Page | 1 Versar, Inc. 2016
Proxy Statement
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HOW TO VOTE
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Shareholders of Record
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Street Name Shareholders
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Employee Plan Participants
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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 – Shareholders may vote on the Internet by going to
www.edocumentview.com/vsr
and following the instructions
provided.
By Telephone – Shareholders may vote by calling
1-800-652-8683 (toll-free) and following the recorded
instructions.
By Mail – Shareholders 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.edocumentview.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 June 28,
2017.
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 Shareholders to
attend the Annual Meeting.
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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 Shareholders to attend the Annual
Meeting.
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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 – Shareholders may vote on the Internet by going to
www.edocumentview.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.edocumentview.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 June 28,
2017.
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
Shareholders to attend the Annual Meeting.
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Page | 2 Versar, Inc. 2016
Proxy Statement
Versar, Inc.
6850 Versar Center
Springfield, VA 22151
(703) 750-3000
2016 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 2016 Annual
Meeting of Shareholders (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 Shareholders
under the Securities and Exchange Commission’s Notice and
Access rules. On or about April 19, 2017, Shareholders will receive
a Notice of Internet Availability of Proxy Materials instead of a
paper copy of this Proxy Statement and the 2016 Annual Report. The
Notice contains instructions on how to access those documents and
vote over the Internet and how Shareholders may receive a paper
copy of our proxy materials, including this Proxy Statement, the
2016 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, Shareholders 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 2016 and will answer questions from
Shareholders.
Record Date and Voting Rights
Shareholders
owning Versar’s Common Stock at the close of business on
April 7, 2017 (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 9,952,208 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 that Annual 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. 2016
Proxy Statement
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 Shareholder 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 regular 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 the
out-of-pocket expenses incurred by them.
Page | 4 Versar, Inc. 2016
Proxy Statement
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PROPOSAL NO. 1 – ELECTION OF DIRECTORS
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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 2017 Annual Meeting of Shareholders 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, an event
that management does not anticipate, 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
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 81.
Dr.
Durfee is a highly experienced executive. His prior roles at
Versar, including as one of the Company’s founders and as
President of a subsidiary GEOMET Technologies, LLC, give him unique
insight into the Company’s businesses, particularly those
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 80.
Mr.
Gallagher 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 has provided 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. 2016
Proxy Statement
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PROPOSAL NO. 1 – ELECTION OF DIRECTORS
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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 75.
Ms.
Hoeber’s experience in government contracting, strategic
planning and business development brings a unique perspective to
the core Versar businesses as well as an understanding of the
strategic planning process to advise Versar as it develops its key
business competencies. Her extensive network and membership in
several key U.S. government advisory boards also 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 71.
Mr.
Hoeper’s experience as a merchant banker and senior
Department of Defense official, plus his 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
75.
Dr.
Metry’s prior business experience in the United States and
overseas and 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
includes launching new business and operations in the Middle East,
Europe and the Pacific Rim. Also, 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. 2016
Proxy Statement
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PROPOSAL NO. 1 – ELECTION OF DIRECTORS
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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 61.
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. Director of HDT Global from January
to Sepetember, 2016; 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
64.
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 69.
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 provides a 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. 2016
Proxy Statement
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 coordinates the Board’s activities, including
scheduling of meetings of the full Board, scheduling of executive
sessions of the non-employee directors, and setting the
Board’s agenda in consultation with the CEO. 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 Shareholders, 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, thereby making the CEO more
accountable.
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 enterprise risk management issues and evaluating
the risk mitigation processes established by senior
management.
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
should (1) identify in a timely fashion the material risks facing
the Company, (2) communicate to the Board the relevant information
regarding senior executive management strategies and their
associated risks, (3) implement appropriate and responsive risk
management strategies consistent with the Company’s risk
profile, and (4) integrate risk management throughout the
Company’s decision-making processes.
In
addition to the formal compliance program, the Board and senior
management 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
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.
Executive Committee.
During fiscal 2016, 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
unable to meet due to time constraints. During such times, the
Committee possesses all the powers of the Board in the management
of the business and affairs of the Company, except that the
Committee may not 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.
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 2016. The Committee’s primary
responsibilities, pursuant to a written charter, which is posted on
the Company's website at
www.versar.com
under Corporate Governance (located under the
“Investors” tab), 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.
Page | 8 Versar, Inc. 2016
Proxy Statement
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 2016. The Committee, pursuant to a written charter, which is
posted on the Company’s website at
www.versar.com
under Corporate Governance (located under the
“Investors” tab), among other things, approves goals
and objectives related to executive compensation, reviews and
adjusts compensation paid to the CEO and all executive officers,
and administers 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 the Company’s 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
2016. The Committee, pursuant to a written charter, which is posted
on the Company's website at
www.versar.com
under Corporate Governance (located under the ?Investors? tab),
among other things, reviews and approves Board committee charters,
conducts assessments of Board performance, ensures that directors
remain current with vital continuing education efforts, develops
criteria for Board membership and proposes Board members who meet
such criteria for annual election. The Committee also identifies
potential Board members to fill vacancies that may occur between
annual shareholder meetings. Shareholders 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 2016, the Board met eight (8) times. The Audit Committee met
four (4) times. The Compensation Committee met three (3) 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 Shareholders, all Board members attended the
2015 Annual Meeting.
Compensation Committee Interlocks and Insider
Participation
During
fiscal 2016, 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 2016.
Page | 9 Versar, Inc. 2016
Proxy Statement
Director Compensation Fiscal Year 2016
During
fiscal 2016, each of the Company?s non-employee directors received
an annual fee consisting of $8,000 in cash, plus the grant of 8,500
shares of restricted stock, all of which vest over a one-year
period. 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 $15,000 in cash and was granted an additional 6,000
shares of restricted stock for additional responsibilities and
efforts on behalf of the Company.
|
Name
(1)
|
Fees Earned or Paid in Cash ($) (2)
|
|
|
|
Paul J.
Hoeper
|
39,100
|
40,170
|
79,270
|
|
Robert L.
Durfee
|
26,900
|
24,720
|
51,620
|
|
James L.
Gallagher
|
30,100
|
24,720
|
54,820
|
|
Amoretta M.
Hoeber
|
30,100
|
24,720
|
54,820
|
|
Amir A.
Metry
|
30,100
|
24,720
|
54,820
|
|
Frederick M.
Strader
|
26,200
|
24,720
|
50,920
|
(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 2016 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 2016, 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 2016 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 10, 2015 for all stock awards, which was $3.09 per share.
Restricted stock awarded to Directors in fiscal 2016 vested on
November 14, 2016, the day before the anticipated first annual
meeting of shareholders after the date of grant.
At the
end of fiscal 2016, the non-employee directors owned the following
number of unvested shares of restricted stock:
|
NAME
|
Unvested Restricted Stock Awards
|
|
Paul J.
Hoeper
|
14,500
|
|
Robert
L. Durfee
|
8,500
|
|
James
L. Gallagher
|
8,500
|
|
Amoretta
M. Hoeber
|
8,500
|
|
Amir A.
Metry
|
8,500
|
|
Frederick
M. Strader
|
8,500
|
Page | 10 Versar, Inc. 2016
Proxy Statement
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. The
Board has determined that all of the following six (6) non-employee
directors in fiscal 2016 are independent directors: Paul J. Hoeper,
Robert L. Durfee, James L. Gallagher, Amoretta M. Hoeber, Amir A.
Metry and Frederick M. Strader. Throughout fiscal 2016, all Board
members, except Mr. Otten and Mr. Wagonhurst, met the NYSE MKT and
SEC standards for independence.
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 those
individuals, including existing directors, who shall be submitted
to the Board for nomination and to the Shareholders for election as
directors. In September 2011, the Board adopted a written Procedure
for Director Nominations by Shareholders. Under this Procedure,
Shareholders 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
Shareholder 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 Shareholder?s
holdings and a statement from the Shareholder as to whether the
Shareholder has a good faith intention to continue to hold the
reported shares through the date of the Company?s next annual
meeting of Shareholders. The nominating Shareholder must also
submit certain information concerning the proposed nominee. The
specific 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 Shareholder, the Company?s competitors,
customers, and suppliers, and any others with special interests
regarding the Company. The nomination must also contain details on
the qualifications of the proposed nominee, a statement from the
Shareholder regarding whether, in the Shareholder?s view, the
nominee would represent all Shareholders, 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 Shareholder 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 Shareholders. The Nominating &
Governance Committee will evaluate any director candidates proposed
by a Shareholder using the same criteria and process it uses for
any 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 Shareholders. 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. 2016
Proxy Statement
Communications with the Board
Versar
has not adopted a formal process for shareholder communications
with the Board, as the Company tries to ensure that the views of
its shareholders are heard by the Board or individual directors, as
applicable, and that appropriate responses are provided to
Shareholders in a timely manner. Shareholders, 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 such
a 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 April 2016, that 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 2016 and through the date of this Proxy
Statement, no waivers have been requested or granted.
Page | 12 Versar, Inc. 2016
Proxy Statement
|
STOCK OWNERSHIP INFORMATION
|
Stock Ownership of Certain Beneficial Owners
The
table below sets forth, as of March 1, 2017 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
|
1,765,373
|
17.8
|
|
Wedbush,
Inc. (2)
1000
Wilshire Boulevard
Los
Angeles, California 90017
|
698,514
|
7.00
|
|
Dr.
Robert L. Durfee (3)
6850
Versar Center
Springfield,
VA 22151
|
596,948
|
5.66
|
|
Illinois
Municipal Retirement Fund (4)
2211
York Road, Suite 500
Oak
Brook, IL 60523
|
557,335
|
5.6
|
(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 February 14, 2017 with the U.S. Securities and Exchange
Commission (the “SEC”) by Ariel. Ariel reports sole
voting power as to 1,032,735 shares and sole dispositive power as
to 1,765,373 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 15, 2017 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 218,268 shares. Edward W. Wedbush has the sole voting
and sole dispositive power as to 365,255 shares. Wedbush
Securities, Inc. has sole voting and sole dispositive power as to
zero shares. Wedbush, Inc. has shared voting and dispositive
power as to 218,268 shares. Edward W. Wedbush has shared voting
power as to 583,523 and shared dispositive power as to 698,514
shares. Wedbush Securities, Inc. has shared voting power
as to 218,268 shares and shared dispositive power as to
328,259.
(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. 2016
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 March 1,
2016.
|
Individual or Group
|
Shares of Common Stock Beneficially Owned as of March 1, 2017
(1)
|
|
Number (5)
|
Percent
|
|
Paul J.
Hoeper
|
124,590
|
1.25
|
|
Robert
L. Durfee
|
594,413
|
5.66
|
|
James
L. Gallagher
|
58,390
|
*
|
|
Amoretta
M. Hoeber
|
56,790
|
*
|
|
Amir A.
Metry
|
74,519
|
*
|
|
Anthony
L. Otten (2)
|
119,442
|
1.20
|
|
Frederick
M. Strader
|
25,000
|
*
|
|
Jeffrey
A. Wagonhurst
|
82,346
|
*
|
|
Cynthia
A. Downes (3)
|
33,035
|
*
|
|
James
D. Villa (4)
|
21,180
|
*
|
|
Linda
M. McKnight
|
21,498
|
*
|
|
All
directors and executive officers as a group (11 persons)
(4)
|
1,234,540
|
12.09
|
* =
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. The table includes all unvested shares of
restricted stock and restricted stock units owned by the
individual.
(2) 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.
(3)
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 which are included in the above table.
(4)
Mr. Villa is a
Trustee of Versar Inc.’s 401(k) Plan and as such he has
shared investment power over 223,880 shares and a shared voting
power over 223,880 shares held by this plan. Mr. Villa disclaims
beneficial ownerships of the plan shares arising solely from his
position as Trustee, none of which are included in the above
table.
(5)
Excludes shares
held by Versar Inc.’s 401(k) Plan as described in notes 3 and
5. Includes restricted stock units that have not yet
vested.
Page | 14 Versar, Inc. 2016
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 2016, were timely filed.
Page | 15 Versar, Inc. 2016
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 2016, 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
|
|
James
D. Villa
|
|
Senior
Vice President, General Counsel, Secretary and Chief Compliance
Officer
|
|
Linda
M. McKnight
|
|
Senior
Vice President, Business Development
|
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 Shareholders. 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 aligned with and
benchmarked against compensation in the professional services
industry for similar executives. In addition, the Committee seeks
to provide 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 Shareholder value.
The
Company’s executive compensation program includes three
components:
●
Base Salary –
Salaries are benchmarked against those paid to other executives in
the professional services industry as determined based on
information provided from time to time 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 Shareholders, as well as the performance of the
Company in a single fiscal year. Long-term incentive awards may be
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 and approved by the
Board. 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 Shareholder 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 may be granted to the
Company’s Chief Executive Officer, President/Chief Operating
Officer and Chief Financial Officer based on a formula if the
Company achieves certain defined growth in diluted earnings per
share each year.
The
Long-Term Incentive Compensation Program is
effective from fiscal 2015 through fiscal 2017. The Company had a
similar program that operated for fiscal 2011 through
2014.
Page | 16 Versar, Inc. 2016
Proxy Statement
●
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 recommended 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 2015 “Say on Pay” Advisory Vote.
We provided our
shareholders with an advisory “say on pay” vote on the
compensation of our named executive officers at our 2015 Annual
Meeting of Shareholders. We received approximately 83.6% 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 2016. The Compensation Committee
will continue to consider shareholder 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 program 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
●
The Incentive Plan
is driven by a combination of metrics, depending on the level of
management. The intent is that all levels of senior management have
a significant portion of their compensation tied to the
Company’s performance.
Page | 17 Versar, Inc. 2016
Proxy Statement
For
fiscal 2016, the Committee determined that individual Incentive
Plan awards would be based 10% to 60% on financial goals
emphasizing the short-term well-being of Versar and 40% to 90% 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 an incentive to
drive future performance of the Company. Restricted stock is also
used as an incentive for future performance 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
Shareholder value while potentially having less of an impact than
stock options from an accounting standpoint on the earnings of the
Company.
In the
fiscal 2016 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 2016, 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 2017 follows the same format as the previous year, and the
minimum pool will be 25,000 shares and the maximum pool will be
175,000 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 2016, 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 2016
was $4.1 million in pre-tax income, with a non-equity incentive
plan compensation pool of $400,000 at that level. The non-equity
incentive plan compensation pool was designed to increase as
pre-tax income reached higher levels so that at $6.2 million of
pre-tax income, a $1.6 million non-equity incentive plan
compensation pool would be created. An executive officer’s
participation in the pool, if any, is based on achievement of
individually designed performance criteria. For fiscal 2017, 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 2017 pre-tax income target
could cause competitive harm to the Company’s business. While
the Company believed that the fiscal 2017 target was challenging
but attainable when adopted, based on performance to date in fiscal
2017, the Company does not anticipate a bonus pool will be
created.
The
fiscal 2016 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 financial,
strategic direction and leadership 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 2017 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. 2016
Proxy Statement
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 2015,
2016 and 2017 of a performance pool equal to 30% of the amount by
which the Company’s diluted earnings per share exceeds that
fiscal year’s target diluted earnings per share (which will
be $0.299 for the 2015 Performance Period, $0.329 for the 2016
Performance Period and $0.362 for the 2017 Performance Period),
times the weighted average number 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. To the extent that the LTICP Pool is zero in
any fiscal year covered by the LTICP, no LTICP Pool will be created
for the subsequent fiscal year.
In any
year that an LTICP Pool is created, each participant in the LTICP
may 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 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 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. 2016
Proxy Statement
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 2016, engaged the services of Steve Parker of
HR-3D, a compensation consulting firm. Annually, Mr. Parker
compiles information from publicly available compensation surveys
and benchmarks, including those prepared by Willis 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 2016 included
benchmarked 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 whose salary data is utilized 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 2016 focused on professional
service companies with revenues in a range similar to that targeted
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 a particular
range based on averages as supported by the
compilation.
The
Committee also considers 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, such 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
mechanics of the plan, including 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 annual base salary increases, except as
required in the case of misaligned salary levels or as deemed
necessary following review of the executives’ overall
compensation packages supported by surveys conducted by Mr. Parker
of executive compensation at similar companies in the professional
services industry.
After discussion of
survey data included in the Company’s annual executive
compensation analysis with Mr. Parker and consideration of the
Company’s current financial situation, the Committee
determined not to make any changes to base salaries, and has sought
to reduce other prerequisites as appropriate.
Page | 20 Versar, Inc. 2016
Proxy Statement
Stock Based Awards (including Long-Term Incentive Compensation
Program)
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 2016, the Company did not
achieve the targets necessary to trigger the award of restricted
stock or restricted stock units under the 2016 Incentive Plan and
the LTICP.
The Committee did
however approve certain discretionary grants of restricted stock
units to executive officers as set out below.
As was reported
in the Company’s Proxy Statement for its 2015 Annual
Shareholders’ Meeting, 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.
However, on September 1, 2015, after review of the
Company’s overall performance and the efforts made by
management with respect to achieving certain goals of the Company
and in order to provide further incentives for improved performance
in the future, the Committee approved the following grants of
restricted stock units to named executive officers: Mr. Otten,
13,300 shares, Mr. Wagonhurst, 6,700 shares, Ms. Downes,
6,000 shares, Mr. Villa 2,700 shares and Ms. McKnight 2,700
shares. Fifty percent of these restricted stock units vest on each
of the immediately succeeding two anniversaries of the date of
grant until fully vested.
Further, the
Committee approved an additional grant of restricted share units to
each of the named executive officers on February 1, 2016 as
follows: Mr. Otten, 18,000 shares, Mr. Wagonhurst 5,000
shares, Ms. Downes 9,000 shares, Mr. Villa 3,000 shares
and Ms. McKnight 5,000 shares. Fifty percent of these
restricted stock units vest on each of the immediately succeeding
two anniversaries of the date of grant until fully vested Such
grants were made to recognize the contributions of these
individuals and to incent them to continue their performance on
behalf of the Company.
Non-Equity Incentive Plan Compensation
In
fiscal 2016, the Company did not achieve the targets necessary to
trigger the accrual of a bonus pool under the 2016 Incentive Plan.
Thus, no non-equity incentive plan compensation was paid to the
named executive officers for fiscal 2016.
Page | 21 Versar, Inc. 2016
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. 2016
Proxy Statement
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 July 1,
2016, and compared with the two prior years. We refer to these
executive officers as our named executive officers in this Proxy
Statement.
|
Name
and Principal Position
|
|
|
|
|
All
Other
Compensation
($)(3)
|
|
|
Anthony L.
Otten
Chief Executive
Officer
|
|
375,000
|
-
|
84,305
|
36,775
|
496,080
|
|
Anthony L.
Otten
Chief Executive
Officer
|
|
331,068
|
-
|
-
|
20,196
|
351,264
|
|
|
325,000
|
-
|
16,252
|
16,802
|
358,054
|
|
Jeffrey A.
Wagonhurst
President and Chief
Operating Officer
|
|
270,000
|
-
|
32,585
|
30,923
|
339,508
|
|
Jeffrey A.
Wagonhurst
President and Chief
Operating Officer
|
|
261,154
|
-
|
-
|
19,390
|
280,544
|
|
|
263,285
(4)
|
-
|
13,000
|
17,422
|
293,707
|
|
Cynthia A.
Downes
Executive Vice
President and Chief Financial Officer
|
|
230,000
|
-
|
40,170
|
23,161
|
293,331
|
|
Cynthia A.
Downes
Executive Vice
President and Chief Financial Officer
|
|
230,000
|
-
|
-
|
14,723
|
244,724
|
|
|
230,000
|
-
|
11,499
|
13,669
(5)
|
255,168
|
|
James D.
Villa
Senior Vice
President,
General Counsel and
Chief Compliance Officer
|
|
210,000
|
-
|
22,763
|
18,210
|
250,973
|
|
James D.
Villa
Senior Vice
President,
General Counsel and
Chief Compliance Officer
|
|
210,000
|
-
|
-
|
16,940
|
226,940
|
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Linda M.
McKnight
Senior Vice
President,
Business
Development
|
2016
|
200,000
|
-
|
20,385
|
21,271
|
241,656
|
|
Linda M.
McKnight
Senior Vice
President,
Business
Development
|
2015
|
200,000
|
-
|
-
|
13,681
|
213,681
|
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
(1)
Includes regular
base salary earnings for fiscal 2016, 2015 and 2014.
(2) Amounts
shown are the aggregate grant date fair value of time-based
restricted stock unit awards computed in accordance with FASB ASC
Topic 718.
(3)
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.
(4)
Includes $2,500 for
payout of personal time off in excess of 200 hours and $785 for
service achievement
(5)
As previously
reported included $51,167 for relocation expenses which actually
were paid in a prior year.
Page | 23 Versar, Inc. 2016
Proxy Statement
Grants of Plan Based Awards
|
|
Estimate
Future Payouts Under Non-Equity Incentive Plan Awards
(1)
|
|
|
|
Name
|
|
|
|
|
All
Other Stock Awards: Number of Shares of Stock or Units
|
Grant
Date Fair Value of Stock and Option Awards ($)(2)
|
|
Anthony L.
Otten
|
(2
)
|
210,000
|
262,500
|
450,000
|
|
|
|
|
|
|
|
13,300
|
40,565
|
|
|
|
|
|
18,000
|
43,740
|
|
Jeffrey A.
Wagonhurst
|
(2
)
|
108,000
|
135,000
|
162,000
|
|
|
|
|
|
|
|
6,700
|
20,435
|
|
|
|
|
|
5,000
|
12,150
|
|
Cynthia A.
Downes
|
(2
)
|
82,800
|
103,500
|
124,200
|
|
|
|
|
|
|
|
6,000
|
18,300
|
|
|
|
|
|
9,000
|
21,870
|
|
James D.
Villa
|
(2
)
|
58,800
|
73,500
|
88,200
|
|
|
|
|
|
|
|
2,700
|
8,235
|
|
|
|
|
|
3,000
|
7,290
|
|
Linda M.
McKnight
|
(2
)
|
56,000
|
70,000
|
84,000
|
|
|
|
|
|
|
|
2,700
|
8,235
|
|
|
|
|
|
5,000
|
12,150
|
(1)
Amounts represent the
threshold (payment made if performance criteria met at 80% level
for fiscal year), target (payment made if the performance criteria
are met for the fiscal year) and maximum payouts (payment made if
the performance criteria are exceeded for the fiscal year) under
the 2016 Incentive Plan. No amounts were earned by the Named
Executive Officers during fiscal 2016 as the performance criteria
was not achieved at the minimum level.
(2)
The amounts in this
column do not represent amounts the named executive officers
received or are entitled to receive. Rather, the reported amounts
represent the grant date fair values of the awards. The grant date
fair value is determined in accordance with FASB ASC Topic 718 by
multiplying the number of shares underlying the units granted by
the closing price of the Company's Common Stock on the grant
date.
Page | 24 Versar, Inc. 2016
Proxy Statement
Outstanding Equity Awards at Fiscal Year-End
|
|
|
|
Name
|
Number
of Securities Underlying Unexercised Options (#)
Exercisable
|
Option
Exercise Price
($)
|
|
Number
of Shares or Units of Stock That Have Not Vested
(#)
|
Market
Value of Shares or Units of Stock That Have Not Vested
($)
|
|
Anthony L.
Otten
|
0
|
-
|
-
|
31,300
|
38,812
|
|
Jeffrey A.
Wagonhurst
|
0
|
-
|
-
|
11,700
|
14,508
|
|
Cynthia A.
Downes
|
0
|
-
|
-
|
15,000
|
18,000
|
|
James D.
Villa
|
0
|
-
|
-
|
7,575
|
9,393
|
|
Linda M.
McKnight
|
0
|
-
|
-
|
7,000
|
9,548
|
(1)
Based on the Fair
Market Value of the Company’s Common Stock (based on the
closing price for the Common Stock on the NYSE MKT) on July 1,
2016.
Stock
Vested
|
Name
|
Number of Shares Acquired on Vesting (#)
|
Value Realized on Vesting ($)(1)
|
|
Anthony
L. Otten
|
6,650
(2)
|
10,706.50
|
|
Jeffrey
A. Wagonhurst
|
3,350
(2)
|
5,393.50
|
|
Cynthia
A. Downes
|
3,000
(2)
|
4,830.00
|
|
James
D. Villa
|
1,350
(2)
|
2,173.50
|
|
Linda
M. McKnight
|
1,350
(2)
|
2,173.50
|
(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 2, 2016 from the restricted stock
unit award granted on September 2, 2015.
Page | 25 Versar, Inc. 2016
Proxy Statement
|
CHANGE IN CONTROL AGREEMENTS
|
On
September 1, 2015, the Company amended the change in controls
severance agreements with Mr. Otten, Mr. Wagonhurst, Ms. Downes,
Ms. McKnight and Mr. Villa and extended the term of the change in
control agreements until September 13, 2017. The agreements provide
that there is a “change in control” upon the occurrence
of 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. 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 following a change in control, 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 (identified 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
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 may provide 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. 2016
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 2016 under the
circumstances described below.
|
|
|
|
|
|
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 2016 under the
circumstances described below.
|
|
|
|
|
|
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 2016 under the
circumstances described below.
|
|
|
|
|
|
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 2016 under the
circumstances described below.
|
|
|
|
|
|
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. 2016
Proxy Statement
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 2016 under the
circumstances described below.
|
|
|
|
|
|
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. 2016
Proxy Statement
During
fiscal 2016, 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 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 benchmarking of compensation offered by
comparable companies; and
●
the
Committee has discretion to alter, including to reduce, incentive
plan payouts or make discretionary awards;
Page | 29 Versar, Inc. 2016
Proxy Statement
|
AUDIT
COMMITTEE REPORT, CHANGE IN AUDITOR AND AUDITORS FEES
|
In
fiscal 2016, 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
2016.
The
Audit Committee oversees the Company’s financial reporting
process on behalf of the Board. 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 regularly 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 July 1, 2016. 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.
On
January 17, 2017, the Company retained Urish Popeck as its
independent registered public accounting firm, to complete the
fiscal 2016 audit. The Committee reviewed with Urish Popeck, which
is responsible for expressing an opinion on the conformity of the
Company’s fiscal 2016 audited financial statements with
generally accepted accounting principles, 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 SAS (Statement on
Auditing Standards) 61. In addition, the Committee received written
disclosures and a letter from Urish Popeck 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 Urish
Popeck its independence. The Committee meets at least quarterly and
further as necessary with Urish Popeck (with Company management
present) to discuss the results of Urish Popeck’s
examinations, its evaluations 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 Urish Popeck (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 July 1, 2016 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 Urish Popeck’s qualifications, resources, personnel
and performance, the Committee has selected Urish Popeck as the
Company’s independent registered public accounting firm for
fiscal 2017 and is submitting its decision for Shareholder
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. 2016
Proxy Statement
Changes in the Company’s Certifying Accountant.
On
January 11, 2017, Grant Thornton LLP (“Grant
Thornton”) informed the Company of its resignation as the
Company’s independent registered public accounting firm,
effective immediately, which was accepted by the Audit Committee on
January 12, 2017.
The
reports of Grant Thornton on the Company’s consolidated
financial statements for the years ended June 26, 2015 and
June 27, 2014 contain no adverse opinion or disclaimer of
opinion, and such reports were not qualified or modified as to
uncertainty, audit scope or accounting principles. Grant Thornton
had not completed it audit of the Company’s financial
statements for the fiscal year ended July 1, 2016 as of the
date of its resignation.
Except
to the extent described below, in connection with Grant
Thornton’s resignation, during the Company’s two most
recent fiscal years and the subsequent interim period through
January 11, 2017, there were (i) no disagreements under
Item 304(a)(1)(iv) of Regulation S-K between the Company
and Grant Thornton on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or
procedure, which, if not resolved to Grant Thornton’s
satisfaction, would have caused Grant Thornton to make reference to
the subject matter of such disagreement in connection with its
report and (ii) no events of the types listed in
paragraphs (A) through (D) of Item 304(a)(1)(c) of
Regulation S-K.
In
connection with its resignation, Grant Thornton indicated that
recent communications from the Company and the Chairman of its
Audit Committee appeared to restrict Grant Thornton’s audit
scope or audit procedures in a manner that was not acceptable to
Grant Thornton. Although the Company and the Audit Committee
Chairman accepted Grant Thornton’s resignation, they do not
agree with Grant Thornton that they were restricting Grant
Thornton’s audit scope or audit procedures. As a result of
Grant Thornton’s resignation, the Company, its Audit
Committee, and Grant Thornton did not resolve their disagreement
over these issues.
The
Company has authorized Grant Thornton to fully respond to the
inquires of any successor accountant concerning the subject matter
of any disagreements.
As
disclosed in the Company’s quarterly report on Form 10-Q
for the quarter ended April 1, 2016, in connection with
preparation of the financial statements for such quarter management
of the Company concluded, after consultation with Grant Thornton,
that a material weakness in internal control over financial
reported existed. The material weakness was disclosed and a
remediation plan developed, which was outlined in the
Company’s Form 10-Q for the quarter ended April 1,
2016.
In
accordance with Item 304(a)(3) of Regulation S-K, the
Company provided Grant Thornton with a copy of this disclosure on
January 13, 2017, requesting Grant Thornton to furnish the
Company with a letter addressed to the Securities and Exchange
Commission stating whether it agrees with the statements contained
herein. A letter from Grant Thornton dated January 18, 2017 is
attached as Exhibit 16.1 to this current report.
On
January 17, 2017, the Audit Committee of the Company’s
Board of Directors retained Urish Popeck as its new independent
registered public accounting firm.
During
the Company’s two most recent fiscal years and the subsequent
interim period through January 17, 2017, neither the Company
nor anyone on its behalf consulted with Urish Popeck with respect
to either (i) the application of accounting principles to a
specified transaction, either completed or proposed, or the type of
audit opinion that might be rendered on the Company’s
consolidated financial statements, and no written report or oral
advice was provided by Urish Popeck to the Company that Urish
Popeck concluded was an important factor considered by the Company
in reaching a decision as to the accounting, auditing or financial
reporting issue, or (ii) any matter that was either the
subject of a disagreement (as defined in Item 304(a)(1)(iv) of
Regulation S-K and the related instructions to that Item) or a
reportable event (as described in Item 304(a)(1)(v) of
Regulation S-K).
Page | 31 Versar, Inc. 2016
Proxy Statement
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 2016 and 2015 received prior
approval by the Audit Committee. The Committee expects that all
services performed by Urish Popeck in fiscal 2017 will be subject
to pre-approval by the Audit Committee.
Audit Fees
In
fiscal 2016 and 2015, Versar paid Grant Thornton $ 400,260 and
$281,360, respectively, for quarterly reviews and the annual fiscal
year audit. Versar also made payments of $9,567 and $4,879 in
fiscal 2016 and 2015
to SGV &
Co. for audit services in the Philippines. Versar paid Grant
Thornton $22,754 and $36,614 for audit services in the United
Kingdom in fiscal 2016 and 2015.
Audit-Related Fees
Versar
paid Grant Thornton $75,953 in fiscal 2016 and $137,467 in fiscal
2015 for audit-related fees for assurance and related
services.
Tax Fees
In
fiscal 2016 and 2015, Versar paid $158,445 and $249,182,
respectively, to Grant Thornton for federal and state tax
compliance services. Versar paid $4,686 and $1,318 in fiscal 2016
and 2015 to SGV & Co. for tax advisory services in the
Philippines.
All Other Fees
In
fiscal 2016 and 2015, Versar paid $25,351 and $36,815,
respectively, to Grant Thornton for various tax consulting,
including acquisition accounting advice. In fiscal 2016, Versar
paid Grant Thornton $4,686 for various tax consulting and stamp
duty filings in the United Kingdom.
Page | 32 Versar, Inc. 2016
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 2016 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 2016 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 | 33 Versar, Inc. 2016
Proxy Statement
PROPOSAL NO. 3 – RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTANTS
PROPOSAL NO. 3 – AMENDMENT AND RESTATEMENT OF THE VERSAR,
INC. 2005 EMPLOYEE STOCK PURCHASE PLAN
The
Audit Committee of the Board of Directors considers it desirable
that its appointment of the firm of Urish Popeck as independent
registered public accounting firm of the Company for fiscal 2017 be
ratified by the Shareholders. Representatives of Urish Popeck 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
Shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF
THE APPOINTMENT OF GRANT THORNTON AS THE COMPANY’S
INDEPENDENT ACCOUNTING FIRM.
Page | 34 Versar, Inc. 2016
Proxy Statement
PROPOSAL NO. 3 – RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTANTS
PROPOSAL NO. 3 – AMENDMENT AND RESTATEMENT OF THE VERSAR,
INC. 2005 EMPLOYEE STOCK PURCHASE PLAN
It is
presently contemplated that the 2017 Annual Meeting of Shareholders
will be held on or about November 15, 2017. In order for any
appropriate Shareholder proposal, including proposals for director
nominees, to be considered for inclusion in the proxy materials for
the 2017 Annual Meeting of Shareholders, it must be received by the
Secretary of the Company no later than August 1, 2017, by
certified mail, return receipt requested and must comply with
applicable federal proxy rules. A proposal submitted for
consideration at the 2017 Annual Meeting of Shareholders subsequent
to August 1, 2017 shall be considered untimely and will not be
included in the Company’s proxy materials. Further, any
proposals for consideration at the 2017 Annual Meeting of
Shareholders for which the Company does not receive notice on or
before August 14, 2017 shall be subject to the discretionary vote
of the proxy holders at the 2017 Annual Meeting of
Shareholders.
Page | 35 Versar, Inc. 2016
Proxy Statement
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,
/s/
James D. Villa
Secretary
May 3,
2017
Page | 36
Versar, Inc. 2016 Proxy Statement
Versar (AMEX:VSR)
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