requisite professional certification in accounting,
or other comparable experience or background which results in
the individuals financial sophistication (including but
not limited to being or having been a chief executive officer,
chief financial officer, or other senior officer with financial
oversight responsibilities). At least one member of the Audit
Committee must qualify as an audit committee financial expert as
defined in Item 401(h) of
Regulation S-K.
A director who qualifies as an audit committee financial expert
under Item 401(h) of
Regulation S-K
is presumed to qualify as financially sophisticated.
3.01 The Audit Committee shall meet at least four times
each calendar year on a quarterly basis; and
3.02 The Audit Committee shall meet separately at least
four times each year with each of Company management, the
Internal Audit Executive and the independent external auditor.
4.01 The Audit Committee shall directly appoint, retain,
compensate, evaluate and terminate the Companys
independent external auditors (or any other public accounting
firm engaged for the purpose of preparing or issuing an audit
report or performing other auditing, review or attestation
services for the Company) and must be directly responsible for
the oversight of the independent external auditors (or such
other public accounting firm), including the resolution of
disagreements between management and the independent external
auditor (or such other public accounting firm). The Audit
Committee has the sole authority to approve all engagements and
fees with the independent external auditor (or any other public
accounting firm), although the Audit Committee may issue
pre-approval policies and procedures as
23
contemplated by Rule 2-01(c)(7) of
Regulation S-X.
This does not preclude the Audit Committee from obtaining the
input of Company management;
4.02 The Audit Committee shall establish written procedures
for the receipt, retention and treatment of complaints on
accounting, internal accounting controls or auditing matters, as
well as for the confidential, anonymous submissions by Company
employees of concerns regarding questionable accounting or
auditing matters;
4.03 The Audit Committee shall engage such independent
legal counsel and such accounting or other expert advisors as
the Audit Committee deems necessary to carry out its duties;
4.04 The Audit Committee shall receive appropriate funding,
as determined by the Audit Committee, from the Company for
payment of (a) compensation to the Companys
independent external auditors (or other public accounting firm
engaged for the purpose of preparing or issuing an audit report
or performing other audit, review or attestation services for
the Company), (b) compensation to the outside legal,
accounting or other expert advisors employed by the Audit
Committee in the fulfillment of its duties and (c) ordinary
administrative expenses of the Audit Committee that are
necessary or appropriate to carry out its duties. The Audit
Committee has sole authority to approve the fees and other
retention terms of such legal, accounting and other expert
advisors;
4.05 The Audit Committee shall, at least annually, obtain
and review a written report by the independent external auditor
describing:
(a) All relationships between the outside auditor and NVR,
consistent with Independence Standards Board Standard 1;
(b) The independent external auditors internal
quality control procedures; any material issues raised by the
most recent internal quality-control review, or peer review, of
the independent external auditor, or by any inquiry or
investigation by governmental or professional authorities,
within the preceding five years, respecting one or more
independent audits carried out by the independent external
auditor, and any steps taken to deal with any such
issues; and
(c) The Audit Committee shall actively engage in a dialogue
with the independent external auditors with respect to any
disclosed relationships or services that may impact the
objectivity and independence of the independent external
auditor, and shall take, or recommend that the Board take,
appropriate action to oversee the independence of the
independent external auditors;
(d) The Audit Committee should present its conclusions with
respect to the independent external auditors
qualifications, performance and independence to the Board;
4.06 The Audit Committee shall discuss the annual audited
financial statements and quarterly financial statements with
management and the independent external auditors, including the
Companys disclosures under Managements
Discussion and Analysis of Financial Condition and Results of
Operations. The Audit Committee shall also discuss the
Companys earnings press releases, as well as financial
information and earnings guidance provided to analysts and
rating agencies. The Audit Committees responsibility to
discuss earnings releases as well as financial information and
earnings guidance may be done generally, such as a discussion of
the types of information to be disclosed. The Audit Committee
need not discuss in advance each earnings release or each
instance in which the Company may provide earnings guidance;
4.07 The Audit Committee shall review with the independent
external auditor any audit problems or difficulties and
managements response;
4.08 The Audit Committee, based on a review of NVRs
annual financial statements and based on a discussion with
NVRs independent external auditor and NVR management, will
recommend to the Board whether to include the audited financial
statements in the Annual Report on
Form 10-K
filed with the Securities and Exchange Commission;
24
4.09 The Audit Committee shall set clear hiring policies
for employees or former employees of the independent external
auditors;
4.10 The Audit Committee shall periodically discuss the
Companys policies with respect to risk assessment and risk
management;
4.11 The Audit Committee shall keep minutes of each Audit
Committee meeting and report regularly to the Board;
4.12 In furtherance, and not in limitation of the
foregoing, the Audit Committee shall be vested with all
responsibilities and authority required by
Rule 10A-3
under the Exchange Act.
5. Review of Charter and Performance
5.01 The Audit Committee shall conduct an annual evaluation
of the Audit Committees performance as compared to the
requirements of this Charter, and shall periodically, but no
less frequently than on an annual basis, review the adequacy of
this Charter; and
5.02 Any changes to the charter must be approved by the
Board.
6. Duty to Serve as Qualified Legal Compliance Committee
6.01 If so appointed by the Board, the Audit Committee will
serve as a qualified legal compliance committee
(QLCC) pursuant to Part 205 of the rules of the
Securities and Exchange Commission, the powers, authority and
duties of which will be enumerated under a separate QLCC Charter.
25
Appendix B
NVR,
Inc.
Nominating Committee Policies and Procedures for the
Consideration of
Board of Director Candidates
The following amended and restated policies and procedures were
adopted by the NVR, Inc. (the Company) Nominating
Committee (the Committee) on November 1, 2005:
I. Policy Regarding Director Candidates Recommended by
Security Holders.
A. The Company will consider all director candidates
recommended by shareholders owning at least 5% of the
Companys outstanding shares at all times during the
preceding year that meet the qualifications established by the
Board of Directors (the Board).
II. Director Minimum Qualifications.
A. Each director nominee is evaluated in the context of the
full Boards qualifications as a whole, with the objective
of establishing a Board that can best perpetuate the success of
the Companys business and represent shareholder interests
through the exercise of sound judgment. Each director nominee
will be evaluated considering the relevance to the Company of
the director nominees respective skills and experience,
which must be complementary to the skills and experience of the
other members of the Board;
B. A substantial majority of the Board shall be independent
as defined by the applicable exchange on which the
Companys shares are listed. The Audit, Compensation,
Corporate Governance, Nominating and Qualified Legal Compliance
Committees will be comprised solely of independent directors;
C. Director nominees must possess a general understanding
of marketing, finance and other elements relevant to the success
of a large publicly-traded company in todays business
environment, and an understanding of the Companys business
on an operational level;
D. Each director may be assigned committee
responsibilities. A director nominees educational and
professional backgrounds must be consistent with the director
nominees committee assignment (e.g., director nominees who
will be assigned to the audit committee must be financially
literate as defined within the Companys Audit Committee
Charter);
E. Director nominees must demonstrate a willingness to
devote the appropriate time to fulfilling Board duties;
F. Director nominees shall not represent a special interest
or special interest group whose agenda is inconsistent with the
Companys goals and objectives or whose approach and
methods are inconsistent with what the Board believes is in the
best interest of the Companys shareholders; and
G. Director nominees shall not be a distraction to the
Board, nor shall a director nominee be disruptive to the
achievement of the Companys business mission, goals and
objectives.
III. Procedures for Consideration of Security Holder
Nominations.
A. Security holder nominations must include ALL of
the information described in paragraphs C. through H. below
and must be received in its entirety by the
120th calendar
day before the date of the companys proxy statement
released to security holders in connection with the previous
years annual meeting to be considered for the next
scheduled annual meeting of shareholders;
B. Security holder nominations must be in writing and
submitted via registered mail or overnight delivery service to
the Nominating Committee Chairman at the Companys
corporate headquarters address;
C. Supporting documentation must be submitted that allows
the Nominating Committee to verify ownership of not less than 5%
of the Companys outstanding shares at all times during the
immediately preceding year;
D. The shareholder must submit an affidavit from the
director nominee stating that if elected, the director nominee
is willing and able to serve on the Companys Board for the
full term to which the director nominee would be elected. The
affidavit must also acknowledge that the director nominee is
aware of, has read and understands the Companys Code of
Ethics, Standards of Business Conduct, Corporate Governance
26
Guidelines, and Board of Director Committee Charters
(collectively, the Corporate Governance Documents),
and further that the director nominee acknowledges that, if
elected, the director nominee is subject to and will abide by
the Corporate Governance Documents;
E. The director nominee must submit a signed independence
questionnaire. This questionnaire shall be distributed to the
director nominee upon receipt of a properly delivered security
holder director nomination request, and must be returned within
five days of receipt via registered mail or overnight delivery
service to the Companys Corporate Secretary and Nominating
Committee Chairman, or designee;
F. The shareholder must submit documentation as to the
director nominees qualifications, which at a minimum must
include:
1. A complete biography;
2. Full employment history, including current primary
occupation;
3. A signed consent form and waiver authorizing the Company
to perform a full background investigation of the director
nominee, including criminal and credit history, from a security
firm acceptable to the Company in its sole discretion, an
original report of which must be sent directly from the security
firm to the Companys Corporate Secretary and Nominating
Committee Chairman, or designee;
4. Documentation of educational levels attained, complete
with official transcripts issued directly by the educational
institution and sent directly from the educational institution
to the Companys Corporate Secretary and Nominating
Committee Chairman, or designee. The Nominating Committee may
waive this requirement if the security firm performing the
background investigation verifies that the director nominee
completed the educational levels indicated by the director
nominee;
5. Disclosure of all special interests and all political
and organizational affiliations; and
6. A complete list of clients if the director nominee is a
consultant, attorney or other professional service provider;
G. The shareholder must submit any additional information
required to be included in the Companys proxy statement
for director nominees which determination will be made by the
Company in its sole and absolute discretion (including, without
limitation, information regarding business experience,
involvement in legal proceedings, security ownership and
transactions with the Company or management); and
H. The information submitted by the security holder must
include relevant contact information (e.g., address, phone
numbers) for the submitting shareholder and the director nominee.
IV. Identification and Evaluation of Director Candidates.
A. For directors standing for reelection, the Nominating
Committee may consider:
1. The general qualifications as noted above;
2. The directors attendance at Board and Committee
meetings; and
3. The directors participation and contributions to
Board activities.
B. The Nominating Committee may consider the following when
identifying and evaluating an individual who is not currently a
Company director:
1. Use of outside executive search firms or referrals, as
appropriate; and
2. Consideration of the Companys minimum director
qualifications as noted above in light of the specific
qualifications possessed by the individual being considered; and
Regardless of the source of the nomination, individuals being
considered for nomination to the Companys Board, who are
not currently directors, must provide to the Company the
information described in Section III, paragraphs D-H.
27
Appendix C
NVR,
Inc.
Policies and Procedures Regarding
Security Holder Communications with the NVR, Inc. Board of
Directors
I. Policies
A. The Board of Directors (the Board)
intent is to foster open communications with its security
holders regarding issues of a legitimate business purpose
affecting NVR, Inc. (the Company). Security holders
need to be aware of the following when submitting correspondence
to the Board:
1. The Board will not respond to or act upon any security
holder correspondence that pertains to the solicitation of
services or products (for use by NVR or the Board) conducted by
or obtained from the security holder or any entity with which
the security holder has an affiliation;
2. Security holders should follow the rules adopted under
the Securities Exchange Act of 1934 (1934 Act)
and the procedures disclosed within NVRs bylaws and proxy
statement to submit shareholder proposals intended for inclusion
in NVRs proxy statement for the next annual meeting of
shareholders; and
3. Security holders should follow the procedures described
within NVRs proxy statement or other 1934 Act filings
to submit board of director nominations.
II. Procedures
A. Communications from security holders should be in the
form of written correspondence, and should be sent via
registered mail or overnight delivery service to NVRs
corporate office, care of the Chief Executive Officer.
Electronic submissions of security holder correspondence will
not be accepted. The correspondence shall include supporting
documentation evidencing the security holders security
holdings in NVR.
B. Each Board member is willing to accept correspondence.
The Chief Executive Officer will forward correspondence
addressed directly to an individual Board member to that Board
member without a screening process, with a copy of the
correspondence provided to the Chairman of the Board.
C. Any correspondence received by NVR that is addressed
generically to the Board of Directors will be forwarded to the
Chairman of the Board. If the Chairman of the Board is not an
independent director, a copy will be sent to the
Chairman of the Audit Committee.
28
|
|
|
|
o |
Mark this box with an X if you have made changes to your name or address details above. |
Annual Meeting Proxy Card
Election of Directors
The Board of Directors recommends a vote FOR the listed nominees.
|
1. |
|
Election of Directors for a term of three years, Nominees: |
|
|
|
|
|
|
|
For |
Withhold |
01 C. Scott Bartlett, Jr.
|
|
o
|
|
o |
02 Timothy M. Donahue
|
|
o
|
|
o |
03 William A. Moran
|
|
o
|
|
o |
Issues
The Board of Directors recommends a vote FOR the following proposal.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For |
|
Against |
|
Abstain |
|
2. |
|
|
Ratification of appointment of KPMG
LLP as independent auditors for the
year ending December 31, 2006.
|
|
o
|
|
o
|
|
o |
|
|
3. |
|
|
In their discretion, the proxies
are authorized to vote upon any
other business that may properly
come before the meeting. |
Authorized Signatures Sign Here This section must be completed for your instructions to be executed.
Please sign exactly as name appears hereon. When joint tenants hold shares, each should sign.
Executors, administrators, trustees, guardians or other fiduciaries should give full title as such.
If signing for a corporation, please sign in full corporate name by a duly authorized officer. If
a partnership, please sign in partnership name by authorized person.
|
|
|
|
|
Signature 1 Please keep signature within the box
|
|
Signature 2 Please keep signature within the box |
|
Date (mm/dd/yyyy) |
Proxy NVR, Inc.
Proxy for the Annual Meeting of Shareholders
May 4, 2006
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James M. Sack, Dennis M. Seremet and Robert W. Henley, or any
of them, as proxies (and if the undersigned is a proxy, as substitute proxies), each with the power
to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on
the reverse side, all shares of common stock of NVR, Inc. held of record by the undersigned on
March 1, 2006 at the Annual Meeting of Shareholders to be held at NVRs Corporate Headquarters,
11700 Plaza America Drive, Suite 500, Reston, Virginia, 20190, on Thursday, May 4, 2006 at 11:30
A.M. and at any adjournments or postponements thereof.
If there are shares allocated to the undersigned in the NVR, Inc. Profit Sharing Trust Plan or the
Employee Stock Ownership Plan, the undersigned hereby directs the Trustee to vote all full and
fractional shares as indicated on the reverse of this card. Shares for which no voting
instructions are received by May 1, 2006 will be voted by the Trustee in the same proportion as all
other shares which have been voted.
This proxy when properly executed will be voted as directed. If no direction is given with respect
to a particular proposal, this proxy will be voted FOR the election of the three nominees for
director, FOR item 2 and otherwise in the discretion of the proxies.
PLEASE MARK, DATE, SIGN, AND RETURN THIS PROXY CARD PROMPTLY, USING THE ENCLOSED ENVELOPE.
CONTINUED AND TO BE SIGNED ON THE REVERSE