Dwight Schar, chief executive of debt-laden NVR L.P., was given a new, five-year contract late last year that provides that he be paid more than $1.1 million if he is fired.
NVR, the McLean, Va.-based homebuilding firm that is the second-leading builder in the metropolitan Baltimore market, disclosed the new arrangement in its annual 10-K filing with the ++ Securities and Exchange Commission last week.
NVR lost $260 million last year, when it wrote off land positions that it had bought during the hot market for new homes in the Baltimore and Washington areas from 1987 to 1989.
The value of the land fell when the market for new homes slowed down. Lenders have taken back land from at least two NVR projects in Baltimore County.
In 1989, Mr. Schar earned $573,000 in salary and another $565,131 in bonuses. Last year, he received the same salary but no bonus. Other company executives also took big cuts in overall pay during 1990, and the company eliminated 800 jobs, bringing its total work force to 1,851 people.
The 10-K filing also discloses that NVR's banks have allowed it to defer two principal payments on the working capital line the company has with a group of eight banks led by Pittsburgh National Bank.
Mr. Schar's new deal, which he signed in December, sets his annual salary at $553,000. The 49-year-old executive is eligible for bonuses of up to 100 percent of his base salary. The agreement also gives Mr. Schar $20,000 in director's fees for serving on the board of NVCompanies Inc., a corporation that in NVR's complicated organizational scheme is the general partner NVR's general partner.
Each of the other NVCompanies directors, who include former Virginia Attorney General J. Marshall Coleman, is also paid $20,000 in annual director's fees.
A general partner is a person or an organization appointed by the other partners in a partnership to run a company. Even though NVR's partnership units -- a limited partnership's equivalent of shares of stock -- are publicly traded on the American Stock Exchange, public shareholders have never had a say in running the company.
The SEC filing says that Mr. Schar will get two years' pay if his "employment is terminated without cause."
The filing also says that Mr. Schar can get one year's pay as severance even if he quits, if he leaves at the time of a change of control in the company or within one year after a change of control.
The filing said that the contract's definition of a change of control includes anything that would remove the general partner or that would push NVCompanies' share of the voting partnership units below 50 percent.
The company has been unable to make payments since December on $207 million in bonds that were issued to finance its 1986 takeover of Ryan by NVHomes.
NVR has been negotiating with its bondholders, and while officials have not said what they will do about the bonds, former company officials have said an exchange of debt for partnership units is one option being considered.
An exchange offer would add to the number of partnership units outstanding, and would push 16.8 million units owned by NVCompanies' four principal owners, including Mr. Schar, down from its current 57 percent of the total to less than 50 percent.
James Sack, NVR's general counsel, refused to comment on Mr. Schar's contract, as did a spokesman for Pittsburgh National Bank.
Mr. Schar founded NVHomes in 1980. Before that, he was vice president of Ryan Homes.