[VERSAR 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 Wednesday, November 12, 1997, 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 10, 1997
<PAGE>
[VERSAR 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 Wednesday, November 12, 1997, at 10:15 A.M. local time for the following
purposes:
1. To elect ten directors to serve until the 1998 Annual Meeting of
Stockholders;
2. To ratify the appointment of Arthur Andersen LLP as independent
accountants for fiscal year 1998; and
3. 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, 1997,
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 10, 1997
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 1
<PAGE>
[LOGO]
VERSAR, INC.
---------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 12, 1997
----------------
GENERAL
This Proxy Statement and the enclosed proxy card are being mailed on or
about October 10, 1997, 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 1997 Annual Meeting of
Stockholders (the "Annual Meeting") to be held at the Company's offices at 6850
Versar Center, Springfield, Virginia 22151, on November 12, 1997, 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, 1997 (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 5,198,259. 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
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. Abstentions and broker
non-votes (which occur if a broker or other nominee does not have discretionary
authority and has not received voting instructions from the beneficial owner
with respect to the particular item) are counted for purposes of determining the
presence or absence of a quorum for the transaction of business. Assuming that
such a quorum is present for the Annual Meeting, in all matters other than the
election of directors, the affirmative vote of the majority of shares present in
person or by proxy at the Annual Meeting and entitled to vote thereon are
required to approve the proposals set forth herein. For such purpose,
abstentions are counted for the purpose of calculating shares entitled to vote
but are not counted as shares voting and therefore have the effect of a vote
against each such proposal. Also, for these purposes, broker non-votes are not
counted as shares eligible to vote and therefore have no effect. Directors will
be elected by a plurality of the votes of the shares present in person or
represented by proxy and entitled to vote. Accordingly, abstentions and broker
non-votes will have no effect on the outcome of the election of directors.
1
<PAGE>
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, FOR proposal 2 and in the proxy
holders' discretion with regard to all other matters. Any unmarked proxies,
including those submitted by brokers (other than broker non votes) or 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 all proxy 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 regard.
The Annual Report of the Company for fiscal year 1997 (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 10, 1997.
PRINCIPAL SHAREHOLDERS
The table below sets forth, as of September 30, 1997, the only persons
known by the Company to be the beneficial owners of more than 5% of the
outstanding shares of Common Stock.
Name and Address Amount and Nature Percent
of of Beneficial of
Beneficial Owner Ownership Class of Stock
---------------- --------- --------------
Dr. Michael Markels, Jr.(1) 851,245 16.4%
6850 Versar Center
Springfield, VA 22151
Dr. Robert L. Durfee(1) 676,546 13.0%
6850 Versar Center
Springfield, VA 22151
Versar, Inc., Employee Savings
and Stock Ownership Plan(2) 770,716 14.8%
- ----------
(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 Stock held by Drs. Markels and Durfee are based
upon filings with the Securities and Exchange Commission.
(2) All of the 770,716 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 Dr. 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.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon copies of reports furnished to Versar, the Company believes that
all reports required to be filed by persons subject to Section 16(a) of the
Securities Exchange Act of 1934, and the rules and regulations thereunder, have
been timely filed except that one report on Form 5 by John E. Gray which was
required to be filed by August 15, 1997 was filed September 2, 1997, due to
illness.
2
<PAGE>
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 1998 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, except Constantine G. Caras, David Gladstone and Pat H.
Moore, 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.
Name Served as Director Business Experience and Age
- ---- ------------------ ---------------------------
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 (Sarnia), the
Company's former real estate
holding company since 1992. Age
56
Michael Markels, Jr. 1969 to the present Chairman of the Board, President
and Chief Executive Officer of
Oacean Farming, Inc. since 1995;
Co-founder of the Company;
Chairman Emeritus of the Board
of Versar; retired former
Chairman of the Board of
Directors from April 1991 to
November 1993; President, Chief
Executive Officer, and Chairman
of the Board and director from
1969 to March 1991; a director
of Sarnia since 1982. Age 71.
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 61
M. Lee Rice 1969-1976; Business consultant since 1986;
1983 to the present between l983 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 72.
3
<PAGE>
Name Served as Director Business Experience and Age
- ---- ------------------ ---------------------------
Charles I. Judkins, Jr. 1992 to the present President and Chief Executive
Officer Sarnia 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 66.
Thomas J. Shields 1996 to the present Managing Director of Shields &
Company, Inc., an investment
firm, since 1991; Managing
Director of Bear, Stearns and
Co., Inc. from 1989 to 1991; and
a director of Seaboard
Corporation and BJ's Wholesale
Club, Inc. Age 50.
James A. Skidmore, Jr. May 1997 to present Since 1972, President and Chief
Officer and since 1975 Chairman
of the Board of Science
Management Corporation, a
professional services firm, and
since May 1997 a majority owned
subsidiary of Versar; a director
of Blue Cross and Blue Shield of
New Jersey, HMO Blue and
Medigroup. Age 65.
Constantine G. Caras New Nominee Private investor since June 1997
Executive Vice President, Chief
Administrative Officer and
Director of Ogden Corporation
from 1990 to May 1997; a
director of OMI Corp. Age 59
David Gladstone New Nominee Private Investor since February
February 1997; Chairman and CEO
of Allied Capital Corporationand
affiliates from 1992 to February
1997; Chairman of the Board of
American Capital Strategies Ltd.
Age 55.
Pat H. Moore New Nominee Private Investor since 1995;
Adjunct Faculty School of
Engineering, Rice University
since 1995; Executive Vice
President and director of Brown
& Root, Inc. from 1990 to 1995.
Age 67.
Committees of the Board of Directors
The Board of Directors of Versar has standing Executive, Audit,
Compensation and Nominating Committees. Existing directors John P. Horton, who
passed away, and John E. Gray are not seeking reelection.
The members of the Executive Committee were Dr. Markels (Chairman), Mr.
Rawls, 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, consisted of Messrs. Judkins (Chairman), Gray and
Rice. 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 used in the annual audit, review the financial statements and results of
the annual
4
<PAGE>
audit, and evaluate the performance of the independent accountants and the
Company's financial and accounting personnel.
The Compensation Committee, the members of which were Messrs. Gray
(Chairman), Shields, Rice, and Horton, 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 were Dr. Durfee (Chairman),
Dr. Markels, 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 12, 1998.
Board and Committee Meetings
During fiscal year 1997, the Board of Directors met five times. The
Executive Committee met three times. The Audit Committee met four times. The
Nominating Committee met once. The Compensation Committee met once. All
directors of the Company attended at least 75% of all meetings of the Board and
committees on which they served, except Dr. Durfee who attended two out of the
three Executive Committee Meetings.
Directors Compensation and Certain Transactions
Directors who are not employees of the Company are paid an annual fee of
$5,000 plus an attendance fee of $1,000 for each meeting of the Board and of its
committees where the director is physically present and $500 for each meeting of
the Board or of its Committees attended telephonically. 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. No options were issued in
fiscal year 1997.
On February 25, 1997, Shields & Company entered into a one-year Consulting
Agreement with the Company to provide advise on potential business transactions
and combinations in an amount not to exceed $25,000. The terms of the agreement
were negotiated on an arms length basis. As of September 24, 1997, Shields &
Company have been paid $20,225 under the agreement.
James A. Skidmore, Jr., Chairman, CEO and President of Science Management
Corporation (SMC) held those positions when SMC, in cooperation with its chief
financial lender, filed a voluntary petition for bankruptcy under Chapter 11 on
July 28, 1993. SMC emerged from bankruptcy on July 10, 1996.
5
<PAGE>
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 30, 1997.
Shares of Common Stock
Beneficially Owned as of
Individual or Group September 30, 1997(1)
- ------------------ ------------------------
Number Percent
------ -------
Michael Markels, Jr.(2) 851,245 16.4%
Robert L. Durfee(3) 676,546 13%
Thomas J. Shields 0 *
M. Lee Rice 0 *
James A. Skidmore, Jr.(4) 5,000 *
Benjamin M. Rawls(5) 162,240 3%
Charles I. Judkins, Jr.(6) 89,168 1.7%
John E. Gray 10,000 *
Thomas S. Rooney(7) 99,595 1.9%
Lawrence A. White(8) 56,144 1%
Gayaneh Contos(9) 112,394 2.0%
James C. Dobbs(10) 51,739 *
All directors and executive
officers as a group (13
persons)(11) 2,154,287 37.95%
- ----------
* Less than 1%.
(1) For the purposes of this table, beneficial ownership has been determined in
accordance with the provisions of Rule l3d-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
30,1997. With respect to ownership of shares which are held in the ESSOP
but allocated to individuals' accounts, the unaudited information is
current as of September 30, 1997.
(2) Includes 421,900 shares owned by adult children of Dr. Markels as to which
he shares voting and investment power. Includes 600 shares that may be
purchased upon the exercise of stock options exercisable within 60 days
after September 30, 1997. Dr. Markels is a Trustee of the ESSOP and as such
he has shared investment power over 770,716 shares and shared voting power
over 770,716 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 30, 1997.
(4) Includes 5,000 shares that may be purchased upon the exercise of stock
options within 60 days after September 30, 1997.
6
<PAGE>
(5) Includes 148,000 shares that may be purchased upon the exercise of stock
options exercisable within 60 days after September 30, 1997. Mr. Rawls is a
Trustee of the ESSOP and as such he has shared investment power over
770,716 shares and shared voting power over 770,716 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 25,900 shares that may be purchased upon the exercise of stock
options within 60 days after September 30, 1997.
(7) Includes 90,000 shares that may be purchased upon the exercise of stock
options within 60 days after September 30, 1997.
(8) Includes 48,000 shares that may be purchased upon the exercise of stock
options within 60 days after September 30, 1997.
(9) Includes 62,000 shares that may be purchased upon the exercise of stock
options within 60 days after September 30, 1997.
(10) Includes 44,900 shares that may be purchased upon the exercise of stock
options within 60 days after September 30, 1997. Mr. Dobbs is a Trustee of
the ESSOP and as such he has shared investment power over 770,716 shares
and shared voting power over 770,716 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 479,400 shares that may be purchased upon the exercise of stock
options within 60 days after September 30, 1997. Excludes 770,716 shares
held by the ESSOP.
7
<PAGE>
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, 1997, 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
Compensation
Annual Compensation Awards
---------------------------------------- ---------------------------
Securities
Other Annual Underlying
Name, Principal Position Salary Bonus Compensation Options/SAR 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
1997 $259,462(7) 0 0 0 $ 8,465(2)
1996 243,467 0 0 300,000 12,150(2)
1995 234,896 0 0 0 8,326(2)
Thomas S. Rooney
Executive Vice President
1997 $187,025(7) $ 6,800 0 0 $ 10,627(3)
1996 178,380 0 0 137,500 11,049(3)
1995 165,518 0 0 12,500 9,919(3)
Lawrence A. White
Executive Vice President
1997 $181,721(7) $ 4,000 0 0 $ 7,633(4)
1996 170,385 4,000 0 0 8,144(4)
1995 160,000 0 0 20,000 7,460(4)
Gayaneh Contos
Senior Vice President
1997 $164,307(7) $ 8,600 0 0 $ 8,479(5)
1996 163,952 10,000 0 30,000 9,068(5)
1995 153,296 8,000 0 0 8,189(5)
James C. Dobbs
Vice President , General
Counsel and Secretary
1997 $143,488(7) $ 4,000 0 0 $ 6,677(6)
1996 130,166 4,000 0 23,500 6,394(6)
1995 131,462 5,000 0 15,000 5,610(6)
</TABLE>
- ---------
(1) No amounts are shown in Other Annual Compensation column for fiscal years
1997, 1996 and 1995 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 1997, 1996 or 1995 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>
(2) The amounts shown in this column for Mr. Rawls are comprised of the
following: (i) in 1997 a payment of $3,894 for insurance premiums on term
life insurance, in 1996 a payment of $3,150 for insurance premiums on term
life insurance, and in 1995 a payment of $2,541 for insurance premiums on
term life insurance, and, (ii) in 1997 a contribution of $4,571 to the
Company 401(k) Plan on behalf of Mr. Rawls, in 1996 a contribution of
$9,000 to the Company 401(K) Plan on behalf of Mr. Rawls, and in 1995 a
contribution of $5,785 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 1997 a payment of $4,520 for insurance premiums on term
life insurance, in 1996 a payment of $4,309 for insurance premiums on term
life insurance, and in 1995 a payment of $4,050 for insurance premiums on
term life insurance; and (ii) in 1997 a contribution of $6,107 to the
Company 401(k) Plan on behalf of Mr. Rooney, in 1996 a contribution of
$6,740 to the Company 401(K) Plan on behalf of Mr. Rooney, and in 1995 a
contribution of $5,869 to the Company 401(K) Plan on the behalf of Mr.
Rooney.
(4) The amounts shown in this column for Mr. White are comprised of the
following: (i) in 1997 a payment of $1,794 for insurance premiums on term
life insurance, in 1996 a payment of $1,675 for insurance premiums on term
life insurance, and in 1995 a payment of $1,555 for insurance premiums on
term life insurance; and (ii) in 1997 a contribution of $5,839 to the
Company 401(k) Plan on behalf of Mr. White, in 1996 a contribution of
$6,469 to the Company 401(K) Plan on behalf of Mr. White, and in 1995 a
contribution of $5,905 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 1997 a payment of $3,937 for insurance premiums on term
life insurance, in 1996 a payment of $2,915 for insurance premiums on term
life insurance, and in 1995 a payment of $2,304 for insurance premiums on
term life insurance, and; (ii) and in 1997 a contribution of $4,542 to the
Company 401(K) Plan on the behalf of Mrs. Contos , in 1996 a contribution
of $6,153 the Company 401(K) Plan on behalf of Mrs. Contos, and in 1995 a
contribution of $5,885 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 1997 a payment of $1,316 for insurance premiums on term
life insurance, in 1996 a payment of $1,249 for life insurance premiums on
term life insurance, and in 1995 a payment of $1,210 for insurance premiums
on term life insurance; and (ii) in 1997 a contribution of $5,361 to the
Company 401(k) Plan on behalf of Mr. Dobbs, in 1996 a contribution of
$5,044 to the Company 401(K) Plan on behalf of Mr. Dobbs, and in 1995 a
contribution of $4,400 to the Company 401(K) Plan on behalf of Mr. Dobbs.
(7) The salary for fiscal year 1997 reflects payments for 27 pay periods
instead of 26 due to the change in financial reporting by the Company. This
will not have any effect on the total salary received by these individuals
for the calendar year 1997.
9
<PAGE>
The following tables set forth certain information with respect to stock
options (i) granted to the Named Executive Officers and (ii) exercised under the
Company's 1992 Stock Option Plan during the fiscal year ended June 30, 1997.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
There were no grants of options or SAR's during the fiscal year ended June
30, 1997.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUE
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
VALUE OF
UNEXERCISED
IN-THE-MONEY
OPTIONS/SARS
NUMBER OF SECURITIES UNDERLYING AT 6/30/97
SHARES UNEXERCISED OPTIONS/SARS
ACQUIRED ON VALUE AT 6/30/97 EXERCISABLE/
EXERCISE REALIZED (POUND) UNEXERCISABLE
NAME (POUND) ($) EXERCISABLE/UNEXERCISABLE (1)
---- ----------- ------- ------------------------------- --------------
<S> <C> <C> <C> <C>
Benjamin M. Rawls 0 0 148,200/180,000 $555,000/675,000
Thomas S. Rooney 0 0 90,000/90,000 $337,500/337,500
Lawrence A. White 0 0 48,000/12,000 $180,750/45,000
Gayaneh Contos 0 0 62,000/18,000 $232,500/67,500
James C. Dobbs 0 0 44,900/17,100 $168,375/64,125
</TABLE>
- --------
(1) On June 30, 1997, 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 30, 1997.
(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 30, 1997.
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 could
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 $175,000 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
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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 could terminate the agreement and 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.
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STOCK PERFORMANCE GRAPH
The following graph and table show a comparison of the cumulative total
return since June 30, 1992 on $100 invested in Versar Common Stock, the Standard
& Poors 500 Stock Index and a Peer Group consisting of ten companies and Versar
(EA Engineering, Science and Technology, Inc.; Ecology & Environment, Inc.;
EMCON; GZA Environmental Technologies, Inc.; Harding Associates, Incorporated;
ICF Kaiser International, Inc.; TRC Companies, Inc.; Roy F. Weston, Inc. and
International Technology Corp. and Jacobs Engineering Group, Inc.), which in
each case includes reinvestment of dividends where applicable. The old Peer
Group included Earth Technology Corporation which was acquired by a large
diversified manufacturing company and Groundwater Technology, Inc. was purchased
by a multi billion dollar engineering construction firm. In their place,
International Technology Corp. and Jacobs Engineering Group, Inc. were added to
better reflect the new diversified engineering and construction business of
Versar.
[INSERT GRAPH]
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CUMULATIVE SHAREHOLDER'S RETURN TABLE
CUMULATIVE SHAREHOLDER'S RETURN
LAST TRADING DATE IN FISCAL YEARS
----------------------------------------
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
Versar, Inc. $100 $111 $147(1) $150 $173 $173
New Peer Group $100 $ 91 $ 78 $ 78 $ 82 $ 77
Old Peer Group $100 $ 78 $ 71 $ 62 $ 57 $ 46
S&P 500 $100 $114 $115 $145 $183 $247
- --------
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.
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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 1997.
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:
(1) Base salary;
(2) Annual Bonus (stock or cash); and
(3) Long-term incentive awards.
o 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.
o 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.
o 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 1996 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.
In determining compensation for fiscal year 1997, 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 build sales volume and backlog. The
Committee also factored in the significant negative financial effect on the
financial statement and performance of the Company through December 1995 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 1996, the Committee renewed a 24 month employment agreement
with Mr. Rawls pursuant to which he would be paid at least $250,000 per year. On
Mr. Rawls' performance in fiscal year 1996, while the Company remained
profitable and increased revenue, net income and new orders, a difficult fourth
quarter resulted in the Company failing to meet its financial plan. In fiscal
year 1996, Mr. Rawls achieved the restructuring of the Company by divesting the
real estate debt on the Company's balance sheet and the
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Sarnia losses through the refinancing of the Sarnia debt in January 1996.
However, because of the failure to meet the profit plan, the Committee decided
that there would be no salary increase or bonus.
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 1996 the Committee renewed a 24 month employment agreement
with Mr. Rooney. The Committee decided that because the Company failed to meet
its profit plan in 1996, none of the Named Executive Officers would receive a
salary increase. However, bonuses were issued to Mr. Rooney, Mr. White, Mrs.
Contos, Mr. Dobbs for $6,800, $4,000, $8,600 and $4,000 respectively. No stock
options were issued to Named Executive Officers in fiscal year 1996.
Compensation Committe of the Board of Directors
Thomas J. Shields
M. Lee Rice
John E. Gray
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PROPOSAL NO. 2
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 1998 be ratified by the Stockholders. Arthur
Andersen served as the Company's independent accountant in fiscal year 1997.
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.
Change in Certifying Accountants
Price Waterhouse LLP ("PW") served as the Company's principal accountant
through the 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 ended June 30, 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 and
resulting spin-off of Sarnia to the Stockholders of 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 operated 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 ended June 30, 1994 and 1995 or during the subsequent
interim period preceding the Company's
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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 ended June 30, 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.
Except as set forth above, during the fiscal years ended June 30, 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.
1998 ANNUAL MEETING
It is presently contemplated that the 1998 Annual Meeting of Stockholders
will be held on or about November 13, 1998. In order for any appropriate
stockholder proposal to be considered for inclusion in the proxy materials for
the 1998 Annual Meeting of Stockholders, it must be received by the Secretary of
the Company no later than June 12, 1998, 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 10, 1997
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