UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE
14A
Proxy Statement Pursuant to Section
14(a) of the
Securities Exchange Act of 1934
(Amendment No. ___)
Filed
by the Registrant x
Filed by a Party other than the Registrant ¨
Check the appropriate box:
| ¨ | Preliminary
Proxy Statement |
| ¨ | Confidential,
For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| x | Definitive
Proxy Statement |
| ¨ | Definitive
Additional Materials |
| ¨ | Soliciting
Materials Pursuant to §240.14a-12 |
Versar,
Inc.
(Name of Registrant as Specified by
its Charter)
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
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computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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| (2) | Aggregate number of securities to which transaction applies: |
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| (3) | Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated
and state how it was determined): |
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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
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______________________________________________________________________________
September 30, 2015
On behalf of the Board
of Directors and management team, I cordially invite you to attend Versar, Inc.’s 2015 Annual Meeting of Stockholders to
be held at the Springfield Golf and Country Club, 8301 Old Keene Mill Road, Springfield, Virginia 22152, on Tuesday, November
10, 2015, at 10:00 a.m. local time.
Scheduled for consideration
at the meeting are the election of directors and other matters described in the enclosed Proxy Statement. We will also report
on Versar’s condition and performance for fiscal year 2015 and you will have the opportunity to question management on matters
that affect the interests of all stockholders.
You can reach the
Springfield Golf and Country Club from either I-95 or I-495. From I-95: take the exit to Old Keene Mill Road West. After about
two miles, the entrance will be on the left. Stay on the right to find the Club House. From I-495: exit from I-95 South to Old
Keene Mill Road West. After about two miles, the entrance will be on the left. Stay on the right to find the Club House.
Stockholders may access
our proxy materials and 2015 annual report through the Internet. This allows us to provide you with the Annual Meeting information
in an efficient manner, while reducing any environmental impact. On or about September 30, 2015 we will mail to stockholders a
Notice of Internet Availability of Proxy Materials containing instructions on how to find and download our proxy materials and
the 2015 Annual Report online. If you receive a Notice by mail, you will not receive a printed copy of the materials unless you
specifically request one. Details on how to request printed copies of the materials and a proxy card by mail will be included
in the Notice.
We encourage stockholders’
interest in the affairs of Versar and it is important that your shares of stock are represented at the Meeting. We hope you will
be able to join us. Whether you plan to attend or not, we encourage you to vote as promptly as possible via the Internet or
by telephone. If you request a printed copy of the proxy materials, please complete, sign, date, and return the proxy card you
will receive in response to your request as soon as possible or you can vote via the Internet or by telephone. Returning your
signed proxy will not limit your right to vote in person or to attend the Meeting, but it will assure your representation if you
cannot attend. Your vote is important.
We look forward to seeing you at the Annual
Meeting.
| |
Sincerely yours, |
| |
|
| |
 |
| |
Paul J. Hoeper |
| |
Chairman of the Board |
NOTICE OF 2015 ANNUAL MEETING
The 2015 Annual Meeting of Stockholders of Versar, Inc. (the
“Company”) will be held at the Springfield Golf and Country Club, 8301 Old Keene Mill Road, Springfield, Virginia
22152, on Tuesday, November 10, 2015, at 10:00 a.m. local time for the following purposes:
| 1. |
Election of Eight Directors
to serve until the 2016 Annual Meeting of Stockholders; |
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|
| 2. |
Advisory Vote on Executive Compensation; |
| |
|
| 3. |
Ratification of the Appointment of
Grant Thornton LLP as Independent Registered Public Accounting Firm for Fiscal Year 2016; and |
| |
|
| 4. |
Transaction of such other business
as may properly come before the meeting or any adjournment or postponement thereof. |
Only those stockholders of record at the
close of business on September 22, 2015 will be entitled to receive notice of and to vote at the Meeting and any adjournments
or postponements thereof. I direct your attention to the Proxy Statement accompanying this Notice for a more complete statement
regarding the matters to be acted upon at the Meeting.
Whether you plan to attend the 2015
Annual Meeting or not, we encourage you to vote as promptly as possible via the Internet or by telephone. If you request a printed
copy of the proxy materials, please complete, sign, date, and return the proxy card you will receive in response to your request
as soon as possible. Returning your signed proxy will not limit your right to vote in person or to attend the meeting, but
it will assure your representation if you cannot attend. Your vote is important.
| |
By Order of the Board of
Directors, |
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|
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 |
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James D. Villa |
| |
Secretary |
September 30, 2015
IMPORTANT
Important
Notice Regarding the Availability of Proxy Materials for the Stockholders Meeting to be held on November 10, 2015. This Proxy
Statement and the Versar Annual Report to Stockholders for fiscal year 2015 are available at www.investorvote.com/VSR.
| | Notice of 2015 Annual Meeting of Stockholders |
TABLE OF CONTENTS
| | Versar, Inc. 2015 Proxy Statement |
TABLE OF CONTENTS
| | Versar, Inc. 2015 Proxy Statement |
SUMMARY INFORMATION
This summary highlights information
contained elsewhere in this Proxy Statement and Versar, Inc.’s Annual Report on Form 10-K for fiscal year 2015. For more
complete information about these topics, please review the entire Proxy Statement and Annual Report.
| ANNUAL MEETING |
| Date: |
November 10, 2015 |
| Time: |
10:00 a.m. EST |
| Location: |
Springfield
Golf and Country Club, 8301 Old Keene Mill Road Springfield, Virginia 22152 |
| Record Date: |
September
22, 2015 |
| Voting: |
Each share of stock is entitled to one vote on each matter to be
voted upon at the Annual Meeting |
| FINANCIAL PERFORMANCE* |
Gross Revenue
|
Net Income (Loss)
|
Earnings Per Share
|
| Gross revenue for fiscal year 2015 was
$159.9 million, an increase of 45% compared to $110.3 million during the 2014 fiscal year. |
Net income for fiscal year 2015 was
$1.4 million, an increase of 521% compared to net (loss) of $0.3 million during the 2014 fiscal year. |
Net income per share for fiscal year
2015 was $0.14, an increase of 567% compared to net (loss) per share of $0.03 during the 2014 fiscal year. |
*All financial results set forth above are from continuing
operations.
| SHAREHOLDER VOTING MATTER |
| |
Voting Matter |
Board Vote Recommendation |
See Page Number |
| Proposal No. 1 |
Election of Directors |
FOR each nominee |
5 |
| Proposal No. 2 |
Advisory Vote on Executive Compensation |
FOR |
32 |
| Proposal No. 3 |
Ratification of Accountants |
FOR |
33 |
| |
|
|
|
| DIRECTOR NOMINEES |
| Nominee |
Age |
Director
Since |
Principal Occupation |
Committee Membership |
| Robert L. Durfee |
79 |
1969 |
Business Consultant |
Audit, Compensation, Executive |
| James L. Gallagher |
78 |
2000 |
President, Gallagher Consulting Group |
Audit (Chair), Nominating & Governance |
| Amoretta M. Hoeber |
73 |
2000 |
President, AMH Consulting |
Nominating & Governance (Chair), Compensation, Executive |
| Paul J. Hoeper (Chairman) |
69 |
2001 |
Business Consultant |
Audit, Nominating & Governance, Executive |
| Amir M. Metry |
73 |
2001 |
Business Consultant |
Compensation (Chair), Nominating & Governance |
| Anthony L. Otten |
59 |
2008 |
Chief Executive Officer, Versar, Inc. |
Executive (Chair) |
| Frederick M. Strader |
62 |
2014 |
Business Consultant |
Audit, Compensation |
| Jeffrey A. Wagonhurst |
66 |
2011 |
President & Chief Operating Officer, Versar, Inc. |
Executive |
| Page | 1 | Versar, Inc. 2015 Proxy Statement |
SUMMARY INFORMATION
HOW TO VOTE
| Stockholders
of Record |
|
Street
Name Stockholders |
|
Employee
Plan Participants |
If you hold your shares in your own name through Versar’s
transfer agent, Registrar and Transfer Company, you may vote by Internet, telephone or mail.
By Internet – stockholders may vote on the Internet
by going to www.investorvote.com/VSR and following the instructions provided.
By Telephone – stockholders may vote by calling
1-800-652-8683 (toll-free) and following the recorded instructions.
By Mail – stockholders must request a paper copy
of the proxy materials to receive a proxy card and follow the instructions given for mailing. A paper copy of the proxy
materials may be obtained by going to www.investorvote.com/VSR
and following the instructions provided.
If you vote by telephone or via the Internet, you do
not need to return your Proxy Card. Telephone and Internet voting are available 24 hours a day and will close at 11:59
p.m. EDT on November 9, 2015.
You may vote in person at the Annual Meeting by completing,
signing, dating and returning your proxy card in person at the Annual Meeting. The Board recommends that you vote using
one of the other voting methods, since it may be impractical for most stockholders to attend the Annual Meeting. |
|
If you own your shares through a bank or other holder
of record, you may vote by Internet, telephone or mail. Please review the voting instructions on your voting instruction
form.
You may vote in person at the Annual Meeting only if
you obtain a proxy, executed in your favor, from the bank, broker or other holder of record through which you hold your
shares. The Board recommends that you vote using one of the other voting methods, since it may be impractical for most
stockholders to attend the Annual Meeting. |
|
If you own your shares through participation in an
employee stock or retirement benefit plan, you may vote by Internet, telephone or mail.
By Internet – plan participants may vote on the
Internet by going to www.investorvote.com/VSR and following the instructions provided.
By Telephone – plan participants may vote by
calling 1-800-652-8683 (toll-free) and following the recorded instructions.
By Mail – plan participants must request a paper
copy of the proxy materials to receive a vote authorization form and follow the instructions given for mailing. A paper
copy of the proxy materials may be obtained by going to www.investorvote.com/VSR
and following the instructions provided.
Telephone and Internet voting are available 24 hours
a day and will close at 11:59 p.m. EDT on November 5, 2015, or other date as determined by the plan trustee.
You may vote in person at the Annual Meeting only if
you obtain a proxy, executed in your favor, from the trustee of the plan through which you hold your shares. The Board
recommends that you vote using one of the other voting methods, since it may be impractical for most stockholders to attend
the Annual Meeting. |
| Page | 2 | Versar, Inc. 2015 Proxy Statement |
GENERAL INFORMATION
Versar, Inc.
6850 Versar Center
Springfield, VA 22151
(703) 750-3000
2015 PROXY STATEMENT
The Board of Directors of the Company
(the “Board”) is providing you with these proxy materials in connection with the solicitation of proxies for use at
Versar, Inc.’s 2015 Annual Meeting of Stockholders (the “Annual Meeting”) and any adjournment(s) or postponement(s)
thereof. In this Proxy Statement, Versar may also be referred to as “we”, “our”, “the Company”
or “the Corporation”.
This year, we are distributing our proxy
materials to our Stockholders under the Securities and Exchange Commission’s Notice and Access rules. On or about September
30, 2015, Stockholders will receive a Notice of Internet Availability of Proxy Materials instead of a paper copy of this Proxy
Statement and the 2015 Annual Report. The Notice contains instructions on how to access those documents and vote over the Internet.
The Notice also contains instructions for requesting paper copies of our proxy materials, this Proxy Statement, the 2015 Annual
Report and a Proxy Card or voting instruction card. This process will conserve resources and reduce the costs of printing and
distributing our proxy materials.
The Purpose of the Annual Meeting
At the Annual Meeting, stockholders will
act upon the matters set forth in the Notice of Meeting, including the election of directors, an advisory vote on executive compensation
and ratification of the selection of the Company’s independent registered public accounting firm. The Company’s senior
management will also present information about the Company’s performance during fiscal year 2015 and will answer questions
from Stockholders.
Record Date and Voting Rights
Stockholders owning Versar’s Common
Stock at the close of business on September 22, 2015 (the “Record Date”) or their legal proxy holders are entitled
to notice of and to vote at the Annual Meeting and any adjournment(s) or postponement(s) thereof. There were 9,815,569 shares
of Common Stock outstanding and entitled to vote as of the Record Date. Each share of Common Stock entitles the holder to one
vote on all matters of business at the Meeting.
Voting Procedures
The By-laws of the Company require that
the holders of a majority of the outstanding shares of the Company’s Common Stock who are entitled to vote at the Annual
Meeting be present in person or represented by proxy in order for a quorum to exist for the transaction of business at such Meeting.
Abstentions and “broker non-votes” (which occur if a broker or other nominee does not have discretionary voting authority
and has not received voting instructions from the beneficial owner with respect to the particular item) are counted for purposes
of determining the presence or absence of a quorum for the transaction of business.
| Page | 3 | Versar, Inc. 2015 Proxy Statement |
GENERAL INFORMATION
Assuming that a quorum is present for
the Annual Meeting, then those eight (8) nominees for director pursuant to Proposal No. 1 who receive the highest number of votes
cast will be elected. Abstentions and broker non-votes will have no effect on the outcome of the election of directors. For Proposals
Nos. 2 and 3, the affirmative vote of a majority of the shares of Common Stock present in person or by proxy at the Annual Meeting
and entitled to vote thereon will be considered approval of the advisory vote on executive compensation and the ratification of
the Company’s accountants, respectively. In each case, abstentions are counted for purposes of calculating shares of Common
Stock present and entitled to vote, but are not counted as shares voting and therefore have the effect of a vote against such
Proposal Nos. 2 and 3. Broker non-votes are not counted as shares of Common Stock present and entitled to vote and therefore have
no effect with respect to Proposals Nos. 2 and 3. Any proxy that is returned by a Stockholder properly completed and which is
not revoked will be voted at the Annual Meeting in the manner specified therein. Unless contrary instructions are given, the persons
designated as proxy holders in the Proxy Card (or their substitutes) will vote FOR Proposal No. 1, the election of the Board nominees,
FOR Proposal No. 2, the advisory vote on executive compensation and FOR Proposal No.3, the ratification of the Company’s
registered independent public accounting firm and in the proxy holders’ discretion with regard to all other matters. Any
unmarked proxies, including those submitted by brokers (other than broker non-votes) or custodians, nominees or fiduciaries, will
be voted in favor of the nominees for the Board of Directors and for the other proposals, as indicated above and as indicated
in the Proxy Card.
Revocation of Proxies
Any person giving a proxy pursuant to
this Proxy Statement may revoke it at any time before it is exercised at the meeting by filing with the Secretary of the Company
an instrument revoking it or by delivering to the Company a duly executed proxy bearing a later date. In addition, if the person
executing the proxy is present at the Annual Meeting, he or she may revoke such proxy by voting his or her shares in person.
Method and Cost of Soliciting Votes
The cost of preparing, assembling, posting
and mailing all proxy materials will be borne by the Company. In addition to solicitation by mail, solicitations may be made by
email, personal interview and telephone by officers and other employees of the Company or its subsidiaries, acting without additional
compensation. The Company anticipates that banks, brokerage houses, and other custodians, nominees, and fiduciaries will forward
this material to beneficial owners of shares of Common Stock entitled to vote at the Annual Meeting, and such persons will be
reimbursed by the Company for their out-of-pocket expenses.
| Page | 4 | Versar, Inc. 2015 Proxy Statement |
PROPOSAL NO.1 – ELECTION OF DIRECTORS
Nominees for Election
The Board recommends the election of the
eight (8) persons named below who have been nominated by the Board to serve as directors of the Company until the 2016 Annual
Meeting of Stockholders or until their successors have been duly elected and qualified or their earlier resignation or removal.
The persons named in the accompanying proxy will vote for the election of the nominees named below unless authority is withheld.
Each nominee is presently a director of the Company and has served as such for the time indicated opposite his or her name. If
for any reason any of the persons named below should become unavailable to serve as a result of an event unanticipated by management,
proxies will be voted for the remaining nominees and such other person or persons as may be designated by the Board.
Director Qualifications and Experience
| Robert L. Durfee, Ph.D. |
1969 to the present |
 |
Business consultant since 2004;
Co-founder of the Company; Executive Vice President of the Company from 1986 to June 2004; President of GEOMET Technologies,
LLC, a subsidiary of the Company, from 1991 to June 2004. Age 79.
Dr. Durfee is a highly experienced
executive. His prior roles at Versar, which include being one of the Company’s founders and President of Versar’s
subsidiary, GEOMET Technologies, LLC, give him unique insight into the Company’s businesses, particularly in the
aspects of environmental compliance, munitions disposal and control of hazardous or toxic materials. |
| James L. Gallagher |
2000
to the present |
 |
President, Gallagher Consulting
Group since September 1999; President of Westinghouse Government and Environmental Services from 1996 to 1999; Executive
Vice President of Westinghouse Government and Environmental Services from 1994 to 1996; Vice President and General Manager
of Westinghouse Government, Operations Business Unit from 1992 to 1994. Age 78.
Mr. Gallagher has served as a
highly experienced executive of a leading environmental and energy unit of a Fortune 500 company. With his significant
financial, business, operations and contracting background, Mr. Gallagher provides expert leadership to the Board’s
Audit Committee. His experience in construction management and outsourcing of large government facilities is important
to two of the Company’s core businesses. As a former consultant to the U.S. Department of Energy, Mr. Gallagher
is able to provide knowledge of markets and client needs in the energy sector. |
| Page | 5 | Versar, Inc. 2015 Proxy Statement |
PROPOSAL NO.1 – ELECTION OF DIRECTORS
| Amoretta M. Hoeber |
2000 to the present |
 |
President, AMH Consulting since
1992; Director, Strategic Planning of TRW Federal Systems Group and TRW Environmental Safety Systems, Inc. from 1986 to
1992; Deputy Under Secretary, U.S. Army from 1984 to 1986; Principal Deputy Assistant Secretary, U.S. Army from 1981 to
1984. Age 73.
Ms. Hoeber’s experience
in government contracting, strategic planning, and business development brings a unique perspective to the core Versar
businesses. Her deep understanding of the strategic planning process brings high-value insight to Versar as it develops
its key business competencies. Her extensive network and membership in several key U.S. government advisory boards also
allows her to give her insight into the needs and priorities of Versar’s biggest client group, the U.S. government,
specifically the U.S. Department of Defense. |
| Paul J. Hoeper |
2001 to the present |
 |
Business consultant since February
2001; Assistant Secretary of the Army for Acquisition, Logistics and Technology, from May 1998 to January 2001; Deputy
Under Secretary of Defense, International and Commercial Programs, from March 1996 to May 1998; President of Fortune Financial
from 1994 to January 1996. Age 69.
Mr. Hoeper’s experience
as a merchant banker and senior Department of Defense official, plus his past service as a director of several public
companies, provide organizational, financial and business experience to the Board. Since leaving the government, Mr. Hoeper
has been an active participant and presenter at conferences focusing on general corporate governance and the specific
governance needs of companies, like Versar, that focus on government contracts. Mr. Hoeper’s participation in various
government advisory groups and institutions enhances his leadership of the Board and enables him to contribute in a meaningful
way to the strategic and risk management tasks of the Board. |
| Amir A. Metry, Ph.D. |
2002 to the present |
 |
Business consultant since 1995;
part-time Versar employee from 1995 to April 2002; Founding Principal of ERM Program Management Corp. from 1989 to 1995;
Vice President of Roy F. Weston from 1981 to 1989. Age 73.
Dr. Metry’s prior business
experience in the United States and overseas, including ongoing charitable work in Egypt and the Sudan, provide Versar
with international business experience in an area that has become its largest business segment. Dr. Metry’s experience
also includes launching new business and operations in the Middle East, Europe and the Pacific Rim. Additionally, Dr.
Metry’s many years of experience and present business relationships in engineering and environmental businesses
enhances his leadership on organizational and compensation issues faced by Versar. |
| Page | 6 | Versar, Inc. 2015 Proxy Statement |
PROPOSAL NO.1 – ELECTION OF DIRECTORS
| Anthony L. Otten |
2008 to the present |
 |
Chief Executive
Officer of Versar since February 2010; Director of Orion Energy Systems, Inc. since August 2015; Managing Member of Stillwater,
LLC from July 2009 to February 2010; Director of New Stream Capital, LLC and Operating Partner of New Stream Asset Funding, LLC
from 2007 to June 2009; Managing Member of Stillwater, LLC from 2004 to 2007; Principal of Grisanti, Galef and Goldress, Inc.
from 2001 to 2004. Age 59. |
Mr. Otten, as Chief Executive
Officer, brings the perspective and input of the senior management team to the Board discussions. As former chief executive
officer of a number of companies, senior financial manager and entrepreneur, he brings a strategic vision with practical
operating and financial implications to the Board’s discussions. |
| Frederick M. Strader |
2014 to the present |
 |
Business
consultant since 2013. President and Chief Executive Officer of Textron Systems, Inc. from January 2010 to December 2012; Executive
Vice President and Chief Operating Officer of Textron Systems, Inc. from January 2008 to December 2009; President and Chief Executive
Officer of United Industrial Corporation from August 2003 to December 2007; Chief Operating Officer and Executive Vice President
of United Industrial Corporation from 2001 to 2003. Prior to 2001, he spent 21 years at United Defense, L.P. and its former parent,
FMC Corporation, in a variety of finance, strategy, operations and general management positions. Retired U.S. Army Reserve officer
and member of the Army Acquisition Corps. Age 62. |
Mr. Strader’s experience
in government contracting, leadership and management of public companies, and service as a board member provide him with
unique insight and experience for the Board. Mr. Strader is a highly experienced executive who has led several companies
serving the Department of Defense and other government agencies. He also has significant experience in finance and the
government acquisition process which enable him to provide valuable input for Versar’s strategic direction.
| Jeffrey A. Wagonhurst |
2011 to the present |
 |
President and Chief Operating
Officer of Versar since February 2010; Executive Vice President, Program Management Group of Versar from May 2009 to February
2010; Senior Vice President of Versar from September 2006 to May 2009; joined Versar as Army Program Manager in February
1999; retired from government service in May 1997 as a Colonel after a 30 year career with the U.S. Army. Age 67.
Mr. Wagonhurst is an experienced
business executive and leader who brings the perspective and input of Versar’s operational management to the Board’s
discussions. As a long time Versar executive and senior military officer, he brings perspective and insight from Versar’s
largest client, the U.S. Department of Defense.
|
Our Corporate Governance Guidelines
provide that each director nominee must be under the age of 72 at the time of their election to the Board and should not
have served as a director for more fifteen (15) years. However these requirements do not apply to any director who was
serving at the time of adoption of the guidelines in July 1, 2008.
| Page | 7 | Versar, Inc. 2015 Proxy Statement |
CORPORATE GOVERNANCE
Board’s Leadership Structure
The
Board has determined that the positions of Chairman of the Board (“Chairman”) and Chief Executive Officer (“CEO”)
should be held by different persons. In addition, the Board has determined that the Chairman should not be an employee of the
Company. Since July 1, 2000, the Board has been led by an independent non-executive Chairman. Under the Company’s Corporate
Governance Guidelines, the Chairman of the Board is responsible for coordinating the Board’s activities, including the scheduling
of meetings of the full Board, scheduling of executive sessions of the non-employee directors, and setting relevant items on the
Board’s agenda, in consultation with the CEO as necessary. The Board believes that this leadership structure enhances the
Board’s oversight of, and independence from, Company management and has strengthened the ability of the Board to carry out
its roles and responsibilities on behalf of the Stockholders, and the overall corporate governance of the Company. Further, the
Board believes that this structure is a more effective method of monitoring and evaluating the CEO’s performance.
Risk Oversight
Management of risk is the direct responsibility
of the Company’s CEO and the senior management team. The Board has oversight responsibility focusing on key risk management
issues and evaluating the risk mitigation processes.
Versar faces a variety of enterprise risks,
including legislative and regulatory risk, liquidity risk, compliance risk and operational risk. The Board believes that an effective
risk management process will (1) identify in a timely fashion the material risks facing the Company, (2) communicate appropriate
information regarding senior executive management strategies and their associated risks to the Board or relevant Board Committee,
(3) implement appropriate and responsive risk management strategies consistent with the Company’s risk profile, and (4)
integrate risk management into the Company’s decision-making process.
In addition to the formal compliance program,
the Board encourages senior management to promote a corporate culture that incorporates risk management into the Company’s
corporate strategy and daily operations. The Board also continually works, with the input of the Company’s senior management,
to assess and analyze the most likely areas of future risk for the Company. We believe that the Board’s leadership structure,
including strong Board Committee Chairs and open communication between senior management and directors, promotes effective oversight
of Versar’s risk management program.
Committees of the Board of Directors
The Board of Directors of Versar has standing
Executive, Audit, Compensation and Nominating & Governance Committees. The written charters for each Committee may be found
on the Company's website at www.versar.com under Corporate Governance located under the “Investors” tab.
Executive Committee. During fiscal year 2015,
the members of the Executive Committee were Mr. Otten (Chair), Dr. Durfee, Ms. Hoeber, Mr. Hoeper and Mr. Wagonhurst. The primary
duty of the Executive Committee is to act in the Board’s stead when the Board is not in session, during which time the Committee
possesses all the powers of the Board in the management of the business and affairs of the Company, except to undertake any action
that pursuant to applicable law, regulation or listing standard must be performed by the full Board or by another committee of
the Board or which cannot be delegated to a committee of the Board.
| Page | 8 | Versar, Inc. 2015 Proxy Statement |
CORPORATE GOVERNANCE
Audit Committee. The Audit
Committee, which the Board has determined is composed exclusively of non-employee directors who are independent, as defined by
the NYSE MKT LLC (“NYSE MKT”) listing standards and the rules and regulations of the SEC, consisted of Mr. Gallagher
(Chair), Dr. Durfee, Mr. Hoeper and Mr. Strader during fiscal year 2015. The Committee’s primary responsibilities among
other things, are to provide oversight of the Company’s accounting and financial controls, review the scope of and procedures
to be used in the annual audit, review the financial statements and results of the annual audit, and retain, and evaluate the
performance of, the independent accountants and the Company’s financial and accounting personnel. The Board of Directors
has determined that Mr. Strader qualifies as an Audit Committee Financial Expert as such term is defined under Item 407(d)(5)
of Regulation S-K and is independent as noted above.
Compensation Committee. The
Compensation Committee, which the Board has determined is composed exclusively of non-employee directors who are independent,
as defined by the NYSE MKT listing standards and the rules and regulations of the SEC, consisted of Dr. Metry (Chair), Dr. Durfee,
Ms. Hoeber and Mr. Strader during fiscal year 2015. The Committee’s primary responsibilities are to, among other things,
approve the goals and objectives related to executive compensation, review and adjust compensation paid to the CEO and all executive
officers, and administer the Company’s incentive compensation plans, including cash bonus and non-equity incentive plan
compensation, restricted stock and restricted stock units granted under those plans. The Committee also reviews and recommends
to the Board an appropriate compensation program for the Board. The role of executive officers of the Company in determining or
recommending the amount or form of executive compensation is discussed under the caption “Compensation Discussion and Analysis”
beginning on page 16. The Committee has also delegated limited authority to the CEO to determine the compensation arrangements
for some of our non-executive officers.
Nominating & Governance Committee.
The Nominating & Governance Committee, which the Board has determined is composed exclusively of non-employee directors
who are independent in accordance with NYSE MKT listing standards, consisted of Ms. Hoeber (Chair), Mr. Gallagher, Mr. Hoeper
and Dr. Metry during fiscal year 2015. The Committee’s primary responsibilities are to, among other things, review and approve
Board committee charters, conduct assessments of Board performance, develop criteria for Board membership and propose Board members
who meet such criteria for annual election. The Committee also identifies potential Board members to fill vacancies that may occur
between annual stockholder meetings. Stockholders may submit nominees for the Board in writing to the Chair of the Nominating
& Governance Committee at the Company’s Springfield office, care of the Company’s Secretary. The Committee also
develops and implements corporate governance principles and policies.
Board and Committee Meetings; Annual
Meeting Attendance
During
fiscal year 2015, the Board met five (5) times. The Executive Committee met one (1) time. The Audit Committee met six (6) times.
The Compensation Committee met four (4) times. The Nominating & Governance Committee met two (2) times. All directors of the
Company attended at least 75% of all meetings of the Board and committees on which they served. Although, the Company does not
have a policy requiring Board Members to attend the Annual Meeting of Stockholders, all Board members attended the 2014 Annual
Meeting of the Stockholders.
Compensation Committee Interlocks and
Insider Participation
During fiscal year 2015, Dr. Metry, Dr.
Durfee, Ms. Hoeber and Mr. Strader served as members of the Compensation Committee. No reportable relationships or transactions
occurred for such committee members during fiscal year 2015.
| Page | 9 | Versar, Inc. 2015 Proxy Statement |
CORPORATE GOVERNANCE
Director Compensation Fiscal Year
2015
During fiscal year 2015, each of the Company’s
non-employee directors received an annual fee consisting of $8,000 in cash, in addition to a grant of 8,000 shares of restricted
stock which will vest after one year. Each non-employee director was paid an attendance fee of $1,400 in cash for each meeting
of the Board or of its committees for which the director was physically present and $700 in cash for each meeting attended telephonically.
In addition, the Chairs of the Audit, Compensation and Nominating & Governance Committees were paid an additional $6,000 a
year in cash as compensation for increased responsibility and work required in connection with those positions. The non-employee
Chairman of the Board was paid an additional $15,000 in cash and was granted an additional 5,000 shares of restricted stock for
additional responsibilities and efforts on behalf of the Company.
Name (1) | |
Fees Earned
or Paid in
Cash ($) (2) | | |
Stock Awards
($) (3) | | |
Total ($) | |
| Paul J. Hoeper | |
| 39,100 | | |
| 38,610 | | |
| 77,710 | |
| Robert L. Durfee | |
| 26,900 | | |
| 23,760 | | |
| 50,660 | |
| James L. Gallagher | |
| 29,400 | | |
| 23,760 | | |
| 53,160 | |
| Amoretta M. Hoeber | |
| 28,700 | | |
| 23,760 | | |
| 52,460 | |
| Amir A. Metry | |
| 28,700 | | |
| 23,760 | | |
| 52,460 | |
| Frederick M. Strader | |
| 17,100 | | |
| 23,760 | | |
| 40,860 | |
| (1) | Anthony L. Otten and Jeffrey A. Wagonhurst
are not included in this table because as employees of Versar, they receive no extra
compensation for their service as directors. Their compensation for fiscal year 2015
is shown on the Summary Compensation Table included herein on page 23. |
| (2) | Includes all fees earned or paid for
services as a director in fiscal year 2015, including annual retainer, committee or Board
chair fees and meeting fees. |
| (3) | Represents the grant date fair value
of shares of restricted stock granted in fiscal year 2015 which is the amount recognized
for financial reporting purposes in accordance with Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification Topic 718 (“Topic 718”).
In accordance with Topic 718, the grant date fair value of each share of restricted stock
is based on the closing price of Versar's Common Stock on the date of the grant, November
13, 2014 for all stock awards, which was $2.97 per share. Restricted stock awarded to
Directors in fiscal year 2015 vests on November 9, 2015, the day before the first annual
meeting of Stockholders after the date of grant. |
At the end of fiscal year 2015, the non-employee
directors owned the following number of unvested shares of restricted stock:
| NAME | |
Unvested Restricted Stock Awards | |
| Paul J. Hoeper | |
| 13,000 | |
| Robert L. Durfee | |
| 8,000 | |
| James L. Gallagher | |
| 8,000 | |
| Amoretta M. Hoeber | |
| 8,000 | |
| Amir A. Metry | |
| 8,000 | |
| Frederick M. Strader | |
| 8,000 | |
| Page | 10 | Versar, Inc. 2015 Proxy Statement |
CORPORATE GOVERNANCE
Corporate Governance
The Company’s business is managed
by its senior management team under the oversight of the Board. Except for Mr. Otten and Mr. Wagonhurst, no member of the Board
is an employee of the Company. The Board limits membership of the Audit, Compensation and Nominating & Governance Committees
to persons determined to be independent under NYSE MKT listing standards and SEC rules and regulations.
The Board has established Corporate Governance
Guidelines that, along with the charters of the Board’s committees and the Company’s Code of Business Ethics and Conduct,
provide a framework for the governance of the Company. The Corporate Governance Guidelines and committee charters are posted on
the Company's website www.versar.com under Corporate Governance (located under the “Investors” tab). The Board
believes that independent directors must constitute a substantial majority of the Board. Throughout fiscal year 2015, all of the
Board members, except Mr. Otten and Mr. Wagonhurst, met the NYSE MKT and SEC standards for independence. The Board has determined
that all of the following six (6) non-employee directors in fiscal year 2015 are independent directors: Paul J. Hoeper, Robert
L. Durfee, James L. Gallagher, Amoretta M. Hoeber, Amir A. Metry and Frederick M. Strader.
To facilitate continuing director education,
the Company maintains a corporate membership in the National Association of Corporate Directors (NACD). Our Board members continue
to enhance their knowledge of current governance best practices and emerging issues through their participation in both local
and national NACD events and conferences.
Under the Corporate Governance Guidelines,
the Nominating & Governance Committee is responsible for determining which individuals, including existing directors, shall
be submitted to the Board for nomination and to the Stockholders for election as directors. In September 2011, the Board adopted
a written Procedure for Director Nominations by Stockholders. Under this Procedure, Stockholders may recommend an individual for
nomination to the Nominating & Governance Committee by written submission addressed to the Committee care of the Company’s
Secretary, 6850 Versar Center, Springfield, Virginia 22151. The submitting Stockholder must include his or her name, address,
telephone number; the number of Versar shares owned and the time period for which such shares have been held; a statement from
the holder of the shares (usually a broker or bank) verifying the Stockholder’s holdings and a statement from the Stockholder
as to whether the Stockholder has a good faith intention to continue to hold the reported shares through the date of the Company’s
next annual meeting of Stockholders. The nominating Stockholder must also submit certain information concerning the proposed nominee.
The type of information required can be obtained from the Company’s Secretary. Further, the nomination must contain information
describing the relationship, if any, between the proposed nominee and the nominating Stockholder, the Company’s competitors,
customers, and suppliers, and any others with special interests regarding the Company. The nomination must also contain a statement
on the qualifications of the proposed nominee, a statement from the Stockholder regarding whether, in the Stockholder’s
view, the nominee would represent all Stockholders, and the consent by the nominee to be interviewed by the Committee and if nominated
and elected, to serve as a director of the Company. Under this procedure, the recommending Stockholder must submit a recommendation
no later than 120 calendar days prior to the date set forth in the most recent proxy statement for the next contemplated annual
meeting of Stockholders. The Nominating & Governance Committee would evaluate any director candidates proposed by a Stockholder
using the same criteria and process it uses for other potential nominees. The Corporate Governance Guidelines require that director
nominees should possess the highest personal and professional ethics, integrity and values and be committed to representing the
long-term interests of the Stockholders. Each director nominee must have experience in areas relevant and necessary to the Company’s
activities, including leadership experience over an extended period of time, be under the age of 72, and serve on fewer than four
boards of public companies, including Versar.
| Page | 11 | Versar, Inc. 2015 Proxy Statement |
CORPORATE GOVERNANCE
Communications with the Board
Versar has not adopted a formal process
for Stockholder communications with the Board because the Company otherwise tries to ensure that the views of its Stockholders
are heard by the Board or individual directors, as applicable, and that appropriate responses are provided to Stockholders in
a timely manner. Stockholders, employees and other interested parties who desire to communicate directly to the Board, any of
the Board’s Committees, the non-employee directors as a group or any individual director should write to the address below:
Name of Addressee
c/o Company Secretary
Versar, Inc.
6850 Versar Center
Springfield, VA 22151
Related Persons Transactions
The Company does not generally engage
in related party transactions with its directors or executive officers or their affiliates. If a proposed related transaction
arises, the Company will present the transaction to the full Board for its review and approval.
Code of Business Ethics and Conduct
The Company’s Board has adopted
a Code of Business Ethics and Conduct, most recently restated in December 2012, which applies to all directors and employees,
including the Company’s principal executive officer, principal financial officer, principal accounting officer and controller.
The Code of Business Ethics and Conduct is posted on the Company’s web site www.versar.com under Corporate Governance
(located under the “Investors” tab). The Company intends to disclose on its website any amendments or modifications
to the Code of Business Ethics and Conduct and any waivers granted under this Code to its principal executive officer, principal
financial officer, principal accounting officer or controller or persons performing similar functions. In fiscal year 2015 and
through the date of this Proxy Statement, no such waivers have been requested or granted.
| Page | 12 | Versar, Inc. 2015 Proxy Statement |
STOCK OWNERSHIP INFORMATION
Stock Ownership of Certain Beneficial
Owners
The table below sets forth, as of September
3, 2015, the only persons known by the Company to be the beneficial owners of more than 5% of the outstanding shares of Common
Stock.
Name and Address of Beneficial Owner | |
Amount and Nature of
Beneficial Ownership | | |
Percent of Class of
Stock | |
Ariel Investments, LLC (1)
200 E. Randolph Drive, Suite 200
Chicago, IL 60601 | |
| 1,684,308 | | |
| 17.16 | % |
Wedbush, Inc. (2)
1000 Wilshire Boulevard
Los Angeles, California 90017 | |
| 679,270 | | |
| 6.92 | % |
Dr. Robert L. Durfee (3)
6850 Versar Center
Springfield, VA 22151 | |
| 614,448 | | |
| 6.26 | % |
Illinois Municipal Retirement Fund (4)
2211 York Road, Suite 500
Oak Brook, IL 60523 | |
| 557,335 | | |
| 5.68 | % |
| (1) | The information with respect to the
shares of Common Stock held by Ariel Investments, LLC (“Ariel”) is based
on a filing made on Schedule 13G/A on May 8, 2015 with the U.S. Securities and Exchange
Commission (SEC) by Ariel. Ariel reports sole voting power as to 1,073,326 shares and
sole dispositive power as to 1,684,308 such shares. |
| (2) | The information with respect to the
shares of Common Stock held by Wedbush, Inc. is based on filings made on Schedule 13G/A
on February 18, 2015 with the SEC by Wedbush, Inc., Edward W. Wedbush and Wedbush Securities,
Inc. (collectively, “Wedbush”) filing as a group. Wedbush reports that
Wedbush, Inc. has sole voting and sole dispositive power as to 171,099 shares.
Edward W. Wedbush has the sole voting and sole dispositive power as to 246,246 shares.
Wedbush Securities, Inc. has sole voting and sole dispositive power as to 77,820 shares. Wedbush,
Inc. has shared voting and dispositive power as to 289,499 shares. Edward W. Wedbush
has shared voting power as to 535,745 and shared dispositive power as to 679,270 shares.
Wedbush Securities, Inc. has shared voting power as to 289,499 shares and shared
dispositive power as to 433,024. |
| (3) | For a description of the nature of
the beneficial ownership of Dr. Durfee, see “Stock Ownership of Directors and Officers”
on page 14. The information with respect to shares of Common Stock held by Dr. Durfee
is based upon filings with the SEC and information supplied by Dr. Durfee. |
| (4) | The information with respect to the
shares of Common Stock held by Illinois Municipal Retirement Fund (“IMRF”)
is based on filings made on Schedule 13G on February 11, 2013 with the SEC by IMRF. IMRF
reports sole voting and shared dispositive power with respect to all such shares. |
| Page | 13 | Versar, Inc. 2015 Proxy Statement |
STOCK OWNERSHIP INFORMATION
Stock Ownership of Directors and Officers
The following table sets forth certain
information regarding the ownership of Versar's Common Stock by the Company’s Directors and each named executive officer
listed in the Summary Compensation Table, each nominee for Director and the Company's Directors and executive officers as a group,
as of September 3, 2015.
| | |
Shares of Common Stock
Beneficially Owned as of
September 3, 2015 (1) | |
| Individual or Group | |
Number | | |
Percent | |
| Paul J. Hoeper | |
| 95,590 | | |
| * | |
| Robert L. Durfee (2) | |
| 614,448 | | |
| 6.26 | % |
| James L. Gallagher | |
| 49,890 | | |
| * | |
| Amoretta M. Hoeber | |
| 48,290 | | |
| * | |
| Amir A. Metry | |
| 57,519 | | |
| * | |
| Anthony L. Otten (3) | |
| 103,253 | | |
| 1.05 | % |
| Frederick M. Strader | |
| 8,000 | | |
| * | |
| Jeffrey A. Wagonhurst (4) | |
| 58,946 | | |
| * | |
| Cynthia A. Downes (5) | |
| 18,416 | | |
| * | |
| Linda M. McKnight | |
| 6,098 | | |
| * | |
| James D. Villa (6) | |
| 9,780 | | |
| * | |
| All directors and executive officers as a group (13 persons) (7) | |
| 1,082,201 | | |
| 11.02 | % |
* = Less than 1%
| (1) | For the purposes of this table, beneficial ownership
has been determined in accordance with the provisions of Rule 13d-3 under the Securities and Exchange Act, as amended, under which,
in general, a person is deemed to be the beneficial owner of a security if he or she has or shares the power to vote or to direct
the voting of the security or the power to dispose or to direct the disposition of the security, or if he or she has the right
to acquire beneficial ownership of the security within 60 days of September 3, 2015. The table includes all unvested shares of
restricted stock and restricted stock units owned by the individual. |
| (2) | Includes 34,000 shares owned by adult
children of Dr. Durfee as to which he shares voting and investment power. |
| (3) | Includes 1,672 restricted stock units
that have not yet vested. Mr. Otten is a Trustee of Versar Inc.’s 401(k) Plan and
as such, he has shared investment power as to 223,880
shares and shared voting power as to 223,880 shares
held by this plan. Mr. Otten disclaims beneficial ownership of the plan shares arising
solely from his position as Trustee, none of which are included in the above table. |
| (4) | Includes 1,337 restricted stock units
that have not yet vested. |
| (5) | Includes 1,183 restricted stock units
that have not yet vested. Ms. Downes is a Trustee of Versar Inc.’s 401(k) Plan
and as such she has shared investment power over 223,880
shares and shared voting power over 223,880
shares held by this plan. Ms. Downes disclaims beneficial ownerships of the plan shares
arising solely from her position as Trustee, none of which are included in the above
table. |
| (6) | Includes 5,625 restricted stock units
that have not yet vested. Mr. Villa is a Trustee of Versar Inc.’s 401(k) Plan and
as such, he has shared investment power as to 223,880
shares and shared voting power as to 223,880 shares
held by this plan. Mr. Villa disclaims beneficial ownership of the plan shares arising
solely from his position as Trustee, none of which are included in the above table. |
| (7) | Excludes shares held by Versar Inc.’s
401(k) Plan as described in notes 3, 5 and 6. Includes restricted stock units that have
not yet vested. |
| Page | 14 | Versar, Inc. 2015 Proxy Statement |
STOCK OWNERSHIP INFORMATION
Section 16(a) Beneficial Ownership
Reporting Compliance
Section 16(a) of the Securities Exchange
Act of 1934 (the “Exchange Act”) requires Versar’s executive officers, directors and persons who beneficially
own more than 10% of Versar’s Common Stock to file initial reports of ownership and reports of changes in ownership with
the SEC. Based solely on Versar’s review of such reports furnished to Versar, Versar believes that all reports required
to be filed by persons subject to Section 16(a) of the Exchange Act, and the rules and regulations thereunder, during fiscal year
2015, were timely filed, except that the Forms 5 for Ms. Downes, Mr. Otten and Mr. Wagonhurst reporting a forfeiture of restricted
stock units were inadvertently filed late.
| Page | 15 | Versar, Inc. 2015 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
Overview
The following Compensation Discussion
and Analysis reviews the executive compensation program, policies, and decisions of the Company’s Compensation Committee
with respect to the Company’s executive officers listed in the Summary Compensation Table below (the “Named Executive
Officers”). For fiscal year 2015, the Named Executive Officers are:
| Name |
|
Position |
| Anthony L. Otten |
|
Chief Executive Officer |
| Jeffrey A. Wagonhurst |
|
President and Chief Operating Officer |
| Cynthia A. Downes |
|
Executive Vice President, Chief Financial
Officer and Treasurer |
| Linda M. McKnight |
|
Senior Vice President, Business Development |
| Jeffrey M. Moran |
|
Senior Vice President, Environmental
Services Group
(ceased employment on June 1,
2015) |
| James D. Villa |
|
Senior Vice President, General Counsel
and Chief Compliance Officer |
Executive Compensation Philosophies
and Policies
The compensation philosophy of the Compensation
Committee (the “Committee”) is built on the principles of pay for performance, stock ownership and alignment of management
interests with the long-term interest of the Stockholders. The Committee’s executive compensation policies are designed
to provide competitive levels of compensation that integrate pay with performance, recognize individual initiative and achievements
and assist the Company in attracting and retaining qualified executive officers. The target levels of new executive officers’
overall compensation are intended to be consistent with compensation in the professional services industry for similar executives.
For current executive officers, the Committee focuses on providing significant incentive compensation to drive the Company’s
performance, instead of annual salary increases, except as required in the case of misaligned salary levels or as deemed necessary
following review of the executives’ overall compensation packages in light of surveys of executive compensation at similar
companies in the professional services industry conducted by the Committee’s compensation consultant. In addition, the Committee
seeks to establish a clear and transparent executive compensation process that reflects the understanding, input and decision
factors that make the compensation and incentive system a valuable tool to increase Stockholder value.
The Company’s executive compensation
program includes three components:
| · | Base
Salary – Salaries are based on those paid to other executives in the professional
services industry as determined based on information provided by the Committee’s
compensation consultant, as described below. |
| · | Long-Term
Equity Incentive Awards – The purpose of this element of the Company’s executive
compensation program is to link the Company’s most senior managers’ compensation
with the long-term interests of the Company’s Stockholders, as well as the performance
of the Company in a single fiscal year. Long-term incentive awards are granted to named
executive officers and other employees usually in the form of restricted stock or restricted
stock units from a pool established under an incentive pay for performance plan at the
beginning of each fiscal year by the Committee as discussed below, and the Committee
bases its decision to grant such awards if a pool is established on the individual’s
performance and potential to contribute to the creation of stockholder value. In February
2015, the Committee approved a Long-Term Incentive Compensation Program under which long-term
incentive awards in the form of restricted stock units will be granted to the Company’s
Chief Executive Officer, President/Chief Operating Officer and Chief Financial Officer
based on achievement of certain defined growth in diluted earnings per share each year.
The Long-Term Incentive Compensation Program is effective from fiscal year 2015 until
2017. The Company had a similar program that operated for fiscal years 2011 through 2014. |
| Page | 16 | Versar, Inc. 2015 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
| · | Non-Equity
Incentive Plan Compensation – Non-equity incentive plan compensation is paid in
cash pursuant to the above-noted incentive pay for performance plan and seeks to reward
performance achieved during the applicable fiscal year. This pay for performance incentive
plan balances the short-term and long-term needs of the Company. Under the non-equity
incentive plan compensation element of the plan, a cash incentive pool is created each
fiscal year upon the Company’s attainment of certain financial targets set by the
Board. If the Company meets the targets, the Committee then determines the allocation
of a pre-determined portion of the cash incentive pool among the executive officers based
on each executive officer’s position and individual contribution to the Company’s
performance. Each executive officer’s performance is measured against financial,
profitability, growth, strategic and operational goals consistent with the Company’s
business plan. For the immediate future, greater emphasis is focused on the short-term
well-being of Versar in determining the allocation of cash awards to executive officers. |
Impact of 2014 "Say on Pay"
Advisory Vote.
We
provided our stockholders with an advisory "say on pay" vote on the compensation of our named executive officers at
our 2014 Annual Meeting of Stockholders. We received approximately 89.8% support in such vote. The Compensation Committee evaluated
the results of this vote when making the determinations described herein and, as a result, the Compensation Committee has continued
to apply substantially similar effective principles and philosophy it has used in previous years in determining executive compensation
and made no material changes in fiscal year 2015. The Compensation Committee will continue to consider stockholder concerns and
feedback in the future.
Incentive Compensation Philosophy
and Policies
Incentive Compensation Pay For Performance
Plan
The Committee annually establishes a company-wide
Incentive Compensation Pay For Performance Plan (“Incentive Plan”) at its first meeting held during the fiscal year.
The Incentive Plan is based on a set of general principles that apply to all elements of compensation and establish the rules
for awarding non-equity incentive plan compensation and stock-based compensation. The Incentive Plan consists of two parts: the
first part is a written Incentive Compensation Plan, which was adopted in September 2010 and, the second part consists of annual
general principles and guidelines for incentive compensation, including performance criteria, defined incentive groups and the
target percentages of the pool to be allocated to each group for the fiscal year. The guidelines applicable to all elements of
the Company’s compensation and that apply directly to the Incentive Plan each year include:
| · | The
senior management team’s compensation is linked to Versar’s profitability,
growth and strategic position; |
| · | The
Incentive Plan’s key concept, pay for performance, balances short-term needs and
long-term goals of the Company and the senior management team; |
| · | The
Pay For Performance concept is applicable to all elements of compensation, including
base salary and merit increases, non-equity incentive plan compensation and restricted
stock awards; |
| · | The
Incentive Plan is simple, rational, consistent and based on agreed-upon measurable parameters; |
| · | The
Incentive Plan is based upon the Company’s achievement of certain levels of pre-tax
income; and |
| Page | 17 | Versar, Inc. 2015 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
| · | The
Incentive Plan is driven by a combination of metrics, depending on the level of management.
The intent is that all levels of management have a significant portion of their compensation
tied to the Company’s performance. |
For fiscal year 2015, the Committee determined
that individual Incentive Plan awards would be based 30% to 60% on financial goals emphasizing the short-term well-being of Versar
and 40% to 70% upon meeting strategic growth and sustainability goals of Versar over a longer period.
Restricted Stock Awards. Awards
of restricted stock or restricted stock units (“restricted stock”) take into account both past performance and the
need to provide the executive officers, other managers and key employees with incentives to drive future performance of the Company.
Restricted stock is also used as an incentive for future performance, in particular for new key employees, and long-term retention
and commitment to the Company’s future. Restricted stock awards are currently made under the Company’s 2010 Stock
Incentive Plan. While this Plan allows the use of stock options and other forms of stock-based awards, the Committee has determined
that all awards will currently be in the form of restricted stock and restricted stock units, because restricted stock provides
an opportunity to tie employees’ incentives to the growth of Stockholder value, while potentially having less of an impact
from an accounting standpoint on the earnings of the Company than stock options.
In the fiscal year 2015 Incentive Plan,
the number of restricted shares available for award was based on the same measure used to establish the size of the cash bonus
pool, subject to a minimum and maximum award range. For fiscal year 2015, the minimum pool for restricted stock awards was set
at 25,000 shares and the maximum pool was 150,000 shares. Shares of restricted stock are awarded from the pool in the discretion
of the Compensation Committee. The Incentive Plan for fiscal year 2016 follows the same format as the previous year, and the minimum
pool will be 25,000 shares and the maximum pool will be 150,000 shares.
Non-Equity Incentive Plan Compensation.
Under the Incentive Plan, if the Company meets the minimum pre-tax income targets set in advance by the Board, then a non-equity
incentive plan compensation pool is created. For fiscal year 2015, the Board set the sole criteria for the creation of the non-equity
incentive plan compensation pool as the Company’s pre-tax income. The minimum goal for fiscal year 2015 was $3.1 million
in pre-tax income, with a non-equity incentive plan compensation pool of $155,000 at that level. The non-equity incentive plan
compensation pool was designed to increase as pre-tax income reached higher levels so that at $4.7 million of pre-tax income,
a $1.2 million non-equity incentive plan compensation pool would be created. For fiscal year 2016, the Board has again adopted
a pre-tax income target for the non-equity incentive plan compensation pool. At this time, the Company believes that disclosure
of the fiscal year 2016 pre-tax income target could cause competitive harm to the Company’s business. The Company believes
that the fiscal year 2016 target is attainable, but will be challenging to achieve. The target depends on increasing net income
in what continues to be a very competitive U.S. government services market.
The fiscal year 2015 non-equity incentive
plan compensation pool was divided into six (6) levels: Executive Team, Senior Vice Presidents, Vice Presidents, Directors, Supervisors
below Director Level and Non-Supervisors. There are varying percentages of participation by each group. If the Named Executive
Officers and other senior managers are entitled to non-equity incentive plan compensation, the Committee will determine the allocation
of non-equity incentive plan compensation among the named executive officers and other senior managers from the pools established
for each category of employee, based on each executive officer’s or manager’s position, contribution to the Company
including the achievement of established performance goals, and information regarding mid-range bonuses paid by others in the
professional services industry based on information provided by its compensation consultant discussed below. The Incentive Plan
for fiscal year 2016 also divides the incentive groups into six (6) levels: Executive Team, Senior Vice Presidents, Vice Presidents,
Directors, Supervisors below Director Level and Non-Supervisors.
| Page | 18 | Versar, Inc. 2015 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
Long-Term Incentive Compensation Program
On February 3, 2015, the Committee approved
the Versar, Inc. 2015 Long-Term Incentive Compensation Program (the “LTICP”) adopted under the Company’s 2010
Stock Incentive Plan (the “2010 Plan”). The LTICP was effective as of June 28, 2014. The LTICP provides for the creation
for each of fiscal years 2015, 2016 and 2017 of a performance pool equal to 30% of the amount by which the Company’s diluted
earnings per share exceeds any fiscal year’s target diluted earnings per share (which was $0.299 for the 2015 Performance
Period and will be $0.329 for the 2016 Performance Period and $0.362 for the 2017 Performance Period), times the weighted average
number of shares of the Company’s common stock outstanding, on a diluted basis (the “LTICP Pool”). The LTICP
Pool shall in no event be less than zero for any fiscal year.
In any year that an LTICP Pool is created,
each participant in the LTICP shall receive a restricted stock award pursuant to the 2010 Plan. The number of shares of restricted
stock received by each participant will be calculated by multiplying the LTICP Pool by each participant’s designated percentage
and then dividing the result by the fair market value of the Company’s common stock on the last day of the fiscal year to
which the award relates. Each participant must be employed by the Company on the date the award amounts are determined in order
to be eligible to receive an award, except as specified by the LTICP. The participants in the LTICP are the Company’s Chief
Executive Officer, President/Chief Operating Officer and Chief Financial Officer, and their participation percentages are 60%,
25% and 15%, respectively, subject to change by the Compensation Committee for any fiscal year.
One third of the restricted shares granted
from the LTICP Pool will vest immediately following the September Compensation Committee meeting at which such award is confirmed,
and the remaining restricted shares will vest in equal proportions on the first and second anniversaries of the valuation date
applicable to the restricted share award. Such restricted stock shall be forfeited if employment is terminated prior to vesting
upon the terms set forth in the award agreement. Any unvested restricted shares will be subject to accelerated vesting if the
Company’s Board of Directors determines in its discretion that the award recipients have complied with the terms of and
objectives as set forth in the LTICP. Further, vesting will be suspended in any year in which the LTICP Pool is equal to zero
or, in periods following fiscal year 2017, if the Company fails to achieve the performance measures then established for that
fiscal year. If in a succeeding performance period, as defined by the LTICP, an LTICP Pool is created, the previously suspended
restricted stock awards will vest. Participation in the LTICP will generally cease upon termination of a participant’s service
with the Company provided that if a participant’s service with the Company is terminated without cause, or by the participant
for good reason, or as a result of retirement, death or disability after the end of a fiscal year but before the receipt of restricted
shares under the LTICP has been determined, such participant will continue to participate and receive restricted shares from the
LTICP Pool for the then completed fiscal year as if a continuing employee of the Company at that time. Upon a Change in Control,
as defined by the 2010 Plan, all participation in the LTICP will cease and no further awards will occur. However, upon a Change
in Control, any unvested restricted shares previously granted pursuant to the LTICP will immediately vest.
Compensation Process
Incentive Compensation Pay For Performance
Plan
As noted above, in establishing the annual
Incentive Plan, the Committee annually reviews the overall compensation of senior management, as well as the size and composition
of the non-equity portion and stock-based award portion of the Incentive Plan at the beginning of each fiscal year.
| Page | 19 | Versar, Inc. 2015 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
At the same time, the Committee gathers
data regarding the Company’s performance during the immediately preceding fiscal year to determine the awards to be made
under the Incentive Plan for that then completed fiscal year.
In making its compensation decisions,
the Committee has historically, and again in fiscal year 2015, engaged the services of Steve Parker of HR-3D Solutions, a compensation
consulting firm. Annually, Mr. Parker compiles information from publicly available compensation surveys and benchmarks, including
those prepared by Towers Watson, Radford Surveys + Consulting, and Culpepper and Associates, Inc., regarding companies in the
professional services industry. The compilation prepared by Mr. Parker for fiscal 2015 included compensation data for different
executive levels of professional services companies of various sizes and in various geographic locations, but did not include
the names of the individual companies used to compile the survey data. The publicly available compensation surveys and benchmarks
used to prepare the compilation were chosen by Mr. Parker based on general direction from the Committee. Under the direction of
Dr. Metry, Mr. Parker provided detailed information by type of executive position for fiscal year 2015 focused on professional
service companies with revenues in a range similar to that achieved by Versar over the same period. The compilation included an
average of the mid-range of salaries and bonus percentages for the various executive levels within the professional services industry.
In making compensation decisions, the Committee’s goal is to over time provide for executives’ salaries and bonuses
within the mid-range averages shown by the compilation.
The Committee also takes into account
the accounting and tax impact to the Company of the proposed compensation. Section 162(m) of the Internal Revenue Code has not
been a relevant factor in the Committee’s compensation decisions to date, because the levels of compensation historically
paid to the executive officers have been substantially below the $1 million threshold set forth in Section 162(m). If the Committee
were to consider compensation increases sufficient to reach this threshold, it would seek advice regarding application and impact
of Section 162(m). In setting compensation, the Committee also considers ways to minimize the adverse tax consequences from the
impact of Section 409A of the Internal Revenue Code. If an executive officer is entitled to nonqualified deferred compensation
benefits, as defined by and subject to Section 409A, and such benefits do not comply with Section 409A, the executive
officer would be subject to adverse tax treatment (including accelerated income recognition in the first year that benefits are
no longer subject to a substantial risk of forfeiture) and a 20% penalty tax. Versar’s compensation plans and programs are,
in general, designed to comply with the requirements of Section 409A so as to avoid possible adverse tax consequences.
Long-Term Incentive Compensation Program
The Committee annually reviews the LTICP
in order to determine if the calculation of the LTICP Pool and the vesting schedule of awards, remain appropriate, and to determine
if the participants in the pool and their respective participation percentages should be modified. Otherwise, as the process in
which awards are granted under the terms of the LTICP is fixed pursuant to the terms of the LTICP, the Committee has no further
discretion with respect to awards under the LTICP.
Compensation Decisions
Base Salary
For current executive officers, the Committee
intends to focus on providing significant incentive compensation to drive the Company’s performance rather than on annual
salary increases, except as required in the case of misaligned salary levels or as deemed necessary following review of the executives’
overall compensation packages in light of surveys conducted by Mr. Parker of executive compensation at similar companies in the
professional services industry. Based on the executive compensation analysis and survey, Mr. Parker found that the salaries of
the Company’s Chief Executive Officer and Chief Operating Officer were below industry standard.
| Page | 20 | Versar, Inc. 2015 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
Effective May 4, 2015, after giving consideration
to the executive compensation analysis and compensation survey, the Committee approved (i) a base salary increase for Anthony
L. Otten, the Company’s Chief Executive Officer, from $325,000 to $375,000; and (ii) a base salary increase for Jeffrey
A. Wagonhurst, the Company’s President and Chief Operating Officer, from $260,000 to $270,000, to align their respective
salaries within the middle range of those executive officers occupying the same position within the same industry.
Stock Based Awards
Restricted stock or restricted stock units
may be awarded to executive officers pursuant to the terms of the annual Incentive Plan and the LTICP if the specified criteria
are met. In fiscal year 2015, the Company did not achieve the targets necessary to trigger the award of restricted stock or restricted
stock units under the 2015 Incentive Plan and the LTICP. Thus, no awards were made to the Named Executive Officers for fiscal
year 2015. Further, no stock awards were made to the Named Executive Officers during fiscal year 2015 in recognition of prior
years’ performance.
Non-Equity Incentive Plan Compensation
In fiscal year 2015, the Company did not
achieve the targets necessary to trigger the accrual of a bonus pool under the 2015 Incentive Plan. Thus, no non-equity incentive
plan compensation was paid to the named executive officers for fiscal year 2015.
Separation of Mr. Moran
On June 11, 2015, Jeffrey Moran, the former
Senior Vice President of the Environmental Services Group, and Versar entered into a Separation Agreement and General Release
providing for the termination of Mr. Moran’s employment with Versar effective June 1, 2015.
Pursuant to the Separation Agreement and
General Release, Mr. Moran was paid all salary earned through and including June 1, 2015 and all accrued but unused personal leave
as of the separation date, up to a cap of 200 hours, as well as other accrued leave, less any applicable taxes and deductions.
Further, Versar paid Mr. Moran a lump sum payment in an amount equal to $51,154, less any withholding and other taxes required
by law, as severance. Pursuant to the Separation Agreement and General Release, Mr. Moran also provided a general release to the
Company of any and all claims, demands and liabilities relating to Mr. Moran’s employment by Versar. The Separation Agreement
and General Release also contains non-disclosure and non-solicitation covenants.
| Page | 21 | Versar, Inc. 2015 Proxy Statement |
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed
and had the opportunity to discuss the Compensation Discussion and Analysis with management. Based on this review, the Compensation
Committee recommends to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement
and incorporated by reference in the Company’s Annual Report on Form 10-K.
Compensation Committee of the Board of
Directors:
Dr. Amir A. Metry, Chair
Dr. Robert L. Durfee
Amoretta M. Hoeber
Frederick M. Strader
| Page | 22 | Versar, Inc. 2015 Proxy Statement |
COMPENSATION TABLES
Summary Compensation Table
The following table presents compensation
information earned by the Company’s Principal Executive Officer, Principal Financial Officer, each of the Company’s
three other most highly compensated executive officers during the fiscal year ended June 26, 2015 and one additional former executive
officer who would have been one of the most highly compensated had he remained with the Company through the end of fiscal year
2015. We refer to these executive officers as our Named Executive Officers in this Proxy Statement.
Name and Principal
Position |
|
Year |
|
|
Salary
($)(1) |
|
|
Bonus
($) |
|
|
Stock
Awards
($)(2) |
|
|
Non-Equity
Incentive Plan
Compensation
($)(3) |
|
|
All Other
Compensation
($)(4) |
|
|
Total
($) |
|
Anthony L. Otten
Chief Executive Officer |
|
|
2015 |
|
|
|
331,068 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
20,196 |
|
|
|
351,264 |
|
| |
|
2014 |
|
|
|
325,000 |
|
|
|
- |
|
|
|
16,252 |
|
|
|
- |
|
|
|
16,802 |
|
|
|
358,054 |
|
| |
|
2013 |
|
|
|
307,692 |
|
|
|
- |
|
|
|
158,114 |
|
|
|
- |
|
|
|
24,659 |
|
|
|
490,465 |
|
Jeffrey A. Wagonhurst
President and Chief Operating Officer |
|
|
2015 |
|
|
|
261,154 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
19,390 |
|
|
|
280,544 |
|
| |
|
2014 |
|
|
|
263,285 |
(5) |
|
|
- |
|
|
|
13,000 |
|
|
|
- |
|
|
|
17,422 |
|
|
|
293,707 |
|
| |
|
2013 |
|
|
|
253,076 |
|
|
|
- |
|
|
|
73,581 |
|
|
|
|
|
|
|
21,257 |
|
|
|
347,914 |
|
Cynthia A. Downes
Executive Vice President and Chief Financial Officer |
|
|
2015 |
|
|
|
230,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
14,723 |
|
|
|
244,724 |
|
| |
|
2014 |
|
|
|
230,000 |
|
|
|
- |
|
|
|
11,499 |
|
|
|
- |
|
|
|
64,836 |
(6) |
|
|
306,335 |
|
| |
|
2013 |
|
|
|
223,077 |
|
|
|
- |
|
|
|
53,388 |
|
|
|
- |
|
|
|
58,641 |
|
|
|
335,106 |
|
Linda M. McKnight
Senior Vice President,
Business Development |
|
|
2015 |
|
|
|
200,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
13,681 |
|
|
|
213,681 |
|
| |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Jeffrey M. Moran (7)
Former Senior Vice President,
Environmental Services Group |
|
|
2015 |
|
|
|
183,748 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
81,435 |
(8) |
|
|
265,183 |
|
| |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
James D. Villa
Senior Vice President,
General Counsel and Chief Compliance Officer |
|
|
2015 |
|
|
|
210,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
16,940 |
|
|
|
226,940 |
|
| |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| (1) | Includes regular base salary earnings
in fiscal year 2015, 2014 and 2013. |
| (2) | Represents the fair value of shares
of restricted stock units granted in fiscal years 2015, 2014 and 2013. The reported amounts
represent the grant date fair values of the awards, in accordance with FASB ASC Topic
718. The grant date fair value is determined by multiplying the number of shares granted
by the closing price of the Company's Common Stock on the grant date. |
| (3) | Non-equity incentive plan compensation
amounts represent amounts awarded for performance during the fiscal year and paid after
the fiscal year end. |
| Page | 23 | Versar, Inc. 2015 Proxy Statement |
COMPENSATION TABLES
| (4) | Consists of the following: Any severance
payments, payments for accrued personal time off after leaving the Company, Company paid
life insurance, Company paid disability, executive medical reimbursement, and Company
match to employee’s 401(k) Plan contribution and relocation expenses. |
| (5) | Includes $2,500 for payout of accrued
personal time off in excess of 200 hours and $785 for service achievement award |
| (6) | Includes $51,167 for relocation expenses. |
| (7) | Mr. Moran was Senior Vice President
of Environmental Services Group until June 1, 2015. |
| (8) | Includes $13,870 as payment for accrued
personal time off upon resignation and $51,154 as severance payment. |
Grants of Plan Based Awards
| | |
| | |
Estimate Future Payouts Under Non-
Equity Incentive Plan Awards | | |
All Other
Stock
Awards:
Number of
Shares of | | |
Grant Date
Fair Value of
Stock and | |
| Name | |
Grant Date | | |
Threshold ($) | | |
Target ($) | | |
Maximum ($) | | |
Stock or
Units (#) | | |
Option
Awards ($) | |
| Anthony L. Otten | |
| - | | |
| 182,000 | | |
| 227,500 | | |
| - | | |
| 0 | | |
| 0 | |
| Jeffrey A. Wagonhurst | |
| - | | |
| 93,600 | | |
| 117,000 | | |
| - | | |
| 0 | | |
| 0 | |
| Cynthia A. Downes | |
| - | | |
| 82,800 | | |
| 103,500 | | |
| - | | |
| 0 | | |
| 0 | |
| Linda M. McKnight | |
| - | | |
| 56,000 | | |
| 70,000 | | |
| - | | |
| 0 | | |
| 0 | |
| Jeffrey M. Moran | |
| - | | |
| 53,200 | | |
| 66,500 | | |
| - | | |
| 0 | | |
| 0 | |
| James D. Villa | |
| - | | |
| 58,800 | | |
| 73,500 | | |
| - | | |
| 0 | | |
| 0 | |
Outstanding Equity Awards at Fiscal
Year-End
| | |
Option
Awards | | |
Stock
Awards | |
| Name | |
Number
of
Securities
Underlying
Unexercised
Options (#)
Exercisable | | |
Option
Exercise
Price ($) | | |
Option
Expiration
Date | | |
Number
of
Shares or
Units of
Stock That
Have Not
Vested (#) | | |
Market
Value
of Shares or
Units of Stock
That Have Not
Vested ($) | |
| Anthony L. Otten | |
| 0 | | |
| - | | |
| - | | |
| 0 | | |
| 0 | |
| Jeffrey A. Wagonhurst | |
| 0 | | |
| - | | |
| - | | |
| 0 | | |
| 0 | |
| Cynthia A. Downes | |
| 0 | | |
| - | | |
| - | | |
| 0 | | |
| 0 | |
| Linda M. McKnight | |
| 0 | | |
| - | | |
| - | | |
| 0 | | |
| 0 | |
| Jeffrey M. Moran | |
| 0 | | |
| - | | |
| - | | |
| 0 | | |
| 0 | |
| James D. Villa | |
| 0 | | |
| - | | |
| - | | |
| 1,875 | (1) | |
| 7,594 | |
| | |
| | | |
| | | |
| | | |
| 3,750 | (2) | |
| 15,187 | |
| (1) | Represents the remaining unvested
shares from the restricted stock unit award granted on May 7, 2014. The restricted stock
units awarded to Mr. Villa was awarded in connection with his joining the Company. 50%
of the restricted stock units vest on each of the next two anniversaries of the award
date. |
| Page | 24 | Versar, Inc. 2015 Proxy Statement |
COMPENSATION TABLES
| (2) | Represents the remaining unvested
shares from the restricted stock unit award granted on May 7, 2014. The restricted stock
units awarded to Mr. Villa was awarded in connection with his joining the Company. 50%
of the restricted stock units vest on each of the next two anniversaries from the date
the Chief Executive Officer certifies that Mr. Villa has completed certain performance
objectives. |
Stock Vested
| Name | |
Number of Shares
Acquired on Vesting
(#) | | |
Value Realized on Vesting ($)(1) | |
| Anthony L. Otten | |
| 15,000 | (2) | |
| 49,350 | |
| Jeffrey A. Wagonhurst | |
| 7,500 | (2) | |
| 24,675 | |
| Cynthia A. Downes | |
| 6,000 | (2) | |
| 19,740 | |
| Linda M. McKnight | |
| 2,500 | (3) | |
| 9,650 | |
| Jeffrey M. Moran | |
| 977 | (4) | |
| 3,371 | |
| | |
| 2,500 | (2) | |
| 8,225 | |
| James D. Villa | |
| 1,875 | (5) | |
| 7,237 | |
| (1) | Calculated by multiplying the number
of shares by the fair market value of the Company’s Common Stock (based on the
closing price for the Common Stock on the NYSE MKT) on the date of vesting. |
| (2) | Represents the shares that vested
on September 5, 2014 from the restricted stock unit award granted on September 5, 2012. |
| (3) | Represents the shares that vested
on May 7, 2015 from the restricted stock unit award granted on May 7, 2013. |
| (4) | Represents the shares that vested
on August 27, 2014 from the restricted stock unit award granted on August 27, 2013. |
| (5) | Represents the shares that vested
on May 7, 2015 from the restricted stock unit award granted on May 7, 2014. |
| Page | 25 | Versar, Inc. 2015 Proxy Statement |
CHANGE IN CONTROL AGREEMENTS
On September 13, 2013, the Company entered
into a change in control severance agreement with each of Mr. Otten, Mr. Wagonhurst, Ms. Downes and Ms. McKnight. On May 12, 2014,
the Company entered into a change in control severance agreement with Mr. Villa. The agreements provide that there is a “change
in control” occurs upon the first of the following events: an acquisition of a controlling interest (defined as 25% or more
of the combined voting power of the Company’s then outstanding securities); if during the term of the agreement, individuals
serving on the board at the time of the agreement, or their approved replacements, cease to constitute a majority of the board;
a merger approval (subject to exceptions listed in the agreement); a sale of all or substantially all of the Company’s assets;
a complete liquidation or dissolution of the Company, or a going private transaction. Except for Mr. Villa whose agreement expires
on May 12, 2016, each of the agreements has a term expiring on September 13, 2015 or the date on which the executive officer ceases
to serve in his or her current position with the Company, in each case prior to the occurrence of a potential change in control
or a change in control, each as defined in the agreement. On September 2, 2015, the Board approved amending the change in control
severance agreements with Mr. Otten, Mr. Wagonhurst, Ms. Downes, Ms. McKnight and Mr. Villa with the term to be extended until
September 13, 2017. If a potential change in control occurs during the term, the termination date is automatically extended to
the later of the existing termination date or the date that is six months from the date of the potential change in control. If
a change in control occurs during the term, the termination date will not apply and the agreement will terminate only on the last
day of the 24th calendar month beginning after the calendar month in which the change in control occurred. Under each of the agreements,
severance benefits are payable to an executive officer if, during the term of the agreement and after a change in control has
occurred, the executive’s employment is terminated by the Company without cause (other than as a result of his death or
disability) or if the executive resigns for good reason (e.g., as a result of change in title, salary reduction, or change
in geographic location). Severance benefits will also be triggered if, after a potential change in control, but before an actual
change in control, the executive’s employment is terminated without cause or the executive resigns for good reason, if the
termination is at the direction of a person who has entered into an agreement with the Company that will result in a change in
control, or the event constituting good reason is at the direction of such a person. Finally, benefits will be triggered if a
successor to the Company fails to assume the agreement. Severance benefits include: (i) a lump sum cash payment equal to two times
the executive’s annual base salary, or, if higher, the annual base salary in effect immediately before the change in control,
potential change in control or good reason event; (ii) a lump sum cash payment equal to two times the higher of the amounts paid
to the executive under any existing bonus or incentive plan in the calendar year preceding the termination of his employment or
the calendar year in which the change in control occurred; (iii) a lump sum payment for any amounts accrued under any other incentive
plan; (iv) a continuation for 24 months of the life, disability and accident benefits the executive was receiving before the end
of his employment; (v) a continuation for 18 months of the health and dental insurance benefits he or she was receiving before
the end of his or her employment; (vi) a lump sum payment of $16,000 in lieu of medical and tax accounting benefits made available
by the Company to its officers; (vii) all unvested options will immediately vest and remain exercisable of the longest period
of time permitted by the applicable stock option plan; and (viii) all unvested restricted stock awards will immediately vest.
Further, the Company provides certain medical benefits to retired executive officers who serve as chief executive officer, president,
executive vice president, senior vice president, corporate vice president, or a Board-elected vice president. A termination following
a change in control will be deemed retirement for purposes of the provision of these medical benefits.
| Page | 26 | Versar, Inc. 2015 Proxy Statement |
CHANGE IN CONTROL AGREEMENTS
The following table estimates and summarizes
potential payments and benefits, other than the benefits ordinarily available to salaried employees, that Mr. Otten would have
received had his employment been terminated on the last day of fiscal year 2015 under the circumstances described below.
| | |
Salary
$ | | |
Bonus
$ | | |
Benefits
$(1) | |
| Termination or resignation following a change of control | |
| 750,000 | | |
| 0 | | |
| 37,694 | |
| Termination or resignation following a potential change of control | |
| 750,000 | | |
| 0 | | |
| 37,694 | |
| Successor fails to assume the contract | |
| 750,000 | | |
| 0 | | |
| 37,694 | |
| (1) | Payment for benefit costs paid by
the Company on behalf of Mr. Otten that are not generally available to other employees
for insurance and medical benefits calculated based on current applicable premiums. |
The following table estimates and summarizes
potential payments and benefits, other than the benefits ordinarily available to salaried employees, that Mr. Wagonhurst would
have received had his employment been terminated on the last day of fiscal year 2015 under the circumstances described below.
| | |
Salary
$ | | |
Bonus
$ | | |
Benefits
$(1) | |
| Termination or resignation following a change of control | |
| 540,000 | | |
| 0 | | |
| 31,334 | |
| Termination or resignation following a potential change of control | |
| 540,000 | | |
| 0 | | |
| 31,334 | |
| Successor fails to assume the contract | |
| 540,000 | | |
| 0 | | |
| 31,334 | |
| (1) | Payment for benefit costs paid by
the Company on behalf of Mr. Wagonhurst that are not generally available to other employees
for insurance and medical benefits calculated based on current applicable premiums. |
The following table estimates and summarizes
potential payments and benefits, other than the benefits ordinarily available to salaried employees, that Ms. Downes would have
received had her employment been terminated on the last day of fiscal year 2015 under the circumstances described below.
| | |
Salary
$ | | |
Bonus
$ | | |
Benefits
$(1) | |
| Termination or resignation following a change of control | |
| 460,000 | | |
| 0 | | |
| 31,526 | |
| Termination or resignation following a potential change of control | |
| 460,000 | | |
| 0 | | |
| 31,526 | |
| Successor fails to assume the contract | |
| 460,000 | | |
| 0 | | |
| 31,526 | |
| (1) | Payment for benefit costs paid by the Company on behalf
of Ms. Downes that are not generally available to other employees for insurance and medical benefits calculated based on current
applicable premiums. |
The following table estimates and summarizes
potential payments and benefits, other than the benefits ordinarily available to salaried employees, that Mr. Villa would have
received had his employment been terminated on the last day of fiscal year 2015 under the circumstances described below.
| | |
Salary
$ | | |
Bonus
$ | | |
Benefits
$(1) | |
| Termination or resignation following a change of control | |
| 420,000 | | |
| 0 | | |
| 19,139 | |
| Termination or resignation following a potential change of control | |
| 420,000 | | |
| 0 | | |
| 19,139 | |
| Successor fails to assume the contract | |
| 420,000 | | |
| 0 | | |
| 19,139 | |
| (1) | Payment for benefit costs paid by the Company on behalf
of Mr. Villa that are not generally available to other employees for insurance and medical benefits calculated based on current
applicable premiums. |
| Page | 27 | Versar, Inc. 2015 Proxy Statement |
CHANGE IN CONTROL AGREEMENTS
The following table estimates and summarizes
potential payments and benefits, other than the benefits ordinarily available to salaried employees, that Ms. McKnight would have
received had her employment been terminated on the last day of fiscal year 2015 under the circumstances described below.
| | |
Salary
$ | | |
Bonus
$ | | |
Benefits
$(1) | |
| Termination or resignation following a change of control | |
| 400,000 | | |
| 0 | | |
| 24,816 | |
| Termination or resignation following a potential change of control | |
| 400,000 | | |
| 0 | | |
| 24,816 | |
| Successor fails to assume the contract | |
| 400,000 | | |
| 0 | | |
| 24,816 | |
| (1) | Payment for benefit costs paid by the Company on behalf
of Ms. McKnight that are not generally available to other employees for insurance and medical benefits calculated based on current
applicable premiums. |
| Page | 28 | Versar, Inc. 2015 Proxy Statement |
RISK CONSIDERATIONS
During fiscal year 2015, the Compensation
Committee considered the impact of the Company’s executive compensation policies and practices, and the incentives created
by its policies and practices, on the Company’s risk profile, and concluded that such policies and practices do not motivate
imprudent risk taking. In addition, the Committee periodically reviews all of the Company’s compensation policies and procedures,
including the incentives they create, and factors that may reduce the likelihood of excessive risk taking, to determine whether
they present a significant risk to the Company. In conducting this review, the Committee also reviews the compensation program
for any design features which have been identified by experts as having the potential to encourage excessive risk-taking, including:
| · | excessive
focus on equity; |
| · | compensation
mix overly weighted toward annual incentives; |
| · | highly
leveraged payout curves and uncapped payouts; |
| · | unreasonable
goals and thresholds; and |
| · | steep
payout cliffs at performance levels that may encourage short-term business decisions
to meet payout thresholds. |
In reaching its conclusion, the Committee
identified several design features of its compensation program that reduce the likelihood of excessive risk taking:
| · | the
Company’s program and policies are designed to provide a balanced mix of cash and
restricted equity, annual and longer-term incentives; |
| · | maximum
payout levels for non-equity incentive plan compensation are capped based on a review
of the Company’s economic position and prospects, as well as the compensation offered
by comparable companies; |
| · | the
Committee has discretion to alter, including to reduce, incentive plan payouts or make
discretionary awards; and |
| · | the
Incentive Plan uses pre-tax income as the performance measure for determining incentive
payouts, which encourages executives to take a balanced approach focused on corporate
profitability, rather than other measures, such as revenue targets, which may incentivize
executives to drive sales levels without regard to cost structure. |
| Page | 29 | Versar, Inc. 2015 Proxy Statement |
AUDIT COMMITTEE REPORT AND AUDITOR FEES
In fiscal year 2015, the Board’s
Audit Committee consisted of four (4) non-employee directors, James L. Gallagher (Chair), Dr. Robert L. Durfee, Paul J. Hoeper
and Frederick M. Strader. Each member has been determined to be an independent director under NYSE MKT listing standards and SEC
rules and regulations. Further, the Board determined that Frederick M. Strader was qualified as an Audit Committee Financial Expert.
Pursuant to the Committee’s written charter, the Committee evaluates audit performance, manages the relationship with the
Company’s independent registered public accounting firm, assesses policies and procedures relating to internal controls
and evaluates complaints regarding auditing and accounting matters. This report relates to the activities of the Audit Committee
in carrying out such roles for fiscal year 2015.
The Audit Committee oversees the Company’s
financial reporting process on behalf of the Board of Directors. The Company’s management has the primary responsibility
for the financial statements and reporting process, which includes the Company’s systems for internal financial controls
and other financial statement requirements under the Sarbanes Oxley Act. In carrying out its oversight responsibilities, the Committee
met with management and reviewed with management the audited financial statements included in the Annual Report on Form 10-K for
the fiscal year ended June 26, 2015. This review included a discussion of the quality and acceptability of the Company’s
financial reporting and internal controls, including the reasonableness of significant judgments and the clarity of disclosures
in the consolidated financial statements.
The Committee also reviewed with the Company’s
independent registered public accounting firm, Grant Thornton LLP (“Grant Thornton”), which is responsible for expressing
an opinion on the conformity of the Company’s audited financial statements with generally accepted accounting principles,
its judgments as to the quality and the acceptability of the Company’s financial reporting and such other matters as are
required to be discussed with the Committee under generally accepted auditing standards and Statement on Auditing Standards (SAS)
61. In addition, the Committee received written disclosures and a letter from Grant Thornton required by applicable requirements
of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Committee
concerning independence, and has discussed with Grant Thornton their independence. The Committee meets periodically and as necessary
with Grant Thornton (with Company management present) to discuss the results of its examination, evaluation of the Company’s
internal controls, and the overall quality of the Company’s financial reporting, financial management, accounting and internal
controls. The Committee also meets privately with Grant Thornton (without Company management present) as deemed necessary by the
Committee. In reliance on the reviews and discussions referred to above, the Committee recommended to the Board of Directors that
the audited financial statements be included in the Annual Report on Form 10-K for the fiscal year ended June 26, 2015 for filing
with the SEC.
Under the Committee’s charter and
the requirements of the Sarbanes Oxley Act and Rule 10A-3 adopted by the SEC, the responsibility for the appointment, compensation,
retention and oversight of the work of the Company’s independent registered public accounting firm rests with the Audit
Committee. Based upon a review of Grant Thornton’s qualifications, resources, personnel and performance, the Committee has
selected Grant Thornton as the Company’s independent registered public accounting firm for fiscal year 2016 and is submitting
its decision for Stockholder ratification at the Annual Meeting.
Submitted by the Audit Committee of the
Board of Directors:
James L. Gallagher, Chair
Dr. Robert L. Durfee
Paul J. Hoeper
Frederick M. Strader
| Page | 30 | Versar, Inc. 2015 Proxy Statement |
AUDIT COMMITTEE REPORT AND AUDITOR FEES
Pre-Approval of Independent Auditor
Fees and Services Policy
The Audit Committee has adopted a pre-approval
policy for services and fees by its registered public accounting firm. Pursuant to this policy, the Audit Committee is required
to pre-approve the audit and non-audit services to be performed by the independent registered public accounting firm in order
to assure that the provision of such services does not impair the firm’s independence. The services and estimated fees are
presented to the Audit Committee for consideration in the following categories: Audit, Audit-Related, Tax and All Other (each
as defined in Schedule 14A of the Securities Exchange Act of 1934). All
services by Grant Thornton rendered in fiscal years 2015 and 2014 received prior approval by the Audit Committee. The Committee
expects that all services performed by Grant Thornton in fiscal year 2016 will be subject to pre-approval by the Audit Committee.
Audit Fees
In fiscal years 2015 and 2014, Versar
paid Grant Thornton $291,774 and $281,360, respectively, for quarterly reviews and the annual fiscal year audit. Versar also made
payments of $5,222 and $4,879 in fiscal years 2015 and 2014 to SGV & Co. for audit services in the Philippines.
Versar paid Grant Thornton $23,332 and $36,614 for audit services in the United Kingdom in fiscal year 2015 and 2014.
Audit-Related Fees
Versar paid Grant Thornton $22,575 in
fiscal year 2015 and $137,467 in fiscal year 2014 for audit-related fees for assurance and related services.
Tax Fees
In fiscal years 2015 and 2014, Versar
paid $114,126 and $249,182, respectively, to Grant Thornton for federal and state tax compliance services. Versar paid $0 and
$1,318 in fiscal years 2015 and 2014 to SGV & Co. for tax advisory services in the Philippines.
All Other Fees
In fiscal years 2015 and 2014, Versar
paid $36,987 and $36,815, respectively, to Grant Thornton for various tax consulting, including acquisition accounting
advice. In fiscal year 2015, Versar paid Grant Thornton $11,785 for various tax consulting and stamp duty filings in the United
Kingdom.
| Page | 31 | Versar, Inc. 2015 Proxy Statement |
PROPOSAL NO. 2 – ADVISORY VOTE
ON EXECUTIVE COMPENSATION
In accordance
with the rules of the Securities and Exchange Commission, we are providing Stockholders with a non-binding advisory vote on our
compensation program for our named executive officers. This non-binding advisory vote is commonly referred to as a “say
on pay” vote. The non-binding advisory vote on the compensation program for our named executive officers, as disclosed in
this Proxy Statement, will be determined by the vote of a majority of the voting power of the shares present or represented at
the 2015 Annual Meeting of Stockholders, eligible to vote on this proposal and voting affirmatively or negatively on the proposal.
Stockholders
are urged to read the sections of this Proxy Statement related to executive compensation, including the Compensation Discussion
and Analysis, the Compensation Tables and the related narrative discussions, which discuss how our executive compensation policies
and procedures implement our compensation philosophy and contain tabular information and narrative discussion about the compensation
of our named executive officers. The Compensation Committee and the Board of Directors believe that these policies and procedures
are effective in implementing our compensation philosophy and in achieving our goals. Accordingly, we will ask our Stockholders
to vote “FOR” the following resolution at the Annual Meeting:
“RESOLVED,
that the compensation paid to the Company’s named executive officers, as disclosed in the Company’s Proxy Statement
for the 2015 Annual Meeting of Stockholders pursuant to Item 402 of Regulation S-K, including the Compensation Discussion
and Analysis, the compensation tables and related narrative discussions is hereby APPROVED.”
As an advisory
vote, this proposal is not binding on the Company. However, our Board and Compensation Committee, which is responsible for designing
and administering our executive compensation program, value the opinions expressed by our Stockholders in their vote on this proposal,
and will consider the outcome of the vote when making future compensation decisions for our named executive officers.
THE BOARD
OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL, ON A NON-BINDING ADVISORY BASIS, OF THE COMPENSATION COMMITTEE’S EXECUTIVE
COMPENSATION PHILOSOPHY, POLICIES AND DETERMINATIONS FOR OUR NAMED EXECUTIVE OFFICERS, AS DESCRIBED IN THE “EXECUTIVE COMPENSATION”
SECTION OF THIS PROXY STATEMENT.
| Page | 32 | Versar, Inc. 2015 Proxy Statement |
PROPOSAL NO. 3 – RATIFICATION
OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTANTS
The Audit Committee of the Board of Directors
considers it desirable that its appointment of the firm of Grant Thornton as independent registered public accounting firm of
the Company for fiscal year 2016 be ratified by the Stockholders. Grant Thornton has been the Company’s accounting firm
since 2002. Representatives of Grant Thornton will be present at the Annual Meeting, will be given an opportunity to make a statement
if they so desire, and will be available to respond to appropriate questions from the Stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE "FOR" THE RATIFICATION OF THE APPOINTMENT OF GRANT THORNTON AS THE COMPANY’S INDEPENDENT ACCOUNTING FIRM.
| Page | 33 | Versar, Inc. 2015 Proxy Statement |
2016 ANNUAL MEETING OF THE STOCKHOLDERS
It is presently contemplated that the
2016 Annual Meeting of Stockholders will be held on or about November 15, 2016. In order for any appropriate stockholder proposal,
including proposals for director nominees, to be considered for inclusion in the proxy materials for the 2016 Annual Meeting of
Stockholders, such proposal must be received by the Secretary of the Company no later than May 31, 2016, by certified mail, return
receipt requested and must comply with applicable federal proxy rules. A proposal submitted for consideration at the 2016 Annual
Meeting of Stockholders subsequent to May 31, 2016 shall be considered untimely and will not be included in the Company’s
proxy materials. Further, any proposals for consideration at the 2016 Annual Meeting of Stockholders for which the Company does
not receive notice on or before August 14, 2016 shall be subject to the discretionary vote of the proxy holders at the 2016 Annual
Meeting of Stockholders.
| Page | 34 | Versar, Inc. 2015 Proxy Statement |
OTHER MATTERS
As of the date of this Proxy Statement,
management of the Company has no knowledge of any matters to be presented for consideration at the Annual Meeting other than those
referred to above. If any other matters properly come before the Annual Meeting, the persons named in the accompanying proxy intend
to vote such proxy, to the extent entitled, in accordance with their best judgment.
| |
By Order of the Board of Directors, |
| |
|
| |
 |
| |
James D. Villa |
| |
Secretary |
September 30, 2015
| Page | 35 | Versar, Inc. 2015 Proxy Statement |
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