<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934
(Amendment No.)
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
VERSAR, INC.
...............................................................................
(Name of Registrant as Specified In Its Charter)
...............................................................................
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
...............................................................................
2) Aggregate number of securities to which transaction applies:
...............................................................
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
...............................................................
4) Proposed maximum aggregate value of transaction:
...............................................................
5) Total fee paid:
...............................................................
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
1) Amount Previously Paid:
...............................................................
2) Form, Schedule or Registration No.:
...............................................................
3) Filing Party:
...............................................................
4) Date Filed:
...............................................................
<PAGE> 2
[VERSAR INC. LOGO]
Dear Stockholder:
You are cordially invited to attend Versar, Inc.'s Annual Meeting of
Stockholders to be held at our offices, 6850 Versar Center, Springfield,
Virginia 22151, on Thursday, November 14, 1996, at 10:15 a.m. local time.
The matters scheduled for consideration at the meeting are the election of
directors and other matters described in the enclosed Proxy Statement. We will
also report to you on Versar's condition and performance, and you will have the
opportunity to question management on matters that affect the interests of all
Stockholders.
You can reach the offices of Versar by car, from either I-395 or I-495.
From I-395: exit Edsall Road West to Backlick Road; left (south) on Backlick to
Hechinger Drive; left on Hechinger Drive to Versar Center. From I-495: exit
Braddock Road East to Backlick Road; right (south) on Backlick to Hechinger
Drive; left on Hechinger Drive to Versar Center.
The Stockholders' interest in the affairs of Versar is encouraged and it is
important that your shares be represented at the meeting. We hope you will be
with us. WHETHER YOU PLAN TO ATTEND OR NOT, PLEASE COMPLETE, SIGN, DATE, AND
RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE IN THE POSTPAID ENVELOPE
PROVIDED. Sending in your proxy will not limit your right to vote in person or
to attend the meeting, but it will assure your representation if you cannot
attend. Your vote is important.
Sincerely yours,
/s/ BENJAMIN M. RAWLS
------------------------------------
Benjamin M. Rawls
Chairman and Chief Executive Officer
October 18, 1996
<PAGE> 3
[VERSAR INC. LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of Versar, Inc.
The Annual Meeting of Stockholders of Versar, Inc. (the "Company") will be
held at the Company's offices, 6850 Versar Center, Springfield, Virginia 22151,
on Thursday, November 14, 1996, at 10:15 A.M. local time for the following
purposes:
1. To elect eight directors to serve until the 1997 Annual Meeting of
Stockholders;
2. To approve the issuance of an additional 600,000 shares of common
stock for the Company's contribution to the Company's Employee
Savings and Stock Ownership Plan;
3. To ratify and approve the Versar, Inc., 1996 Stock Option Plan;
4. To amend Versar, Inc.'s Certificate of Incorporation to increase the
number of shares of authorized common stock to 30,000,000 from
10,000,000 and authorize the issuance of 10,000,000 shares of
undesignated preferred stock;
5. To ratify the appointment of Arthur Andersen LLP as independent
accountants for fiscal year 1997;
6. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only Stockholders of record at the close of business on September 30, 1996,
will be entitled to notice of and to vote at the meeting and any adjournments
thereof.
Your attention is directed to the Proxy Statement accompanying this Notice
for a more complete statement regarding the matters to be acted upon at the
meeting.
By Order of the Board of Directors,
/s/ JAMES C. DOBBS
-----------------------------------
James C. Dobbs
Secretary
October 18, 1996
IMPORTANT NOTICE
YOUR PROXY IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE
AND RETURN THE ENCLOSED PROXY AS SOON AS POSSIBLE IN THE POST-PAID ENVELOPE
PROVIDED.
<PAGE> 4
[VERSAR INC. LOGO]
VERSAR, INC.
------------------------------------------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 14, 1996
------------------------------------------------------------
GENERAL
This Proxy Statement and the enclosed proxy card are being mailed on or
about October 18, 1996, to Stockholders ("Stockholders") of Versar, Inc.
("Versar" or the "Company") in connection with the solicitation by the Board of
Directors of the Company of proxies for use at the 1996 Annual Meeting of
Stockholders (the "Annual Meeting") to be held at the Company's offices at 6850
Versar Center, Springfield, Virginia 22151, on November 14, 1996, and any
adjournment thereof. 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 vote his or
her shares in person. Proxies in the form enclosed, if duly signed and received
in time for voting, and not so revoked, will be voted at the Annual Meeting in
accordance with the directions specified therein.
RECORD DATE AND VOTING RIGHTS
Only holders of record of Versar's common stock, par value $.01 per share
("Common Stock"), at the close of business on September 30, 1996 (the "Record
Date") are entitled to notice of and to vote at the Annual Meeting and any
adjournment(s) thereof. The number of shares of Common Stock outstanding and
entitled to vote as of the Record Date was 5,005,051. Each share of Common Stock
is entitled to one vote on all matters of business at the meeting.
The By-laws of the Company require that the holders of a majority of the
outstanding shares of the Company's Common Stock 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 meeting. Assuming that such a
quorum is present for the Annual Meeting, then those eight nominees for director
listed herein who receive the highest number of votes cast will be elected. On
all other matters considered at the meeting, the affirmative vote of a majority
of the shares represented at the Annual Meeting, in person or by proxy, is
required for approval except with respect to Proposal No. 4. The affirmative
vote of a majority of shares entitled to be voted with respect to Proposal No. 4
is required for its adoption. The shares of Common Stock represented by a valid
proxy which abstains with respect to any matter will be counted in determining
the number of votes cast with respect to that matter but will not be counted as
an affirmative vote in determining whether the affirmative vote of the requisite
number of shares was cast in favor of that matter. Therefore, abstentions as to
the election of directors will not affect the election of the candidates
receiving a plurality of the votes cast. Abstentions as to the other proposals
will have the same effect as votes against such proposals. Broker non-votes will
be
1
<PAGE> 5
treated as unvoted for purposes of determining approval of any such proposals
and will not be counted as votes for or against such proposal.
Any proxy which is returned by a Stockholder properly completed and which
is not revoked will be voted at the Annual Meeting in the manner specified
therein. Unless contrary instructions are given, the persons designated as proxy
holders in the accompanying proxy card (or their substitutes) will vote FOR the
election of the Board of Directors' nominees and FOR proposals 2, 3, 4, and 5
and in the proxyholders' discretion with regard to all other matters. Any
unmarked proxies, including those submitted by brokers or nominees, will be
voted in favor of the proposals and the nominees for the Board of Directors, as
indicated in the accompanying proxy card.
The cost of preparing, assembling and mailing this material will be borne
by Versar. In addition to solicitation by mail, solicitations may be made by
personal interview, telephone, and telegram by officers and regular employees of
the Company or its subsidiaries, acting without additional compensation. It is
anticipated 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 for the out-of-pocket expenses incurred by them in this connection.
The Annual Report of the Company for fiscal year 1996 (including financial
statements), the Notice of Annual Meeting, this Proxy Statement, and the
enclosed proxy card were initially mailed in a single envelope to holders of the
Common Stock as of the Record Date on or about October 18, 1996.
PRINCIPAL SHAREHOLDERS
The table below sets forth, as of September 3, 1996, the only persons known
by the Company to be the beneficial owners of more than 5% of the outstanding
shares of Common Stock.
<TABLE>
<CAPTION>
PERCENT
AMOUNT AND NATURE OF
OF BENEFICIAL CLASS OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP STOCK
<S> <C> <C>
Dr. Michael Markels, Jr.(1) 846,284 16.9%
6850 Versar Center
Springfield, VA 22151
Dr. Robert L. Durfee(1) 675,299 13.2%
6850 Versar Center
Springfield, VA 22151
Versar, Inc., Employee Savings and Stock 656,967 13.1%
Ownership Plan(2)
</TABLE>
- ---------------
(1) For a description of the nature of the beneficial ownership of Drs.
Markels and Durfee, see "SECURITY HOLDINGS OF MANAGEMENT". The information
with respect to shares of Common Shares held by Drs. Markels and Durfee
are based upon filings with the Securities and Exchange Commission.
(2) All of the 656,967 shares of Common Stock held by the Employee Savings and
Stock Ownership Plan ("ESSOP") are allocated to individual ESSOP
participants' accounts and are voted by those participants. The ESSOP
Trustees have investment power over all shares of Common Stock held by
the ESSOP. The ESSOP Trustees are Michael Markels, Jr., Benjamin M. Rawls
and James C. Dobbs. Each disclaims beneficial ownership of the Common
Stock held by the ESSOP. The information with respect to shares of Common
Stock held by the ESSOP is based upon filings with the Securities and
Exchange Commission and a report by the Company's stock transfer agent.
2
<PAGE> 6
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon copies of reports furnished Versar, the Company believes that
all reports required to be filed by persons subject to Section 16 of the
Securities Exchange Act of 1934, and the rules and regulations thereunder, have
been timely filed except that one report on Form 4 by Lawrence W. Sinnott
reporting a grant of stock which was required to be filed by July 10, 1996 was
filed the next day July 11, 1996.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES FOR ELECTION
The Board of Directors of the Company recommends the election of the
persons named below who will be nominated to serve as directors of Versar until
the fiscal year 1997 Annual Meeting of Stockholders and until their successors
have been duly elected and qualified. 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 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 of Directors.
<TABLE>
<CAPTION>
SERVED AS
NAME DIRECTOR BUSINESS EXPERIENCE AND AGE
- ----------------------- ------------------- -----------------------------------------------
<S> <C> <C>
Benjamin M. Rawls 1991 to the present Chairman of the Board of Versar since November
1993, President and Chief Executive Officer
of Versar since April 1991; President and
Chief Executive Officer of Rawls Associates,
Inc., a management consulting firm, from
April 1988 to March 1991; President and Chief
Executive Officer of R-C Holding, Inc., (now
Air & Water Technologies Corporation) from
July 1987 to April 1988; Chairman of Metcalf
& Eddy, Inc., a subsidiary of
Research-Cottrell, from 1984 to April 1988; a
director of Sarnia Corporation since 1992.
Age 55.
Michael Markels, Jr. 1969 to the present Chairman of the Board, President and Chief
Executive Officer of Ocean Farming, Inc.
since 1995; Co- founder of the Company;
Chairman Emeritus of the Board of Versar;
retired former Chairman of the Board from
April 1991 to November 1993; President, Chief
Executive Officer and Chairman of the Board
from 1969 to March 1991; a director of Sarnia
Corporation since 1982. Age 70.
Robert L. Durfee 1969 to the present Co-founder of the Company; Executive Vice
President of the Company since 1986 and
President of GEOMET Technologies, Inc., a
subsidiary of the Company since 1991. Age 60.
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
SERVED AS
NAME DIRECTOR BUSINESS EXPERIENCE AND AGE
- ----------------------- ------------------- -----------------------------------------------
<S> <C> <C>
M. Lee Rice 1969-1976; 1983 to Business consultant since 1986; between 1983
the present and 1986, President of the Shipbuilders
Council of America, the trade association of
principal shipbuilders and ship repairers;
between 1972 and 1983, President and Chief
Executive Officer of Ogden Transportation
Corporation and director of its parent, Ogden
Corporation, a diversified manufacturer and
services company. Age 71.
John P. Horton 1987 to the present President and Chief Executive Officer of
Rokalor, Inc., a management consulting firm
from 1981; Chairman of the Board of Growth
Financial Corporation from 1986 to 1994; from
1981 to 1983 Assistant Administrator of the
United States Environmental Protection Agency
and director of Madison Bancshares Ltd. Age
71.
John E. Gray 1992 to the present Director and President of Integrex System
Corporation since 1981; Chairman of IEA of
Japan Co., Ltd., since 1981; between 1985 to
1990 he was President and Chief Operating
Officer and Vice Chairman of the Board of
Directors of ERC International, Inc.,
Chairman and Chief Executive Officer of ERC
Environmental and Energy Services Co., Inc.,
from 1988 to 1990; Age 74.
Charles I. Judkins, Jr. 1992 to the present President and Chief Executive Officer of Sarnia
Corporation, the Company's former real estate
holding company, since June 1994; business
consultant from June 1993 to present; retired
former Senior Vice President of Versar from
August 1992 to May 1993; Senior Vice
President and Chief Financial Officer of
Versar from July 1991 to August 1992;
President of GEOMET Technologies, Inc., a
subsidiary of the Company from 1986 to 1991;
Age 65.
Thomas J. Shields New Nominee Managing Director of Shields & Company, Inc.,
an investment banking firm, since 1991;
Managing Director of Bear, Stearns and Co.,
Inc. from 1989 to 1991; and a director of
Seaboard Corporation and Waban Inc. Age 49.
</TABLE>
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of Versar has standing Executive, Audit,
Compensation and Nominating Committees.
The members of the Executive Committee are Mr. Rawls (Chairman), Dr.
Markels, Dr. Durfee and Mr. Rice. The primary duty of the Executive Committee is
to act in the Board's stead when the Board is not in session, during which time
the Committee possesses all the powers of the Board in the management of the
business and affairs of the Company, except as otherwise limited by law.
The Audit Committee, composed exclusively of directors who are not
employees of the Company, consists of Messrs. Rice (Chairman), Gray and Judkins.
This committee's primary responsibilities are to provide oversight of the
Company's accounting and financial controls, review the scope of and procedures
to be
4
<PAGE> 8
used in the annual audit, review the financial statements and results of the
annual audit, and evaluate the performance of the independent accountants and
the Company's financial and accounting personnel.
The Compensation Committee, the members of which are Dr. Horton (Chairman),
Messrs. Shields, Rice and Gray, reviews and adjusts compensation paid to the
President of the Company and all executive officers, and administers the
Company's Cash Bonus and Stock Option Plans.
The Nominating Committee, the members of which are Dr. Markels (Chairman),
Dr. Durfee, Mr. Rawls and Mr. Gray, develops criteria for Board membership and
proposes Board members who meet the criteria for the annual election of
directors. The Committee also identifies potential Board members to fill
vacancies which may occur between annual stockholder meetings. Stockholders may
submit nominees for the Board of Directors in writing to the Committee at the
Company's Springfield office no later than June 27, 1997.
BOARD AND COMMITTEE MEETINGS
During fiscal year 1996, the Board of Directors met five times. The
Executive Committee met once. The Audit Committee met five times. The Nominating
Committee met once. The Compensation Committee met twice. All directors of the
Company attended at least 75% of all meetings of the Board and committees on
which they served.
DIRECTORS' COMPENSATION AND CERTAIN TRANSACTIONS
Directors who are not employees of the Company are paid an annual fee of
$3,000 plus an attendance fee of $1,000 for each meeting of the Board and of its
committees. Under the Versar 1992 Stock Option Plan, on each anniversary of the
effective date of the Plan (November 19) each non-employee director receives
1,000 Non-Qualified Stock Options if he or she has served less than one year as
a director or 500 Non-Qualified Stock Options if he or she has served a longer
term. The exercise price of such options is the price of the Company's Common
Stock on the date the option is granted. If the 1996 Stock Option Plan described
in Proposal No. 3 is adopted it will replace the 1992 Stock Option Plan. Under
the 1996 Stock Option Plan directors may receive options in the discretion of
the administrator of the plan, but no formula grants are provided. The Board of
Directors intends to compensate directors with 5,000 stock options for fiscal
year 1997. See Proposal No. 3 for a discussion of the 1996 Stock Option Plan.
On December 29, 1993, Dr. Markels entered into a Retirement Agreement with
the Company pursuant to which he received, from January 1, 1994 through February
28, 1996, $90,000 per year as a consultant and for a non-compete agreement which
will run through December 28, 1996.
On July 16, 1993, Dr. Markels entered into a Loan Agreement ("Loan
Agreement") with the Company permitting him to borrow from the Company up to
$100,000, limited to $25,000 in any one quarter. Dr. Markels is required to pay
interest at the same rate as defined in the Company's Revolving Loan and
Security Agreement. To secure the loan Dr. Markels is required to pledge Versar
Common Stock equal to twice the value of any loan to the Company. All loan
amounts must be fully repaid at the end of the Company's fiscal year unless
otherwise extended by the Company's Chief Executive Officer. As of September 30,
1996, Dr. Markels was not obligated to the Company under this Loan Agreement.
During 1996 there were no outstanding loans under this Loan Agreement.
5
<PAGE> 9
SECURITY HOLDINGS OF MANAGEMENT
The following table sets forth certain information regarding the ownership
of Versar's Common Stock by the Company's directors and each executive officer
named in the Summary Compensation Table and the Company's directors and
executive officers as a group, as of September 3, 1996.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED
AS OF SEPTEMBER 3,
INDIVIDUAL OR GROUP 1996(1)
NUMBER PERCENT
<S> <C> <C>
Michael Markels, Jr.(2) 846,284 16.9%
Robert L. Durfee(3) 675,299 13.2%
Thomas J. Shields 0 *
M. Lee Rice 0 *
John P. Horton(4) 8,800 *
Benjamin M. Rawls(5) 101,014 2%
Charles I. Judkins, Jr.(6) 83,968 1.7%
John E. Gray 10,000 *
Thomas S. Rooney(7) 161,871 3.1%
Lawrence A. White(8) 96,500 1.9%
Gayaneh Contos(9) 104,336 2.0%
James C. Dobbs(10) 41,794 *
All directors and executive officers as a group (13
persons)(11) 2,181,923 39.8%
</TABLE>
- ---------------
* 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 Exchange
Act of 1934, as amended, under which, in general, a person is deemed to be
the beneficial owner of a security if he or she has or shares the power to
vote or to direct the voting of the security or the power to dispose or to
direct the disposition of the security, or if he or she has the right to
acquire beneficial ownership of the security within 60 days of September 3,
1996. With respect to ownership of shares which are held in the ESSOP but
allocated to individuals' accounts, the information is current as of
September 3, 1996.
(2) Includes 425,900 shares owned by adult children of Dr. Markels as to which
he shares voting and investment power. Includes 300 shares that may be
purchased upon the exercise of stock options exercisable within 60 days
after September 3, 1996. Markels is a Trustee of the ESSOP and as such he
has shared investment power over 656,967 shares and shared voting power
over 656,967 shares held by the ESSOP, none of which are included in the
above table. Dr. Markels disclaims beneficial ownership of the ESSOP
shares.
(3) Includes 34,000 shares owned by adult children of Dr. Durfee as to which he
shares voting and investment power. Includes 19,000 shares that may be
purchased upon the exercise of stock options exercisable within 60 days
after September 3, 1996.
(4) Includes 4,200 shares in a Profit Sharing Plan in which Dr. Horton is the
sole beneficiary and over which he has voting power. Includes 2,700 shares
that may be purchased upon the exercise of stock options within 60 days
after September 3, 1996.
(5) Includes 88,000 shares that may be purchased upon the exercise of stock
options exercisable within 60 days after September 3, 1996. Mr. Rawls is a
Trustee of the ESSOP and as such he has shared
6
<PAGE> 10
investment power over 656,967 shares and shared voting power over 656,967
shares held by the ESSOP, none of which are included in the above table.
Mr. Rawls disclaims beneficial ownership of the ESSOP shares.
(6) Includes 20,700 shares that may be purchased upon the exercise of stock
options within 60 days after September 3, 1996.
(7) Includes 154,000 shares that may be purchased upon the exercise of stock
options within 60 days after September 3, 1996.
(8) Includes 90,000 shares that may be purchased upon the exercise of stock
options within 60 days after September 3, 1996.
(9) Includes 55,200 shares that may be purchased upon the exercise of stock
options within 60 days after September 3, 1996.
(10) Includes 36,500 shares that may be purchased upon the exercise of stock
options within 60 days after September 3, 1996. Mr. Dobbs is a Trustee of
the ESSOP and as such he has shared investment power over 656,967 shares
and shared voting power over 656,967 shares held by the ESSOP, none of
which are included in the above table. Mr. Dobbs disclaims beneficial
ownership of the ESSOP shares.
(11) Includes 489,300 shares that may be purchased upon the exercise of stock
options within 60 days after September 3, 1996. Excludes 656,967 shares
held by the ESSOP.
7
<PAGE> 11
EXECUTIVE COMPENSATION
CASH COMPENSATION
The following table sets forth information on compensation paid by Versar
for services rendered in all capacities during the three fiscal years ended June
30, 1996, to the Company's Chief Executive Officer and the four most highly
compensated executive officers of the Company (collectively the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
AWARDS
SECURITIES
OTHER ANNUAL UNDERLYING
NAME, PRINCIPAL POSITION, SALARY BONUS COMPENSATION OPTIONS/SARS ALL OTHER
AND FISCAL YEAR $ $ $(1) # COMPENSATION
<S> <C> <C> <C> <C> <C>
Benjamin M. Rawls
Chairman of the Board, President
and Chief Executive Officer
1996 $243,467 0 0 300,000 $12,150(2)
1995 234,896 0 0 0 8,326(2)
1994 209,365 0 0 0 10,596(2)
Thomas S. Rooney
Executive Vice President
1996 $178,380 0 0 137,500 $11,049(3)
1995 165,518 0 0 12,500 9,919(3)
1994 162,419 0 0 12,500 19,217(3)
Lawrence A. White
Executive Vice President
1996 $170,385 4,000 0 0 $ 8,144(4)
1995 160,000 0 0 20,000 7,460(4)
1994 154,500 0 0 20,000 7,667(4)
Gayaneh Contos
Senior Vice President
1996 $163,952 $10,000 0 30,000 9,068(5)
1995 153,296 8,000 0 0 8,189(5)
1994 151,385 0 0 17,500 8,330(5)
James C. Dobbs
Vice President, General Counsel
and Secretary
1996 $130,166 $ 4,000 0 23,500 $ 6,293(6)
1995 131,462 5,000 0 15,000 5,610(6)
1994 125,000 0 0 3,500 11,749(6)
</TABLE>
- ---------------
(1) No amounts are shown in "Other Annual Compensation" column for fiscal years
1996, 1995 and 1994 because the aggregate amount of any perquisites or other
personal benefits for each of the Named Executive Officers did not exceed
the lesser of (i) $50,000 or (ii) 10 percent of the combined fiscal year
1996, 1995 or 1994 salary and bonus for the Named Executive Officer and the
Company does not pay any other type of compensation that would have to be
reported under this column.
8
<PAGE> 12
(2) The amounts shown in this column for Mr. Rawls are comprised of the
following: (i) in 1996 a payment of $3,150 for insurance premiums on term
life insurance, in 1995 a payment of $2,541 for insurance premiums on term
life insurance, and in 1994 payment of $2,202 for insurance premiums on term
life insurance; and, (ii) in 1996 a contribution of $9,000 to the Company
401(K) Plan on behalf of Mr. Rawls, in 1995 a contribution of $5,785 to the
Company 401(K) Plan on the behalf of Mr. Rawls; and in 1994 a contribution
of $8,394 to the Company 401(K) Plan on the behalf of Mr. Rawls.
(3) The amounts shown in this column for Mr. Rooney are comprised of the
following: (i) in 1996 a payment of $4,309 for insurance premiums on term
life insurance, in 1995 a payment of $4,050 for insurance premiums on term
life insurance, and in 1994 a payment of $3,834 for insurance premiums on
term life insurance; (ii) in 1996 a contribution of $6,740 to the Company
401(K) Plan on behalf of Mr. Rooney, in 1995 a contribution of $5,869 to the
Company 401(K) Plan on the behalf of Mr. Rooney, and in 1994 a contribution
of $6,372 to the Company 401(K) Plan on the behalf of Mr. Rooney; and, (iii)
in 1994 a payment of $9,211 for moving expenses.
(4) The amounts shown in this column for Mr. White are comprised of the
following: (i) in 1996 a payment of $1,675 for insurance premiums on term
life insurance, in 1995 a payment of $1,555 for insurance premiums on term
life insurance, and in 1994 a payment of $1,487 for insurance premiums on
term life insurance; (ii) in 1996 a contribution of $6,469 to the Company
401(K) Plan on behalf of Mr. White, in 1995 a contribution of $5,905 to the
Company 401(K) Plan on the behalf of Mr. White, and in 1994 a contribution
of $6,180 to the Company 401(K) Plan on the behalf of Mr. White.
(5) The amounts shown in this column for Mrs. Contos are comprised of the
following: (i) in 1996 a payment of $2,915 for insurance premiums on term
life insurance, in 1995 a payment of $2,304 for insurance premiums on term
life insurance, and in 1994 a payment of $2,275 for insurance premiums on
term life insurance; and (ii) in 1996 a contribution of $6,153 the Company
401(K) Plan on behalf of Mrs. Contos, in 1995 a contribution of $5,885 to
the Company 401(K) Plan on the behalf of Mrs. Contos, and in 1994 a
contribution of $6,055 to the Company 401(K) Plan on the behalf of Mrs.
Contos.
(6) The amounts shown in this column for Mr. Dobbs are comprised of the
following: (i) in 1996 a payment of $1,249 for life insurance premiums on
term life insurance, in 1995 a payment of $1,210 for insurance premiums on
term life insurance, and in 1994 a payment of $914 for insurance premiums on
term life insurance; (ii) in 1996 a contribution of $5,044 to the Company
401(K) Plan on behalf of Mr. Dobbs, and in 1995 a contribution of $4,400 to
the Company 401(K) Plan on behalf of Mr. Dobbs; and, (iii) in 1994 a payment
of $10,835 in moving expenses.
9
<PAGE> 13
The following tables set forth certain information with respect to stock
options (i) granted to the Named Executive Officers and (ii) exercised under the
Company's 1992 Stock Option Plan during the fiscal year ended June 30, 1996.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(4)
(a) (b) (c) (d) (e) (f) (g)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANTED EXERCISE OR
UNDERLYING OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED#(1) FISCAL YEAR(2) ($ PER SHARE)(3) DATE 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Benjamin M. Rawls 300,000 50.6% 3.00 2/7/06 1,396,200 2,122,200
Thomas S. Rooney 12,500 23.2% 3.3750 11/13/05 65,450 99,475
125,000 3.00 02/07/06 581,750 884,250
Lawrence A. White 0 -- -- -- -- --
Gayaneh Contos 30,000 5.1% 2.8125 3/12/06 130,890 198,960
James C. Dobbs 23,500 4.0% 3.00 5/16/06 109,369 166,239
</TABLE>
- ---------------
(1) The options were granted for a term of 10 years, 20% of which were vested
immediately and 80% of which vest equally over a four year period, subject
to earlier termination in certain events related to termination of
employment. The 1992 Stock Option Plan includes a change-in-control
provision providing for immediate vesting upon the happening of certain
events defined as a change-in-control of the Company. The option plan grants
the Compensation Committee broad discretion to change or modify the material
terms of the option grants.
(2) The total number of options granted to employees in fiscal year 1996 was
592,000.
(3) The exercise price equals the fair market value of the underlying Common
Stock on the date of the grant for all options disclosed in this table.
(4) The dollar amounts in these columns are determined using assumed rates of
appreciation set by the Securities and Exchange Commission and are not
intended to forecast future appreciation, if any, in the market value of the
Corporation's Common Stock. Such amounts are based on the assumptions that
the named persons hold the options for their full ten-year term. The actual
value of the options will vary in accordance with the market price of the
Corporation's Common Stock.
10
<PAGE> 14
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUE
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED ON VALUE OPTIONS/SARS AT 6/30/96 IN-THE-MONEY
EXERCISE REALIZED (#) OPTIONS/SARS AT 6/30/96
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
<S> <C> <C> <C> <C>
Benjamin M. Rawls.......... 0 0 338,000/240,000 $1,267,500/900,000
Thomas S. Rooney........... 0 0 154,000/126,000 $577,500/472,500(2)
Lawrence A. White.......... 0 0 90,000/20,000 $337,500/75,000
Gayaneh Contos............. 0 0 55,200/24,800 $207,000/93,000(3)
James C. Dobbs............. 0 0 36,500/25,500 $136,875/95,625
</TABLE>
- ------------------
(1) On June 28, 1996, the closing price of the Company's Common Stock was $3.75.
(2) 12,500 options granted to Mr. Rooney were out-of-the money which means that
the option exercise price for those options exceeded the closing price of
the Company's Common Stock on the American Stock Exchange on June 28, 1996.
(3) 15,000 options granted Mrs. Contos were out-of-the money which means that
the option exercise price for those options exceeded the closing price of
the Company's Common Stock on the American Stock Exchange on June 28, 1996.
EMPLOYMENT CONTRACTS
On September 1, 1996, the Company renewed its Employment Agreement with Mr.
Rawls for a period of twenty-four months which provides for him to serve as
Chairman, President and Chief Executive Officer at a base salary of $250,000
plus any fringe benefits available to executive officers of the Company
including any incentive compensation programs which may be in effect. If Mr.
Rawls' employment is terminated during the term of the employment agreement,
except for voluntary termination or termination for cause, he will be paid 12
months salary, fringe benefits, incentive compensation due and shall be entitled
to immediate vesting of all stock options. If there is a change in circumstances
(change in title, salary reduction, or change in geographic location) or change
in control of the Company (as defined in the agreement), Mr. Rawls can terminate
the agreement and will be paid 18 months salary and fringe benefits and shall be
entitled to immediate vesting of all stock options.
On September 1, 1996, the Company renewed its Employment Agreement with Mr.
Rooney for a period of twenty-four months which provides for him to serve as
Executive Vice President at a base salary of $180,000 plus any fringe benefits
available to executive officers of the Company including any incentive
compensation programs which may be in effect. If Mr. Rooney's employment is
terminated for any reason during the term of the employment agreement, except
for termination for cause or voluntary termination, he will be paid 12 months
salary, fringe benefits, incentive compensation due and shall be entitled to
immediate vesting of all stock options. If there is a change in circumstances
(change in title, salary reduction or change in geographic location) or change
in control of the Company (as defined in the agreement), Mr. Rooney will be paid
18 months salary and fringe benefits and shall be entitled to immediate vesting
of all stock options.
CHANGE IN CONTROL AGREEMENTS
On September 1, 1996, the Company entered into Change-in-Control Severance
Agreements with Lawrence W. Sinnott, Vice President and Chief Financial Officer
and James C. Dobbs, Vice President and General Counsel, for a period of
twenty-four months. These agreements provide that if there is a change in
circumstances (change in title, salary reduction or change in geographic
location) or change in control of the Company (as defined in the Agreement),
Messrs. Sinnott or Dobbs could terminate their employment and will receive
twelve months salary, fringe benefits, and incentive compensation due and shall
be entitled to immediate vesting of all stock options.
11
<PAGE> 15
STOCK PERFORMANCE GRAPH
The following graph and table show a comparison of the cumulative total
return since June 30, 1991 on $100 invested in Versar Common Stock, the Standard
& Poors 500 Stock Index and a Peer Group consisting of nine companies and Versar
(EA Engineering, Science and Technology, Inc.; Ecology & Environment, Inc.;
EMCON; Groundwater Technology, Inc.; GZA Environmental Technologies, Inc.;
Harding Associates, Incorporated; ICF Kaiser International, Inc.; TRC Companies,
Inc.; and Roy F. Weston, Inc.), which in each case includes reinvestment of
dividends where applicable.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG VERSAR, INC., THE S&P 500 INDEX AND A PEER GROUP
[GRAPH]
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) VERSAR, INC. PEER GROUP S&P 500
<S> <C> <C> <C>
6/91 100 100 100
6/92 86 89 113
6/93 95 70 129
6/94 127 63 131
6/95 129 55 165
6/96 149 47 208
</TABLE>
* $100 INVESTED ON 6/30/91 IN STOCK OR INDEX -- INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING JUNE 30.
12
<PAGE> 16
CUMULATIVE SHAREHOLDER'S RETURN TABLE
<TABLE>
<CAPTION>
CUMULATIVE SHAREHOLDER'S RETURN
LAST TRADING DATE IN FISCAL YEARS
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Versar, Inc. $100 $86 $95 $127(1) $129 $149
Peer Group $100 $89 $70 $63 $55 $47
S&P 500 $100 $113 $129 $131 $165 $208
</TABLE>
- ---------------
(1) On June 30, 1994, Versar spun-off its real estate subsidiary, Sarnia
Corporation (formerly Versar Virginia, Inc.) to Versar's Stockholders on a
one to one share basis. Because of its negative equity position after the
spin-off Sarnia Common Stock had a zero tax basis.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee ("Committee") of the Board of Directors has
furnished the following report on executive compensation for fiscal year 1996.
The Committee provides oversight of all policies under which compensation is
paid to the Company's executive officers and stock options are granted. The
Committee consists entirely of non-employee directors.
EXECUTIVE COMPENSATION PHILOSOPHIES AND POLICIES
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 executives. Target levels of the executive
officers' overall compensation are intended to be consistent with others'
compensation in the Company's industry, but are also weighed toward results that
contribute to increases in shareholder value and enhance the Company's long-term
(three years or greater) performance.
The Company's executive compensation program includes three components:
<TABLE>
<C> <S>
(1) Base salary;
(2) Annual Bonus (stock or cash); and
(3) Long-term incentive awards.
- Base Salary -- ranges of appropriate base salaries are determined by analysis of
salary data on positions of comparable responsibility within the environment services
sector. Committee approval of individual salary changes is based upon performance of
the executive against the Company's financial and strategic objectives and of the
position of the executive in the competitive salary range.
- Annual Bonus -- bonuses are paid pursuant to an executive incentive bonus plan
established each year by the Board of Directors for key employees and managers of the
Company and its subsidiaries. Under the Plan, an incentive pool is created each fiscal
year and is distributed if certain financial goals for the Company are met. The amount
of the incentive pool distributed depends on the extent to which the Company's
consolidated net income before taxes exceeds targeted amounts as set forth in the
bonus pool schedule.
- Long-Term Incentive Awards -- the purpose of this element of the executive
compensation program is to link management pay with the long-term interest of
shareholders, rather than only the performance in one single fiscal year. The
Committee is currently using incentive stock options from the Company's 1992 Stock
Option Plan for key employees and managers. In determining annual stock option grants,
the Committee bases its decision on the individual's performance or potential to
improve shareholder value.
</TABLE>
13
<PAGE> 17
In determining compensation for fiscal year 1996, the Committee took into
account the performance of the Company's stock, the financial performance of the
Company and the fact it continued to need to rebuild sales volume and backlog.
The Committee also factored in the significant negative financial effect on the
financial statement and performance of the Company that the former real estate
that was spun off at the end of fiscal year 1994 had because of the existing
guarantee by Versar.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Since Mr. Rawls joined Versar, he has voluntarily foregone $125,000 in
salary. In fiscal 1994, the Committee decided to enter into an 24 month
employment with Mr. Rawls pursuant to which he would be paid $235,000 per year.
This employment agreement was to fulfill a commitment made when Mr. Rawls joined
the Company in 1991. Despite the continued negative effect of the former real
estate, in the view of the Company's positive fiscal year 1995 financial
performance and his superior individual performance, Mr. Rawls base salary was
increased to $250,000, however, no bonus was paid. In addition, in February the
Committee granted Mr. Rawls both incentive and non-qualified stock options for
300,000 shares to replace options granted on his original employment with the
Company that have since expired.
COMPENSATION FOR NAMED EXECUTIVE OFFICERS
The performances of the individual Named Executive Officers listed in the
Summary Compensation Table for fiscal year 1996 were also reviewed by the
Committee. In fiscal year 1996, the Committee, granted the following salary
increases based upon individual and the Company's overall fiscal year 1995
financial performance: Mr. Rooney to $180,000; Mr. White to $175,000; Mrs.
Contos to $160,000 and Mr. Dobbs to $135,000. Bonuses were issued to Mrs.
Contos, Mr. White and Mr. Dobbs for $10,000, $4,000 and $4,000, respectively.
Mr. Rooney was granted an option to purchase 137,500 shares to replace certain
options which will shortly expire. Mrs. Contos was granted an option to purchase
30,000 shares and Mr. Dobbs was granted an option to purchase 23,500 shares.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
John P. Horton
Thomas J. Shields
M. Lee Rice
John E. Gray
PROPOSAL NO. 2
APPROVAL OF THE ISSUANCE OF ADDITIONAL SHARES FOR ESSOP
On September 12, 1996, the Board of Directors adopted a resolution to
reserve an additional aggregate 600,000 shares of Common Stock for issuance
pursuant to the Company's Employee Stock Ownership Plan ("ESOP") and an Employee
Savings Plan ("Savings Plan"), jointly operated as the Versar Employee Savings
and Stock Ownership Plan ("ESSOP") subject to Stockholder approval. The Board
determined that it was in the best interest of Versar to continue to make
matching contributions to the Savings Plan and have the opportunity to make
contributions to the ESOP at the Company's discretion.
BACKGROUND OF PROPOSAL
At the November 1987 Annual Meeting the Stockholders approved the ESOP and
the Savings Plan qualified under Section 401(k) of the Internal Revenue Code,
jointly operated as the ESSOP. In 1987, the Board of Directors reserved 500,000
shares of the Company's authorized but unissued Common Stock for issuance under
both plans in the ESSOP. Such shares have all been issued under the ESOP and
Savings Plan.
In the November 1994 Annual Meeting the Stockholders approved the
reservation of an additional 450,000 shares of Common Stock for issuance
pursuant to the ESSOP. As of September 3, 1996 only of such 6,371 shares remain
unissued. In addition to the reserved shares issued to the ESSOP, during the
period
14
<PAGE> 18
February 1996 through September 3, 1996, the Company purchased 73,100 shares on
the open market and in private transactions which were used by the Company as
part of its contribution to the Savings Plan. However, depending on the trading
price of the Company's stock continued open market purchases to fund the ESSOP
may not be a satisfactory method for providing shares to the ESSOP. As a result,
the Board of Directors recommends that additional shares be reserved for
issuance under the ESSOP for use when open market purchases are not feasible.
The Company believes that continued funding of the Savings Plan will help
attract and retain employees by providing a mechanism to assist with their
retirement needs.
The following is a summary of the ESOP and Savings Plan:
EMPLOYEE STOCK OWNERSHIP PLAN. All full-time employees of the Company and
certain subsidiaries become participants in the ESOP on the first day of the
calendar month coinciding with or next following the date on which they have
been employed for one year with at least 1,000 hours of service. The Board of
Directors of the Company has the discretion to declare each year a cash amount
or a specified number of shares of Common Stock that will be contributed by the
Company to the ESOP.
The trustees of the ESOP, Michael Markels, Jr., Benjamin M. Rawls and James
C. Dobbs have exclusive authority to manage the trust in which ESOP
contributions are deposited and are obligated to invest the cash portion of ESOP
contributions primarily in the Company's Common Stock. The trustees are
permitted to borrow money to purchase Common Stock for the trust, although to
date no such borrowing has occurred.
As of June 30 of each year, eligible participants are credited with their
proportionate share of the trust's assets. A participant's interest vests and is
nonforfeitable if while employed by the Company or participating subsidiaries,
he or she attains at least 65 years of age, becomes totally or permanently
disabled, or dies. Alternatively, a participant's interest vests and is
nonforfeitable to the extent and in the percentage set forth in a schedule in
the ESOP. Under this schedule, a participant's interest is 100% vested after
five years of service. Vested amounts are distributed upon retirement,
disability, death or other termination of service. As determined by the
trustees, distributions are made in cash or Common Stock, but a participant has
the option of requiring payment entirely in Common Stock, but a participant has
the option of requiring payment entirely in Common Stock.
The Company may terminate or amend the ESOP but not in such a way as would
adversely affect any participant's vested interests. The trustees have the right
to vote the Common Stock in the trust subject to the direction of each
participant with respect to the shares allocated to his or her account.
The Company is not required to purchase a participant's shares after they
are distributed.
There was no ESOP contribution by the Company in fiscal year 1996.
SAVINGS PLAN. For the benefit of eligible employees of Versar and certain
of its subsidiaries, the Company maintains the Savings Plan qualified under
Section 401(k) of the Internal Revenue Code. All full-time employees can elect
to become participants on the first day of the calendar month coinciding with or
next following the date on which they have been employed for one year with at
least 1,000 hours of service. A participant may elect to contribute up to 10% of
his salary and wages to the Savings Plan ("Elective Contribution"). Quarterly,
the Company or its relevant subsidiary allocates cash or Common Stock to match a
portion of a participant's Elective Contribution. All contributions to a
participant's Savings Plan account are vested and nonforfeitable at all times.
The Company presently matches 100% of a participant's Elective Contribution up
to 4% of an employee's eligible salary.
Distributions of Elective Contributions are made in cash. The Company's
matching portion may be distributed in cash or Common Stock, at the discretion
of the trustees, although a participant has the option of requiring that the
distribution of the matched portion be made in Common Stock. Distributions are
made upon retirement, disability, or other termination of service. A participant
may request that his Elective Contribution be distributed as soon as practicable
following termination of employment. In addition, a participant may request from
the trustees a withdrawal of all or a portion of his Elective Contribution to
meet pressing financial obligations. The Company may terminate or amend the
Savings Plan, but such action may not retroactively adversely affect any vested
rights of participants.
15
<PAGE> 19
Participants in a similarly qualified plan and trust may, upon becoming
employed by the Company, transfer their account balances to the Savings Plan.
These balances will be considered to be Elective Contributions under the Savings
Plan, although not subject to matching by the Company.
Because the amount of any ESOP contribution and amount of any Savings Plan
match is dependent on the future actions of the Company's Board of Directors,
the price of the Company's Common Stock and amounts contributed by an individual
employee to the Savings Plan, the amount of shares available or allocable to an
individual officer or group of officers cannot be determined at this time. In
fiscal year 1996, the Company contributed 142,527 shares as its matching
contribution to the Savings Plan. In fiscal year 1996, no contribution was made
to the ESOP. In fiscal year 1996 the following Named Executive Officers received
the following matches from their elective contributions to the Savings Plan: Mr.
Rawls, 2,697 shares; Mr. Rooney 2,032 shares; Mr. White 1,948 shares; and Mrs.
Contos 1,886 shares; Mr. Dobbs 1,520 shares.
The affirmative vote of a majority of the outstanding Common Stock of the
Company, present, or represented, and entitled to vote at the Annual Meeting is
required for approval. The Board of Directors recommends a vote "FOR" this
proposal and the enclosed Proxy will be so voted unless the Proxy specifically
states otherwise.
PROPOSAL NO. 3
APPROVAL OF 1996 STOCK OPTION PLAN
On September 12, 1996, the Board of Directors adopted, subject to the
approval of the Stockholders, a 1996 Stock Option Plan (the "1996 Stock Option
Plan") under which options to purchase the Company's Common Stock may be granted
to such employees, Service Providers, as defined below, and directors of the
Company or any of its Affiliates, as defined by the 1996 Stock Option Plan, as
are selected from time to time by the Administrator of the 1996 Stock Option
Plan.
PURPOSE OF PROPOSAL
The 1996 Stock Option Plan is designed to provide an incentive to
employees, Service Providers and directors of Versar and its Affiliates, to
encourage proprietary interest in the Company by such persons, to encourage such
persons to remain in the service of the Company and its Affiliates and to
attract new employees and directors with outstanding qualifications. The 1996
Stock Option Plan will replace the Versar 1992 Stock Option Plan when all shares
authorized for issuance thereunder have been used.
TERMS OF 1996 STOCK OPTION PLAN
Under the terms of the 1996 Stock Option Plan, the number of options to be
granted to any employee, Service Provider or director will be determined from
time to time by the Administrator. A "Service Provider" is defined for purposes
of the 1996 Stock Option Plan as an individual who is neither an employee nor a
director of the Company or any of its Affiliates but who provides the Company or
one of its Affiliates, in the opinion of the Administrator, substantial and
important services. The aggregate number of shares of the Company's Common Stock
that may be issued upon exercise of options issued under the 1996 Stock Option
Plan is 1,000,000. The following is a summary of certain provisions of the 1996
Stock Option Plan and is qualified by reference to the complete plan, a copy of
which will be furnished to any Stockholder upon request.
The 1996 Stock Option Plan will be administered in the discretion of the
Board of Directors by a committee appointed by the Board (the "Administrator").
The committee shall consist of not less than two (2) members of the Board of
Directors who qualify as "non-employee directors" within the meaning of Rule
16b-3 under the Securities Exchange Act of 1934, or any successor rule or
regulation, and as "disinterested directors" for purposes of the Code. The Board
of Directors currently intends to appoint the Compensation Committee as the
Administrator under the 1996 Stock Option Plan. The Administrator shall, from
time to time, at its discretion, select employees, directors and Service
Providers to receive options under the 1996 Stock Option Plan, determine the
number of shares to be covered by any such option, and designate options as
Incentive Stock Options or Non-Qualified Stock Options; provided that Incentive
Stock Options
16
<PAGE> 20
may be granted only to employees (including directors who are also employees).
The Administrator has full power, discretion and authority to interpret,
construe and administer the 1996 Stock Option Plan and any part thereof, and its
interpretations and constructions thereof, and the actions taken thereunder,
will be final, conclusive and binding on all persons for all purposes, except as
otherwise determined by the Board of Directors of the Company. The
Administrator's powers include the power to set additional terms with respect to
the grant of options, determine the transferability or non-transferability of
options, determine a vesting schedule with respect to options, and set such
other terms, restrictions and privileges with respect to any options granted not
inconsistent with the terms of the 1996 Stock Option Plan. To date, no options
have been granted under the 1996 Stock Option Plan and, following approval by
the Stockholders, the Administrator currently does not intend to grant any
options to Named Executive Officers. The Administrator does plan, pursuant to a
resolution adopted by the Company's Board of Directors, as part of the fiscal
year 1997 compensation to directors, to grant each non-employee director
Non-Qualified Stock options for 5,000 shares.
Options issued under the 1996 Stock Option Plan will be designated as
either Incentive Stock Options or Non-Qualified Stock Options. Incentive Stock
Options are options meeting the requirements of Section 422(b) of the Internal
Revenue Code of 1986, as amended (the "Code"), and Non-Qualified Stock Options
are options not described in Sections 422(b), 432(b) or 424(b) of the Code.
Service Providers and directors (who are not also employees of the Company or
one of its Affiliates) will only be eligible to receive Non-Qualified Stock
Options. The exercise price for any option granted under the 1996 Stock Option
Plan will be determined by the Administrator; provided, that, in the case of any
Incentive Stock Option, the exercise price shall not be less than the Fair
Market Value, as defined in the 1996 Stock Option Plan, of the Company's Common
Stock on the date the option is granted, while Non-Qualified Options may have an
exercise price as low as fifty percent (50%) of Fair Market Value.
Notwithstanding other terms of the 1996 Stock Option Plan, a participant who
owns more than ten percent (10%) of the total combined voting power of all
classes of outstanding stock of the Company or any of its Affiliates will not be
eligible to receive Incentive Stock Options unless (i) the exercise price is at
least equal to one hundred ten percent (110%) of the Fair Market Value of the
Common Stock on the date of grant and (ii) the Incentive Stock Option, by its
terms, will not be exercisable more than five (5) years from the date of grant.
The exercise price of an option may be paid (i) in cash, (ii) by delivery
of shares of the Company's Common Stock, (iii) by delivery of a promissory note
with a term of not more than five (5) years and secured by the shares purchased,
(iv) through simultaneous exercise and sale of the shares acquired pursuant to a
brokerage or similar arrangement approved in advance by the Administrator, (v)
any combination of the above methods or (vi) by such other means as the
Administrator shall approve.
The vesting of each option will be determined by the Administrator. In the
event of a change in control of the Company, as defined in the 1996 Stock Option
Plan, the Administrator may in its sole discretion, without Stockholder
approval, either (i) accelerate the exercise dates of outstanding options or
make options fully vested and exercisable, (ii) pay cash to any or all owners of
options in exchange for the required cancellation of their outstanding options,
or (iii) make any other adjustments or amendments to the 1996 Stock Option Plan
and outstanding options and substitute new options for outstanding options. To
the extent any of these change of control actions would not be permitted under
the Code to apply to any Incentive Stock Option, then such option, immediately
upon the occurrence of the change of control, shall be treated for all purposes
of the 1996 Stock Option Plan as a Nonqualified Stock Option and shall be
immediately exercisable.
Each Option expires on the earlier of the last day of the tenth year after
the date of grant or the date the employee, Service Provider or director ceases
to be an employee of, or to provide services to, the Company or its
subsidiaries. However, the following terms apply with respect to employees: (i)
upon death, options may be exercised for up to two (2) years thereafter; (ii)
upon retirement (defined as voluntary cessation of employment after qualifying
for early or normal retirement under any pension or profit-sharing or stock
bonus plan of the Company, or if no such plan exists, voluntary termination of
employment after age 65 and after attaining the tenth anniversary of the last
preceding date of hire) options may be exercised for up to three (3) months
thereafter; and (iii) upon disability, defined as a physical or mental condition
affecting an optionee as determined by the Administrator in its sole discretion,
options may be exercised for up to six (6) months thereafter. If an employee
resigns or is discharged or terminated on account of misconduct
17
<PAGE> 21
(misconduct to be determined by the Administrator in its sole discretion in a
manner consistent with the then policies of the Company) all options held by the
employee will automatically terminate will no longer be exercisable. If an
employee ceases to be an employee for any reason other than those described
above, such employee shall have the right to exercise outstanding options for up
to three (3) months following cessation of employment. Unless the Administrator
provides otherwise in connection with any grant, the exercise periods described
above will apply only to the extent an option was vested and exercisable as of
the date of termination.
If a Service Provider or director who is not also an employee ceases to
provide service to the Company of any of its Affiliates for reasons of death,
disability or termination of service for any reason other than resignation or
discharge or termination for misconduct, he or she may exercise outstanding
options at any time up to six (6) months after cessation of service; provided
that, unless the applicable option agreement provides otherwise, such options
may be exercised only to the extent that they were exercisable at the time of
such cessation of service. If a Service Provider or director (who is not an
employee) is terminated through resignation or discharge or termination on
account of misconduct, as determined by the Administrator in its sole
discretion, all options held by such Service Provider or director shall
terminate and no longer be exercisable upon notice of resignation, discharge or
termination. Options may be transferable to the extent permitted by the
Administrator in connection with any particular grant.
Within the limitations of the 1996 Stock Option Plan, the Administrator may
modify, extend or renew outstanding options, or accept the cancellation of
outstanding options not previously exercised, for the granting of new options in
substitution therefor. Notwithstanding this power, no modification of an option
may not, without the consent of the holder, alter or impair any rights or
obligations under any option previously granted. The Board of Directors may
amend or terminate the 1996 Stock Option Plan at any time; provided that no
amendment shall be made without the approval of the Stockholders if such
approval is required under Section 422 of the Internal Revenue Code of 1986 or
Rule 16b-3 under the Securities Exchange Act of 1934 or if such amendment would
change material terms or performance goals that were previously approved by the
Company's Stockholders (unless the Board determines that approval is not
necessary to avoid the loss of a deduction under the Code, such approval will
not avoid such a loss of deduction or such approval is not advisable).
FEDERAL TAX CONSEQUENCES
The tax consequences of options granted under the 1996 Stock Option Plan
are complex. The following is a summary only of the general tax principles
applicable to options awarded under the 1996 Stock Option Plan under federal law
as in effect on the date of this Proxy Statement. Participants in the Plan
should review the current tax treatment with their individual tax advisor at the
time of the grant, exercise or any other transaction relating to any option
award.
There are no tax consequences to a participant upon the grant of an option
pursuant to the 1996 Stock Option Plan. There are no tax consequences to a
participant upon exercise of an Incentive Stock Option, except that the amount
by which the Fair Market Value of the shares at the time of exercise exceeds the
option exercise price is a tax preference item possibly giving rise to
alternative minimum tax. If the shares of Common Stock acquired are not disposed
of within two (2) years from the date the Incentive Stock Option was granted and
within one (1) year after the shares are transferred to the optionee, any gain
realized upon the subsequent disposition of the shares will be characterized as
long-term capital gain and any loss will be characterized as long-term capital
loss. If all requirements other than the above described holding period
requirements are met, a "disqualifying disposition" occurs and gain in an amount
equal to the lesser of (i) the Fair Market Value of the shares on the date of
exercise minus the option exercise price or (ii) the amount realized on
disposition minus the option exercise price (except for certain "wash" sales,
gifts or sales related to persons), is taxed as ordinary income and the Company
will be entitled to a corresponding deduction in an amount equal to the
participant's ordinary income at that time. The gain in excess of this amount,
if any, will be characterized as long-term capital gain if the optionee held the
shares for more than one year.
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<PAGE> 22
Other than Incentive Stock Options, all options granted under the 1996
Stock Option Plan will be taxed as Non-Qualified Stock Options. Upon the
exercise of a Non-Qualified Stock Option, the participant will recognize taxable
income in the amount by which the then Fair Market Value of the shares of Common
Stock acquired exceeds the option exercise price, with the Company being
entitled to a deduction in an equal amount. The amount of such taxable income
will be characterized as compensation income to the participant. Upon the
subsequent disposition of the Common Stock, the participant will recognize gain
or loss, which will be characterized as capital gain or loss in an amount equal
to the difference between the proceeds received upon disposition and his or her
basis for the shares (the basis being equal to the sum of the price paid for the
stock and the income realized upon exercise of the option) provided the shares
are held as a capital asset. Any capital gain or loss to the participant will be
characterized as long-term or short-term depending upon whether his or her
holding period for tax purposes exceeds one (1) year. The taxable income
recognizable upon the exercise of a Non-Qualified Stock Option is subject to
withholding for federal income tax purposes.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock of the Company present, or represented, and entitled to vote at
the annual meeting is required for approval of the 1996 Stock Option Plan. The
Board of Directors recommends a vote "FOR" the 1996 Stock Option Plan and the
enclosed Proxy will be so voted unless a vote against the proposal or an
abstention is specifically indicated.
PROPOSAL NO. 4
AMENDMENT TO CERTIFICATE OF INCORPORATION
On February 8, 1996, the Board of Directors approved, subject to
Stockholder approval, an amendment to the Company's Certificate of Incorporation
(the "Certificate Amendment") to increase the number of authorized shares of
capital stock to 40,000,000 shares from 10,000,000 shares, including an increase
in the authorized shares of common stock, $.01 par value per share (the "Common
Stock"), to 30,000,000 shares from 10,000,000 shares, and the establishment of a
class of 10,000,000 shares of preferred stock, $25 par value (the "Preferred
Stock"), as described below.
DESCRIPTION OF THE PROPOSAL
As of September 30, 1996, the Company had 5,005,051 shares of Common Stock
outstanding and an aggregate of 2,421,454 shares of Common Stock reserved for
issuance under the Company's 1982 Incentive Stock Ownership Plan, 1987
Non-Qualified Stock Option Plan, 1992 Stock Option Plan and Employee Savings
Stock Ownership Plan. If the 1996 Stock Option Plan described in Proposal No. 3
and the Issuance of Additional Shares for the ESSOP in Proposal No. 2 is
approved then an additional 1,600,000 shares will be reserved for issuance under
the plans. As of September 3, 1996, the Company had approximately 1,573,491
shares of Common Stock authorized but unissued and unreserved. If the
Certificate of Amendment is approved the Company will have a total of 21,573,491
shares of Common Stock authorized but unreserved.
The proposed Certificate Amendment also provides for the authorization of
10,000,000 shares of Preferred Stock. Pursuant to the amendment, the Board will
be authorized, without further action by the Company's Stockholders, to provide
for the issuance of Preferred Stock in series, to establish the number of shares
to be included in each such series and the designations, preferences and
relative, participating, optional, conversion and other special rights, and
qualifications, limitations or restrictions, of such shares. Such authority of
the Board of Directors would include, but not be limited to, fixing the number
of shares constituting any one series or the distinct designation thereof, the
rate and nature (whether participating or cumulative) of any dividends payable
on shares of Preferred Stock, the voting rights of such shares, the conversion
or redemption features of any such shares, and the rights of such shares in the
event of liquidation, dissolution or winding up of the Company.
At present, the Company has no specific plans or arrangements which are
expected to result in the issuance of any additional shares of Common Stock or
Preferred Stock, other than shares of Common Stock reserved for issuance under
various employee benefit plans as described above. However, assuming approval of
19
<PAGE> 23
the Certificate Amendment, the Company intends to use the additional shares of
Common Stock and the Preferred Stock for a variety of corporate purposes in the
future, including future financing, to facilitate corporate acquisitions and in
connection with the compensation of its officers and employees.
The purpose of the proposed Certificate Amendment at this time is the
elimination of later delays associated with Stockholder votes on specific
issuances. However, notwithstanding the attempt by the Company to eliminate this
delay, the rules and regulations of the American Stock Exchange may require the
Company to obtain the approval of the Stockholders of the Company in connection
with certain acquisitions or certain private placements resulting in the
issuance of 20% or more of the Common Stock outstanding prior to such issuance.
The Company will also be required under the rules and regulations of the
American Stock Exchange and under federal securities laws to obtain approval of
the Stockholders for the issuance of Common Stock pursuant to any employee
benefit in which officers or directors may participate.
EFFECTS OF CERTIFICATE AMENDMENT
Although the Certificate Amendment is not proposed for the purpose of any
anti-takeover effect, the issuance of the additional shares of Common Stock or
the Preferred Stock may have an anti-takeover effect and may delay or prevent a
tender offer or takeover attempt that a Stockholder might consider in its best
interest, including those attempts that might result in a premium over the
market price of shares held by such Stockholder. The Certificate Amendment
enables the Board of Directors to issue shares of Common Stock or Preferred
Stock to third parties which could render more difficult or discourage an
attempt to obtain control of the Company by means of a merger, tender offer,
proxy contest or otherwise.
Further, while the Company does not currently have any plans to issue
shares of Preferred Stock, shares of Preferred Stock may be issued from time to
time in one or more series by the Board of Directors, without further approval
of the Stockholders. The Board would be authorized to fix the dividend rights
and terms, any conversion rights, any voting rights, any redemption rights and
terms, the liquidation preferences, and the other rights, preferences,
privileges and restrictions applicable to each issued series of Preferred Stock.
Issued classes or series of shares of Preferred Stock could be given voting and
conversion rights which could dilute the voting power and equity of holders of
Common Stock and could have preference over the Common Stock with respect to
dividends and liquidation rights.
STOCKHOLDER VOTE
The affirmative vote by Stockholders holding at least a majority of the
votes entitled to be cast by holders of the Common Stock outstanding and
entitled to vote, is required for the adoption of the Certificate Amendment. The
Board of Directors recommends a vote "FOR" the Certificate Amendment and the
enclosed proxy will be voted for the Certificate Amendment unless a vote against
the proposal or an abstention is specifically indicated.
PROPOSAL NO. 5
APPOINTMENT OF ACCOUNTANTS
The Board of Directors considers it desirable that its appointment of the
firm of Arthur Andersen LLP ("Arthur Andersen") as independent accountants of
the Company for fiscal year 1997 be ratified by the Stockholders. Arthur
Andersen served as the Company's independent accountant in fiscal year 1996.
Representatives of Arthur Andersen will be present at the Annual Meeting, will
be given an opportunity to make a statement if they so desire, and will be
available to respond to appropriate questions from the Stockholders.
The Board of Directors recommends a vote "FOR" this proposal and the
enclosed proxy will be so voted unless the Proxy specifically indicates
otherwise.
20
<PAGE> 24
CHANGE IN CERTIFYING ACCOUNTANTS
Price Waterhouse LLP ("PW") served as the Company's principal accountant
through fiscal year ended June 30, 1995. The Company determined not to renew the
engagement of PW on October 2, 1995 and selected Arthur Andersen as the
Company's principal accountant. This decision was made following a review of the
Company's accounting costs in recent years and a bid solicitation process
initiated by the Board of Directors following such review. Solicitations were
distributed to seven firms, including PW, and six responses were received by the
Company. The Audit Committee of the Company's Board of Directors recommended,
after reviewing the responses, and the Board of Directors approved, the
selection of Arthur Andersen as the Company's principal accountant in
replacement of PW, effective October 2, 1995.
PW's report on the Company's financial statements for each of the last
fiscal years 1994 and 1995 did not contain an adverse opinion or a disclaimer of
opinion, nor was it qualified or modified as to uncertainty, audit scope, or
accounting principles.
During the Company's fiscal years 1994 and 1995 and the subsequent interim
period preceding the replacement of PW, there were no disagreements with PW on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreement(s), if not
resolved to the satisfaction of PW, would have caused it to make a reference to
the subject matter of the disagreement(s) in connection with its report.
On May 31, 1995 the Company filed a Form 10-K/A for the purpose of
restating its financial statements for the year ended June 30, 1994 and Forms
10-Q/A for the purpose of restating its financial statements for the quarters
ended September 30, 1994 and December 31, 1994. The restatement was a result of
a review, initiated by PW, of the accounting and financial treatment of the
divestiture of the Company's real estate holdings to Sarnia Corporation
("Sarnia") and resulting spin-off of Sarnia to the Stockholders of the Company
as of June 30, 1994. The financial information initially disclosed as part of
the divestiture and spin-off had reflected and was consistent with PW's advice
during the transaction. Although the Sarnia divestiture was completed on a legal
and tax basis, and Sarnia now operates as a separate, independent business, PW,
as a result of further review of the Company's accounting treatment of the
divestiture, informed the Company that from an accounting standpoint the
divestiture did not transfer the risks of ownership to Sarnia principally
because of the Company's guarantee of Sarnia's $12.5 million of debt at June 30,
1994. PW and the Company's Audit Committee consulted about the issue. On May 19,
1995, following the consultations and resolution of the issue PW withdrew its
report on the Company's financial statements for the year ended June 30, 1994,
pending the restatement of such financial statements to include Sarnia's results
of operations and assets and liabilities. In connection with such restatement,
PW issued a new auditor's report, which, in light of the resolution to PW's
satisfaction of its discussions with the Company as to the accounting treatment
of the Sarnia divestiture, was not qualified or modified in any respect. The
Company authorized PW to respond fully to any inquiries by Arthur Andersen
concerning the restatement.
Except as explained above, PW did not advise the Company during the
Company's fiscal years 1994 and 1995 or during the subsequent interim period
preceding the Company's decision not to extend PW's engagement of any
"reportable events" as defined in subparagraph (a)(i)(v) of Item 304 of
Regulation S-K under the Securities and Exchange Act of 1934.
As stated above, the Company engaged Arthur Andersen, independent
accountant, as the principal accountant to audit the consolidated financial
statements of the Company for the three fiscal years 1994, 1995 and 1996.
In connection with evaluating the position taken by PW in early 1995
regarding the appropriate accounting treatment of the divestiture of the
Company's real estate holdings to, and the spin-off of, Sarnia, the Company
consulted with representatives of Arthur Andersen as to its analysis of the
accounting treatment of the Sarnia transaction. The Company was orally informed
by Arthur Andersen that it agreed with PW's analysis in all material respects
and no written report was ever furnished by Arthur Andersen to the Company in
regard to this consultation.
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<PAGE> 25
Except as set forth above, during fiscal years 1994 and 1995 and during the
interim period prior to engaging Arthur Andersen, neither the Company nor anyone
on its behalf consulted Arthur Andersen regarding either: (a) 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 financial
statements, and neither a written report nor oral advice was provided to the
Company that Arthur Andersen concluded was an important factor considered by the
Company in reaching a decision as to the accounting, auditing or financial
reporting issue; or (b) any matter that was the subject of either a disagreement
or any other event described above.
Following the Board's decision on October 2, 1995, the Company provided
notice to PW and Arthur Andersen of its decision to replace PW with Arthur
Andersen and received a response from PW to the statements of the Company in
accordance with the requirements of Item 304(a) of Regulation S-K.
1997 ANNUAL MEETING
It is presently contemplated that the 1997 Annual Meeting of Stockholders
will be held on or about November 13, 1997. In order for any appropriate
Stockholder proposal to be considered for inclusion in the proxy materials for
the 1997 Annual Meeting of Stockholders, it must be received by the Secretary of
the Company no later than June 20, 1997, by certified mail, return receipt
requested.
OTHER MATTERS
As of the date of this Proxy Statement, management of the Company has no
knowledge of any matters to be presented for consideration at the Annual Meeting
other than those referred to above. If any other matters properly come before
the Annual Meeting, the persons named in the accompanying proxy intend to vote
such proxy, to the extent entitled, in accordance with their best judgment.
By Order of the Board of Directors,
/s/ JAMES C. DOBBS
-----------------------------------
James C. Dobbs
Secretary
October 18, 1996
22
<PAGE> 26
VERSAR, INC.
1996 STOCK OPTION PLAN
As adopted by the Board of Directors on
September 12, 1996
and by the stockholders on
, 1996.
<PAGE> 27
VERSAR, INC.
1996 STOCK OPTION PLAN
1. PURPOSE.
The purpose of the Plan is to attract and retain persons of high calibre
and potential as employees, directors and service providers of Versar, Inc. and
its affiliates, motivate and reward good performance, and encourage such
employees and service providers to continue to exert their best efforts on
behalf of Versar, Inc. and its affiliates. The Plan is intended to provide
opportunities for stock ownership by such employees, directors and service
providers in order to increase the proprietary interests in the company. This
will be accomplished by providing awards to eligible individuals of nonqualified
and incentive stock options.
2. DEFINITIONS.
Unless otherwise defined herein or the context otherwise requires, the
capitalized terms used herein shall have the following meanings:
(a) "Administrator" shall mean the committee, which shall be administrating
the Plan from time to time in the discretion of the Board, as described in
Section 4 of the Plan.
(b) "Affiliate" means any Directly Related Company and any entity in which
the Corporation or a Directly Related Company has at least a fifty percent (50%)
ownership interest.
(c) "Board" shall mean the Board of Directors of the Corporation.
(d) "Change in Control of the Corporation" shall mean:
(i) The acquisition in one or more transactions by any "Person" (as
the term person is used for purposes of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the "1934 Act")), of
"Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under
the 1934 Act) of forty percent (40%) or more of the combined voting power
of the Corporation's then outstanding voting securities (the "Voting
Securities"), provided, however, that for purposes of this definition,
Voting Securities acquired directly from the Corporation by any Person
shall be excluded from the determination of such Person's Beneficial
Ownership of Voting Securities (but such Voting Securities shall be
included in the calculation of the total number of Voting Securities then
outstanding); or
(ii) The individuals who are members of the Incumbent Board, cease for
any reason to constitute at least two-thirds of the Board; or
(iii) Approval by the stockholders of the Corporation of (i) a merger
or consolidation involving the Corporation if the stockholders of the
Corporation immediately before such merger or consolidation do not own,
directly or indirectly, immediately following such merger or consolidation,
more than sixty percent (60%) of the combined voting power of the
outstanding voting securities of the corporation resulting from such merger
or consolidation in substantially the same proportion as their ownership of
the Voting Securities immediately before such merger or consolidation, or
(ii) a complete liquidation or dissolution of the Corporation or an
agreement for the sale or other disposition of all or subsequently all of
the assets of the Corporation.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because forty percent (40%) or more of the then outstanding Voting
Securities is acquired by (i) a trustee or other fiduciary holding securities
under one or more employee benefit plans maintained by the Company or any of its
Affiliates, or (ii) any corporation, which, immediately prior to such
acquisition, is owned directly or indirectly by the stockholders of the Company
in the same proportion as their ownership of stock in the Company immediately
prior to such acquisition.
Moreover, notwithstanding the foregoing, a Change in Control shall not be
deemed to occur solely because any Person (the "Subject Person") acquired
Beneficial Ownership of more than the permitted amount of the outstanding Voting
Securities as a result of the acquisition of Voting Securities by the Company
<PAGE> 28
which, by reducing the number of Voting Securities outstanding, increases the
proportional number of shares Beneficially Owned by the Subject Person,
provided, that if a Change in Control would occur (but for the operation of this
sentence) as a result of the acquisition of Voting Securities by the Company,
and after such share acquisition by the Company, the Subject Person becomes the
Beneficial Owner of any additional Voting Securities which increases the
percentage of the then outstanding Voting Security Beneficially Owned by the
Subject Person, then a Change in Control shall occur.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(f) "Common Stock" shall mean, unless otherwise specifically provided, the
common stock of the Corporation and any class of common shares into which such
common stock may hereafter be converted.
(g) "Corporation" shall mean Versar, Inc., a Delaware corporation.
(h) "Directly Related Company" means a corporation related to the
Corporation within the meaning of Sections 524(e) and (f) of the Code.
(i) "Director" shall mean a person who is a member of the Board or a member
of the Board of Directors of a Affiliate, whether or not such person is also an
Employee.
(j) "Disability" shall mean such physical or mental condition affecting an
Optionee as determined by the Administrator in its sole discretion.
(k) "Employee" shall mean an individual who is employed (within the meaning
of Section 3401 of the Code and the regulations thereunder) by the Corporation
or a Affiliate (i.e., an individual with respect to whom income taxes must be
withheld from compensation). Directors who are employed by the Corporation or a
Affiliate are considered to be "Employees" for purposes of this Plan.
(l) "Exercise Price" shall mean the price per Share of Common Stock,
determined by the Administrator, at which an Option may be exercised.
(m) "Fair Market Value" shall mean the value of one (1) Share of Common
Stock, determined as follows:
(1) If the Shares are traded on an exchange or the National Market
System ("NMS") of the NASDAQ System, (A) if listed on an exchange, the
closing price as reported or as composite transactioned on the date of
valuation or, if no sale occurred on that date, then the mean between the
closing bid and asked prices on such exchange on such date, and (B) if
traded on the NMS, the last sales price on the date of valuation or, if no
sale occurred on such date, the mean between the highest bid and lowest
asked prices as of the close of business on the date of valuation, as
reported in the NASDAQ System;
(2) If the Shares are traded over-the-counter on the NASDAQ System,
the mean between the bid and asked prices on the NASDAQ System at the close
of business on the date of valuation; and
(3) If neither (1) nor (2) applies, the fair market value as
determined by the Administrator in good faith. Such determination shall be
conclusive and binding on all persons. If the date of valuation is not a
business day, the price on the last business day preceding the date of
valuation shall be utilized.
(n) "Incentive Stock Option" shall mean an option described in Section
422(b) of the Code.
(o) "Incumbent Board" shall mean the individuals who as of November 14,
1996 are members of the Board and any individual becoming a director subsequent
to November 14, 1996 whose election, or nomination for election by the
Corporation's stockholders, was approved by a vote of at least two-thirds of the
directors then comprising the Incumbent Board; provided, however, that any
individual who is not a member of the Incumbent Board at the time he or she
becomes a member of the Board shall become a member of the Incumbent Board upon
the completion of two full years as a member of the Board; provided, further,
however, that notwithstanding the foregoing, no individual shall be considered a
member of the Incumbent Board if such individual initially assumed office (i) as
a result of either an actual or threatened "election contest" (within the
meaning of Rule 14a-11 promulgated under the 1934 Act) or other actual or
threatened
2
<PAGE> 29
solicitation of proxies or consents by or on behalf of a Person other than the
Board (a "Proxy Contest"), or (ii) with the approval of the other Board members,
but by reason of any agreement intended to avoid or settle a Proxy Contest.
(p) "Nonqualified Stock Option" shall mean an option not described in
Section 422(b), 423(b) or 424(b) of the Code.
(q) "Option" shall mean any stock option granted pursuant to the Plan. All
Options shall be granted on the date the Administrator takes the necessary
action to approve the grant. However, if the minutes or appropriate resolution
of the Administrator provide that an Option is to be granted as of another date,
the date of grant shall be that other date.
(r) "Option Agreement" shall mean a written stock option agreement
evidencing a particular Option.
(s) "Optionee" shall mean an Employee, Director or Service Provider who has
received an Option.
(t) "Plan" shall mean this Versar, Inc. 1996 Stock Option Plan, as it may
be amended from time to time.
(u) "Purchase Price" shall mean the Exercise Price times the number of
Shares with respect to which an Option is exercised.
(v) "Retirement" shall mean the voluntary cessation of employment by an
Employee after qualifying for early or normal retirement under any pension plan
or profit sharing or stock bonus plan of the Corporation or Affiliate. If an
Employee is not covered by any such plan, "Retirement" shall mean voluntary
termination of employment after the Employee has attained age sixty-five (65)
and after the employee has attained the tenth (10th) anniversary of his or her
last preceding date of hire.
(w) "Service Provider" means an individual who is neither an Employee nor
Director of the Company or any Affiliate but who provides the Company or any
Affiliate, in the opinion of the Administrator, substantial and important
services.
(x) "Share" shall mean one (1) share of Common Stock, adjusted in
accordance with Section 10 of the Plan (if applicable).
3. EFFECTIVE DATE.
The Plan was adopted by the Board effective September 12, 1996, subject to
the approval of the Corporation's stockholders pursuant to Section 15 hereof.
The Plan shall terminate as provided in Section 9 below.
4. ADMINISTRATION.
(a) Committee.
The Plan shall be administered, in the discretion of the Board from time to
time, by a committee which shall be appointed by the Board. The committee shall
consist of not less than two (2) members of the Board who shall qualify as
"non-employee directors" within the meaning of Rule 16b-3 under the 1934 Act
("Rule 16b-3") or any successor rule or regulation and as a "disinterested
director" for purposes of the Code. The Board may from time to time remove
members from, or add members to, such committee. Vacancies on the committee,
however caused, shall be filled by the Board. The Board shall appoint one of the
members of the committee as Chairman. The committee, as Administrator, shall
hold meetings at such times and places as it may determine. Acts of a majority
of the Administrator at which a quorum is present, or acts reduced to or
approved in writing by the unanimous consent of the members of the
Administrator, shall be the valid acts of the Administrator.
(b) Powers.
The Administrator shall from time to time at its discretion select the
Employees, Directors and Service Provides who are to be granted Options,
determine the number of Shares to be optioned to each Optionee and
3
<PAGE> 30
designate such Options as Incentive Stock Options or Nonqualified Stock Options;
provided that Incentive Stock Options may be granted only to Employees
(including Directors who are also Employees). The Administrator shall have full
power, discretion and authority to interpret, construe and administer the Plan
and any part thereof, and its interpretations and constructions thereof and
actions taken thereunder shall be, except as otherwise determined by the Board,
final, conclusive and binding on all persons for all purposes. Without
limitation of the foregoing, the Administrator's power shall include the power
to set additional terms with respect to the grant of Options, determine the
transferability or non-transferability of such Options, determine the vesting
schedule with respect to such Options (which may include Options that are
immediately vested upon grant) and set such other terms, restrictions and
privileges with respect to any Options granted as are not inconsistent with the
terms of this Plan. No member of the Administrator shall be liable for any
action or determination made in good faith with respect to the Plan or any
Option granted thereunder.
5. PARTICIPATION.
(a) Eligibility.
The Optionees shall be those Employees, Directors and Service Providers of
the Corporation to whom Options may be granted from time to time by the
Administrator. The Administrator pursuant to this Plan may grant Incentive Stock
Options and Nonqualified Stock Options to Employees and Nonqualified Stock
Options to Service Providers and Directors who are not Employees.
(b) Ten-Percent Shareholders.
An Employee who owns more than ten percent (10%) of the total combined
voting power of all classes of outstanding stock of the Corporation, its parent
or any of its Subsidiaries shall not be eligible to receive an Incentive Stock
Option unless (i) the Exercise Price of the Shares subject to such Incentive
Stock Option is at least one hundred ten percent (110%) of the Fair Market Value
of such Shares on the date of grant and (ii) such Incentive Stock Option by its
terms shall not be exercisable more than five (5) years from the date of grant.
(c) Stock Ownership.
For purposes of Section 5(b) above, in determining stock ownership, an
Employee shall be considered as owning the stock owned, directly or indirectly,
by or for his or her brothers and sisters, spouse, ancestors and lineal
descendants. Stock owned, directly or indirectly, by or for a corporation,
partnership, estate or trust shall be considered as being owned proportionately
by or for its shareholders, partners or beneficiaries. Stock with respect to
which such Employee holds an Option shall not be counted.
(d) Outstanding Stock.
For purposes of Section 5(b) above, "outstanding stock" shall include all
stock actually issued and outstanding immediately after the grant of the
Incentive Stock Option to the Optionee. "Outstanding stock" shall not include
shares authorized for issue under outstanding Options held by the Optionee or by
any other person.
6. STOCK.
The stock subject to Options granted under the Plan shall be Shares of the
Corporation's authorized but unissued or reacquired Common Stock. The aggregate
number of Shares which may be issued upon exercise of Options under the Plan
shall not exceed One Million (1,000,000). The number of Shares subject to
Options outstanding at any time shall not exceed the number of Shares remaining
available for issuance under the Plan. Whenever an Optionee's rights to exercise
an Option as to any Shares shall cease for any reason before he or she has
exercised such Option as to such Shares, the Option shall be deemed terminated
to that extent and such Shares shall again be subject to Option under the Plan.
The limitations established by this Section 6 shall be subject to adjustment in
the manner provided in Section 10 hereof upon the occurrence of an event
specified therein.
4
<PAGE> 31
7. TERMS AND CONDITIONS OF OPTIONS.
(a) Stock Option Agreements.
Options shall be evidenced by written Option Agreements in such form as the
Administrator shall from time to time determine. Such Option Agreements shall
comply with and be subject to the terms and conditions set forth herein. Each
Option shall state whether it is an Incentive Stock Option or a Nonqualified
Stock Option.
(b) Number of Shares.
Each Option shall state the number of Shares to which it pertains and shall
provide for the adjustment thereof in accordance with the provisions of Section
10 hereof.
(c) Exercise Price.
Each Option shall state the Exercise Price. The Exercise Price in the case
of any Incentive Stock Option shall not be less than the Fair Market Value on
the date of grant and, in the case of an Incentive Stock Option granted to an
Optionee described in Section 5(b) hereof, shall not be less than one hundred
ten percent (110%) of the Fair Market Value on the date of grant. The Exercise
Price in the case of any Nonqualified Stock Option shall not be less than fifty
percent (50%) of the Fair Market Value on the date of grant. The Exercise Price
shall be subject to adjustment as provided in Section 10 hereof.
(d) Medium and Time of Payment.
The Purchase Price shall be payable in full in United States dollars or by
certified check upon the exercise of the Option; provided, however, that if the
applicable Option Agreement so provides, or the Administrator, in its sole
discretion otherwise approves thereof, the Purchase Price may be paid, (i) by
the surrender of Shares in good form for transfer, owned by the person
exercising the Option and having a Fair Market Value on the date of exercise
equal to the Purchase Price, (ii) through delivery of a promissory note by the
Optionee evidencing the Optionee's obligation to make future cash payments to
the Corporation, which promissory note shall be payable as determined by the
Corporation (but in no event later than five years after the date hereof), shall
be secured by a pledge of the Shares of Common Stock purchased and shall bear
interest at a rate established by the Administrator, but not less than the
applicable Federal Rate under Section 1274 of the Code, (iii) simultaneous
exercise of the Option and sale of shares of Common Stock acquired, pursuant to
a brokerage or similar arrangement approved in advance by the Administrator, and
use of the proceeds from sale as payment of the purchase price of such Common
Stock, (iv) in any combination of cash, Shares and promissory notes, as long as
the sum of the cash so paid, note delivered and the Fair Market Value of the
Shares so surrendered equals the Purchase Price or (v) any such other method as
the Administrator shall approve in its sole discretion.
In the event the Corporation determines that it is required to withhold
state or Federal income tax as a result of the exercise of an Option, as a
condition to the exercise thereof, an Optionee must make arrangements
satisfactory to the Corporation to enable it to satisfy such withholding
requirements. Payment of such withholding requirements may be made, in the
discretion of the Administrator, (i) in cash, (ii) by delivery of Shares
registered in the name of Optionee, or by the Corporation not issuing such
number of Shares subject to the Option having a Fair Market Value at the time of
exercise equal to the amount to be withheld or (iii) any combination of (i) and
(ii) above.
(e) Term and Non-transferability of Options.
Each Option shall state the time or times when all or part thereof becomes
exercisable. No Option shall be exercisable more than ten (10) years from the
date it was granted and no Incentive Stock Option granted to an Optionee
described in Section 5(b) hereof shall be exercisable after the expiration of
five (5) years from the date it was granted. During the lifetime of the
Optionee, the Option shall be exercisable only by the Optionee and shall not be
assignable or transferable, unless otherwise determined by the Administrator. In
the event of the Optionee's death, the Option shall not be transferable by the
Optionee, unless otherwise determined by the Administrator, other than by will
or the laws of descent and distribution.
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<PAGE> 32
(f) Cessation of Employment by Employee; etc.
After an Optionee ceases to be an Employee, his/her rights to exercise any
unexercised Option then held by the Optionee shall be determined as provided in
this Section 7(f). No Option, however, may be exercised after the Optionee
ceases to be an Employee except to the extent that the Option was exercisable at
the time of such cessation or to such greater extent as shall be approved by the
Administrator in connection with an Option grant. No Option may be exercised
after its term expires or is otherwise cancelled.
(i) Retirement. If an Optionee ceases to be an Employee because of
Retirement (and not on account of misconduct as determined below), such
Optionee may, subject to the restrictions referred to in Section 7(f)
above, exercise the Option at any time within three months after cessation
of employment, but, except as provided in the applicable Option Agreement,
only to the extent that, at the date of cessation of employment, the
Optionee's right to exercise such Option had accrued pursuant to the terms
of the applicable Option Agreement and had not previously been exercised.
(ii) Death. If an Optionee dies while he or she is an Employee or
having ceased to be an Employee but during the period during which he or
she could have exercised the Option under this Section 7, and has not fully
exercised the Option, then the Option may be exercised in full, subject to
the restrictions referred to in Section 7(f) above, at any time within
twenty-four months after the Optionee's death by the executor or
administrator of his or her estate or by any person or persons who have
acquired the Option directly from the Optionee by bequest or inheritance,
but, except as otherwise provided in the Option Agreement, only to the
extent that, at the date of death, the Optionee's right to exercise such
Option had accrued and had not been forfeited pursuant to the terms of the
applicable Option Agreement and had not been previously exercised.
(iii) Disability. If a Optionee ceases active service as a Employee by
reason of Disability, such Optionee shall have the right, subject to the
restrictions referred to in Section 7(f) above, to exercise the Option at
any time within six months after such cessation of employment, but, except
as provided in the applicable Option Agreement, only to the extent that, at
the date of such cessation of employment, the Optionee's right to exercise
such Option had accrued pursuant to the terms of the applicable Option
Agreement and had not previously been exercised.
(iv) Misconduct. If an Optionee resigns or is discharged or terminated
on account of misconduct, his or her Option shall terminate and shall no
longer be exercisable upon notice of such resignation, discharge or
termination. The existence of misconduct shall be determined by the
Administrator in its sole discretion, such determination to be made in a
manner consistent with the then policies of the Corporation as adopted by
the Board from time to time.
(v) Other Reasons. If an Optionee ceases to be an Employee for any
reason other than those mentioned above in subsections (i), (ii), (iii) or
(iv), the Optionee shall have the right, subject to the restrictions
referred to in Section 7(f) above, to exercise the Option at any time
within three months following such cessation, discharge or termination,
but, except as otherwise provided in the applicable Option Agreement, only
to the extent that, at the date of cessation, discharge or termination, the
Optionee's right to exercise such Option had accrued pursuant to the terms
of the applicable Option Agreement and had not previously been exercised.
An Optionee's employment with the Corporation shall not be considered as
having been terminated while the Optionee is on military or sick leave or other
bona fide leave of absence (such as temporary employment by the Government) if
the period of such leave does not exceed ninety (90) days, or, if longer, so
long as the Optionee's right to re-employment with the Corporation is guaranteed
either by statute or by contract. Where the period of such leave exceeds ninety
(90) days and where the Optionee's rights to re-employment is not guaranteed
either by statute or by contract, the Optionee's employment will be deemed to
have terminated on the ninety-first (91st) day of such leave.
6
<PAGE> 33
(g) Cessation of Service by Service Provider or Director (Other than a
Director who is Also an Employee).
After an Optionee ceases to be a Service Provider or Director (other than a
Director who is also an Employee), his/her rights to exercise any unexercised
Option then held by the Optionee shall be determined as provided in this Section
7(g). No Option, however, may be exercised after the Optionee ceases to be a
Service Provider or Director, except to the extent that the Option was
exercisable at the time of such cessation or to such greater extent as shall be
approved by the Administrator in connection with an Option grant. No Option may
be exercised after its term expires or is otherwise cancelled. If an Optionee
ceases to be a Service Provider or Director because of death, disability, or
termination of service for any reason, other than resignation or discharge or
termination for misconduct as described below, such Optionee may, subject to the
restrictions referred to above, exercise the Option at any time within six
months after cessation of service, but, except as provided in the applicable
Option Agreement, only to the extend that, at the date of cessation of service,
the Optionee's right to exercise such Option had accrued pursuant to the terms
of the applicable Option Agreement and had not previously been exercised.
Notwithstanding the above, if an Optionee's service to the Corporation as a
Service Provider or Director (who is not an Employee) is terminated through
resignation or discharge or termination on account of misconduct, as determined
by the Administrator in its sole discretion, his or her Option shall terminate
and shall no longer be exercisable upon notice of such resignation, discharge or
termination. All Directors who are also Employees shall be governed by the terms
of Section 7(f) in lieu of this Section 7(g).
(h) Rights as a Stockholder.
No one shall have rights as a stockholder with respect to any Shares
covered by his or her Option until the date of the issuance of a stock
certificate for such Shares. No adjustment shall be made for dividends (ordinary
or extraordinary, whether in cash, securities or other property), distributions
or other rights for which the record date is prior to the date such stock
certificate is issued, except as provided in Section 10 hereof.
(i) Modification, Extension and Renewal of Options.
Within the limitations of the Plan, the Administrator may modify, extend or
renew outstanding Options or accept the cancellation of outstanding Options (to
the extent not previously exercised) for the granting of new Options in
substitution therefor. The foregoing notwithstanding, no modification of an
Option shall, without the consent of the Optionee, alter or impair any rights or
obligations under any Option previously granted.
(j) Other Provisions.
The Option Agreements authorized under the Plan may contain such other
provisions not inconsistent with the terms of the Plan as the Administrator
shall deem advisable (including, without limitation, restrictions upon the
exercise of the Option or subjecting the shares issued pursuant to the exercise
of an Option to rights of repurchase by the Corporation).
(k) Substitution of Option.
Notwithstanding any inconsistent provisions or limits under the Plan, in
the event the Corporation acquires (whether by purchase, merger or otherwise)
all or substantially all of the outstanding capital stock or assets of another
corporation by any reorganization or other transaction qualifying under Section
425 of the Code, the Administrator may, in accordance with the provisions of
that Section, substitute options under the Plan for options under the plan of
the acquired company provided (i) the excess of the aggregate fair market value
of the shares subject to an option immediately after the substitution over the
aggregate option price of such shares is not more than the similar excess
immediately before such substitution and (ii) the new option does not give
persons additional benefits, including any extension of the exercise period.
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<PAGE> 34
8. LIMITATION ON ANNUAL AWARDS.
The aggregate Fair Market Value (determined as of the time the Option is
granted) of stock for which Incentive Stock Options exercisable for the first
time by an Optionee may be granted during any calendar year (under all incentive
stock options plans of the Corporation and its Subsidiaries) may not exceed
$100,000, but the value of stock for which Incentive Stock Options may be
granted to an Optionee in a given year may exceed $100,000. If the $100,000
limit is exceeded, the portion of the Incentive Stock Option that exceeds that
limit shall constitute a Nonqualified Stock Option but this shall not cause the
terms of the Option Agreement which created the Incentive Stock Option to cease
to apply or be modified.
9. TERM OF PLAN.
Options may be granted pursuant to the Plan until the expiration of the
Plan on September 12, 2006.
10. RECAPITALIZATIONS.
Subject to any required action by stockholders, the number of Shares
covered by the Plan as provided in Section 6 hereof, the number of Shares
covered by each outstanding Option and the Exercise Price thereof shall be
proportionately adjusted for any increase or decrease in the number of issued
Shares resulting from a subdivision or consolidation of Shares or the payment of
a stock dividend (but only of Common Stock) or any other increase or decrease in
the number of issued Shares effected without receipt of consideration by the
Corporation.
Subject to any required action by stockholders, if the Corporation is the
surviving corporation in any merger or consolidation, each outstanding Option
shall pertain and apply to the securities to which a holder of the number of
Shares subject to the Option would have been entitled. If the Corporation is not
the surviving corporation in any merger or consolidation, then, except to the
extent governed by Section 12 hereof, any outstanding Options shall be fully
vested and exercisable until five days prior to such merger or consolidation
(but shall terminate thereafter) unless provisions are made in connection with
such transaction for the continuance of the Plan or the assumption or the
substitution for outstanding Options of new options covering the stock of a
successor employer corporation, or a parent or Affiliate thereof, with
appropriate adjustments as to the number and kind of shares and prices. A
dissolution or liquidation of the Corporation shall cause each outstanding
Option to terminate.
To the extent that the foregoing adjustments relate to securities of the
Corporation, such adjustments shall be made by the Administrator, whose
determination shall be conclusive and binding on all persons.
Except as expressly provided in this Section 10 or in Section 12, the
Optionee shall have no rights by reason of any subdivision or consolidation of
shares of stock of any class, the payment of any stock dividend or any other
increase or decrease in the number of shares of stock of any class or by reason
of any dissolution, liquidation, merger or consolidation or spin-off of assets
or stock of another corporation, and any issue by the Corporation of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall not affect, and no adjustment by reason thereof shall be made with respect
to, the number or Exercise Price of Shares subject to an Option.
The grant of an Option pursuant to the Plan shall not affect in any way the
right or power of the Corporation to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure, to merge or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.
11. SECURITIES LAW REQUIREMENTS.
(a) Securities Act Requirements.
No Option granted pursuant to this Plan shall be exercisable in whole or in
part, and the Corporation shall not be obligated to sell any Shares subject to
any such Option, if such exercise and sale would, in the
8
<PAGE> 35
opinion of counsel for the Corporation, violate the Securities Act of 1933 (or
other Federal or State statutes having similar requirements) as it may be in
effect at that time.
As a condition to the issuance of any Shares upon exercise of an Option
under this Plan, the Administrator may require the Optionee to furnish a written
representation that he is acquiring the shares for investment and not with a
view to distribution to the public. Such representations shall be required in
cases where, in the opinion of the Administrator, they are necessary to enable
the Corporation to comply with the provisions of the Securities Act of 1933, and
any shareholder who gives such representation shall be released from it at such
a time as the shares to which it applies are registered pursuant to the
Securities Act of 1933.
(b) Listing and Regulatory Requirements.
Each Option shall be subject to the further requirements that, if at any
time the Administrator shall determine in its discretion that the listing or
qualification of the shares of stock subject to such Option under any securities
exchange requirements or under any applicable law, or the consent or approval of
any governmental regulatory body, is necessary or desirable as a condition of,
or in connection with, the granting of such Option or the issue of Shares
thereunder, such Option may not be exercised in whole or in part unless and
until such listing, qualification, consent or approval shall have been effected
or obtained free of any conditions not acceptable to the Administrator.
(c) Section 16.
With respect to persons subject to Section 16 of the 1934 Act, transactions
under this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the 1934 Act. To the extent any provision of the
Plan or action by the Administrator fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the
Administrator.
12. CHANGE IN CONTROL.
In the event any Change in Control of the Corporation should occur, then
the Administrator may in its sole discretion, without obtaining stockholder
approval, take one or more of the following actions to the extent not
inconsistent with other provisions of the Plan;
(a) Accelerate the exercise dates of any outstanding Option, or make the
Option fully vested and exercisable;
(b) Pay cash to any or all owners of Options in exchange for the required
cancellation of their outstanding Options; or
(c) Make any other adjustments or amendments to the Plan and outstanding
Options and substitute new Options for outstanding Options.
To the extent the Code would not permit the provisions of the foregoing
paragraph to apply to any Incentive Stock Option granted under this Plan, then
such Option, immediately upon the occurrence of the event described in the
foregoing paragraph, shall be treated for all purposes of the Plan as a
Nonqualified Stock Option and shall be immediately exercisable as provided in
the foregoing paragraph. Notwithstanding the foregoing, in no event shall any
option be exercisable after the date of termination of the exercise period of
such option specified in Section 7(f) of this Plan.
13. AMENDMENT AND TERMINATION OF THE PLAN.
The Board may amend or terminate the Plan at any time, but no amendment
shall be made without the approval of the stockholders of the Corporation if
stockholder approval under Section 422 of the Code or Rule 16b-3 would be
required or if it would change the material terms or performance goals that were
previously approved by the Company stockholders, within the meaning of Treasury
Regulation Section 1.162-27(e)(4)(vi) or successor provision (unless the Board
determines that such approval is not necessary to avoid loss of a deduction
under Section 162(m) of the Code, such approval will not avoid such a loss of
deduction or such approval is not advisable). No amendment of the Plan or any
Option granted under
9
<PAGE> 36
the Plan shall impair any Optionee's rights, without his or her consent, under
any Option theretofore granted under the Plan.
14. APPLICATION OF FUNDS.
The proceeds received by the Corporation from the sale of Common Stock
pursuant to the exercise of an Option will be used for general corporate
purposes.
15. APPROVAL OF SHAREHOLDERS.
The Plan shall be subject to approval by the affirmative vote of the
holders of a majority of the outstanding shares present and entitled to vote at
the annual meeting of stockholders of the Corporation following the adoption of
the Plan, to be held on November 14, 1996. Prior to such approval, Options may
be granted but shall not be exercisable, not even in the event of a Change in
Control of the Corporation.
16. EXECUTION.
To record the adoption of the Plan by the Board on September 12, 1996, the
Corporation has caused its authorized officers to affix the corporate name and
seal hereto.
VERSAR, INC.
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
[Seal]
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<PAGE> 37
<TABLE>
<S> <C> <C> <C>
(1) Election of Directors VOTE FOR all nominees / / WITHHOLD authority to vote / / *EXCEPTIONS / /
listed below for all nominees listed below
</TABLE>
Nominees: Benjamin M. Rawls, Michael Markels, Jr., Robert L. Durfee, M. Lee
Rice, John P. Horton, Charles I. Judkins, Jr., John E. Gray, Thomas J. Shields
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided
below).
*Exception
------------------------------------------------------------------
(2) To approve the issuance of an additional 600,000 shares of Common Stock for
the Company's contribution to the Company's Employee Savings and Stock
Ownership Plan.
FOR / / AGAINST / / ABSTAIN / /
(3) To approve the Versar, Inc. 1996 Stock Option Plan.
FOR / / AGAINST / / ABSTAIN / /
(4) To Amend the Company's Certificate of Incorporation to increase number of
authorized shares of common stock to 30,000,000 from 10,000,000 and
authorize the issuance of 10,000,000 shares of undesignated preferred stock.
FOR / / AGAINST / / ABSTAIN / /
(5) Ratification of the appointment of Arthur Andersen as independent
accountants for fiscal year 1997.
FOR / / AGAINST / / ABSTAIN / /
(6) In their discretion upon such other matters as may properly come before the
meeting or any adjournment(s) thereof and upon matters incident to the
conduct of the meeting.
Change of Address and / /
or Comments Mark Here
Please sign exactly as your name
appears herein. If you are signing
for the stockholder, please sign
the stockholder's name, your name
and state the capacity in which you
are signing.
Date: ______________________, 1996
----------------------------------
----------------------------------
(Signature)
PLEASE INDICATE VOTES / /
(X) IN BLACK OR BLUE INK.
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED
ENVELOPE.
<PAGE> 38
VERSAR, INC.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 14, 1996
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby authorizes Michael Markels, Jr., Benjamin M. Rawls
and Robert L. Durfee, and each of them individually, with power of
substitution, to vote and otherwise represent all of the shares of Common Stock
of Versar, Inc. (the "Company"), held of record by the undersigned, at the
Annual Meeting of Stockholders of the Company to be held at the Company's
offices, 6850 Versar Center, Springfield, Virginia, on Thursday, November 14,
1996 at 10:15 a.m. local time, and any adjournment(s) thereof, as indicated on
the reverse side hereof.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement dated in each case, October 18, 1996. All
other proxies heretofore given by the undersigned to vote shares of the
Company's Common Stock are expressly revoked.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DESCRIBED ON THE
REVERSE HEREOF BY THE STOCKHOLDER. IF NOT OTHERWISE DIRECTED, THIS PROXY WILL
BE VOTED FOR ALL NOMINEES FOR DIRECTORS LISTED IN PROPOSAL 1 AND FOR PROPOSALS
REFERRED TO IN ITEMS 2, 3, 4 AND 5 ON THE REVERSE SIDE.
(Continued, and to be signed and dated on the reverse side)
VERSAR, INC.
P.O. BOX 11078
NEW YORK, N.Y. 10203-0078
