<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 sec. 240.14a-11(c) or sec. 240.14a-12
VERSAR, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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:
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(2) Form, schedule or registration no.:
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(3) Filing party:
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(4) Date filed:
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<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 Wednesday, November 18, 1998, 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 19, 1998
<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 Wednesday, November 18, 1998, at 10:15 A.M. local time for the following
purposes:
1. To elect nine directors to serve until the 1999 Annual Meeting of
Stockholders;
2. To amend Versar, Inc.'s Certificate of Incorporation to change the
par value of the undesignated preferred stock from $25.00 to $.01 per
share.
3. To ratify the appointment of Arthur Andersen LLP as independent
accountants for fiscal year 1999; and
4. 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 October 2, 1998,
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
Secretary
October 19, 1998
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 18, 1998
------------------------------------------------------------
GENERAL
This Proxy Statement and the enclosed proxy card are being mailed on or
about October 19, 1998, 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 1998 Annual Meeting of
Stockholders (the "Annual Meeting") to be held at the Company's offices at 6850
Versar Center, Springfield, Virginia 22151, on November 18, 1998, and any
adjournment or postponement 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 revoke such proxy by voting 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 October 2, 1998 (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 5,917,682. 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. 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 purposed 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, then those nine nominees for
director who receive the highest number of votes cast will be elected.
With respect to Proposal No. 2, the affirmative vote of a majority of the
shares present and entitled to vote thereon is required. With respect to
Proposal No. 3, the affirmative vote of a majority of the shares present in
person or by proxy at the Annual Meeting and entitled to vote thereon is
required. For purposes of Proposals No. 2 and 3, abstentions are counted for
purposes 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. For
purposes of Proposal No. 2, broker non-votes will have the same effect as
abstentions. For purposes of Proposal No. 3,
1
<PAGE> 5
broker non-votes are not counted as shares eligible to vote and therefore have
no effect. Abstentions and broker non-votes will have no effect on the outcome
of the election of directors.
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 proposals 2 and 3 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 materials 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 1998 (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 19, 1998.
PRINCIPAL SHAREHOLDERS
The table below sets forth, as of September 15, 1998, 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>
AMOUNT AND NATURE PERCENT
OF BENEFICIAL OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS OF STOCK
------------------------------------ --------- --------------
<S> <C> <C>
Dr. Michael Markels, Jr.(1) 846,984 14.3%
6850 Versar Center
Springfield, VA 22151
Dr. Robert L. Durfee(1) 677,443 11.4%
6850 Versar Center
Springfield, VA 22151
Versar, Inc., Employee Savings and Stock 833,416 14.1%
Ownership Plan(2)
</TABLE>
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(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 833,416 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(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 of the
Securities Exchange Act of 1934, and the rules and regulations thereunder, have
been timely filed.
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 1999 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; a director of
Sarnia Corporation ("Sarnia"), the Company's
former real estate holding company since
1992. Age 57.
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 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
Corporation since 1982. Age 72.
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 62.
M. Lee Rice 1969-1976; 1983 to the Business consultant since 1986; between l983
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 73.
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
SERVED AS
NAME DIRECTOR BUSINESS EXPERIENCE AND AGE
---- --------- ---------------------------
<S> <C> <C>
Charles I. Judkins, Jr. 1992 to the present President and Chief Executive Officer of 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 67.
Thomas J. Shields 1996 to the present 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 BJ's Wholesale Club,
Inc. Age 51.
Constantine G. Caras 1997 to the present Private investor since June 1997; Executive
Vice President, Chief Administrative Officer
and Director of Ogden Corporation from July
1990 to May 1997; a director of OMI Corp. Age
60.
David Gladstone 1997 to the present Private investor since November 1997; Chairman
and CEO of Allied Capital Corporation from
1994 to 1997; a director of American Capital
Strategies Ltd. Age 56.
Pat H. Moore 1997 to the present Private Investor since 1995; Lecturer School of
Engineering, Rice University since 1995;
Executive Vice President and director of
Brown & Root, Inc. from 1990 to 1995. Age 68.
</TABLE>
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of Versar has standing Executive, Audit,
Compensation, Nominating and Strategic Planning Committees.
During fiscal year 1998, the members of the Executive Committee were Mr.
Rawls (Chairman), Dr. Durfee, Dr. Markels 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.
During fiscal year 1998, the Audit Committee, composed exclusively of
directors who were not employees of the Company, consisted of Messrs. Judkins
(Chairman), Gladstone, Moore 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 audit, and evaluate the
performance of the independent accountants and the Company's financial and
accounting personnel.
The Compensation Committee, the members of which, during fiscal year 1998,
were Messrs. Shields (Chairman), Caras, Gladstone and Judkins, 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, during fiscal year 1998,
were Dr. Durfee (Chairman), Dr. Markels, Mr. Rawls and Mr. Skidmore (a Director
of the Company who elected not to stand for reelection), 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
4
<PAGE> 8
Board of Directors in writing to the Nominating Committee at the Company's
Springfield office no later than June 15, 1999 for the 1999 Annual Meeting of
Stockholders.
The Strategic Planning Committee, the members of which, during fiscal year
1998 were, Messrs. Skidmore (Chairman); Rawls, Shields, Caras and Moore provide
guidance to management on strategic planning and the direction of the Company.
BOARD AND COMMITTEE MEETINGS
During fiscal year 1998, the Board of Directors met four times. The
Executive Committee met once. The Audit Committee met four times. The Strategic
Planning Committee met twice. 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, except Mr.
Gladstone who attended two out of the three Board of Director meetings and
neither of the two Audit Committee meetings since his election to the Board and
Mr. Moore who attended one out of two Strategic Planning Committee meetings.
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 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 1998.
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. Thomas J. Shields, a
Director of the Company, is a Managing Director of Shields & Company. The terms
of the agreement were negotiated on an arms length basis. During the fiscal year
ended June 30, 1998, Shields & Company was paid $20,225 under the agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Rawls, an executive officer of Versar, serves on the Board of Directors
of Sarnia Corporation. Mr. Judkins, an executive officer of Sarnia Corporation
is a member of the Compensation Committee of Versar.
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 15, 1998.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED
AS OF
INDIVIDUAL OR GROUP SEPTEMBER 15, 1998 (1)
------------------- -----------------------
NUMBER PERCENT
------ -------
<S> <C> <C>
Michael Markels, Jr.(2) 846,984 14.3%
Robert L. Durfee(3) 677,443 11.4%
Thomas J. Shields 0 *
M. Lee Rice 1,200 *
James A. Skidmore, Jr.(4) 153,200 2.6%
Benjamin M. Rawls(5) 232,547 3.7%
Charles I. Judkins, Jr.(6) 80,544 1.3%
David Gladstone 0
Constantine Caras 0
Pat H. Moore 1,000 *
Thomas S. Rooney(7) 138,393 2.2%
Lawrence A. White(8) 117,422 1.9%
Gayaneh Contos(9) 122,266 2.0%
All directors and executive officers as a group (15
persons)(10) 2,489,633 37.69%
</TABLE>
- ---------------
* 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
15, 1998. With respect to ownership of shares which are held in the ESSOP
but allocated to individuals' accounts, the information is current as of
September 15, 1998.
(2) Includes 425,900 shares owned by adult children of Dr. Markels as to which
he shares voting and investment power. Includes 700 shares that may be
purchased upon the exercise of stock options exercisable within 60 days
after September 15, 1998. Dr. Markels is a Trustee of the ESSOP and as such
he has shared investment power over 833,416 shares and shared voting power
over 833,416 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 15, 1998.
(4) Includes 10,000 shares that may be purchased upon the exercise of stock
options within 60 days after September 15, 1998.
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<PAGE> 10
(5) Includes 217,000 shares that may be purchased upon the exercise of stock
options exercisable within 60 days after September 15, 1998. Mr. Rawls is a
Trustee of the ESSOP and as such he has shared investment power over
833,416 shares and shared voting power over 833,416 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 26,200 shares that may be purchased upon the exercise of stock
options within 60 days after September 15, 1998.
(7) Includes 127,500 shares that may be purchased upon the exercise of stock
options within 60 days after September 15, 1998.
(8) Includes 108,000 shares that may be purchased upon the exercise of stock
options within 60 days after September 15, 1998.
(9) Includes 70,600 shares that may be purchased upon the exercise of stock
options within 60 days after September 15, 1998.
(10) Includes 686,800 shares that may be purchased upon the exercise of stock
options within 60 days after September 15, 1998. Excludes 833,416 shares
held by the ESSOP.
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<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, 1998, 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
1998 $268,750 $45,000 0 45,000 $10,890(2)
1997 259,462(7) 0 0 0 8,465(2)
1996 243,467 0 0 300,000 12,150(2)
James A. Skidmore, Jr.
Chairman, CEO and President of Science Management Corporation
1998 $200,000 0 0 0 $ 384(2)
Thomas S. Rooney
Executive Vice President
1998 $190,902 $25,000 0 35,000 $11,266(4)
1997 187,025(7) 6,800 0 0 10,627(4)
1996 178,380 0 0 137,500 11,049(4)
Lawrence A. White
Executive Vice President
1998 $180,333 $10,000 0 10,000 $ 8,315(5)
1997 181,721(7) 4,000 0 0 7,633(5)
1996 170,385 4,000 0 0 8,144(5)
Gayaneh Contos
Senior Vice President
1998 $167,308 $10,000 0 13,000 $10,226(6)
1997 164,307(7) 8,600 0 0 8,479(6)
1996 163,952 10,000 0 30,000 9,068(6)
</TABLE>
- ---------------
(1) No amounts are shown in "Other Annual Compensation" column for fiscal years
1998, 1997 and 1996 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, 1997 or 1996 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.
(2) The amounts shown in this column for Mr. Rawls are comprised of the
following: (i)in 1998 a payment of $4,223 for life insurance premiums on
term life insurance, in 1997 a payment of $3,894 for insurance
8
<PAGE> 12
premiums on term life insurance and in 1996 a payment of $3,150 for
insurance premiums on term life insurance; and, (ii) in 1998 a contribution
of $6,667 to the Company's 401(k) Plan on behalf of Mr. Rawls; in 1997 a
contribution of $4,571 to the Company 401(k) Plan on behalf of Mr. Rawls,
and in 1996 a contribution of $9,000 to the Company 401(k) Plan on behalf of
Mr. Rawls.
(3) The amount shown in this column for Mr. Skidmore constitutes $384 for life
insurance premiums on term life insurance.
(4) The amounts shown in this column for Mr. Rooney are comprised of the
following: (i) in 1998 a payment of $4,910 for life insurance premiums on
term life insurance, 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 (ii) in 1998 a contribution of $6,555 to the
Company's 401(k) Plan on behalf of Mr. Rooney, 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.
(5) The amounts shown in this column for Mr. White are comprised of the
following: (i) in 1998 a payment of $2,131 for life insurance premiums on
term life insurance, 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 (ii) in 1998 a contribution of $6,264 to the
Company 401(k) plan on behalf of Mr. White, 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.
(6) The amounts shown in this column for Mrs. Contos are comprised of the
following: (i) in 1998 a payment of $3,996 for life insurance premiums on
term life insurance, 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; (ii) in 1998 a contribution of $6,230 to the
Company's 401(k) Plan on behalf of Mrs. Contos, in 1997 a contribution of
$4,542 to the Company 401(k) Plan on the behalf of Mrs. Contos, in 1996 a
contribution of $6,153 the Company 401(k) Plan on behalf of Mrs. Contos.
(7) The salary for fiscal year 1997 reflects payments for 27 pay periods instead
of 26 due to the change in financial reporting by the Company. This will not
have any effect on the total salary received by these individuals for the
calendar year 1998.
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<PAGE> 13
The following tables set forth certain information with respect to stock
options (i) granted to the Named Executive Officers and (ii) exercised under the
Company's 1996 Stock Option Plan during the fiscal year ended June 30, 1998.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(4)
------------------------------------------------------------------ -----------------------
(a) (b) (c) (d) (e) (f) (g)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANTED EXERCISE OR
UNDERLYING OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED#(1) FISCAL YEAR(2) ($ PER SHARE)(3) DATE 5%($) 10%($)
------------------ ------------------- --------------- ---------------- ----------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Benjamin M. Rawls 45,000 13.9% 4.50 1/26/08 649,374 1,525,061
Thomas S. Rooney 25,000 10.8% 4.50 1/26/08
10,000 5.375 5/14/08 533,128 1,920,862
Lawrence A. White 10,000 3.0% 5.375 5/14/08 172,365 404,800
Gayaneh Contos 13,000 4.0% 4.50 1/26/08 187,597 440,573
James A. Skidmore 0 -- -- -- --
</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 1996 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 for fiscal year 1998 was
323,000.
(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. 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 6/30/98 IN-THE-MONEY
EXERCISE REALIZED (#) OPTIONS/SARS AT 6/30/98
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
--------------------------- ----------- -------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
Benjamin M. Rawls.......... 0 0 217,000/156,000 $840,875/604,500
Thomas S. Rooney........... 0 0 127,000/77,500 $494,062/300,312(2)
Lawrence A. White.......... 0 0 108,000/12,000 $418,500/46,500
Gayaneh Contos............. 0 0 70,600/22,400 $273,575/86,800(3)
James A. Skidmore, Jr. .... 0 0 10,000/15,000 $38,750/58,125
</TABLE>
- ------------------
(1) On June 30, 1998, the closing price of the Company's Common stock was
$3.875.
(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, 1998.
(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, 1998.
11
<PAGE> 15
STOCK PERFORMANCE GRAPH
The following graph and table show a comparison of the cumulative total
return since June 30, 1993 on $100 invested in Versar Common Stock, the Standard
& Poors 500 Stock Index and a Peer Group consisting of ten companies (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.), and Versar,
which in each case includes reinvestment of dividends where applicable. The Peer
Group used by the Company in its proxy statement prior to 1997 included Earth
Technology Corporation which was acquired by a large diversified manufacturing
company and Groundwater Technology, Inc. which was purchased by a multi billion
dollar engineering construction firm. In their place, International Technology
Corp. and Jacobs Engineering Group, Inc. were added in 1997 to better reflect
the new diversified engineering and construction activity of Versar.
[GRAPH]
CUMULATIVE SHAREHOLDER'S RETURN TABLE
<TABLE>
<CAPTION>
CUMULATIVE SHAREHOLDER'S RETURN
----------------------------------------------------------------------------------------------------------
LAST TRADING DATE IN FISCAL YEARS
------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998
----- ----- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Versar, Inc. $100 $133.01(1) $135.62 $156.48 $156.48 $161.70
Peer Group $100 $85.49 $85.21 $89.69 $84.59 $100.03
S&P 500 $100 $101.41 $127.84 $161.09 $216.99 $282.43
</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.
12
<PAGE> 16
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 1998.
The compensation decisions reported below were made in October 1997 based upon
the Company's and each executives' performance for fiscal year 1997 which ended
June 30, 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 which 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 for similar executives, but are also
weighed toward results that contribute to increases in shareholder value and
enhance the Company's long-term 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 environmental services
industry. 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 bonus 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 of the Company in a 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.
</TABLE>
In determining executive compensation for fiscal year 1998, the Committee
took into account the performance of the Company's stock, the financial
performance of the Company and the continued growth of the Company in fiscal
year 1997. While the Company in fiscal year 1997 did not make its profit plan,
the Company made significant progress and increased shareholder value as
reflected in the significant rise in the price of Versar's common stock in the
later portion of calendar 1997. The Company's accomplishments during fiscal year
1997 included an 81% increase in operating income, a 10% increase in revenue and
an increase in backlog to approximately $340 million dollars. This was achieved
despite the fact that the Company began to pay federal taxes and a generally
unfavorable business climate for its principal lines of business. The Committee
considered the fact that there were no salary increases for Executive Officers
in 1996.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Committee reviewed Mr. Rawls performance and accomplishments for fiscal
year 1997 in setting his compensation for fiscal year 1998, which
accomplishments are outlined above. It concluded the overall trends of the
Company as favorable. In addition, the Committee noted that Mr. Rawls had not
received a bonus since
13
<PAGE> 17
he joined the Company in 1991 and had forgone significant salary during the past
six years. Based upon the Company's financial results during fiscal year 1997
and the initial implementation of the Vision 2000 program, the Committee
approved a salary increase of $25,000 to $275,000 and a $50,000 bonus for Mr.
Rawls. The Committee also granted Mr. Rawls 45,000 incentive stock options.
COMPENSATION FOR NAMED EXECUTIVE OFFICERS
The Committee recognized the continued strong performance of the AFCEE
Contract and the Rocky Mountain Region under Thomas S. Rooney's leadership. It
also recognized that his guidance and direction was a significant factor in the
Company's performance in fiscal year 1997. The Committee approved a salary
increase of $15,000 to $195,000 and a $25,000 bonus for Mr. Rooney. The
Committee also granted Mr. Rooney 35,000 incentive stock options.
Despite not meeting the new orders goal in fiscal year 1997, Lawrence A.
White has put efforts in increasing the Company's backlog, putting effective
teams together and developing a company-wide business development strategy. Mr.
White has also began increasing our private sector business and has transitioned
into new areas such as outsourcing and privatization. The Committee approved a
salary increase of $10,000 to $185,000 and a $10,000 bonus for Mr. White. The
Committee also granted Mr. White 10,000 incentive stock options.
The Committee agreed that Mrs. Contos was a strong technical and financial
unit manager, especially with respect to financial controls. The units reporting
to her, ESG, ESM and Atlantic, were successful in fiscal year 1997 and, as a
whole, almost on plan. Based upon these factors, the Committee approved a salary
increase of $10,000 to $170,000 and a $10,000 bonus for Mrs. Contos. The
Committee also granted Mrs. Contos 13,000 incentive stock options.
James A. Skidmore, Jr. was not a Versar employee in fiscal year 1997 and
was under an Employment Agreement in fiscal year 1998 so no action was taken
regarding his compensation.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Thomas J. Shields, Chairman
Constantine Caras
David Gladstone
Charles I. Judkins, Jr.
PROPOSAL NO. 2
AMENDMENT TO CERTIFICATE OF INCORPORATION
TO CHANGE PAR VALUE OF PREFERRED STOCK
On August 4, 1998, the Board of Directors of the Company unanimously
adopted, subject to Stockholder approval, an amendment to the Company's Amended
and Restated Certificate of Incorporation (the "Par Value Amendment") decreasing
the par value of the Company's undesignated class of preferred stock (the
"Preferred Stock") from $25.00 per share to $0.01 per share. The Stockholders
are asked to approve the adoption of the Par Value Amendment as described below.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING
RESOLUTION WHICH WILL BE PRESENTED AT THE COMPANY'S ANNUAL MEETING:
RESOLVED, that the first sentence of Article FOURTH of the Amended and
Restated Certificate of Incorporation of the Company be, and hereby is,
amended to read in its entirety as follows:
The total number of shares of stock that the Corporation shall have
authority to issue is forty million (40,000,000) of which thirty million
(30,000,000) shall be designated common stock, $.01 par value per share,
and ten million (10,000,000) shall be designated preferred stock, $.01
par value per share.
14
<PAGE> 18
REASONS FOR THE PROPOSAL
None of the ten million (10,000,000) shares of authorized Preferred Stock
have been issued. This class of authorized, but unissued, Preferred Stock was
originally approved by the Stockholders of the Company at the Company's annual
meeting held on November 14, 1996. At such time, the Preferred Stock was
approved with a par value of $25.00 per share. Following approval of this class
of Preferred Stock, it was determined that the par value designation of $25.00
per share would result in additional expense to the Company for franchise taxes
of approximately $40,000 per year. Pursuant to the State of Delaware's method of
calculating franchise tax, the proposed Par Value Amendment would reduce
expenses associated with the Company's franchise tax payments by approximately
$30,000 per year. The Company believes that this franchise tax savings will
benefit the Company without impairing the ability of the Company to issue
Preferred Stock in the future at an appropriate price.
The Company has no plan, commitment or understanding at this time to issue
any shares of Preferred Stock. However, pursuant to the Amended and Restated
Certificate of Incorporation of the Company, the Board is authorized, without
further action by the Stockholders, to issue 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. The existence of the Preferred Stock may enable the Board to render more
difficult or discourage an attempt by another person or entity to obtain control
of the Company. Such Preferred Stock could be issued by the Board in a public or
private sale, merger or similar transaction, increasing the number of
outstanding shares and thereby diluting the equity interest and voting power of
a party attempting to obtain control of the Company.
VOTE REQUIRED
Proxies will be voted for the proposed Par Value Amendment to the Company's
Amended and Restated Certificate of Incorporation unless contrary instructions
are set forth on the proxy card. 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 at the Annual Meeting is required for the
adoption of the Par Value Amendment.
PROPOSAL NO. 3
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 1999 be ratified by the Stockholders. Arthur
Andersen served as the Company's independent accountant in fiscal years 1996
through 1998. 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.
1999 ANNUAL MEETING
It is presently contemplated that the 1999 Annual Meeting of Stockholders
will be held on or about November 17, 1999. In order for any appropriate
stockholder proposal to be considered for inclusion in the proxy materials for
the 1999 Annual Meeting of Stockholders, it must be received by the Secretary of
the Company no later than June 17, 1999, by certified mail, return receipt
requested.
15
<PAGE> 19
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 19, 1998
16
<PAGE> 20
<TABLE>
<S> <C>
______
|______|
(1) Election of Directors VOTE FOR all nominees /X/ WITHHOLD authority to vote /X/ EXCEPTIONS* /X/
listed below. for all nominees listed below.
Nominee: Benjamin M. Rawls, Michael Markels, Jr., Robert L. Durfee, M. Les Rice, Charles J. Judkins, Jr., Thomas J. Shields,
Constantine G. Caras, David Gladstone and Pat M. Moore.
(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 Amend the Company's Certificate of Incorporation (3) Ratification of the appointment of Arthur Andersen
to change the par value of the undersignated LLP as independent accountants for fiscal year 1999.
preferred stock from $25.00 to $.01 per share.
FOR /X/ AGAINST /X/ ABSTAIN /X/ FOR /X/ AGAINST /X/ ABSTAIN /X/
(4) At 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 /X/
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.
Dated: _________________________________________, 1998
------------------------------------------------------
------------------------------------------------------
(Signatures)
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN PLEASE INDICATE VOTES
THE ENCLOSED ENVELOPE. (X) IN BLACK OR BLUE INK. / /
</TABLE>
VERSAR, INC.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 18, 1998
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 Wednesday, November 18,
1998 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 19, 1998. 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 AND 4 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
